May 2, 2017 / 8:25 PM / 3 years ago

Mondelez's results beat on better pricing, cost cuts

(Reuters) - Mondelez International Inc (MDLZ.O) reported higher-than-expected quarterly profit and sales, helped by cost cuts, strong sales of its chocolate brands such as Cadbury Dairy Milk and Milka, and better product pricing mainly in Latin America.

The logo of Mondelez International is pictured at the company's building in Zurich November 14, 2012. REUTERS/Michael Buholzer

Shares of the world’s No. 2 confectionary company rose 3.3 percent to $45.17 in after-hours trading on Tuesday.

Mondelez’s Latin America net revenue, which accounts for about 14 percent of total sales, increased 11.4 percent in the first quarter ended March 31, compared with the year-ago period.

Net sales from the company’s main brands, such as Cadbury Dairy Milk, Milka chocolate and Oreo cookies, rose 1.6 percent in the quarter.

However, total revenue declined, hit by lower volume growth for biscuits in North America, Mondelez’s second-biggest market, a strong dollar, and changing consumer tastes.

Mondelez has also been launching products such as GOOD THiNS crackers and herb-infused Vea biscuits in the United States to cater to consumers who prefer less-processed, organic foods over high-calorie, sugary snacks.

The Deerfield, Illinois-based confectioner said its net revenue fell to $6.41 billion, but came in above analysts’ average estimate of $6.37 billion, according to Thomson Reuters I/B/E/S.

Mondelez, since separating from Kraft in 2012, has also focused on its profit margins by cutting costs through internal controls and divestitures.

The company which has a $3 billion cost-savings program till the end of 2018, uses a zero-based budgeting plan, which requires expenses to be justified for each new period.

Selling, general and administrative expenses fell about 9 percent to $1.48 billion in the first quarter.

The company also said a strong U.S. dollar would reduce net revenue growth by about 1 percent and adjusted earnings by 2 cents in 2017.

The average value of the dollar rose about 3.3 percent against a basket of currencies in the quarter, compared with the year-earlier period.

Mondelez, however, said that it expects a double-digit growth in adjusted profit in 2017 on a currency neutral basis.

On an adjusted basis, the company earned 53 cents, topping analysts’ average estimate of 50 cents.

Net income attributable to Mondelez fell to $630 million, or 41 cents per share, from $554 million, or 35 cents per share.

Reporting by Gayathree Ganesan in Bengaluru; Editing by Martina D'Couto

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