Mondelez profit tops on higher confectionary sales, cost controls

(Reuters) - Mondelez International Inc MDLZ.O on Wednesday reported a better-than-expected quarterly profit as it sold more Cadbury chocolates and Oreo cookies in Europe and North America, while keeping a lid on costs.

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

Shares of the world’s No. 2 confectioner rose 5.04 percent to $43.7 in extended trading on Wednesday, after the company also said it expected organic net revenue growth at the top end of its previously estimated range of 1 to 2 percent.

Sales in Mondelez’s Power Brands business, which houses Oreo, Cadbury and Milka, rose 5.2 percent to $4.55 billion, marking their fourth straight quarterly rise.

Established markets of North America and Europe drove the gains, with sales in each region rising more than 6 percent, the company said.

Mondelez’s strong performance comes at a time food packaging companies, including Kraft Heinz and Hershey, are facing a number of challenges ranging from higher transportation costs to consumers’ growing preference for healthier foods.

To counter the impact, Mondelez has been focusing its efforts on opening more efficient manufacturing plants and implementing zero-based budgeting to meet its target of about $3 billion in cost savings by the end of 2018.

Some of these efforts helped drive adjusted gross profit margin up 60 basis points to 40.4 percent in the reported quarter and beat consensus estimates by about 90 basis points, according to Bernstein.

“Solid results in Q2 suggest Mondelez is bucking the trend versus other U.S. food companies,” Bernstein analyst Alexia Howard wrote in a note.

Net income attributable to the company fell to $323 million, or 22 cents per share, in the second quarter ended June 30 from $498 million, or 32 cents per share, a year earlier.

Excluding items, the company earned 56 cents per share, beating analysts’ estimates by 2 cents, according to Thomson Reuters I/B/E/S.

Net revenue rose about 2 percent to $6.11 billion, but fell marginally short of estimates.

Reporting by Indranil Sarkar and Nivedita Balu in Bengaluru; Editing by Anil D’Silva