Updated Version 3 - With cost pressures easing, Mondelez International's third-quarter profit exceeds market expectations

Supplemented by analyst comments, earnings call details, and the latest stock developments.

Sanskriti Shekhar

Reuters, October 29 - The parent company of Cadbury, Mondelez International (MDLZ.O), on Thursday reported third-quarter profits that exceeded Wall Street expectations, thanks to favorable cocoa prices as well as price increases across key markets, including North America, which drove growth .

The shares of this Oreo maker rose 6.5% in after-hours trading.

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The company has raised prices several times over the past few years as cocoa prices surged, but later benefited from declining costs due to a global supply glut. This gave Mondelez International more room to attract consumers with promotions and value packs.

The Toblerone maker said that pricing increased by 0.3 percentage points this quarter, with sales volume up by 1.8 percentage points. Its North American unit held sales volume steady, after a 1.8 percentage point decline last year.

Daniel Binns, CEO of brand consultancy Elmwood, said, “A year ago, record-high cocoa costs forced companies to increase prices, leading to a decline in sales volume. Now, while those costs are still being absorbed, sales volumes have recovered, and the brand's innovation is one of the reasons.”

However, CEO Dirk Van de Put said that higher energy prices continue to put pressure on consumer confidence in North America, and he expects the situation will not improve in the near term.

"The company's strategy of relying on price increases to drive growth in the North American market may soon yield diminishing marginal returns, as cash-strapped consumers allocate a larger portion of their budgets to gas and cut back on spending on snacks like Oreos," said eMarketer analyst Rachel Wolf.

Earlier on Thursday, rival Hershey (HSY.N) also warned (link) that high inflation and rising energy prices could impact candy consumption during this year’s Halloween.

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Mondelez also announced that it will acquire Undercover Snacks, a maker of chocolate-coated quinoa crisps, in a bid to expand its reach in the fast-growing “permissible indulgence” category.

“Mondelez’s acquisition of Undercover Snacks could improve the company’s positioning in the ‘better-for-you’ segment and attract consumers willing to pay more for products with health benefits,” Wolf said.

The company reported adjusted earnings per share of $0.78 for the quarter ended September 30, above analysts’ average estimate of $0.71 per share. But according to data compiled by London Stock Exchange Group (LSEG), quarterly revenue was $9.97 billion, slightly below the analyst forecast of $9.98 billion.

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