10-QPeriod: Q2 FY2011

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:MDLZ

Summary

Mondelez International, Inc. (MDLZ), formerly Kraft Foods Inc., reported strong net revenue growth for the second quarter and first six months of 2011, driven by a combination of increased pricing and favorable volume/mix, alongside currency tailwinds. The company's integration of the Cadbury acquisition continues to progress, with ongoing efforts to realize significant cost savings and revenue synergies. Despite overall revenue increases, investors should note the impact of increased input costs, particularly for commodities like dairy, coffee, and grains, which pressured margins. The company also addressed a significant legal dispute with Starbucks regarding their retail coffee agreement, the outcome of which is pending arbitration. Looking ahead, Mondelez announced a strategic intention to split into two independent public companies, focusing on a global snacks business and a North American grocery business, a move expected to unlock further value.

Financial Highlights

49 data points
Beta

Revenue

$9.16B

36.2% Gross Margin

Net Income

$976.00M

10.7% Net Margin

EPS (Diluted)

$0.55

Total Assets

$99.03B

Cash & Equivalents

$2.27B

Free Cash Flow

$864.00M

Financial Statements
Beta
Revenue$9.16B
Cost of Revenue$9.01B
Gross Profit$3.31B
SG&A Expenses$3.01B
Operating Income$1.81B
Net Income$976.00M
EPS (Basic)$0.55
EPS (Diluted)$0.55
Shares Outstanding (Basic)1.76B
Shares Outstanding (Diluted)1.77B

Key Highlights

  • 1Net revenues increased by 13.3% to $13.9 billion for the second quarter and 12.2% to $26.5 billion for the first six months of 2011, driven by organic growth and favorable foreign currency impacts.
  • 2Operating income saw a 6.2% increase to $1.8 billion for the second quarter and a substantial 18.7% increase to $3.5 billion for the first six months, reflecting pricing power and cost management.
  • 3Diluted EPS from continuing operations rose to $0.55 for the second quarter and $1.01 for the first six months, showing improvement in core business profitability.
  • 4The company incurred significant integration charges related to the Cadbury acquisition, totaling $240 million for the first six months of 2011, as it works towards achieving at least $750 million in annual cost savings.
  • 5Inventories increased to $6.4 billion as of June 30, 2011, up from $5.3 billion at the end of 2010, indicating potential supply chain build-up or increased product costs.
  • 6Goodwill and intangible assets remain substantial at $39.1 billion and $26.5 billion respectively, largely due to acquisitions like Cadbury.
  • 7Mondelez announced plans to split into two independent companies: a global snacks business and a North American grocery business, via a tax-free spin-off, targeting completion before year-end 2012.

Frequently Asked Questions

For the three months ended June 30, 2011, Kraft Foods reported net revenues of $13.9 billion, an increase of 13.3% year-over-year. Operating income was $1.8 billion, up 6.2%. Diluted EPS attributable to Kraft Foods was $0.55. For the six months ended June 30, 2011, net revenues were $26.5 billion (up 12.2%), operating income was $3.5 billion (up 18.7%), and diluted EPS from continuing operations was $1.01.

The integration of Cadbury is ongoing, with the company expecting to achieve at least $750 million in annual cost savings by the end of the third year post-acquisition. Integration charges incurred for the first six months of 2011 were $240 million, contributing to a total of $897 million incurred since the program's inception against an expected $1.5 billion.

Kraft Foods announced its intention to split into two independent public companies: a global snacks business and a North American grocery business, through a tax-free spin-off. This strategic move aims to create more focused entities, potentially unlocking value by allowing each business to pursue its own growth strategies in distinct markets and with different capital structures.

Yes, the company is involved in an arbitration proceeding against Starbucks concerning the termination of their retail coffee agreement, which began on March 1, 2011. Additionally, significant commodity cost increases, particularly for dairy, coffee, wheat, and oils, are impacting input costs and are expected to continue throughout the year.