July 30, 2019 / 8:29 PM / 20 days ago

Oreo maker Mondelez raises sales forecast as emerging markets fuel growth

(Reuters) - Mondelez International Inc (MDLZ.O) raised its 2019 sales forecast on Tuesday, benefiting from several years of tailoring its chocolates and cookies to cater to consumer tastes in emerging markets such as China and India.

FILE PHOTO: The logo of Mondelez International is seen on an office building in the Glattpark district in Opfikon, Switzerland October 2, 2018. REUTERS/Arnd Wiegmann

However, the company warned that a hard Brexit could require it to make changes to its prices and sourcing.

Mondelez has been aggressively investing in marketing and molding its products to attract consumers in emerging markets where rising demand for its Cadbury chocolates and Oreo cookies has countered sluggish sales in developed countries.

The company has previously told Reuters that “the big bulk” of a $150 million increase in global investment this year - the first hike in five years - will be in rural India.

The efforts lifted the company’s second-quarter organic sales, which exclude the impact from acquisitions and currency changes, 7.6% in emerging markets.

China, India, Southeast Asia, Russia and Mexico were among the biggest drivers of that growth, company executives said on a post-earnings call with analysts.

Encouraged by the second-quarter growth, the company raised its full-year organic net revenue forecast to over 3%, compared with the prior expectation of 2% to 3%.

The Easter holiday also boosted demand for chocolates in the second quarter, especially in Europe, the company said.

Like other packaged food companies, the Toblerone maker has been raising prices for its cookies, gum and chocolates to counter higher raw material and labour costs.

Pricing in Latin America rose 11.5 percentage points in the reported quarter, the company said.

HARD BREXIT

New British Prime Minister Boris Johnson has repeatedly said that if the European Union continues to refuse to renegotiate a withdrawal agreement he will take Britain out on Oct. 31 without a deal.

“If there is a hard Brexit, there will certainly be implications to our business,” Chief Executive Officer Dirk Van de Put said on the call.

Uncertainty around Brexit and its effect on consumer spending in the United Kingdom have been an overhang over the company’s European business, its largest.

Mondelez has been stockpiling all its European-made products, which include BelVita biscuits and Milka chocolate, due to the threat of a no-deal Brexit.

Net revenue slipped 0.8% to $6.06 billion in the three months ended June 30, but beat analysts’ average estimate of $6.03 billion, according to IBES data from Refinitiv.

Excluding items, the company earned 57 cents per share, in line with analysts’ average estimate.

Mondelez also gave an upbeat 2019 adjusted earnings per share forecast, expecting a 5% rise, compared with the prior forecast of between 3% and 5%.

The company’s shares rose about 1% to $55.40 in extended trading.

Reporting by Aditi Sebastian; Editing by Sriraj Kalluvila

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