10-Q: Mondelz International Reports Mixed Results in Q2 2024 Amidst Economic Headwinds

Mondelz International's second-quarter results show a slight revenue decrease and a significant drop in diluted EPS, despite growth in Organic Net Revenue and Adjusted EPS.

Summary

• Mondelz International's net revenues decreased by 1.9% to $8.3 billion in the second quarter of 2024, and decreased 0.2% to $17.6 billion in the first six months of 2024.
• The revenue decline was primarily driven by unfavorable currency-related items, unfavorable volume/mix, and the impact of the 2023 divestiture of the developed market gum business.
• Organic Net Revenue, a non-GAAP measure, increased by 2.5% to $8.6 billion in the second quarter and 3.4% to $18.0 billion in the first six months of 2024, driven by higher net pricing, partially offset by unfavorable volume/mix.
• Diluted earnings per share (EPS) attributable to Mondelz International decreased by 34.8% to $0.45 in the second quarter and 32.3% to $1.49 in the first six months of 2024.
• The decrease in diluted EPS was due to an unfavorable year-over-year change in mark-to-market impacts from commodity and currency derivatives, lapping prior-year operating results from the divested gum business, unfavorable initial impacts from enacted tax law changes, higher acquisition integration costs and contingent consideration adjustments, and higher equity method investee items.
• Adjusted EPS, a non-GAAP measure, increased by 19.4% to $0.86 in the second quarter and 15.9% to $1.82 in the first six months of 2024.
• On a constant currency basis, Adjusted EPS increased by 25.0% to $0.90 in the second quarter and 20.4% to $1.89 in the first six months of 2024.
• The increase in Adjusted EPS was driven by operating gains, lower interest expense, and fewer shares outstanding, partially offset by unfavorable currency-related items and higher taxes.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with some positive aspects like growth in Organic Net Revenue and Adjusted EPS, but also significant negatives like the decline in net revenues and diluted EPS. The company is facing several challenges, including economic headwinds, geopolitical uncertainty, and higher input costs. The sentiment is neutral to slightly negative.

Positives

• Organic Net Revenue increased by 2.5% in Q2 2024, driven by higher net pricing.
• Adjusted EPS increased by 19.4% in Q2 2024, and 25.0% on a constant currency basis.
• The company is taking steps to mitigate impacts to its supply chain, operations, technology and assets.
• The company fully resumed production at its two Ukrainian manufacturing facilities after completing targeted repairs.

Negatives

• Net revenues decreased by 1.9% in Q2 2024.
• Diluted EPS decreased by 34.8% in Q2 2024.
• The company experienced unfavorable currency-related items, unfavorable volume/mix, and the impact of the 2023 divestiture of the developed market gum business.
• The company expects to continue to face higher cocoa costs.
• The company experienced sales impacts related to the conflict in the Middle East in certain AMEA markets.

Risks

• The company continues to observe significant market and geopolitical uncertainty, fluctuating consumer demand, inflationary pressures, supply constraints and exchange rate volatility.
• The company expects to continue to face higher cocoa costs, as the market price for cocoa beans has increased significantly year-over-year.
• The company's operations in Russia are subject to risks, including the temporary or permanent loss of assets due to expropriation or further curtailment of the ability to conduct business operations in Russia.
• The company is subject to risks related to the conflict in the Middle East between Hamas and Israel, which has expanded to other parts of the region.
• The company is subject to risks related to the implementation of a multi-year systems transformation program to upgrade its global ERP and supply chain systems.

Future Outlook

The company's overall outlook for future snacks revenue growth remains strong, but they anticipate ongoing volatility. They will continue to proactively manage their business in response to the evolving global economic environment, related uncertainty and business risks while also prioritizing and supporting their employees and customers.

Industry Context

The results reflect the challenges faced by the consumer goods industry, including inflationary pressures, supply chain disruptions, and fluctuating consumer demand. The company's focus on pricing and cost management is consistent with industry trends.

Comparison to Industry Standards

• The company's performance is mixed compared to its peers in the consumer packaged goods sector. While the company has shown growth in Organic Net Revenue and Adjusted EPS, the decline in net revenues and diluted EPS is concerning.
• Companies like Nestle and Unilever have also reported facing similar challenges related to inflation and supply chain issues, but their results have varied across different regions and product categories.
• The company's performance in emerging markets is mixed, with some regions showing growth while others are impacted by geopolitical events and currency fluctuations. This is consistent with the broader trend of volatility in emerging markets.
• The company's decision to invest in a multi-year systems transformation program is a positive step towards improving operational efficiency and competitiveness, but it will require significant capital expenditure and may not yield immediate results.

Legal Proceedings

• The company reached a negotiated resolution in the European Commission investigation and adjusted its accrual from a liability of 340 million to 337.5 million ($362 million), on a pre-tax basis.

Stakeholder Impact

• Shareholders may be concerned about the decrease in diluted EPS and the challenges faced by the company.
• Employees may be affected by the ongoing restructuring program and the potential for job losses.
• Customers may experience price increases due to higher input costs.
• Suppliers may be affected by the company's efforts to optimize its supply chain.

Next Steps

• The company will continue to proactively manage its business in response to the evolving global economic environment.
• The company will implement a multi-year systems transformation program to upgrade its global ERP and supply chain systems.
• The company will continue to monitor existing and potential future tax reform around the world.

Key Dates

Keywords

Mondelz International, Organic Net Revenue, Adjusted EPS, Net Revenues, Diluted EPS, Restructuring, Divestiture, Currency, Commodity Costs, Inflation, Ukraine, ERP System