PITTSBURGH & CHICAGO–(BUSINESS WIRE)–The Kraft Heinz Company (Nasdaq: KHC) today reported financial results for the fourth quarter and full year 2023.
“I’m proud of the results we delivered in 2023 and the progress we’ve made as a Company throughout the year,” said Kraft Heinz CEO Carlos Abrams-Rivera. “We delivered net sales growth across each of our key pillars, Global Foodservice, Emerging Markets, and U.S. Retail GROW Platforms. We laid out action plans early in 2023 to drive market share and volume improvement – and they worked. We also executed well against our efficiency program, unlocking and powering it in large part with our tech-enabled Agile@Scale methodology. Thanks to these digital advancements and new ways of working, we were able to reinvest dollars across the business to drive future growth. We also strengthened our balance sheet, ending the year at our target Net Leverage of approximately 3.0x, while executing against our new share repurchase program and maintaining a competitive dividend.”
Abrams-Rivera continued, “In the fourth quarter, the industry faced headwinds that were driven by ongoing consumer pressure. Looking ahead, we expect some of these pressures to dissipate, particularly as the reduction in SNAP benefits is lapped.
“For 2024, we expect continued growth for Kraft Heinz. We’ll keep a strong focus on execution against our strategy, supported by investments we’re making in our brands and our people. We’re confident we have the right strategy in place to deliver profitable growth and create value for our stockholders.”
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Net Sales |
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In millions |
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Net Sales |
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Organic Net Sales(1) |
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December 30, |
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December 31, |
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% Chg vs |
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YoY Growth |
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Price |
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Volume/ |
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For the Three Months Ended |
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North America |
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$ |
5,167 |
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$ |
5,684 |
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(9.1)% |
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(3.0)% |
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2.5 pp |
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(5.5) pp |
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International |
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1,693 |
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1,697 |
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(0.2)% |
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7.1% |
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7.7 pp |
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(0.6) pp |
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Kraft Heinz |
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$ |
6,860 |
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$ |
7,381 |
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(7.1)% |
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(0.7)% |
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3.7 pp |
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(4.4) pp |
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For the Year Ended |
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North America |
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$ |
20,126 |
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$ |
20,340 |
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(1.0)% |
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1.0% |
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7.5 pp |
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(6.5) pp |
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International |
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6,514 |
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6,145 |
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6.0% |
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11.5% |
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13.6 pp |
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(2.1) pp |
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Kraft Heinz |
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$ |
26,640 |
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$ |
26,485 |
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0.6% |
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3.4% |
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8.9 pp |
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(5.5) pp |
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Net Income/(Loss) and Diluted EPS |
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In millions, except per share data |
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For the Three Months Ended |
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For the Year Ended |
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December 30, |
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December 31, |
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% Chg vs |
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December 30, |
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December 31, |
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% Chg vs |
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Gross profit |
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$ |
2,317 |
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$ |
2,364 |
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(2.0)% |
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$ |
8,926 |
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$ |
8,122 |
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9.9% |
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Operating income/(loss) |
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1,300 |
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1,226 |
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6.0% |
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4,572 |
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3,634 |
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25.8% |
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Net income/(loss) |
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757 |
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887 |
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(14.6)% |
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2,846 |
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2,368 |
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20.2% |
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Net income/(loss) attributable to common shareholders |
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757 |
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890 |
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(14.9)% |
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2,855 |
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2,363 |
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20.8% |
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Diluted EPS |
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$ |
0.61 |
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$ |
0.72 |
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(15.3)% |
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$ |
2.31 |
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$ |
1.91 |
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20.9% |
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Adjusted EPS(1) |
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0.78 |
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0.85 |
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(8.2)% |
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2.98 |
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2.78 |
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7.2% |
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Adjusted EBITDA(1) |
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$ |
1,650 |
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$ |
1,743 |
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(5.3)% |
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$ |
6,307 |
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$ |
6,003 |
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5.1% |
FY 2023 Financial Summary
- Net Sales increased 0.6 percent versus the year-ago period to $26.6 billion, including a negative 1.8 percentage point impact from a 53rd week in the prior year period, a negative 0.9 percentage point impact from foreign currency, and a negative 0.1 percentage point impact from divestitures. Organic Net Sales increased 3.4 percent versus the prior year period. Price increased 8.9 percentage points versus the prior year period, with increases in both reportable segments primarily driven by price increases to mitigate rising input costs. Volume/mix declined 5.5 percentage points versus the prior year period, with declines in both reportable segments, primarily driven by elasticity impacts from pricing actions and industry headwinds, particularly the reduction of Supplemental Nutrition Assistance Program (“SNAP”) benefits in the United States.
