10-Q: Mondelz International Reports Mixed Q3 Results Amidst Inflationary Pressures and Strategic Shifts

Mondelz International's third-quarter results show a slight revenue increase but a decrease in earnings per share, influenced by strategic divestitures, currency fluctuations, and ongoing economic uncertainties.

Summary

• Mondelz International's net revenues increased by 1.9% to $9.2 billion in the third quarter of 2024, and 0.5% to $26.8 billion for the first nine months of 2024.
• Organic Net Revenue, a non-GAAP measure, grew by 5.4% in Q3 and 4.0% in the first nine months of 2024, driven by higher net pricing and favorable volume/mix.
• Diluted earnings per share (EPS) decreased by 12.5% to $0.63 in Q3 and 27.4% to $2.12 for the first nine months of 2024.
• Adjusted EPS, a non-GAAP measure, increased by 28.6% to $0.99 in Q3 and 19.1% to $2.80 for the first nine months of 2024.
• The company experienced unfavorable currency-related items, particularly due to the strength of the U.S. dollar, impacting revenue and profitability.
• The divestiture of the developed market gum business in 2023 continued to affect year-over-year comparisons.
• Mondelz is implementing a multi-year ERP system upgrade with an approved funding of $1.2 billion, which is expected to be completed by year-end 2028.
• The company is also managing the impact of high inflation in Argentina and Turkey, which are accounted for as highly inflationary economies.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with positive revenue growth and adjusted EPS but negative diluted EPS and challenges from currency and commodity costs. The strategic moves and investments are positive, but the overall sentiment is neutral due to the mixed financial results and ongoing economic uncertainties.

Positives

• Organic Net Revenue growth of 5.4% in Q3 2024 demonstrates strong underlying business performance.
• Adjusted EPS increased by 28.6% in Q3 2024, indicating improved profitability.
• The company is actively investing in technology with a $1.2 billion ERP system upgrade.
• Mondelz is taking steps to mitigate the impact of high inflation in Argentina and Turkey.
• The company is expanding its presence in China with the acquisition of a majority stake in Evirth.

Negatives

• Diluted EPS decreased by 12.5% in Q3 2024, reflecting the impact of various factors.
• Unfavorable currency-related items negatively impacted revenue and profitability.
• The divestiture of the developed market gum business continues to affect year-over-year comparisons.
• The company is facing higher raw material costs, particularly for cocoa.
• The company is incurring costs related to the ERP system implementation.

Risks

• The company faces significant market and geopolitical uncertainty, including fluctuating consumer demand and inflationary pressures.
• The ongoing war in Ukraine and developments in the Middle East could impact business operations and financial results.
• The company is exposed to volatility in commodity costs, particularly cocoa, which could affect profitability.
• Currency exchange rate volatility could continue to impact revenue and profitability.
• The company is subject to legal and tax proceedings, which could result in substantial fines or penalties.
• The company is exposed to risks related to its global operations, including political, economic, and regulatory risks.
• The company is exposed to risks related to cyberattacks and other security breaches.

Future Outlook

The company anticipates ongoing volatility in the global economic environment but remains optimistic about future snacks revenue growth. They will continue to proactively manage the business in response to evolving conditions and prioritize employees and customers. The company expects to incur the remainder of the Simplify to Grow program charges by year-end 2024 and the ERP System Implementation program is expected to be completed by year-end 2028.

Management Comments

• Management believes that the successful implementation of strategic priorities and leveraging of global footprint, strong brands, and cost excellence capabilities will drive consistent topand bottom-line growth.
• Management is proactively managing the business in response to the evolving global economic environment and related uncertainty.
• Management is taking steps to mitigate impacts to the supply chain, operations, technology, and assets.

Industry Context

The results reflect the challenges faced by global consumer goods companies, including inflationary pressures, supply chain disruptions, and currency volatility. The company's strategic focus on pricing and cost management aligns with industry trends, as companies seek to maintain profitability amidst rising costs. The divestiture of the gum business and the acquisition of Evirth indicate a strategic shift towards core snacking categories and growth in emerging markets.

Comparison to Industry Standards

• Mondelz's performance is being compared to other global snack food companies such as Nestle, PepsiCo, and Unilever, which are also navigating similar economic challenges.
• The company's focus on pricing and cost management is a common strategy among its peers to mitigate the impact of inflation.
• The divestiture of the gum business is a strategic move similar to other companies streamlining their portfolios to focus on core categories.
• The investment in ERP systems is a common trend among large corporations to improve efficiency and data management.
• The company's growth in emerging markets is consistent with the industry trend of seeking growth opportunities in developing economies.

Legal Proceedings

• The company is involved in various legal proceedings, including a class action lawsuit related to wheat futures trading and an investigation by the European Commission.
• The company reached a negotiated resolution in the European Commission matter and fulfilled its payment obligation in August 2024.

Stakeholder Impact

• Shareholders are impacted by the mixed financial results, including decreased diluted EPS but increased adjusted EPS.
• Employees are affected by the ongoing restructuring program and the ERP system implementation.
• Customers may experience price changes due to input cost-driven pricing actions.
• Suppliers are impacted by the company's supply chain financing programs and payment terms.
• Creditors are impacted by the company's debt management and financing activities.

Next Steps

• The company will continue to implement its multi-year ERP system upgrade.
• The company will continue to manage the impact of high inflation in Argentina and Turkey.
• The company expects to complete the acquisition of a majority stake in Evirth (Shanghai) Industrial Co., Ltd.
• The company expects to complete the termination of the Mondelz Global LLC Retirement Plan in 2025.
• The company expects to complete the sale of remaining shares in JDE Peet's to JAB Holdings Company in the fourth quarter of 2024.

Key Dates

Keywords

Mondelz International, Snack Foods, Organic Net Revenue, Adjusted EPS, ERP System Implementation, Divestiture, Acquisition, Inflation, Currency Fluctuations, Commodity Costs