10-QPeriod: Q2 FY2008

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 1, 2008For Securities:MDLZ

Summary

Mondelez International, Inc. (MDLZ), formerly Kraft Foods Inc., reported strong revenue growth in the second quarter and first six months of 2008, largely driven by the acquisition of the Danone Biscuit business and positive foreign currency movements. Net revenues increased by 21.4% to $11.2 billion in Q2 and 21.1% to $21.5 billion for the first six months of the year. While revenue showed robust growth, net earnings for the first six months saw a slight decrease of 4.9% to $1.34 billion, impacting diluted EPS growth. This was primarily due to higher interest expenses related to financing the Danone acquisition and ongoing restructuring charges. The company is actively managing its portfolio, announcing the planned split-off of its Post cereals business and continuing its global restructuring program aimed at cost optimization and increased efficiency. Despite increased debt levels from acquisitions, the company maintains adequate liquidity and is focused on integrating new businesses and streamlining operations for future growth.

Financial Highlights

27 data points
Beta

Revenue

$10.80B

35.8% Gross Margin

Net Income

$745.00M

6.9% Net Margin

EPS (Diluted)

$0.49

Cash & Equivalents

$708.00M

Free Cash Flow

$759.00M

Financial Statements
Beta
Revenue$10.80B
Cost of Revenue$6.94B
Gross Profit$3.87B
SG&A Expenses$2.26B
Operating Income$1.42B
Net Income$745.00M
EPS (Basic)$0.49
EPS (Diluted)$0.49

Key Highlights

  • 1Net revenues surged by 21.4% to $11.2 billion in Q2 2008 and 21.1% to $21.5 billion in the first six months, primarily driven by the Danone Biscuit acquisition and favorable foreign currency exchange rates.
  • 2Diluted Earnings Per Share (EPS) saw an increase of 9.1% to $0.48 in Q2 2008, but for the six-month period, it grew by only 1.1% to $0.88.
  • 3The company incurred significant Restructuring Program charges totaling $121 million in Q2 and $219 million for the first six months of 2008, aimed at cost reduction and organizational streamlining.
  • 4The acquisition of Danone Biscuit for approximately $7.6 billion in late 2007 is a major contributor to revenue growth, adding $869 million in Q2 and $1,575 million in the first six months of 2008.
  • 5Mondelez announced the planned split-off of its Post cereals business, expected to close in early August 2008, which will reduce the number of outstanding shares.
  • 6Long-term debt increased significantly due to debt issuances in March and May 2008, totaling approximately $6.5 billion, to repay bridge financing for the Danone acquisition and for general corporate purposes.
  • 7The company expects to complete its $5.0 billion share repurchase program, with $850 million remaining as of June 30, 2008.

Frequently Asked Questions

The primary drivers of the significant revenue increase were the acquisition of the Danone Biscuit business, higher net pricing across various categories, and favorable foreign currency exchange rate movements, particularly with the euro, Canadian dollar, and Brazilian real.

The Danone Biscuit acquisition contributed $869 million in net revenues for the three months and $1,575 million for the six months ended June 30, 2008. It also led to an increase in goodwill and intangible assets on the balance sheet and increased interest expenses due to acquisition financing.

The company is executing a global restructuring program, which includes incurring charges for asset disposals, severance, and implementation costs. They also announced a new operating structure to streamline operations, increase accountability, and simplify processes, aiming for reliable growth.

The company issued significant amounts of senior unsecured notes in March and May 2008 to repay bridge financing for the Danone acquisition. While total debt increased, the debt-to-capitalization ratio remained relatively stable at 0.44 as of June 30, 2008. The company believes it has sufficient liquidity to meet its obligations.

The split-off of the Post cereals business is a strategic move to streamline the company's portfolio. It involves an exchange offer for shareholders to swap Kraft shares for shares in a new entity that will merge with Ralcorp. This transaction is expected to close in early August 2008 and will reduce the number of Kraft shares outstanding.