Mondelez International

  • Mondelez International is a US-based multinational confectionary company that owns brands such as Cadbury’s, Oreo, Côte d'Or, Toblerone, Tuc, Chips Ahoy! and Halls. 

  • The company reported Q3 results earlier this week, with net revenue for the period up 4.9% to $6.67 billion primarily driven by strong organic net revenue growth of 4.4%. 

  • The gross profit margin increased 20 basis points to 39.9%, underpinned by volume leverage, pricing and productivity, although this was somewhat offset by higher raw material costs and incremental Covid-19 related costs. 

  • Diluted EPS in the quarter was $0.78, down 20.4%, largely a result of a prior-year Swiss tax reform benefit. Adjusted EPS in the quarter was $0.63, flat on a constant-currency basis, which was in line with estimates. Year-to-date adjusted EPS was $1.92, up 5.9% on a constant-currency basis 

  • Looking ahead for the full-year, Mondelez guided organic net revenue to rise 3.5% and adjusted EPS to grow 5% on a constant-currency basis. 

  • Year-to-date cash provided by operating activities was $2.3 billion, up $0.4 billion versus prior year while Free Cash Flow was $1.7 billion, an increase of $0.5 billion versus prior year. 

  • On a geographical basis, North America reported the most robust growth, with revenue in the region growing by 12.9% in Q3 to just north of $2 billion. Sales in the region were boosted by e-commerce as people stayed home due to Covid. In fact, e-commerce grew by 78% in Q3 from the same period a year ago and now accounts for 5% of the company’s revenue base. Management have targeted this as a key area of growth going forward. 

  • Mondelez is a high-quality business with an outstanding array of brands. The company is projecting $3 billion in free cash flow for the full year, which places the company on 3.8% free cash flow yield at the current share price. Although this on the rich side, the company does have significant investment opportunities and earnings are expected to grow at high single digit rates over the medium term, which in turn will likely see low double digit growth rate in dividends. Over the last 5 years Mondelez have grown dividends at an average annual rate of 13.5% which, if sustained, justifies the relatively high valuation. Mondelez is a new holding in the Cratos Worldwide Flexible Fund and global portfolios and we will use any correction to add to our position in this high-quality business.

Mondelez International