Lowers Full Year Outlook for Organic Net
Sales(1)(2) and Adjusted Operating Income(1)(2)
Reaffirms Full Year Outlook for Adjusted
EPS(1)(2)
Second Quarter
Highlights
- Net sales decreased 3.6%; Organic Net Sales(1) decreased
2.4%
- Gross profit margin increased 180 basis points to 35.4%;
Adjusted Gross Profit Margin(1) increased 210 basis points to
35.5%
- Operating income decreased 62.1%; Adjusted Operating Income(1)
increased 2.0%
- Diluted EPS was $0.08, down 90.1%; Adjusted EPS(1) was $0.78,
down 1.3%
- Year-to-date net cash provided by operating activities was $1.7
billion, up 8.1%; Free Cash Flow(1) was $1.2 billion, up 8.7%
- Year-to-date return of capital to stockholders was $1.5
billion
The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) today reported financial results for the second quarter
of 2024.
“Our second quarter net sales growth came in lower than
originally anticipated, as consumer sentiment remains cautious,”
said Kraft Heinz CEO Carlos Abrams-Rivera. “While we are now
expecting a more gradual top-line improvement in the back half of
the year, we continue to unlock efficiencies that are allowing us
to make accretive investments in our brands, grow profits, and
drive future sales growth.
“As we enter the second half of 2024, many drivers are giving us
optimism for improved top-line trends. We are anticipating a
continued ramp up of both innovation and renovation, particularly
in North America Retail, and we are increasing our marketing
investment to continue to drive brand superiority across our
portfolio. In Away From Home and Emerging Markets, we expect to
increase distribution through our go-to-market strategy and global
activations. Finally, understanding that the consumer is looking
for value, we will selectively increase investments in
promotions.”
Abrams-Rivera continued, “We remain confident in our strategy
and in the attractive categories in which we compete. We are
committed to managing our business in a disciplined manner that
preserves our ability to drive sustainable, long-term growth.”
Net Sales
In millions
Net Sales
Organic Net Sales(1)
June 29, 2024
July 1, 2023
% Chg vs PY
YoY Growth Rate
Price
Volume/ Mix
For the Three Months Ended
North America
$
4,921
$
5,079
(3.1)%
(2.9)%
1.3 pp
(4.2) pp
International Developed Markets
885
932
(5.0)%
(3.9)%
(1.5) pp
(2.4) pp
Emerging Markets(a)
670
710
(5.7)%
3.4%
1.9 pp
1.5 pp
Kraft Heinz
$
6,476
$
6,721
(3.6)%
(2.4)%
1.0 pp
(3.4) pp
Net Sales
In millions
Net Sales
Organic Net Sales(1)
June 29, 2024
July 1, 2023
% Chg vs PY
YoY Growth Rate
Price
Volume/ Mix
For the Six Months Ended
North America
$
9,749
$
9,964
(2.2)%
(2.1)%
1.9 pp
(4.0) pp
International Developed Markets
1,740
1,792
(2.9)%
(2.6)%
0.5 pp
(3.1) pp
Emerging Markets(a)
1,398
1,454
(3.8)%
4.4%
2.9 pp
1.5 pp
Kraft Heinz
$
12,887
$
13,210
(2.4)%
(1.5)%
1.8 pp
(3.3) pp
(a)
Emerging Markets represents the
aggregation of our West and East Emerging Markets (“WEEM”) and Asia
Emerging Markets (“AEM”) operating segments.
Net Income/(Loss) and Diluted
EPS
In millions, except per share
data
For the Three Months
Ended
For the Six Months
Ended
June 29, 2024
July 1, 2023
% Chg vs PY
June 29, 2024
July 1, 2023
% Chg vs PY
Gross profit
$
2,294
$
2,261
1.5%
$
4,537
$
4,374
3.7%
Operating income/(loss)
522
1,376
(62.1)%
1,824
2,619
(30.4)%
Net income/(loss)
100
998
(90.0)%
904
1,835
(50.7)%
Net income/(loss) attributable to common
shareholders
102
1,000
(89.8)%
903
1,836
(50.8)%
Diluted EPS
$
0.08
$
0.81
(90.1)%
$
0.74
$
1.49
(50.3)%
Adjusted EPS(1)
0.78
0.79
(1.3)%
1.47
1.48
(0.7)%
Adjusted Operating Income(1)
$
1,380
$
1,351
2.0%
$
2,645
$
2,596
1.9%
Q2 2024 Financial Summary
- Net sales decreased 3.6 percent versus the year-ago
period to $6.5 billion, including a negative 1.0 percentage point
impact from foreign currency and a negative 0.2 percentage point
impact from divestitures. Organic Net Sales(1) decreased 2.4
percent versus the prior year period. Price increased 1.0
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 due to waning consumer sentiment.
