PURCHASE, N.Y. -- PepsiCo plans to cut costs in some operations and take a restructuring charge of up to $85 million. As part of the plan, the company's Frito-Lay unit said it would lay off 200 to 250 employees, or 0.5% of the snack-food maker's 46,000 work force, according to a report from Reuters. Frito-Lay said it would notify the employees in early December.
Although the unit did not give details on the charges related to the job cuts, Frito-Lay said it will be a part of Purchase, N.Y.-based PepsiCo's announced charge of $65 million to $85 [image-nocss] million, or 3 cents a share, for 2005.
"It has been the toughest year I have seen since I joined PepsiCo, from a cost perspective," Indra Nooyi, PepsiCo's CFO said in a presentation in Manhattan, according to Reuters. Nooyi joined PepsiCo in 1994.
She added that rising costs of polyethylene terephthalate, or PET, which is used in packaging, higher energy costs and rising orange-juice prices were contributing to cost pressures. PepsiCo said the restructuring charges would cut 2005 earnings to $2.38 to $2.39 a share, from the previously forecast $2.41 to $2.42 a share.
"It is a good, proactive move," said Peter Schofield, a portfolio manager at Knott Capital, which owns Pepsi shares. "The cost pressures are inevitable, and all packaged food companies are talking about them. So actions taken to mitigate its impact is a positive."
PepsiCo expects the cost-cutting measures and planned innovations for next year to lead to low double-digit earnings per share growth in 2006. The company said expense reductions will take place throughout the 2005 fourth quarter.
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