01—Abstract
Summary
Summary of the 8-K filed January 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Mondelēz International reported fourth-quarter and full-year 2023 results on January 30, 2024, capping a year of strong top-line and earnings growth.
Full-year net revenues rose 14.4% to $36.0 billiona, driven by 14.7% Organic Net Revenue growth (pricing contributed 13.4 points and volume/mix 1.3 points), with acquisitions of Clif Bar and Ricolino adding to sales. Reported diluted EPS jumped 84.7% to $3.62, but this was inflated by a $593 million gain on marketable securities (largely the KDP stake sale), the favorable swing in derivative mark-to-market impacts, and a gain on the developed market gum divestiture. The more relevant measure is Adjusted EPS, which rose 19.0% on a constant currency basis to $3.19 (14.3% as reported).
Adjusted operating income margin expanded 10 basis points to 15.9%, supported by pricing, productivity and SG&A leverage, partly offset by input cost inflation and higher advertising spend. Cash generation and capital return were solid. Operating cash flow was $4.7 billionb and Free Cash Flow reached $3.6 billion, up $0.6 billion year over year.
The company returned $3.7 billionc to shareholders through dividends and buybacks and raised the dividend per share by 10%. Net debt fell to $17.6 billion from $21.0 billion, helped by the $1.4 billion gum divestiture and proceeds from the sale of its KDP and JDE Peet's stakes. The fourth quarter was more moderate, with net revenues up 7.1% (Organic growth 9.8%, but volume/mix slightly negative at -0.4 points) and Adjusted EPS of $0.84, up 23.5% constant currency.
Looking ahead, management guided to a 2024 that it described as an "on-algorithm" year, with Organic Net Revenue growth of 3-5% (revenue growth at the upper end of that range), high-single-digit constant currency Adjusted EPS growth against a 2023 base that includes the divested gum business, and Free Cash Flow of at least $3.5 billiond. Currency translation is expected to reduce 2024 revenue growth by about 0.5 points and Adjusted EPS by $0.03.
Management also flagged a significant step-up in brand, capability and talent investment, and noted greater-than-usual outlook volatility from geopolitical uncertainty. The company also resolved the European Commission legal matter with an accrual of roughly €340 million ($375 million).
02—Key points
Key Highlights
- Full-year net revenues grew 14.4% to $36.0 billion; Organic Net Revenue grew 14.7%, with pricing contributing 13.4 points and volume/mix 1.3 points.
- Adjusted EPS rose 19.0% on a constant currency basis to $3.19 (14.3% as reported); reported diluted EPS of $3.62 was inflated by a $593M marketable securities gain and other one-time items.
- Adjusted operating income margin expanded 10 bps to 15.9%, driven by pricing, productivity and SG&A leverage, partly offset by input cost inflation and higher advertising spend.
- Free Cash Flow reached $3.6 billion, up $0.6 billion year over year, on operating cash flow of $4.7 billion.
- Shareholder returns totaled $3.7 billion in dividends and buybacks, and the dividend per share was increased 10%.
- Net debt declined to $17.6 billion from $21.0 billion, aided by the $1.4 billion divestiture of the developed market gum business and KDP/JDE Peet's stake sales.
- 2024 guidance: Organic Net Revenue growth of 3-5%, high-single-digit constant currency Adjusted EPS growth, and Free Cash Flow of at least $3.5 billion; fourth-quarter volume/mix was -0.4 points.
03—Questions
Frequently Asked Questions
Why is reported EPS growth (84.7%) so much higher than Adjusted EPS growth (19.0% constant currency)?
Reported diluted EPS of $3.62 includes several non-recurring or non-operating items excluded from Adjusted EPS, most notably a $593 million gain on marketable securities from selling the remaining Keurig Dr Pepper stake, a gain on equity method investment transactions, favorable mark-to-market derivative swings, a gain on the gum divestiture, and the lapping of a large prior-year European Commission charge. Adjusted EPS of $3.19 better reflects underlying operating performance.
How much of the revenue growth came from pricing versus volume?
Almost all of it came from pricing. For the full year, Organic Net Revenue grew 14.7%, of which pricing contributed 13.4 points and volume/mix 1.3 points. In the fourth quarter, the picture was weaker: 10.2 points from pricing and -0.4 points from volume/mix, so volume was a slight drag on growth.
What does the 2024 outlook imply for investors?
Management guided to Organic Net Revenue growth of 3-5% (at the upper end of that range for revenue), high-single-digit constant currency Adjusted EPS growth, and Free Cash Flow of at least $3.5 billion. Currency is expected to be a modest headwind of about 0.5 points to revenue growth and $0.03 to Adjusted EPS. Management described 2024 as an 'on-algorithm' year while also stepping up investment in brands, capabilities and talent, so margin expansion may be more limited than in 2023.
How did the company's balance sheet and cash returns change in 2023?
Net debt fell about $3.4 billion to $17.6 billion, reflecting lower total debt ($19.4 billion versus $22.9 billion) and stable cash of $1.8 billion. Free Cash Flow of $3.6 billion funded $3.7 billion of shareholder returns, including the 10% dividend increase, and the asset sales (gum business, KDP and JDE Peet's stakes) provided additional liquidity.
Are there any notable legal or one-time items that affect the quality of earnings?
Yes. The company accrued approximately €340 million ($375 million) to resolve the European Commission competition matter, up from the prior €300 million accrual. Other items include a $108 million pre-tax gain on the gum divestiture, $246 million of acquisition integration costs and contingent consideration adjustments for the year, and $98 million of remeasurement losses from highly inflationary accounting in Argentina and Türkiye. These are excluded from Adjusted results, so investors should weigh both GAAP and adjusted figures.
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