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Oreos maker Mondelez raises outlook on emerging markets demand
[CHICAGO] Ritz crackers-owner Mondelez International Inc raised its 2019 sales forecast on Tuesday after reporting a 1.1 per cent rise in third-quarter revenue, driven by higher demand in emerging markets where Mondelez has been ramping up investment.
As demand slows in developed countries, Illinois-based Mondelez has been spending more on marketing and creating products for shoppers in markets with rising incomes and e-commerce sales.
In China, for instance, Mondelez has been working for years with Alibaba's online marketplace Tmall to expand its reach, even creating novelties like wasabi or hot chicken flavoured Oreos to attract shoppers. The company told Reuters this year that "the big bulk" of a US$150 million increase in global investment this year - the first hike in five years - would be in rural India.
Demand from these markets - along with Southeast Asia, Russia and Mexico - drove up organic sales by 6.6 per cent, the company said.
Mondelez said it expects full-year organic net revenue growth of over 3.5 per cent, up from its previous forecast of over 3 per cent growth. Mondelez also said it now expects adjusted earnings per share growth of 5 per cent to 7 per cent on a constant-currency basis.
The company, which warned in July that a hard Brexit could mean changes to its prices and sourcing, said this outlook did not account for a so-called hard Brexit.
"We have to remain a little bit mindful again about Brexit which didn't happen this year but it will have an effect potentially on the first quarter," chief executive Dirk Van de Put said on a post-earnings call. "If it will be a hard Brexit with the devaluation of the pound and a big consumer reaction, that is not included for us."
Cadbury, one of Mondelez's biggest and most storied brands, is based in the United Kingdom. The company told Reuters in February that it had increased warehousing and transportation capacity in the UK, and begun stockpiling all its European-made products, which include BelVita biscuits and Milka chocolate.
In Brazil, margins were squeezed between weak demand for powdered drinks and higher logistics costs as the company restructures operations there. Mondelez said it expected these issues to mostly be resolved by next year, but that costs would continue to hurt fourth-quarter profit.
Mondelez reported third-quarter earnings of US$1.42 billion, or 98 cents per share, up from US$1.19 billion, or 81 cents per share a year earlier. The company earned 64 cents a share on an adjusted basis, beating analysts' estimate of 60 cents of according to Refinitiv I/B/E/S data.
Net revenue rose to US$6.36 billion in the quarter ended Sept 30 from US$6.29 billion a year earlier, just beating analysts' estimate of US$6.34 billion.
Shares of Mondelez were down 1.6 per cent in extended trading.