Pepsi Bottling Group reports Q2 2009 results

Filed by Bill Bruce

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This includes a net after-tax gain of $39m, or $0.18 per share, as a result of a benefit from the settlement of tax audits, previously announced restructuring charges and advisory fees relating to PepsiCo’s proposal to acquire PBG. This compares to net income of $174m, or $0.78 per diluted share, that the company reported in the second quarter of 2008.

“PBG delivered a strong set of results during the second quarter,” said PBG chairman and CEO, Eric Foss. “Our ability to execute an effective global pricing strategy, achieve robust cost and productivity savings, and deliver solid execution at the point of sale has fuelled our success through the first half of 2009. We’re also benefiting from improved carbonated soft drink trends in the US, as well as encouraging developments in the commodity and foreign currency markets.

“All of this has driven our performance above expectations for two consecutive quarters despite the challenging macro-economic environment, and we have a positive outlook for the remainder of this year and beyond.

“As we look towards the future, we continue to focus on our three strategic priorities for growth. We’ll strengthen and reposition our brand portfolio, transform our performance through operational excellence, and pursue geographic growth opportunities. We believe that our work in these three areas will unlock significant new growth opportunities and position us well for long-term success.”

Executive summary

• PBG reported a net revenue per case decline of 3% for the second quarter. Net revenue per case improved 5% on a currency neutral basis, with growth across all reporting segments. This included growth of 8% in Europe, with strong results in Russia. In Mexico, currency neutral net revenue per case improved 6%. Reported net revenue per case improved 2% in the US and Canada segment, with a currency neutral improvement of 3% driven by strong pricing actions.
• Total worldwide physical case volume declined 4% for the second quarter. Volume in the US and Canada was down 1%. European volume declined 15%. In Mexico, volume declined 7%. Worldwide volume benefited by one percentage point due to the shift of the Easter holiday from the first quarter of 2008 to the second quarter of 2009.
• Reported worldwide operating income for the second quarter declined 12% vs the second quarter of 2008, including a six percentage point reduction from previously announced restructuring charges coupled with advisory fees related to PepsiCo’s proposed acquisition of PBG. On a comparable basis, currency neutral operating income declined 1% given the lapping of strong performance in the prior year. In the US and Canada segment, reported operating income declined 1% and increased a strong 5% on a comparable basis, including a two percentage point negative impact from currency. International results were stronger than expected, but declined on a year over year basis due to overall weak macro-economic trends and the impact of foreign exchange devaluations.

Financial highlights

On a reported basis, worldwide revenue decreased 7%. Worldwide revenue was flat on a currency neutral basis in the second quarter. The company’s revenue performance reflects solid currency neutral net revenue per case gains offset by softer volume due to macro-economic pressure.

Reported COGS per case were flat in the second quarter. Currency neutral COGS per case increased 8%, consistent with the company’s expectations.

On a reported basis, PBG’s SD&A expenses declined 10% in the second quarter. Restructuring charges and advisory fees increased reported SD&A by two percentage points. Reported SD&A in the US and Canada segment declined 2%. Comparable worldwide SD&A expenses improved 4% on a currency neutral basis, reflecting the success of the company’s global productivity initiatives.

Source: The Pepsi Bottling Group