Deerfield / IL. (mdlz) Mondelez International reported its second quarter 2018 results. Highlights:
- Net revenues increased 2.1 percent; Organic Net Revenue1 grew 3.5 percent
- Operating income margin was 7.9 percent, down 270 basis points; Adjusted Operating Income1 margin was 16.7 percent, up 130 basis points
- Diluted EPS was USD 0.22, down 31 percent; Adjusted EPS1 was USD 0.56, up 15 percent on a constant-currency basis
- Announcing 18 percent increase to quarterly cash dividend
«We delivered a strong second quarter, in both developed and emerging markets, building on the momentum created in the beginning of the year», said Dirk Van de Put, Chairman and CEO. «We posted solid top-line results with good performance across all regions. We remain focused on executing against our plans and will share the results of our strategic review with investors in September».
Net Revenue
| USD in millions | Reported Net Revenues | Organic Net Revenue Growth | ||||||||||||||
| Q2 2018 | %Chg vs PY | Q2 2018 | Vol/Mix | Pricing | ||||||||||||
| Quarter 2 | ||||||||||||||||
| Latin America | USD | 774 | (8.7 | )% | 3.8 | % | (2.3 | )pp | 6.1 | pp | ||||||
| Asia, Middle East + Africa | 1,360 | (2.4 | ) | 1.7 | (1.0 | ) | 2.7 | |||||||||
| Europe | 2,303 | 6.1 | 2.8 | 3.5 | (0.7 | ) | ||||||||||
| North America | 1,675 | 6.5 | 5.7 | 5.1 | 0.6 | |||||||||||
| Mondelez International | USD | 6,112 | 2.1 | % | 3.5 | % | 2.1 | pp | 1.4 | pp | ||||||
| Emerging Markets | USD | 2,309 | 0.2 | % | 4.7 | % | ||||||||||
| Developed Markets | 3,803 | 3.3 | 2.6 | |||||||||||||
| Power Brands | USD | 4,548 | 5.2 | % | 4.7 | % | ||||||||||
| June Year-to-Date | June YTD | June YTD | ||||||||||||||
| Latin America | USD | 1,665 | (5.3 | )% | 3.0 | % | (3.1 | )pp | 6.1 | pp | ||||||
| Asia, Middle East + Africa | 2,902 | 0.6 | 2.7 | 0.8 | 1.9 | |||||||||||
| Europe | 5,009 | 10.4 | 3.8 | 4.6 | (0.8 | ) | ||||||||||
| North America | 3,301 | 2.5 | 1.9 | 1.9 | – | |||||||||||
| Mondelez International | USD | 12,877 | 3.8 | % | 2.9 | % | 1.9 | pp | 1.0 | pp | ||||||
| Emerging Markets | USD | 4,893 | 4.0 | % | 5.1 | % | ||||||||||
| Developed Markets | 7,984 | 3.8 | 1.5 | |||||||||||||
| Power Brands | USD | 9,685 | 6.8 | % | 3.7 | % | ||||||||||
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Operating Income and Diluted EPS
| USD in millions | Reported | Adjusted | ||||||||||||||||
| Q2 2018 | vs PY (Rpt Fx) | Q2 2018 | vs PY (Rpt Fx) | vs PY (Cst Fx) | ||||||||||||||
| Quarter 2 | ||||||||||||||||||
| Gross Profit | USD | 2,540 | 9.8 | % | USD | 2,472 | 5.6 | % | 4.7 | % | ||||||||
| Gross Profit Margin | 41.6 | % | 2.9 | pp | 40.4 | % | 0.6 | pp | ||||||||||
| Operating Income | USD | 481 | (24.4 | )% | USD | 1,018 | 12.4 | % | 11.3 | % | ||||||||
| Operating Income Margin | 7.9 | % | (2.7 | )pp | 16.7 | % | 1.3 | pp | ||||||||||
| Net Earnings2 | USD | 323 | (35.1 | )% | USD | 826 | 12.2 | % | 10.6 | % | ||||||||
| Diluted EPS | USD | 0.22 | (31.3 | )% | USD | 0.56 | 16.7 | % | 14.6 | % | ||||||||
| June Year-to-Date | June YTD | June YTD | ||||||||||||||||
| Gross Profit | USD | 5,389 | 11.5 | % | USD | 5,138 | 5.2 | % | 2.0 | % | ||||||||
| Gross Profit Margin | 41.8 | % | 2.8 | pp | 39.9 | % | (0.3 | )pp | ||||||||||
| Operating Income | USD | 1,705 | 16.7 | % | USD | 2,151 | 10.9 | % | 6.9 | % | ||||||||
| Operating Income Margin | 13.2 | % | 1.4 | pp | 16.7 | % | 0.7 | pp | ||||||||||
| Net Earnings | USD | 1,261 | 11.8 | % | USD | 1,754 | 13.9 | % | 8.4 | % | ||||||||
| Diluted EPS | USD | 0.84 | 15.1 | % | USD | 1.17 | 17.0 | % | 12.0 | % | ||||||||
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Second Quarter Commentary
- Net revenues increased 2.1 percent, including the impact of prior year divestitures. Organic Net Revenue increased 3.5 percent, which included the benefit of lapping the prior year’s malware incident, and the negative impact of Easter shipment timing and the Brazil trucking strike.
- Gross profit margin was 41.6 percent, an increase of 290 basis points driven primarily by a favorable impact from currency and commodity hedging activities. Adjusted Gross Profit margin was 40.4 percent, an increase of 60 basis points, driven by productivity savings and improved volume leverage.
- Operating income margin was 7.9 percent, down 270 basis points, driven primarily by the impact from pension participation changes in North America, partially offset by a favorable impact from currency and commodity hedging activities. Adjusted Operating Income margin increased 130 basis points to 16.7 percent due to productivity savings and lower selling, general + administrative costs.
- Diluted EPS was USD 0.22, down 31 percent, driven by the impact from pension participation changes in North America and loss on debt extinguishment + related expenses partially offset by a favorable impact from currency and commodity hedging activities.
- Adjusted EPS was USD 0.56 and grew 15 percent on a constant-currency basis, driven primarily by operating gains.
- Capital Return: The company repurchased approximately USD 650 million of its common stock and paid approximately USD 300 million in cash dividends. Year to date, the company has returned approximately USD 1.8 billion. Today, the company’s Board of Directors also declared a quarterly cash dividend of USD 0.26 per share of Class A common stock, an increase of 18 percent. This dividend is payable on October 12, 2018, to shareholders of record as of September 28, 2018.
2018 Outlook
Mondelez International provides guidance on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results, including the impact of foreign exchange. Refer to the Outlook section in the discussion of non-GAAP financial measures below for more details.
The company raised its full year 2018 outlook for Organic Net Revenue growth to the high end of the previous range of 1 to 2 percent. The company maintained its outlook for Adjusted Operating Income margin of approximately 17 percent and double-digit Adjusted EPS growth on a constant-currency basis. The company estimates currency translation would decrease net revenue growth by approximately 1 percent3 with no impact to Adjusted EPS3. In addition, the company continues to expect Free Cash Flow1 of approximately USD 2.8 billion.