- Net income/(loss) increased 20.2 percent versus the year-ago period to $2.8 billion, driven by higher Adjusted EBITDA versus the prior year period, lower non-cash impairment losses in the current year period, an expense related to the securities class action lawsuit in the prior year period, and unrealized losses on commodity hedges in the prior year period. These factors more than offset higher tax expense and unfavorable changes in other expense/(income) driven by non-cash charges related to the $162 million settlement of one of our U.K. defined benefit pension plans in the current year period. Adjusted EBITDA increased 5.1 percent versus the year-ago period to $6.3 billion, primarily driven by higher pricing and efficiency gains. These factors more than offset higher commodity costs, higher supply chain costs (reflecting inflationary pressure in manufacturing, procurement, and logistics), unfavorable volume/mix, increased SG&A (including investments in marketing, technology, and research and development), a negative 2.1 percentage point impact from a 53rd week in the prior year period, and a negative 0.9 percentage point impact from foreign currency.
- Diluted EPS was $2.31, up 20.9 percent versus the prior year period, primarily driven by the net income/(loss) factors discussed above. Adjusted EPS was $2.98, up 7.2 percent versus the prior year period, primarily driven by higher results of ongoing operations and lower interest expense. These factors were partially offset by a 53rd week in the prior year period, unfavorable changes in other expense/(income), and higher taxes on adjusted earnings.
- Net cash provided by/(used for) operating activities was $4.0 billion, up 61.0 percent versus the year-ago period, primarily driven by lower cash outflows in the current year for inventories, primarily related to stock rebuilding in the prior year, lower cash outflows in the current year for tax payments driven by taxes paid in 2022 related to the sale of certain assets in our global cheese business and the licensing of certain trademarks, higher Adjusted EBITDA in the current period, and lower interest payments in the current period due to the reduction of long-term debt throughout 2022. These impacts were partially offset by cash payments associated with the settlement of the consolidated securities class action lawsuit. Year-to date Free Cash Flow(1) was $3.0 billion, up 90.7 percent versus the comparable prior year period due to the same drivers of net cash provided by/(used for) operating activities. This more than offset an increase of $97.0 million in capital expenditures in the current year.
- Capital Return: In fiscal year 2023, the Company paid $1,965 million in cash dividends and repurchased $455 million of common stock. On Nov. 27, 2023, the Company announced that the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $3.0 billion of the Company’s common stock through Dec. 26, 2026. Of the $455 million shares repurchased in 2023, $300 million were repurchased under the Company’s publicly announced share repurchase program and $155 million were purchased to offset the dilutive effect of equity-based compensation. As of Dec. 30, 2023, the Company had remaining authorization to repurchase $2.7 billion of common stock under the publicly announced share repurchase program.
Q4 2023 Financial Summary
- Net sales decreased 7.1 percent versus the year-ago period to $6.9 billion, including a negative 6.1 percentage point impact from a 53rd week in the prior year period, a negative 0.2 percentage point impact from foreign currency, and a negative 0.1 percentage point impact from divestitures and acquisitions. Organic Net Sales decreased 0.7 percent versus the prior year period. Price increased 3.7 percentage points versus the prior year period, with increases in both reportable segments primarily driven by list price increases taken to mitigate higher input costs. Volume/mix declined 4.4 percentage points versus the prior year period, with declines in both reportable segments that were primarily driven by elasticity impacts from pricing actions and industry headwinds, particularly the reduction of SNAP benefits in the United States.
