Mondelēz may not be much loved within the craft chocolate market, but they are popular with investors. We couldn’t find any stock analyst that had a SELL position for the company. Most had BUY positions with a couple of HOLD. Despite a dubious ESG record, the company knows how to keep investors happy.
As with the other chocolate companies, reporting half year results, Mondelēz saw both the top line (sales) and bottom line (profit) grow. But unlike Barry Callebaut, who’s results we also reported on this week, Mondelēz is more cautious in their outlook, noting macro-economic events outside of their control, although they did find a way to increase dividends by 10%.
Chairman and CEO, Dirk Van de Put referred to ‘pricing resilience’, and a strong performance in the chocolate market. I took this as an indication that despite the fears inflation related price hikes might have on demand, that the company is feeling optimistic consumers are willing to pay.
- Net revenues increased +9.5% driven by Organic Net Revenue1 growth of +13.1% with underlying Volume/Mix of +5.1%
- Diluted EPS was $0.54, down 28.9%; Adjusted EPS1 was $0.67, up +9.1% on a constant-currency basis
- Year-to-date cash provided by operating activities was $2.0 billion, an increase of +$0.2 billion versus prior year; Free Cash Flow1 was $1.6 billion, +$0.2 billion
- Return of capital to shareholders was $2.5 billion in the first half of the year
- Announced agreement to acquire Clif Bar, a leader in high growth, well-being snack bars, creating a $1+ billion global snack bar business
- Announcing +10% increase to quarterly dividend
- Raising Organic Net Revenue growth outlook for full year to 8%+
Our second quarter and first half results were marked by strong top and bottom-line performance across all regions and categories, supporting the raising of our full-year revenue growth outlook.
Dirk Van de Put, Chairman and Chief Executive Officer.
Our chocolate and biscuit businesses continue to demonstrate strong volume growth and pricing resilience across both developed and emerging markets. These results combined with ongoing cost discipline, simplification and revenue growth management are delivering robust profit dollar growth and strong cash flow, enabling us to increase our dividend by 10 percent.
Net Revenue
| $ in millions | Reported Net Revenues | Organic Net Revenue Growth | ||||||||||
| Q2 2022 | % Chg vs PY | Q2 2022 | Vol/Mix | Pricing | ||||||||
| Quarter 2 | ||||||||||||
| Latin America | $ | 876 | 30.9 | % | 33.0 | % | 12.4 pp | 20.6 pp | ||||
| Asia, Middle East & Africa | 1,535 | 5.7 | 13.2 | 8.7 pp | 4.5 | |||||||
| Europe | 2,626 | 6.1 | 10.8 | 5.9 pp | 4.9 | |||||||
| North America | 2,237 | 9.3 | 9.2 | (1.0)pp | 10.2 | |||||||
| Mondelēz International | $ | 7,274 | 9.5 | % | 13.1 | % | 5.1 pp | 8.0 pp | ||||
| Emerging Markets | $ | 2,806 | 22.4 | % | 22.5 | % | 10.2 pp | 12.3 pp | ||||
| Developed Markets | $ | 4,468 | 2.7 | % | 8.1 | % | 2.4 pp | 5.7 pp | ||||
| June Year-to-Date | YTD 2022 | YTD 2022 | ||||||||||
| Latin America | $ | 1,702 | 27.2 | % | 29.4 | % | 10.6 pp | 18.8 pp | ||||
| Asia, Middle East & Africa | 3,402 | 6.4 | 10.9 | 7.5 pp | 3.4 | |||||||
| Europe | 5,561 | 4.5 | 7.6 | 4.5 pp | 3.1 | |||||||
| North America | 4,373 | 8.7 | 8.5 | % | (0.4)pp | 8.9 | ||||||
| Mondelēz International | $ | 15,038 | 8.3 | % | 10.7 | % | 4.3 pp | 6.4 pp | ||||
| Emerging Markets | $ | 5,770 | 18.8 | % | 19.4 | % | 9.9 pp | 9.5 pp | ||||
| Developed Markets | $ | 9,268 | 2.7 | % | 6.0 | % | 1.3 pp | 4.7 pp |
Operating Income and Diluted EPS
| $ in millions, except per share data | Reported | Adjusted | ||||||||||||||
| Q2 2022 | vs PY (Rpt Fx) | Q2 2022 | vs PY (Rpt Fx) | vs PY (Cst Fx) | ||||||||||||
| Quarter 2 | ||||||||||||||||
| Gross Profit | $ | 2,641 | 0.4 | % | $ | 2,756 | 4.1 | % | 9.7 | % | ||||||
| Gross Profit Margin | 36.3 | % | (3.3) | pp | 37.9 | % | (2.1) | pp | ||||||||
| Operating Income | $ | 927 | 6.3 | % | $ | 1,100 | 2.3 | % | 8.5 | % | ||||||
| Operating Income Margin | 12.7 | % | (0.4) | pp | 15.1 | % | (1.1) | pp | ||||||||
| Net Earnings2 | $ | 747 | (30.7) | % | $ | 925 | (0.5) | % | 7.3 | % | ||||||
| Diluted EPS | $ | 0.54 | (28.9) | % | $ | 0.67 | 1.5 | % | 9.1 | % | ||||||
| June Year-to-Date | YTD 2022 | YTD 2022 | ||||||||||||||
| Gross Profit | $ | 5,624 | 0.5 | % | $ | 5,766 | 4.6 | % | 9.8 | % | ||||||
