updated 9/30/2004 9:54:15 AM ET 2004-09-30T13:54:15

PepsiCo Inc., the world’s No. 2 soft drink company, said Thursday quarterly profit rose due to $221 million in tax benefits and strong performances from its key Frito-Lay snack and North American beverage businesses.

The company also said it was closing four plants at Frito-Lay, resulting in 780 job cuts at those locations. About 250 of those jobs will be moved to other Frito-Lay operations.

As a result of the job cuts and the tax benefits. PepsiCo forecast full year earnings per share of at least $2.35, 6 cents above its previous estimate. It affirmed its 2004 forecast of cash from operating activities of about $4.9 billion.

The company said it will take a charge of $160 million from the job cuts.

“A thorough, eight-month assessment determined that this is the right move to position the business for continued growth into the future,” Chairman and Chief Executive Officer Steve Reinemund said in a statement.

PepsiCo reported earnings of $1.36 billion, or 79 cents a share, including tax benefits of 13 cents a share, for the third quarter ended Sept. 4. This compares to year-earlier profit of $1.01 billion, or 58 cents per share.

Excluding the tax benefits, the company reported earnings of $1.14 billion, or 66 cents per share.

Analysts were expecting the Purchase, New York, company to earn between 64 cents and 66 cents a share, with an average forecast of 65 cents, according to Reuters Estimates.

Revenue rose 6 percent to $7.26 billion from $6.83 billion.

Total volume of products sold worldwide rose 4 percent during the quarter, led by growth in the company’s international operations.

Volume at Frito-Lay, the company’s largest division rose 2 percent but the unit’s operating profit grew 7 percent as a strong performance by its salty snacks overcame higher cooking oil and energy costs.

Beverage volume fell 1 percent in the company’s key North American territories during the quarter, hurt by the shift of Labor Day to the fourth quarter this year. But strong sales of noncarbonated beverages such as Gatorade and Tropicana juice drinks helped fuel an 8 percent rise in operating profit at the company’s North American beverage unit.

The Frito-Lay job cuts stem from the company’s plan to increase capacity at its plants by 10 percent. Manufacturing improvements allow the company to shut down the four factories, which are located in Allen Park, Michigan, Council Bluffs, Iowa, Beaverton, Oregon, and Visalia, California, the company said.

PepsiCo shares rose to $48.70 from $48.10 on Wednesday on the New York Stock Exchange.

The company’s stock has fallen 4.8 percent since rival Coca-Cola Co. said in mid-September its profit would lag Wall Street forecasts and said there was no quick fix for its problems. Coke’s stock has fallen 6.7 percent during the same period. 

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