Pepsi profits rise 61% as international sales climb

PEPSICO posted a 61% rise in quarterly profit yesterday on strong US sales of Frito-Lay snacks, but shares fell because of weak demand for its Gatorade sports drink and a conservative forecast.

The world’s No 2 soft drink company behind CocaCola said net earnings rose to $1.78 billion (€11.36bn), or $1.06 per share, in the fourth quarter from $1.11bn, or 65 cents per share, a year earlier.

PepsiCo’s worldwide concentrate headquarters is in Cork.

Excluding a one-time benefit from a tax settlement and a charge for closing two Frito-Lay plants, earnings were 72 cents per share, matching the average forecast of analysts.

“An in-line fourth quarter and conservative guidance were generally expected,” JP Morgan analyst John Faucher said in a research note.

“However, the negative volumes on the Gatorade business is somewhat disappointing and may be enough to cause the stock to trade down today,” he added.

The company’s shares fell about 1% to $63.87 in morning New York Stock Exchange trade.

Net revenue rose to $10.38bn from $10.1bn a year earlier, driven by a 7% revenue increase at Frito-Lay, which posted strong sales of Doritos, Sunchips, Tostitos, Lay’s and Cheetos.

Sales of Gatorade fell, due mostly to difficult year-ago comparisons, cooler weather in the early part of the quarter, and higher inventories at the end of the third quarter from a year earlier, when there were shortages of the beverage.

Sales of Tropicana orange juice also fell, Pepsi said, because of the impact of price increases amid higher costs for oranges.

Sales volume in Pepsi’s international snacks business rose 9%, boosted by strength in Russia, Turkey and Egypt. Sales volume in international beverages increased 7% on strength in the Middle East and Argentina.

PepsiCo has benefited from its diverse portfolio as growing health consciousness in many developed markets has led consumers away from sugary soft drinks toward healthier drinks like water and orange juice.

For the current year, PepsiCo, based in Purchase, New York, said it expected mid-single-digit percentage growth in volume and net revenue, with earnings per share of at least $3.30.

Analysts on average expect 2007 profit of $3.31 per share.

“Given the strength of Pepsi’s overall portfolio, we don’t see risk to overall earnings-per-share growth and in fact still see potential upside to our $3.30 estimate (for 2007),” Morgan Stanley analyst William Pecoriello wrote in a research note.

Mr Faucher and Mr Pecoriello both have ‘overweight’ ratings on Pepsi shares.