In October 2012, Kraft Foods split itself into two separate publicly traded companies: Mondelez International (NASDAQ:MDLZ) and Kraft Foods Group, which is now part of Kraft Heinz. Kraft Foods retained numerous, classic grocery brands, including Oscar Mayer and Velveeta, but Mondelez International kept the good stuff — Cadbury and Milka chocolate, Nabisco and Oreo cookies, and Trident gum, among several others.
Since it began trading as a stand-alone company on Oct. 2, 2012, Mondelez stock is up more than 50%, as the snack food giant has been able to improve margins in the face of slow growth. Let’s review the company’s performance, as well as the opportunities and challenges Mondelez faces going forward.
Management focused on margin improvement
In recent years, Mondelez has been undergoing a massive overhaul of its supply chain to improve its margins and at the same time remain positioned for long-term growth. Along the way, management has been very active with several transactions, shedding underperforming plants and nonessential businesses, which appear designed to narrow the scope of the company’s focus around its most recognized brands.
The shedding of non-essential assets, coupled with currency headwinds, has caused Mondelez’s annual revenue to fall to $25.9 billion in 2016 compared to $35 billion in 2012, but at the same time, the company has become more profitable. From 2012 through 2016, adjusted operating margin improved from 12.2% to 15.3%. This helped Mondelez grow adjusted earnings per share 39.5%, despite slow organic revenue growth over the same period.
Mondelez’s stock price history
The expectation of continued margin improvement and bottom line growth as a result of the company’s restructuring program has evidently kept investors happy over the last five years, given the stock’s fairly steady ascent.