PepsiCo, Inc. reported net revenue growth of 4 percent and constant currency net revenue growth of 5 percent in the first quarter. Reported earnings per share EPS was $0.71 and core EPS was $0.69, in line with management’s expectations. Management reaffirmed both its 2012 core constant currency EPS guidance and long-term financial targets and stated that its 2012 strategic initiatives are on track.
“Our first quarter results reflect the strength of our brands which allowed us to implement significant pricing actions,” said PepsiCo Chairman and CEO Indra Nooyi in a prepared statement. “Effective pricing and packaging initiatives drove 5 percent constant currency net revenue growth, allowing us to substantially offset approximately $300 million in commodity cost inflation.”
“With disciplined pricing now in place, we’re doubling our focus on the other key initiatives for 2012. Our top priorities include stepping up our brand support through increased advertising and marketing, accelerating our innovation, and driving an aggressive productivity agenda that includes a significant restructuring program.
“All of these initiatives were launched in Q1 with good results, are on track, and will gain momentum as the year progresses. We’re executing on a clear, deliberate game plan that will enhance our competitiveness while also positioning PepsiCo for sustainable growth and value creation for the long term.”
Net revenue grew in three of our four business units on a reported basis and grew net revenue in all four business units on an organic basis.
The company achieved 5.5 points of effective net pricing globally.
Both global snacks and global beverage revenue grew. Grew global nutrition revenue 10 percent.
Net revenue grew 9 percent in emerging markets. Emerging market net revenue grew 13 percent on a constant currency basis.
Media spending in the U.S. rose by 25 percent in the first quarter.
The company ranked No. 1 for contribution to revenue growth in U.S. convenience stores.
The company gained Family Dollar, a leading retailer with more than 7,000 outlets in North America, as a new beverage customer.
The company completed strategic alliance with Tingyi, China’s largest beverage manufacturer, on March 31. China is the world’s second largest LRB market and the alliance creates a system with a relative market share of 1.6 times the next largest competitor’s position. The alliance also creates the country’s largest LRB manufacturing network with more than 70 plants.
Net capital spending declined by $122 million in the quarter and was 4.7 percent of net sales over the last four quarters, an improvement of 80 basis points over the comparable prior four quarters.
Net revenue increased 4 percent and constant currency net revenue increased 5 percent, led by double-digit growth in the Europe and AMEA divisions and mid-single-digit growth in PepsiCo Americas Foods.
Net revenue benefited from 5.5 percentage points of effective net pricing, offset by negative foreign currency translation of 1 percentage point. Acquisitions contributed less than 1 percentage point to net revenue growth.
Operating profit was flat and core operating profit declined 6 percent. Operating profit performance was in line with management’s expectations and reflected the impact of division operating profit performance and higher corporate unallocated expenses. Reported operating profit included $84 million in mark-to-market gains on commodity hedges and $35 million of restructuring, impairment and integration charges.
Division operating profit declined 1 percent and core division operating profit declined 2 percent. Division operating profit performance reflected net revenue growth, which was substantially offset by approximately $300 million of commodity cost inflation.
Net interest expense was $175 million, an increase of $12 million, primarily driven by higher debt balances.