10-QPeriod: Q3 FY2020

Mondelez International, Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 3, 2020For Securities:MDLZ

Summary

Mondelez International, Inc. reported solid top-line growth in its third quarter and first nine months of 2020, driven by increased consumer demand for in-home consumption and higher net pricing, largely offsetting impacts from the COVID-19 pandemic. Net revenues increased by 4.9% to $6.7 billion in Q3 and 1.7% to $19.3 billion for the nine months ended September 30, 2020. Despite revenue growth, net earnings attributable to Mondelēz International decreased significantly due to various factors including lapping prior-year tax reform benefits, costs associated with equity method investment transactions, and higher intangible asset impairment charges. Diluted EPS saw a notable decline compared to the prior year. However, the company demonstrated resilience with an increase in Adjusted EPS for the nine-month period and a flat performance in Q3 on a constant currency basis, highlighting its focus on operational efficiency and underlying business performance. The company continues to navigate the complex global environment, including the ongoing impacts of COVID-19 and Brexit, while focusing on strategic priorities such as accelerating consumer-centric growth and driving operational excellence. Liquidity remains strong, supported by operating cash flows and available credit facilities.

Financial Highlights

54 data points
Beta

Revenue

$6.67B

41.9% Gross Margin

Net Income

$1.12B

16.8% Net Margin

EPS (Diluted)

$0.78

Total Assets

$66.25B

Cash & Equivalents

$2.79B

Free Cash Flow

$572.00M

Financial Statements
Beta
Revenue$6.67B
Cost of Revenue$3.87B
Gross Profit$2.79B
SG&A Expenses$1.48B
Operating Income$1.14B
Interest Expense$104.00M
Net Income$1.12B
EPS (Basic)$0.78
EPS (Diluted)$0.78
Shares Outstanding (Basic)1.43B
Shares Outstanding (Diluted)1.44B

Key Highlights

  • 1Net revenues grew 4.9% to $6.7 billion in Q3 2020 and 1.7% to $19.3 billion in the first nine months of 2020, driven by increased in-home consumption and higher net pricing.
  • 2Organic Net Revenue increased by 4.4% in Q3 and 3.9% for the nine months ended September 30, 2020, indicating strong underlying business performance.
  • 3Diluted EPS decreased to $0.78 in Q3 2020 from $0.98 in Q3 2019 and to $1.66 for the nine months from $2.19 in the prior year, primarily due to prior-year tax reform benefits and transaction-related costs.
  • 4Adjusted EPS showed resilience, decreasing slightly by 1.6% in Q3 but increasing by 2.7% year-over-year for the nine months, demonstrating underlying operational strength.
  • 5The company acquired a majority interest in Give & Go for $1.142 billion in April 2020, contributing incremental net revenues.
  • 6Mondelez International continues to manage risks associated with COVID-19 and Brexit, implementing measures to safeguard operations and supply chains.
  • 7Cash provided by operating activities increased to $2.3 billion for the nine months ended September 30, 2020, and the company maintained a strong liquidity position with $2.8 billion in cash and cash equivalents.

Frequently Asked Questions

The COVID-19 pandemic had a mixed impact. In developed markets, especially North America and Europe, demand for in-home consumption increased, boosting biscuit and chocolate sales. However, gum and candy, travel retail, and foodservice businesses were negatively affected. Overall, revenue growth returned in key emerging markets as impacts from earlier in the year subsided, but some emerging markets and specific product categories continued to face challenges.

While net earnings and EPS declined compared to the prior year, the company reported improved Adjusted EPS for the nine-month period and flat performance on a constant currency basis for Q3. This suggests that the underlying operational performance remains solid. The company's focus on strategic priorities like consumer-centric growth and operational excellence, along with strong organic net revenue growth, indicates a positive underlying trend, despite significant year-over-year comparisons impacted by one-time items and prior-year benefits.

The company maintained strong liquidity, with $2.8 billion in cash and cash equivalents and $2.3 billion in net cash provided by operating activities for the nine months ended September 30, 2020. They also have access to credit facilities and have actively utilized debt markets. While overall debt increased slightly, the company managed its financing activities effectively, including issuing new long-term debt and repaying existing debt, ensuring sufficient funds for operations, capital expenditures, and shareholder returns.

Several items affected year-over-year comparability. These included lapping the significant benefit from Swiss tax reform in the prior year, costs associated with the JDE Peet's transaction, higher intangible asset impairment charges, gains on equity method investment transactions, and changes in mark-to-market impacts from derivatives. The company also noted the impact of acquisitions and divestitures.