Mondelēz International reported its third quarter 2020 results.” Our third quarter performance was strong across all key metrics, with broad-based revenue growth as demand remained elevated in Developed Markets and sequentially improved in Emerging Markets. Our teams are executing well and we continue to deliver share gains by meeting the needs of customers and consumers, despite the uncertainties caused by COVID-19. Our strategy remains unchanged and we are accelerating certain initiatives and increasing the investment behind our brands to further support long-term sustainable growth,” said Dirk Van de Put, Chairman and Chief Executive Officer.
Third Quarter Commentary
– Net revenues increased 4.9 percent driven by Organic Net Revenue growth of 4.4 percent. Volume and pricing drove growth, partially offset by unfavourable mix. Organic Net Revenue grew in all four regions.
– Gross profit increased $276 million and margin increased 230 basis points to 41.9 percent due to higher mark-to-market gains from currency and commodity derivatives and higher Adjusted Gross Profit1. Adjusted Gross Profit increased $152 million at constant currency while Adjusted Gross Profit margin increased 20 basis points to 39.9 percent due to volume leverage, pricing and productivity, partially offset by higher raw material costs and incremental COVID-19 related costs.
– Operating income increased $259 million and margin was 17.0 percent, up 320 basis points primarily due to favourable year-over-year mark-to-market gains from currency and commodity derivatives, higher Adjusted Operating Income1, and lower restructuring expenses. Adjusted Operating Income increased $112 million at constant currency, and margin increased 70 basis points to 17.5 percent driven by SG&A leverage and Adjusted Gross Profit margin expansion.
– Diluted EPS was $0.78, down 20.4 percent, lapping a prior-year benefit from Swiss tax reform.
– Adjusted EPS was $0.63, flat on a constant-currency basis, primarily driven by operating gains offset by unfavourable taxes.
– Capital Return: The company returned $0.4 billion to shareholders in cash dividends. The company suspended its share repurchase program in March, providing flexibility while managing the COVID-19 situation and response.
Mondelēz International provides guidance on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results, including the impact of foreign exchange. Refer to the Outlook section in the discussion of non-GAAP financial measures below for more details.
For 2020, the company expects Organic Net Revenue growth of 3.5+ percent. The company expects Adjusted EPS growth of 5+ percent on a constant-currency basis. The company estimates currency translation would decrease 2020 net revenue growth by approximately 3 percent3 with a negative $0.04 impact to Adjusted EPS3. The company expects Free Cash Flow of approximately $3 billion. Guidance is provided in the context of greater than usual volatility as a result of COVID-19. The company strategy and long-term algorithm remain unchanged.