Mondelez International Drives Margin Expansion Through Supply Chain Redesign
- Supply chain initiatives to deliver $3 billion in gross productivity savings
and $1 billion in incremental cash over the next three years
- Supply chain productivity will drive significant margin expansion
BOSTON, Sept. 3, 2013
BOSTON, Sept. 3, 2013 /PRNewswire/ --At the Barclays Capital Back to School
Consumer Conference today, executives of Mondelez International (NASDAQ: MDLZ)
highlighted initiatives to redesign the company's supply chain that are
expected to deliver over the next three years $3 billion in gross productivity
savings, $1.5 billion in net productivity and $1 billion in incremental cash.
These savings will be the primary driver of an approximately 60-to-90
basis-point annual improvement in base operating income margin.
As previously announced, Mondelez International is stepping up investments in
emerging markets to deliver profitable growth over the long-term. The company
plans to pay for these investments primarily by expanding margins in North
America and Europe to levels at or above the average of peer companies.
"In North America, we're targeting a 500-basis-point improvement in operating
income margin, and we now expect to reach that target by 2016, a year earlier
than originally anticipated," said Chairman and CEO Irene Rosenfeld. "In
Europe, we're targeting an improvement of 250 basis points in OI margin, which
we also expect to reach by 2016."
Driving Supply Chain Productivity Savings to Reinvest in Growth
"We're building an integrated supply chain organization that's laser-focused
on delivering a demonstrable competitive advantage and generating savings we
can reinvest in our growth," said Daniel Myers, Executive Vice President,
Integrated Supply Chain.
Myers detailed the company's journey to reinvent its complex supply chain,
starting with upgrading leadership talent and capabilities. Leveraging
experience from more than a dozen leading CPG companies, the team is
transforming manufacturing processes and partnering with suppliers to develop
more efficient, modular designs for global product platforms.
Based on these new designs, the company is installing Oreo manufacturing lines
that require 30 percent less capital and reduce operating costs by $10 million
per line. These "lines of the future" can be installed in one-third the time
and provide double the capacity in half the space as older designs. The
company is now implementing similar transformations for other biscuits Power
Brands and the chocolate and gum categories.
At the same time, Mondelez International is restructuring its supply chain
network. To support expected demand, the company will invest in 14 greenfield
plants by 2020, to be built on advantaged platforms in locations with
optimized logistics. By 2020, the volume produced on advantaged assets will
rise from 15 percent today to about 80 percent. Similarly, revenue per plant
is expected to more than double by the end of the decade.
The company is also driving major productivity improvements through Lean Six
Sigma, procurement transformation and simplification programs. Myers
underscored several examples, including: $400 million of conversion
productivity savings over the past two years, largely from Lean Six Sigma
work; a 20 percent reduction in procurement costs by partnering with strategic
suppliers; and simplification of the European biscuit portfolio that is
expected to reduce complexity by 60 percent and save $100 million in costs.
Finally, Myers highlighted the focus on improving cash management by
addressing all the levers of the cash conversion cycle, including Days Sales
Outstanding, inventory levels and suppliers' payment terms. In doing so, the
company delivered a $400 million step-up in cash flow last year and expects to
deliver incremental cash of $1 billion over the next three years.
"We're well-positioned for success," said Dave Brearton, Executive Vice
President and CFO, who concluded the presentation by explaining how the supply
chain initiatives underpinned the company's margin and EPS targets. "We're
bullish on the future and in our ability to deliver top-tier financial results
and superior shareholder returns." The company's 2013 outlook calls for
Organic Net Revenue^1 growth at the low-end of its long term target range of 5
to 7 percent and Adjusted EPS^1 of $1.55 to $1.60.^2
A live audio webcast of the presentation, including slides, is available on
the company's web site at www.mondelezinternational.com/investor.
