PepsiCo reports better-than-expected quarterly profits

PepsiCo reported a better-than-expected quarterly profit as the company trimmed costs and demand rose in North America for its snacks, including Cheetos and Lay's chips.

Shares of the company, which also makes Gatorade energy drinks and Tropicana fruit juices, rose 1 per cent in premarket trading on Monday. PepsiCo has handled sliding demand for fizzy sodas better than rival Coca-Cola Co as its snacks business has offset much of the impact of a shift in consumer preference to drinks such as teas and fruit juices. "We broadened our beverage portfolio to lessen our reliance on colas..." PepsiCo said in a statement, adding that just 12 per cent of its revenue now comes from Pepsi colas, and less than 25 per cent from fizzy drinks globally.

Sales in PepsiCo’s North America snacks business, which accounts for more than a quarter of its total revenue, rose nearly 3 per cent in the first quarter ended March 19. Cost of sales fell 6.4 per cent, with the company benefiting from lower prices of raw materials, including sugar.

PepsiCo’s results marked a “very classic Pepsi quarter,” UBS analyst Stephen Powers said, adding that the numbers showed the company’s cost-control efforts were paying off. However, PepsiCo’s total sales fell 3 per cent to $11.86 billion, the sixth straight quarter of decline, hurt by a strong dollar and weakness in some markets including Latin America and Europe.

Sales slumped more than 26 per cent in Latin America, partly due to the exclusion of its Venezuelan business. Sales fell 9.1 per cent in Europe and sub-Saharan Africa. The net income attributable to PepsiCo declined nearly 24 per cent to $931 million, or 64 cents per share, mainly due to an impairment charge of $373 million related to its interest in Tingyi-Asahi Beverages Holding Co Ltd. Excluding items, PepsiCo earned 89 cents per share, beating the average analyst estimate of 81 cents, according to Thomson Reuters I/B/E/S. Excluding the impact of currency movements, acquisitions and divestitures, sales rose 3.5 per cent. PepsiCo shares were trading at $104.78 before the bell.

Reuters