US snacks heavyweight Mondelez International has estimated it will take a US$200m revenue hit this year following the closure of its two factories in Ukraine.
It also flagged a dent in its annual profit due to Russia’s invasion of the country.
However, Mondelez expects its organic net revenue to increase by over 4% in 2022. It had previously expected growth in line with its long-term target of more than 3%.
Speaking to analysts yesterday (26 April) after the release of its first-quarter results, Luca Zaramella, the Oreo cookies owner’s CFO, said: “We stopped all business in Ukraine as the war began, including our two plants in the country that produce products for both Ukraine and broader Europe. In total, this represents about $320m in revenues on a yearly basis. As a result of this business stoppage, we expect asset write-offs and one-time costs of approximately $143m, which will be excluded from our adjusted results.
“For the remainder of 2022, we expect about $200m in revenue headwinds from the loss of revenue in Ukraine, as well as losses related to finished goods that our Ukraine plant produce for other countries within Europe, where we do not have supply alternative yet. The lost revenue is expected to translate into $0.03 lower EPS.”
CEO Dirk Van de Put added: “Unfortunately, our site in Trostyanets [in eastern Ukraine] has suffered significant damage due to the substantial military action in the area.”
More widely, describing an operating environment with multiple challenges, Van de Put said: “If I think about the complex environment, we all know about the geopolitical conflict. There’s still some pockets of Covid, particularly in China at the moment, but also south-east Asia. We are seeing absolutely record inflation. And the supply chain disruption is still there. So probably one of the more difficult periods that I have known in my career from an operational perspective.”
Mondelez has acted on its prices to help offset the pressure it is seeing on its costs.
Zaramella said: “We are also announcing price increases across a number of markets for the rest of the year tied to inflation. We now expect input cost inflation in the low double-digit range for 2022 versus our prior view of approximately 8%.”
He added: “We also expect additional pricing in a number of markets connected to this inflation, and these actions could cause an increase in elasticity versus what we are seeing today. As a result, we have planned accordingly.
“As we gave you guidance for 2022, we had some headroom. So we still feel we have an opportunity to hit high single-digit EPS. But the situation is very volatile. And given these dynamics, we believe it is prudent to call a range of EPS growth between mid-single to high-single-digit.”
Mondelez – which this week announced it was buying Grupo Bimbo’s Mexican confectionery business Ricolino – saw net revenue rise in the quarter by 7.3%, on a year-on-year basis, to $7.76bn but operating income decrease by $189m.