| Eat, drink and be merry
New York, April 18: PepsiCo reported a 13 per cent increase in its first-quarter earnings on Thursday and attributed the growth to strong sales at its Frito Lay North America unit, cost savings from its merger with Quaker Oats and the sale of a pasta business.
PepsiCo booked incremental growth in each of its major business areas. Overall worldwide sales of the company’s products increased 3 per cent, while global sales of snacks and beverages each increased 3 per cent. But continued growth at Frito Lay North America represented the brightest spot in the company’s returns.
For nearly a year, PepsiCo has been trying to revive business at Frito Lay, its snack division. Overspending on trade promotions last summer failed to generate a significant increase in sales for the second quarter of 2002. In the months that followed, executives at PepsiCo pledged to lift sales at Frito Lay, which generates two-thirds of PepsiCo’s profits.
The first quarter provided evidence that the company was moving closer to its goals, analysts said. Revenues at Frito Lay climbed 5 per cent to $ 2 billion, and operating profit was up 6 per cent to $ 506 million. Volume also increased 4 per cent.
“It’s certainly improving,” said Bryan Spillane, a beverage analyst at Banc of America Securities. “You can visibly see a recovery. The next phase is now that you’re seeing the top line increase, you should start to see a better spread on profitability.”
PepsiCo’s earnings topped Wall Street’s expectations, which had been fairly conservative because the weak economic environment has negatively affected food and beverage companies throughout the quarter, analysts said.
In the first quarter, net income rose to $ 777 million, or 45 cents a share, up from $ 689 million, or 38 cents a share, in the period a year earlier. The results included a penny gain from the $ 16 million sale of Quaker’s Mission pasta business.
Analysts had forecast earnings per share of 42 cents, according to Thomson First Call. Total revenue rose 4.1 per cent to $ 5.5 billion.