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Rating Action:

Moody's affirms Mondelez's Baa1 senior unsecured rating; outlook remains stable

29 Jan 2021

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 ratings in accordance with Moody's rating practices. For ratings 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 to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating 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 office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

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.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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