Mondelez International Inc.

MondelēzInternational Inc., previously Kraft Foods Inc., is manufacturingcompany in North America. The company portfolio includes nine brandswhich includes Oreo, LU biscuits, Nabisco, chocolates (Milka, CadburyDairy Milk and Cadbury), Trident gum, Tang powdered beverage andJacobs coffee. The company’s main objective is to create deliciousbeverage and food products for its consumers in the whole world. Thecompany in the leading international producer of candy, biscuits andpowdered beverages, and hold the second position in production ofcoffee and gum.

Theglobal net revenues in Mondelēz is $35.0 billion. The nine portfoliohave annual revenues of $1 billion each while the 52 brands ofrefreshments and snack food generates over 100 billion annually. Following the spin-off that saw the company changing its name fromKraft Food to Mondelēz International Inc., the company startedtrading on NASDAQ Global Select Market using the symbol MDLZ. Thecompany remains incorporated within the Virginia Commonwealth and aproud member of Dow Jones Sustainability Index and Standard andPoor’s 500.

KeyFinancial Statements

IncomeStatement

Mondelēz International Inc., Consolidated Income Statement

USD $ in millions

12 months ended

Dec 31, 2014

Dec 31, 2013

Dec 31, 2012

Dec 31, 2011

Net revenues

34,244

35,299

35,015

54,365

Cost of sales

-21,647

-22,189

-21,939

-35,350

Gross profit

12,597

13,110

13,076

19,015

Selling, general and administrative expenses

-8,457

-8,679

-9,176

-12,140

Asset impairment and exit costs

-692

-273

-153

7

Gains (losses) on acquisition and divestitures, net

30

107

Amortization of intangibles

-206

-217

-217

-225

Operating income

3,242

3,971

3,637

6,657

Interest expense, debt

-778

-1,017

-1,177

-1,645

Loss on debt extinguishment and related expenses

-495

-612

Unrealized gain on planned coffee business transactions currency hedge

628

Benefit from indemnification resolution

49

Spin-Off-related financing fees

-609

Acquisition-related financing fees

Other income (expense), net

-43

1

-77

-240

Interest and other expense, net

-688

-1,579

-1,863

-1,885

Earnings from continuing operations before income taxes

2,554

2,392

1,774

4,772

Provision for income taxes

-353

-60

-207

-1,225

Earnings from continuing operations

2,201

2,332

1,567

3,547

Earnings from discontinued operations, net of income taxes

1,603

1,488

Net earnings

2,201

3,935

3,055

3,547

Noncontrolling interest

-17

-20

-27

-20

Net earnings attributable to Mondelēz International

2,184

3,915

3,028

3,527

Source: Mondelēz International Inc., Annual Reports

CashFlow

Annual Income Statement (values in 000`s) Get Quarterly Data

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Period Ending:

12/31/2014

12/31/2013

12/31/2012

12/31/2011

Net Income

$2,184,000

$3,915,000

$3,067,000

$3,554,000

Cash Flows-Operating Activities

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&nbsp

&nbsp

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Depreciation

$1,059,000

$1,077,000

$1,345,000

$1,485,000

Net Income Adjustments

($124,000)

$335,000

$594,000

($88,000)

Changes in Operating Activities

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&nbsp

&nbsp

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Accounts Receivable

$184,000

$492,000

($599,000)

($115,000)

Changes in Inventories

($188,000)

($116,000)

($129,000)

($556,000)

Other Operating Activities

($86,000)

($42,000)

$217,000

($374,000)

Liabilities

$516,000

$729,000

($599,000)

$594,000

Net Cash Flow-Operating

$3,562,000

$6,410,000

$3,923,000

$4,520,000

Cash Flows-Investing Activities

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&nbsp

&nbsp

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Capital Expenditures

($1,642,000)

($1,622,000)

($1,610,000)

($1,771,000)

Investments

$0

$0

$0

$0

Other Investing Activities

$0

$139,000

($77,000)

