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Pepsi (PEP; A1/A) 2Q Results (3m to June)

CONSUMER STAPLES
  • 2Q organic growth was +1.9% (c+2.9%) leaving revenue at $22.5b. Operating profit of $4.05b was at a 18% margin (c17.6%).
  • Quacker foods (a NA food segment) is continuing to face double digit falls after product recalls that started late last year. It's a small segment (3-4% of sales & EBIT). Larger NA Food (chips) segment Frito-Lay (~30% sales, 50% EBIT) did also see -4% volume declines with pricing doing the legwork to leave it flat; mgmt adding it was a "subdued performance".
  • NA beverage volume was also weak at -3%, pricing +1% growth. Europe was firmer; volumes up +5% in foods and +1% in beverages.
  • FY24 (to dec) guidance is for +4% organic growth (prev. "at least 4%", c4.15%). Rest is unch including FX headwind of 1%, constant currency EPS growth of +8% (c+7%) and cash returns totalling $8.2b ($7.2b dividends, $1b buyback) - which looks like most of FCF for this year.
  • Debt levels were little changed ($0.1b of net supply over the half), cash down $3.5b over 1H (to $6.5b) mainly on unfavourable working capital movements and not helped by the $4b in equity returns.
  • $10b due over next two years but front € maturity is only in April 2026 and for sterling in '29. It's been 3/2yrs since it visited €/£. * Unclear if it will choose to refi some $ debt in local markets; US has continued to make up the bulk (~60%) of the group revenues but local funding does look cheaper (when swapped back into $s).

Earnings call at 1:15pm London here, equities -2.6% in pre-market, analyst takes here.
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