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Summary
- PepsiCo has capped off an uncertain year with resilience. Earnings are slightly lower compared to last year.
- It plans cash returns to shareholders in the tune of $5.9 billion, which mostly includes dividends and small repurchase.
PepsiCo, Inc. recently released full-year and last quarter results. The consumer goods business clocked full-year revenue growth of 4.8%, while fourth-quarter revenue was up 8.8%. FX impact for the full-year negative 2%.
Source: PepsiCo NY Conference
The global food and beverage company has a strong portfolio of brands, including Pepsi-Cola, Tropicana, Gatorade, Frito-Lay, and Quaker. It manufactures through owned operations, contract manufacturers, bottlers, and other parties.
PepsiCo products are sold in over 200 countries. The pandemic impacted the operation of the group in markets where its products are manufactured and marketed. Retail industry remains highly affected due to the pandemic given the shift in sales channels.
Net revenue for the year was $70.4 billion compared to $67.16 billion in the previous year. Operating profit fell 2% to $10.08 billion while operating profit margin fell one percentage point to 14.3%.
A lower operating profit was attributed mainly to an increase in operating costs, offset by productivity savings and net revenue growth. Incremental costs were incurred to manage the pandemic, while other items that compressed operating profit were merger and integration charges, higher inventory fair value adjustments, and negative FX impacts.
Source: PepsiCo 4Q Reports, 11 February 2020
The year's free cash flow was $6.43 billion, up 15% from $5.58 billion last year. PepsiCo uses free cash flows to fund acquisitions and financing activities like dividends, share repurchases and debt repayment.
Net income for the year was $7.12 billion down from $7.31 billion last year. Diluted earnings per share for the year was $5.12, which was down from $5.2 in the previous year. Its annualised dividend rose 5% to $4.3 per share from $4.09 per share.
In 4Q20, the company clocked revenue of $22.45 billion compared to $20.64 billion in the previous year. Gross profit rose to $12.02 billion from $11.29 billion, while operating profit rose to $2.82 billion against $2.69 billion. Net income was $1.85 billion compared to $1.77 billion in 4Q19.
Under the 2019 Multiyear Productivity Plan, the company expects to spend pre-tax charges of $2.5 billion, including $1.6 billion of capital expenditure. Since inception to 26 December 2020, the company had incurred $797 million in pre-tax costs, including cash expenditure of $518 million.
In 2021, the food & beverage company expects a mid single-digit increase in organic revenue and a high single-digit increase in constant currency EPS. Cash returns to shareholders were estimated at $5.9 billion, which comprise $5.8 billion in dividend and $100 million via share repurchase.
