PepsiCo Inc. is cutting jobs and closing factories to give it some "breathing room" to navigate the volatility that has permeated all corners of the global economy.
The maker of Pepsi-Cola, Doritos and Sun Chips said it planned to eliminate 3,300 jobs and close six plants in an effort to save $1.2 billion over three years. It plans to use the savings primarily to revive lagging U.S. soft drink sales.
"This will enable our competitiveness and give us breathing room to respond," Chief Executive Indra Nooyi said. "It is no news to you the economy is turbulent, and there are uncertainties and volatility in every part of the environment."
The announcement came as the global snacks and drinks company reported a 9.5% drop in third-quarter profit, missing Wall Street expectations.
PepsiCo also issued a downbeat profit outlook for the fourth quarter and full year, saying that the dollar's recent surge against other major currencies will hurt profit from its rapidly growing international business, which posted a 20% increase in quarterly sales.
The job cuts amount to roughly 1.8% of PepsiCo's global workforce of about 185,000 employees, and will affect managerial and factory jobs both in the U.S. and abroad. Most will be eliminated in the coming months, Chief Financial Officer Richard Goodman said.
The nation's second-largest drink maker -- which also owns the Frito-Lay, Tropicana and Quaker brands -- said the cuts would generate savings of $350 million to $400 million in 2009.
In the third quarter, the company reported net income of $1.58 billion, or 99 cents a share, down from $1.74 billion, or $1.06, a year earlier. Revenue grew to $11.2 billion, up from $10.17 billion.
Excluding one-time costs, the company earned $1.06 a share. On that basis, analysts surveyed by Thomson Reuters expected earnings of $1.08 a share on revenue of $11.2 billion.
Purchase, N.Y.-based PepsiCo noted that the recent surge in the U.S. dollar would trim fourth-quarter profit by about 4 to 5 cents a share.
As a result, the company now expects to report 2008 earnings per share of $3.67 to $3.68, compared with prior guidance of $3.72. Analysts have forecast $3.74 per share for the year.
PepsiCo shares fell $7.37, or 11.9%, to close at $54.40.