10-QPeriod: Q2 FY2019

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 31, 2019For Securities:MDLZ

Summary

Mondelez International, Inc. (MDLZ) reported its second-quarter and first-half 2019 financial results, showing a net revenue decrease of 0.8% to $6.1 billion for the quarter and 2.2% to $12.6 billion for the first six months, primarily impacted by unfavorable currency translations and a divestiture of its cheese business in the Middle East and Africa. However, the company demonstrated resilience with an Organic Net Revenue increase of 4.6% for the quarter and 4.1% for the first six months, driven by higher net pricing and favorable volume/mix. Diluted Earnings Per Share (EPS) attributable to Mondelēz International saw a significant increase, up 161.9% to $0.55 for the quarter and 29.7% to $1.18 for the first six months, largely due to favorable year-over-year comparisons including lapping prior-year impacts and cost reductions. Adjusted EPS, a non-GAAP measure, also showed positive growth, increasing by 3.6% to $0.57 for the quarter and 4.3% to $1.22 for the first six months, with constant currency growth even stronger at 9.1% and 12.0% respectively. This highlights the company's focus on underlying operational performance despite macro-economic headwinds. The company continues to manage its costs effectively through its Simplify to Grow program and maintains a strong liquidity position, expecting sufficient resources to cover its obligations. Investors should note the ongoing impact of currency fluctuations and the company's strategic initiatives to drive profitable growth.

Financial Highlights

55 data points
Beta

Revenue

$6.06B

40.7% Gross Margin

Net Income

$803.00M

13.2% Net Margin

EPS (Diluted)

$0.55

Total Assets

$63.57B

Cash & Equivalents

$1.25B

Free Cash Flow

$381.00M

Financial Statements
Beta
Revenue$6.06B
Cost of Revenue$3.59B
Gross Profit$2.47B
SG&A Expenses$1.43B
Operating Income$1.02B
Interest Expense$127.00M
Net Income$803.00M
EPS (Basic)$0.56
EPS (Diluted)$0.55
Shares Outstanding (Basic)1.45B
Shares Outstanding (Diluted)1.46B

Key Highlights

  • 1Net revenues decreased slightly (0.8% for Q2, 2.2% YTD) due to unfavorable currency and a divestiture, but Organic Net Revenue showed solid growth (4.6% for Q2, 4.1% YTD) driven by pricing and volume/mix.
  • 2Diluted EPS attributable to Mondelēz International significantly increased (161.9% for Q2, 29.7% YTD) driven by lapping prior-year unfavorable items and cost management.
  • 3Adjusted EPS (non-GAAP) grew 3.6% for Q2 and 4.3% YTD, with constant currency Adjusted EPS showing stronger growth of 9.1% for Q2 and 12.0% YTD, indicating healthy underlying performance.
  • 4The company completed the divestiture of its Middle East and Africa cheese business, generating cash proceeds and a net gain.
  • 5Operating income increased substantially (113.1% for Q2, 20.9% YTD) due to a combination of factors including lapping prior-year charges and cost efficiencies.
  • 6The Simplify to Grow program continues to be a focus, contributing to cost reductions and operational improvements.
  • 7Mondelez International maintains a strong liquidity position, expecting sufficient cash flow to meet its obligations, and continues its share repurchase program and quarterly dividend payments.

Frequently Asked Questions

The net revenue decrease is primarily attributed to unfavorable currency translations as the U.S. dollar strengthened against several operating currencies, and the divestiture of the company's cheese business in the Middle East and Africa. These factors more than offset the positive contributions from higher net pricing and favorable volume/mix.

On an organic basis, excluding the impact of currency fluctuations and divestitures, Mondelez International demonstrated strong performance. Organic Net Revenue increased by 4.6% in the second quarter and 4.1% for the first six months of 2019, indicating healthy underlying growth from its core operations driven by higher net pricing and favorable volume/mix.

The substantial increase in Diluted EPS (up 161.9% for Q2 and 29.7% YTD) and the positive growth in Adjusted EPS (up 3.6% for Q2 and 4.3% YTD) are significant. This improvement is largely due to lapping unfavorable year-over-year comparisons, such as prior-year pension participation changes and debt extinguishment costs, coupled with ongoing cost management initiatives like the Simplify to Grow program and gains from divestitures. The constant currency Adjusted EPS growth further highlights the underlying operational strength of the business.

The company believes its cash from operations, revolving credit facilities, and other financing arrangements provide sufficient liquidity for its working capital needs, planned capital expenditures, debt obligations, and shareholder returns. They expect to fund future obligations and planned expenditures from ongoing operations and capital markets.