Food maker Mondelez International says political turmoil, including a globalisation backlash, has caused disruption and uncertainty for its international business.
The maker of Oreo cookies and Triscuit crackers sells snacks in 165 countries and operates factories all over the world. If President Donald Trump followed through with planned changes to taxes and tariffs affecting global trade, Mondelez operations in Mexico and elsewhere could be affected, said chief executive Irene Rosenfeld.
“Taxation and tariffs are going to have a profound impact on us,” Ms Rosenfeld said in an interview.
“We are keeping a close eye on this.”
Mondelez yesterday reported an unusually low 0.6 per cent rise in comparable sales, excluding currency fluctuations, for the fourth quarter. Adjusted earnings per share rose 12 per cent, reflecting cost-cutting at headquarters and the supply chain.
Mondelez acknowledged the downsides of its global reach. Economic uncertainty in India since demonetisation policies were implemented there late last year and in Britain since the vote to leave the European Union have weighed on Mondelez’s business in those countries.
Mr Trump’s calls to adjust border taxes could affect operations in the US and abroad.
“To the extent that we face higher costs for imported products, we’d obviously need to look for ways to cover these costs, adapt our supply chain model,” said chief financial officer Brian Gladden.
Since it was created following a split from Kraft Foods in 2012, Mondelez has looked to emerging markets for growth, making it more susceptible to recent economic weakness in countries such as China and India.
The Illinois-based company has also struggled to keep up with a rapid shift toward foods perceived as healthier.
In the latest quarter, Mondelez’s comparable sales rose 0.4 per cent in North America, where it generates about a quarter of its revenue.
Ms Rosenfeld said Mondelez discounted its cookies in the US to compete with other brands, hurting sales and profit margins at the end of the year.
“The North America food and beverage environment has been very sluggish,” Ms Rosenfeld said. “We’re expecting more of the same in 2017.”
She said Mondelez would invest more this year in e-commerce sales and in renovating brands, as it did recently with non-GMO Triscuits.
The company said it expected comparable revenue to grow at least 1 per cent in 2017 and double-digit growth in adjusted per-share earnings, excluding currency fluctuations.
Over all, Mondelez posted a fourth-quarter profit of $US93 million ($122m), or US6c a share, compared with a loss of $US729m, or US45c a share, a year earlier, when the company posted a $US778m loss on the deconsolidation of its Venezuelan business.
Excluding certain items, adjusted per-share earnings were US47c, compared with US48c as expected by analysts polled by Thomson Reuters.
Revenue fell 8.1 per cent to $US6.77 billion, also short of analyst expectations of $US6.89bn.
Mondelez’s adjusted operating profit margin rose about 1 percentage point to 14.4 per cent in the fourth quarter.
Mondelez expects it to top 16 per cent this year.
