Mondelez International(MDLZ) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents Mondelēz International's unaudited condensed consolidated financial statements for Q2 and H1 2024-2025, covering earnings, cash flows, and comprehensive notes Condensed Consolidated Statements of Earnings Q2 2025 net revenues increased to $8.98 billion with net earnings at $641 million, while H1 2025 net revenues grew to $18.30 billion, but net earnings decreased to $1.04 billion Key Earnings Data (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $8,984 | $8,343 | $18,297 | $17,633 | | Gross profit | $2,937 | $2,797 | $5,367 | $7,547 | | Operating income | $1,172 | $854 | $1,852 | $3,581 | | Net earnings attributable to Mondelēz International | $641 | $601 | $1,043 | $2,013 | | Diluted EPS attributable to Mondelēz International | $0.49 | $0.45 | $0.80 | $1.49 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $71.02 billion, total liabilities rose to $44.77 billion due to higher debt, and total equity slightly decreased to $26.25 billion Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $12,750 | $13,242 | | Total Assets | $71,020 | $68,497 | | Total Current Liabilities | $19,883 | $19,549 | | Long-Term Debt | $18,116 | $15,664 | | Total Liabilities | $44,773 | $41,539 | | Total Equity | $26,247 | $26,958 | Condensed Consolidated Statements of Cash Flows H1 2025 net cash from operating activities decreased to $1.40 billion, with $591 million used in investing and $862 million in financing, including $1.65 billion in share repurchases and $1.23 billion in dividends Cash Flow Summary for the Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,400 | $2,146 | | Net cash used in investing activities | $(591) | $(847) | | Net cash used in financing activities | $(862) | $(1,604) | | Capital expenditures | $(582) | $(666) | | Repurchases of Common Stock | $(1,653) | $(1,074) | | Dividends paid | $(1,233) | $(1,151) | Notes to Condensed Consolidated Financial Statements The notes detail key accounting policies and events, including the Evirth acquisition, a $282 million pension settlement loss, $1.6 billion in share repurchases, and a Q2 2025 effective tax rate of 26.9% - On November 1, 2024, the company acquired Evirth, a Chinese cake and pastry manufacturer, for $255 million in cash, resulting in $125 million of goodwill assigned to the AMEA segment[31][33] - In Q2 2025, the company recognized a non-cash pre-tax settlement loss of $282 million from the buy-out conversion of the Mondelēz Global LLC Retirement Plan for U.S. salaried employees[74] - A new share repurchase program authorizing up to $9.0 billion was approved effective January 1, 2025. In the first six months of 2025, the company repurchased 27 million shares for approximately $1.6 billion[87][88] - The effective tax rate for Q2 2025 was 26.9%, down from 34.7% in Q2 2024, driven by the jurisdictional mix of earnings and lower mark-to-market losses on derivatives[96] Net Revenue by Product Category - Q2 2025 vs Q2 2024 (in millions) | Category | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Biscuits & Baked Snacks | $4,575 | $4,357 | +5.0% | | Chocolate | $2,661 | $2,233 | +19.2% | | Gum & Candy | $950 | $957 | -0.7% | | Beverages | $227 | $266 | -14.7% | | Cheese & Grocery | $571 | $530 | +7.7% | | Total Net Revenues | $8,984 | $8,343 | +7.7% | Management's Discussion and Analysis (MD&A) Management discusses Q2 2025 performance, noting a 7.7% net revenue increase and 5.6% organic growth, but Adjusted EPS decreased 12.0% to $0.73 due to higher input costs and unfavorable volume/mix Overview and Recent Developments The company faces macroeconomic challenges including elevated cocoa prices, continued operations in Russia (4.0% of Q2 revenue), and a newly approved $1.2 billion multi-year ERP system upgrade program - The company expects to continue facing significantly higher operating costs, particularly for cocoa, as market prices have increased significantly and are likely to remain elevated[110] - In Q2 2025, Russia generated 4.0% of consolidated net revenue, up from 2.9% in Q2 2024. The company has suspended new capital investments and advertising in Russia but continues operations to maintain food supply continuity[114] - In July 2024, the Board approved a $1.2 billion multi-year program to upgrade global ERP and supply chain systems, with expected completion by year-end 2028[121] Consolidated Results of Operations Q2 2025 net revenues grew 7.7% to $9.0 billion with 5.6% organic growth, but Adjusted Operating Income margin contracted to 14.3%, and Adjusted EPS fell 12.0% to $0.73 due to higher input costs Q2 2025 vs Q2 2024 Performance Summary | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $8,984M | $8,343M | +7.7% | | Organic Net Revenue (Non-GAAP) | $8,814M | $8,343M | +5.6% | | Operating Income | $1,172M | $854M | +37.2% | | Adjusted Operating Income (Non-GAAP) | $1,283M | $1,492M | -14.0% | | Diluted EPS | $0.49 | $0.45 | +8.9% | | Adjusted EPS (Non-GAAP) | $0.73 | $0.83 | -12.0% | - Q2 Organic Net Revenue growth of 5.6% was driven by a +7.1 percentage point impact from