International Demand

Mondelez reports larger supply chain affected in first quarter

Oreo cookies are displayed in front of the Mondelez International logo in this illustration photo taken July 26, 2021. REUTERS/Dado Ruvic/Illustration

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Jan 27 (Reuters) – Mondelez International Inc said on Thursday it expects to face a greater impact from supply chain issues in its key North American segment during the quarter in course as the chocolatier grapples with labor shortages and inflationary pressures.

Shares of the Chicago-based Oreo cookie maker fell about 2% after the bell as the company’s gross margin fell to 37% in the fourth quarter from 39.4% a year earlier.

Packaged food makers have been hit by soaring shipping and labor costs due to a tight supply chain, while rising demand for wheat, sugar and other commodities has driven up raw material costs, squeezing margins across the industry.

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Mondelez is also reeling from a six-week strike by around 1,000 workers at its US factories that took place in August, which, coupled with high demand and ongoing supply chain issues, has exhausted the stocks of chocolate maker Cadbury.

“We entered 2022 with low inventory, and we are working to rebuild inventory levels, which takes time in this environment,” Mondelez chief financial officer Luca Zaramella said on a call.

The company had replenished inventory before the strike, which helped it offset a decline in third-quarter revenue.

“The effect of (the strike) may linger modestly, but should dissipate as the year progresses,” said Edward Jones analyst John Boylan.

The food giant said it expects cost inflation to rise in the single digits from 2021. It also warned of an 8-cent drop in adjusted earnings per share. for the full year through foreign currency translation, adding that this would reduce net revenue growth by approximately 2.5%.

Even as Mondelez hit margins, price increases and strong consumer demand pushed revenue up 4.9% to $7.66 billion, above analysts’ estimate of $7.59 billion. dollars, according to Refinitiv IBES.

Excluding items, the Ritz cracker maker earned 72 cents per share in the quarter, in line with expectations.

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Reporting by Deborah Sophia in Bengaluru; Editing by Vinay Dwivedi and Sherry Jacob-Phillips

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