Pepsico to Cut 8,700 Jobs; Quarterly Earnings Rise
Pepsico plans to cut 8,700 jobs in a restructuring as it seeks to offset high commodity costs and increases investment in advertising and marketing in North America.
The maker of Pepsi soda, Tropicana juice and Doritos chips said Thursday that the job cuts are 3 percent of its work force. The company says it expects to save an additional $1.5 billion by 2014 — on top of $1.5 billion in cost cutting it previously announced.
Snack and soda makers are facing high commodity costs and changing consumer tastes toward healthier snacks and drinks. Pepsi's rival Coca-Cola announced its own cost-cutting program on Tuesday, although the company said it would ultimately add jobs in its program.
Pepsi said “tough decisions” were needed because it expects 2012 will be the second year in a row with higher-than-average costs for commodities. It said it is not able to offset those with higher prices because of consumer caution in light of the uncertain economy, so the cost-cutting plan is needed.
CFO Hugh Johnston said in a statement: “2012 will be a year of transition, one in which we will make the right investments to position PepsiCo properly to achieve long-term high-single-digit core constant currency earnings per share growth.”
PepsiCo plans to increase advertising and marketing behind its brands by $500 million to $600 million in 2012, with a particular focus on North America. It also plans to increase dividends and share buybacks in 2012 to return cash to shareholders.
Meanwhile, Purchase, N.Y.-based company also said Thursday that its net income for the quarter ended Dec. 31 rose 4 percent to $1.42 billion, or 89 cents per share. That's up from $1.37 billion, or 85 cents per share, last year.
Excluding restructuring and other costs, net income was $1.15 per share Analysts expected $1.13 per share, According to FactSet.
Revenue rose 11 percent to $20.16 billion. Analysts expected $19.89 billion. Higher prices and cost cuts helped offset higher commodity costs. Volume rose 7 percent.
The company took a $383 million charge in the fourth quarter related to the restructuring plan and said it will take $425 million in charges in 2012. It will take $100 million in charges between 2013 and 2015.
For the year, net income rose 2 percent to $6.46 billion, or $4.03 per share. That compares with $6.33 billion, or $3.91 per share.
Revenue rose 15 percent to $66.5 billion from $57.84 billion.
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