10-Q: Mondelēz International Reports Mixed Q2 2025 Results Amid Rising Input Costs and Strategic Investments

Mondelēz International reported a 7.7% increase in Q2 2025 net revenues driven by pricing and acquisitions, but saw a decline in Adjusted Operating Income and EPS due to higher input costs and strategic investments in ERP and pension settlement.

Summary

• Net revenues increased 7.7% to $8,984 million for the three months ended June 30, 2025, and 3.8% to $18,297 million for the six months ended June 30, 2025, compared to the prior year periods.
• Organic Net Revenue, a non-GAAP measure, grew 5.6% in Q2 2025 and 4.3% in H1 2025, primarily driven by higher net pricing across all regions except North America.
• Operating income increased 37.2% to $1,172 million in Q2 2025 but decreased 48.3% to $1,852 million in H1 2025.
• Adjusted Operating Income (non-GAAP) decreased 14.0% to $1,283 million in Q2 2025 and 17.0% to $2,658 million in H1 2025, primarily due to higher input costs and unfavorable volume/mix.
• Diluted EPS attributable to Mondelēz International increased 8.9% to $0.49 in Q2 2025 but decreased 46.3% to $0.80 in H1 2025.
• Adjusted EPS (non-GAAP) decreased 12.0% to $0.73 in Q2 2025 and 16.5% to $1.47 in H1 2025.
• The company incurred a non-cash pre-tax settlement loss of $282 million in Q2 2025 related to the Mondelēz Global LLC Retirement Plan.
• Costs for the multi-year ERP System Implementation program totaled $37 million in Q2 2025 and $70 million in H1 2025.
• The acquisition of Evirth (Shanghai) Industrial Co., Ltd. on November 1, 2024, contributed $102 million in incremental net revenues in Q2 2025 and $201 million in H1 2025.
• The company repurchased approximately 27 million shares of Common Stock for approximately $1.6 billion in H1 2025 under a new $9.0 billion program.
• The quarterly cash dividend was increased by 6% to $0.50 per share.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative. While net revenues showed growth, core profitability metrics (Adjusted Operating Income and Adjusted EPS) declined significantly due to persistent high input costs and unfavorable volume/mix. The large non-cash pension settlement loss and ongoing ERP implementation costs further impacted GAAP earnings. The outlook for cocoa costs remains elevated, posing continued pressure. Shareholder returns via dividends and buybacks are positive, but overall financial performance indicates headwinds.

Positives

• Net revenues increased by 7.7% in Q2 2025 and 3.8% in H1 2025, driven by strong net pricing and the acquisition of Evirth.
• Organic Net Revenue grew 5.6% in Q2 2025 and 4.3% in H1 2025, indicating underlying business growth.
• Selling, general and administrative expenses decreased by $166 million in Q2 2025 and $393 million in H1 2025, partly due to lower advertising and consumer promotion costs and overhead costs.
• The company completed its Simplify to Grow Program in Q4 2024, reducing restructuring charges.
• A new share repurchase program of up to $9.0 billion was approved, with approximately $1.6 billion already utilized in H1 2025, demonstrating commitment to shareholder returns.
• The quarterly cash dividend was increased by 6% to $0.50 per share, signaling confidence in future cash flows.
• The European Commission legal matter was resolved in Q2 2024, with the payment obligation fulfilled in August 2024, removing a significant legal overhang.

Negatives

• Adjusted Operating Income decreased 14.0% in Q2 2025 and 17.0% in H1 2025, primarily due to significantly higher input costs and unfavorable volume/mix.
• Adjusted EPS decreased 12.0% in Q2 2025 and 16.5% in H1 2025, reflecting operating declines, higher interest expense, and lower benefit plan non-service income.
• Higher raw material costs, particularly cocoa, packaging, dairy, energy, edible oils, and nuts, significantly impacted profitability.
• Unfavorable volume/mix was experienced across all regions, driven by pricing elasticity impacts in Europe and Latin America, and U.S. retailer inventory destocking and soft consumption in North America.
• A non-cash pre-tax settlement loss of $282 million was recognized in Q2 2025 due to the settlement of a U.S. pension plan.
• The ERP System Implementation program incurred $37 million in operating costs in Q2 2025 and $70 million in H1 2025, contributing to increased expenses.
• Net cash provided by operating activities decreased from $2,146 million in H1 2024 to $1,400 million in H1 2025, primarily due to lower cash-basis net earnings and higher working capital movements.
• Short-term borrowings significantly increased from $71 million at December 31, 2024, to $1,664 million at June 30, 2025.

Risks

• Weakness in macroeconomic conditions, including inflation and instability of financial institutions, could adversely affect business.
• Geopolitical, trade, tariff, and regulatory uncertainties, particularly the ongoing war in Ukraine and conflict in the Middle East, pose risks to operations, assets, and financial performance.
• Volatility of cocoa and other commodity input costs, and the ability to effectively hedge such costs, could significantly impact profitability.
• Supply chain disruptions, labor availability, and transportation constraints continue to affect costs and operations.
• Consumer spending weakness and shifts in consumer preferences and demand could impact sales volumes.
• The multi-year ERP System Implementation program involves significant capital and operating expenses, with potential for unforeseen disruptions or cost overruns.
• Compliance with new regulations, such as the EU Deforestation Regulation, could impact cocoa supply and costs.
• The company's Russian business, while currently profitable, faces risks of asset loss due to expropriation or further curtailment of operations.

