Mondelez International, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; the filing also reports fourth-quarter results. Mondelez sells snacks and related food products in more than 150 countries, with four reporting segments: Latin America, AMEA, Europe and North America.
Financial performance and position
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Net revenue | $26.581 billion | $25.868 billion | +2.8% |
| Operating income | $3.853 billion | $3.843 billion | +0.3% |
| Net earnings attributable to Mondelez | $3.555 billion | $3.929 billion | -9.5% |
| Diluted EPS | $2.47 | $2.69 | -8.2% |
| Adjusted EPS (non-GAAP) | $2.59 | $2.46 | +5.3% |
| Cash from operating activities | $3.964 billion | $3.965 billion | Essentially unchanged |
| Capital expenditures | $863 million | $925 million | -$62 million |
Gross profit was $10.446 billion, or approximately 39.3% of revenue. Operating margin declined to 14.5% from 14.9%; adjusted operating margin increased to 16.6% from 16.5%. Operating cash flow less capital expenditures was approximately $3.1 billion.
At year-end, cash and cash equivalents were $3.619 billion and total debt was approximately $20.0 billion, versus $18.4 billion a year earlier. The debt-to-capitalization ratio rose to 0.42 from 0.40. The company reported $6.0 billion of undrawn credit facilities and compliance with debt covenants. Current assets were $9.979 billion and current liabilities were $15.159 billion.
Material changes versus 2019
- Organic net revenue, a non-GAAP measure excluding acquisitions, divestitures and currency, increased 3.7% to $26.773 billion, with higher pricing and favorable volume/mix. Currency reduced reported revenue by $637 million.
- North America revenue rose 14.8%, reflecting in-home demand and acquisitions, including Give & Go. Latin America revenue fell 17.9%, largely from unfavorable currency and weaker volume/mix. Europe revenue increased 2.4%; AMEA declined 0.5%.
- Higher pricing and productivity supported adjusted operating income, but higher input costs offset much of the benefit. GAAP operating income was nearly flat.
- GAAP earnings included $989 million of gains on equity-method investment transactions. The 2020 effective tax rate was 36.2%, compared with 0.1% in 2019; the 2019 rate benefited from a $767 million net Swiss tax reform benefit. The 2020 rate was elevated in part by tax expense related to JDE Peet’s and KDP transactions.
- The company sold KDP shares, reducing its ownership to 8.4%, and sold part of its JDE Peet’s holding, retaining 22.9%. It acquired a majority interest in Give & Go for net cash consideration of $1.136 billion.
Outlook, risks and unusual items
- The filing provides no specific 2021 revenue or EPS guidance. Management expected 2021 capital expenditures of up to $1.0 billion and anticipated a higher, volatile aggregate commodity-cost environment.
- Management described strong 2020 demand for at-home snacks, particularly biscuits, but cautioned that elevated demand may not continue. Traditional trade in some emerging markets, travel retail, foodservice, and gum and candy remained exposed to pandemic-related weakness. Management reported no material consolidated supply-chain disruption in 2020, though temporary disruptions occurred in some emerging markets.
- COVID-19-related labor, logistics, safety and sanitation costs were higher, especially in the second quarter. Foreign currency translation also reduced reported results. The outlook remains sensitive to pandemic developments, consumer demand and mix, commodity costs, pricing, currency, and access to financing.
- The company recorded $144 million of intangible-asset impairment charges for eight brands. Nine brands, including those impaired, had aggregate book value of $753 million and fair value no more than 10% above book value. Goodwill was not impaired; further brand impairments remain possible.
- Other significant items included $185 million of debt-extinguishment losses, $48 million of JDE Peet’s transaction costs, and $360 million of Simplify to Grow restructuring and implementation costs. The restructuring program is expected to continue through 2022.
- Legal matters include a European Commission competition investigation and CFTC and related class-action proceedings concerning historical wheat trading. The company stated that it could not predict the outcomes; it also reported that the CFTC settlement agreement had been vacated and a new agreement in principle submitted for court approval.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. Give & Go was excluded from the internal-control assessment and audit scope, representing 0.4% of consolidated assets and 1% of revenue.
Key facts for investors to verify
- Whether organic growth and at-home demand persist as pandemic conditions and purchasing patterns change.
- How pricing, commodity inflation, productivity and currency movements affect margins and cash generation.
- Debt maturities and funding plans: the company expected approximately $1.8 billion of long-term debt maturities in 2021, including amounts repaid in January.
- Future brand impairment risk, particularly for the brands with limited fair-value headroom.
- Cash-tax implications of KDP and JDE Peet’s transactions, and developments in the disclosed legal and tax matters.
- Progress and remaining costs of Simplify to Grow, and the returns from Give & Go and other acquisitions.