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Pepsi profit tops analysts’ estimates

By Duane D. Stanford
Bloomberg News

PepsiCo Inc., the food and beverage company that investor Nelson Peltz wants to split up, on Wednesday posted third-quarter profit that topped analysts’ estimates as sales of snacks gained in the U.S. and Latin America.

Net income in the three months ended Sept. 7 rose 0.6 percent to $1.91 billion, or $1.23 a share, from $1.9 billion, or $1.21, a year earlier, PepsiCo said in a statement. Profit excluding some items was $1.24. The average estimate of 15 analysts surveyed by Bloomberg was $1.17 a share.

PepsiCo’s Summit County workforce totals about 600. The company operates a production plant in Twinsburg and a Frito-Lay snack distribution center in Green. Wooster, in Wayne County, is home to a large Frito-Lay facility.

PepsiCo’s increased snack sales bolster Chief Executive Officer Indra Nooyi’s case against Peltz, whose Trian Fund Management LP has pressured her to acquire cookie maker Mondelez International Inc. to boost value.

The company’s lagging drinks performance in the U.S. could give Peltz ammunition for his other idea —splitting beverages from food.

Total sales rose 1.5 percent to $16.9 billion. Analysts estimated $17 billion, on average. Revenue from Frito-Lay and other snacks in the Americas rose 7 percent, excluding the effects of acquisitions, divestitures and foreign-currency fluctuations.

Revenue on that basis in the company’s Americas beverages unit slid 1.5 percent. Sales volume for the business fell 4 percent, steeper than the 2 percent decline estimated by John Faucher, an analyst at JPMorgan Chase & Co.

PepsiCo shares have advanced about 18 percent this year compared with a 19 percent gain for the Standard & Poor’s 500 index.

PepsiCo reiterated it will increase per-share earnings, excluding the effects of currency fluctuations, at least 7 percent. That would produce profit of about $4.39 a share, up from $4.10 in 2012. The company expects currency fluctuations to reduce its full-year earnings per share by 2 percentage points.

Peltz, who disclosed ownership stakes in PepsiCo and Mondelez in April, said at a conference in New York in July that PepsiCo should acquire Mondelez in an all-stock deal that would be valued at as much as $67.8 billion.

Mondelez is based in Deerfield, Ill., and makes crackers and sweet snacks. It had a market value of about $54.4 billion as of Tuesday’s market close.

Peltz said that he has met often with Nooyi and that the company didn’t favor the idea.

PepsiCo has responded that its strategy is working and it is confident in its ability to increase shareholder value as a combined food and beverage company.

“Why break them up?” Warren Buffett, whose Berkshire Hathaway Inc. is Coca-Cola’s largest shareholder, told cable television business channel CNBC on Wednesday in an interview. “I believe in running a company for the shareholders who are going to stay rather than the ones who are going to leave.”

Peltz’s Trian held 12.3 million shares, or 0.8 percent, of PepsiCo as of June 30. The firm held almost 41 million shares, or 2.3 percent, of Mondelez.


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