Strong North America Snack Sales and Cost Cuts Helps PepsiCo Report Good Quarter

As PepsiCo trimmed costs and demand rose in North America for its snacks, including Cheetos and Lay’s chips, the company reported a better-than-expected quarterly profit for the first quarter.

There was a rise of 1 percent in the value of shares of the company on Monday Apart from a wide range of soft drinks, PepsiCo also makes Gatorade energy drinks and Tropicana fruit juices.

As its snacks business has offset much of the impact of a shift in consumer preference to drinks such as teas and fruit juices, PepsiCo has handled sliding demand for fizzy sodas better than rival Coca-Cola Co.

“We broadened our beverage portfolio to lessen our reliance on colas…” PepsiCo said in a statement. The US based global soft drink giant added that less than 25 percent of its revenues are generated from fizzy drinks globally and just around just 12 percent of its revenue now comes from Pepsi colas.

There was a rise of nearly 3 percent in the first quarter ended March 19 in the sales in PepsiCo’s North America snacks business. This snacks business of the company accounts for more than a quarter of its total revenue.

With the company benefiting from lower prices of raw materials, including sugar, there was a fall of 6.4 percent in the cost of sales for the company.

UBS analyst Stephen Powers said that the numbers showed the company’s cost-control efforts were paying off and added that PepsiCo’s results marked a “very classic Pepsi quarter”.

Hurt by a strong dollar and weakness in some markets including Latin America and Europe However, in the sixth straight quarter of decline, PepsiCo’s total sales fell 3 percent to $11.86 billion.

Partly due to the exclusion of its Venezuelan business, there was a slump of more than 26 percent in sales in Latin America. Ther3e was also a decline of 9.1 percent in sale in Europe and sub-Saharan Africa.

Accounted for primarily due to an impairment charge of $373 million related to its interest in Tingyi-Asahi Beverages Holding Co Ltd, the net income attributable to PepsiCo declined nearly 24 percent to $931 million, or 64 cents per share.

Beating the average analyst estimate of 81 cents, according to Thomson Reuters I/B/E/S, PepsiCo earned 89 cents per share excluding items.

Excluding the impact of currency movements, acquisitions and divestitures, sales rose 3.5 percent. PepsiCo shares were trading at $104.78 before the bell.

(Adapted from reuters.com)

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