PepsiCo reports 5% decline in Q3 net income

American food and beverage major PepsiCo has reported that its net income for the third quarter 2012 fell 5% to $1.9bn, compared to $2bn during the previous year, due to increased spending on advertising, higher commodity costs and negative impact from foreign-exchange translation.

Revenue decreased 5% to $16.65bn, down from $17.58bn last year, due to the refranchising of its bottling businesses in China and Mexico and the effect of currency fluctuations.

Excluding these factors, revenue increased 5%, reflecting 1% volume growth and 4% price rise.

PepsiCo chairman and CEO Indra Nooyi said the company is implementing the strategy announced earlier this year and is on track to achieve its full-year targets.

"We will continue to invest aggressively to build our brands, accelerate innovation to drive growth, focus on execution and deliver our productivity agenda while returning cash to shareholders," Nooyi added.

Earlier in 2012, PepsiCo rolled out a plan to lower costs, invest at least $600m in additional advertising of its top brands, and roll out a range of new products.

Segment-wise, Frito-Lay North America division saw a 3% increase in revenue to $3.26bn, while operating profit declined marginally to $917m.

In the Latin America Foods segment, net revenue grew 2% to $1.88bn, while operating profit rose 21% to $219m.

Net revenue in Quaker Foods North America unit increased marginally to $615m, and operating profit dipped 13% to $154m.

PepsiCo Americas Beverage division saw a net revenue decline of 7% to $5.53bn, while operating profit decreased 16% to $837m, as a result of refranchising of its Mexican drinks business and the company’s decision to stop selling unprofitable drinks.

Revenue in Europe fell 6% to $3.69bn, while operating profit fell 6% to $483m.

In Asia, Middle East and Africa, revenue declined 21% to $1.66bn, and operating profit increased 11% to $317m.

The company stood by its full year outlook – it expects earnings per share to decrease 5% from the $4.40 it earned in 2011, and revenue to rise by a low single-digit rate.

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Image: PepsiCo, which has reported a 5% decrease in Q3 net income, is optimistic about meeting its full-year targets. Photo credit: PepsiCo.