Consumer Non-Cyclical Sector Review: Pringles Update, PepsiCo 2012 Vision

Diamond Foods, Inc. (NASDAQ:DMND): Proctor & Gamble (NYSE:PG) issued the following Pringles transaction update: “Diamond Foods (NASDAQ:DMND) issued a news release announcing that its financial statements for 2010 and 2011 could not be relied on and would need to be restated. It also placed its President and CEO, Michael Mendes, and CFO, Steven Neil, on administrative leave and commenced a search for their permanent replacements. This is breaking news for us and the information released by Diamond Foods is very disappointing. Pringles remains a valuable asset and it has attracted considerable interest from other outside parties. We need to evaluate next steps and we are currently keeping all our options open. As we evaluate the right next steps, we will be guided by what is best for our shareholders and our employees.”

The shares closed at $23.13, down $13.53, or 36.91%, on the day. Its market capitalization is $510.21 million.

PepsiCo, Inc. (NYSE:PEP): “As we implement our strategic priorities in 2012, we’ve had to make some tough decisions,” said CFO Hugh Johnston. “As a result, 2012 will be a year of transition, one in which we will make the right investments to position PepsiCo properly to achieve long-term high-single-digit core constant currency EPS growth.” For 2012, the Company is targeting mid-single-digit core constant currency net revenue growth, in-line with its long-term target. It expects a decline in core constant currency EPS of approximately 5 percent from its fiscal 2011 core EPS of $4.40, reflecting a combination of strategic and macroeconomic factors. In 2012, the Company will step-up its strategic brand investments by $500-$600 million, particularly in North American beverages and food — the benefits from which will be increasingly seen in the second half of 2012 and into 2013. Further, the Company anticipates a larger increase in consumer-facing spending through marketing efficiency initiatives. Additionally, incremental investments in routes and display racks will total about $100 million in 2012. The Company anticipates a second consecutive year of global commodity cost inflation that is well above historic levels. In a different economic climate the Company would likely offset these additional costs through increased pricing. However, it does not anticipate that it can pass through all of the higher commodity costs to its consumers in 2012 given the continuing challenges that consumers are facing, particularly in the developed economies. Additionally, the Company expects higher pension costs as a result of a lower discount rate, higher net interest expense as it increases indebtedness and also terms-out debt in a low interest rate environment, and a core tax rate of approximately 27%, about 50 basis points higher than in 2011. Partially offsetting these additional costs, major productivity initiatives are expected to result in about a $500 million incremental reduction in operating expenses in 2012.

The shares closed at $64.27, down $2.47, or 3.7%, on the day. Its market capitalization is $100.48 billion.

The Coca-Cola Company (NYSE:KO): PepsiCo (NYSE:PEP) CEO Indra Nooyi has focused on the company’s move into healthier food and drinks but at the expense of Pepsi-Cola’s market share and the company’s share price, but is now expected to make a significant investment in advertising and marketing, reports Bloomberg Businessweek.

The shares closed at $67.97, down $0.36, or 0.53%, on the day. Its market capitalization is $153.82 billion.

Synutra Intl., Inc. (NASDAQ:SYUT): Reports Q3 revenue $114.46M vs. consensus $93.78M.

The shares closed at $6.61, up $0.25, or 4.01%, on the day. Its market capitalization is $379.04 million.

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