CHICAGO — Adjusted operating income for the North American business of Mondelez International was about flat in the first quarter ended March 31, while revenues rose 4.3%. Elsewhere globally, the snack company’s business was strong, boosted by strong biscuit sales.
“Our first-quarter results demonstrate that we are emerging from the COVID-19 pandemic stronger, as we continue to build upon our track record of robust growth, profitability and cash generation,” said Dirk Van de Put, chairman and chief executive officer. “We saw continued improvement across emerging markets, healthy demand in developed markets and another quarter of strong share performance. We remain squarely focused on accelerating growth.”
He said the company’s strategies are working and that Mondelez is “better positioned than ever before.”
Investors were impressed. In trading early April 28 after the financial results were announced, Mondelez shares traded as high as $61.87, up more than $3 a share, or about 5%.
Operating income of the North American business of Mondelez during the quarter was $270 million, down 29% from $381 million in the first quarter last year. Net revenues were $1.98 billion, up 4.3% from $1.9 billion in the first quarter of 2020. The sales results lapped an extraordinary surge in business late in the first quarter of 2020.
Adjusted for restructuring costs, operating income in the region was $382 million, down 3% from $394 million a year earlier.
In an April 27 call with investment analysts, Luca Zaramella, executive vice president and chief financial officer, attributed the dip in operating income to “volume dynamics” as well as elevated costs associated with late winter storms. He noted that the drop in operating income contrasted with a two-year average of 5.6% growth.
“Biscuit posted a low single-digit increase on top of strong double-digit growth in the previous year quarter,” he said. “While gum and candy saw double-digit declines, our venture business unit, which combines Tate’s, Give & Go, Hu, Perfect Snacks and Enjoy Life grew strongly, both organically and on a pro forma basis.”
Globally, the Oreo brand generated high single-digit growth, Mr. Van de Put said.
“Oreo has been growing at a double-digit CAGR since 2018 as we activate our planned trade group and pursue a $1 billion opportunity over the next three years via geographical expansion and share gains,” he said. “We also delivered mid-single-digit growth in our local jewels, including strong results from Chips Ahoy! and Tate’s in biscuit as well as Côte d’Or and Lacta in chocolate.”
More generally, sales of biscuits across the entire Mondelez business were up 3.4% in the first quarter.
“Each of our big countries delivered double-digit growth during the quarter, while our large US business posted low single-digit growth against very elevated growth from the previous year,” Mr. Van de Put said. “The Oreo brand once again was a clear winner with nearly double-digit growth. Chocolate grew more than 10% for the quarter with a two-year average of 6.5%.”.
Mondelez net income in the first quarter ended March 31 was $961 million, equal to 68¢ per share on the common stock, up 31% from $736 million, or 51¢ per share, during the first quarter last year. Net revenues were $7.24 billion, up 8% from $6.71 billion a year earlier.
Results included $90 million of asset impairment and exit costs in 2021, up from $15 million in 2020. Reported earnings gains were boosted by mark-to-market derivatives gains, versus losses a year earlier. Adjusted earnings per share were up 11%.
For the year, Mondelez is forecasting 2021 sales growth of 3% or greater and high single-digit earnings per share growth.
“Our first-quarter results leave us well positioned to deliver on our full year 2021 outlook and provide increased confidence
that we can accelerate our long-term growth rate,” Mr. Van de Put said.
Mr. Zaramella said the Mondelez growth forecast perhaps would be higher but for a volatile cost environment that includes surging ingredient costs.
“From a profit standpoint, we expect high single-digit growth for EPS,” he said. “This reflects our current view of top line, some incremental commodity and transportation inflation for the year that despite being higher than originally planned remains manageable.”
Elaborating on his optimism about the company’ s potential to sustain above industry growth, Mr. Van de Put said the core categories in which Mondelez operates “are attractive and resilient.”
He said the company is “seizing large opportunities in under-indexed channels,” including e-commerce and discounters while at the same time looking to expand in rapidly growing segments such as well-being and premium.
Mondelez was active making acquisitions in the first months of 2021:
- Jan. 4, Mondelez acquired the remaining 93% of Hu Master Holdings, a premium chocolate manufacturer in the United States
- March 25, acquired a majority interest in Lion/Gemstone Topco Ltd., a United Kingdom-based performance nutrition leader, known as Grenade.
- April 1, acquired Gourmet Food Holdings Pty Ltd, a leading biscuit and cracker company based in Australia.
Combined, the three transactions resulted in $7 million of acquisition-related costs in the three months ended March 31.
Mr. Van de Put identified aspects of each acquisition that make him enthusiastic about its prospects. For example, Grenade offers Mondelez an avenue for the company to expand its snacking portfolio into active nutrition products.
Of Gourmet Food Holdings, Mr. Van de Put said, “This platform allows us to significantly increase our Australia biscuits business and share. The brand has tremendous growth potential inside and outside of Australia and is a leader in a highly attractive segment.”
Noting that Hu is the fastest growing chocolate brand at Whole Foods, Mr. Van de Put said Hu’s presence is limited at conventional retailers, suggesting considerable expansion potential.
He also commented on Mondelez’s April 2020 acquisition of Give & Go, a North American leader in fully-finished sweet baked goods and the maker of the two-bite brand of brownies and the Create-A-Treat brand, known for cookie and gingerbread house decorating kits. The business gives Mondelez access to the in-store bakery channel.
“Give & Go is an undisputed leader in the large and high-growth in-store bakery segment in North America,” Mr. Van de Put said. “It is highly incremental and spans across multiple product forms like cookies, muffins, brownies and cupcakes. It has strong consumer appeal, driven by high-quality freshness and permissible indulgence. This platform is performing very well, and we believe it will yield good revenue and cost synergies.”
Asked whether the series of bolt-on investments means Mondelez is uninterested in large acquisitions, Mr. Van de Put said he would not rule out a larger transaction but suggested such a deal was not likely.
“If there would be a larger acquisition that would provide us the opportunity to get bigger in snacking and/or get an accelerated growth rate, we’re certainly open to it,” he said. “But it’s just very difficult to find and we’re hesitant. We would probably be open to get into other areas of snacking, but we are hesitant to get into other food categories, which are showing less growth. And so that makes it much more difficult to find the right sizable acquisitions.”