Mondelez: Company Raises Guidance After Strong Q2, Plots Clif Bar Expansion

Global food conglomerate Mondelez International beat analyst expectations and raised its growth outlook for the year in its Q2 earnings report this week, announcing net revenue growth of 9.5%.

“Our second quarter and first half results were marked by strong top and bottom-line performance across all regions and categories, supporting the raising of our full-year revenue growth outlook,” said chairman and CEO Dirk Van de Put, in a statement. “Our chocolate and biscuit businesses continue to demonstrate strong volume growth and pricing resilience across both developed and emerging markets. These results combined with ongoing cost discipline, simplification and revenue growth management are delivering robust profit dollar growth and strong cash flow, enabling us to increase our dividend by 10 percent.”

The company announced organic net revenue growth of 13.1% with a volume/mix of 5.1% in the quarter. Diluted EPS was $0.54, down 28.9%, while adjusted EPS was up 9.1% to $0.67 on a constant-currency basis. Year-to-date cash provided by operating activities was $2 billion, up by about $200 million from the prior year. Free cash flow was $1.6 billion, up around $200 million.

Organic net revenue growth outlook for the full year was increased to 8%.

The results outperformed analyst expectations, with investment bank Morgan Stanley noting the updated guidance was conservative as the Q2 topline growth results “puts it on track to overdeliver” for 2022.

“[Mondelez’s] organic sales growth underscores its strong category and market share momentum, supported by the positive strategic changes the company has made over the last several years,” the report stated. “In addition, [Mondelez] is benefiting from strong consumer confidence in emerging markets and limited demand elasticity in developed markets (to date).”

During the call Van de Put detailed Mondelez’s plans to drive growth for Clif Bar, which the company agreed to acquire last month in a $2.9 billion deal. According to Van de Put, Clif reported around $800 million in annual sales last year and the acquisition is primed to take Mondelez from “a small bar business” to a more than $1 billion global snack bar player, buoyed by the acquisition of Perfect Snacks in 2019 and Grenade in 2021.

“The Clif Bar acquisition offers an opportunity for us to do business to our marketing expertise, operational excellence and financial discipline to create significant value,” he said during the call. “There are clear and substantial cost synergies, which include leveraging our experience with logistics and warehousing, reducing waste in existing and ties in marketing and advertising to optimize [advertising and consumer spend. In terms of growth, we see substantial opportunities to increase household penetration and distribution in alternative and e-commerce as well as existing outlets. “

Van de Put also emphasized a strong opportunity for international growth for the Clif business in the $16 billion global bar category. During the call’s Q&A portion, he noted that the Clif brand has sold well among all age demographics and Mondelez will aim to decrease input costs on the brand while improving distribution within existing channels. As well, he noted that the brand is still rebounding from a dip in sales during the pandemic but growth is now returning to pre-pandemic levels.

“We’re already seeing in the first two quarters of this year a much improved profitability for the [Clif] business,” he said. “So we feel that the business is completely coming back to normal, and then we can add on the many synergies that we see from our side. So the earn-out is another factor, probably, that’s important. We did see the possibility to add a significant earnout if we would go with a substantial top line acceleration and margin expansion. So we believe that as we would enter into that acceleration, our returns would even go up.”

Beyond Clif, Mondelez has continued to invest in strategic M&A, including its acquisitions of croissant and baked goods brand Chipita and Mexican brand Ricolino. Van de Put said that since 2018 the company has “completed or announced” nine acquisitions that have added more than $2.8 billion in annual revenue to the company.