MONDELEZ INTERNATIONAL INC. $31 (Nasdaq symbol MDLZ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.8 billion; Market cap: $55.8 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.mondelezinternational.com) makes cookies and biscuits (Oreo, Chips Ahoy, Ritz), chocolate bars (Cadbury, Toblerone) and gum and candy (Trident, Chiclets, Halls cough drops). It also makes beverages, including coffee (Tassimo) and powdered fruit drinks (Tang), as well as grocery and cheese products for overseas markets. Mondelez gets 46% of its sales from developing countries, 35% from Europe and 19% from North America.
Mondelez aims to improve its efficiency by shutting less profitable plants and offices. Severance and other costs will total $925 million. The company didn’t say how much it expects the restructuring will save it after it is completed in 2014. However, Mondelez will probably use these savings to cut its long-term debt of $15.6 billion, which is equal to 28% of its market cap.
If you assume the October 2012 breakup of the old Kraft Foods Inc. into Mondelez and Kraft Foods Group (see right) occurred at the start of 2011, Mondelez would have earned $1.6 billion, or $0.86 a share, in 2012. That’s down 9.8% from $1.7 billion, or $0.97 a share, in 2011. If you exclude restructuring costs and other unusual items, per-share earnings would have risen by 0.7%, to $1.39 from $1.38,
Sales fell 2.0%, to $34.8 billion from $35.5 billion. Without the negative impact of currency exchange rates, sales would have risen 4.4%.
The company is facing strong competition from rival food makers, particularly in Brazil and Russia, on products like gum, chocolate and coffee. In response, it has cut its prices and spent more on advertising. Even so, its overall sales should rise 5% in 2013.
The stock has gained 24% since the start of 2013. It trades at 19.9 times the $1.56 a share that Mondelez will probably earn this year. That’s a high p/e ratio for a company that is in the middle of a major restructuring. The $0.52 dividend yields 1.7%.
Mondelez is a hold.
