2nd UPDATE: Pepsi Bottling's 3Q Profit Rises 9.9% On Gains
07 October 2009 - 3:22AM
Dow Jones News
Pepsi Bottling Group Inc.'s (PBG) fiscal third-quarter earnings
rose 9.9%, as the bottler was aided by lower commodity costs in one
of its last quarters as an independent company.
The company's revenue, however, came in below expectations. The
bottler and peer PepsiAmericas Inc. (PAS) are being acquired by
PepsiCo Inc. (PEP) for a combined $7.8 billion. After the deal is
completed, Pepsi Bottling Chief Executive Eric J. Foss will head a
new unit that will account for about three-quarters of PepsiCo's
North American bottling volume.
While soda companies have struggled with weakened volume for
some time, signs began to emerge in recent months that the worst
impact from the recession may have passed. Foss on Tuesday said
easing commodity costs and fewer pressures from currency exchange
translation drove improvements in the company's performance from
the first half of the year.
For the quarter ended Sept. 5, Pepsi Bottling reported a profit
of $254 million, or $1.14 a share, up from $231 million, or $1.06 a
share, a year earlier. Results for the latest quarter included a
net 8 cents a share of tax and other gains. The company, in July,
predicted earnings excluding items of $1.03 to $1.08 a share.
Revenue decreased 5% to $3.63 billion, but rose 2% excluding
currency effects. Analysts polled by Thomson Reuters projected
revenue of $3.73 billion on average. JPMorgan analyst John Faucher
said in a research brief that the bottler's North American volume
was likely hurt by softer sales of bottled water. Speaking to
investors on a conference call, Pepsi Bottling executives said the
overall market for non-alcoholic beverages isn't growing as yet
despite some improvements. The beverage category continues to face
difficulties with consumers still cutting back, they said.
Foss also said outside brands that go beyond the PepsiCo line up
will continue to be important to the Pepsi system even after the
acquisitions are completed. The Pepsi bottler currently distributes
Dr. Pepper Snapple's (DPS) Crush brand and it still remains to be
seen how Pepsi's acquisition of its bottlers will affect
distribution of Crush. Foss said Tuesday that the company will
continue to be interested in adding new brands to its lineup and
emphasized that the partnership with Dr. Pepper has been
strong.
Total case volume declined 2% as U.S. and Canada volume fell 1%,
European volume fell 5% and Mexico volume rose 1%. The total volume
declines were smaller than first-quarter and second-quarter drops
of 5% and 4% respectively, as well the prior-year period's decline
of 6%.
The bottler said it expects to incur fees of $40 million to $60
million for external advisors hired in connection with the PepsiCo
acquisition.
Shares of Pepsi Bottling, which confirmed its 2009 earnings
forecast, rose 1.3% to $37.81 in premarket trading. The stock is up
66% this year amid the impending takeover.
-By Anjali Cordeiro and Tess Stynes, Dow Jones Newswires;
212-416-2200; anjali.cordeiro@dowjones.com; 212-416-2481;
tess.stynes@dowjones.com