10-QPeriod: Q2 FY2018

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 26, 2018For Securities:MDLZ

Summary

Mondelēz International, Inc. reported its second quarter and first six months of 2018 results, showing a mixed financial performance. For the second quarter, net revenues increased by 2.1% year-over-year to $6.1 billion, driven by organic growth and favorable currency impacts, although this was partially offset by divestitures. However, operating income saw a significant decline of 24.4% due to items such as pension participation changes and a substantial loss on debt extinguishment. Despite the operating income drop, adjusted EPS showed a healthy increase of 16.7% for the quarter, highlighting the company's focus on managing core operations. For the first six months of 2018, net revenues grew by 3.8% to $12.9 billion, with organic growth and favorable currency being key drivers. Operating income also increased by 16.7% for this period, reflecting improved performance over the longer term. Diluted EPS saw an increase of 15.1% for the six-month period, and adjusted EPS grew by 17.0%. The company also made a significant acquisition, Tate's Bake Shop, during the quarter, and is actively managing its cost structure through a restructuring program. Investors should note the impact of several non-recurring items on reported net earnings and EPS.

Financial Highlights

53 data points
Beta

Revenue

$6.11B

41.6% Gross Margin

Net Income

$318.00M

5.2% Net Margin

EPS (Diluted)

$0.21

Total Assets

$62.97B

Free Cash Flow

$527.00M

Financial Statements
Beta
Revenue$6.11B
Cost of Revenue$3.57B
Gross Profit$2.54B
SG&A Expenses$1.90B
Operating Income$481.00M
Interest Expense$115.00M
Net Income$318.00M
EPS (Basic)$0.22
EPS (Diluted)$0.21
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Net revenues for Q2 2018 increased by 2.1% to $6.1 billion, with organic net revenue growing 3.5%.
  • 2For the first six months of 2018, net revenues rose 3.8% to $12.9 billion, and organic net revenue grew 2.9%.
  • 3Diluted EPS attributable to Mondelēz International decreased by 31.3% to $0.22 in Q2 2018, largely due to specific charges, but increased by 15.1% to $0.84 for the six-month period.
  • 4Adjusted EPS (a non-GAAP measure) showed strong growth, increasing by 16.7% to $0.56 in Q2 2018 and by 17.0% to $1.17 for the first six months of 2018.
  • 5The company acquired Tate's Bake Shop for $528 million in the second quarter of 2018, expanding its premium biscuit offerings.
  • 6A significant loss on debt extinguishment of $140 million was recognized in Q2 2018, impacting reported earnings.
  • 7The company recorded a $408 million charge related to a partial withdrawal from a multiemployer pension plan in North America.

Frequently Asked Questions

The decrease in net earnings attributable to Mondelēz International in the second quarter of 2018 was primarily driven by a substantial loss on debt extinguishment ($140 million), the impact of pension participation changes (a $408 million charge related to withdrawal from a multiemployer pension plan), and higher restructuring program costs, partially offset by favorable mark-to-market impacts from derivatives and operating gains.

The acquisition of Tate's Bake Shop on June 7, 2018, contributed $7 million in net revenues for both the second quarter and the first six months of 2018. The preliminary purchase price allocation included $337 million to goodwill and $210 million to intangible assets.

Mondelēz continues to execute its 2014-2018 Restructuring Program, expecting to incur the full $4.1 billion of program charges by year-end 2018. Regarding Argentina, the company concluded it has become a highly inflationary economy and will apply highly inflationary accounting beginning July 1, 2018. While its net monetary liability position may mitigate some risks, the overall impact of this accounting change on net earnings is difficult to predict.

Excluding specific items, the company's Adjusted EPS showed significant improvement. For the second quarter of 2018, Adjusted EPS increased by 16.7% to $0.56, and for the first six months of 2018, it grew by 17.0% to $1.17. This indicates that the core operational performance, when adjusted for unusual items, remains strong.