Mondelez International Inc.
) beat the Zacks Consensus Estimate for revenues, but only met
the earnings expectations in the first quarter of 2013. The maker
of Oreo cookies and Cadbury chocolates maintained its outlook for
revenues, but increased its earnings guidance on tax
Mondelez's fourth quarter adjusted earnings of 34 cents per
share were in line with the Zacks Consensus Estimate of 34 cents.
Adjusted earnings however, increased 9.7% from the prior-year
quarter driven largely by lower taxes which made up for the
sluggish profits due to stepped up investments in growth
initiatives. Earnings grew 22.6% on a constant currency
Mondelez International focuses on the global food and snacks
business of the old Kraft Foods. It markets products in fast
growing food categories like chocolates, biscuits, gum, candy,
coffee and powdered beverages. The old Kraft Foods was spun off
from its North American grocery business into a separate
Kraft Foods Group, Inc.
) in October last year.
Revenues & Margins
Revenues improved 0.9% $8.74 billion, hurt largely by currency
headwinds as Mondelez has a significant international presence.
Revenues however, marginally beat the Zacks Consensus Estimate of
Organic (excluding impact from acquisitions, divestures and
foreign exchange) revenues grew 3.8% driven by volume/mix gains,
strong performance of Power Brands and emerging markets, and
market share gains. Mondelez's Power Brands grew 7.5% in the
quarter while emerging markets were up 9.3% mainly due to strong
growth in Brazil and Russia. On the other hand, developed markets
grew only 0.4% due to lower coffee pricing.
Organic top line growth was however, lower than its long term
targets. Lower coffee pricing, capacity constrains in a number of
markets and continued weakness in its gum business hurt organic
revenue growth in the quarter. Lower coffee prices
adversely affected top line growth by around 1.3 percentage
points (pp) while capacity constraints created a headwind of 0.5
pp. Volume/mix benefitted the top line by 2.5 pp while pricing
added 1.3 pp.
Among the food categories, biscuits, chocolates and candies
were up in the quarter, while the gum and candy business was down
1% and also suffered share declines. The company's gum business
has been down since the last few quarters, mainly in the
developed nations. Management does not expect any significant
turnaround in the gum business in 2013. The beverages and cheese
and grocery revenues were flat in the quarter.
Adjusted gross margins were flat in the quarter at 37.2% as
gains from volume/mix and pricing were offset by headwinds from
higher input costs.
Adjusted operating income declined 4% year over year to $979
million on a constant currency basis as gross margin gains were
offset by higher selling, general and administration (SG&A)
costs. SG&A costs increased due to higher spending behind
brand building, advertising, consumer support, sales capabilities
and route-to-market expansion. Adjusted operating margin declined
160 basis points in the quarter to 10.3%.
: Revenues grew 2% to $1.40 billion. Organically, revenues
increased 12.6% driven largely by price increases taken to offset
inflation. Brazil was up in mid-teens driven by double-digit
volume/mix gains and higher pricing. Adjusted segment operating
income was flat on a constant currency basis at $96 million as
gross profit gains were offset by increased overhead costs and
higher investments in sales capabilities and route-to-market
Revenues grew 3.6% to $1.37 billion. Organically, revenues
increased 5.8% driven by volume/mix gains. Double-digit growth in
emerging markets of China, India and Philippines was offset by
low single-digit decline in the developed markets of Asia
Pacific, especially the gum category in Japan. Mondelez faced
capacity constraints in India in the chocolate category. Adjusted
segment operating income increased 4.8% on a constant currency
basis to $193 million.
Eastern Europe, Middle East & Africa:
Revenues grew 1.6% to $863 million. Organically, revenues
increased 4.0% as volume/mix gains were offset by lower coffee
and chocolate pricing in Russia and other eastern European
markets. Russia grew 2% despite the pricing pressure due to
strong volume/mix performance. Adjusted segment operating income
declined 46.5% on a constant currency basis to $72 million due to
strong year-ago comparisons which included gain from sale of a
property in Russia. Increased overheads and higher investments in
sales capabilities and advertising also hurt profits.
: Revenues declined 1.0% to $3.46 billion. Organically, revenues
were almost flat as volume/mix gains mainly in chocolates and
biscuits were offset by lower coffee pricing. Adjusted
segment operating income improved 0.2% on a constant currency
basis to $436 million.
: Revenues grew 1.5% to $1.66 billion. Organically, revenues
increased 2.4% driven by mid single-digit biscuit sales in the
U.S. However, the gum business continued to decline. Adjusted
segment operating income declined 0.5% on a constant currency
basis to $192 million due to lower gross margins resulting from
weak gum sales.
Mondelez retained its 2013 outlook for revenues but increased
the same for earnings.
For 2013, Mondelez continues to expect its organic top line to
grow at the lower end of its long-term range of 5%-7%. The first
quarter organic revenue growth of 3.8% was below these targets.
Management expects the second-quarter organic growth to be
tempered again by lower coffee pricing and capacity constraints.
However, top line growth is expected to accelerate in the second
half driven by Mondelez's growth initiatives which include
boosting its emerging markets business, increasing investments in
brand building and improving production capacity.
The company raised its operating earnings per share guidance
to the range of $1.55-$1.60 from the previous range of
$1.52-$1.57 per share to reflect tax benefits.
The stock carries a Zacks Rank #3 (Hold). Mondelez announced
its first decent quarterly results after the Kraft split.
However, tensions will continue to linger in the gum
Some consumer staple stocks that are worth a look include
Flower Foods Inc.
), carrying a Zacks Rank # 1(Strong Buy) and
B&G Foods Inc.
) carrying a Zacks Rank #2 (Buy).
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KRAFT FOODS GRP (KRFT): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
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