Dr Pepper Snapple Group, Inc. Reports Decline In First Quarter Earnings

Dr Pepper Snapple Group, Inc. reported first quarter 2012 earnings per share (EPS) of $0.48 compared to $0.50 in the prior year period. Excluding $0.02 per share of unrealized commodity mark-to-market gains, Core EPS were $0.46 compared to $0.50 in the prior period.

For the quarter, reported net sales increased 2 percent reflecting 4 percentage points of price/mix, partially offset by lower branded volumes, a reclassification of certain customer transportation allowances that were previously recorded as selling, general and administrative expenses and foreign currency translation. Reported segment operating profit (SOP) decreased 4 percent, or $12 million, as the benefits of higher sales and productivity improvements were more than offset by higher packaging and ingredient costs, other operating cost increases and higher marketing investments of $8 million. Reported income from operations for the quarter was $192 million including $6 million of unrealized mark-to-market gains. Reported income from operations was $202 million in the prior year period including $2 million of unrealized mark-to-market gains.

Company President and CEO Larry Young said in a prepared statement, “Despite expected commodity headwinds and higher pricing across our CSD brands and Hawaiian Punch and Mott’s trademarks, our business continued to perform well in the quarter, and consistent with our expectations. We outperformed the industry in both volume and dollar share in both the CSD and Tea categories. Now in its second year, rapid continuous improvement (RCI) is delivering results for our customers and in our financial performance. With solid marketing plans in place for the remainder of the year and RCI further expanding across the organization, I remain confident in our plans for the year.” 

For the quarter, BCS volume was flat with carbonated soft drinks (CSDs) growing 2 percent and non-carbonated beverages (NCBs) declining 7 percent.

In CSDs, Dr Pepper volume increased 2 percent. Canada Dry, A&W and Sunkist soda all grew mid-single digits, while 7UP increased low-single digits. Peñafiel and Squirt also posted solid gains, while Crush declined mid-single digits and Sun Drop declined double-digits, as we cycled the national launch of the brand in the prior year period. Fountain foodservice volume grew 5 percent, cycling 7 percent volume growth in the prior year period.

In NCBs, Hawaiian Punch volume declined 21 percent and Mott’s volume declined 16 percent due to cycling price increases that were taken in mid-year 2011. Clamato increased 27 percent and Snapple volume grew 5 percent, cycling 10 percent growth in the prior year period.

For the quarter, sales volume decreased 1 percent. Branded volume declined just over 1 percent, while contract manufacturing volume increased. 

Net sales for beverage concentrates for the quarter were flat as 4 percentage points of concentrate pricing were offset by a 3 percent volume decline and higher discounts. SOP decreased 10 percent principally due to increased marketing investments and higher ingredient costs. 

Net sales for packaged beverages for the quarter were up 3 percent reflecting favorable mix and 2 percentage points of pricing, partially offset by the reclassification of certain customer transportation allowances that were previously recorded in selling, general and administrative expenses. SOP increased 3 percent as the benefits of higher sales were partially offset by cost inflation in packaging and ingredients and other operating costs. 

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