PepsiCo plans restructuring on costs pressures

PepsiCo Inc, the world's second-largest soft drink maker, on Wednesday said it plans to cut costs in some of its operations and take a restructuring charge of up to $85 million.
Pepsi's shares were little changed in early morning trading on the New York Stock Exchange. The company, which also makes Doritos snacks and Quaker granola bars, said the charges of $65 million to $85 million, or 3 cents a share, will cut 2005 earnings per share to $2.38 to $2.39, from the previously forecast $2.41 to $2.42 a share.
But PepsiCo affirmed core earnings per share, which excludes charges, of $2.64 to $2.65. Analysts on average forecast 2005 earnings at $2.65 a share, according to Reuters Estimates.
"We continue to see very good top line momentum, giving us confidence in our outlook for the fourth quarter," Steve Reinemund, PepsiCo's chairman and chief executive, said in the release. "At the same time, we are tightening our belts wherever we can to be in position to deal more effectively with continued cost pressures next year."
Reinemund added that the cost-cutting measures and planned innovations for next year will lead to low double-digit earnings per share growth in 2006.
The company said that expense reductions will take place throughout the 2005 fourth quarter as plans are finalised.
"They are looking at ways to manage the cost environment, which is still going to be challenging and in operations of their scale there is always opportunity to cut costs," said UBS analyst Caroline Levy. "I would expect some plant closures and job cuts."
PepsiCo's President and Chief Financial Officer Indra Nooyi is expected to expand on the restructuring plan later this morning in a presentation at the Morgan Stanley Global Consumer and Retail Conference in New York.
In recent years, health-conscious consumers have shunned traditional soft drinks. Coca-Cola Co, the world's largest soft drink maker, has been retooling over the past year and a half as sales slowed in its core soft-drink brands. The moves initiated by its new management team have started to gain some traction, and it has ramped up marketing spending.
PepsiCo, while better equipped to handle the shift, has been spending much of its budget on developing items for customers who are watching their calories closely.