Mondelez International Inc. (MDLZ, Financial) is a snack manufacturing company. It had pro forma 2014 revenue of more than $30 billion. The company manufactures and markets food and beverage products for consumers in approximately 165 countries around the world. The company produces biscuits, chocolate, candy and powdered beverages as well as gum and coffee.
The company's portfolio includes brands like Oreo, Nabisco and LU biscuits; Milka, Cadbury Dairy Milk and Cadbury chocolates; Trident gum; Jacobs coffee; and Tang powdered beverage. In addition, the company's portfolio of snack foods and refreshments includes 52 brands. It is a proud member of the Standard and Poor's 500, NASDAQ 100 and Dow Jones Sustainability Index.
Strong financials
Net revenues decreased by 9.2%.
Organic net revenue increased by 4.3%.
On a reported basis, net revenues were $7.7 billion (which declined by 9.2%).
Operating income was $841 million, down 12.1%.
Diluted EPS was $0.25 (decrease of $0.11).
Power Brands grew 6.6%. Organic net revenue from emerging markets was up 9.7%, while developed markets increased 0.9%.
Adjusted GP margin was 40.2%, (an increase of 330 bps). The improvement was driven by record net productivity and a 150 basis point benefit from mark-to-market adjustments associated with commodities and currency hedging.
Due to operating income improvement, adjusted EPS grew 37.5%.
Adjusted Operating Income margin expanded 270 bps to 15.2%. The company made good progress in reducing overhead costs as a percent of revenue by leveraging zero-based budgeting and other cost-saving tools.
Share repurchases
The company declared a $6.0 billion increase to the company's share repurchase authorization from $7.7 billion to $13.7 billion and extended the expiration by two years to December 31, 2018. In the first half, the company repurchased nearly $2.2 billion of its common stock at an average price of $37.17 per share.
Dividend
MDLZ declared a regular quarterly dividend of $0.17 per share, an increase of 13%. The dividend is payable on Oct. 14, 2015, to shareholders of record as of Sept. 30, 2015. In the first half, the company paid $495 million in dividends.
(Source: Company's Website)
Outlook
The company expects free cash flow excluding items to be approximately $1.0 billion, down approximately by $0.2 billion from its previous estimate.
For 2016, the company reaffirmed its adjusted operating income margin target of 15% to 16%.
For the second half 2015, the company expects adjusted operating income margin to be at least 14%.
For the second half and full year 2015, the company increased its Organic Net Revenue growth outlook to at least 3% to reflect its strong year-to-date performance.
Opportunities in emerging markets
Mondelez has been experiencing a strong demand for its products from consumers in emerging markets including China. Its Oreo brand has grown significantly: Sales rose 20% year over year to $500 million in fiscal year 2012.
The company wants to increase its strength in China. It also plans to boost its spending on marketing and expansion of its sales network, which will help it leverage growth opportunities in the Chinese market.
The company plans to fund the investments in China by expanding margins in North America and Europe. Mondelez targets 5% and 2.5% margin improvement in North America and Europe respectively, which it expects to reach in 2016.
Focus
The company is currently focused on the following:
- MDLZ is continuing to make excellent progress driving supply chain productivity.
- Overhead cost reductions.
- To deliver top-tier margin expansion and earnings growth.
- Capacity expansion to accelerate revenue growth and improve market share, both now and over the long term.
- Achieve world-class safety performance.
Being in the news
The company recently announced it has completed the acquisition of an 80% stake in Kinh Do, Vietnam's leading snacks business. First announced in November 2014, the combination brings together Kinh Do's well-loved local snacks, including Kinh Do mooncakes and biscuits, Cosy biscuits, Solite soft cakes and AFC crackers, with Mondelez International's iconic global brands, such as Oreo cookies, Ritz crackers and Cadbury chocolate. Vietnam is home to over 90 million increasingly sophisticated consumers looking for high-quality snacking products and holds great potential for the company. This will increase synergic benefits like world-class innovation, marketing, food safety and quality, strengthening core snacking categories.
IT recently announced an investment of more than $130 million in its North American biscuits business, as the company continues its journey to modernize its manufacturing assets and processes and create a global best-in-class integrated supply chain. This investment will fund the installation of four state-of-the-art manufacturing lines –Â "Lines of the Future" –Â at the company's Americas production facility in Salinas, Mexico, which opened late last year. This investment in these Lines of the Future will be completed by mid-2016 and will replace nine older, inefficient manufacturing lines at its Chicago biscuit plant.
On a concluding note
Despite its near-term challenges, the snack-food giant boasts plenty of attractive long-term growth opportunities. Mondelez still holds a great deal of promise for the patient investor.
Mondelez is the number one global company in sales of biscuits, chocolate, candy and powdered beverages. The company also holds the number two position in gum and coffee.
It posted strong 2015 second quarter results and its revenue is going to get even better with time. The investments the company made are going to deliver in the near future. I think the company is going to continue its momentum. I would strongly recommend this company to the investors (my personal opinion). Adding this company to their portfolio, investors may reap great benefits.
