Mondelez has said it is “encouraged” by signs the price of cocoa may fall, after record-high prices for the commodity squeezed the confectionery giant’s profits for another consecutive quarter.
Adjusted gross profit at Mondelez fell by a fifth (20.5%) in the three months to 30 September, pushing down operating profit by a third (32.6%) to $1.2bn (£890m), as costs peaked in Q3.
While Mondelez reported top-line organic growth of 3.4% year on year, higher revenues came entirely from an eight-point bump in pricing that managed to claw back growth from a 4.6% drop in volumes.
“We delivered solid top-line growth despite the impact of record-high cocoa cost inflation, with the third quarter representing peak costs of the year,” said Monzelez chair and CEO Dirk Van de Put.
“Although we anticipate challenging conditions to continue in some markets, we are encouraged by recent moderation in cocoa prices, as well as promising signs for a strong cocoa crop this fall.”
The drop in volumes disappointed investors, which had anticipated a 4.1% reduction in volumes, and came in around three points worse than Q2’s volume performance.
Mondelez’s ability to raise revenue through price and mix was most pronounced in Europe, where a 7.5% decline in volume and mix-related revenue was covered by a 12.6% increase in prices.
The company now expects organic revenue growth of over 4% for the year – down from estimates of 5% in July.
“Our teams are focused on executing clear plans for volume improvement, significantly increasing growth investments, and driving meaningful cost efficiencies,” said Van de Put.
“We remain confident in our teams’ proven track record of navigating volatility, as well as our strong business fundamentals, which position us well for next year and beyond.”
RBC analyst Nik Modi said the results were “disappointing albeit not totally surprising”, as peers in the consumer staples market struggle.
“While it looked as though management could still deliver on initial guidance despite slimmer margin for error following Q2, the headwinds this quarter were evidently too great.”
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