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.
It posted strong third-quarter result,s and its revenue is going to get even better with time. The investments the company made are going to deliver in the near future. The company is going to continue its momentum. Investors are urged to consider this company. By adding this company to their portfolios, investors may reap great benefits.
The third quarter reflected continued strong adjusted operating income, margin expansion and solid organic net revenue growth. Adjusted EPS was flat versus the prior year on a constant-currency basis due to dilution related to the company's recently created coffee joint venture.
The company delivered strong margin expansion in the third quarter by progressing the transformation agenda in a volatile and challenging macroeconomic environment. The company is continuing to aggressively reduce costs to expand margins and provide the fuel for incremental investments. It is up to improving market shares.
Strong third quarter
On a reported basis, net revenues were $6.8 billion, a decrease of 17.8%, including a negative 13.6 percentage point impact from currency and a negative 9.3 percentage points from the coffee business transactions.
Operating income was $7.8 billion, an increase of 815%, including a $7.1 billion pretax gain from the coffee transaction.
Diluted EPS was $4.46, an increase of $3.93.
Organic net revenue increased by 3.7%.
Power Brands grew by 5.1%.
Organic net revenue from emerging markets increased by 10.3%.
Organic net revenue from developed markets decreased by 0.5%.
Adjusted gross profit margin was 39.1%, an increase of 180 basis points.
Adjusted operating income margin expanded 170 basis points and was 14.1%.
Share repurchases
Through the first nine months, the company repurchased $3.1 billion of its common stock at an average price of $38.69 per share and paid $736 million in dividends.
Outlook
The company targets Adjusted Operating Income margin of 15% to 16% while continuing to return significant capital to shareholders.
Organic net revenue growth is expected to be around 3%.
The company expects a double-digit growth on a constant growth basis.
Free cash flow to be around $1.0 billion.
Focus
The company is currently focused on the following:
- Mondelez is continuing to make excellent progress driving supply chain productivity.
- Reducing overhead costs
- Delivering top-tier margin expansion and earnings growth
- Capacity expansion to accelerate revenue growth and improve market share, both now and over the long term
- Achieving world-class safety performance
Being in the news
The company 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 more than 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 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 – "Lines of the Future" – 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.
It has invested more than $50 million in a state-of-the-art local production facility to meet surging demand for Cadbury Bournvita, Nigeria's favorite cocoa drink. The investment supports the company's global growth strategy by expanding the availability of regional Power Brands like Cadbury Bournvita in key markets and creating a more efficient supply chain footprint.
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.
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 No. 1 global company in sales of biscuits, chocolate, candy and powdered beverages. The company also holds the No. 2 position in gum and coffee.
"As the world's leading snacking company, we're proud to be one of few industry players with the assets, leadership and strategy to deliver strong top- and bottom-line growth over the long term. This is our point of difference," said Brian Gladden, executive vice president and CFO. "Our advantaged platform provides us the potential to be among the industry's fastest growing companies, with substantial margin upside and the highest EPS growth while also returning significant cash to our shareholders."
Disclosure: I do not hold any position in the company.
