What Fueled Mondelez’s Margin Expansion in Fiscal 2Q16?

Operating profit margin increase

For 2Q16, Mondelez’s (MDLZ) delivered another strong quarter of margin expansion. The adjusted operating profit margin expanded 210 basis points to 15.2%. Ongoing gains from ZBB (zero-based budgeting) resulted in a reduction in overhead costs. Ultimately, this benefited the operating margin.

What Fueled Mondelez’s Margin Expansion in Fiscal 2Q16?

Margin expansion was also led by one-time favorable impacts from asset sales in North America. The adjusted gross profit margin was in line with the same quarter last year. Currency-driven inflation reduced the net productivity for the quarter. However, the company is confident about its efforts to reinvent its supply chain to drive margin benefits. It has already helped net productivity results of 3.5% in 1H16.

What Fueled Mondelez’s Margin Expansion in Fiscal 2Q16?

Segment’s operating margin

North America had a strong margin. Its adjusted operating profit margin expanded by 470 basis points. The asset sale benefit, strong productivity, and overhead cost reductions helped the margin growth. Europe also had a 350 basis point expansion in the operating margin aided by lower overheads and higher productivity. Weaker demand impacted the margins in the Europe, Middle East and Africa segment. It was flat for the quarter. In Asia-Pacific, the margins were up 190 basis points due to lower overheads, strong productivity, and pricing. In Latin America, the operating margins declined 210 basis points due to a challenging economic environment.

Mondelez’s peers in the industry like Pinnacle Foods (PF) and Flowers Foods (FLO) reported operating margins of 10.6% and 6.0% for their last quarter.

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