$43,000

Net Cash Flows-Investing

($1,642,000)

($1,483,000)

($1,687,000)

($1,728,000)

Cash Flows-Financing Activities

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&nbsp

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Sale and Purchase of Stock

($1,700,000)

($2,900,000)

$0

$0

Net Borrowings

($218,000)

($2,976,000)

$2,373,000

($1,643,000)

Other Financing Activities

$194,000

$132,000

($111,000)

$511,000

Net Cash Flows-Financing

($2,688,000)

($6,687,000)

$204,000

($3,175,000)

Effect of Exchange Rate

($223,000)

($93,000)

$61,000

($124,000)

Net Cash Flow

($991,000)

($1,853,000)

$2,501,000

($507,000)

&nbspBalanceSheet

Values in Million US Dollars

ASSETS

2014

2013

2012

2011

Cash and cash equivalents

1,631

2,622

4,475

1,974

Receivables (net of allowances)

3,802

4,463

6,129

6,361

Inventories, net

3,480

3,743

3,741

5,706

Deferred income taxes

480

517

542

912

Other current assets

1,408

889

735

1,249

Total current assets

11,750

13,174

15,622

16,202

Property, plant and equipment, net

9,827

10,247

10,010

13,813

Goodwill

23,389

25,597

25,801

37,297

Intangible assets, net

20,335

21,994

22,552

25,186

Prepaid pension assets

53

54

18

31

Other assets

1,461

1,449

1,475

1,308

TOTAL ASSETS

66,815

72,515

75,478

93,837

LIABILITIES

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&nbsp

Short-term borrowings

1,305

1,594

274

182

Current portion of long-term debt

1,530

1,003

3,577

3,654

Accounts payable

5,299

5,345

4,642

5,525

Accrued marketing

2,047

2,318

2,484

2,863

Accrued employment costs

946

1,043

1,038

1,365

Other current liabilities

2,880

3,051

2,858

4,856

Total current liabilities

14,007

14,354

14,873

18,445

Long-term debt

13,865

14,482

15,574

23,095

Deferred income taxes

5,512

6,282

6,302

6,738

Accrued pension costs

2,912

1,962

2,885

3,597

Accrued postretirement health care costs

526

412

451

3,238

Other liabilities

2,140

2,491

3,038

3,396

TOTAL LIABILITIES

38,962

39,983

43,123

58,509

Commitments and Contingencies (Note 12)

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EQUITY

&nbsp

&nbsp

Common Stock, no par value

Additional paid-in capital

31,651

31,396

31,548

31,318

Retained earnings

14,529

13,419

10,457

18,012

Accumulated other comprehensive losses

(7,318

(2,889

(2,633

(6,637

Treasury stock, at cost

(11,112

(9,553

(7,157

(7,476

Total Mondelēz International Shareholders’ Equity

27,750

32,373

32,215

35,217

Non-controlling interest

103

159

140

111

TOTAL EQUITY

27,853

32,532

32,355

35,328

TOTAL LIABILITIES AND EQUITY

66,815

72,515

75,478

93,837

From the figure, it can beobserved that total assets, total liabilities, total shareholders’equity and total liabilities and equity have been decreasing from2011 through to 2014.

Accordingto the reports, Mondelez is prone to the fluctuations in currencyexchange rates. This could be a major factor for the trends observedin the figure above. For instance, by December 2014, the company hadsold the products to over 165 countries with major operations in 80countries. This implies that a considerable portion of the businessis prone to the fluctuations in currency exchange rates. Thefinancial results and ratios are prone to movements within thecurrency exchange rates since the large portion of the assets,expenses, revenue and liabilities require translation into US dollarsto enhance reporting as well as meet the dollar-denominated dividendsand indebtedness. Furthermore, the movement in the currency exchangerates have high likelihood of affecting transaction costs since theproduct ingredients are sourced from various countries.

