Mondelez International(MDLZ) - 2023 Q2 - Quarterly Report

Revenue Growth and Performance - Net revenues increased 17.0% to $8.5 billion in Q2 2023 and 17.5% to$ 17.7 billion in the first six months of 2023, driven by higher net pricing, acquisitions, and favorable volume/mix[142] - Organic Net Revenue, a non-GAAP measure, increased 15.8% to $8.4 billion in Q2 2023 and 17.7% to$ 17.7 billion in the first six months of 2023, primarily due to higher net pricing[143] - Net revenues increased by $1,233 million (17.0%) to$ 8,507 million in Q2 2023, driven by Organic Net Revenue growth of 15.8% and acquisitions, partially offset by unfavorable currency translation and divestitures[150] - Emerging markets net revenues increased by 17.8%, with Organic Net Revenue growth of 23.3%, while developed markets net revenues increased by 16.4%, with Organic Net Revenue growth of 11.2%[150] - Net revenues increased by $2,635 million (17.5%) to$ 17,673 million for the six months ended June 30, 2023[161] - Net revenue increased by 17.5% to $17.673 billion, with acquisitions adding$ 751 million and unfavorable currency impacts reducing revenues by $748 million[162] - Net revenues for Latin America increased by 40.2% to$ 1.228 billion in Q2 2023, driven by higher net pricing (35.1 pp), acquisitions (15.9 pp), and favorable volume/mix (2.6 pp)[176][177] - Net revenues for Europe increased to $2.926 billion in Q2 2023, up from$ 2.626 billion in Q2 2022[174] - North America net revenues rose to $2.744 billion in Q2 2023, compared to$ 2.237 billion in Q2 2022[174] - Total net revenues for the company reached $8.507 billion in Q2 2023, up from$ 7.274 billion in Q2 2022[174] - Net revenues in North America increased by $1,080 million (24.7%) over six months, driven by higher net pricing (12.7 pp), Clif Bar acquisition (10.5 pp), and favorable volume/mix (2.1 pp), partially offset by unfavorable currency (0.6 pp)[196] Earnings and Profitability - Diluted EPS increased 27.8% to$ 0.69 in Q2 2023 and 91.3% to $2.20 in the first six months of 2023, driven by favorable mark-to-market impacts and lower acquisition costs[144] - Adjusted EPS, a non-GAAP measure, increased 16.9% to$ 0.76 in Q2 2023 and 13.0% to $1.65 in the first six months of 2023, driven by operating gains and acquisitions[145] - Operating income rose by$ 498 million (53.7%) to $1,425 million in Q2 2023, compared to$ 927 million in Q2 2022[150] - Net earnings attributable to Mondelēz International increased by $197 million (26.4%) to$ 944 million in Q2 2023[150] - Diluted earnings per share increased by $0.15 (27.8%) to$ 0.69 in Q2 2023[150] - Operating income increased by $498 million (53.7%) to$ 1,425 million in Q2 2023 compared to Q2 2022[152] - Adjusted Operating Income on a constant currency basis increased by $288 million (26.3%) to$ 1,385 million in Q2 2023[152] - Net earnings attributable to Mondelēz International increased by $197 million (26.4%) to$ 944 million in Q2 2023[159] - Diluted EPS attributable to Mondelēz International increased by $0.15 (27.8%) to$ 0.69 in Q2 2023[159] - Adjusted EPS on a constant currency basis increased by $0.14 (21.5%) to$ 0.79 in Q2 2023[159] - Operating income increased by $909 million (45.0%) to$ 2,930 million for the six months ended June 30, 2023[161] - Net earnings attributable to Mondelēz International increased by $1,423 million (88.8%) to$ 3,025 million for the six months ended June 30, 2023[161] - Diluted earnings per share attributable to Mondelēz International increased by $1.05 (91.3%) to$ 2.20 for the six months ended June 30, 2023[161] - Adjusted Operating Income increased by 17.7% to $2.913 billion, and on a constant currency basis, it increased by 23.2% to$ 3.047 billion[163] - Higher net pricing contributed $2.403 billion to Adjusted Operating Income, partially offset by higher input costs of$ 1.681 billion[164] - Favorable volume/mix contributed $108 million to Adjusted Operating Income, driven by AMEA, Latin America, and North America[164][166] - Operating income margin increased from 13.4% in 2022 to 16.6% in 2023, driven by favorable mark-to-market gains and lower costs related to the war in Ukraine[168] - Adjusted Operating Income margin remained flat at 16.5% as higher net pricing was offset by higher raw material costs[168] - Adjusted EPS on a constant currency basis was$ 1.75 for