- Operating Income decreased 62.1 percent versus the
year-ago period to $0.5 billion, primarily driven by non-cash
impairment losses of $854 million in the current year period.
Adjusted Operating Income(1) increased 2.0 percent versus
the year-ago period to $1.4 billion, primarily driven by gross
savings, including lower commodity and logistics costs, and higher
pricing. This more than offset unfavorable volume/mix, increased
selling, general and administrative expenses primarily driven by
investments in marketing and technology, and an unfavorable impact
from foreign currency (0.7 pp).
- Diluted EPS was $0.08, down 90.1 percent versus the
prior year period, primarily driven by non-cash impairment losses
in the current year period. Adjusted EPS(1) was $0.78, down
1.3 percent versus the prior year period, primarily driven by
lapping a one-time tax benefit in the prior year associated with a
net decrease in uncertain tax position reserves. The lapping of
this one-time tax benefit more than offset higher Adjusted
Operating Income, fewer shares outstanding, and favorable changes
in other expense/(income).
- Year-to-date net cash provided by/(used for) operating
activities was $1.7 billion, up 8.1 percent versus the year-ago
period. This increase was primarily due to favorable improvements
in working capital, predominantly within inventory and accounts
payable, as well as higher Adjusted Operating Income. These impacts
were partially offset by higher cash outflows for variable
compensation in the 2024 period compared to the 2023 period.
Free Cash Flow(1) was $1.2 billion, up 8.7 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 $35 million in capital expenditures
in the current year.
- Capital Return: Year to date, the Company paid $969
million in cash dividends and repurchased $537 million of common
stock. Of the $537 million in share repurchases in 2024, $350
million were repurchased under the Company’s publicly announced
share repurchase program and $187 million were purchased to offset
the dilutive effect of equity-based compensation. As of June 29,
2024, the Company had remaining authorization to repurchase $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 down 2 percent to flat versus
the prior year, compared to the previous expectation of 0 to 2
percent growth.
- Adjusted Operating Income(2) growth of 1 to 3 percent
versus the prior year, compared to the previous expectation of 2 to
4 percent growth. This contemplates expected Adjusted Gross Profit
Margin(1)(2) expansion in the range of 75 to 125 basis points
versus the prior year, compared to the previous expectation of 50
to 100 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, which is the same as prior expectations.
The Company continues to expect 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 $30 million
within interest expense and other expense/(income) versus the prior
year. The outlook does not contemplate any potential additional
share repurchases in 2024.
End Notes
(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.
(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 second 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.
Forward-Looking Statements
This press release contains a number of forward-looking
statements. Words such as “accelerate,” “anticipate,” “believe,”
“commit,” “continue,” “expect,” “will,” “guidance,” and “outlook,”
and variations of such words and similar future or conditional
expressions are intended to identify forward-looking statements.
Examples of forward-looking statements include, but are not limited
to, statements regarding the Company's plans, impacts of accounting
standards and guidance, growth, legal matters, taxes, costs and
cost savings, impairments, dividends, expectations, investments,
innovations, opportunities, capabilities, execution, initiatives,
and pipeline. These forward-looking statements reflect management's
current expectations and are not guarantees of future performance
and are subject to a number of risks and uncertainties, many of
which are difficult to predict and beyond the Company's
control.
