DEERFIELD, Ill., April 27, 2016 (GLOBE NEWSWIRE) -- Mondelēz International, Inc. today reported its first quarter 2016 results, with strong Adjusted Operating Income margin expansion and Adjusted EPS growth on a constant currency basis, as well as solid Organic Net Revenue growth.
“We’ve had a good start to the year,” said Irene Rosenfeld, Chairman and CEO. “We significantly expanded margins by continuing to reduce supply chain and overhead costs. In addition, we delivered improved volume/mix in developed markets, while effectively managing through the volatile operating environment in emerging markets. As a result, we’re confident in our ability to deliver our 2016 outlook that we shared in February.”
On a reported basis, net revenues were $6.5 billion, down 16.8 percent, driven by a negative 9.4 percentage point impact from the coffee transaction and a 7.2 percentage point headwind from currency. Operating income was $722 million, down 11.0 percent. Diluted EPS was $0.35, up $0.16.
Net Revenue
Organic Net Revenue increased 2.1 percent, as the company increased volume/mix in developed markets and raised prices to recover currency-driven input cost inflation in inflationary markets. Power Brands grew 3.8 percent. Organic Net Revenue from emerging markets was up 3.6 percent and developed markets increased 1.3 percent.
Mark Clouse to Leave Company
Mondelēz International also announced today that Mark Clouse, Chief Commercial Officer (CCO), will leave the company to become CEO of a North American publicly traded food company starting in late May. In his 20 years with the company, Clouse has managed a number of regional and global businesses and served as Chief Growth Officer prior to his appointment as CCO at the beginning of 2016.
“We’re proud of and grateful for Mark’s significant contributions to our company over the last two decades,” said Rosenfeld. “He’s a seasoned executive and natural leader who has built our brands and businesses, while always demonstrating a deep passion for developing others. Mark has proven he’s ready for this exciting next step in his career and we wish him and his family all the best.”
The company does not plan to appoint a new CCO.
JDE coffee business transactions
On July 2, 2015, the company completed transactions to combine the company’s wholly owned coffee businesses (including the company’s coffee portfolio in France) with those of D.E Master Blenders 1753 B.V. (“DEMB”) to create a new company, JDE. Following the exchange of a portion of the company’s investment in JDE for an interest in Keurig Green Mountain Inc. (“Keurig”) in March 2016, the company now holds a 26.5% equity interest in JDE. The remaining 73.5% interest in JDE is held by a subsidiary of Acorn Holdings B.V., (“AHBV”, owner of DEMB prior to July 2, 2015). In connection with the contribution of the company’s global coffee businesses to JDE, the company recorded a pre-tax gain of $6.8 billion (or $6.6 billion after-taxes) in the third quarter of 2015. The company also recorded approximately $1.0 billion of net gains related to hedging the expected cash proceeds from the transaction as described further below.
The consideration the company received consisted of €3.8 billion of cash ($4.2 billion as of July 2, 2015), a 43.5% equity interest in JDE (prior to the decrease in ownership due to the Keurig transaction) and $794 million in receivables (related to sales price adjustments and tax formation cost payments). During the third quarter of 2015, the company also recorded $283 million of cash and receivables related to the reimbursement of costs that the company incurred in separating its coffee businesses. The cash and equity consideration the company received at closing reflects that the company retained its interest in a Korea-based joint venture, Dongsuh Foods Corporation. During the second quarter of 2015, the company also completed the sale of its interest in a Japanese coffee joint venture, Ajinomoto General Foods, Inc. (“AGF”). In lieu of contributing its interest in the AGF joint venture to JDE, the company contributed the net cash proceeds from the sale, and the transaction did not change the consideration received for the company’s global coffee businesses.
During the fourth quarter of 2015, the company and JDE concluded negotiations of a sales price adjustment and completed the valuation of the company’s investment in JDE. Primarily related to the negotiated resolution of the sales price adjustment in the fourth quarter, the company recorded a $313 million reduction in the pre-tax gain on the coffee transaction, reducing the $7.1 billion estimated gain in the third quarter to the $6.8 billion final gain for 2015. As part of the company’s sales price negotiations, the company retained the right to collect future cash payments if certain estimated pension liabilities come in over an agreed amount in the future. As such, the company may recognize additional income related to this negotiated term in the future.
In connection with the expected receipt of cash in euros at the time of closing, the company entered into a number of consecutive currency exchange forward contracts in 2014 and 2015 to lock in an equivalent expected value in U.S. dollars as of the date the coffee business transactions were first announced in May 2014. Cumulatively, the company realized aggregate net gains and received cash of approximately $1.0 billion on these hedging contracts that increased the cash the company received in connection with the coffee business transactions, from $4.2 billion in cash consideration received to $5.2 billion. In connection with these currency contracts, the company recognized a net gain of $551 million in in the three months ended March 31, 2015 within interest and other expense, net.
The company also incurred incremental expenses related to readying its coffee businesses for the transactions that totaled $28 million in the three months ended March 31, 2015. These expenses were recorded within selling, general and administrative expenses of primarily the company’s Europe and EEMEA segments and within general corporate expenses. Full report.
