PepsiCo reports marginal decline in Q1 net income

American food and beverage major PepsiCo has reported that its net income for the first quarter 2012 fell marginally to $1.13bn, compared to $1.14bn during the previous year, as the company raised prices to tackle surging commodity costs.

Revenue increased 4% to $12.43bn, compared to $11.94bn last year.

In the quarter, the company hiked prices by 5.5% to offset the $300m rise in ingredient costs, which included items such as corn, aluminium, packaging materials, and fuel for vehicles transporting products.

Like several food companies, PepsiCo is struggling to strike a balance to control ingredient costs without losing budget-conscious customers. PepsiCo is simultaneously trying to wrest lost market share from rival The Coca-Cola Co.

PepsiCo chairman and CEO Indra Nooyi said the first quarter results reflect the strength of the company’s brands, which enabled it to take pricing actions.

PepsiCo’s global snack revenue grew 7%, however, its beverage sales increased to just 2%.

The increase in revenue was led by the emerging markets – revenue from Asia, Middle East and Africa rose 12% to $1.26bn, and operating profit inched up by 2% to $148m.

Revenue in Europe grew 13% to $1.84bn, while operating profit soared 29% to $81m.

Frito-Lay North America division saw a 4% increase in revenue to $3.01bn, while operating profit rose 1% to $780m.

In the Latin America Foods segment, net revenue grew 11% to $1.23bn, while operating profit increased 7% to $183m.

Net revenue in Quaker Foods North America unit declined 3% to $623m, and operating profit dipped 12% to $187m.

Americas Beverage division saw a net revenue decline of 2% to $4.44bn, while operating profit decreased 6% to $525m, as a result of refranchising of its Mexican drinks business.

Affirming its outlook for 2012, the company expects a 5% decline in adjusted net income.

For the year, Pepsico plans to increase advertising and marketing budget, accelerate innovation, and take up an aggressive productivity agenda.