Mondelez Results Boosted by International Sales -- Update

By Micah Maidenberg

Mondelez International Inc. leaned on overseas markets to drive its results in its latest quarter, helping to offset weaker demand in North America.

Organic sales, which exclude currency fluctuations and the effect of acquisitions and divestitures, rose across Mondelez's international markets, including a 6.1% gain in Asia, the Middle East and Africa. That increase was fueled by both higher sales volume and prices.

The global reach of the maker of Oreos, Ritz crackers and Wheat Thins means it is exposed to the health of consumer spending in world-wide markets. In China, where the company has a significant presence, the government recently lowered its economic growth target. The eurozone's economy, meanwhile, has been growing more slowly than the U.S.'s.

Mondelez Chief Executive Dirk Van de Put said in an interview that the company notched organic sales gains in China in the first quarter, helped along by sales related to the Lunar New Year in February and gains in market share in biscuits and gum. Sales volume rose almost 3% in Europe, meanwhile, while prices were flat.

In North America, organic sales rose 0.5%, driven by price increases despite a decline in the volume of items sold. The company has raised prices in the U.S. and Canada this year to combat rising transportation and ingredient costs.

On a conference call Tuesday, Mr. Van de Put said Mondelez was hunting for acquisitions to bolster certain product categories, including premium products, and in specific regions around the world. In response to an analyst's question, the CEO said Australian-based biscuit-and-snacks maker Arnott's, owned by Campbell Soup Co., fit part of the company's acquisition criteria, but added that it would be disciplined about any transaction.

"It's quite a sizable business," he said of Arnott's.

Overall, Mondelez's first-quarter sales fell 3.4% from a year earlier to $6.54 billion. Analysts expected $6.55 billion of sales for the period.

Profit narrowed 13% to $914 million, or 63 cents a share. However, excluding acquisitions, divestitures and foreign currency fluctuations, Mondelez's profit was 65 cents a share, beating analysts' forecast of 61 cents a share, according to FactSet.

Shares rose nearly 2% to $51.76 in postmarket trading.

A range of big food companies are pursuing price increases after a long stretch of low inflation. Retailers want to keep prices low to draw in consumers but have been more open to increases of late with strong economic growth in the U.S.

Unlike Hershey Co., which said last week the timing of Easter helped its first quarter results, Mondelez didn't get a boost in its candy business from the holiday in North America, according to Mr. Van de Put. It also struggled with its gum business, which includes Trident, in the region.

"It's a category that by itself is already kind of not doing so great," he said of the gum market in North America.

Mondelez reported an adjusted gross margin of 39.7% in the quarter, up slightly from the year-ago period. The company is still seeing higher freight costs in North America, according to Mr. Van de Put.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

April 30, 2019 19:21 ET (23:21 GMT)

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