Mondelez International is “cautiously optimistic” it can weather the effects from the Middle East crisis but management suggested the big uncertainty is the consumer.
So far, the US-headquartered chocolate and biscuits giant has not seen any real impact as Mondelez reported its first-quarter results to 31 March, which would cover around four weeks since the conflict started in late February.
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Chairman and CEO Dirk Van de Put told analysts yesterday (28 April) consumer confidence in Europe is “fragile”, while the current “low” sentiment in the US is likely to “deteriorate” the longer the stand-off lasts.
However, CFO Luca Zaramella said the Cadbury and Ritz brands owner has hedges in place to cover the oil and packaging requirement for 2026, although he added some markets do not allow protection strategies.
“That’s the cost that will materialise in the remainder of the year for which we have to account,” Zaramella said as Mondelez kept its full-year outlook for organic sales and adjusted EPS unchanged.
Van de Put took a balanced view on Mondelez’s outlook as he told analysts that, from a category perspective in the first quarter, “there’s nothing there that we feel is starting to show that there’s a slowdown”.
Looking further ahead, he added: “The consumer, to my opinion, will remain quite anxious. I think as the conflict continues and they see the effect of oil prices, and they will start to see it in some of the other things they buy, I believe that that is not going to help with the overall consumer confidence.
“That doesn’t mean that our business is not going to continue to improve.”
As Mondelez completed its retail price negotiations in Europe during the quarter with no real hiccups, Van de Put said sentiment in the region is “stable” but “fragile”, with both snacking and biscuits demand “holding up”.
In the US, however, he said the “consumer remains very concerned about affordability, the economic outlook and job security”, with “flattish” value growth in biscuits.
“Where there is growth, that’s usually in the value club channels and in better-for-you and premium,” he added.
In Mondelez’s key emerging markets, only China stood out, where consumer sentiment was “softer”, while confidence was classed as “positive” in India, Mexico and Brazil.
Still, Van de Put said that “everywhere the consumer is quite cautious as it relates to the conflict and what that could mean for inflation and their energy costs”.
As a counter, he said: “You need to make sure that you are where the consumer really can afford you”, adding: “That’s a big focus that we have at the moment.”
Organic growth of 6.3% in emerging markets outpaced the 0.8% in developed countries in the first quarter, when the group print increased 3%.
Reported sales revenue was up 8.2% at $10.08bn based on pricing of 3.5 percentage points but with volume/mix down 0.5%.
Adjusted operating income dropped 19%, while adjusted EPS fell 14.9% due to the “phasing” effect from cocoa prices.
“Although cocoa costs remain elevated relative to historical trends, we’re continuing to see gradual normalisation,” Zaramella said.
Mondelez provided an outlook that reaffirmed its guidance for its organic revenue in 2026 to be between flat and up 2%. The company is forecasting its adjusted EPS will be flat to up 5%.
“I think it’s fair to say we are ahead of expectations in Q1 but on the remainder of the year, while we continue to be cautiously optimistic, we need also to address some headwinds that we didn’t have in our original forecast, particularly as they stem out of the Middle East crisis,” Zaramella said.
“The team is managing that situation quite well, finding alternative routes to produce our brands and to deliver our brands, but that is coming at an extra cost. Clearly the oil cost, albeit we are covered for the year, is having a little bit of an impact on the profitability.”
