PepsiCo Quarter Helped by Snack Sales and Cost Cuts
- Updated: April 18, 2016
PepsiCo Inc posted a quarterly profit that was better than had been expected as the U.S. based company trimmed its costs and the demand increased for snacks in North America including Lay’s chips and its hugely popular Cheetos.
Shares at the company, which is also the maker of Gatorade the energy drink and fruit juice from Tropicana, rose 1% in trading before the opening bell on Monday.
PepsiCo handled the sliding demand for its carbonated sodas than did its biggest rival Coca-Cola, as its business of snacks has been able to offset the majority of the impact of the shift by consumers of preferring drinks like fruits juices and teas that are in their minds, healthier.
PepsiCo in a prepared statement said it broadened its beverage portfolio to lessen the reliance it has on its colas. PepsiCo announced in a prepared statement that only 12% of its overall revenue now is from its Pepsi line and less than 25% is from its carbonated drinks globally.
North American PepsiCo snacks business that accounts for over 25% of its overall revenue was up close to 3% during the first quarter that ended on March 19.
Cost of sales for the quarter was down by 6.4%, with PepsiCo benefitting due to raw materials having lower prices including sugar.
Results at PepsiCo marked what one analyst called a classic Pepsi quarter, adding that its numbers showed that the company’s efforts for cost control were starting to bear fruit.
However, total sales at PepsiCo fell by 3% to just over $11.86 billion, the sixth consecutive quarter sales declines, hurt by the strength of the U.S. dollar and the weakness in certain markets including Europe and Latin America.
Sales were down over 26% across Latin America, due in part to its exclusion of business in Venezuela. Sales were down 9.1% across Europe and the region of sub-Saharan Africa.
The attributable net income to PepsiCo was down close to 24% to just over $931 million equal to 64 cents a share, due mainly to a big impairment charge of more than $373 million that was related to its Tingyi-Asahi Beverages stake.
Excluding certain items, PepsiCo had earnings of 89 cents a share beating analyst’s estimates of just 81 cents.
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