Home

Pepsico makes progress on bottler acquision against mixed 2009 results

26.02.10 blog

According to media sources, PepsiCo has completed the  next step on the way to take full control of its two biggest bottlers, PepsiAmericas and Pepsi Bottling Group.

PepsiCo hopes to complete the deal by the end of February 2010 and has refiled for clearance from the US Federal Trade Commission, the soft drinks giant said late on 17 February. Both PepsiAmericas and Pepsi Bottling Group (PBG) reported recently that the vast majority of shareholders have voted in favour of the US$7.8bn deal.

PepsiCo CEO Indra Nooyi said in the firm's recent full-year results announcement that the bottlers deal "changes the rules of the game in North America beverages". She continued to say "we will be taking advantage of the financial benefits of this merger not only to step change our North American beverage business and augment our positions in Eastern Europe, but also to make strategic investments that will sustain our momentum well into the future."

In particular, the company forecasts huge "synergies". After initially pinpointing $300m in annual pre-tax synergies, PepsiCo recently raised this to $400m by 2012. Between $125m and $150m of savings are set to be realised in 2010, although it expects a $400m one-off charge on the deal, it said.

It is, mildly speaking, doubtful whether this is as good news for workers as it described to be for shareholders. Unions definitely should be alerted - such "synergies" usually come down to slashing union jobs and cutting into terms and conditions.

The company has scheduled an analyst meeting March 22 and 23, 2010, where it announces to discuss the details of "integration planning" and "other efficiencies"

The deal will merge three companies which look at mixed results for 2009, mainly depending on their various geographies and product portfolio.

PBG, operating in as diverse countries as the United States, Canada, Greece, Mexico, Russia, Spain and Turkey, announced a significant income increase for 2009, although revenue declined. For the year ended Dec. 26, the company had income of $612 million, equal to $2.84 per share on the common stock, up from $162 million, or 75c per share, during fiscal 2008. Revenue for the year was $13,219 million, down 4% from $13,796 million during fiscal 2008.

PepsiAmericas, operating apart from the US in a number of crisis-affected Eastern European Countries and the Carribean, had to put up with less net income than 2008, but still earning a full year 2009 net income of $181.2 million, or diluted earnings per share (EPS) of $1.46. Results were negatively impacted by significant foreign currency movements -  Reported revenue of $4.4 billion decreased 10 percent. Comparable currency neutral revenue was declining less sharply, but still lower by 1 percent as a result of volume declines in both the U.S. and Central and Eastern Europe (CEE), partially offset by strong pricing across all geographies.

Pepsico Inc. itself reported "strong execution of PepsiCo's operational priorities (...) despite the macroeconomic challenges across much of the world,"

The American Foods and Snacks division PAF (including Frito Lay North America, Quaker Foods North America, and Latin America Foods, grew both revenue and core operation profit. The Pepsico owned PepsiCo Americas Beverages (PAB) divison saw more difficult times "against the backdrop of a challenging liquid refreshment beverage category in North America". For the full year, volume and net revenue declined 6, while core operating profit decreased 3 percent. Outside the Americas, PepsiCo International (PI) saw a 17 percent increase in core operating profit on an 11 percent increase in net revenue, underlining again the growing importance of the international business for Pepico.

English