Mondelez International(MDLZ) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported organic net revenue growth of 4.2% in Q1 2024, with adjusted gross profit dollar growth of 11.6% [8][19] - Adjusted EPS grew by 16.3%, and free cash flow generation exceeded $1 billion [8][28] - Total revenue for emerging markets grew by 8.3%, while developed markets saw a growth of 1.4% [20][24] Business Line Data and Key Metrics Changes - Biscuits and Baked Snacks grew by 0.6%, with brands like Oreo and Ritz showing solid growth, while US Biscuit brands faced ongoing softness [21] - Chocolate category grew by 5.8%, with strong performance from Cadbury Dairy Milk and Milka despite customer disruptions [22] - Gum and Candy experienced a growth of 12.9%, driven by momentum in key markets like China and Mexico [22] Market Data and Key Metrics Changes - North America saw a growth of 1.3%, impacted by softness in the Biscuit market and a shift to non-tracked channels [24] - Europe grew by 4.4%, with strong execution and share gains despite volume declines due to customer disruptions [23] - AMEA (Asia, Middle East, and Africa) grew by 5.9%, with China delivering low double-digit growth and India showing high single-digit growth [25][26] Company Strategy and Development Direction - The company aims to achieve global snacking leadership by investing in brands and capabilities, focusing on core categories of Chocolate, Biscuits, and Baked Snacks [7][11] - The strategy includes capturing synergies from recent acquisitions and enhancing distribution in emerging markets [12][19] - The company is committed to sustainability, with a roadmap for net zero by 2050 and ongoing improvements in mindful snacking priorities [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted challenges in the operating environment, including inflation and consumer sensitivity to price points, particularly among lower-income consumers [10][36] - There is optimism about emerging markets, where consumer confidence remains strong and demand is resilient [9][46] - The outlook for 2024 remains unchanged, with expectations for organic net revenue growth in the range of 3% to 5% [32] Other Important Information - The company is fully covered for cocoa prices in 2024 and is implementing flexible strategies to manage potential price increases [29][30] - The company repurchased$ 600 million in stock during the quarter, maintaining a strong balance sheet with leverage at about 2.5 times [28] Q&A Session Summary Question: Challenges in North America and actions to protect share - Management acknowledged the slowing category and loss of share, attributing it to inflation and consumer confidence issues, and outlined plans to increase promotional activities and adjust pack sizes to better meet price points [35][36] Question: Any unusual factors for Q2 forecasts - Management reaffirmed guidance for 2024, noting that while the Biscuit category is softer, overall dynamics remain positive, particularly around key consumption events like Chinese New Year and Easter [38][39] Question: Insights on emerging markets - Emerging markets contributed significantly to growth, with strong performance in China and India, while Mexico is expected to recover from integration issues [43][44][46] Question: Cocoa pricing strategy - Management discussed the current high cocoa prices and the expectation of a market correction, emphasizing the need for flexible hedging strategies [50][51] Question: European chocolate market performance - Management noted strong performance in the European chocolate market, which should aid in negotiations with retailers for future pricing [53][54] Question: Gross margin expectations - Management indicated that while Q1 saw strong gross profit dollar growth, cocoa price escalations are expected to impact margins in the second half of the year [60][61] Question: North American consumer confidence and volume trends - Management expressed optimism for improved consumer confidence in the second half of the year, which should positively impact volume trends [68]