Mondelez International(MDLZ) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Organic net revenue grew by 2.5% in Q2 2024, with adjusted gross profit dollar growth of 11.3% and adjusted EPS increasing by 25% [7][20][26] - Free cash flow generation was strong, totaling $1.5 billion in the first half of the year, with an 11% increase in dividends announced [5][27] Business Line Data and Key Metrics Changes - Biscuits and baked snacks grew by 0.8% for the quarter, with brands like Oreo and Ritz gaining market share [21][23] - Chocolate segment grew by 5.6%, driven by strong performance in both developed and emerging markets, with Cadbury Dairy Milk and Milka showing significant growth [21][22] - Gum and candy grew by 2.9%, supported by momentum in key markets such as China and Brazil [22] Market Data and Key Metrics Changes - North America experienced a growth of 0.3%, with challenges in the biscuit category but improvements noted in brands like Chips Ahoy! [23][24] - Europe grew by 2.7%, with strong execution leading to share gains despite volume declines due to customer disruptions [23] - Emerging markets saw a revenue increase of 4.5%, with strong growth in China and Brazil, while India faced challenges due to food inflation [24][25] Company Strategy and Development Direction - The company is focused on long-term growth in chocolate, biscuits, and baked snacks, aiming for 90% of revenue from these core categories by 2030 [14][19] - A strategic partnership with Lotus Bakeries was announced to develop co-branded chocolate products and expand the biscuit business in India [18][19] - Continued investment in advertising and consumer engagement is emphasized, with innovative marketing campaigns planned for brands like Oreo [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted a stabilizing consumer environment in North America, with inflation pressures easing and consumer confidence improving [32][33] - The outlook for Q3 and the second half of the year remains positive, with expectations for volume growth in Europe and North America [30][34] - Cocoa prices are anticipated to be a significant headwind in the second half, but the company is well-positioned to manage costs and maintain profitability [26][28] Other Important Information - The company is making progress on its sustainability agenda, aiming for net zero carbon by 2050, with a carbon-neutral biscuit manufacturing plant in China [17] - The ERP transition is being implemented over four years to minimize disruptions, with a focus on successful execution [40] Q&A Session Summary Question: Consumer situation in North America and need for price reset - Management indicated that while the category remains soft, it is stabilizing, and they do not foresee a full price reset but will focus on targeted promotions and smaller pack sizes [32][33] Question: Volume growth expectations and drivers - Management expects volume growth to return in Europe, driven by strong execution and upcoming consumer activities [34] Question: Impact of ERP transition - The ERP program will be rolled out in phases to minimize disruptions, with careful planning to ensure successful execution [40] Question: Long-term free cash flow guidance - Management indicated that free cash flow could exceed$ 4 billion on an ongoing basis, with current guidance at $3.5 billion for the year [42] Question: Cocoa pricing strategy - The company is securing cocoa positions for 2025 and expects a market correction, with a significant portion of their positions already covered [46][48] Question: Partnership with Biscoff - The partnership involves co-branding chocolate products and distributing Biscoff cookies in India, with potential for global expansion if successful [48]