Futures and Commodity Market News

Apr 24, 2024 (MarketLine via COMTEX) --

PepsiCoaEUR(TM)s North American Quaker Foods division booked a first-quarter loss related to a product recall, while the groupaEUR(TM)s international division posted growth.

Last December, the US Food and Drug Administration recalled more than 40 Quaker Oats products due to concerns of salmonella contamination. Earlier this month, PepsiCo closed a US facility linked to the issue.

The Quaker Foods North America division saw organic revenue decline 24%, reaching $593m. Meanwhile, PepsiCo reported an operating loss for the business unit of $49m compared to a profit of $188m in the opening quarter of 2023.

In PepsiCo’s prepared remarks, it said: “We expect the financial impacts associated with product recalls at Quaker Foods North America to moderate as the year progresses.”

The Quaker struggles were partially offset by a strong performance in PepsiCo’s international markets, as the Latin America and Europe markets posted 8% and 10% revenue growth, respectively, of $2.07bn and $1.94bn.

CEO Ramon Laguarta told analysts that the international businesses have been “an area of investment for us now for a few years, both in snacks and in beverages".

He said: “We’ve been investing in capacity. We’re in the process of opening factories in Vietnam and in China and in India and in Mexico, and we just opened one in Poland. So we keep expanding our manufacturing and our go-to-market capabilities in those markets. So we feel good, and I think that it's going to continue to be a big source of growth for us.”

The chief executive added that PepsiCo is seeing a demand slowdown in its business in China, as the “consumer is cautious and the consumer is saving a lot”.

Laguarta said: “The truth is that in China, our team is not only this year, but already consistently for the last four, five years, been gaining share and creating a very capable and profitable business in China, we're very proud of.”

The group’s Frito-Lay North America division, which includes snacks like Lay’s crisps, saw a drop in operating profit which caught analysts by surprise. The unit reported a profit of $1.55bn, down from $1.6bn last year.

Robert Moskow, an analyst at TD Securuities, said in a research report: “We think management's description of the division as having "very healthy margins already"(now 28% compared to a peak of 31%) and set for further investment may have spooked investors who think that FLNA will need to introduce deeper discounts (especially with low-income consumers) to revitalise volume growth.”

PepsiCo’s total net revenue grew to $18.3bn from $17.8bn last year. Operating profit rose marginally from $2.63bn to $2.72bn while net income grew to $2.05bn from $1.94bn in the opening quarter of 2023.

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COMTEX_451362882/2227/2024-04-24T18:03:37


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