PITTSBURGH & CHICAGO–(BUSINESS WIRE)–The Kraft Heinz Company (Nasdaq: KHC) today reported financial results for the first quarter of 2024.
“I’m pleased that our strategic focus on unlocking end-to-end efficiencies and reinvesting in the business to drive sales growth continues to pay off,” said Kraft Heinz CEO Carlos Abrams-Rivera. “Our first quarter results were in line with our expectations, with growth across each of our three strategic pillars – Global Away From Home, Emerging Markets, and North America Retail ACCELERATE Platforms – and continued sequential volume recovery. At the same time, we increased year-over-year operating income in the quarter.”
“Our Agile@Scale methodology continues to fuel reinvestment in the business, helping to deliver against our gross efficiency target. These reinvestments are powering innovation, brand superiority, disruptive marketing, sales excellence, and further productivity to drive growth.”
Abrams-Rivera continued, “As a result, we are reiterating our outlook for 2024 and remain confident in our ability to drive profitable growth.”
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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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March 30, |
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April 1, 2023 |
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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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$ |
4,828 |
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$ |
4,885 |
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(1.2)% |
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(1.2)% |
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2.5 pp |
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(3.7) pp |
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International Developed Markets |
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855 |
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860 |
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(0.6)% |
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(1.3)% |
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2.5 pp |
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(3.8) pp |
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Emerging Markets(a) |
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728 |
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744 |
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(2.1)% |
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5.5% |
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4.1 pp |
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1.4 pp |
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Kraft Heinz |
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$ |
6,411 |
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$ |
6,489 |
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(1.2)% |
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(0.5)% |
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2.7 pp |
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(3.2) pp |
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(a) |
Emerging Markets represents the aggregation of our West and East Emerging Markets (“WEEM”) and Asia Emerging Markets (“AEM”) operating segments. |
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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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March 30, |
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April 1, 2023 |
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% Chg vs |
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Gross profit |
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$ |
2,243 |
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$ |
2,113 |
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6.2% |
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Operating income/(loss) |
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1,302 |
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1,243 |
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4.7% |
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Net income/(loss) |
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804 |
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837 |
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(3.9)% |
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Net income/(loss) attributable to common shareholders |
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801 |
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836 |
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(4.2)% |
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Diluted EPS |
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$ |
0.66 |
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$ |
0.68 |
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(2.9)% |
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Adjusted EPS(1) |
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0.69 |
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0.68 |
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1.5% |
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Adjusted Operating Income(1) |
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$ |
1,265 |
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$ |
1,245 |
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1.7% |
Q1 2024 Financial Summary
- Net sales decreased 1.2 percent versus the year-ago period to $6.4 billion, including a negative 0.6 percentage point impact from foreign currency and a negative 0.1 percentage point impact from divestitures. Organic Net Sales(1) decreased 0.5 percent versus the prior year period. Price increased 2.7 percentage points versus the prior year period, with increases in each segment that were primarily driven by list price increases taken to mitigate higher input costs. Volume/mix declined 3.2 percentage points versus the prior year period, with declines in the North America and International Developed Markets segments that were primarily driven by elasticity impacts from pricing actions and the reduction of Supplemental Nutrition Assistance Program (“SNAP”) benefits in the United States, partially offset by volume/mix growth in the Emerging Markets segment.
- Operating Income increased 4.7 percent versus the year-ago period to $1.3 billion, primarily driven by unrealized gains on commodity hedges in the current year compared to unrealized losses on commodity hedges in the prior year and higher Adjusted Operating Income. Adjusted Operating Income(1) increased 1.7 percent versus the year-ago period to $1.3 billion, primarily driven by higher pricing. This more than offset unfavorable volume/mix, investments in marketing, technology, and research and development, and an unfavorable impact from foreign currency (0.5 pp).
- Diluted EPS was $0.66, down 2.9 percent versus the prior year period, primarily driven by a net loss on the sale of businesses in the first quarter of 2024 and higher tax expense. This was partially offset by higher operating income and fewer shares outstanding. Adjusted EPS(1) was $0.69, up 1.5 percent versus the prior year period, primarily driven by higher Adjusted Operating Income and fewer shares outstanding. These factors more than offset higher taxes on adjusted earnings.
- Net cash provided by/(used for) operating activities was $771 million, up 58.6 percent versus the year-ago period. This increase was driven by lower cash outflows in the current year period for inventories, primarily related to stock rebuilding in the prior year, partially offset by higher cash outflows for variable compensation in the current year period compared to the prior year period. Free Cash Flow(1) was $477 million, up 116.8 percent versus the prior year period, driven by the same net cash provided by/(used for) operating activities discussed above. These factors more than offset an increase of $28 million in capital expenditures in the current year.
- Capital Return: The Company paid $486 million in cash dividends and repurchased $329 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 $329 million shares repurchased in 2024, $150 million were repurchased under the Company’s publicly announced share repurchase program and $179 million were purchased to offset the dilutive effect of equity-based compensation. As of March 30, 2024, the Company had remaining authorization to repurchase $2.6 billion of common stock under the publicly announced share repurchase program.
Outlook
For fiscal year 2024, the Company is reaffirming its outlook for Organic Net Sales(2), Adjusted Operating Income(2), and Adjusted EPS(2). The Company continues to expect:
- Organic Net Sales 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 growth of 2 to 4 percent versus the prior year. This is in part driven by expected Adjusted Gross Profit Margin(1)(2) expansion in the range of 50 to 100 basis points versus the prior year, compared to the previous expectation of 25 to 75 basis points versus the prior year.
- Adjusted EPS 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 expense and other expense/(income) versus the prior year. This is primarily driven by foreign currency headwinds and debt refinancing at a higher rate. The outlook does not contemplate any potential additional share repurchases in 2024.
End Notes
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(1) |
Organic Net Sales, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Income, Adjusted EPS, and Free Cash Flow 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 first quarter 2024 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 Daylight 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 eight 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.
