10-QPeriod: Q3 FY2009

Mondelez International, Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 3, 2009For Securities:MDLZ

Summary

Mondelez International, Inc. (MDLZ), formerly Kraft Foods Inc., reported its third-quarter and year-to-date results for the period ending September 30, 2009. For the third quarter, net revenues decreased by 5.7% to $9.8 billion, and diluted EPS saw a significant drop of 39.6% to $0.55. However, earnings from continuing operations showed strong growth, with diluted EPS increasing by 61.8%. For the first nine months of the year, net revenues decreased by 6.0% to $29.4 billion, and diluted EPS decreased by 11.9% to $1.56, while diluted EPS from continuing operations rose by 32.8% to $2.317 billion. The company highlighted strong operating income growth in both periods, driven by lower input costs, favorable volume/mix, and reduced restructuring charges. A notable event impacting comparability was the Post cereals business split-off in August 2008, with its prior period results classified as discontinued operations. Additionally, Mondelez is actively exploring a potential combination with Cadbury plc, with a deadline for a formal offer set for November 9, 2009.

Financial Highlights

52 data points
Beta

Revenue

$9.40B

35.9% Gross Margin

Net Income

$824.00M

8.8% Net Margin

EPS (Diluted)

$0.55

Total Assets

$66.67B

Cash & Equivalents

$3.00B

Free Cash Flow

$1.27B

Financial Statements
Beta
Revenue$9.40B
Cost of Revenue$6.02B
Gross Profit$3.38B
SG&A Expenses$2.03B
Operating Income$1.34B
Interest Expense$322.00M
Net Income$824.00M
EPS (Basic)$0.56
EPS (Diluted)$0.55
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Net revenues for the third quarter decreased by 5.7% to $9.8 billion, and for the nine-month period by 6.0% to $29.4 billion, primarily impacted by unfavorable foreign currency movements.
  • 2Diluted Earnings Per Share (EPS) attributable to Kraft Foods decreased by 39.6% to $0.55 in Q3 and by 11.9% to $1.56 for the nine months, largely due to the absence of the gain from the Post cereals business split-off in the prior year.
  • 3Earnings from continuing operations showed robust growth, with diluted EPS increasing by 61.8% in Q3 and 36.8% for the nine-month period, indicating improved operational performance.
  • 4Operating income increased significantly by 38.7% in Q3 and 20.1% for the nine months, driven by lower input costs, favorable volume/mix, reduced restructuring costs, and gains on hedging activities.
  • 5The company is actively engaged in a potential acquisition of Cadbury plc, having made a proposal valued at approximately $16.7 billion, with a deadline to formalize the offer approaching.
  • 6Mondelez continues to manage its financial position with strong operating cash flow, though it has not repurchased shares in 2009 after a significant buyback program in the prior year.
  • 7The company updated its full-year 2009 EPS guidance to at least $1.97, reflecting strong year-to-date performance and a reduced effective tax rate.

Frequently Asked Questions

The primary drivers for the decrease in net revenues were unfavorable foreign currency exchange rates, which significantly weakened the reported revenues when translated into U.S. dollars. The impact of divestitures and the absence of a favorable resolution of a Brazilian value-added tax claim from the prior year also contributed to the decline. While volume/mix was unfavorable overall for the nine months, the third quarter saw a slight positive impact from volume/mix.

Despite the decline in net revenues, profitability improved significantly in terms of operating income and earnings from continuing operations. Operating income rose due to lower commodity input costs, favorable volume/mix, reduced restructuring charges, and gains from hedging activities. Earnings from continuing operations saw a substantial increase, indicating the company's underlying business is performing well, separate from the impact of discontinued operations.

The Post Cereals split-off, completed in August 2008, means that prior period results include significant gains from this discontinued operation, making year-over-year comparisons for net earnings less straightforward. The potential acquisition of Cadbury plc is a major strategic development, representing a significant effort to expand the company's global presence in snacks and confectionery. The outcome of this potential transaction will be a key factor influencing future financial performance and strategic direction.

The company believes its cash from operations, credit facilities, and authorized long-term financing provide sufficient liquidity. Operating cash flow increased year-over-year due to working capital improvements. While debt levels remain substantial, the debt-to-capitalization ratio slightly improved. The company redeemed a portion of its long-term debt and is focused on managing its credit facility and meeting its financial covenants.