PepsiCo Reports Growth In First Quarter 2013

April 18, 2013

PepsiCo, Inc. reported core earnings per share of $0.77 for the first quarter, an increase of 12 percent on organic revenue growth of 4.4 percent. PepsiCo Americas Foods organic revenue grew 6 percent in the quarter driven by organic revenue growth in all divisions, including Frito-Lay North America, Quaker Foods North America and Latin America Foods. The company reported net revenue increased of 5 percent in the quarter. Frito-Lay North America market share in the U.S. grew in the quarter, reflecting 4 percent volume growth driven by strategic investments and disciplined execution, according to the company.

On an organic basis, international beverage volume grew 6 percent and international snack volume grew 5 percent. PepsiCo Americas Beverages core constant currency operating profit grew 4 percent in the quarter reflecting favorable effective net pricing and productivity gains, according to the company. Reported operating profit was up 8 percent. Asia, Middle East and Africa (AMEA) organic revenue grew 15 percent in the quarter driven by organic volume growth in both snacks and beverages. Reported net revenue in AMEA declined 14 percent, reflecting the impact of structural changes, according to the company.

On an organic basis, emerging and developing market revenue grew 12 percent in the quarter. The refranchising of the company’s beverage business in China and unfavorable foreign exchange impacted emerging and developing markets net revenue growth by 11 percentage points, resulting in 1 percent reported net revenue growth, according to the company. Core gross margin expanded 130 basis points and reported gross margin expanded 100 basis points. Core operating margin expanded 80 basis points including an 11 percent increase in advertising and marketing expense. On track to deliver targeted $900 million of productivity savings during 2013 and $3 billion in productivity savings by 2015.

The company reported decreased net capital spending by $4 million in the quarter, with net capital spending of 4.0 percent of net sales over the past four quarters, an improvement of 70 basis points over the comparable prior four quarters. Management operating cash flow (excluding certain items) was $464 million. Cash flow from operations was $702 million. On track to return a total of $6.4 billion to shareholders in 2013 through approximately $3.4 billion in dividends and approximately $3.0 billion in share repurchases.

All 2013 volume growth measures reflect an adjustment to the base year for divestitures that occurred in 2012.

"We're greatly encouraged by the strong start to 2013. We delivered solid organic revenue growth and double-digit core EPS growth in the first quarter, driven by our balanced food and beverage product and global geographic portfolio. Our investments in creating this portfolio are paying off and our brand and innovation strategies are driving sustainable top-line growth," said chairman and CEO Indra Nooyi in a prepared statement.

"We are driving increased marketplace execution and making higher investments in marketing and innovation to drive future growth. In the first quarter, our advertising and marketing expense increased by 11 percent, while our core operating margin increased 80 basis points,” added Nooyi.

"Importantly, we're laser focused on ramping up the effectiveness and efficiency of every aspect of our operating system, from procurement to manufacturing to selling and distribution," Nooyi continued. "For the full year 2013, we expect to deliver approximately $900 million in productivity savings as part of our three-year, $3 billion productivity program, which will fund future growth investments and further enhance our operating margins. And, we've already begun to identify the next tranche of productivity savings to extend beyond our current program."

"We are squarely on track to deliver on our financial commitments for 2013, and remain committed to acting with urgency and intensity to create long-term value for our shareholders," Nooyi concluded.


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