Investments in Bai drag on Dr Pepper Snapple earnings
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Already battling stagnant soda sales, Dr Pepper Snapple reported an unexpected earnings drop of 28 per cent after debt write-down and expenses related to its Bai drink acquisition.
As the company behind 7UP and A&W adjusts to a market of more health-conscious consumers, the group reported earnings in the second quarter had decreased to $188m, or $1.02 per share, compared to $260m, or $1.40 per share, in the period last year.
While revenue of roughly $1.8bn met expectations, analysts had estimated earnings per share of $1.28.
The Plano, Texas-based company said the losses primarily stemmed from a $49m early payment of debt as well as $40m in additional expenses related to its acquisition of Bai, a flavoured water drink. As the the company spent $20m in marketing the brand, however, the group noted total Bai brand sales growth contributed just over 2 percentage points of net sales growth.
The company reported a slight recovery in volume, as non-carbonated beverages grew 5 per cent with the help of Bai, making up for a 1 per cent decline in Snapple.
In the carbonated drinks division, volume also rose 3 per cent, assisted by a 4 per cent gain in sales of Schweppes and 6 per cent increase of Canada Dry. Squirt and 7UP were also up, while A&W was flat.
By geography, US and Canada volume increased 3 per cent, while Mexico and the Caribbean volume grew 6 per cent- both slight improvements over the previous quarter.
The company said it continues to expect core earnings per share in the range of $4.56 to $4.66 for its 2017 fiscal year outlook.
Shares in Dr Pepper Snapple are up just 1.6 per cent for the year, while shares in rivals PepsiCo and Coca-Cola are up 11.8 per cent and 9.9 per cent, respectively.
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