DPS reports 3 percent increase in net sales for Q3
Company expects full-year reported net sales to be up approximately 1 percent
Dr Pepper Snapple Group Inc. (DPS), Plano, Texas, announced a 3 percent increase in reported net sales in the third quarter, driven by favorable segment mix, product and package mix, and net pricing. Reported segment operating profit (SOP) increased 4 percent, or $15 million, driven by favorable commodity costs and ongoing productivity improvements that were partially offset by higher transportation and manufacturing costs. SOP also was negatively impacted by an unfavorable year-over-year last-in-first-out (LIFO) comparison of $7 million and an unfavorable comparison to a $6 million adjustment to a legal provision in the prior year, the company says.
Reported income from operations for the quarter was $316 million, which includes a $2 million unrealized commodity mark-to-market loss. By comparison, reported income from operations was $300 million in the prior-year period, which included a $1 million unrealized commodity mark-to-market gain. Core income from operations for the quarter was $318 million, up 6 percent compared with the prior-year period.
Bottler case sales (BCS) volume increased 1 percent during the quarter, with carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) both increasing 1 percent.
In the CSD category, Peñafiel volume increased 25 percent on product innovation. The company’s Core 4 brands increased 3 percent, driven primarily by a high-single-digit increase in Canada Dry. Sunkist soda increased low-single-digits, while 7UP and A&W were both flat in the quarter. Schweppes increased 8 percent and Dr Pepper volume declined 2 percent, driven primarily by declines in DPS’s diet products. Fountain foodservice volume grew 1 percent in the quarter.
In the NCB category, Clamato volume increased 7 percent, and the company’s water brands grew 3 percent in the quarter. Snapple grew 2 percent in the quarter, driven primarily by mid-single-digit growth in Snapple Premium, which was partially offset by the company’s de-emphasis on its value products. Hawaiian Punch volume decreased 2 percent in the period, and Mott’s declined 1 percent with lower sauce volumes.
By geography, volume in the United States and Canada was flat, and volume in Mexico and the Caribbean increased 10 percent.
In terms of sales volume for beverage concentrates, packaged beverages and Latin America beverages, the third quarter was flat and the year-to-date timeframe was up 1 percent. Beverage concentrate net sales for the quarter decreased 1 percent, as concentrate price increases taken earlier in the year were more than offset by a 3 percent decline in concentrate shipments. SOP for the quarter was flat, as the decline in net sales and increases in certain operating costs were offset by planned reductions in marketing investments of $2 million and favorable cost of goods trends.
Net sales for packaged beverages for the quarter increased 2 percent on higher sales volume. Favorable product and package mix was offset by increased promotional activity in the quarter. SOP increased 8 percent as a result of favorable cost of goods trends and ongoing productivity improvements, which were partially offset by an unfavorable comparison to a $6 million adjustment to a legal provision in the prior year and increased manufacturing and logistics costs in the current year.
Latin America beverage net sales for the quarter increased 21 percent with a 10 percent increase in volume driven primarily by Peñafiel innovation, higher pricing associated with the pass-through of the sugar tax in Mexico, and favorable mix. SOP increased 38 percent as net sales growth and ongoing productivity improvements were partially offset by increases in logistics and operating costs.
“Our teams posted yet another quarter of solid performance in what continues to be an extremely challenged environment,” said DPS President and Chief Executive Officer Larry Young said in a statement. “We remained focused on our strategy of building our brands with consumers and executing with excellence in the marketplace.
“Rapid Continuous Improvement (RCI) has become the foundation of our business, and it continues to yield improvements across the organization,” he continued.
Year-to-date, reported net sales increased 2 percent, and reported income from operations was $924 million, including $10 million of unrealized commodity mark-to-market gains. By comparison, reported income from operations was $782 million in the prior-year period, which included $13 million of unrealized commodity mark-to-market losses. Core income from operations was $914 million, up 14 percent compared with the prior-year period.
The company now expects full-year reported net sales to be up approximately 1 percent and core earnings per share to be in the $3.56 to $3.62 range.