FEBRUARY 15, 2019 — WITH A NEW CHAIRMAN AND CEO, PEPSICO TELEGRAPHS A CONTINUING RESTRUCTURING PROGRAM
The handwriting is definitely on the wall as Purchase, New York-based PepsiCo, the iconic drinks and snack foods company, used their Fourth Quarter earnings call to telegraph a massive $2.5 billion restructuring program in the coming years that will result in closed plants and a major reduction in force. No specific closures or layoffs were announced at this time. However, there will be a share buy back to please the Wall Street Wizards.
“Contributing to the productivity goal are expected savings from certain restructuring actions that are intended to enable the Company to leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; simplify our organization and optimize our manufacturing and supply chain footprint.”
According to According to Ramon Laguarta, the new Chairman, President & CEO …
“Our productivity programs will be guided by a set of universally applied principles, namely: achieving local affordability; simplifying and standardizing processes; collaborating across functions rather than optimizing within functions to achieve lowest cost end-to-end processes; relentlessly automating and merging the best of our optimized business models with the best new thinking and technologies. Just as importantly, we're also adopting a philosophy that recognizes that not all the capabilities or costs are equal, so we'll be very discriminating in where we need to pay for best-in-class or we should pay for just good enough. These principles will be applied across the entire cost structure, from labor to discretionary costs, and advertising and marketing, to fixed assets.”
Pepsico announced that they will be laying off less than one-percent of their 110,000 employees or up to 1100 workers if you do the math. This is said to be part of a part of a previously-announced and ongoing productivity program.
Chairman and CEO Indra Nooyi was quick to defend the Pepsico's 2017 reported results, saying, "These are impressive results, particularly in light of the challenges posed by global megatrends impacting our industry from macroeconomic and political volatility, to the continued rebalancing of the economic world, to shifting consumer preferences and increasing demand for healthier products, the disruption of retail costs by the rapid growth of e-commerce and the blurring of channel lines" .
Pepsico posted a loss of $710 million in the three months ending Dec. 30, 2017 -- but was majorly impacted by the Trump tax reform which led to a $2.5 billion provisional net tax expense. Whether or not Pepsico chooses to repatriate future money from abroad and take advantage of lowered taxes remains to be seen.
While the Trump tax proposal will result in a lower tax rate on U.S. earnings, it does impose a one-time mandatory tax on international accumulated earnings that existed at the end of 2017 -- regardless of whether or not an entity decides to repatriate those earnings from abroad.
According to The Vice Chairman and CFO, "In the fourth quarter of 2017, we recorded a one-time $2.5 billion provisional net tax expense which reflects a portion of the total $4 billion liability on accumulated earnings which is expected to be paid out over eight years starting in 2019.
There are no guarantees in life, or promises for a bright future. Just because something bad hasn't happened yet, doesn't mean it won't. It can happen to anyone, anytime, anywhere ... are you now wondering, Am I Next?