PITTSBURGH & CHICAGO–(BUSINESS WIRE)–The Kraft Heinz Company (Nasdaq: KHC) today reported financial results for the third quarter of 2024.
“In the third quarter, our top-line performance across two of our strategic pillars, Global Away From Home and Emerging Markets, grew in line with our expectations,” said Kraft Heinz CEO Carlos Abrams-Rivera. “As we look forward, we are expecting continued momentum in these two pillars. When we look at our U.S. Retail business, we are expecting more of an elongated recovery, driven by specific categories that continue to experience pressure.”
“We continue to make investments in marketing, research and development, and technology as we look to bring solutions to the table that both create value for our consumers and support future top-line growth. We are supporting these investments by our proven ability to sustainably unlock efficiencies and generate strong cash flow.”
Abrams-Rivera continued, “While a recovery is taking longer than originally anticipated, we are not losing sight of our long-term strategy. We remain confident in our ability to drive profitable growth, generate strong cash flow, and return capital to 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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September 28, |
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September 30, |
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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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$ |
4,826 |
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$ |
4,995 |
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(3.4)% |
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(3.2)% |
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1.2 pp |
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(4.4) pp |
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International Developed Markets |
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882 |
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883 |
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(0.2)% |
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(1.8)% |
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(1.0) pp |
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(0.8) pp |
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Emerging Markets(a) |
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675 |
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692 |
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(2.4)% |
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4.9% |
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3.8 pp |
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1.1 pp |
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Kraft Heinz |
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$ |
6,383 |
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$ |
6,570 |
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(2.8)% |
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(2.2)% |
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1.2 pp |
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(3.4) pp |
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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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September 28, |
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September 30, |
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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 Nine Months Ended |
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North America |
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$ |
14,575 |
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$ |
14,959 |
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(2.6)% |
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(2.5)% |
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1.6 pp |
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(4.1) pp |
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International Developed Markets |
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2,622 |
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2,675 |
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(2.0)% |
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(2.4)% |
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(0.1) pp |
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(2.3) pp |
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Emerging Markets(a) |
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2,073 |
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2,146 |
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(3.4)% |
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4.6% |
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3.3 pp |
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1.3 pp |
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Kraft Heinz |
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$ |
19,270 |
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$ |
19,780 |
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(2.6)% |
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(1.7)% |
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1.6 pp |
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(3.3) 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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For the Nine Months Ended |
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September 28, |
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September 30, |
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% Chg vs |
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September 28, |
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September 30, |
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% Chg vs |
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Gross profit |
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$ |
2,186 |
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$ |
2,235 |
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(2.2)% |
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$ |
6,723 |
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$ |
6,609 |
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1.7% |
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Operating income/(loss) |
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(101) |
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653 |
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(115.5)% |
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1,723 |
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3,272 |
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(47.3)% |
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Net income/(loss) |
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(290) |
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254 |
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(214.2)% |
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|
614 |
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2,089 |
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(70.6)% |
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Net income/(loss) attributable to common shareholders |
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(290) |
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262 |
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(210.7)% |
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613 |
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2,098 |
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(70.8)% |
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Diluted EPS |
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$ |
(0.24) |
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$ |
0.21 |
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(214.3)% |
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$ |
0.50 |
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$ |
1.70 |
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(70.6)% |
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Adjusted EPS(1) |
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0.75 |
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0.72 |
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4.2% |
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2.22 |
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2.20 |
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0.9% |
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Adjusted Operating Income(1) |
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$ |
1,330 |
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$ |
1,312 |
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1.4% |
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$ |
3,975 |
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$ |
3,908 |
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1.7% |
Q3 2024 Financial Summary
- Net sales decreased 2.8 percent versus the year-ago period to $6.4 billion, including a negative 0.4 percentage point impact from foreign currency and a negative 0.2 percentage point impact from divestitures. Organic Net Sales(1) decreased 2.2 percent versus the prior year period. Price increased 1.2 percentage points versus the prior year period, with increases in the North America and Emerging Markets segments partially offset by lower price in International Developed Markets. Favorable price was primarily due to pricing taken in certain categories to mitigate higher input costs. Volume/mix declined 3.4 percentage points versus the prior year period, with declines in the North America and International Developed Markets segments partially offset by volume/mix growth in Emerging Markets. Unfavorable volume/mix was primarily driven by continued shifts in consumer behavior due to economic uncertainty and a decline in Lunchables.
- Operating Income decreased 115.5 percent versus the year-ago period to $(0.1) billion, as a result of non-cash impairment losses of $1.4 billion in the current year period. This impairment charge was due to an intangible asset impairment largely on the Lunchables brand and a goodwill impairment related to the Continental Europe reporting unit. Excluding the impact of these non-cash impairment losses, operating income increased $12 million due to factors noted in Adjusted Operating Income. Adjusted Operating Income(1) increased 1.4 percent versus the year-ago period to $1.3 billion, primarily driven by higher pricing, the beneficial impact from our efficiency initiatives mostly in procurement, and lower variable compensation expense. These factors more than offset unfavorable volume/mix, increased manufacturing expenses due in part to increased labor costs, and an unfavorable impact from foreign currency (0.2 pp).
- Diluted EPS decreased 214.3 percent versus the prior year period to $(0.24), driven by non-cash impairment losses in the current year period. Adjusted EPS(1) was $0.75, up 4.2 percent versus the prior year period, primarily driven by higher Adjusted Operating Income, fewer shares outstanding, and lower taxes on adjusted earnings.
- Year-to-date net cash provided by/(used for) operating activities was $2.8 billion, up 6.7 percent versus the year-ago period. This increase was primarily due to favorable changes in working capital driven by accounts payable and the lapping of prior year cash payments associated with the settlement of the consolidated securities class action lawsuit, which were partially offset by higher cash outflows from inventory and variable compensation in the 2024 period compared to the 2023 period. Further, net cash by operating activities was favorably impacted by increased Adjusted Operating Income. Free Cash Flow(1) was $2.0 billion, up 9.7 percent versus the prior year period, driven by the same net cash provided by/(used for) operating activities discussed above.
- Capital Return: Year to date, the Company paid $1.5 billion in cash dividends and repurchased $538 million of common stock. Of the $538 million in share repurchases in 2024, $350 million were repurchased under the Company’s publicly announced share repurchase program and $188 million were purchased to offset the dilutive effect of equity-based compensation. As of Sept. 28, 2024, the Company had remaining authorization to repurchase approximately $2.4 billion of common stock under the publicly announced share repurchase program.
Outlook
For fiscal year 2024, the Company now expects:
- Organic Net Sales(2) to be at the low end of the previous guidance range of down 2 percent to flat versus the prior year.
- Adjusted Operating Income(2) growth to be at the low end of the previous guidance range of 1 to 3 percent versus the prior year. This also contemplates expected Adjusted Gross Profit Margin(1)(2) expansion at the lower end of the previous range of 75 to 125 basis points versus the prior year.
- Adjusted EPS(2) growth to be at the low end of the previous guidance range 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 approximately 21 percent. Additionally, the Company expects interest expense and other expense/(income) to be relatively flat versus the prior year. This guidance does not reflect any impact from future potential share repurchases.
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. |
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.
