Mondelez (MDLZ) to Invest $24M to Expand Plant in Turkey - Analyst Blog

Mondelez International, Inc. (MDLZ) recently announced its plans to invest $24 million to expand a confectionery manufacturing plant in Turkey which will lead to a 20% increase in its production capacity.

The investment, part of Mondelez's ongoing supply-chain reinvention plan, will be used to add a new line to the Gebze, Turkey plant which currently produces local brands like Fal??m, S??psevdi as well as global brands like Halls and Trident. The new line is expected to be operational by 2015-end.

Under the supply-chain reinvention plan, Mondelez is building an integrated supply chain organization, restructuring the supply chain network and driving productivity improvement through Lean Six Sigma, procurement transformation and simplification. It is also taking steps to manufacture more of its high-margin power brands and streamline the production base to improve margins. These efforts are expected to deliver $3 billion in gross productivity savings, $1.5 billion in net productivity and $1 billion in incremental cash by 2016.

With the 2012 restructuring program set to expire in 2014, the company announced a new $3.5 billion restructuring plan (2014–2018 Restructuring Program) in March to accelerate supply chain cost savings and reduce overhead costs. The program aims to lower operating costs by accelerating supply chain cost reductions, layoffs, asset disposals and implementation of a zero-based budgeting system.

The program is expected to generate annualized savings of at least $1.5 billion by 2018 and annual net productivity improvement of 3% of the cost of goods sold which can be reinvested in margin expansion. Mondelez, thus, expects to use the costs savings to grow its operating margins to 15–16% by 2016.

Mondelez, which carries a Zacks Rank #3 (Hold), was previously known as Kraft Foods, Inc. It changed the name following the spin-off of its North American grocery business into a separate independent company, Kraft Foods Group, Inc. (KRFT), in Oct 2012.

Other Stocks to Consider

Some better-ranked food companies are ConAgra Foods, Inc. (CAG) and McCormick & Company, Incorporated (MKC). Both the stocks have a Zacks Rank #2 (Buy).

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