Thisimplies the need to mitigate the exposure to fluctuations in exchangerates, particularly on the cross-currency transactions. Themanagement should be aware that changes in exchange rates forcurrency used to translate the results into US dollars can adverselyand materially affect the financial conditions and operations inMondelez.

Costof Goods Sold

Thefigures below illustrate the changes in net revenue and net incomefrom 2011 to 2014.

The net revenue in MondelezInternational Inc.`s deteriorated from 54,365 million US$ in 2011 to35,015 US$ in 2012, and from 35,229 Million US$ in 2013 to 34,244Million US$ in 2014, equivalent to 3%% decrease.

Trendsin Net Income

The net income in MondelezInternational Inc`s deteriorated from 3.554 million US$ in 2011 to3.067 US$ in 2012, and from 3.917 Million US$ in 2013 to 2.184MillionUS$ in 2014, equivalent to 44.2% decrease.

These changes observed from thefigures of net revenues and net income are as a result of increase inthe cost of the goods sold. Also, the other contributing factors havebeen increase in general, administrative and selling expenses, aswell as the interest paid. When compared to the non-manufacturingsector, the values can vary due to low overhead costs innon-manufacturers due to little inventory and relatively low numberof employees. Therefore, the income statements generated bynon-manufacturers will focus on income gotten and expensesencountered by the business. Unlike Mondelez, the non-manufacturerswill tend to ignore the common expenses. On the other hand,manufacturing companies, such as Mondelez, will experience highrevenue levels, as it can be seen from the figures above. This isbecause products produced are sold to retailers, consumers and toother manufacturers, meaning the customer portfolio is veryextensive.

However, due to changes ineconomic conditions, the raw materials, labor requirement andmanufacturing equipment required increase the expenses required togenerate the revenue, hence relatively low profits compared to theincome. Therefore, income statements for Mondelez will be more robustthan for non-manufacturers due to the wider range of expenses thatare encountered. For instance, Mondelez manufactures and source theproducts globally. The distribution chain comprises of network ofsuppliers that support the ability to deliver consistently.

Ratios

Liquidity Ratios

2014

2013

2012

2011

Current Ratio

84%

92%

105%

88%

Quick Ratio

39%

49%

71%

45%

Cash Ratio

12%

18%

30%

11%

Profitability Ratios

Gross Profit Margin

37%

37%

37%

35%

Operating Profit Margin

9%

11%

10%

12%

Net Profit Margin

6%

11%

9%

6%

Return on Equity (ROE)

8%

12%

9%

10%

Return on Assets(ROA)

3%

5%

4%

4%

Efficiency Ratios

Inventory turnover

622%

593%

586%

620%

Receivables turnover

901%

791%

571%

855%

Payables turnover

409%

415%

473%

640%

Solvency

Equity to Asset

42%

45%

43%

38%

Debt to Equity

60%

53%

60%

76%

CurrentRatio

Currentratio is the ration of current assets to current liabilities. Currentratio assists in evaluating the current assets of a company againstits current liabilities. The current ratio for Mondelez from 2011 to2014 are 88%, 105%, 92% and 84% respectively. A higher ratio is morepreferred as it shows that the company’s assets are higher than theliabilities and as such, it can easily pay for its short-term debts.

QuickRatio

Quickratio is the ration of the sum of cash and equivalents, short-terminvestments and accounts receivable to the current liabilities. Thequick ration for Mondelez International from 2011 to 2014 is as shownbelow.

2014

2013

2012

2011

39%

49%

71%

45%

It can be observed that quickratio decline from 2011 to 2012 by 26% and from 2013 to 2014 by 10%. A higher ratio is more preferred as it reflects the increase in thecompany’s returns companies to liabilities.

CashRatio

Thiscompares the cash equivalents to the liabilities. This can beconsidered as the most conservative ration of liquidity. Mondelez hadthe following cash ratios.

2014

2013

2012

2011

12%

18%

30%

11%

The cash ration increased from2011 to 2012 by 19%, and decreased by 6% from 2013 to 2014.

