Soft drinks manufacturer PepsiAmericas, Inc. (PAS) Wednesday reported a decline in net profit for the third quarter of fiscal 2009, negatively impacted by foreign currency movements, one-time impairment charge and lower net sales. The company also lowered its adjusted earnings guidance for full year 2009.
For the third quarter, net income attributable to PepsiAmericas was $63.5 million or $0.51 per share compared to $73.1 million or $0.58 per share in the prior-year quarter. On an adjusted basis, attributable net income fell to $72.2 million or $0.59 per share from $80.2 million or $0.64 per share in the 2008-year period.
On average, nine analysts polled by Thomson Reuters expected PepsiAmericas to earn $0.62 per share for the quarter. Analysts' estimates typically exclude special items.
The Minneapolis, Minnesota-based company stated that its results were negatively impacted by foreign currency movements, which reduced the quarter's net income by $38 million or $0.31 per share.
During the third quarter, PepsiAmericas incurred a one-time impairment charge amounting to $17.4 million in relation to the company's Sandora and Sadochok brands. The company stated that the non-cash charge resulted from the company's determination that carrying value of indefinite life intangible assets exceeded fair value.
Net sales for the period dropped 15% to $1.13 billion from $1.33 billion in the third quarter of fiscal 2008. PepsiAmericas said comparable currency neutral revenue fell 3% as a result of volume declines in both the U.S. and Central and Eastern Europe, or CEE, offset partly by strong net pricing across all geographies. Analysts expected the company to generate revenues of $1.22 billion during the quarter.
PepsiAmericas stated that its take home business in the US was particularly soft while pricing, productivity and cost management increased operating profits by 7% in the quarter. In Europe, the company added that weaker economic trends in Romania negatively impacted revenues and operating profits in the quarter, while volumes sequentially improved in all other markets.
Comparable volume for the period declined 9%, and CEE volume slipped 9.3%. PepsiAmericas added that US volume decreased 8.9% including more than 3 percentage points from quarterly shift in Fourth of July holiday.
During the quarter, selling, delivery and administrative expenses, or SD&A, incurred by the company fell to $334.6 million from $388.8 million a year earlier. In the third quarter, PepsiAmericas recorded a fee of $1.8 million in SD&A, with regard to pending merger with PepsiCo, Inc. In August, PepsiAmericas had signed deal to merge with PepsiCo along with its peer The Pepsi Bottling Group.
PepsiAmericas noted that special charges for the period, associated with restructuring of Hungary operations for severance and fixed asset impairments, plunged to $0.1 million from $7.1 million in the 2008-year period.
In the preceding second quarter, attributable net income had plunged to $61.4 million or $0.50 per share from $90.8 million or $0.72 per share in the same quarter a year ago. Net sales for the second quarter had dropped to $1.26 billion from $1.34 billion in the second quarter of fiscal 2008.
For the nine-month period, net income attributable to the company was $146.6 million or $1.18 per share compared with $188.6 million or $1.48 per share in the same period last year. Year-to-date net sales slumped to $3.45 billion from $3.77 billion in the first nine months of fiscal 2008.
Looking ahead, chairman and chief executive officer Robert Pohlad said the company expects topline pressures to continue for the remainder of the year.
As a result, PepsiAmericas currently expects its adjusted earnings for full year 2009 to be in a range of $1.83 to $1.87 per share, lower than its previous view of $1.87 to $1.94 per share. The company added the reduced outlook reflects the impact of softer US volumes and difficult emerging economies, particularly Romania. For full year 2009, analysts' currently expect PepsiAmericas to earn $1.93 per share on revenues of $4.67 billion.
Further, the company said it anticipates to generate adjusted operating cash flow at the high end of its guidance range of $180 million to $200 million.
In Wednesday's regular trading session, PAS is currently trading on the New York Stock Exchange at $29.27 per share down $0.17 or 0.58% on a volume of 220,892 shares.
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