10-QPeriod: Q2 FY2017

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 2, 2017For Securities:MDLZ

Summary

Mondelez International reported a 5.0% decrease in net revenues to $6.0 billion for the second quarter of 2017, and a 2.8% decrease to $12.4 billion for the first six months, impacted by unfavorable currency movements and a significant malware incident that disrupted sales and operations. Despite the revenue challenges, the company saw an increase in Diluted EPS, which rose 10.3% to $0.32 for the quarter and 14.1% to $0.73 for the six-month period. Adjusted EPS also showed positive growth, increasing 11.6% to $0.48 in the second quarter and 9.8% to $1.01 for the six months, demonstrating the company's ability to manage costs and improve profitability even amidst operational disruptions. The company incurred incremental expenses of $7.1 million due to the malware incident, which is expected to continue impacting results in the second half of 2017. The company also continued to execute its 2014-2018 Restructuring Program, focusing on cost optimization. Management remains confident in the company's liquidity and ability to fund operations, capital expenditures, and shareholder returns through operating cash flow and existing credit facilities.

Financial Highlights

52 data points
Beta

Revenue

$5.99B

38.7% Gross Margin

Net Income

$498.00M

8.3% Net Margin

EPS (Diluted)

$0.32

Total Assets

$62.76B

Free Cash Flow

$637.00M

Financial Statements
Beta
Revenue$5.99B
Cost of Revenue$3.67B
Gross Profit$2.31B
SG&A Expenses$1.46B
Operating Income$636.00M
Interest Expense$103.00M
Net Income$498.00M
EPS (Basic)$0.33
EPS (Diluted)$0.32
Shares Outstanding (Basic)1.52B
Shares Outstanding (Diluted)1.54B

Key Highlights

  • 1Net revenues decreased by 5.0% to $5.99 billion for the three months ended June 30, 2017, and by 2.8% to $12.4 billion for the six months ended June 30, 2017, primarily due to unfavorable currency and the impact of a significant malware incident.
  • 2Diluted Earnings Per Share (EPS) increased to $0.32 for the second quarter and $0.73 for the six months, up from $0.29 and $0.64 respectively in the prior year periods.
  • 3Adjusted EPS, a non-GAAP measure, saw significant growth, rising 11.6% to $0.48 for the second quarter and 9.8% to $1.01 for the six months, indicating improved underlying profitability.
  • 4The company reported a negative impact of 2.3% on net revenue growth and 2.4% on Organic Net Revenue growth in the second quarter due to a global malware incident, which also incurred incremental expenses of $7.1 million.
  • 5Operating income increased slightly by 0.5% to $641 million for the quarter, and by 8.9% to $1.48 billion for the six months, supported by cost management and favorable pricing.
  • 6The company continues to execute its $5.7 billion 2014-2018 Restructuring Program, with $2.9 billion incurred as of June 30, 2017, aimed at reducing operating costs.
  • 7Total debt stood at $18.8 billion as of June 30, 2017, with a debt-to-capitalization ratio of 0.42, indicating a stable capital structure.

Frequently Asked Questions

The global malware incident on June 27, 2017, had a significant impact, resulting in delayed shipments and a negative impact of 2.3% on net revenue growth and 2.4% on Organic Net Revenue growth for the second quarter. The company incurred incremental expenses of $7.1 million and expects further recovery costs in the second half of 2017.

Net revenues decreased by 5.0% to $5.99 billion in the second quarter and by 2.8% to $12.4 billion in the first six months of 2017. This decline was mainly attributed to unfavorable currency movements and the operational disruption caused by the malware incident. Organic Net Revenue, excluding currency impacts and divestitures/acquisitions, also saw a slight decrease.

Despite revenue challenges, Mondelez International demonstrated improved profitability. Diluted EPS increased by 10.3% to $0.32 in the second quarter and by 14.1% to $0.73 for the six months. Adjusted EPS, a non-GAAP measure that excludes special items, saw even stronger growth, up 11.6% to $0.48 for the quarter and 9.8% to $1.01 for the six months, indicating effective cost management and operational efficiency.

Mondelez International is actively managing its cost structure through its 2014-2018 Restructuring Program, which aims to reduce operating costs by $4.1 billion by year-end 2018. The company has incurred $2.9 billion of these costs to date. In the second quarter, the company benefited from lower selling, general, and administrative expenses due to cost reduction efforts and lower restructuring costs.