PepsiCo Q3 2013 Earnings Call

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This Powerpoint is meant to accompany the PepsiCo Q3 2013 Earnings Call.

Financial Highlights
• Year-to-date and expected full-year organic1 revenue growth in line with long-term target • Each of the four business units achieved positive net price realization in the quarter
• Core1 gross margin up 70 bps in the quarter and 105 bps year to date
• Productivity on track
• Year-to-date management operating cash flow (ex-items)1 of $5.5 billion, up 12 percent year-over-year; returned $4.6 billi

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PepsiCo Q3 2013 Earnings Call

  1. 1. PepsiCo Third Quarter 2013 Earnings Call October 16, 2013 Indra Nooyi Chairman and Chief Executive Officer Hugh Johnston Chief Financial Officer
  2. 2. Safe Harbor Statement of Terms & Non-GAAP Information Note: This presentation should be viewed in conjunction with PepsiCo’s Q3 2013 earnings call Safe Harbor Statement • Statements in this communication that are "forward-looking statements,” including our 2013 guidance, are based on currently available information, operating plans and projections about future events and trends. Terminology such as “believe,” “expect,” “intend,” “estimate,” “project,” “anticipate,” “will,” “expressed confidence,” “position” or similar statements or variations of such terms are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in demand for PepsiCo’s products, as a result of changes in consumer preferences and tastes or otherwise; changes in the legal and regulatory environment; PepsiCo’s ability to compete effectively; PepsiCo’s ability to grow its business in developing and emerging markets or unstable political conditions, civil unrest or other developments and risks in the markets where PepsiCo’s products are sold; unfavorable economic conditions in the countries in which PepsiCo operates; increased costs, disruption of supply or shortages of raw materials and other supplies; failure to realize anticipated benefits from PepsiCo’s productivity plan or global operating model; disruption of PepsiCo’s supply chain; damage to PepsiCo’s reputation; failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo’s existing operations or to complete or manage divestitures or refranchisings; PepsiCo’s ability to hire or retain key employees or a highly skilled and diverse workforce; trade consolidation or the loss of any key customer; any downgrade or potential downgrade of PepsiCo’s credit ratings; PepsiCo’s ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business transformation initiative or outsource certain functions effectively; fluctuations in foreign exchange rates; climate change, or legal, regulatory or market measures to address climate change; failure to successfully renew collective bargaining agreements or strikes or work stoppages; any infringement of or challenge to PepsiCo’s intellectual property rights; and potential liabilities and costs from litigation or legal proceedings. • For additional information on these and other factors that could cause PepsiCo’s actual results to materially differ from those set forth herein, please see PepsiCo’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Information • Please refer to the “Investors” section of PepsiCo’s web site at www.pepsico.com under the heading “Events & Presentations” to find disclosure and a reconciliation of any nonGAAP financial measures contained herein. Glossary • Please refer to the Glossary and attachments to our October 16, 2013 earnings release for the definitions of core, constant currency, organic and certain other terms used herein. Beginning with the second quarter of 2012, organic results exclude the impact of foreign exchange translation. 2
  3. 3. Financial Highlights • Year-to-date and expected full-year organic1 revenue growth in line with long-term target • Each of the four business units achieved positive net price realization in the quarter • Core1 gross margin up 70 bps in the quarter and 105 bps year to date • Productivity on track • Year-to-date management operating cash flow (ex-items)1 of $5.5 billion, up 12 percent year-over-year; returned $4.6 billion to shareholders through dividends and share repurchases 1. Represents Non-GAAP financial measures that adjust for certain items. For a description of these items, please refer to “Reconciliation of GAAP and Non-GAAP Information” under “Events and Presentations” in the “Investors” section of PepsiCo’s website at www.pepsico.com 3
