DEERFIELD, Ill., US – Mondelez International, Inc. yesterday reported third quarter 2013 results. “We delivered solid results in a difficult environment. Both revenue and operating margin improved sequentially, fueled by volume/mix gains of more than 5 percent, double-digit growth in emerging markets and increased global market shares,” said Chairman and CEO Irene Rosenfeld.
“Weak biscuit performance in China, continued headwinds from coffee pricing and slower global category growth, however, led to revenue growth below our expectations.”
“Looking forward, we expect these factors will continue to pressure our top line for the remainder of the year,” Rosenfeld continued. “As a result, we’re reducing our 2013 Organic Net Revenue growth outlook to approximately 4 percent.
In light of this more challenging environment, we’re stepping up our efforts in productivity and overheads, and continue to expect Adjusted Operating Income margin of approximately 12 percent for the full year. Additionally, we’re raising our 2013 Adjusted EPS target to $1.57 to $1.62.”
Rosenfeld concluded: “We believe that the recent industrywide slowdown in key emerging markets, especially China, is temporary. But this slowdown, along with lower coffee prices, will moderate our top-line growth in 2014 to be in the 4 to 5 percent range.
We will, however, continue to invest in Power Brands, sales capabilities and routes to market so that we’re well-positioned when global category growth returns to previous levels.
As a result, we remain committed to delivering our long-term goals of 5 to 7 percent Organic Net Revenue growth and double-digit Adjusted EPS growth.”
Third Quarter Results
Net revenues were $8.5 billion, up 1.8 percent. Organic Net Revenues increased 5.3 percent, driven entirely by volume/mix, despite challenging macroeconomic conditions and slowing category growth in many key emerging markets. The pass-through of lower coffee commodity costs tempered growth by 0.5 percentage points.
Power Brands continued to grow faster than the company average, up 6.9 percent, led by Tuc, Club Social, belVita and Barni biscuits and Cadbury Dairy Milk, Milka and Lacta chocolate.
Revenues from emerging markets increased 10.7 percent, led by gains of mid-to-high teens in Russia, India and Brazil. China, however, declined double digits reflecting softening macroeconomic conditions and weak biscuit performance.
The BRIC markets, in aggregate, were up double digits despite China’s weak performance. Developed markets grew 1.8 percent as North America, Europe and Asia Pacific all posted low-single digit gains, in line with our long-term algorithm.
Operating income increased to $1.3 billion, up 50.6 percent, and operating income margin was 14.9 percent. This includes a $336 million favorable impact from the reversal of an indemnity accrual related to the 2010 acquisition of Cadbury.
Adjusted Operating Income1 increased 0.8 percent on a constant currency basis, including a negative 5.0 percentage point impact from prior year one-time items.
Excluding these items, higher gross profit was partially offset by increased investments in advertising, consumer support, sales capabilities and route-to-market expansion.
Adjusted Operating Income margin was 12.2 percent, a sequential improvement from the previous quarter, but down 0.8 percentage points versus prior year as last year’s margin was unusually high due to the spin-off of Kraft Foods Group.
The decline also reflects increased growth investments and a negative 0.6 percentage point impact from prior year one-time items.
Diluted EPS was $0.57, including a $0.21 benefit from the indemnity accrual reversal. Adjusted EPS was $0.41, including a negative $0.01 impact from currency. On a constant currency basis, Adjusted EPS increased 16.7 percent, reflecting a positive impact of $0.07 from lower taxes.
Third Quarter Revenue Results by Region
Latin America: Net revenues increased 1.7 percent. Organic Net Revenues grew 16.9 percent primarily driven by continued strong performance in Brazil as well as pricing in the inflationary economies of Venezuela and Argentina. Brazil increased mid-teens behind strong volume/mix gains and pricing.
Power Brands grew 18.1 percent, led by Club Social, Oreo and belVita biscuits, Lacta chocolate and Halls candy.
Asia Pacific: Net revenues decreased 7.5 percent. Organic Net Revenues were essentially flat, as higher volume/mix offset lower pricing. The region’s emerging markets were down slightly, as double-digit declines in our $1.1 billion China business, driven by weak biscuits performance, offset high-teens growth in India.
Developed markets in the region were up slightly. Power Brands decreased 3.5 percent primarily due to Oreo biscuits in China.