Dr Pepper Snapple 2nd-Quarter Net Up 3.5%; Case Volume Off
07/26/2012| 01:10pm US/Eastern
--Dr Pepper Snapple second-quarter earnings up slightly as higher prices lift sales
--Volume remains weak in non-carbonated drinks
--Company backs earnings outlook for year as it sees costs easing slightly
(Adds details from conference call, updated share price, other information, in the first through seventh paragraphs.)
By Paul Ziobro
Dr Pepper Snapple Group Inc.'s (>> Dr Pepper Snapple Group Inc.) second-quarter earnings rose 3.5%, with higher prices helping to lift sales higher as volume slumped, especially on some of its non-carbonated drinks such as Hawaiian Punch and Mott's.
But despite projections for a slightly easier cost picture as aluminum and plastic prices fall, Dr Pepper Snapple only backed its guidance for the year. Chief Financial Officer Marty Ellen said the company is "pretty well hedged" on its corn purchases for this year, so the recent rise in the price of corn, which is used in sweeteners, won't affect the company's bottom line.
Dr Pepper Snapple, which in addition to its flagship soda also sells 7Up, A&W Root Beer and other soft drinks, has been grappling with declining demand for soft drinks in the U.S., plus higher costs for packaging and ingredients. The company has responded by raising prices and also coming out with new products, including a low-calorie version of Dr Pepper.
The company's bottler-case sales, which represent packaged beverages sold by the company or its bottlers, were down 1% in the latest quarter, with sodas flat and non-carbonated drinks down 6%. Its Dr Pepper brand was up 1%, driven primarily by the low-calorie Dr Pepper Ten and by higher sales at restaurants, while its next five largest sodas were up 1%.
Hawaiian Punch dragged down non-carbonated sales with volume down 20% while Mott's was down 2%. Snapple iced-tea sales were up 1%.
While rivals Coca-Cola Co. (>> The Coca-Cola Company) and PepsiCo Inc. (>> PepsiCo, Inc.) relayed mixed messages on trends in the U.S., Dr Pepper Snapple said the sales environment remains steady despite some challenging conditions.
"A lot of the things we're hearing from others is that they're seeing a slowdown," Dr Pepper Snapple Chief Executive Larry Young said during a conference call Thursday to discuss earnings. "None of our trends are showing that."
For the quarter, Dr Pepper Snapple reported a profit of $178 million, or 83 cents a share, up from $172 million, or 77 cents a share, a year earlier. Excluding unrealized commodity mark-to-market losses and other items, core earnings rose to 85 cents from 78 cents. Sales increased 2.5% to $1.62 billion.
Analysts polled by Thomson Reuters most-recently forecast earnings of 82 cents on revenue of $1.63 billion.
Gross margin shrank to 57.7% from 58.2%.
Sales of packaged beverages, Dr Pepper Snapple's biggest segment by revenue, rose 3.7% to $1.18 billion. Beverage-concentrates sales climbed 3.1% to $331 million, and beverage sales in Latin America fell 10% to $113 million.
Total bottler-case sales volume decreased 1% as carbonated soft-drink volume was flat and noncarbonated beverages declined 6%.
Dr Pepper Snapple shares were up 0.6% in recent trading to $44.05, trailing larger gains in the broader markets. Its shares are up 11.1% over the last 12 months.
--Melodie Warner contributed to this article.
Write to Paul Ziobro at email@example.com.
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