November 18, 2008 / 1:02 PM / 9 years ago

UPDATE 3-Pepsi Bottling to cut jobs, trims forecast

* Company to cut some 3,150 jobs in Mexico, Europe and US

* Sees Q4 charges of $1.52 to $1.57 per share

* Cuts ‘08 EPS view to $2.20 to $2.26, from $2.32 to $2.38

* Shares down nearly 2 percent (Adds employee total and background on Mexico)

By Martinne Geller

NEW YORK, Nov 18 (Reuters) - The Pepsi Bottling Group Inc PBG.N announced restructuring plans on Tuesday that would eliminate some 3,150 jobs, or 4.5 percent of its workforce, and cut its forecast for full-year earnings due to weaker foreign currencies.

The largest bottler of PepsiCo Inc (PEP.N) drinks said its multiyear restructuring plan should yield $150 million to $160 million in annualized pretax savings when completed, starting with savings of at least $70 million in 2009.

Pepsi Bottling shares have lost nearly half their value this year as soft drink bottlers like it and Coca-Cola Enterprises Inc CCE.N have been hit by high commodity and fuel costs and weakening sales as cash-strapped consumers cut out impulsive beverage purchases.

Earlier this year, the weakness of the U.S. dollar had boosted the value of international sales when they were converted to the U.S. currency, but that benefit is disappearing with the recent strength of the dollar.

Morgan Stanley analyst William Pecoriello said on Tuesday he expects Pepsi Bottling shares to stay under pressure in the short term, due to uncertainty about the operating environment and the impact of currency exchange rates.

The bottler’s shares were down 1.7 percent at $19.57 on the New York Stock Exchange in morning trade.

STREAMLINING THE BUSINESS

In the United States and Canada, Pepsi Bottling said it would streamline its selling and service organization and supply chain infrastructure, impacting about 750 jobs and closing four U.S. plants. It also plans to modify its defined benefit pension plans to lower future financial obligations.

In Mexico, plans to close three plants, about 30 distribution centers, and eliminate about 700 distribution routes over time will affect about 2,200 jobs there as well, the company said.

Similar actions in Europe will affect about 200 jobs, said the company, which currently employs about 70,000 people worldwide.

The company expects cumulative charges from the plan of $140 million to $170 million, with a charge of 27 cents to 32 cents per share expected in the fourth quarter of 2008.

In addition the bottler expects a fourth-quarter impairment charge of $412 million, or $1.25 per share after tax, related to a reduction in value of its Electropura water business in Mexico, which has performed below expectations.

Taken together, the restructuring and the impairment charge will result in fourth-quarter charges of $1.52 to $1.57 per share.

The bottled water business in Mexico has been difficult for many soft drink makers, due to increased competition and discounting, and weak sales as the impact from the financial crisis spreads. Dr Pepper Snapple Group Inc (DPS.N) said last week that quarterly sales of its bottled water Aguafiel fell 20 percent in Mexico, hurt by a price increase and more competition.

Pepsi Bottling said it now expects earnings per share of $2.20 to $2.26 for the full year, down from a previous view of $2.32 to $2.38, due to the weakening of foreign currencies versus the U.S. dollar and a higher-than-expected interest cost on a recent bond issue.

Including its restructuring plan and the asset impairment charge, Pepsi Bottling forecast full-year earnings of 62 cents to 73 cents per share.

The full-year outlook is based on current exchange rates and does not reflect the potential for further changes, the company said, adding that it expects the foreign currency weakness and increased interest cost to continue into 2009. (Additional reporting by Michele Gershberg, editing by Dave Zimmerman)

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