Reflecting unfavourable currency factors, PepsiCo’s net revenue for 2016 declined by 0.4% to $63.056 billion but organic revenue, which excludes the impacts of foreign exchange translation, structural changes and the 53rd reporting week, grew by 3.7%. Reported operating profit at the global drinks and snacks group increased by 17% to $8.353 billion and core constant currency operating profit rose by 7%.
“We concluded 2016 with another strong quarter of operating performance, capping off a successful year. We met or exceeded every financial goal we set for 2016, while delivering a good balance between revenue performance and productivity,” says Indra Nooyi, chairman and chief executive of PepsiCo. “Looking ahead to 2017, we expect solid financial performance despite anticipated continued macroeconomic challenges. Further, reflecting our commitment to providing attractive cash returns to shareholders, we are increasing our dividend per share for the 45th consecutive year, beginning with our June 2017 payment.”
She adds: “We had notably good operating performance across our operating segments for the year. Our two largest divisions, Frito-Lay North America and North American Beverages, each had strong well-balanced performance with volume gains, net price realization and margin expansion driving high-single-digit core constant currency operating profit growth.”
Despite volatility and weak currencies in many key overseas markets which impacted reported results, PepsiCo’s international divisions delivered solid organic revenue growth led by high-single-digit growth in developing and emerging market businesses as a group with particularly strong performance in Mexico, China and Egypt, which grew organic revenue in the double-digits.
PepsiCo’s Europe Sub-Saharan Africa (ESSA) region was positively impacted by productivity gains, partially offset by higher raw material costs (in local currency terms, driven by a strong US dollar), operating cost inflation, higher advertising and marketing expenses and adverse foreign exchange translation. Incremental investments reduced reported operating profit growth by 2 percentage points.
Indra Nooyi elaborates: “Our results reflect our commitment to plan and manage our business in a way that is self-sustaining and balances delivery of attractive short-term financial results with long-term shareholder value creation. We achieve this by executing a virtuous circle model that combines top-line growth, productivity and significant reinvestment in the business.”
PepsiCo is continuing to make progress in transforming its portfolio. The once dominant Pepsi-Cola trademark accounted for only 12% of net revenue in 2016 and ‘everyday nutrition products’, which include positive nutrients like grains, fruits and vegetables or protein, plus those that are naturally nutritious like water and unsweetened tea, generated approximately 25% of portfolio net revenue.
Looking ahead, PepsiCo expects 2017 organic revenue growth of at least 3% and core earnings per share of $5.09.