* Kraft's third quarter EPS $0.79, revenue $4.61 bln
* Mondelez EPS $0.37, revenue $8.3 billion
* Mondelez cites executional issues in Brazil, Russia
By Martinne Geller
Nov 7 Kraft Foods Group Inc and
Mondelez International Inc both stood by their
full-year 2013 forecasts on Wednesday in their first earnings
reports as standalone companies following last month's breakup.
Kraft, home to brands like Oscar Mayer lunch meat and
Maxwell House coffee, said it was working to better tailor its
product portfolio to a weak economy in North America, the only
region in which it now operates.
Mondelez, a geographically diverse snack company with brands
like Cadbury chocolate and Trident gum, said it had "short-term
executional" issues in Brazil and Russia that hurt sales in the
quarter. After taking steps to address them, Mondelez said it
expects the issues to be resolved by the end of the year.
"Our revenue growth hit a bit of a speed bump in the third
quarter," said Mondelez Chief Financial Officer Dave Brearton.
"But we fully expect it to rebound in (the fourth quarter) to
Mondelez said that in Brazil gum category sales slowed to
about half their prior rate, but the company failed to slow its
shipments in time, leading to retailers getting overstocked and
reducing future orders. The company then pulled back on its
marketing for biscuits, which ended up hurting sales in that
category as well.
"Essentially, they robbed Peter to pay Paul," said Chief
Executive Irene Rosenfeld. "I would suggest that was a mistake,
in hindsight, and we have since restored marketing support to
In Russia, the company did not lower prices on coffee and
chocolate as fast as some competitors did after raising them to
offset higher commodity costs. That led the company to lose some
market share. Rosenfeld said that situation is fixed now as
Mondelez derives some 45 percent of sales from developing
markets and saw a 6.6 percent hit from foreign exchange rates.
Kraft is focused on slower-growing North America, and sees
earnings growth limited by the spending power of U.S. consumers
who face stubbornly high unemployment and slow economic growth.
In the weakened economy, Kraft said it must drive sales
volume with more advertising and a greater range of products and
prices, in what it calls a "good, better, best" strategy.
"You have to be able to offer price points and innovation in
all segments," said Kraft Chief Executive Tony Vernon on a
conference call. He said specific areas needing improvement were
Maxwell House coffee, Planters nuts and Jell-O.
"The economic environment has not improved and that creates
a burning platform for Kraft, our customers and our industry,"
Shares of Mondelez were down 1 percent at $26 in after-hours
trade. Shares of Kraft, which reported results on Wednesday
morning, closed down 0.3 percent at $44.57 on the Nasdaq.
BY THE NUMBERS
After adjustments related to the separation, Mondelez
reported third-quarter earnings of 37 cents per share and
revenue of $8.3 billion, which was down 5 percent and slightly
short of analysts' estimate of $8.66 billion, according to
Thomson Reuters I/B/E/S.
"As we expected, our top-line growth this quarter was
modest," Rosenfeld said. Excluding the impact of currency
exchange rates, revenue would have risen 1.5 percent.
Kraft said net income rose to $470 million, or 79 cents per
share, from $417 million, or 70 cents per share, a year earlier.
Revenue increased 3 percent to $4.61 billion. Most of the
increase came from volume gains and selling a more expensive mix
of products, with a smaller contribution from price increases.
The company affirmed its 2013 outlook, calling for earnings
of $2.60 per share and revenue growth in line with the rest of
the North American food and beverage market.
Mondelez also stood by its forecast, which calls for
earnings of $1.50 to $1.55 per share and revenue growth at the
low end of a 5 to 7 percent range.
Kraft said revenue in the current, fourth quarter would be
flat to down due to a comparison with the year-earlier period
when retailers increased orders in advance of a price increase.
In addition, Kraft will lose sales from some products that
it pruned from its portfolio.