10-QPeriod: Q1 FY2017

PEPSICO INC Quarterly Report for Q1 Ended Mar 25, 2017

Filed April 26, 2017For Securities:PEP

Summary

PepsiCo reported strong first-quarter 2017 results, with net revenue increasing by 2% to $12.05 billion, driven by effective net pricing across its divisions. Net income attributable to PepsiCo surged by 41% to $1.32 billion, with diluted EPS growing by 43% to $0.91. This robust performance was significantly bolstered by a prior-year impairment charge related to the Tingyi transaction, which, when excluded, shows a more modest but still positive underlying growth. The company highlighted operational improvements across several segments, including growth in Frito-Lay North America and North America Beverages. Europe Sub-Saharan Africa also showed a significant rebound in operating profit. While Latin America faced challenges with declining operating profit due to cost increases and currency headwinds, the overall financial health of PepsiCo appears strong, supported by effective cost management and strategic pricing initiatives.

Financial Statements
Beta

Key Highlights

  • 1Net revenue increased 2% to $12.05 billion, primarily driven by effective net pricing strategies.
  • 2Net income attributable to PepsiCo rose significantly by 41% to $1.32 billion, with diluted EPS up 43% to $0.91.
  • 3Operating profit increased by 19% to $1.93 billion, largely due to favorable year-over-year comparisons, especially the absence of a prior-year impairment charge.
  • 4Frito-Lay North America and North America Beverages divisions both showed healthy net revenue and operating profit growth.
  • 5Europe Sub-Saharan Africa experienced a substantial 51% increase in operating profit, indicating a strong turnaround.
  • 6The company announced a 7.0% increase in its annualized dividend to $3.22 per share, signaling confidence in its financial position.
  • 7Cash flow from operations was negative ($199 million) for the quarter, primarily due to unfavorable working capital movements, though investing and financing activities provided positive net cash.

Frequently Asked Questions

The primary driver of PepsiCo's net revenue growth was effective net pricing across its various divisions, which helped offset a slight decline in overall volume. This indicates a successful strategy of adjusting prices to maintain or increase revenue even with softer consumer demand.

A significant impairment charge of $373 million related to the Tingyi transaction in the first quarter of 2016 had a substantial positive impact on the year-over-year comparison of operating profit and net income in the first quarter of 2017. When excluding this item and other 'items affecting comparability', the underlying growth in operating profit was more moderate but still positive.

PepsiCo increased its annualized dividend by 7.0% to $3.22 per share and plans to return approximately $6.5 billion to shareholders in 2017 through dividends ($4.5 billion) and share repurchases ($2.0 billion), demonstrating a commitment to returning capital to investors.

Yes, cash flow from operating activities was negative for the quarter ($199 million), mainly due to unfavorable working capital movements. This was a significant change from the positive $305 million in the prior year. However, the company stated its overall liquidity and financial condition are adequate to meet its needs.