10-QPeriod: Q2 FY2016

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 27, 2016For Securities:MDLZ

Summary

Mondelez International, Inc. (MDLZ) reported its second quarter 2016 results, showing a decrease in reported net revenues primarily due to the deconsolidation of its historical coffee business and unfavorable currency movements, partially offset by underlying organic net revenue growth. Diluted Earnings Per Share (EPS) saw a significant increase, largely driven by a substantial gain on the exchange of an equity method investment and a reduction in restructuring charges compared to the prior year. Key financial highlights include positive organic net revenue growth, driven by higher net pricing across most segments, and an improvement in Adjusted Operating Income, reflecting cost efficiencies and productivity initiatives. The company is actively managing its portfolio through strategic divestitures and acquisitions, including progress on the sale of French manufacturing facilities and the integration of the EEMEA business. Despite currency headwinds and ongoing restructuring efforts, Mondelez International maintained its financial outlook and continued to return value to shareholders through dividends and share repurchases.

Financial Highlights

51 data points
Beta

Revenue

$6.30B

39.9% Gross Margin

Net Income

$464.00M

7.4% Net Margin

EPS (Diluted)

$0.29

Total Assets

$63.27B

Free Cash Flow

$522.00M

Financial Statements
Beta
Revenue$6.30B
Cost of Revenue$3.79B
Gross Profit$2.52B
SG&A Expenses$1.67B
Operating Income$638.00M
Interest Expense$135.00M
Net Income$464.00M
EPS (Basic)$0.30
EPS (Diluted)$0.29
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.58B

Key Highlights

  • 1Reported net revenues decreased by 17.7% to $6.3 billion for the second quarter of 2016, primarily impacted by the deconsolidation of the coffee business and unfavorable currency. However, Organic Net Revenue (excluding these impacts) increased by 1.5%.
  • 2Diluted EPS increased by 16.0% to $0.29 for the second quarter of 2016, reflecting significant one-time items and a decrease in restructuring charges compared to the prior year.
  • 3Adjusted Operating Income increased by 12.9% (17.4% on a constant currency basis) to $960 million, driven by higher net pricing, lower SG&A expenses, and gains on property sales, despite unfavorable currency translation.
  • 4The company continues its 2014-2018 Restructuring Program, incurring $154 million in charges during the quarter, aimed at reducing operating costs.
  • 5Mondelez International received a $43 million gain on an equity method investment exchange related to the Keurig transaction.
  • 6Total debt stood at $17.3 billion as of June 30, 2016, with a debt-to-capitalization ratio of 0.39.
  • 7The company declared an increased quarterly dividend of $0.19 per common share, signaling confidence in future financial performance.

Frequently Asked Questions

The primary driver for the decrease in reported net revenues was the deconsolidation of Mondelez's historical coffee business, which was contributed to Jacobs Douwe Egberts (JDE) in July 2015. Additionally, unfavorable currency movements, primarily due to a strengthening U.S. dollar, and the deconsolidation of its Venezuelan operations also contributed significantly to the revenue decline.

Mondelez International addressed higher input costs through a combination of strategies. This included hedging techniques to limit fluctuations in raw material costs, implementing pricing actions, and focusing on productivity and manufacturing cost control initiatives. While they aim to mitigate the impact of higher costs, they acknowledged that pricing actions may lag commodity cost changes temporarily due to competitive or market conditions.

The company is actively progressing with its $3.5 billion 2014-2018 Restructuring Program, aimed at reducing operating cost structures in its supply chain and overhead. During the second quarter of 2016, $154 million in restructuring charges were recorded. The company expects to incur the majority of the remaining charges in 2016 and anticipates completing the program by the end of 2018.

The UK's vote to exit the European Union (Brexit) introduced volatility in global markets and currency exchange rates. While Mondelez International had not experienced significant immediate business disruptions in its UK operations, the devaluation of the British pound sterling in late June 2016 adversely affected its translated results reported in U.S. dollars. The company is continuing to monitor the implications of Brexit on future demand, financial results, and operations.