Mondelēz International, Inc. — Q1 2022 Form 10-Q
Business context and period. Unaudited results for the three months ended March 31, 2022, compared with Q1 2021. Mondelēz makes and sells snacks and other food products across four regions: Latin America, AMEA, Europe and North America. Figures below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Key financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net revenue | $7,764 | $7,238 | +7.3% |
| Gross profit / margin | $2,983 / 38.4% | $2,966 / 41.0% | Margin down 2.6 percentage points |
| Operating income / margin | $1,094 / 14.1% | $1,283 / 17.7% | Income down 14.7% |
| Net earnings attributable to Mondelēz | $855 | $961 | Down 11.0% |
| Diluted EPS | $0.61 | $0.68 | Down 10.3% |
| Adjusted EPS (non-GAAP) | $0.84 | $0.79 | Up 6.3%; up 13.9% at constant currency |
| Cash from operations | $1,131 | $915 | Up $216 |
Organic net revenue, a non-GAAP measure, rose 8.6% to $7,857 million. Growth reflected higher pricing (+4.8 percentage points) and favorable volume/mix (+3.8 points), offset in reported revenue by unfavorable currency translation; acquisitions also affected reported results. Adjusted operating income increased 6.7% to $1,378 million, or 13.5% at constant currency.
Cash used in investing activities was $1,441 million, including $1,418 million net cash paid for Chipita; capital expenditures were $167 million. Cash used in financing activities was $1,280 million, including $751 million for share repurchases and $491 million of dividends paid. Cash and cash equivalents were $1,946 million at quarter-end, versus $3,546 million at December 31, 2021. The company reported $9 billion of unused credit facilities.
Total debt was $19.7 billion, versus $19.5 billion at year-end; debt-to-capitalization was 0.41. The company issued $2 billion of notes and redeemed or repaid debt during the quarter. It reported compliance with debt covenants. Current assets were $9,619 million and current liabilities $14,103 million; the filing does not provide a current ratio as a headline measure.
Material changes and unusual items
- Revenue increased across all regions. Latin America grew 23.5%, AMEA 7.0%, Europe 3.1% and North America 8.0%. Segment operating income fell in AMEA and Europe, while rising in Latin America and North America.
- Operating income included $143 million of direct Ukraine-war costs, a $78 million intangible-asset impairment, $32 million of acquisition integration and contingent-consideration costs, and $21 million of acquisition-related costs. The war-related charges included damaged Ukrainian facilities, inventory reserves/write-offs, increased receivable allowances and employee compensation.
- A $129 million loss on debt extinguishment and related expenses was recorded. Favorable prior-year derivative mark-to-market gains also made the year-over-year comparison less favorable.
- Chipita was acquired on January 3, 2022, for a total purchase price of approximately $1.9 billion, including assumed debt. It contributed $152 million of incremental revenue and $4 million of operating income in the quarter, per the acquisition note.
- On April 24, 2022, after quarter-end, the company agreed to acquire Grupo Bimbo’s Ricolino confectionery business for approximately $1.3 billion, subject to approvals and closing conditions; closing was expected in late Q3 or early Q4 2022.
Outlook, commentary and risks
- The filing does not provide a specific full-year revenue or EPS forecast. Management expected a higher aggregate cost environment and continued price volatility through the remainder of 2022; it expected 2022 capital expenditures of approximately $1.2 billion.
- Management cited continued inflation in raw materials, packaging, energy, transportation and labor, supply-chain disruption, currency volatility, and uncertainty around the pandemic and war in Ukraine. Pricing and productivity actions may not fully or promptly offset rising costs.
- Operations in Ukraine were closed after the invasion, and two manufacturing facilities were significantly damaged. The company continued to operate in Russia, while suspending new capital investment and advertising there; it continued to assess its ability to control operations in both countries and risks from sanctions and possible asset impairments.
- Türkiye was classified as highly inflationary for accounting purposes beginning April 1, 2022. Argentina was already accounted for as highly inflationary. UK advertising and promotion restrictions were expected to take effect in 2022–2023 and could affect results.
- Material uncertainties also include competition-law investigations in the EU, the CFTC and related wheat-market litigation, tax proceedings, and cybersecurity threats. Management said it could not predict the outcomes of certain legal matters; it believed their aggregate ultimate outcome would not materially harm the company, while noting an unfavorable outcome could have a material adverse impact.
- Management reported effective disclosure controls as of March 31, 2022, with no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether pricing can offset persistent input-cost inflation without weakening demand, product mix or margins.
- The duration and financial consequences of the Ukraine war, including facility restoration, Russia-related decisions, sanctions and potential further impairments.
- Chipita integration, realized growth and returns, and the funding and completion terms of the proposed Ricolino acquisition.
- Cash conversion and liquidity after acquisition spending, dividends and repurchases; also the company’s ongoing use of supplier financing, with $2.5 billion of participating-supplier payables outstanding at quarter-end.
- The assumptions behind adjusted, non-GAAP measures and the reported gap between adjusted and GAAP earnings, including the effect of excluded charges.
- Developments in the EU competition investigation, wheat-market litigation, highly inflationary accounting in Türkiye and Argentina, and UK marketing restrictions.