Выбор редакции

Mondelez's (MDLZ) Margins Improve while Sales Remain Weak - Analyst Blog

We issued an updated research report on Mondelez International, Inc. MDLZ on Apr 10, 2015.

Mondelez’s top line was weak in 2014 hurt by volume losses due to significant pricing actions to counter the increase in commodity cost as well as competitive pressures.

Input costs rose sharply in 2014, especially dairy, coffee and cocoa, leading management to take significant pricing action, mainly chocolate. However, its competitors were slow in increasing prices which led to market share loss and pricing-related retailer customer disputes in many markets, especially France.

In fact, Mondelez has witnessed sluggish sales results ever since it split from Kraft Foods Group, Inc. KRFT in 2012 due to global snacking category slowdown.

Mondelez’s global categories (biscuits, chocolate, gum, candy, coffee, powdered beverages and cream cheese) slowed down to 3.8% in 2013 and about 3.5% in 2014 from 6% in 2012. In fact, the company trailed category growth in 2014, recording organic growth of just 2.4%, much less than the overall category growth of 3.5%. The category growth is not expected to improve in 2015, while the retail and consumer environment remains challenging.

Mondelez’s key category — snacks — has slowed down due to soft global retail and consumer demand. Mondelez, like many other U.S. food producers including Kraft and General Mills, Inc. GIS, has struggled due to shifting consumer’s preference toward natural and organic ingredients over packaged and processed food.

Nevertheless, Mondelez is focusing on expanding margins through cost savings and productivity improvement, though sales have been slower. The company is taking some major steps to improve margins, cash flow and return on invested capital. Its new $3.5 billion restructuring plan is expected to generate annualized savings of at least $1.5 billion by 2018 which can be reinvested in margin expansion.

The proposed spin-off of its coffee business will also allow Mondelez to further cut back on its supply chain and overhead costs. Mondelez’s coffee business will be merged with the Netherlands-based coffee company, D.E Master Blenders 1753, to form a new Dutch coffee company called Jacobs Douwe Egberts. Mondelez will enjoy a 49% stake in the combined company.

The company is also working to drive advertising cost efficiencies by consolidating media providers, reducing non-working media costs and shifting spending to lower-cost, digital media outlets.

Its strong portfolio of iconic brands, presence in impulsive categories and commanding presence in the fast growing emerging markets also keeps our faith in the stock.

Stocks to Consider

Mondelez carries a Zacks Rank #3 (Hold). A better-ranked food stock is Flowers Foods, Inc. FLO with a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
GENL MILLS (GIS): Free Stock Analysis Report
MONDELEZ INTL (MDLZ): Free Stock Analysis Report
FLOWERS FOODS (FLO): Free Stock Analysis Report
KRAFT FOODS GRP (KRFT): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research