01—Abstract
Summary
Summary of the 8-K filed April 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Mondelēz International reported first-quarter 2024 results on April 30, 2024, with a headline picture of solid underlying top-line growth and strong earnings quality, but a sharply lower GAAP diluted EPS.
Net revenues rose 1.4% to $9.29 billiona, driven by Organic Net Revenue growth of 4.2% (pricing +6.3pp, volume/mix -2.1pp), partly offset by the 2023 divestiture of the developed market gum business and unfavorable currency. Emerging markets (Organic +8.3%) carried growth while Developed Markets organic growth slowed to 1.4% on volume/mix weakness in Europe and North America. GAAP diluted EPS fell 31.6% to $1.04, but this decline is largely explained by non-cash items: a $665 million impairment on the JDE Peet's equity-method stake and the lapping of a $796 million marketable securities gain from the former KDP stake in Q1 2023.
Adjusted EPS rose 10.5% to $0.95b as reported and 16.3% on a constant currency basis to $1.00. Adjusted operating margin expanded 160 basis points to 18.5%, and the GAAP gross profit and operating income jump was inflated by a $1.12 billion mark-to-market derivative gain, which investors should treat as non-operational.
Cash generation was strong, with operating cash flow of $1.32 billionc and Free Cash Flow of $1.03 billion, and the company returned $1.1 billion to shareholders. Management reiterated 2024 guidance of 3–5% Organic Net Revenue growth, high-single-digit constant currency Adjusted EPS growth, and Free Cash Flow of at least $3.5 billion, while cautioning about currency headwinds (about -1.5% to net revenue growth and -$0.10 to Adjusted EPS) and geopolitical volatility.
02—Key points
Key Highlights
- Net revenues up 1.4% to $9.29B; Organic Net Revenue up 4.2%, driven by pricing of +6.3pp against a -2.1pp volume/mix decline
- GAAP diluted EPS down 31.6% to $1.04, mainly due to a $665M non-cash JDE Peet's impairment and lapping the prior-year $796M KDP-related gain
- Adjusted EPS of $0.95, up 10.5% reported and 16.3% at constant currency ($1.00); Adjusted Operating Income margin up 160 bps to 18.5%
- GAAP gross profit and operating income were boosted by a ~$1.12B unrealized mark-to-market derivative gain, which is excluded from non-GAAP results
- Free Cash Flow of $1.03B (up $125M year over year) on operating cash flow of $1.32B; $1.1B returned to shareholders via dividends and buybacks
- Developed Markets organic growth slowed to 1.4% with volume/mix down 3.6pp, while Emerging Markets organic growth rose 8.3%
- 2024 guidance maintained: Organic Net Revenue growth of 3–5%, high-single-digit constant currency Adjusted EPS growth, and Free Cash Flow of $3.5B+; currency expected to reduce net revenue growth by ~1.5% and Adjusted EPS by $0.10
03—Questions
Frequently Asked Questions
Why did GAAP diluted EPS fall 31.6% if the business performed well?
The GAAP decline reflects non-cash and non-recurring items rather than core operating weakness. Q1 2024 included a $665M (€612M) impairment on the JDE Peet's equity-method investment, and Q1 2023 included a large gain on the KDP stake sale that is not repeated. Adjusted EPS, which strips these items out, grew 10.5% as reported and 16.3% at constant currency.
How much of the gross profit and operating income growth is sustainable?
Much of the headline GAAP increase is not sustainable. Gross profit rose $1.3B and operating income rose $1.2B, but roughly $1.12B of that came from favorable mark-to-market derivative movements (commodity and currency hedges) that reverse with market prices. On an adjusted basis, gross profit grew 9.5% (11.6% at constant currency) and adjusted operating income grew 12.2% (16.8% at constant currency), driven by pricing, productivity and mix.
What is driving the divergence between Emerging and Developed Markets?
Emerging Markets organic net revenue grew 8.3%, led by Latin America (+7.1% organic, with reported growth of 8.9%) and pricing across regions, while Developed Markets grew only 1.4% organically. Developed Markets volume/mix fell 3.6pp, with Europe down 3.5pp on volume/mix and North America down 2.1pp, indicating weaker consumer demand or price elasticity in mature markets.
Is the 2024 outlook still intact, and what are the main risks?
Management reaffirmed 2024 guidance for 3–5% Organic Net Revenue growth, high-single-digit constant currency Adjusted EPS growth and Free Cash Flow of at least $3.5B. Key risks include currency translation (an estimated 1.5% drag on net revenue and a $0.10 hit to Adjusted EPS), volatile commodity and cocoa costs, geopolitical uncertainty in Ukraine and the Middle East, weaker consumer spending and volume declines in developed markets, and the ability to realize acquisition synergies and Simplify to Grow savings.
What does the JDE Peet's impairment mean for investors?
The company wrote down its JDE Peet's stake to fair value based on the March 28, 2024 closing price, recording a non-cash charge of €612M ($665M). Because the company accounts for JDE Peet's under the equity method, the charge reduces GAAP earnings but does not affect cash flow, and it is excluded from Adjusted EPS. The impairment reflects a prolonged period in which the share price has traded below the carrying value, so it may signal a lower valuation of this investment going forward.
04—Continue