Despite the decline in earnings and sales, Irene Rosenfeld, chairman and chief executive officer (CEO), was upbeat about the financials, saying the results reflected the company’s continued execution of its transformation agenda.
“We had a strong second quarter,” she said in a July 30 conference call with analysts. “We built on our momentum from the start of the year, continuing to drive top year margin expansion and earnings growth, while also delivering solid organic revenue growth. Specifically, organic revenue grew 4.3%, led by pricing actions to recover commodity and currency-driven input costs.”
With the combination of its global coffee business with D.E Master Blenders and acquisition of Kinh Do snacks in Vietnam now in the rearview mirror, Rosenfeld said Mondel?z has sharpened its focus on snacks.
“With the completion of the coffee transaction, on a pro forma basis snacks now represent nearly 85% of our revenue, up from 75%,” she said. “This will enable us to further optimize our capital allocation and focus on accelerating the growth of our key franchises.
“Biscuits and chocolate now make up nearly 70% of our revenue, with gum and candy at about 15%. Post coffee, our beverages segment is now composed entirely of powdered beverages and will represent about 6% of revenue. Finally, cheese and grocery is about 10% of sales with a little less than half of the business in Europe.”
While revenue grew only modestly in North America behind improved biscuits growth in the U.S., Rosenfeld said Mondel?z experienced gains of more than 20% in China behind strong execution in both biscuits and gum.
“We know that some of our peers have had some challenges (in China),” she said. “We had challenges of our own as you recall back in 2013, and we very quickly have addressed them. We’ve taken a number of steps, aside from very closely monitoring inventory versus consumption. We’ve invested quite significantly in category growth in biscuits, as well as in our innovation platforms.
“So we’ve invested behind Oreo, behind the launch of Oreo Thins, which has been off to a terrific start. We’ve seen very nice improvement in our shares as a result of that, and we’re seeing the biscuit category is starting to improve after quite some time of being essentially flat. We’re also launching our belVita product as we speak, and that will have a nice impact.”
Rosenfeld said a lot of the work going on in China is focused on the company’s ability to control its own destiny by making sure that it has the adequate spending behind its franchises, as well as adequate strong innovation platforms.
She said the company’s gum business in China also has pleased Mondel?z.
“Stride continues to do well,” she said. “We continue to innovate behind that franchise in terms of the launch of bottles and Stride Layers, but we also just recently introduced Trident into the market, and it’s off to a very strong start. So we’re cautiously optimistic. We’re continuing to keep our eye very closely on the dynamic in the market, but I think we’ve got our hands firmly on the key levers that will help to fuel our business.”
For the six months ended June 30 net income was $730 million, or 45¢ cents per share, down 7% from $785 million, or 46¢ cents per share, in the same period a year ago. Revenues fell nearly 10% to $15.423 billion from $17.077 billion.