New York, January 29, 2021 -- Moody's Investors Service, ("Moody's") today
affirmed Mondelez International, Inc.'s ("Mondelez")
domestic and foreign ratings, including the company's Baa1 senior
unsecured rating and Prime-2 commercial paper program rating.
The outlook remains stable.
Moody's also has elected to assign a stable outlook to the company's
Netherlands-based subsidiary issuer, Mondelez International
Holdings Netherlands BV (MIHN).
RATINGS RATIONALE
The affirmation of Mondelez's Baa1 rating is supported by its large scale
and leading global market position in the attractive global snacks category,
which will continue to grow faster than the broader global packaged food
sector. The company's portfolio of leading global and regional
brands generates strong earnings and free cash flow through a range of
economic cycles. This allows for continued reinvestment in product
development, efficiency initiatives and further expansion opportunities
in developing markets that creates attractive earnings growth potential.
These credit positives are balanced against corporate governance risks
related to aggressive financial policy, including a sizable and
growing dividend and history of using free cash flow in its entirety to
repurchase shares. Mondelez's higher leverage than comparably
rated peers is supported by its strong business profile and the incremental
value and liquidity flexibility provided by its meaningful equity positions
in JDE Peet's and Keurig Dr Pepper with a combined market value
of roughly $8.2 billion.
MIHN's A3 senior unsecured rating is additionally supported by the
structurally senior claim on approximately 75% of the company's
revenue and assets relative to the debt at Mondelez. MIHN's
term loans and notes represent roughly 25% of consolidated total
debt and are guaranteed by Mondelez International, Inc.,
but there is no upstream guarantee of Mondelez's debt from MIHN.
The following ratings/assessments are affected by today's action:
Affirmations:
..Issuer: Mondelez International Hldgs Netherlands
BV
....Senior Unsecured Notes, Affirmed
A3
..Issuer: Mondelez International, Inc.
.... Issuer Rating, Affirmed Baa1
....Senior Unsecured Commercial Paper,
Affirmed P-2
....Senior Unsecured Notes, Affirmed
Baa1
Outlook Actions:
..Issuer: Mondelez International, Inc.
....Outlook, Remains Stable
.Issuer: Mondelez International Hldgs Netherlands BV
Assigned Stable Outlook
The packaged food sector is moderately exposed to social risks related
to responsible production, health and safety standards and evolving
consumer lifestyle changes. The sector is also moderately exposed
to environmental risks such as soil/water and land use, and energy
& emissions impacts, among others. These factors will
continue to play an important role in evaluating the overall creditworthiness
of food processors, like Mondelez, particularly as the industry
continues to evolve globally.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Although
an economic recovery is underway, it is tenuous, and its continuation
will be closely tied to containment of the virus. As a result,
the degree of uncertainty around our forecasts is unusually high.
Moody's regards the coronavirus outbreak as a social risk under our ESG
framework, given the substantial implications for public health
and safety.
That said, Mondelez's business is likely to be more resilient than
most because of its focus on packaged foods, which remains essential
in most markets. Shelf stable packaged food companies, including
Mondelez, are currently experiencing higher than normal retail sales
volume, especially in developed markets, because of consumer
behavioral shifts related to the coronavirus epidemic. Higher earnings
variation can be expected in calendar year 2021 because of uncertain demand
characteristics, higher production costs, channel shifting,
and the potential for supply chain disruptions.
Acquisitions will continue to play an important role in the company's
growth strategy, but based on Mondelez's large scale, Moody's
does not believe that any likely acquisitions would be transformational.
Rather, Moody's expects that the company will pursue bolt-on
(<$2 billion), branded snacks acquisitions globally,
mostly in emerging markets.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Mondelez's strong business profile,
Moody's projection that Mondelez will continue to generate free
cash flow exceeding $1.6 billion over the next 12 months,
and Moody's expectation that financial leverage will moderate gradually
through earnings growth. This assumes that the operating environment
improves gradually as ongoing coronavirus disruptions abate.
A rating downgrade is possible if the company expands its portfolio into
less attractive categories, adopts a more aggressive financial policy,
sustains debt/EBITDA above 4.0x, or sustains retained cash
flow/net debt below 14%. A weakening of Mondelez's
market position or monetization of the minority investments without a
reduction in leverage could also lead to a downgrade.
Mondelez's ratings could be upgraded if the company improves operating
performance such that debt/EBITDA is sustained below 3.5x and retained
cash flow / net debt is sustained above 18%.
The principal methodology used in these ratings was Consumer Packaged
Goods Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1202237.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Headquartered in Chicago, Illinois, Mondelez is the fifth-largest
global food company in the world (behind Nestlé, PepsiCo,
Mars and Danone). With approximately $27 billion in annual
sales, Mondelez remains the world's largest player in global snacks,
a $100 billion in retail sales category that is growing faster
than the broader global packaged food sector. Snack categories
(biscuits, chocolate, gum and candy) represent approximately
88% of the company's total net sales. Within snacks,
the company owns five global brands that generate over $1 billion
in sales each: Oreo, Nabisco, Cadbury, Milka and
Trident. Mondelez is publicly traded on the NASDAQ under the ticker
"MDLZ".
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
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issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
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and whose ratings may change as a result of this credit rating action,
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if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
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review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
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The Global Scale Credit Rating on this Credit Rating Announcement was
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Brian Weddington, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 1 212 553 0376
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