Mondelez International booked lower sales and earnings in 2016 but insisted it continues to make progress towards its margin expansion goals.
The company revealed its net sales fell 12.5% on a group-wide basis in 2016. The Cadbury owner attributed the drop to the spin-off of its coffee business, which boosted last year’s profits, as well as the deconsolidation of its operations in Venezuela and currency headwinds. Operating profit fell 71% on a reported basis, with last year’s figure inflated by the coffee transaction. 2016 operating profit was, however, also lower than in 2014 – dropping by almost 21% over the two-year period. The decrease in net profit mirrored these trends.
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Mondelez’s underlying sales trajectory – stripping out one-time items such as the coffee sale and currency impact – also slowed in 2016. Underlying sales at the Oreo owner rose 1.3%. Mondelez said the growth rate reflected a negative impact of approximately 110 basis points from “revenue management activities” and India’s demonetisation in November.
The company was upbeat on the progress it has made to strengthen its underlying operating margin. While comparisons of reported margins were affected by the gain from Mondelez’s coffee transaction, the company continued to see steady improvement in underlying margin in 2016. Adjusted operating profit margin rose to 15.3% in 2016, compared to 13.7% in 2015 and 12.9% in 2014. Mondelez said the 2016 result was thanks to “continued reductions” in overhead costs and supply chain productivity savings.
“We continue to make solid progress toward our near-term margin targets, while investing for long-term growth,” chairman and CEO Irene Rosenfeld said. “Despite significant economic disruptions, political uncertainties and slower global category growth, we remain confident in and committed to our balanced strategy for both top- and bottom-line growth. Throughout the year, we continued to sharpen the focus of our portfolio, increase Power Brand investments and modernise our supply chain. These actions, together with our excellent cost discipline, position us well to deliver strong operating leverage that will drive sustainable value creation for our shareholders.” Mondelez so-called power brands include Cadbury, Oreo and Trident.
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Outlook
Looking to 2017, Mondelez said it expects net revenue to increase by “at least” 1%, with forex expected to weigh about 1% on growth. The group also expects to book improved adjusted operating profit margins, which should rise to the “mid-16% range”.
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By GlobalDataFor our analysis of whether Mondelez’s focus on margins is denting sales, click here