From the liquidity ratioanalysis, a higher liquidity ratio is normally more preferred as itdepicts that the company can easily meet the short term debtobligations. However, the management in Mondelez need to put somecontrol measures to avoid the high fluctuations in liquidity ratios.For instance, in 2014, the company experienced drastic decreases inliquidity ratios. This meant that the capacity to cover the shortterm debts decreased significantly.

Profitability Ratios

Profitability Ratios

2014

2013

2012

2011

Gross Profit Margin

37%

37%

37%

35%

Operating Profit Margin

9%

11%

10%

12%

Net Profit Margin

6%

11%

9%

6%

Return on Equity (ROE)

8%

12%

9%

10%

Return on Assets(ROA)

3%

5%

4%

4%

Profitability ratios arecritical in measuring the performance of a company. This reflects theability of a company in making profits. The major profitabilityratios evaluated for Mondelez are Gross Profit Margin (GPM),Operating Margin (OM), Net Profit Margin, Return on Assets (ROA) andReturn on Equity (ROE). GPM is amount of each dollar sales kept by acompany in terms of gross profits. A higher ratio is a reflection ofthe company charging premium prices for the goods and service. It canbe seen from the calculations that the GPM in Mondelez increased from2011 to 2012 and stagnated thereafter up to 2014. The operatingmargins reflects the profits or losses made by a company compared tothe total sales. A higher value is more preferred.

From 2011 to 2014, Mondelez hasnot experienced drastic changes in OM meaning that it is doing well.The Net Margin reflects the amount of revenue in a company for allexpenses or income to the total sales. The ROA measures ability ofcompany in converting the assets, and is expressed as the ratio ofthe sum of net income and after tax interest expense to average totalassets. A higher value shows that the company can easily attainprofitability from its assets. The ROE measures the return oninvestment by the shareholders. A higher ROE is better as it reflectsthat a company obtains higher returns from the shareholders equity.

Some of the areas that arechanging and which should be considered to achieve higher profits andensure that the company remains objective is the commodity prices andchanges in the input prices. For instance, the Mondelez purchasessoybeans, vegetable oils, corn products, coffee, cocoa, wheat, dairyproducts, nuts and sweeteners in large quantities. Also, prices forthe raw materials, energy and other prices may tend to fluctuatebased on different political and environmental factors that areunpredictable. Other changes that are critical include changes inregulations and laws that can easily affect the costs. The activitiesin Mondelez are highly regulated globally and depend mostly on thegovernment oversight of their country of operation. Therefore,compliance with revised laws and regulations can adversely affect thefinancial condition, product sales and operational results. Also, thecompany need to address issues with global workforce and risks ofconsolidation consumers and value proposition to enhance theircompetitive advantage. In this case, the prices should be regulatedto ensure that the company remains profitable across the globe. Theprice control translates directly to controlled sales, the revenueand income. This will consequently influence the profitability,liquidity, efficiency and solvency ratios.

The company adjusts the productprices based on demand, changes in product input costs andcompetitive environment. The net growth in revenue and profitabilityis normally affected as the prices are adjusted in order to addressthe changing conditions. For instance, in 2014, the prices wereincreased in response to the increase in currency and commodity costsamongst other market factors. Mondelez has also, in 2015, continuedto change the product prices due to high aggregate commodity costs.The adjustment of prices is based on the changes in marketconditions. The competition in prices and delayed price increases bythe competitors or consumers also adversely affects the net revenuesand market share in the company.

These issues need to be addressedto discontinue the low margins and customer-specific product lines.The low-margin licensed products should be discontinued and the SKUsportfolios should be continued.

References

Cengiz, H. (2014). Effects Of International Financial Reporting Standards Application On Financial Ratios In Turkey. International Journal 10(21) .

http://www.mondelezinternational.com/investors/investing-in-us/annual-reports

Kimmel, P. (2011). Accounting: Tools for Business Decision Making. Hoboken, NJ: Wiley.