Mondelez Forecast Trails Estimates After ‘Missteps’
Mondelez International Inc. (MDLZ), the snacks business separated from Kraft Foods Inc. last month, forecast profit for its next fiscal year that trailed analysts’ estimates after “executional missteps” in Brazil and Russia.
Profit excluding some items next year will be $1.50 to $1.55 a share, the Deerfield, Illinois-based company said today in a statement. The average estimate of 16 analysts surveyed by Bloomberg was $1.58. Third-quarter sales for Mondelez business on a pro-forma basis fell 5.1 percent to $8.3 billion, while operating income gained 2.2 percent. Excluding currency fluctuations, revenue rose 1.5 percent.
“As we expected, our top-line growth this quarter was modest,” Chief Executive Officer Irene Rosenfeld said in the statement. “This reflected the lapping of our exceptional performance in the third quarter last year and a lower contribution from pricing. We also had some short-term executional missteps in a few key countries, but these issues should be largely resolved by the end of the year.”
The missteps resulted in “weak” results in Brazil and Russia. In Brazil, sales of gum were hurt by a slowing economy and a reduction in marketing trimmed revenue from biscuits, Rosenfeld said during a conference call with analysts. In Russia, Mondelez lost market share when competitors cut prices on coffee and chocolate products, she said.
“Those are emerging markets, and you want to see things going well there,” Brian Yarbrough, an analyst for Edward Jones in St. Louis, said in a telephone interview. “Anytime there is an executional issue, that kind of raises a red flag.”
The company is working to address the issues and expects fourth-quarter revenue, excluding the effect of foreign currency exchange-rate fluctuations and other items, to increase at a high single-digit percentage rate in developing markets. Total revenue by that measure will gain by mid-single digits.
Mondelez fell 1.8 percent to $25.77 in late trading at 6:09 p.m. New York time.
Kraft was split up so the snacks business, which became Mondelez, could push products into emerging markets by adding new offerings alongside its Oreo cookies and Cadbury chocolates. The remaining company, Kraft Foods Group Inc., contains the North American grocery unit that includes brands such as Velveeta and Oscar Mayer.
Kraft Foods earlier today posted higher third-quarter income and revenue, helped by price increases and stronger sales of cheese. Net income rose 13 percent to $470 million, or 79 cents a share, from $417 million, or 70 cents, a year earlier, the Northfield, Illinois-based company said.
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