About Mondelez International
Mondelez International, Inc. (NASDAQ: MDLZ) is a global snacking powerhouse,
with 2012 revenue of $35 billion. Creating delicious moments of joy in 165
countries, Mondelez International is a world leader in chocolate, biscuits,
gum, candy, coffee and powdered beverages, with billion-dollar brands such as
Cadbury, Cadbury Dairy Milk and Milka chocolate, Jacobs coffee, LU, Nabisco
and Oreo biscuits, Tang powdered beverages and Trident gum. Mondelez
International is a proud member of the Standard and Poor's 500, NASDAQ 100 and
Dow Jones Sustainability Index. Visit www.mondelezinternational.com and
1.Please see discussion of Non-GAAP Financial Measures at the end of this
2.Adjusted EPS guidance of $1.55-$1.60 is based on 2012 average currency
rates and includes the estimated impact of the write-down of the net
monetary assets and the translation of operating income for the company's
Venezuelan business stemming from that government's decision to devalue
its currency to a fixed rate of 6.30/$US on Feb.8, 2013.
This press release contains a number of forward-looking statements. The words
"will," "expect," "plan," "drive," "improve," "deliver," "growth,"
"reaffirm," "outlook," "guidance" and similar expressions are intended to
identify our forward-looking statements. Examples of forward-looking
statements include, but are not limited to, statements we make about our
future performance, including future revenue growth, earnings per share and
margins; the drivers of our future performance, including production,
productivity and cash management improvements; our investments in emerging
markets; and confidence in our future. These forward-looking statements
involve risks and uncertainties, many of which are beyond our control, and
important factors that could cause actual results to differ materially from
those in our forward-looking statements include, but are not limited to,
continued global economic weakness, increased competition, continued
volatility of commodity and other input costs, business disruptions, pricing
actions, risks from operating globally and tax law changes. For additional
information on these and other factors that could affect our forward-looking
statements, see our risk factors, as they may be amended from time to time,
set forth in our filings with the SEC, including our most recently filed
Annual Report on Form 10-K. We disclaim and do not undertake any obligation to
update or revise any forward-looking statement in this press release, except
as required by applicable law or regulation.
Non-GAAP Financial Measures
The company reports its financial results in accordance with accounting
principles generally accepted in the United States ("GAAP"). We use certain
non-GAAP financial measures to budget, make operating and strategic decisions
and evaluate our performance. We disclose non-GAAP financial measures so that
you have the same financial data that we use to assist you in making
comparisons to our historical operating results and analyzing our underlying
Our non-GAAP financial measures and corresponding metrics reflect how we
evaluate our operating results currently and provide improved comparability of
operating results. As new events or circumstances arise, these definitions
could change over time:
o"Organic Net Revenues" is defined as net revenues excluding the impacts of
acquisitions, divestitures (including businesses under a sales agreement),
Integration Program costs, accounting calendar changes and foreign
currency rate fluctuations.
o"Adjusted EPS" (previously referred to as "Operating EPS") is defined as
diluted EPS attributable to Mondelez International from continuing
operations excluding the impact of Spin-Off Costs, pension costs related
to the obligations transferred in the Spin-Off, the 2012-2014
Restructuring Program, the Integration Program and other acquisition
integration costs, gains / losses from divestitures or acquisitions,
acquisition-related costs and net earnings from divestitures (including
businesses under sales agreements), and including an interest expense
adjustment related to the Spin-Off transaction. We also evaluate growth in
our Adjusted EPS on a constant currency basis.
We believe that the presentation of these non-GAAP financial measures, when
considered together with our U.S. GAAP financial measures and the
reconciliations to the corresponding U.S. GAAP financial measures, provides
you with a more complete understanding of the factors and trends affecting our
business than could be obtained absent these disclosures. In addition, the
non-GAAP measures the company is using may differ from non-GAAP measures used
by other companies. Because GAAP financial measures on a forward-looking basis
are neither accessible nor deemed to be significantly different from the
non-GAAP financial measures, and reconciling information is not available
without unreasonable effort, the company has not provided that information
with regard to the non-GAAP financial measures in the company's Outlook.
SOURCE Mondelez International
Contact: Michael Mitchell (Media), +1-847-943-5678, email@example.com, or Dexter
Congbalay (Investors), +1-847-943-5454, firstname.lastname@example.org
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