Pepsi-Cola Products Philippines Inc. said Wednesday its net income for the first nine months of its fiscal year ending June 2008 fell 1.8 percent to P497.07 million as higher expenses offset sales growth.

In its financial report, Pepsi said it registered a 5-percent jump in net sales to P9.49 billion during the period under review due to growth in carbonated soft drink revenues of 2 percent and non-carbonated beverage revenues of 31 percent.

Cost of goods sold rose 4 percent from P6.18 billion to P6.45 billion in line with overall volume growth. This resulted in an 8-percent hike in gross profit to P3.04 billion from P2.82 billion.

Operating expenses rose by 15 percent as selling and distribution expenses went up to P1.31 billion from P1.17 billion. This was mainly due to an increase in personnel costs as a result of an expansion in headcount and salary bases as well as increase in cost of outside services and depreciation of various tools of trade equipment.

General and administrative expenses rose to P539 million from P532 million.

Marketing expense surged 51 percent from P328.4 million to P495.4 million on account of a special one-time marketing investment made during the second quarter of the current fiscal year.

Consequently, income from operations dropped to P696 million from P788 million.

Net finance and other expenses dropped 29 percent to P12 million from P17 million, reflecting the decrease of long-term debt and increase in interest earned from short-term investments.

For January to March 2008, Pepsi reported a 1.7-percent drop in revenues due to the softness in carbonated soft drinks volumes and lower pricing.

However, non-carbonated beverage revenues continued to grow by 24 percent over the previous year, driven by higher volumes.