  4. 4. Innovation Strength Driving New Product Success • Year-to-date, innovation as a percentage of net revenue, is up more than 100 basis points year over year • 6 of the top 25 new food and beverage product introductions across all measured US retail channels year to date • 7 new products this year that are on pace to achieve $100 million each in annual retail sales in the US 4
  5. 5. Frito Lay North America • FLNA organic1 revenue growth of 5%, organic volume growth of 3%, and core constant currency1 operating profit growth of 6% in the quarter • FLNA gained volume and value share across measured channels in the U.S. in salty snacks in the quarter and year to date • Continued innovation strength – Tostitos Cantina, Doritos Jacked Ranch Dipped Hot Wings, Cheetos Mix-Ups and Lay’s Do Us a Flavor 1. Represents Non-GAAP financial measures that adjust for certain items. For a description of these items, please refer to “Reconciliation of GAAP and Non-GAAP Information” under “Events and Presentations” in the “Investors” section of PepsiCo’s website at www.pepsico.com 5
  6. 6. PepsiCo Americas Beverages • Focused on disciplined revenue management and LRB value share • NAB sequentially improved both volume and value market share performance in measured channels while leading the industry in net price realization at retail • Product launches performing well – Mountain Dew Kickstart, Lipton Pure Leaf, Tropicana Farmstand, and Starbucks Iced Coffee 6
  7. 7. Developing and Emerging Markets • Organic1 revenue growth of 9% in the quarter • Most D&E markets continue to perform well as we drive greater penetration – double-digit organic1 revenue growth in China, +9% in Brazil, and +7% in Turkey in the quarter • AMEA organic1 revenue grew 6% in the quarter, with the deceleration from double-digit growth in the first half reflecting political and marketplace volatility in certain markets, notably Egypt and India 1. Represents Non-GAAP financial measures that adjust for certain items. For a description of these items, please refer to “Reconciliation of GAAP and Non-GAAP Information” under “Events and Presentations” in the “Investors” section of PepsiCo’s website at www.pepsico.com 7
  8. 8. Q3 and YTD Results Summary Q3 YTD Core EPS $1.24 $3.32 Core Constant Currency EPS Growth +5% +12% +3.3% +3.9% +70 basis points +105 basis points Core Constant Currency Operating Profit Growth +3%* +8%** Core Effective Tax Rate 25.5% 24.9% Organic Revenue Growth Core Gross Margin Expansion YTD MOCF (excluding certain items) $5.5 billion YTD Share Repurchases and Dividends $4.6 billion * Includes a 1-percentage-point negative impact from the incremental investments in the quarter ** Includes a 1-percentage-point positive contribution from the Vietnam gain net of incremental investments year to date The above items, other than share repurchases and dividends, represent Non-GAAP financial measures that adjust for certain items. For a description of these items, please refer to “Reconciliation of GAAP and Non-GAAP Information” under “Events and Presentations” in the “Investors” section of PepsiCo’s website at www.pepsico.com 8
  9. 9. 2013: Full-Year Outlook Unchanged Core Constant Currency EPS Growth +7%1 Organic Revenue Growth +Mid-Single Digits 2013 Productivity Savings ~$900M Commodity Inflation A&M Core Effective Tax Rate Foreign Exchange Translation Impact 2 MOCF (excluding certain items) Net Capital Expenditures +Low-Single Digits At Least 5.7% of Net Revenue ~27% At least -2% to EPS; ~-2% to Net Revenue More than $7B ~$3B (<5% of Net Revenue) Share Repurchases Dividends 1 ~$3.0B ~$3.4B From PepsiCo’s fiscal 2012 core EPS of $4.10; 2 Based on current market consensus rates Core EPS, core constant currency EPS growth, organic revenue growth, core effective tax rate and MOCF (excluding certain items) are Non-GAAP financial measures that adjust for certain items. For a description of these items, please refer to “Reconciliation of GAAP and Non-GAAP Information” under “Events and Presentations” in the “Investors” section of PepsiCo’s website at www.pepsico.com 9
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