Mondelez: Reports Third-Quarter 2016 Results

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).