Mondelez sees increasing pressure on margins

Despite dwindling margins, Mondelez was able to increase sales in the final quarter. The snacks manufacturer expects an even stronger headwind in the coming months as the group is coping with labour shortages and fears further rising inflation.

Raw material prices

The Chicago-based biscuit manufacturer saw its gross margin fall to 37 per cent in the fourth quarter from 39.4 per cent a year earlier. Like everyone else in the sector, the company struggles with rising shipping and labour costs. In addition, raw materials such as sugar and wheat have become much more expensive in the past year.
 

Mondelez is also still feeling the effects of a six-week strike held by about a thousand workers in its factories in the United States in August. This, combined with a rise in demand and ongoing supply chain issues, has depleted the company’s stocks. “We have entered 2022 with low stocks, and we are working to rebuild inventory levels, which takes time in this environment”, CFO Luca Zaramella told Reuters.

Better than expected

Although Mondelez experienced declining margins, price increases and strong consumer demand boosted sales by 4.9 per cent to 7.66 billion dollars (6.87 billion euros). As such, the group performed better than what analysts had predicted. The operating result of 1.2 billion dollars (1.07 billion euros) was in line with expectations.
 

The food giant expects inflation to rise further over the coming months. For 2022 as a whole, the group expects organic net sales growth of more than 3 per cent. Currency effects would have a negative impact on sales and profits.