PepsiCo, Inc. has reported volume, revenue and operating profit growth for the first quarter of 2011 driven by top-line gains across its worldwide snacks and beverage businesses, and from the acquisitions of its anchor bottlers.
Global snacks volume increased 3 percent reflecting broad-based gains in the core snacks portfolio. Core snacks volume gains were partially offset by declines in food volume (which is included in overall reported snacks volume) in North America and Brazil. Global beverage volume increased 12 percent, and organic beverage volume increased 3.5 percent. In North America, beverage volume grew 2 percent on an organic basis.
Net revenue increased 27 percent reflecting the benefits of organic volume growth, effective net pricing, the impact of the bottler acquisitions and the acquisition of Wimm-Bill-Dann (WBD), the leading Russian dairy and juice company. Net revenue on a pro forma basis (adjusting for comparability of prior year bottler acquisitions) grew 7 percent and included 2 percentage points of revenue growth from the acquisition of WBD.
Reported total operating profit increased 105 percent, reflecting the benefit of higher non-core charges in the prior year, primarily related to the bottler acquisitions. Reported net income and EPS each declined 20 percent, lapping a reported EPS increase in the prior year of 23 percent which reflected the impact of a $958 million non-core accounting gain recorded below the operating profit line in 2010.
Core operating profit increased 4 percent, reflecting the benefits of net revenue gains, synergies from the anchor bottler acquisitions and productivity, offset somewhat by higher commodity costs, investment spending on brand building and emerging markets infrastructure, and seasonal losses associated with the operations of the acquired bottlers. Core EPS of $0.74 was in line with management’s expectations and declined 2 percent reflecting higher net interest expense in 2011, primarily related to the bottler acquisitions, and a higher core tax rate.
The company affirmed its full-year earnings outlook of 7-8 percent core, constant currency EPS growth.
“We are pleased with the broad-based volume and net revenue growth in the quarter. Growth in emerging markets was strong, driving attractive gains in Eastern Europe, Asia and the Middle East,” said PepsiCo Chairman and CEO Indra Nooyi. “Importantly, we had strong volume growth in both our Frito-Lay snacks and North American beverage businesses, with each up 2 percent on an organic basis over the prior year. We continue to make investments in innovation, brand building and emerging markets growth, and our first quarter results give us confidence that our investments are paying off. We are focused on managing our global portfolio to succeed in the marketplace and, at the same time, drive profitable growth and strong returns for our shareholders.”
PepsiCo Chief Financial Officer Hugh Johnston said, “Strong top-line performance in the first quarter translated to solid financial results. As expected, we are experiencing a high level of input cost inflation, which we are addressing with productivity programs, prudent pricing actions and systematic hedging that give us good visibility into our cost outlook for the year. We are executing as planned and remain confident in our full-year outlook.”
