01—Abstract
Summary
Summary of the 10-K filed February 25, 2008. Cited figures are marked; the original filing is the authoritative source.
Mondelez International, Inc. (formerly Kraft Foods Inc.) in its 2007 10-K filing, reported robust net revenue growth of 8.4% to $37.2 billiona, driven by favorable currency movements, acquisitions, higher volume, and pricing.
However, diluted Earnings Per Share (EPS) saw a decline of 12.4% to $1.62b. This decrease was influenced by significant restructuring charges, higher commodity costs impacting profitability, and increased marketing, administration, and research expenses. A major strategic move during the year was the acquisition of Danone Biscuit for $7.6 billion, alongside the planned divestiture of the Post cereal business.
The company also continued its share repurchase program and increased its quarterly dividend, signaling a focus on shareholder returns despite the EPS dip. Key financial trends indicate rising commodity costs (dairy, coffee, cocoa, grains) impacting margins, a continued strategic shift towards international markets, and ongoing restructuring efforts aimed at cost reduction and efficiency improvements. Investors should note the company's significant debt increase related to the Danone Biscuit acquisition, which will be a key factor in its financial management going forward.
02—Key points
Key Highlights
- Net revenues increased by 8.4% to $37.2 billion, driven by favorable currency, acquisitions, volume, and pricing.
- Diluted EPS decreased by 12.4% to $1.62, impacted by restructuring charges, higher commodity costs, and increased operating expenses.
- Acquisition of Danone Biscuit for $7.6 billion, significantly expanding international presence, particularly in snacks.
- Announcement of a definitive agreement to merge the Post cereal business with Ralcorp Holdings, Inc.
- Significant increase in commodity costs, with aggregate commodity costs rising by $1.25 billion in 2007.
- Total debt increased substantially to $21.0 billion, largely due to the Danone Biscuit acquisition financing.
- Company announced an 8.0% increase in its quarterly dividend to $0.27 per share and repurchased $3.6 billion of common stock.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, Mondelez International, Inc. kept $0.08.
- Revenue$35.86B100.0%
- Cost of revenue−$23.66B66.0%
- Gross profit$12.20B34.0%
- Operating costs−$8.03B22.4%
- Operating income$4.18B11.6%
- Interest, other & tax−$1.46B4.1%
- Net income$2.72B7.6%
Where FY2007 revenue went
$35.86B- Cost of revenue: $23.66B, 66% of revenue
- SG&A: $7.59B, 21% of revenue
- Net income: $2.72B, 7.6% of revenue
- Other operating costs: $439.0M, 1.2% of revenue
- Interest, other & tax: $1.46B, 4.1% of revenue
Kept 7.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 25, 2008Financial Statements
FY2007 against FY2006
| Line item | FY2007FY2006 | Change |
|---|---|---|
| Revenue | $35.86B$33.02B | +8.6% |
| Cost of Revenue | $23.66B$21.19B | +11.6% |
| Gross Profit | $12.20B$11.83B | +3.2% |
| SG&A Expenses | $7.59B$7.03B | +7.9% |
| Operating Income | $4.18B$4.16B | +0.4% |
| Net Income | $2.72B$3.06B | −11.1% |
| EPS (Basic) | $1.71$1.84 | −7.1% |
| EPS (Diluted) | $1.70$1.84 | −7.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in 2007?
Revenue growth was primarily driven by favorable currency movements (3.2 percentage points), the impact of acquisitions (1.0 percentage point), higher volume (1.7%), and higher net pricing (1.6%). Favorable currency was particularly noted due to the weakness of the U.S. dollar against the euro and Canadian dollar.
Why did earnings per share (EPS) decline in 2007 despite revenue growth?
Diluted EPS decreased due to several factors. These included higher total manufacturing costs, particularly increased commodity costs (dairy, coffee, cocoa, grains) which were partially offset by higher pricing. Additionally, the company incurred higher marketing, administration, and research costs, along with asset impairment charges. Significant restructuring program charges also impacted profitability.
What are the key strategic initiatives mentioned in the report?
The company outlined a growth strategy focused on 'Rewiring the organization for growth' through organizational and incentive changes, 'Reframing categories' via acquisitions and divestitures (like Danone Biscuit acquisition and Post cereal divestiture), 'Exploiting sales capabilities' with initiatives like the 'Wall-to-Wall' program, and 'Driving down costs' while investing in quality, R&D, and marketing.
How did the Danone Biscuit acquisition and Post cereal divestiture impact the company's financial position?
The Danone Biscuit acquisition, for approximately $7.6 billion, significantly increased total assets and long-term debt. It is expected to enhance international revenue derived from Kraft International. The planned divestiture of the Post cereal business, expected to close in mid-2008, will streamline the portfolio and generate approximately $960 million in cash, which is intended for debt repayment.
06—Continue