PepsiCo net income falls 9%, to slash 3,300 jobs
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Beverages and snacks giant Pepsico on Wednesday posted a decline of 9.58 per cent in its net income for the third quarter of 2008 and will cut 3,300 jobs globally under its cost saving initiatives, while lowering its earnings guidance for the full year.
Pepsico reported a net income of $1.57 billion for the third quarter in 2008 dropping from $1.74 billion in the same period last year, a company statement said.
The company further said it will carry out a productivity program for simplifying organisation for effective decision making, increase cost competitiveness and for streamlining the product portfolio.
As a part of the productivity plan, the company will slash 3,300 positions worldwide and expects the program to produce pre-tax savings of more than $1.2 billion over the next three years with $350-400 million of cost savings flowing through in 2009.
"Globally, approximately 3,300 positions will be eliminated in connection with the productivity program, of which about 40 per cent relate to the closing of up to six plants and other capacity rationalisation actions, which will be announced by the end of the year," the statement said.
Commenting on third quarter results, Pepsico's India-born Chairman and Chief Executive Indra Nooyi said, "We had solid top and bottom-line results in the face of a challenging macro environment and the most difficult quarterly comparisons on commodity cost inputs.”
"We were adversely impacted by continued weakness in the US liquid refreshment beverage category, which resulted in disappointing performance in our domestic beverage business. We are taking important steps to revitalise our beverage portfolio,” she added.
The company has also lowered earnings guidance for full year, in light of adverse impact of recent surge in US dollar on the fourth-quarter earnings. Pepsico expects to report full-year core 2008 earnings per share in the range of $3.67-3.68 versus the prior guidance of $3.72, the statement said.
"The company has revised its 2008 guidance with respect to cash provided by operating activities to be approximately $7.3 billion and capital spending to be about $2.5 billion, excluding productivity for growth costs," it added.
Pepsico reported a 10.52 per cent increase in its net revenue at $11.24 billion for the third quarter in 2008 as against $10.17 billion in the year-ago period.
Noting that macro economic situation cannot be controlled, Nooyi said Pepsico's operating agility to respond to the changing environment could be enhanced.
"To do so, we are implementing a broad-based productivity program, which we expect will produce USD 1.2 billion in pre-tax savings over three years. Majority of savings will be invested in our businesses. A primary focus will be restoring growth to our North American beverage business," she added.
The company would also increase investment in developing markets, make selective investments to continue growth in global snacks business and accelerate global R&D initiatives to help secure future innovation pipeline, Nooyi said.
The statement said that the nine per cent snack volume growth in the Middle East, Africa and Asia (MEAA) segment was led by double-digit growth in India, Middle East and China.
While beverage volume jumped 10 per cent, driven by growth in China, Middle East and India, it added. PepsiCo International delivered strong performance while lapping 20 per cent revenue growth, amid growing demand across most markets outside the Americas, despite pricing actions across the board to cover commodity inflation.
Pepsico reported a net income of $1.57 billion for the third quarter in 2008 dropping from $1.74 billion in the same period last year, a company statement said.
The company further said it will carry out a productivity program for simplifying organisation for effective decision making, increase cost competitiveness and for streamlining the product portfolio.
As a part of the productivity plan, the company will slash 3,300 positions worldwide and expects the program to produce pre-tax savings of more than $1.2 billion over the next three years with $350-400 million of cost savings flowing through in 2009.
"Globally, approximately 3,300 positions will be eliminated in connection with the productivity program, of which about 40 per cent relate to the closing of up to six plants and other capacity rationalisation actions, which will be announced by the end of the year," the statement said.
Commenting on third quarter results, Pepsico's India-born Chairman and Chief Executive Indra Nooyi said, "We had solid top and bottom-line results in the face of a challenging macro environment and the most difficult quarterly comparisons on commodity cost inputs.”
"We were adversely impacted by continued weakness in the US liquid refreshment beverage category, which resulted in disappointing performance in our domestic beverage business. We are taking important steps to revitalise our beverage portfolio,” she added.
The company has also lowered earnings guidance for full year, in light of adverse impact of recent surge in US dollar on the fourth-quarter earnings. Pepsico expects to report full-year core 2008 earnings per share in the range of $3.67-3.68 versus the prior guidance of $3.72, the statement said.
"The company has revised its 2008 guidance with respect to cash provided by operating activities to be approximately $7.3 billion and capital spending to be about $2.5 billion, excluding productivity for growth costs," it added.
Pepsico reported a 10.52 per cent increase in its net revenue at $11.24 billion for the third quarter in 2008 as against $10.17 billion in the year-ago period.
Noting that macro economic situation cannot be controlled, Nooyi said Pepsico's operating agility to respond to the changing environment could be enhanced.
"To do so, we are implementing a broad-based productivity program, which we expect will produce USD 1.2 billion in pre-tax savings over three years. Majority of savings will be invested in our businesses. A primary focus will be restoring growth to our North American beverage business," she added.
The company would also increase investment in developing markets, make selective investments to continue growth in global snacks business and accelerate global R&D initiatives to help secure future innovation pipeline, Nooyi said.
The statement said that the nine per cent snack volume growth in the Middle East, Africa and Asia (MEAA) segment was led by double-digit growth in India, Middle East and China.
While beverage volume jumped 10 per cent, driven by growth in China, Middle East and India, it added. PepsiCo International delivered strong performance while lapping 20 per cent revenue growth, amid growing demand across most markets outside the Americas, despite pricing actions across the board to cover commodity inflation.
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