Mondelez International Inc. 4Q Beats Earnings Estimates, Whiffs On Revenue

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The famed candy and snack company, Mondelez  reported fourth quarter earnings this morning told investors that profits dove 72% during the fourth quarter, thanks to currency risk across all regions that it conducts business.  Being that Mondelez relies on 80% of its revenue from international regions, the weakness of those perspective international currencies against the US Dollar ate into the company’s bottom line.  Mondelez reported earnings per share of $.29 on revenue of $8.83 billion.  Adjusted earnings per share came in at $.47, when excluding stock option compensation, other one time costs.  Analysts were looking for earnings per share of $.43 on revenue of $9.08 billion.  Full year earnings per share came in at $1.28 on revenue of $34.24 billion.  Currently, as of this writing, shares of Mondelez are rallying nearly 3% in early market trading to $36.85.

US Dollar strength continues to hurt international sales

The US Dollar has staged a serious rally over the past several months, since mid-August 2014.  Since then the US Dollar has strengthened from around $82 to its current $95, when looking at the Dollar futures.  The strength has come as speculation that the US Federal Reserve will soon be raising interest rates and the prospect that the US is indeed getting stronger, economically.  Additionally, with the general easing stance that we have seen other big central banks, this has only aided the Dollar’s strength further.  Evidence of further easing by central banks can be seen by the Royal Bank of Australia’s interest rate cut to historical lows, the European Central Bank’s implementation of QE, and further speculation of a New Zealand rate cut.  Ultimately, this phenomena, coined “currency wars” is extremely bad for corporate profits from international regions.  Companies like Mondelez may have had a good number of units sold of its products, but it is the exchange rates that kill the underlying profit.


Mondelez forward guidance and future plans

Management said that it expects further pain from currency conversion rates in 2015, and announced it would be cutting its earnings per share guidance by $.30 and revenue by 11% for the year.  Essentially, this is a pretty bearish reduction in guidance, as the company really does not see any relief in sight for other major currencies picking up against the US Dollar.

Aside from the bearish outlook for 2015, the company is still ramping up its image and foothold around the world.  For one thing, Mondelez appears to be going after Nestle’s coffee foothold in Europe by signing a deal with D.E. Master Blenders of Europe.  As described in the deal, Mondelez will give D.E. Master Blenders of Europe their coffee brands such as Gevalia and Jacobs, in order to create a new company called Jacobs Douwe Egberts.  Mondelez will receive $5 billion cash and a 49% ownership in the new company.

In other news, Mondelez appears to be strengthening its Vietnam presence with the proposed plan to buy a controlling stake in Kinh Do Corp, a Vietnamese snacks company. The plan would have Mondelez pay up $370 million for an 80% stake in the company.

Overall, Mondelez appears to be hurting greatly by currency exchange rates and falling demand in the US.  The company must continue to find ways to minimize risk and get back to earnings growth.

Disclosure: None

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