August 8, 2013 12:05 am

Mondelez raises buyback to $6bn

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Mondelez International has approved a $4.8bn boost to its share buyback programme as the global snacks group spun out of Kraft Foods faces calls from activist investor Nelson Peltz to merge with PepsiCo.

The owner of the Trident, Cadbury and Oreo brands said on Wednesday it had authorised a rise in its share repurchase programme from $1.2bn to $6bn up until 2016, and raised its quarterly dividend 8 per cent.

Mondelez reported second quarter net income of $616m, or 34 cents a diluted share, down from $1.03bn, or 58 cents a share, during the same period last year.

After stripping out the contribution from Kraft Foods grocery business, Mondelez’ earnings rose nearly 26 per cent, on barely changed revenue of just under $8.6bn.

Excluding special items, the company earned 37 cents a share, against expectations of 34 cents.

Irene Rosenfeld, chief executive, split the company last year and stayed on to run the larger international snacks group.

Mondelez has since become the target of Mr Peltz, who has launched a public campaign urging PepsiCo to merge its snacks business with Mondelez. Mr Peltz has taken billion-dollar stakes in both companies.

Mondelez has struggled since the split, with Ms Rosenfeld acknowledging early “executional missteps” in Brazil and Russia, markets which are central to the company’s emerging markets focused strategy.

Mistakes on pricing in developing markets, as well as a struggling gum business, have been reflected in the company’s shares, which are down over 24 per cent since the company split on October 1.

The company has insisted that its struggles will subside, and remains bullish about its future because of its large emerging markets footprint. “If there’s a challenge there, it’s that we’re seeing our categories slow a little bit in response to the slowdown in GDP,” Ms Rosenfeld said. “But the good news is we have continued [to maintain market] share.”

The group said it would “fast-track” a number of emerging markets investments that had been planned for the future, including efforts to improve distribution and marketing, along with new plants in China, Mexico and India. Capital expenditures will increase from about 4 per cent of revenues to about 5 per cent.

The company reaffirmed its full-year operating earnings guidance of $1.55-$1.60 per share, and maintained its guidance for full-year organic net revenue growth at the low end of its 5-7 per cent range.

The quarter ended June was the third full one in which Mondelez operated as an independent company. Last week Kraft Foods reported second-quarter net income of $829m, or $1.38 a share, up from $603m, or $1.02 a share, in the previous year.

Mondelez shares rose 2.5 per cent in after-market trading to $32.05.

This story has been amended to reflect reader’s comments.

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