Deerfield / IL. (mdlz) Mondelez International reported its Q3/2016 results. «Our third quarter results underscore our continued commitment to improve operational efficiency, expand margins and profitably grow volume while also investing in strategic growth initiatives for the longer term», said Irene Rosenfeld, Chairman and CEO. «In the face of challenging market conditions, we’re building a stronger, more streamlined company that is well positioned to deliver sustainable, profitable growth and attractive cash generation», Rosenfeld said this week in a press release.
Net Revenue
| USD in millions | Reported Net Revenues | Organic Net Revenue Growth | |||||||||||||||||||
| Q3/2016 | Change versus PY | Q3/2016 | Vol/Mix | Pricing | |||||||||||||||||
| Quarter 3 | |||||||||||||||||||||
| Latin America | USD | 868 | (29.6 | )% | 2.9 | % | (7.1)pp | 10.0pp | |||||||||||||
| Asia Pacific | 1’128 | 2.5 | 1.5 | 2.0 | (0.5 | ) | |||||||||||||||
| Eastern Europe, Middle East + Africa | 543 | (7.3 | ) | (1.2 | ) | (6.7 | ) | 5.5 | |||||||||||||
| Europe | 2’104 | (3.2 | ) | 1.0 | 3.3 | (2.3 | ) | ||||||||||||||
| North America | 1’753 | (0.2 | ) | 0.9 | 2.6 | (1.7 | ) | ||||||||||||||
| Mondelez International | USD | 6’396 | (6.6 | )% | 1.1 | % | 0.5pp | 0.6pp | |||||||||||||
| September Year-to-Date | Sept YTD | Sept YTD | |||||||||||||||||||
| Latin America | USD | 2’528 | (32.2 | )% | 5.1 | % | (5.8)pp | 10.9pp | |||||||||||||
| Asia Pacific | 3’278 | – | 2.2 | 1.6 | 0.6 | ||||||||||||||||
| Eastern Europe, Middle East + Africa | 1’738 | (19.2 | ) | 0.1 | (5.7 | ) | 5.8 | ||||||||||||||
| Europe | 6’461 | (18.9 | ) | 0.4 | 1.7 | (1.3 | ) | ||||||||||||||
| North America | 5’148 | (0.1 | ) | 1.4 | 1.8 | (0.4 | ) | ||||||||||||||
| Mondelez International | USD | 19’153 | (14.0 | )% | 1.6 | % | (0.1)pp | 1.7pp | |||||||||||||
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Operating Income and Diluted EPS
| USD in millions | Reported | Adjusted | ||||||||||||||||||
| Q3/2016 | versus PY (Rpt Fx) | Q3/2016 | versus PY (Rpt Fx) | versus PY (Cst Fx) | ||||||||||||||||
| Quarter 3 | ||||||||||||||||||||
| Gross Profit | USD | 2’488 | (6.8 | )% | USD | 2’551 | (1.5 | )% | 1.3 | % | ||||||||||
| Gross Profit Margin | 38.9 | % | (0.1)pp | 39.9 | % | 0.3pp | ||||||||||||||
| Operating Income | USD | 702 | (91.0 | )% | USD | 1’011 | 13.5 | % | 16.9 | % | ||||||||||
| Operating Income Margin | 11.0 | % | (102.9)pp | 15.8 | % | 2.2pp | ||||||||||||||
| Net Earnings | USD | 548 | (92.5 | )% | USD | 822 | 32.2 | % | 36.3 | % | ||||||||||
| Diluted EPS | USD | 0.35 | (92.2 | )% | USD | 0.52 | 36.8 | % | 42.1 | % | ||||||||||
| September Year-to-Date | Sept YTD | Sept YTD | ||||||||||||||||||
| Gross Profit | USD | 7’539 | (13.1 | )% | USD | 7’680 | (0.7 | )% | 3.8 | % | ||||||||||
| Gross Profit Margin | 39.4 | % | 0.4pp | 40.1 | % | 1.1pp | ||||||||||||||
| Operating Income | USD | 2’062 | (78.2 | )% | USD | 2’982 | 16.2 | % | 21.4 | % | ||||||||||
| Operating Income Margin | 10.8 | % | (31.6)pp | 15.6 | % | 2.6pp | ||||||||||||||
| Net Earnings | USD | 1’566 | (80.4 | )% | USD | 2’321 | 17.5 | % | 22.5 | % | ||||||||||
| Diluted EPS | USD | 0.99 | (79.6 | )% | USD | 1.47 | 22.5 | % | 27.5 | % | ||||||||||
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Third Quarter Commentary
- Net revenue decreased 6.6 percent, driven by currency headwinds and deconsolidation of the company’s Venezuelan operations. Organic Net Revenue increased 1.1 percent, driven by continued improvement in overall volume/mix trends and pricing to recover currency-driven input costs in inflationary markets.
- Gross profit margin was 38.9 percent, a decrease of 10 basis points, driven primarily by higher Restructuring Program costs partially offset by the deconsolidation of the company’s Venezuelan operations. Adjusted Gross Profit1 margin was 39.9 percent, an increase of 30 basis points. Strong net productivity and improved volume/mix was mostly offset by higher trade investments in a few key markets.
- Operating income margin was 11.0 percent, down 103 percentage points. Adjusted Operating Income margin expanded 220 basis points to 15.8 percent. These results reflect continued reductions in overhead costs, driven by the ongoing benefits from zero-based budgeting and increased shared services activities.
- Diluted EPS was 0.35 USD, down 4.11 USD or 92 percent, driven by last year’s gain from the coffee business transactions.
- Adjusted EPS was 0.52 USD and grew 42 percent on a constant-currency basis, driven primarily by operating gains, strong results from coffee equity income investments and lower taxes.
- Capital return: The company repurchased approximately 475 million USD of its common stock in the quarter and paid approximately 264 million USD in cash dividends. The company has returned approximately 2.6 billion USD to shareholders year-to-date.
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 2016 Outlook section in the discussion of non-GAAP financial measures below for more details.
For the full year, the company now expects Organic Net Revenue growth of approximately 1.6 percent, in line with year-to-date growth. The company continues to expect Adjusted Operating Income margin of 15 to 16 percent. Given the year-to-date performance, the company has increased its full-year Adjusted EPS outlook and now expects growth of approximately 25 percent on a constant-currency basis. In addition, the company expects Free Cash Flow excluding items1 of at least 1.4 billion USD for full-year 2016.
Based on foreign exchange rates as of October 21, 2016, there would be a negative translation impact on full year net revenue growth of approximately 4 percentage points3 and on full year Adjusted EPS of approximately 0.093 USD (from approximately 0.08 USD).
