By Annie Gasparro
Mondelez International Inc. said its ability to raise prices for
its sweets and snacks is helping bolster revenue more than it
expected amid continued pressure from the strong U.S. dollar.
The maker of Oreo cookies and Ritz crackers on Thursday reported
better-than-expected results for the latest quarter. It also
credited its continuing restructuring, which involves slashing
overhead, closing under-utilized factories and opening new, more
efficient ones and ridding itself of low-margin products. That
effort boosted its adjusted operating profit margin by 2.7
percentage points to 15.2% in the quarter ended June 30.
Mondelez is in a tough position dealing with changing eating
habits in the U.S. and slower economic growth in emerging markets.
Its revenue fell 9% in the quarter, hurt by the weakness of foreign
currencies against the dollar, which makes overseas revenue less
valuable.
Excluding one-time factors like product divestitures, however,
sales rose 4%, primarily because Mondelez raised its prices. The
Deerfield, Ill., company said it now expects organic net revenue,
which excludes divestitures and acquisitions, to grow at least 3%
for the second half of the year, up from an earlier estimate of
2%.
"The biggest driver of our revenue is pricing--so there's no
question that volume is not where we need it to be," Chief
Executive Irene Rosenfeld said on a conference call. "A big part of
the investment we'll be making...is designed to get our volume
momentum back." That means more marketing spending to promote its
core brands, like Chips Ahoy cookies and Tang drink mix, being
careful to only do deals that shoppers will respond to.
Mondelez's shares were up about 5% in midday trading
Thursday.
Mondelez, which also makes Cadbury chocolates and Trident gum,
has been focused on expanding in emerging markets with growing
numbers of middle-class consumers. Recently, economic growth has
sputtered in places like China, Brazil and India, putting a damper
on Mondelez's sales.
"I feel very good that we've got our finger on the pulse of the
business and that we've got much greater visibility into the
various levels of demand," in emerging markets, Ms. Rosenfeld said,
reminding investors that "India is growing; it's just growing at a
slower rate than it has been."
She said Mondelez continues to make progress on its plan
announced last year to trim $1.5 billion from its annual costs
using a tool called zero-base budgeting, which requires managers to
justify expenses anew each year.
Mondelez said its profit in the latest quarter was $406 million,
or 25 cents a share, down from $622 million, or 37 cents a share, a
year earlier. Excluding special items, per-share earnings were 47
cents.
Revenue fell to $7.66 billion from $8.44 billion.
Analysts polled by Thomson Reuters had projected 39 cents a
share in earnings with revenue of $7.49 billion.
Earlier this month, Mondelez completed the divestiture of its
coffee business, which it combined with D.E. Master Blenders 1753
B.V. of Europe, in exchange for $5 billion in cash and a 49% stake
in the new company, Jacobs Douwe Egberts.
Angela Chen contributed to this article.
Write to Annie Gasparro at annie.gasparro@wsj.com