Earnings Digest -- Food: Pepsi's Overseas Growth Boosts Profit; Commodity Costs Put A Dent in U.S. Results, But Net Still Rises 61%
PepsiCo Inc.'s 61% profit rise in the fourth quarter shows how the snack-and-beverage giant is increasingly relying on robust growth outside the U.S. and a widening product lineup as rising commodity costs and soft sales of some drink brands hurt results in the U.S.</br></br>Like some other companies, the Purchase, N.Y., company is grappling with rising costs of corn, oranges, fuel, and other costs at the same time that U.S. consumer demand for some products has slowed. PepsiCo declined to reveal how much its commodity costs have risen, Cash corn prices surged 57% from December 2005 through December 2006 amid growing demand for ethanol and other pressures.</br></br>The price of orange-juice futures climbed more than 60% in 2006 on the New York Board of Trade, as hurricane damage in Florida constrained supplies.</br></br>Sales of sports drink Gatorade and Tropicana Pure Premium orange juice declined in the fourth quarter, accompanied by continued drops in soda sales. Stronger-than-expected results from the company's Frito-Lay North America unit, PepsiCo's largest source of profit, showed how the company is offsetting rising costs by raising prices, improving productivity and churning out new snacks.</br></br>The company's strongest results came from its fast-growing international division, with operating profit rising 26%. Snack volume rose 9%, with particularly strong sales in Mexico and Russia, while beverage volume rose 7%, led by sales in the Middle East, Argentina, China and Brazil.