| Gross Profit Margin | 37.4 | % | (2.9) | pp | 38.3 | % | (1.5) | pp | ||||||||
| Operating Income | $ | 2,021 | (6.2) | % | $ | 2,478 | 4.7 | % | 11.2 | % | ||||||
| Operating Income Margin | 13.4 | % | (2.1) | pp | 16.5 | % | (0.6) | pp | ||||||||
| Net Earnings | $ | 1,602 | (21.4) | % | $ | 2,093 | 1.9 | % | 9.6 | % | ||||||
| Diluted EPS | $ | 1.15 | (20.1) | % | $ | 1.50 | 3.4 | % | 11.7 | % |
- Net revenues increased 9.5 percent driven by Organic Net Revenue growth of 13.1 percent, and incremental sales from the company’s acquisition of Chipita, partially offset by unfavorable currency. Pricing and volume drove Organic Net Revenue growth.
- Gross profit increased $10 million, while gross profit margin decreased 330 basis points to 36.3 percent primarily driven by the decrease in Adjusted Gross Profit1 margin and lower mark-to-market gains from derivatives. Adjusted Gross Profit increased $257 million at constant currency, while Adjusted Gross Profit margin decreased 210 basis points to 37.9 percent due to higher raw material and transportation costs and unfavorable mix, partially offset by pricing and volume leverage.
- Operating income increased $55 million and operating income margin was 12.7 percent, down 40 basis points primarily due to lower mark-to-market gains from derivatives, lower Adjusted Operating Income1 margin and higher acquisition integration costs, partially offset by lower restructuring costs and lapping prior-year pension participation changes. Adjusted Operating Income increased $91 million at constant currency while Adjusted Operating Income margin decreased 110 basis points to 15.1 percent, with input cost inflation and unfavorable mix, mostly offset by pricing and SG&A leverage.
- Diluted EPS was $0.54, down 28.9 percent, primarily due to lapping a prior-year net gain on equity method transactions, an unfavorable year-over-year change in mark-to-market impacts from derivatives and higher acquisition integration costs, partially offset by lower restructuring costs, lower negative impacts from enacted tax law changes, lapping a prior-year intangible asset impairment charge, lapping a prior-year unfavorable impact of pension participation changes and an increase in Adjusted EPS.
- Adjusted EPS was $0.67, up 9.1 percent on a constant-currency basis driven by strong operating gains, lower taxes and fewer shares outstanding, partially offset by higher interest expense and lower income from equity method investments.
- Capital Return: The company returned $1.2 billion to shareholders in cash dividends and share repurchases. Today, the company’s Board of Directors declared a quarterly cash dividend of $0.385 per share of Class A common stock, an increase of 10 percent. This dividend is payable on October 14, 2022, to shareholders recorded as of September 30, 2022.
2022 Outlook
Mondelēz International provides its outlook on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results, including the impact of foreign exchange. Refer to the Outlook section in the discussion of non-GAAP financial measures below for more details.
The company is updating its fiscal 2022 outlook to reflect expectations for continued top-line growth, higher cost of goods sold inflation, the timing effect of additional pricing actions and the impact of the war in Ukraine.
For 2022, the company now expects 8+ percent Organic Net Revenue growth, which reflects the strength of its first half and higher pricing related to increased input costs. The company’s expectation of mid-to-high single digit Adjusted EPS growth on a constant currency basis remains unchanged. The company’s Free Cash Flow outlook remains at $3+ billion. The company estimates currency translation would decrease 2022 net revenue growth by approximately 5 percent3 with a negative $0.22 impact to Adjusted EPS3.
Outlook is provided in the context of greater than usual volatility as a result of COVID-19 and geopolitical uncertainty.
End Notes
- Organic Net Revenue, Adjusted Gross Profit (and Adjusted Gross Profit margin), Adjusted Operating Income (and Adjusted Operating Income margin), Adjusted EPS, Free Cash Flow and presentation of amounts in constant currency are non-GAAP financial measures. Please see discussion of non-GAAP financial measures at the end of this press release for more information.
- Earnings attributable to Mondelēz International.
- Currency estimate is based on published rates from XE.com on July 20, 2022.