10-QPeriod: Q3 FY2011

Mondelez International, Inc. Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 4, 2011For Securities:MDLZ

Summary

Mondelez International, Inc. (formerly Kraft Foods Inc.) reported a strong increase in net revenues for the third quarter and first nine months of 2011, driven by a combination of net pricing increases and favorable volume/mix, especially in its Developing Markets and European segments. The company also benefited from favorable foreign currency movements. While top-line growth was robust, the company continues to navigate integration costs related to the Cadbury acquisition, which are a significant factor impacting profitability. An important strategic development highlighted is the announced intention to spin off the North American grocery business into a separate public company, creating a global snacks business and a North American grocery business. This transaction is intended to unlock shareholder value by allowing each business to focus on its distinct strategic priorities. Investors should monitor the progress and conditions of this spin-off closely. The company's financial performance reflects ongoing integration efforts and strategic restructuring, with a focus on managing input costs and driving organic growth across its diverse product portfolio.

Financial Highlights

49 data points
Beta

Revenue

$8.78B

37.0% Gross Margin

Net Income

$922.00M

10.5% Net Margin

EPS (Diluted)

$0.52

Total Assets

$95.83B

Cash & Equivalents

$1.98B

Free Cash Flow

$743.00M

Financial Statements
Beta
Revenue$8.78B
Cost of Revenue$8.61B
Gross Profit$3.25B
SG&A Expenses$2.87B
Operating Income$1.70B
Net Income$922.00M
EPS (Basic)$0.52
EPS (Diluted)$0.52
Shares Outstanding (Basic)1.77B
Shares Outstanding (Diluted)1.78B

Key Highlights

  • 1Net revenues increased by 11.5% to $13.2 billion in Q3 2011 and by 12.0% to $39.7 billion in the first nine months of 2011, driven by pricing and volume/mix, particularly in developing markets and Europe.
  • 2Organic net revenues grew by 8.4% in Q3 and 6.7% in the first nine months, indicating underlying business growth beyond currency and acquisition/divestiture impacts.
  • 3The company announced a plan to spin off its North American grocery business to create two independent companies: a global snacks business and a North American grocery business.
  • 4Operating income increased by 11.8% in Q3, but net earnings attributable to Kraft Foods decreased by 24.5% for the first nine months due to significant one-time items and integration costs from the Cadbury acquisition in the prior year.
  • 5Integration program costs related to the Cadbury acquisition amounted to $112 million in Q3 and $352 million for the first nine months of 2011.
  • 6Diluted EPS from continuing operations was $0.52 in Q3, up from $0.43 in the prior year, but overall diluted EPS for the first nine months decreased to $1.52 from $2.09, largely due to discontinued operations in the prior year.
  • 7The company is experiencing increased commodity costs, particularly for dairy, coffee, grains, and oils, which are being partially offset by net pricing increases.

Frequently Asked Questions

The company's primary strategic initiative is the planned spin-off of its North American grocery business to create two independent public companies: a global snacks business and a North American grocery business. This is intended to focus each entity on its respective strategic priorities and unlock shareholder value. Additionally, the company continues to focus on driving organic net revenue growth through pricing and favorable volume/mix and managing integration costs from the Cadbury acquisition.

The Cadbury acquisition, completed in February 2010, significantly impacts current results. While it contributes to revenue growth, especially in international segments, it also necessitates substantial integration costs, totaling $352 million for the first nine months of 2011. These integration costs affect operating income and profitability.

For the full year 2011, the company increased its expectations for organic net revenue growth to at least 6% and raised its Operating EPS guidance to at least $2.27. This reflects strong operating momentum and an expectation of neutral currency impact in the fourth quarter. However, investors should remain mindful of ongoing integration costs and commodity price volatility.

Yes, the company is involved in a dispute with Starbucks Coffee Company regarding the Starbucks packaged coffee business. Starbucks took control of the business in March 2011, alleging Kraft had breached agreements, while Kraft is seeking remedies in arbitration. The results of this business were included in Kraft's segments through March 1, 2011. The company also states that it is routinely involved in other legal proceedings but does not expect them to have a material impact on financial results.