Future Outlook

The company anticipates ongoing volatility in the macroeconomic environment, including continued inflationary pressures and supply constraints. Elevated cocoa costs are expected in the nearand medium-term, and the company may not be able to fully hedge against or pass on these incremental costs. Capital expenditures for 2025 are expected to be up to $1.3 billion, including funding for strategic priorities. The multi-year ERP System Implementation program is expected to be completed by year-end 2028, with a majority of the $1.2 billion funding allocated to operating expenses. The company will continue to proactively manage its business in response to the evolving global economic environment.

Management Comments

• The company aims to be the global leader in snacking, driving long-term growth through accelerating consumer-centric growth, operational excellence, a winning growth culture, and scaling sustainable snacking.
• Management believes successful implementation of strategic priorities and leveraging global footprint, iconic brands, and talent will drive consistent topand bottom-line growth and long-term shareholder value.
• The company continues to monitor and evaluate the impact of proposed and enacted tariffs and trade restrictions, which are expected to adversely impact revenue and cost of goods sold.
• The company has not ceased operations in Russia, believing it plays a role in the continuity of the food supply, but acknowledges risks including potential asset impairment or deconsolidation.
• The company is still evaluating the impacts of the One Big Beautiful Bill Act (OBBBA) but does not expect any material impacts to its financial statements for the year ending December 31, 2025.

Industry Context

The global food and snacking industry continues to face significant macroeconomic uncertainty, including fluctuating consumer demand, persistent inflationary pressures on raw materials (notably cocoa), labor, and energy, and ongoing supply chain constraints. Geopolitical events, such as the war in Ukraine and conflicts in the Middle East, contribute to market instability and exchange rate volatility. Companies in this sector are navigating these challenges by implementing pricing actions, focusing on productivity, and optimizing supply chain financing. The emphasis on strategic investments in areas like ERP systems reflects a broader industry trend towards digital transformation and operational efficiency to mitigate rising costs and enhance competitiveness.

Corporate Governance

Legal Proceedings

• A class action complaint, Harry Ploss et al. v. Kraft Foods Group, Inc. and Mondelēz Global LLC (case number 15-cv-2937), is ongoing in the U.S. District Court for the Northern District of Illinois, alleging manipulation of wheat markets and other violations prior to the Kraft Foods Group spin-off. The company expects to bear any monetary penalties.
• The European Commission investigation into alleged infringement of EU competition law was resolved in Q2 2024, with a payment of 337.5 million EUR ($376 million) made in August 2024. No material impact on ongoing business practices within the EU is anticipated.

Stakeholder Impact

• Shareholders: Impacted by decreased Adjusted EPS, but benefit from increased dividends and ongoing share repurchase program. The pension settlement loss and ERP costs affect reported earnings.
• Employees: Benefit from the new Global Employee Stock Purchase Matching Plan and the new Severance Plan for Key Executives. The pension plan settlement affects U.S. salaried employees.
• Customers: May experience continued pricing actions due to rising input costs, potentially affecting purchasing behavior and volume/mix.
• Suppliers: The company continues to optimize payment terms and facilitate voluntary supply chain financing programs, impacting supplier liquidity and relationships.
• Creditors: The company's increased short-term borrowings and long-term debt, along with a higher debt-to-capitalization ratio, indicate increased leverage, which creditors will monitor.

Next Steps

• Continue to proactively manage the business in response to the evolving global economic environment, related uncertainty, and business risks.
• Monitor and evaluate the impacts of the One Big Beautiful Bill Act (OBBBA) on financial statements for the year ending December 31, 2025.
• Make further contributions of approximately $10 million to U.S. pension plans and $23 million to non-U.S. plans for the remainder of 2025.
• Continue the multi-year ERP System Implementation program, with expected completion by year-end 2028.
• Pay the declared quarterly cash dividend of $0.50 per share on October 14, 2025, to shareholders of record as of September 30, 2025.
• Continue to utilize the $9.0 billion share repurchase program, with approximately $7.4 billion remaining capacity.

Key Dates

Recommendation

Mondelēz International's Q2 2025 filing presents a mixed financial picture. While net revenues show growth, driven by pricing and strategic acquisitions like Evirth, core profitability metrics (Adjusted Operating Income and Adjusted EPS) have declined significantly due to persistent high input costs, particularly cocoa, and unfavorable volume/mix. The substantial non-cash pension settlement loss and ongoing investments in the ERP system further weigh on reported earnings. The company's commitment to shareholder returns through increased dividends and a robust share repurchase program is positive. However, the continued inflationary pressures, commodity price volatility, and geopolitical uncertainties create headwinds. Given the strong brand portfolio and strategic initiatives balanced against the near-term profitability challenges and cost outlook, a 'hold' recommendation is appropriate for a seasoned investor, suggesting a wait-and-see approach to observe the effectiveness of pricing strategies and cost mitigation efforts against persistent macroeconomic pressures.

Keywords

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