Mondelez International Inc.
) missed on both the top and bottom lines in its fourth quarter
2012 mainly due to currency headwinds. However, the company
raised its financial outlook for 2013.
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. On Oct 1, Kraft Foods spun off its
North American grocery business into a separate independent
Kraft Foods Group, Inc.
). Both Kraft Foods Group and Mondelez started trading regularly
on the NASDAQ stock exchange from Oct 2.
Following are the adjusted results of Mondelez that reflect
the impact of the spin-off.
Mondelez's fourth quarter earnings of 36 cents per share
missed the Zacks Consensus Estimate by 2.7% and also declined
7.7% from the prior-year quarter. Currency headwinds and weak top
line led to the earnings miss. On a constant currency basis,
earnings fell 5.1%.
Revenues & Margins
Revenues (excluding revenues from Kraft Foods Group) declined
1.9% to $9.5 billion, hurt largely by currency headwinds. A
stronger dollar pulled down revenues of all companies like
Mondelez, which have a significant international presence. Also,
revenues were short of the Zacks Consensus Estimate of $9.7
Organic revenues grew 3.7% buoyed by revival in developing
markets and surge in its Power Brands. A 2.1 percentage points
gain from higher volume/mix and 1.6 percentage points of
favorable pricing also led to the organic growth. However, lower
coffee prices adversely impacted growth by around 0.6 percentage
points. Mondelez's Power Brands grew 7% in the quarter.
Among the food categories, biscuits and chocolates performed
well in the quarter, while the gum and candy business was down.
The company's gum business has been suffering for the last few
quarters. Management expects a turnaround in the gum business in
a couple of years
Adjusted operating income improved 1.1% year over year to $1.1
billion on a constant currency basis as the revenue shortfall was
offset by effective input cost management and higher volume/mix.
Revenues in these emerging markets grew 2.7% to $4.22 billion.
Strong contributions from both volume/mix and pricing drove
top-line growth. Organic net revenues increased 7.6% helped by
12.7% growth in the region's power brands like Cadbury Dairy
Milk, Lacta and Milka chocolates. Double-digit increases were
witnessed in Asia Pacific and Latin America on a year-over-year
Strong sales in chocolates, biscuits, and powdered beverages,
led by Lacta, Club Social, and Tang drove sales in Brazil
partially offset by the softening gum demand. In Asia, China and
India posted substantial growth buoyed by higher demand for
biscuits led by Oreo, Gum and Candy.
In Russia, revenues declined modestly due to lower pricing in
coffee and chocolates which marred the strong demand for
biscuits. In the Middle East and Africa, revenues grew in
Adjusted operating income fell 4.0% to $551.0 million on a
constant currency basis mainly due to a double-digit increase in
Segment revenues declined 7.1% to $3.45 billion, also hurt by
currency headwinds and uncertain economic conditions. Net
revenues inched up 0.1%. Power Brands were up 3%.
The company saw volume mix growth in the chocolates, coffee
and biscuits categories. However, strong price-driven growth
witnessed in the coffee segment in the first half of the year did
not continue in the second half due to decline in coffee prices.
Management expects coffee prices to be a persistent headwind in
the first half of 2013.
Despite modest revenue growth, adjusted operating income
improved 5.7% on a constant currency basis to $460.0 million.
Lower input costs and overheads led to the improvement in
Segment revenues decreased 1.7% to $1.82 billion. However,
organic revenues grew 2.2% driven by pricing gains and a
mid-single digit growth in biscuits. Power Brands grew 5.5%.
On a constant currency basis, segment adjusted operating
income grew 3.4% to $277.0 million on the back of price hikes and
Adjusted earnings per share for the full-year were $1.39 per
share, up 0.7% year over year helped by lower interest
Net revenues declined 2.2% to $35.0 billion. On a constant
currency basis, net revenues increased 4.4% on the back of higher
pricing and volume/mix.
Mondelez retained its 2013 outlook for revenues but increased
the same for earnings.
For 2013, Mondelez expects its organic top line to grow at the
lower end of its long-term range of 5%-7%. Challenging economic
conditions are expected to result in lower growth versus the
The company raised its operating EPS guidance to the range of
$1.52-$1.57 from the previous range of $1.50-$1.55 per share to
reflect lower headwinds from currency.
The stock carries a Zacks Rank #3 (Hold). Mondelez is still in
a transitional stage and we believe it will take some to
stabilize. However, tensions will continue to linger in the gum
Some consumer staple stocks that are worth a look include
Flower Foods Inc.
Chiquita Brands International Inc.
) both carrying Zacks Rank #1 (Strong Buy)
CHIQUITA BR INT (CQB): Free Stock Analysis
FLOWERS FOODS (FLO): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
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