April 29, 2015 / 1:11 PM / 4 years ago

UPDATE 3-Mondelez beat profit estimates, increases margins

(Adds context and CEO quote)

By Anjali Athavaley and and Sruthi Ramakrishnan

April 29 (Reuters) - Mondelez International Inc reported a better-than-expected quarterly profit helped by cost cutting and price increases, as the maker of Cadbury chocolate and Oreo cookies seeks to boost margins amid slow growth in demand for packaged foods.

Mondelez has focused on cutting costs with measures such as factory closures and zero-based budgeting, which requires managers to justify every cost in each new period. In the first quarter, Mondelez’s operating margin and gross profit margin rose to 10.4 percent and 37.9 percent, respectively, from the year-earlier period.

The company’s shares were up 5 percent at $38.69 in midday trading.

“The stock is indicating up, and we think this is the correct reaction,” said JP Morgan analyst Ken Goldman in a note. “The company’s plan to drive margin growth via supply chain and overhead savings seems to be on track.”

Still, the company has grappled in recent quarters with volatility in some markets. Sales in Europe, where it raised prices to cover higher cocoa costs and faced weak demand, fell for the third straight quarter, down 16.4 percent to $2.98 billion.

The company’s sales in North America were weak, rising just 0.9 percent to $1.68 billion, as a result of a strategy by Wal-Mart Stores Inc to reduce in-store displays and give store managers more control over merchandise space.

Chief Executive Irene Rosenfeld said on a conference call with investors that she expected “the opportunity to revisit some of those decisions, and particularly in our categories, which are highly impulse driven.”

Net income rose to $312 million, or 19 cents per share, from $150 million, or 9 cents per share. Excluding items, the company earned 41 cents per share, beating the average analyst forecast of 37 cents.

Total revenue fell 10.2 percent to $7.76 billion in the three months ended March 31, the sharpest drop in six quarters.

That still beat the average analyst estimate of $7.72 billion, according to Thomson Reuters I/B/E/S.

Selling and general expenses fell 15 percent to $1.9 billion.

Mondelez said it expected the strong dollar to reduce 2015 net revenue growth by about 12 percentage points and adjusted earnings by about 34 cents per share.

The company previously said the effects of foreign exchange translation would reduce net revenue growth by about 11 percentage points and adjusted earnings by about 30 cents per share. (Reporting by Sruthi Ramakrishnan in Bengaluru. Editing by Ted Kerr, Meredith Mazzilli and Andre Grenon)

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