PepsiCo Americas Foods profit rises 8%

by Eric Schroeder
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PURCHASE, N.Y. — Strong results from Frito-Lay North America (F.L.N.A.) and the benefit of an inventory accounting change at Quaker Foods North America (Q.F.N.A.) helped drive an 8% increase in operating profit within the PepsiCo Americas Foods unit of PepsiCo, Inc. in the first quarter of fiscal 2011.

Operating profit of PepsiCo Americas Foods totaled $1,159 million in the quarter ended March 19, up from $1,068 million in the same period a year ago. Sales for PepsiCo Americas Foods rose 3% in the first quarter to $4,652 million from $4,530 million.

Leading the profit surge within the PepsiCo Americas Foods unit was again F.L.N.A., which posted a 6% gain in operating profit, to $774 million, and a 1.5% increase in sales, to $2,904 million.

“F.L.N.A. increased volume 2% in the quarter, reflecting solid performance across retail channels, with strong growth in the important mass merchandise and convenience channels,” PepsiCo said. “Growth was supported by innovation on key brands such as Lay’s, Ruffles, Doritos and Rold Gold, and the Sabra joint venture contributed 1 percentage point of volume growth. Operating margins expanded by 1.3 percentage points, driven by gross margin expansion.”

Although sales at Q.F.N.A. fell 6% in the quarter to $640 million, the unit posted a 9% gain in operating profit, to $214 million, PepsiCo said.

“Declines in volume and net revenue in the quarter were driven by declines in the center-of-store categories of ready-to-eat cereals, side dishes and mixes,” PepsiCo said. “Operating profit performance reflected the benefit of an inventory accounting change, which contributed 7 percentage points of growth in the quarter, as well as positive net pricing and productivity.”

The third component of PepsiCo Americas Foods, Latin America Foods, posted a 17% gain in operating profit and a 13% gain in sales.

Overall, PepsiCo net income in the quarter ended March 19 totaled $1,143 million, equal to 71c per share on the common stock, down 20% from $1,430 million, or 89c per share, during the same quarter of the previous year.
Revenue, meanwhile, was $11,937 million, up 27% from $9,368 million during the same quarter of the previous year. Revenues were boosted by the addition of the two anchor bottlers as well as the acquisition of Wimm-Bill-Dann, a Russian dairy and juice company.

“We are pleased with the broad-based volume and net revenue growth in the quarter,” said Indra Nooyi, chairman and chief executive officer of PepsiCo. “Growth in emerging markets was strong, driving attractive gains in Eastern Europe, Asia and the Middle East.”
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