The FINANCIAL -- Mondelēz International, Inc. on February 7 reported its fourth quarter and full-year 2016 results.
"We continue to make solid progress toward our near-term margin targets, while investing for long-term growth," said Irene Rosenfeld, Chairman and CEO. "Despite significant economic disruptions, political uncertainties and slower global category growth, we remain confident in and committed to our balanced strategy for both top- and bottom-line growth. Throughout the year, we continued to sharpen the focus of our portfolio, increase Power Brand investments and modernize our supply chain. These actions, together with our excellent cost discipline, position us well to deliver strong operating leverage that will drive sustainable value creation for our shareholders."
Net revenues decreased 12.5 percent, driven by the coffee business transactions, deconsolidation of the company's Venezuelan operations and currency headwinds. Organic Net Revenue increased 1.3 percent, which includes a negative impact of approximately 110 basis points from revenue management activities and India demonetization.
Gross profit margin was 39.1 percent, an increase of 30 basis points, driven primarily by Adjusted Gross Profit1 margin expansion and the impact from the prior year's Venezuela deconsolidation, partially offset by the net negative change in mark-to-market impacts from commodity and currency derivative contracts. Adjusted Gross Profit margin was 39.8 percent, an increase of 70 basis points. Strong net productivity and improved mix were mostly offset by higher trade investments in a few key markets.
Operating income margin was 9.9 percent, down 20.1 percentage points, driven by the prior-year gain on the coffee business transactions, partially offset by the prior year loss on the Venezuela deconsolidation. Adjusted Operating Income margin expanded 230 basis points to 15.3 percent. These results reflect continued reductions in overhead costs and supply chain productivity savings, according to Mondelēz International.
Diluted EPS was $1.05, down 76 percent, driven by last year's $7 billion gain from the coffee business transactions.
Adjusted EPS was $1.94 and grew 24 percent on a constant-currency basis, driven primarily by operating gains.
Free Cash Flow1 was $1.6 billion driven by strong working capital management.
Capital Return: The company returned $3.7 billion of capital to shareholders through share repurchases and dividends.
Fourth Quarter Commentary
Net revenues decreased 8.1 percent, driven by the Venezuela deconsolidation and currency headwinds. Organic Net Revenue increased 0.6 percent, tempered by a negative impact of 60 basis points from India demonetization.
Gross profit margin was 38.2 percent, a decrease of 30 basis points, driven primarily by the net negative change in mark-to-market impacts from commodity and currency derivative contracts, partially offset by the impact from the prior year's Venezuela deconsolidation. Adjusted Gross Profit margin was 39.0 percent, a decrease of 30 basis points, driven by pricing investments and unfavorable mix impacts, partially offset by strong net productivity.
Operating income margin was 7.5 percent, up 15.1 percentage points, reflecting the prior year Venezuela deconsolidation loss. Adjusted Operating Income margin expanded 110 basis points to 14.4 percent. These results reflect continued reductions in overhead costs and supply chain productivity savings.
Diluted EPS was $0.06, up 113 percent, driven by the impact from the prior year loss on the Venezuela deconsolidation.
Adjusted EPS was $0.47 and grew 12 percent on a constant-currency basis, driven primarily by operating gains.
Capital Return: The company repurchased more than $800 million of its common stock and paid approximately $300 million in cash dividends.
Mondelēz International provides guidance on a non-GAAP basis, as the company cannot predict some elements that are included in reported GAAP results, including the impact of foreign exchange. Refer to the Outlook section in the discussion of non-GAAP financial measures below for more details.
The company expects Organic Net Revenue to increase at least 1 percent in 2017 and Adjusted Operating Income margin in the mid-16 percent range. The company also expects double-digit Adjusted EPS growth on a constant-currency basis. The company estimates currency translation would reduce net revenue growth by approximately 1 percent3 and Adjusted EPS by approximately $0.033.
The company remains committed to its 2018 Adjusted Operating Income margin target of 17 to 18 percent.