In the fourth quarter of 2008, PepsiAmericas reported net income of $37.8m. Results in 2008 benefited from an additional week of operating performance, which contributed $5.7m to net income or 2% increase to operating income.
Despite the challenging global economic environment, Chairman and CEO Robert C Pohlad stated that the company had successfully managed to offset US volume decline and unfavourable foreign exhange rates by adjusting pricing strategies and managing the rising cost of raw materials.
“We begin 2009 with a pragmatic view of the challenges ahead, anticipating unfavourable foreign exchange and slowing global consumer demand,” he said.
“We’re taking actions to effectively manage through this challenging period, while strengthening our position in our markets. Our plans include execution of disciplined pricing, accelerated productivity initiatives and specific cost-reduction programmes, and expansion of our portfolio with new products and innovation.
“With these efforts, I’m confident that PepsiAmericas will continue to deliver dependable growth and attractive returns for our shareholders over the long term.”
##Local and worldwide results## In the fourth quarter, worldwide revenue for PepsiAmericas increased 3% to $1.2bn, reflecting strong pricing across all markets partly offset by a volume decline of 1.1%. Cost of goods sold per unit increased 4.7%, primarily driven by rate, reflecting continued raw material increases across all geographies.
Net sales in the US increased 5% to $849.2m in Q4 as pricing and the impact of the 53rd week offset a 7.3% decline in volume. Carbonated soft drink volume decreased 6%, lapping strong promotional activity in the prior year, and non-carbonated soft drinks decreased almost 14%.
The decrease in the US non-carbonated soft drinks market reflects the continued decline in the low-margin Aquafina take-home package, and in Lipton. Single-serve volume decreased 7% due to continued softness in the foodservice channel, particularly third-party operators, reflecting the difficult economic environment. Net pricing grew 6.4%, primarily reflecting rate increases to cover higher raw material costs.
In Central and Eastern Europe, net sales were $256.5m in the fourth quarter, down 2% from the previous year, primarily due to poor exchange rates. Regardless, according to the report, favourable volume trends continued in Poland and Romania during the quarter. Cost of goods sold per unit decreased 3.5%, reflecting a 2.8% cost increase in local currency offset by a 6.3% decrease from foreign currency.
The Caribbean reported an operating loss of $0.6m, including non-comparable adjustments of $3.1m, compared to operating income of $2.3m in the prior year quarter.
A strategic restructuring of the Caribbean business was initiated in the third quarter to streamline operations and improve profitability, resulting in a $9m special charge for the full year.
##Outlook## Overall, PepsiAmericas is expecting currency to reduce net sales by roughly 7% in 2009, if foreign exchange rates stay at median levels. This results in an estimated net sales decline of 2-3%, including the impact of currency.
The US business operating profits are anticipated to grow in the low, single-digit range, as pricing, productivity, and an expanded product portfolio offset higher costs and anticipated continued category softness. In Central and Eastern Europe, the company expects year-over-year profits to decline in the 30 % range, as transactional and translational currency losses offset the benefits from volume, pricing and productivity.
Finally, the company expects to generate adjusted operating cash flow of approximately $180m to $200m in 2009, with capital spending of approximately $275m.
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