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Beverage News

PepsiCo reports full-year, Q4 2012 results

February 14, 2013

PepsiCo, Purchase, N.Y., reported core earnings per share of $1.09 for the fourth quarter of 2012 and $4.10 for the full year, with organic revenue growth of 5 percent for both the quarter and the full year. Overall, the company reported net revenue of approximately $20.2 billion for the quarter and $66.5 billion for the year. Its beverage division reported net revenue of approximately $6.3 billion for the quarter and $22.4 billion for the year.

"In 2012, we delivered 5 percent organic revenue growth, reflecting PepsiCo's many strengths: We're well positioned in attractive and highly complementary growth categories, our portfolio is diversified with products that have broad appeal and a global footprint that is balanced, and we have an enviable portfolio of iconic brands," said Chairman and Chief Executive Officer Indra Nooyi in a statement.

"We also took a number of significant steps in 2012 that will even better position our business for sustainable, long-term growth: we increased our brand investment, stepped up our innovation, improved our marketplace execution, and embarked on an aggressive productivity program that will contribute to our profitability and act as a funding source of future investment,” she continued. “Our recent brand-building initiatives and innovation across the portfolio, including Quaker Real Medleys, Gatorade Energy Chews, Pepsi Next and Doritos Locos Tacos, are translating into success in the marketplace.

"Just as importantly, we remain highly focused on generating attractive returns for our shareholders. We returned $6.5 billion to shareholders in 2012 through a combination of share repurchases and dividends, and today announced an increase in our quarterly dividend that will take effect in June. We're encouraged by the progress we're making and expect performance in the coming year to be consistent with our long-term targets,” she said.

Specifically for PepsiCo Americas Beverages, organic revenue grew 2.5 percent during the fourth quarter, reflecting organic volume that was even with the prior year and 2.5 percentage points of effective net pricing. Non-carbonated beverages volume grew in the low-single-digits led by mid-single-digit volume growth for Gatorade, while carbonated soft drink volume declined approximately 1 percent during the quarter. For the full year, organic revenue grew 1.5 percent, reflecting a 1-percentage-point organic volume decline, 3 percentage points of effective net pricing, and the impact of concentrate shipment timing.

Reported net revenue declines included the impacts of refranchising the division's Mexican bottling operation in 2011, which had a negative 2-percentage-point impact for the quarter and a negative 5-percentage-point impact for the full year, and of the extra reporting week in 2011, which had a negative 5-percentage-point impact for the quarter and a negative 1-percentage-point impact for the year.

Core constant currency operating profit declined 8 percent during the quarter and 11 percent for the full year, primarily reflecting increased commodity costs and higher advertising and marketing expenses, partially offset by favorable effective net pricing and productivity initiatives. Operating profit comparisons also were impacted by a gain associated with the refranchising of the division's Mexico bottling operation in the fourth quarter of 2011.

For 2013, the company expects 7 percent core constant currency earnings per share (EPS) growth versus its fiscal 2012 core EPS of $4.10. Based on the current foreign exchange market consensus, the company expects that foreign exchange translation will have an unfavorable impact of up to 1 point on the company's full-year core EPS performance in 2013. Excluding the impact of structural changes and foreign exchange translation, organic revenue is expected to grow in the mid-single-digits, consistent with the company's long-term targets. The impact of structural changes, principally beverage refranchisings, is expected to reduce organic revenue growth by approximately 1 percentage point for the full year.

For 2013, the company expects low-single-digit commodity inflation and productivity savings of approximately $900 million. The company also expects advertising and marketing expenses to increase at or above the rate of net revenue growth. Below the operating line, the company expects higher interest expense driven by increased debt balances and a core effective tax rate of approximately 27 percent. The company is targeting more than $9 billion in cash flow from operating activities and more than $7 billion in management operating cash flow (excluding certain items) in 2013. Net capital spending is expected to be approximately $3 billion in 2013, within the company's long-term capital spending target of less than or equal to 5 percent of net revenue.

Reflecting its commitment to return capital to shareholders, the company announced a new share repurchase program providing for the repurchase of up to $10 billion of PepsiCo common stock from July 1 through June 30, 2016, which will succeed the current repurchase program that expires June 30. The company also announced a 5.6 percent increase in its annualized dividend to $2.27 per share from $2.15 per share, to take effect with the June 2013 payment. Under these programs, the company expects to return a total of $6.4 billion to shareholders in 2013 through dividends of approximately $3.4 billion and share repurchases of approximately $3 billion, it says.
 

KEYWORDS: Gatorade PepsiCo

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