10-QPeriod: Q2 FY2009

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 5, 2009For Securities:MDLZ

Summary

In the second quarter of 2009, Kraft Foods Inc. (MDLZ) reported a 5.9% decrease in net revenues to $10.2 billion, compared to the prior year's second quarter. This decline was primarily attributed to unfavorable foreign currency movements, which significantly impacted reported revenues, as well as the impact of divestitures. Despite the revenue headwinds, the company demonstrated improved profitability, with diluted Earnings Per Share (EPS) increasing by 14.3% to $0.56. This EPS growth was driven by factors such as higher pricing, favorable volume/mix in certain segments, lower restructuring costs, and effective management of input costs, which more than offset increased marketing investments. For the six-month period ending June 30, 2009, net revenues also saw a decrease of 6.2% to $19.6 billion, largely due to similar foreign currency pressures and divestitures. However, diluted EPS saw a robust increase of 14.9% to $1.00. The company's operational performance was strengthened by strategic pricing initiatives and ongoing cost-saving measures, including the completion of its restructuring program. Management's outlook for full-year 2009 EPS was raised, reflecting confidence in the company's ability to navigate current economic conditions and drive future growth through both brand investment and efficiency improvements.

Financial Highlights

51 data points
Beta

Revenue

$9.78B

35.9% Gross Margin

Net Income

$827.00M

8.5% Net Margin

EPS (Diluted)

$0.56

Total Assets

$64.65B

Cash & Equivalents

$1.73B

Free Cash Flow

$1.03B

Financial Statements
Beta
Revenue$9.78B
Cost of Revenue$6.27B
Gross Profit$3.51B
SG&A Expenses$2.06B
Operating Income$1.46B
Interest Expense$309.00M
Net Income$827.00M
EPS (Basic)$0.56
EPS (Diluted)$0.56
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.48B

Key Highlights

  • 1Net revenues for Q2 2009 decreased 5.9% year-over-year to $10.2 billion, primarily due to unfavorable foreign currency impacts and divestitures.
  • 2Diluted EPS for Q2 2009 increased 14.3% year-over-year to $0.56, driven by pricing power, cost management, and lower restructuring costs.
  • 3For the first six months of 2009, net revenues declined 6.2% to $19.6 billion, while diluted EPS grew 14.9% to $1.00.
  • 4The company implemented a change in inventory valuation method from LIFO to average cost for U.S. inventories, effective January 1, 2009, with restatement of prior periods.
  • 5Kraft Foods Europe segment experienced a significant revenue decline of 17.4% in Q2 2009, largely due to foreign currency impacts and divestitures, but saw a substantial operating income increase of 90.8%.
  • 6The company raised its full-year 2009 diluted EPS guidance to at least $1.93.
  • 7Share repurchases under a $5.0 billion program concluded in March 2009, with no shares repurchased in 2009 year-to-date.

Frequently Asked Questions

The primary driver for the decrease in net revenues was the unfavorable impact of foreign currency exchange rates, particularly the strength of the U.S. dollar against major global currencies. The impact of divestitures also contributed to the revenue decline.

Kraft Foods implemented higher pricing strategies that more than offset increases in input costs, which were primarily related to raw materials like wheat, cocoa, and sugar. This, combined with cost-saving initiatives and lower restructuring charges, led to a significant increase in operating income and diluted EPS despite the revenue decline.

Effective January 1, 2009, Kraft Foods changed its method for valuing U.S. inventories from Last-In, First-Out (LIFO) to the average cost method. The company believes this change improves financial reporting by better matching current costs with revenues, aligns external reporting with competitors, and matches external reporting with the tax basis of accounting. Prior periods were restated to reflect this change, which had a favorable impact on reported earnings and equity.

Despite a significant year-over-year revenue decrease of 17.4% in the second quarter of 2009, Kraft Foods Europe's operating income increased substantially by 90.8%. This improvement was driven by lower costs from the completed restructuring program, higher pricing, reduced input costs, and favorable foreign currency impacts that offset the revenue decline. The segment's performance highlights the company's focus on improving profitability through cost management and strategic pricing.