Thursday, February 4, 2016

Q4 Earnings Not So Sweet At Oreo Maker Mondelez

Shares of Mondelez International (MDLZ) moved lower Wednesday after the maker of Oreo cookies, Ritz crackers and Cadbury chocolates fell short of quarterly earnings views, as improving margins were offset by the strong U.S. dollar and uncertain global economy.



Reporting before the open, Mondelez logged fourth-quarter earnings of 46 cents a share, down from 47 cents the prior year and a 2 cents below analysts’ consensus views. Revenue fell 17% to $7.4 billion, slightly ahead of consensus.

The revenue figure included a negative 11.4% impact from transactions tied to its coffee business and a negative 11% impact from unfavorable currency exchange rates. Last year, Mondelez and D.E. Master Blenders 1753 merged their coffee businesses to form a company called Jacobs Douwe Egberts, a move that allowed Mondelez to focus more on snacks. Excluding those items, organic net revenue rose 4.7% for the quarter, helped by higher prices on some items.

Mondelez also posted a one-time accounting charge of $778 million during the quarter to remove all assets and liabilities of its Venezuelan operations from its balance sheet.

The company’s shares closed down 6.5% on the stock market today. The stock is down 18% from its high of 48.58 set in August.

The Q4 results marked the ninth straight quarter of lower revenue for Mondelez and the second straight quarter of double-digit declines. The strengthening dollar has been a major top-line headwind for the company, which gets about three-quarters of its revenue outside North America.

To help offset that problem, Chief Executive Irene Rosenfeld has led efforts to slash expenses by $3 billion and move production to lower-cost countries. During the fourth quarter, Mondelez’s adjusted gross profit rose 280 basis points from a year earlier to 38.8%.

Rosenfeld put an upbeat face on the results, saying in a statement that Mondelez “delivered another year of very strong results despite the highly volatile macroeconomic environment.”

“Our aggressive cost-savings programs drove significant margin expansion,” she added. “In addition, we increased our marketing investments, enabling us to steadily accelerate organic revenue growth and improve our share performance as the year progressed. We remain confident in our ability to execute our transformation agenda despite weakening macroeconomic conditions in emerging markets.”

The shaky global economy isn’t the only problem Mondelez faces. It and other snack food companies must contend with increasingly health-conscious consumers who are shying away from processed foods, particularly in Europe. This shift is reflected in the fact that Mondelez’s North America business reported a 2.6% gain in Q4 net organic revenue, while its Europe business logged a 1.1% decline.

Meanwhile, Mondelez also has faced pressure to improve its performance from activist investors Trian Fund Management and Pershing Square Capital Management.


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