In October 2012 Kraft Foods Inc. broke up into two separate companies, Kraft Foods Group (Nasdaq symbol KRFT) and Mondelez. Recently, we looked at Kraft (view the daily post here), whose operations are now focused on North America. Today we look at its spinoff, Mondelez, which gets most of its sales from overseas markets.
MONDELEZ INTERNATIONAL INC. (Nasdaq symbol MDLZ; 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.
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Stock market investments: Food makers in big markets like Brazil and Russia offer stiff competition
If you assume the October 2012 breakup of the old Kraft Foods Inc. into Mondelez and Kraft Foods Group 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.
The stock has gained 24% since the start of the year. The $0.52 dividend yields 1.6%.
In the latest edition of Wall Street Stock Forecaster, we look whether the measures Mondelez is taking to compete with rival food makers can increase its sales. We also look at the company’s earnings outlook and whether the shares can keep on rising. We conclude with our clear buy-hold-sell advice on the stock.
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When this spinoff occurred, Kraft Foods turned its focus almost entirely to North America while Mondelez gets 80% of its sales overseas. In general, which kind of stock would you prefer: one that depends on the North American market, or one that is primarily engaged in trying to win market share in overseas markets? Let us know what you think.
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