Pepsico To Cut 8,700 Jobs; 4Q Net Rises
By Mae Anderson
PURCHASE, N.Y. (AP) -- PepsiCo plans to cut 8,700 jobs, or about 3 percent of its workforce, 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 it expects the restructuring will save an additional $1.5 billion by 2014 - on top of $1.5 billion in cost cutting it previously announced.
The announcement of the job cuts came as the company reported slightly higher earnings for the fourth quarter.
Snack and soda makers are facing high commodity costs and changing consumer tastes toward healthier snacks and drinks. Pepsi's rival Coca-Cola Co. announced its own cost-cutting program on Tuesday, although Coke said its plan would ultimately add jobs. PepsiCo has been losing ground to Coke, on the soda side at least, since Coca-Cola has more of an overseas presence, particularly in emerging markets. Pepsi's snack business has been stronger.
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 costs with higher prices because of consumer caution in light of the uncertain economy, so the plan to cut costs elsewhere is needed.
"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," CFO Hugh Johnston said in a statement.
At the same time, 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.
PepsiCo says it expects adjusted 2012 earnings to fall 5 percent in 2012 during a transition and then rise in the high single digits after that.
Its shares fell $1.27, or 1.9 percent, to $65.47 in premarket trading.
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