May 04, 2015

Pepsi-Cola Bottlers Philippines Inc’s 1Q15 net income up 41% YoY

In a disclosure to the Exchange, Pepsi-Cola Bottlers Philippines Inc said its 1Q15 net income grew 41% to P192m on a 14% rise in net revenues. The company noted that this is the third quarter in a row where revenue is growing faster than volumes.

Also, PIP said that volumes for its liquid refreshment beverage segment were outpacing industry growth but did not cite specific data.

Net sales for both its carbonated soft drinks and non-carbonated beverages grew 14% YoY. Of special note is that PIP has sustained the improvement in gross margins at 25.2% in 1Q15 vs. 25% in 2014 and 23.5% in 1Q14.

Operating margins also gained 130 bps YoY to 4.7%. As a result, operating income grew 56% to P295m. On the other hand, tax expense grew 52% to P85m while the company incurred other charges worth P18m in contrast to a P3m other income in 1Q14, thus diluting overall income growth to 41%.

Our take: While PIP’s 1Q15 earnings were coming off a low base (1Q14 net income fell 50% YoY on higher depreciation and amortization charges), we take note of the sustained revenue growth momentum and margin improvements. Consensus forecast puts PIP’s earnings growth to just 14% this year.

So far, the 1Q15 net income accounted for 21% of the full-year consensus forecast (1Q14 net income was 17% of overall income in 2014). The company said that demand for its products usually peaks in March to June and again in late December to early January. – WealthSec