PepsiCo’s new drinks line puts fizz in profits

PepsiCo reported a better-than-expected profit for the second quarter, helped by lower raw material costs as well as strong demand for Frito-Lay snacks and new beverages in North America.

Its shares rose 2.2 per cent in premarket trading after the maker of Gatorade and Tropicana also raised its adjusted profit forecast for the year.

New drinks such as Propel flavored water and Naked Cold Pressed juice, and snacks under its “Simply” brand helped drive sales, the company said.

PepsiCo’s cost of sales fell 6 per cent in the three months to June 11th.

That helped net income attributable to PepsiCo increase 1.3 per cent to $2.01 billion, or $1.38 per share.

Excluding items, the company earned $1.35 per share, beating the average analyst estimate of $1.30, according to Thomson Reuters.

Net revenue fell 3.3 per cent to $15.395 billion, but inched past the average analyst estimate of $15.37 billion.

Net revenue in the North America Beverages unit, PepsiCo’s biggest business, rose 1 per cent - the slowest growth since the company started breaking out beverage sales from the region a year ago.

Revenue from the Frito-Lay business, which includes Doritos, Lay’s and the Simply line of snacks, rose 3 per cent.

New snacks launched under the Simply brand included Simply Tostitos black bean chips and organic chunky medium salsa.

PepsiCo said it now expects 2016 adjusted earnings of $4.71 per share, up from its previous forecast of $4.66 per share.

- Reuters