- Net income/(loss) declined 14.6 percent versus the year-ago period to $757 million, primarily driven by non-cash charges related to the $162 million settlement of a U.K. defined benefit pension plan in the current year period, lower Adjusted EBITDA versus the prior year period, and unrealized losses on commodity hedges in the current year period. These factors were partially offset by an expense related to the securities class action lawsuit in the prior year period. Adjusted EBITDA decreased 5.3 percent versus the year-ago period to $1.7 billion, primarily driven by a negative 6.9 percentage point impact from a 53rd week in the prior year period, higher supply chain costs (reflecting inflationary pressure in manufacturing and procurement costs), investments in SG&A (including in marketing, research and development, and technology), unfavorable volume/mix, increased commodity costs, and a negative 0.3 percentage point impact from foreign currency. These factors were partially offset by higher pricing and efficiency gains.
- Diluted EPS was $0.61, down 15.3 percent versus the prior year period, driven by the net income/(loss) factors discussed above. Adjusted EPS(1) was $0.78, down 8.2 percent versus the prior year period, primarily driven by a 53rd week in the prior year and a higher effective tax rate in the current year. These factors were partially offset by results of ongoing operations and lower interest expense versus the prior year period.
Outlook
For fiscal year 2024, the Company expects:
- Organic Net Sales(2) growth of 0 to 2 percent versus the prior year. The Company expects a positive contribution from price throughout the year, with volumes inflecting positive in the second half of the year.
- Adjusted Operating Income(1)(2) growth of 2 to 4 percent versus the prior year. Adjusted Gross Profit Margin(1)(2) is expected to expand modestly, in the range of 25 to 75 basis points versus the prior year.
- Adjusted EPS(2) growth of 1 to 3 percent, or in the range of $3.01 to $3.07. The Company expects an effective tax rate on Adjusted EPS to be in the range of 20 to 22 percent. Additionally, the Company expects an unfavorable impact of approximately $45 million within interest and other expense/(income) versus the prior year. This is primarily driven by foreign currency headwinds and debt refinancing that will come at a higher rate. The outlook does not include the possibility of additional share buyback in 2024.
End Notes
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(1) |
Organic Net Sales, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Income, Adjusted EBITDA, Constant Currency Adjusted EBITDA, Adjusted EPS, Free Cash Flow and Net Leverage are non-GAAP financial measures. Please see discussion of non-GAAP financial measures and the reconciliations at the end of this press release for more information. | |
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(2) |
Guidance for Organic Net Sales, Adjusted Gross Profit Margin, Adjusted Operating Income, and Adjusted EPS is provided on a non-GAAP basis only because certain information necessary to calculate the most comparable GAAP measure is unavailable due to the uncertainty and inherent difficulty of predicting the occurrence and the future financial statement impact of such items impacting comparability, including, but not limited to, the impact of currency, acquisitions and divestitures, divestiture-related license income, restructuring activities, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, certain non-ordinary course legal and regulatory matters, equity award compensation expense, nonmonetary currency devaluation, and debt prepayment and extinguishment (benefit)/costs, among other items. Therefore, as a result of the uncertainty and variability of the nature and amount of future adjustments, which could be significant, the Company is unable to provide a reconciliation of these measures without unreasonable effort. |
Earnings Discussion and Webcast Information
A pre-recorded management discussion of The Kraft Heinz Company’s fourth quarter and full year 2023 earnings is available at ir.kraftheinzcompany.com. The Company will host a live question and answer session beginning today at 9:00 a.m. Eastern Standard Time. A webcast of the session will be accessible at ir.kraftheinzcompany.com.
ABOUT THE KRAFT HEINZ COMPANY
We are driving transformation at The Kraft Heinz Company (Nasdaq: KHC), inspired by our Purpose, Let’s Make Life Delicious. Consumers are at the center of everything we do. With 2023 net sales of approximately $27 billion, we are committed to growing our iconic and emerging food and beverage brands on a global scale. We leverage our scale and agility to unleash the full power of Kraft Heinz across a portfolio of six consumer-driven product platforms. As global citizens, we’re dedicated to making a sustainable, ethical impact while helping feed the world in healthy, responsible ways. Learn more about our journey by visiting www.kraftheinzcompany.com or following us on LinkedIn.