the first six months of 2023, up 19.9% from $1.46 in the same period of 2022[170] - Diluted EPS attributable to Mondelēz International increased by 91.3% to$ 2.20 in the first six months of 2023, compared to $1.15 in 2022[170] - Earnings before income taxes for the company grew to$ 1.161 billion in Q2 2023, up from $859 million in Q2 2022[174] Acquisitions and Divestitures - The company completed acquisitions of Ricolino, Clif Bar, and Chipita in 2022 to expand its portfolio and announced divestitures of its gum and Halls candy businesses[134] - The acquisition of Ricolino added$ 137 million in net revenues, and the acquisition of Clif Bar added $240 million in net revenues on a constant currency basis[151] - The acquisition of Ricolino contributed$ 137 million in incremental net revenues on a constant currency basis in Q2 2023[177] - The acquisition of Ricolino added $293 million in net revenues, and the acquisition of Clif Bar added$ 458 million in net revenues[162] - North America region net revenues increased by $507 million (22.7%) for the three months ended June 30, driven by Clif Bar acquisition (10.8 pp), higher net pricing (10.4 pp), and favorable volume/mix (2.0 pp), partially offset by unfavorable currency (0.5 pp)[194] - Segment operating income in North America increased by$ 126 million (27.8%) for the three months ended June 30, primarily due to higher net pricing, Clif Bar acquisition impact, and favorable volume/mix, partially offset by higher raw material costs and unfavorable currency[195] - Net revenues in North America increased by $1,080 million (24.7%) over six months, driven by higher net pricing (12.7 pp), Clif Bar acquisition (10.5 pp), and favorable volume/mix (2.1 pp), partially offset by unfavorable currency (0.6 pp)[196] - Segment operating income in North America increased by$ 274 million (31.4%) over six months, primarily due to higher net pricing, Clif Bar acquisition impact, and favorable volume/mix, partially offset by higher raw material costs and unfavorable currency[197] Regional Performance - Russia generated 2.8% of consolidated net revenue in Q2 2023, down from 3.7% in Q2 2022, due to suspended advertising and currency weakness, but profitability increased significantly[132] - Ukraine generated 0.3% of consolidated net revenue in Q2 2023, up from 0.2% in Q2 2022, as the company restored limited operations at damaged facilities[132] - Segment operating income for Latin America grew by 48.9% to $134 million in Q2 2023, compared to$ 90 million in Q2 2022[176] - AMEA region net revenues increased by $74 million (4.8%) for the three months ended June 30, driven by higher net pricing (9.9 pp) and favorable volume/mix (3.3 pp), partially offset by unfavorable currency (8.4 pp)[182] - Europe region net revenues increased by$ 300 million (11.4%) for the three months ended June 30, driven by higher net pricing (17.6 pp), partially offset by unfavorable volume/mix (4.5 pp) and unfavorable currency (1.7 pp)[188] - Segment operating income increased by $44 million (48.9%) due to higher net pricing, Ricolino acquisition impact, and favorable volume/mix, partially offset by higher raw material costs and unfavorable currency[178] - Net revenues increased by$ 737 million (43.3%) over six months, driven by higher net pricing (33.4 pp), Ricolino acquisition (17.4 pp), and favorable volume/mix (5.0 pp), partially offset by unfavorable currency (10.7 pp)[179] - Segment operating income increased by $80 million (41.5%) over six months, primarily due to higher net pricing, favorable volume/mix, and Ricolino acquisition impact, partially offset by higher raw material costs and unfavorable currency[180] Currency and Market Impacts - Unfavorable currency impacts decreased net revenues by$ 283 million, primarily due to the strength of the U.S. dollar against various currencies[151] - Unfavorable currency impacts decreased net revenues by $748 million, primarily due to the strength of the U.S. dollar against most currencies[162] - Fluctuations in currency exchange rates create volatility in reported results, with a stronger U.S. dollar adversely affecting consolidated earnings and net assets[230] - The company uses derivative instruments to hedge against currency exchange rate, commodity price, and interest rate risks to reduce earnings volatility[229] Costs and Expenses - Selling, general, and administrative expenses increased by$ 307 million, primarily due to higher advertising and consumer promotion costs[167] - Commodity costs increased in the first six months of 2023 due to higher energy, dairy, sugar, grains, edible oils, packaging, cocoa, nuts, and other ingredient costs, as well as unfavorable currency exchange impacts[213] - The company anticipates continued price volatility and higher aggregate costs due to supply chain disruptions, transportation challenges, and labor market conditions[215] - The company manages input cost volatility through forward purchase agreements, productivity measures, and pricing actions to mitigate the impact of higher costs on earnings[231] Liquidity and Capital Management - The company expects to continue utilizing its commercial paper program and international credit lines to meet liquidity needs, with no material negative effects expected on funding sources[199] - Net cash provided by operating activities was $1,973 million in the first six months of 2023, compared to$ 1,967 million in the same period of 2022, showing minimal change[203][204] - Net cash provided by investing activities improved to $1,250 million in the first six months of 2023, compared to a net cash used of$ 999 million in the same period of 2022, driven by higher proceeds from share sales and lapping prior-year acquisition costs[203][205] - Net cash used in financing activities increased to $3,539 million in the first six months of 2023, compared to$ 2,516 million in the same period of 2022, primarily due to lower debt proceeds[203][206] - The company paid dividends of $1,055 million in the first six months of 2023, up from$ 977 million in the same period of 2022, with a 10% increase in the quarterly dividend to $0.425 per share declared in July 2023[207] - Total debt decreased to$ 21.2 billion as of June 30, 2023, from $22.9 billion as of December 31, 2022, with a debt-to-capitalization ratio of 0.43, down from 0.46[211] - The company expects 2023 capital expenditures to be up to$ 1.2 billion, primarily for modernizing manufacturing facilities and supporting productivity initiatives[205] Non-GAAP Adjustments and Exclusions - Adjusted Operating Income excludes impacts from Simplify to Grow Program, goodwill and intangible asset impairments, divestiture and acquisition-related costs, and other non-recurring items to improve comparability of underlying operating results[224] - Adjusted EPS excludes items such as debt extinguishment losses, interest rate swap gains/losses, and mark-to-market impacts from marketable securities to provide a clearer view of ongoing performance[224] - Constant currency adjustments are used to evaluate growth in Adjusted Operating Income and Adjusted EPS by removing the impact of currency exchange rate fluctuations[224] - The company incurred incremental costs due to the war in Ukraine, including asset impairments and higher allowances for uncollectible receivables, which are excluded from non-GAAP results[226] - The European Commission legal matter, related to alleged competition law infringements, is excluded from non-GAAP results due to its infrequent and unusual nature[226] - Pension participation changes, including multiemployer plan withdrawals, are excluded from non-GAAP results as they do not reflect ongoing pension obligations[226] - Marketable securities gains or losses, both realized and unrealized, are excluded from non-GAAP earnings measures starting in Q1 2023[226] Shareholder Returns and Dividends - The company declared a quarterly cash dividend of $0.425 per share, a 10% increase, payable on October 13, 2023, to shareholders of record as of September 29, 2023[207] - The company paid dividends of$ 1,055 million in the first six months of 2023, up from $977 million in the same period of 2022, with a 10% increase in the quarterly dividend to$ 0.425 per share declared in July 2023[207] Geopolitical and External Factors - The company anticipates ongoing volatility due to supply chain issues, inflationary pressures, and geopolitical uncertainty, but remains optimistic about future snacks revenue growth[130] - The company incurred incremental costs due to the war in Ukraine, including asset impairments and higher allowances for uncollectible receivables, which are excluded from non-GAAP results[226]