Get the app today! Download iPhone App Download Android App

SUBSCRIBE

PepsiCo Forecasts 2 Per Cent Profit Gain As Dollar Weighs On Sales

Published on Feb 11 2016 7:13 PM in Drinks tagged: Featured Post / PepsiCo / Pepsi / Walkers / Doritos

PepsiCo Forecasts 2 Per Cent Profit Gain As Dollar Weighs On Sales

PepsiCo Inc. said profit this year will rise about 2 per cent as the strong dollar weighs on revenue abroad, nearly offsetting gains in its North American businesses.

Earnings in 2016 will be $4.66 a share, excluding some items, up from $4.57 last year, the Purchase, New York-based company said in a statement Thursday. Analysts estimated $4.76 for the current year, on average. The forecast and estimates may not be comparable.

The dollar’s two-year surge has reduced the value of PepsiCo’s results abroad when translated back into the US currency. The company forecast that trend will continue this year, projecting that exchange-rate effects will reduce profit by 4 per cent.

"They want to set targets that they can beat," Rob Plaza, an analyst at Key Private Bank, said in an interview. "That’s standard operating procedure for these guys."

PepsiCo’s fourth-quarter profit was $1.06 a share, excluding items. That matched analysts’ estimates. While sales fell 6.8 per cent to $18.6 billion, that topped analysts’ $18.5 billion projection. The company also raised its annual dividend 7.1 per cent to $3.01 a share.

PepsiCo fell 0.4 per cent to $97.24 at 9:34 am in New York, hurt by a broader market decline. The shares slid 2.8 per cent this year through Wednesday.

International Sales

Currency effects took a bite out of fourth-quarter sales. Net revenue fell 26 per cent in Latin America and 17 per cent in Europe and sub-Saharan Africa. The company’s domestic units fared better, with Frito-Lay North America and North America Beverages posting 2 per cent sales gains. The Quaker Foods North America division saw sales fall 1 per cent.

"What we can control, we are doing very well – execution, productivity, innovation ­– we’re doing a very good job, and that’s giving us some tailwinds," Chief Executive Officer Indra Nooyi said on a conference call. "That’s why we feel cautiously optimistic on the one hand while feeling despondent about the macros on the other hand."

PepsiCo, which makes Doritos and Mountain Dew, has increased its "better for you" offerings to appeal to consumers increasingly wary of sugary drinks and artificial sweeteners. The company removed aspartame from Diet Pepsi in August, announced a partnership with smoothie maker BarFresh Food Group Inc. in October and introduced a line of healthy vending machines in December.

Cost Cuts

Nooyi has worked to cut costs and to find new sources of growth from emerging markets, but the faltering global economy and strong dollar may have hampered gains in those areas. PepsiCo beat its goal to trim $1 billion in expenses last year and is in line to do so again this year, Chief Financial Officer Hugh Johnston said in an interview.

"The focal point here is how do you focus on the areas where you’re making people more efficient," he said. "That’s why we’ve been able to sustain the top line while other people haven’t."

PepsiCo ended its joint venture with German dairy giant Theo Muller Group in December, citing weak sales. The company also was rebuffed by yogurt maker Chobani, which recently declined the company’s offer to take a majority stake.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazineclick here.

Share on Facebook Share on Twitter Share on LinkedIn Share via Email