This summary is based on the third quarter fiscal 2008 earnings call conducted by PepsiCo Inc. (PEP) on October 14, 2008.
Management:
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Chairman and Chief Executive Officer: Indra Nooyi
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Chief Financial Officer: Richard Goodman
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Vice Chairman and Chief Executive Officer, PepsiCo International: Mike White
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Chief Executive Officer, PepsiCo Americas Foods: John Compton
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Chief Executive Officer, PepsiCo Americas Beverages: Massimo D''Amore
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Vice President, Investor Relations: Mike Nathenson
Key Investors Issues
- Revenues were up 11% from $10.2 billion in 2007 to $11.2 billion.
- Earnings amounted to $1.58 billion or 99 cents a share, down 10%.
- The firm repurchased $4.2 billion worth of its own shares.
Year to Date Highlights:
- Revenues were up 13% to $30.5 billion from $27.1 billion in 2007
- Income increased 1% $4.4 billion or $2.74 a share.
Third Quarter Highlights
Net revenue growth of 11% from $10.2 billion in 2007 to $11.2 billion was driven by strong performance in PepsiCo Americas Foods and PepsiCo International.
- Earnings amounted to $1.58 billion or 99 cents a share, down 10% from $1.74 billion in the prior year on increased costs.
- The firm reported marked-to-market losses of $176 million as energy prices reversed course.
- This marked-to-market loss compares to a $29 million loss in the previous year for a net change of $147 million versus last year.
Other corporate unallocated costs were up $19 million, primarily due to higher investments in R&D and the company''s global SAP implementation.
- Cash provided by operating activities is expected to be approximately $7.3 billion and capital expenditures about $2.5 billion excluding the Productivity for Growth costs.
- The firm maintained a strong credit rating - A plus from S&P and Aa2 from Moody''s - which is a major asset in the current environment.
- The firm repurchased $4.2 billion worth of its own shares but will be cautious of future repurchases given prevailing market volatility.
Segment Highlights:
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PepsiCo International delivered solid performance while lapping 20% revenue growth in the prior year period.
- PI''s diverse brand portfolio continued to benefit from growing demand across most markets outside the Americas despite significant pricing actions to offset the impact of commodity cost increases.
- Revenue increased 20% to $3.3 billion and operating profit increased 18% to $506 million.
Growth across the Middle East, Africa, Asia segment was broad based, with revenue up 22% and operating profit up 18%.
- Snack volume increased 9%, led by high teens growth in the Middle East and double-digit growth in China and India.
- On the Beverages side, volume increased 10%, driven by a combination of mid-teens growth in China, double-digit growth in the Middle East, and high single-digit growth in India.
- In the U.K.-Europe segment, PI performed well despite increased inflation, macroeconomic challenges, and unseasonably cool weather during the summer months which particularly impacted Beverage results.
The U.K.-Europe volume growth of 13% entirely reflects the benefit of two acquisitions - Sandora, a Ukrainian juice business, and the expansion of the Pepsi-Lipton joint venture in Europe.
- Excluding M&A activity, volume was down slightly, with a mid single-digit increase in the U.K. entirely offset by category softness across the continent and Russia, in part related to poor summer weather.
- Snack volume, up 4%, was largely in line with expectations and reflected visual pricing and rate hours across the category to address inflationary pressures.
- The segment closed with its [Marvel] Snack acquisition in Serbia and it''s [Lebidionski] juice acquisition in Russia.
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PepsiCo Americas Foods revenue was up 12% to $5 billion and profits were up 9% to $1.14 billion.
- FritoLay North America Snack brand grew volume 1.5% even as the firm realized net price increases from rate hours and visual pricing to offset inflation.
- In addition to growing across all major brands, FritoLay North America sales also increased across all retail channels and gained dollar market share in major channels in the savory snack category.
Quaker Foods North America experienced significant production and shipment disruptions in the quarter as a result of flooding at the beginning of the quarter in Cedar Rapids, Iowa, where a major Quaker plant is located.
- The firm was not able to ship some products normally which resulted in volume and revenue declines versus prior year.
- Nevertheless, productivity was up 7%, largely because the firm received business disruption insurance payments related to the flooding.
- Latin America Foods reported revenue growth of 23% and profit growth of 22% with organic revenue growth driven by net price realization, both in the form of rate hour and visual pricing across all of the businesses.
