Mondelez International Inc's (MDLZ) quarterly profit handily beat estimates, helped by cost cuts, and the Cadbury chocolate maker raised its profit forecast for the year, sending its shares up 3.65% on Wednesday.
Since separating from Kraft in 2012, Mondelez has concentrated on increasing its profit margins by reducing costs through internal controls, divestitures and asset sales.
The company is in the midst of a $3 billion cost saving program, which runs till the end of 2018, opening more efficient manufacturing plants and using zero-based budgeting (ZBB), which requires expenses to be justified for each new period.
Mondelez has targeted cost savings of 30-50% in 12 areas including travel, sales support services and business events. ZBB efforts in travel have cut costs by 30%, Mondelez spokeswoman Valerie Moens told Reuters.
Overall selling, general and administrative expenses fell 13.3% to $1.6 billion in the third quarter ended Sept. 30.
Net sales fell 6.6% to $6.40 billion, hurt by a strong dollar and the deconsolidation of its Venezuela operations.
Organic net revenue grew 1.1% in the quarter, driven by sales of Oreos and Trident gum.
The company, however, cut its full-year organic growth forecast to about 1.6% from at least 2% earlier due to deceleration in some markets such as the Middle East where low oil prices have stifled demand.
Mondelez also raised its forecast for adjusted earnings per share for the full year to be up about 25% on a constant currency basis from its previous expectations of double-digit growth.
Net income attributable to the company fell to $548 million, or 35 cents per share, in the quarter, from $7.27 billion, or $4.46 per share, a year earlier.
The company had a $6.8 billion one-time gain from a joint venture with Dutch group D.E. Master Blenders, last year.
Excluding items, the company earned 52 cents per share in the third quarter, beating analysts' average estimate of 43 cents per share, according to Thomson Reuters.
Analysts on average had expected net revenue of $6.45 billion.
Management is really doing a great job in cutting expenses. EPS easily beat analyst's estimates. And I like Oreo cookies very much :), so will definitely buy MDLZ.