10-QPeriod: Q3 FY2016

Mondelez International, Inc. Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 26, 2016For Securities:MDLZ

Summary

Mondelez International, Inc. reported its financial results for the quarter and nine months ended September 30, 2016. The company experienced a significant decrease in net revenues and net earnings compared to the prior year, primarily due to the deconsolidation of its Venezuelan operations and the prior year's large gain from the JDE coffee business transactions. Excluding these and other significant items, the company's underlying performance showed signs of growth. Organic Net Revenue saw an increase in both periods, indicating healthy underlying sales growth. Adjusted Operating Income and Adjusted EPS also showed positive growth, especially on a constant currency basis, highlighting the company's efforts in cost management and operational efficiency. Investors should note the impact of ongoing restructuring programs, currency fluctuations, and strategic divestitures and acquisitions on the reported figures. The company is actively managing its debt and capital structure, with recent actions aimed at optimizing its financing.

Financial Highlights

51 data points
Beta

Revenue

$6.40B

38.9% Gross Margin

Net Income

$548.00M

8.6% Net Margin

EPS (Diluted)

$0.35

Total Assets

$63.27B

Free Cash Flow

$496.00M

Financial Statements
Beta
Revenue$6.40B
Cost of Revenue$3.91B
Gross Profit$2.49B
SG&A Expenses$1.55B
Operating Income$702.00M
Interest Expense$129.00M
Net Income$548.00M
EPS (Basic)$0.35
EPS (Diluted)$0.35
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.58B

Key Highlights

  • 1Net revenues decreased by 6.6% for the third quarter and 14.0% for the first nine months of 2016, largely impacted by the deconsolidation of Venezuelan operations and currency headwinds.
  • 2Organic Net Revenue, excluding certain items, increased by 1.1% for the quarter and 1.6% for the nine months, indicating underlying sales growth.
  • 3Diluted EPS saw a substantial decrease due to significant one-time items, particularly the prior year's gain from the JDE coffee business transactions.
  • 4Adjusted EPS, a non-GAAP measure, increased by 36.8% for the quarter and 22.5% for the nine months, showing improved operational performance.
  • 5The company's 2014-2018 Restructuring Program continued, with significant charges incurred in both periods, aimed at reducing operating costs.
  • 6Strategic transactions, including the ongoing impact of the JDE coffee business transactions and the acquisition of an interest in Keurig, continue to shape the company's portfolio.
  • 7Latin America segment net revenues saw a significant decline, heavily influenced by the deconsolidation of Venezuelan operations and currency impacts.

Frequently Asked Questions

The substantial decrease in net earnings is primarily attributable to the lapping of a large pre-tax gain of $7.1 billion recognized in the prior year from the JDE coffee business transactions. Additionally, the deconsolidation of the Venezuelan operations and unfavorable currency movements also contributed to the year-over-year decline in reported net earnings.

Despite the reported net revenue and earnings declines, the company's underlying business performance shows resilience. Organic Net Revenue, which excludes the impact of currency, acquisitions, divestitures, and other significant items, increased in both the third quarter and the first nine months. Furthermore, Adjusted EPS, a non-GAAP measure that excludes one-time items, demonstrated strong growth, indicating that operational improvements and cost management are driving positive results.

The strengthening U.S. dollar against most international currencies had a negative impact on reported net revenues and operating income. This unfavorable currency translation reduced net revenues by $193 million in the third quarter and $996 million in the first nine months. The company actively monitors currency risks and utilizes hedging strategies to mitigate some of these impacts.

The 2014-2018 Restructuring Program, aimed at reducing operating cost structure in supply chain and overhead, incurred significant charges in both periods. The company has incurred the majority of the program's charges through Q3 2016 and expects to complete it by the end of 2018. This program is a key initiative for driving future margin improvements.