Even the snack food industry isn't immune to tough economic times. When your wallet is feeling a bit thinner than usual, it makes that package of Oreos or that box of Wheat Thins all the less tempting. However, snack and beverage company Mondelez International (NASDAQ:MDLZ) -- which owns those two brands and many more -- is chugging along strongly. Let's look at some of what Mondelez management had to say during its most recent conference call with analysts.
Back on Aug. 6, Mondelez reported a second-quarter organic net revenue increase of 1.2% and adjusted earnings per share of $0.40, up 19.4% on a constant currency basis. It was far from terrible, but the company reduced its outlook for full-year organic net revenue growth from 3% to between 2% and 2.5%. CEO Irene Rosenfeld explained in the conference call:
Our second quarter reflected the continued challenges of a difficult macro environment that again tempered category and revenue growth. In fact the operating environment worsened in the quarter in a number of markets especially in Europe. But we continue to expand operating income margins and again delivered strong, high quality EPS growth in the face of these challenges.
Prices went up
Rosenfeld also said input costs experienced "significant inflation," especially in cocoa and dairy. Mondelez has had a strategy in place to pass on increased input costs to its customers through higher prices. Problem solved and even higher sales, right? Normally, yes, but competitors didn't get that memo at the same time, and it left the company's hands tied. Rosenfeld said:
In a number of key countries and categories our competitors have been slow to implement price increases. As a result we’re seeing some negative effects on consumer takeaway as well as on our share performance.
It's all temporary
Most importantly, Mondelez acknowledged the above problems but conveyed that they should be temporary. As such, the company is not slowing down with any of its plans. Rosenfeld reassured investors by saying, "So to be clear, we're not reducing support of our brands or innovation platforms. We're maintaining our share of voice at least at historical levels especially in the face of our significant pricing."
Snacking on the competitors' market share
Mondelez wants you to know that despite the challenges which it sees as temporary, it continues to take market share from competitors. Rosenfeld said:
Actually our snacking business has performed quite well ... We have been outperforming the categories for quite some time and I think it's for couple of reasons. I think we have had a very strong marketing and innovation pipeline in North America. I think or DSD [direct store deliver] network is operating extremely effectively. And so we believe that we can continue to drive our growth at or above category rates ... So I think there is some slowdown in some of the categories but we have been able to capture a more than our fair share and that's been driving our overall revenue performance.
Showing you the money
Mondelez also talked about the money it is returning to shareholders. Said CFO David Brearton:
In the first half we returned $1.4 billion to our shareholders, $900 million of which was through share repurchases. For the full year we still expect to return $2 billion to $3 billion to our shareholders including $1 billion to $2 billion in share buybacks. Finally we have paid almost $500 million in dividends year-to-date and today announced a 7% increase in our quarterly dividend to $0.15 per common share.
Mondelez is experiencing some temporary problems beyond its control that should correct in the quarters ahead. Meanwhile, it is making the business more solid through market share gains while returning increasing amounts of value to shareholders in the form of earnings, dividends, and stock buybacks.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.