PepsiCo 4th-quarter profit climbs on strength of its snacks business

PepsiCo 4th-quarter profit rises on snacks unit

NEW YORK — PepsiCo Inc.’s fourth-quarter profit almost doubled on strength in its snacks business and overseas beverage operations, and the company said it will keep expanding internationally to buffer the slumping U.S. drinks market.

The snack and drink maker also said Thursday it expects more savings from its buyout of two of its bottlers, a deal it says will help it get new products to market more quickly because it will control their distribution. The company said the deal, valued at $7.8 billion, should close by the end of the month.

PepsiCo will launch more new snack products and speed growth in developing markets, which it expects to boost revenue and profit. International sales are becoming increasingly important for beverage makers, who are facing a soft domestic market as people shift toward healthier juices and teas or cut back on purchases to save money.

Rival Coca-Cola Co. also is expanding overseas, which is helping its profits. But Coca-Cola has an advantage because more than three-quarters of its sales are outside the U.S. PepsiCo’s international sales are about half its revenue. That figure is up from 25 percent a decade ago and will keep growing, CFO Richard Goodman said.

“We have big business in countries outside the U.S. We’ll continue to grow there because that’s where the opportunity is and that’s where more growth is,” he told reporters on a conference call. “We’ll grow in the U.S. but we’ll grow much faster internationally.”

In China, the company is building 14 plants to keep up with rising demand. CEO Indra Nooyi said Pepsi plans to invest heavily in its beverages in China through 2015, and now is able to because it has received government permission to build the plants. Nooyi said savings from buying bottlers will give the company more money to invest.

The company, whose brands include Gatorade, Quaker and Pepsi-Cola, earned $1.43 billion, or 90 cents per share, even with the estimates of analysts polled by Thomson Reuters. These estimates normally remove one-time items.

Sales for the period ended Dec. 26 climbed 4.5 percent to $13.3 billion from $12.74 billion. This edged out Wall Street’s $13.26 billion forecast.

Shares of PepsiCo, based in Purchase, N.Y., rose 81 cents, or 1.3 percent, to $61.19.

Deutsche Bank-North America analyst Marc Greenberg said the results were “solid quality.” He was pleased with the company’s boost of expected savings from the buyout of bottlers PepsiAmericas and the Pepsi Bottling Group. The company now expects pre-tax savings of $400 million by 2012 from the buyouts, up from $300 million previously. It expects to save between $125 million and $150 million this year.

North American beverage revenue dipped slightly to $2.75 billion, while volume dropped 5 percent. The company said it was encouraged by the performance of its SoBe Lifewater and Gatorade beverages, which gained market share during the quarter.

Frito-Lay North America snacks sales rose 6 percent to $3.89 billion, although its volume was flat.

Snack sales have held up better as people buy more food at grocery stores and eat out less often in the recession. Internationally, snack sales volume dropped in Europe, which has been suffering in the recession. But volume in other parts of the world, including Asia and the Middle East, grew 13 percent.

Beverages outside of Europe and North America grew 8 percent in the quarter.

On Tuesday, Coca-Cola said that international sales drove a 55 percent profit increase in the last three months of the year, with China’s case volume up 29 percent.

PepsiCo anticipates 2010 earnings will rise 11 percent to 13 percent on a constant currency basis.

Analysts predict a profit of $4.16 per share for the year.

The company’s annual profit improved to $5.95 billion, or $3.77 per share, up from $5.14 billion, or $3.21 per share, in the prior year.

Full-year revenue was nearly flat at $43.2 billion.

AP Retail Writer Michelle Chapman contributed to this report.