2008 Q2 Earnings Call

Transcription

1 2008 Q2 Earnings Call July 23, 2008

2 Safe Harbor Statement This material may contain forward-looking statements about our expectations regarding future performance, such as our business outlook. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in demand for our products, as a result of shifts in consumer preferences or otherwise; our ability to maintain our reputation; our ability to build and sustain our information technology infrastructure and successfully implement our business process transformation initiative or to outsource certain functions effectively; fluctuations in the cost and availability of raw materials; our ability to compete effectively; disruption of our supply chain; trade consolidation, the loss of any key customer, or failure to maintain good relationships with our bottling partners; unfavorable economic, environmental or political conditions in the countries where we operate; changes in the legal or regulatory environment; our ability to hire or retain key employees; and market risks arising from changes in commodity prices, foreign exchange rates and interest rates. For additional information on these and other factors that could cause our actual results to materially differ from those set forth herein, please see our filings with the Securities and Exchange Commission, including our 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. We undertake no obligation to update any forward looking statements, whether as a result of new information, future events or otherwise. Please refer the Investors section of PepsiCo s web site at under the heading PepsiCo Financial Press Releases to find disclosure and a reconciliation of any non-gaap financial measures contained herein. 2

3

4 Indra Nooyi Chairman & CEO, PepsiCo

5 PepsiCo: Q Results Growth Versus Q2 Prior Year Worldwide Volume: Snacks Beverages Revenue EPS (excluding mark-to to-market) 4% 5% 14% 11% 5

6 Confirming 2008 Full Year Guidance EPS at least $3.72, excluding mark-to to- market commodity gains Increased share repurchases to at least $5.3 Billion, an increase of at least $1 Billion 6

7 PepsiCo Q Markets outside the U.S. remain vibrant PI delivered double-digit digit snack and beverage growth in Q2 and H1 Strong brands, local relevance and unparalleled distribution delivered category growth in spite of increased pricing Monitoring the markets for signs of change 7

8 Navigating the Environment Increasing commodity hedges and taking longer positions to minimize volatility Leveraging pricing and revenue capabilities from around the world Optimal price/pack architectures Efficient trade promotions Strong pricing power of brands Raising the bar on productivity 8

9 Snacks: An Affordable Treat Stable global consumer demand Snacks offer affordability and value around the world Local cost base and global scale drive affordability and profitability 9

10 N.A. PEP Advantages and Action Plan PEP Advantages Ongoing share gains in CSD #1 position in hydration with 150 index vs. next competitor Excellent Health and Wellness credentials with Tropicana and Naked juice brands PEP Actions Continue to innovate Leverage Power of One sales team Work together with bottling partners Focus on productivity & cost measures Leadership in Tea and Coffee 10

11 John Compton CEO, PepsiCo Americas Foods

12 PAF: Q Results Growth Versus Q Volume Revenue Operating Profit 2% 16% 13% 12

13 FLNA: Q Results Growth Versus Q Volume Revenue Operating Profit 2% 8% 8% 13

14 Volume Increases in FLNA Core Brands 14

15 Strong Brands Demonstrated Pricing Power Achieved high-single single-digit net pricing Balanced visual pricing and weight-outs Maintained volume growth Managed price gaps, resulting in value share growth in salty and savory categories Revenue growth across all major channel segments 15

16 FLNA Innovation 16

17 FLNA Productivity Productivity savings accelerated to cover about 20% of commodity inflation Productivity initiatives delivered tangible sustainability benefits in H1 Water use down 2% Electricity down 3% Natural gas down 3% 17

18 FLNA Summary Expect solid top- and bottom-line results in H2 Inflation higher in Q3 v. Q4 Pricing and productivity plans in place to manage inflation Expect full-year profitability and share growth to be in-line with past performance 18

19 QFNA: Q Results Growth Versus Q Volume Revenue Operating Profit 2% 4% 4% 19

20 QFNA Cedar Rapids Expect insurance payment in late 2008 to cover asset damage and business disruption Expect return to full production levels by mid-august 20

21 LAF: Q Results Growth Versus Q Volume Revenue Operating Profit 4% 41% 38% 21

22 LAF Summary Effective net pricing and weight-outs drove revenue and profit growth Sabritas and Gamesa on-track Brazil showed strong organic growth plus Lucky acquisition 22

23 PAF Summary Very strong Q2 with growth across all segments Continue to see opportunities for growth Drive aggressive productivity Expect continued strong performance for balance of 08 23

24 Massimo d Amore CEO, PepsiCo Americas Beverages

25 PAB: Q Results Growth Versus Q Volume Revenue Operating Profit (1%) 1% (7%) 25

26 PBNA: Q CSD Overview CSD gained volume and value share 26

27 PBNA: Q NCB Overview Gatorade continued to grow volume and value share G2 and Tiger results encouraging SoBe Life Water > 50% volume growth Amp Energy more than doubled Continued innovation in Lipton Tea and Tropicana 27

28 PBNA: Forward Focus Developing price/pack architecture to optimize Consumer affordability System net price and profit realization Consumer-driven innovation Laying groundwork for productivity 28

29 LAB Highlights Market share gains across markets Mid-single single-digit CSD growth Double-digit NCB growth H2Oh! Lipton Gatorade 29

30 Mike White Vice Chairman and CEO, PepsiCo International

31 PI: Q Results Growth Versus Q Volume: Snacks Beverages Revenue Operating Profit 10% 13% 25% 18% 31

32 PI Performance Highlights Broad-based growth across geographies Solid developed market growth Continued strong growth in emerging markets 32

33 PI Product Innovation Juice platform expansion across region Tropicana Smoothies expanded to Western Europe Baked Snacks doing well in Russia and Spain Fight For your Flavour program in India 33

34 PI UK/Europe: Q Results Growth Versus 2007 Volume: Snacks Beverages Revenue Operating Profit 8% 20% 24% 19% 34

35 PI MEAA: Q Results Growth Versus Q Volume: Snacks Beverages Revenue Operating Profit 13% 10% 25% 16% 35

36 PI H2 Overview Full calendar of innovation across PI To date, emerging and developed markets continue to grow Closely monitoring for changes in market conditions Focusing on productivity and cost control 36

37 Richard Goodman CFO, PepsiCo

38 PepsiCo: Q Results % Growth Versus Q2 Prior Year Revenue Division Operating Profit EPS 14% 7% 11%* *Excluding mark-to-market commodity gains 38

39 Q2 Below the Line: Mark-to to-market Q2 08 Mark-to to-market gain on commodities of $61 million Net change vs. Q2 07 of $48 million Drove 2 percentage points of operating leverage and $0.02 EPS Management discussion and guidance on EPS and EPS growth to exclude mark-to to- market in current and prior year 39

40 Q2 2008: Cash Flow Returned $2 Billion to shareholders $600 million in dividends $1.4 Billion in share repurchases Increasing 2008 share repurchases to at least $5.3 billion At least $1 Billion increase in planned repurchases 40

41 2008 Full Year Outlook Continued strong H2 More challenging commodity overlaps in Q3 v. Q4 Guidance Volume growth of 3% to 5% Low-double double-digit digit revenue growth Core EPS of at Least $3.72* No change to cash flow or capex targets $7.6 Billion and $2.7 Billion, respectively *Excluding mark-to-market commodity gains 41

42