pricing, partially offset by a -1.5 percentage point impact from unfavorable volume/mix[148] - Adjusted Operating Income (constant currency) decreased by $239 million in Q2, primarily driven by higher input costs (-$860M) and unfavorable volume/mix (-$129M), which were not fully offset by higher net pricing (+$589M) and lower SG&A (+$141M)[150] Results of Operations by Reportable Segment In Q2 2025, Europe's revenue surged 18.7% and AMEA grew 14.7%, while North America's revenue fell 3.5% and Latin America decreased 3.1%, with most segments experiencing operating income declines Q2 2025 Net Revenue Change by Segment | Segment | Q2 2025 Net Revenue (M) | % Change vs Q2 2024 | Key Drivers | | :--- | :--- | :--- | :--- | | Latin America | $1,194 | -3.1% | Unfavorable currency (-8.5pp) and volume/mix (-2.2pp), offset by pricing (+7.6pp) | | AMEA | $1,821 | +14.7% | Higher pricing (+7.9pp), acquisition impact (+6.4pp), and favorable volume/mix (+0.7pp) | | Europe | $3,412 | +18.7% | Higher pricing (+13.8pp) and favorable currency (+6.2pp), offset by unfavorable volume/mix (-1.3pp) | | North America | $2,557 | -3.5% | Unfavorable volume/mix (-2.4pp) and lower pricing (-1.0pp) | Q2 2025 Segment Operating Income Change | Segment | Q2 2025 Op. Income (M) | % Change vs Q2 2024 | | :--- | :--- | :--- | | Latin America | $133 | -7.6% | | AMEA | $271 | -6.6% | | Europe | $514 | -6.5% | | North America | $454 | -16.7% | Liquidity and Capital Resources H1 2025 net cash from operations decreased to $1.4 billion, total debt increased to $20.9 billion, and the company paid $1.23 billion in dividends while increasing the Q3 dividend by 6% - Net cash from operating activities decreased to $1.4 billion in H1 2025 from $2.1 billion in H1 2024, primarily due to lower cash-basis net earnings and working capital movements[202][203] - Total debt rose to $20.9 billion at June 30, 2025, from $17.7 billion at December 31, 2024[210] - A quarterly cash dividend was declared at $0.50 per share, a 6% increase, payable in October 2025[206] Commodity Trends The company faces significant cost pressures, primarily from elevated cocoa prices, which are expected to remain high, potentially impacting profitability despite mitigation efforts through hedging and pricing actions - The primary driver of increased aggregate commodity costs in H1 2025 was higher cocoa prices, along with packaging, dairy, energy, and other ingredients[213] - The company expects to face elevated cocoa costs in the near- and medium-term and acknowledges it may not be able to increase prices sufficiently to fully cover these incremental costs, potentially leading to a significant adverse impact on profitability[216] Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from currency, commodity, and interest rates, using derivative instruments to mitigate earnings fluctuations and adverse impacts on operating results - The company's main market risk exposures are to currency exchange rates, commodity prices, and interest rates[223] - Derivative instruments are principally used to reduce significant, unanticipated earnings fluctuations from market volatility[224] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[226] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025[227] PART II OTHER INFORMATION Legal Proceedings This section refers to Note 10 for details on legal proceedings, including an ongoing class action lawsuit related to 2011 wheat futures and a settled European Commission investigation - Information regarding legal proceedings is detailed in Note 10, Commitments and Contingencies[229] Risk Factors There were no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There were no material changes to the risk factors disclosed in the company's 2024 Annual Report on Form 10-K[230] Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company repurchased approximately 1.7 million shares at an average price of $64.46, with $7.4 billion remaining under the current repurchase authorization through December 31, 2027 Issuer Purchases of Equity Securities for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Value of Shares Remaining for Repurchase (M) | | :--- | :--- | :--- | :--- | | April 2025 | 588,992 | $64.70 | $7,507 | | May 2025 | 1,134,281 | $64.33 | $7,434 | | June 2025 | 945 | $67.22 | $7,434 | | Total Q2 | 1,724,218 | $64.46 | $7,434 | - A new $9.0 billion share repurchase program is authorized through December 31, 2027. As of June 30, 2025, approximately $7.4 billion remained under this authorization[232] Other Information No directors or executive officers adopted or terminated Rule 10b5-1(c) trading plans or other non-Rule 10b5-1 trading arrangements during Q2 2025 - During Q2 2025, no directors or executive officers adopted or terminated insider trading arrangements under Rule 10b5-1(c)[234] Exhibits This section lists exhibits filed with Form 10-Q, including employee benefit plans, CEO and CFO certifications, and financial statements in iXBRL format - Exhibits filed include management compensatory plans, CEO/CFO certifications (Rules 13a-14(a)/15d-14(a) and Section 906), and iXBRL data files[235]