10-QPeriod: Q3 FY2017

Mondelez International, Inc. Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 31, 2017For Securities:MDLZ

Summary

Mondelez International, Inc. (MDLZ) reported a solid performance for the third quarter of 2017, with net revenues increasing by 2.1% to $6.5 billion and diluted Earnings Per Share (EPS) rising by an impressive 85.7% to $0.65 compared to the prior year. This growth was driven by a combination of factors including favorable currency translation, the recovery from a second-quarter malware incident, and strategic pricing actions. The company also saw strong performance in its Power Brands and emerging markets. For the nine-month period, net revenues saw a slight decrease of 1.2% to $18.9 billion, primarily due to divestitures and unfavorable currency impacts. However, Organic Net Revenue grew by 0.3%, indicating underlying business strength. Diluted EPS for the nine months increased by 39.4% to $1.38, boosted by significant non-recurring benefits such as the resolution of a Brazilian indirect tax matter and a gain on divestiture. The company continues to focus on optimizing its cost structure through its 2014-2018 Restructuring Program, aiming for long-term profitable growth.

Financial Highlights

53 data points
Beta

Revenue

$6.53B

39.0% Gross Margin

Net Income

$981.00M

15.0% Net Margin

EPS (Diluted)

$0.64

Total Assets

$63.29B

Free Cash Flow

$302.00M

Financial Statements
Beta
Revenue$6.53B
Cost of Revenue$3.98B
Gross Profit$2.55B
SG&A Expenses$1.34B
Operating Income$1.17B
Interest Expense$89.00M
Net Income$981.00M
EPS (Basic)$0.65
EPS (Diluted)$0.64
Shares Outstanding (Basic)1.51B
Shares Outstanding (Diluted)1.52B

Key Highlights

  • 1Net revenues increased 2.1% to $6.5 billion in Q3 2017, driven by favorable currency and malware incident recovery.
  • 2Diluted EPS surged 85.7% to $0.65 in Q3 2017, signaling strong profit growth.
  • 3Organic Net Revenue for the nine months grew 0.3% to $18.8 billion, showcasing underlying business resilience despite divestitures and currency headwinds.
  • 4Significant non-recurring benefits, including a Brazilian tax matter resolution and divestiture gains, positively impacted net earnings and EPS for the nine-month period.
  • 5The company is actively managing its cost structure through the 2014-2018 Restructuring Program, aiming for operational efficiency.
  • 6Shareholder returns remain a focus with $1.8 billion in share repurchases and a 16% increase in the quarterly dividend to $0.22 per share during the nine months.

Frequently Asked Questions

The malware incident in June 2017 had a negative impact on net revenue growth in Q2 and early Q3. While the company executed business continuity plans to minimize damage and restore systems, it resulted in lost revenue due to delayed shipments. For Q3, the company estimates a net favorable impact of 0.6% on net revenue and Organic Net Revenue due to the recovery of delayed shipments. Incremental expenses of $47 million were incurred in Q3 2017 related to the incident, with further expenses expected in Q4.

Mondelez International aims to deliver strong, profitable long-term growth by accelerating its core snacks business and expanding its global Power Brands. This includes innovating with well-being offerings, enhancing its e-commerce presence, and optimizing its cost structure through supply chain reinvention and overhead cost management using zero-based budgeting.

The company believes its cash from operations, revolving credit facilities, and authorized long-term financing will provide sufficient liquidity for its needs. They continue to utilize commercial paper, international credit lines, and long-term debt issuances for funding. Total debt was $18.6 billion as of September 30, 2017, with a debt-to-capitalization ratio of 0.42. The company has a $4.5 billion revolving credit facility and expects to fund upcoming debt maturities with operating cash flow and potential new financing.

Several non-recurring items significantly impacted earnings. For the nine months ended September 30, 2017, the company benefited from a $212 million reversal of tax liabilities related to a Brazilian indirect tax matter, a $187 million gain on the sale of its Australian grocery business, and a $58 million gain from the settlement of a pre-acquisition Cadbury tax matter. These items contributed positively to net earnings and EPS.