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PepsiCo takes almost $500mn charge related to Russia-Ukraine war

PepsiCo has taken nearly $ 500 million in charges related to the impact of Russia’s war against Ukraine on its beverage and snack business in the region, reflecting the rising costs of the conflict to Western brands that saw Eastern Europe as a growth market.

The New York consumer goods group has announced in March that it will suspend brand sales including Pepsi and 7 Up in Russia, while claiming it has a humanitarian responsibility to continue offering products including milk and baby food in Russia, where it has 20,000 employees. .

It announced to investors on Tuesday that it would take $ 241 million in “brand portfolio reduction commissions” and $ 241 million in “charges in the Russia-Ukraine conflict,” relating to its need to write off debtors and some inventory value in the region.

The total amount of $ 482 million is one of the largest announced by an American company. GE announced on Tuesday $ 230 million in charges related to its business in Russia and Ukraine.

Pressure is mounting on Western brands to leave Russia altogether as the conflict escalates. However, Hugh Johnston, PepsiCo’s chief financial officer, said that “there has been no change in our thinking” since March and that the company has not set a deadline for testing its longer-term presence in Russia.

Despite the allegations, PepsiCo has boosted its sales forecast for 2022, though it has warned that a strong dollar will result in higher currency translation “against” profit expectations.

Gatorade and Lay’s maker now expects full-year revenue to grow by 8% by 2022 on an organic basis, which is adjusted for acquisitions, realizations and currency effects. The company has previously led organic growth in revenue of 6 percent.

The updated forecast came despite higher-than-expected inflation in commodities, energy prices and other input costs, which, according to Ramon Leguerta, the company’s CEO, will hold up “in the 2022 balance sheet.”

Analysts welcomed better-than-expected 13.7% organic growth, which led to a 7% increase in its core earnings per share index to $ 1.29, above the $ 1.23 forecast on Wall Street.

PepsiCo’s updated revenue forecast was in contrast to rival Coca – Cola’s re-approval of the 2022 forecast on Monday, despite reporting its highest quarterly revenue and profit since 2016.

Coca-Cola said on Monday that suspending its business in Russia would shave off one percent of global portfolio volumes and 4 cents from the 2022 forecast for earnings per share, but did not go so far as to announce any charges for impairment.

PepsiCo has confirmed most of its other assumptions for the entire year, but warned against a 2-point headwind in foreign currency translation, an increase from the February forecast of 1.5 percentage points. This implies that the core index of its earnings will reach $ 6.63 per share in 2022, 6% above 2021 but 4 cents lower than the previous forecast.

Overall, PepsiCo said revenue rose 9.3 percent to $ 16.2 billion in its first quarter from a year earlier, while net income rose nearly 150 percent to $ 4.26 billion.

Johnston said new products including Pepsi Nitro and Ruffles Flamin ‘Hot Cheddar & Sour Cream prevented growth, noting that consumers are adopting zero-sugar products at an accelerated pace.

He said the group encountered little resistance from consumers when it raised prices in response to inflation, but was looking for another “several hundred million dollars” in cost savings to offset the need for further price increases.

PepsiCo takes almost $500mn charge related to Russia-Ukraine war Source link PepsiCo takes almost $500mn charge related to Russia-Ukraine war

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