MDLZ Financial Analysis

Analysis Date: 2/5/2025

Business Model

Mondelez International generates revenue through the sale of snacks and food products across various categories and geographies. Key categories include Biscuits & Baked Snacks, Chocolate, and Gum & Candy. Revenue is diversified across developed and emerging markets.

Revenue Sources

• Biscuits & Baked Snacks (e.g., Oreo, Ritz, LU, Belvita, Tate's Bake Shop)
• Chocolate (e.g., Cadbury Dairy Milk, Milka, Toblerone)
• Gum & Candy
• Beverage (e.g., Tang)
• Cheese & Grocery (e.g., Philadelphia)

Income Statement Analysis

• Net revenues increased by 3.1% compared to the previous year quarter, driven by Organic Net Revenue growth of 5.2%, offset by currency headwinds.
• Gross profit increased by 6.9% with gross profit margin improving to 38.6% from 37.3%, driven by favorable year-over-year change in mark-to-market impacts from derivatives.
• Operating income significantly increased by 35.0%, with operating income margin at 16.8%, up from 12.8% due to factors including favorable year-over-year change in mark-to-market gains from currency and commodity hedging activities and lower divestiture-related costs.

Balance Sheet Analysis

• Cash and cash equivalents decreased by 25.4%, indicating cash utilization for operations, investments, or returns to shareholders.
• Trade receivables increased by 6.6% and inventories increased by 5.9%, suggesting potential sales growth and increased business activity.
• Total assets decreased by 4.1%, primarily due to a decrease in goodwill and intangible assets.
• Total liabilities decreased by 3.5% mainly due to reduction in long-term debt and short-term borrowings.
• Total Mondelēz International Shareholders' Equity decreased by 4.9%, reflecting share repurchases and other equity adjustments.

Capital Allocation

Mondelez International demonstrates a balanced capital allocation strategy: Dividends: Increased dividends paid in FY 2024 compared to FY 2023, indicating a commitment to providing shareholder returns through regular dividend payouts. Share Repurchases: Significantly increased share repurchases in FY 2024, reflecting a strategy to enhance shareholder value by reducing share count and potentially signaling undervaluation of the company's stock. Business Reinvestment: Increased capital expenditures in FY 2024, suggesting continued investment in property, plant, and equipment to support future growth and operational efficiency. The acquisition of Evirth also indicates reinvestment in portfolio expansion. Liquidated investment in JDE Peet's to reallocate capital.

Management Commentary

Fiscal 2024 was another strong year of performance for our company. We delivered balanced top-line growth, strong earnings, and robust free cash flow generation, while returning significant capital back to shareholders.

As we transition into 2025, we remain focused on executing against our long-term growth strategy and delivering on our chocolate business playbook to navigate unprecedented cocoa cost inflation.

We expect Adjusted EPS to decline approximately 10% on a constant currency basis due to unprecedented cocoa cost inflation.

Cocoa costs continue to remain volatile amid supply concerns.

Overall Sentiment: Cautiously optimistic. Management expresses confidence in long-term strategy and brand strength, highlighting strong FY 2024 performance. However, there is caution regarding FY 2025 outlook due to significant cocoa cost inflation, expected to negatively impact EPS despite revenue growth and cost management efforts. The sentiment is balanced, acknowledging challenges while emphasizing strategic execution and long-term value creation.

Recommendation

Rating: Hold

Reason for Rating: Given the strong FY 2024 performance and positive long-term outlook balanced against the anticipated EPS decline in FY 2025 due to unprecedented cocoa costs and ongoing market volatility, a Hold recommendation is appropriate. The company demonstrates resilience and strategic focus, but near-term earnings headwinds warrant caution.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/5/2025, 3:34:09 AM