Mondelez Profit Beats Estimates as Factories Move OverseasCraig Giammona
Mondelez International Inc., the maker of Oreo cookies and Triscuit crackers, posted second-quarter profit that topped analysts’ estimates, helped by a push to cut costs and shift production overseas.
Excluding some items, profit was 47 cents a share, the Deerfield, Illinois-based company said Thursday in a statement. Analysts estimated 39 cents on average, according to data compiled by Bloomberg. The snack giant also increased its stock buyback plan by $6 billion.
Mondelez, which generates about 80 percent of its revenue outside North America, has been cutting supply-chain costs. That’s helped it cope with a stronger dollar, which has eroded the value of international revenue. The company has invested in factories overseas and said this week it would move some cookie and cracker production from Chicago to Mexico.
Mondelez shares rose 5 percent to $45.27 in New York on Thursday after results were released. The stock has gained 25 percent this year.
The plan to increase stock repurchases will boost the size of the program to $13.7 billion from $7.7 billion. Mondelez also extended the expiration of the buyback effort by two years to the end of 2018.
As the stronger dollar has increased the cost of doing business at home, Mondelez has poured money into foreign projects designed to reduce its supply-chain overhead. The company invested in a new factory in Russia last year and is building a $90 million plant in Bahrain.
The company said Wednesday it would spend $130 million to boost the manufacturing capacity at its facility in Salinas, Mexico, which started production in late 2014. The new production lines will make Oreos, Ritz crackers and Nabisco Honey Maid Grahams. Those products were being made in Chicago, where about 600 jobs will be cut.
In 2012, Mondelez split with Kraft Foods Group Inc., which went on to merge with H.J. Heinz this year. The company defused an activist fight last year when Nelson Peltz, an activist investor, joined its board and agreed to abandon a push for Mondelez to merge with PepsiCo Inc.
Chief Executive Officer Irene Rosenfeld is working on a plan to reduce expenses by $3 billion by 2017, helping improve margins. The savings also will help the company reignite growth, she said on Thursday.
“This provides additional fuel to step up investments in marketing, sales and capacity expansion to accelerate revenue growth and improve market share, both now and over the long term,” Rosenfeld said in the statement.
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