The FINANCIAL — Mondelēz International, Inc. on October 28 reported its third quarter 2015 results, reflecting continued strong Adjusted Operating Income margin expansion and solid Organic Net Revenue1 growth. Adjusted EPS1 was flat versus the prior year on a constant-currency basis due to dilution related to the company’s recently created coffee joint venture.
“We delivered strong margin expansion in the third quarter by progressing our transformation agenda in a volatile and challenging macroeconomic environment,” said Irene Rosenfeld, Chairman and CEO. “We’re continuing to aggressively reduce costs to expand margins and provide the fuel for incremental investments behind our Power Brands and route-to-market capabilities to drive sustainable revenue growth and improve market shares. As a result, we remain confident in our ability to deliver our 2015 outlook and our 2016 Adjusted Operating Income margin target of 15 to 16 percent, while continuing to return significant capital to our shareholders.”
On a reported basis, net revenues were $6.8 billion, down 17.8 percent, including a negative 13.6 percentage point impact from currency and a negative 9.3 percentage points from the coffee business transactions. Operating income was $7.8 billion, up 815 percent, including a $7.1 billion pre-tax gain from the coffee transaction. Diluted EPS was $4.46, up $3.93, according to Mondelēz International.
Organic Net Revenue increased 3.7 percent, as the company raised prices to recover currency-driven input cost inflation. Volume/mix was unfavorable, largely due to price elasticity as well as a 70 basis point headwind resulting from strategic decisions to exit certain low-margin product lines. Power Brands2 grew 5.1 percent. Organic Net Revenue from emerging markets3 was up 10.3 percent, while developed markets4 decreased 0.5 percent.
Adjusted Gross Profit1 margin was 39.1 percent, up 180 basis points. The improvement was driven by strong net productivity partially offset by a negative 40 basis point impact from a mark-to-market adjustment associated with commodities and currency hedging.
Adjusted Operating Income margin expanded 170 basis points to 14.1 percent. The company significantly stepped up advertising and consumer support, especially behind its Power Brands, and continued to reduce overhead costs as a percent of revenue.
Adjusted EPS was flat to prior year on a constant-currency basis as the company’s strong operating performance was offset by dilution related to the recently created coffee joint venture as well as cycling an unusually low effective tax rate in the prior-year quarter.
Return of Capital
Through the first nine months, the company repurchased $3.1 billion of its common stock at an average price of $38.69 per share and paid $736 million in dividends.
The company reaffirmed its outlook for 2015, as described below, as well as its Adjusted Operating Income margin target for 2016 of 15 percent to 16 percent.
In addition, the company estimates foreign exchange translation to reduce 2015 net revenue growth by approximately 13 percentage points6 and Adjusted EPS by approximately $0.336 due to the strengthening of the U.S. dollar versus other currencies.
Consolidating Focus on Cost Savings, Growth and Commercial Execution
Mondelēz International also announced today that it has named Mark Clouse, 47, to the newly created position of Chief Commercial Officer (CCO), and Tim Cofer, 46, as Chief Growth Officer (CGO), as the company continues to sharpen its focus on cost savings, growth and commercial execution. These changes become effective in January 2016.
“We’ve seen great benefit in consolidating our cost agenda under our CFO and our growth agenda under our Chief Growth Officer,” Rosenfeld said. “We now have the same opportunity to sharpen our global commercial execution by creating this new Chief Commercial Officer position. Brian Gladden, Tim Cofer and Mark Clouse, together with our region presidents, Daniel Myers and our Integrated Supply Chain teams, will work hand in hand to advance our transformation agenda and accelerate growth on both our top and bottom lines.”
In his role as CCO, Clouse, who currently serves as CGO, will oversee the company’s commercial execution with oversight of all five geographic regions as well as the global sales function. This new role is designed to simplify and accelerate day-to-day P&L decision-making and trade-offs while focusing investments in areas that will best drive profitable growth.
Cofer, who currently serves as Executive Vice President and President, Asia Pacific and EEMEA, is a 23-year veteran of the company and has successfully led large commercial operations in four different regions around the world. As CGO, he will oversee the development of next generation innovation platforms and new business opportunities that will accelerate future growth. Corporate strategy, global categories and global marketing, as well as research, development and quality will report to him.
“Mark and Tim are very talented senior executives who are well-positioned to take on these new enterprise roles,” Rosenfeld continued. “Their strong operating experience in emerging and developed markets, combined with a deep understanding of our categories, will enable us to continue to deliver sustainable, profitable growth and top-tier returns to our shareholders.”
Concurrent with these changes, the company announced that Maurizio Brusadelli will assume the role of President of Asia Pacific; Dave Brearton, EVP, Strategic Initiatives, will retire at year-end; and Tracey Belcourt, EVP, Strategy, will leave the organization.