Important factors that may affect the Company's business and
operations and that may cause actual results to differ materially
from those in the forward-looking statements include, but are not
limited to, operating in a highly competitive industry; the
Company’s ability to correctly predict, identify, and interpret
changes in consumer preferences and demand, to offer new products
to meet those changes, and to respond to competitive innovation;
changes in the retail landscape or the loss of key retail
customers; changes in the Company's relationships with significant
customers or suppliers, or in other business relationships; the
Company’s ability to maintain, extend, and expand its reputation
and brand image; the Company’s ability to leverage its brand value
to compete against private label products; the Company’s ability to
drive revenue growth in its key product categories or platforms,
increase its market share, or add products that are in
faster-growing and more profitable categories; product recalls or
other product liability claims; climate change and legal or
regulatory responses; the Company’s ability to identify, complete,
or realize the benefits from strategic acquisitions, divestitures,
alliances, joint ventures, or investments; the Company's ability to
successfully execute its strategic initiatives; the impacts of the
Company's international operations; the Company's ability to
protect intellectual property rights; the Company’s ability to
realize the anticipated benefits from prior or future streamlining
actions to reduce fixed costs, simplify or improve processes, and
improve its competitiveness; the influence of the Company's largest
stockholder; the Company's level of indebtedness, as well as our
ability to comply with covenants under our debt instruments;
additional impairments of the carrying amounts of goodwill or other
indefinite-lived intangible assets; foreign exchange rate
fluctuations; volatility in commodity, energy, and other input
costs; volatility in the market value of all or a portion of the
commodity derivatives we use; compliance with laws and regulations
and related legal claims or regulatory enforcement actions; failure
to maintain an effective system of internal controls; a downgrade
in the Company's credit rating; the impact of sales of the
Company's common stock in the public market; the impact of the
Company’s share repurchases or any change in the Company’s share
repurchase activity; the Company’s ability to continue to pay a
regular dividend and the amounts of any such dividends; disruptions
in the global economy caused by geopolitical conflicts,
unanticipated business disruptions and natural events in the
locations in which the Company or the Company's customers,
suppliers, distributors, or regulators operate; economic and
political conditions in the United States and in various other
nations where the Company does business (including inflationary
pressures, instability in financial institutions, general economic
slowdown, recession, or a potential U.S. federal government
shutdown); changes in the Company's management team or other key
personnel and the Company's ability to hire or retain key personnel
or a highly skilled and diverse global workforce; our dependence on
information technology and systems, including service
interruptions, misappropriation of data, or breaches of security;
increased pension, labor, and people-related expenses; changes in
tax laws and interpretations and the final determination of tax
audits, including transfer pricing matters, and any related
litigation; volatility of capital markets and other macroeconomic
factors; and other factors. For additional information on these and
other factors that could affect the Company's forward-looking
statements, see the Company's risk factors, as they may be amended
from time to time, set forth in its filings with the Securities and
Exchange Commission (“SEC”). The Company disclaims and does not
undertake any obligation to update, revise, or withdraw any
forward-looking statement in this press release, except as required
by applicable law or regulation.
We use our investor relations website, ir.kraftheinzcompany.com, as a routine channel for
distribution of important, and often material, information about
Kraft Heinz, including quarterly and annual earnings results and
presentations, press releases and other announcements, webcasts,
analyst presentations, investor days, sustainability initiatives,
financial information, and corporate governance practices, as well
as archives of past presentations and events. We encourage you to
follow our investor relations website in addition to our filings
with the SEC to receive timely information about the Company. The
information on our website is not part of this press release and
shall not be deemed to be incorporated by reference into any
filings we make with the SEC.
Non-GAAP Financial Measures
The non-GAAP financial measures provided in this press release
should be viewed in addition to, and not as an alternative for,
results prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”).
To supplement the financial information provided, the Company
has presented Organic Net Sales, Adjusted Operating Income,
Constant Currency Adjusted Operating Income, Adjusted Gross Profit,
Adjusted Gross Profit Margin, Adjusted Net Income/(Loss), Adjusted
EPS, Free Cash Flow, and Net Leverage which are considered non-GAAP
financial measures. The non-GAAP financial measures presented may
differ from similarly titled non-GAAP financial measures presented
by other companies, and other companies may not define these
non-GAAP financial measures in the same way. These measures are not
substitutes for their comparable GAAP financial measures, such as
net sales, net income/(loss), gross profit, diluted earnings per
share (“EPS”), net cash provided by/(used for) operating
activities, or other measures prescribed by GAAP, and there are
limitations to using non-GAAP financial measures.
Management uses these non-GAAP financial measures to assist in
comparing the Company’s performance on a consistent basis for
purposes of business decision making by removing the impact of
certain items that management believes do not directly reflect the
Company’s underlying operations. The Company believes:
- Organic Net Sales, Adjusted Operating Income, Constant Currency
Adjusted Operating Income, Adjusted Gross Profit, Adjusted Gross
Profit Margin, Adjusted Net Income/(Loss), and Adjusted EPS provide
important comparability of underlying operating results, allowing
investors and management to assess the Company’s operating
performance on a consistent basis; and
- Free Cash Flow and Net Leverage provide measures of the
Company’s core operating performance, the cash-generating
capabilities of the Company’s business operations, and are factors
used in determining the Company’s borrowing capacity and the amount
of cash available for debt repayments, dividends, acquisitions,
share repurchases, and other corporate purposes.
Management believes that presenting the Company’s non-GAAP
financial measures is useful to investors because it (i) provides
investors with meaningful supplemental information regarding
financial performance by excluding certain items, (ii) permits
investors to view performance using the same tools that management
uses to budget, make operating and strategic decisions, and
evaluate historical performance, and (iii) otherwise provides
supplemental information that may be useful to investors in
evaluating the Company’s results. The Company believes that the
presentation of these non-GAAP financial measures, when considered
together with the corresponding GAAP financial measures and the
reconciliations to those measures, provides investors with
additional understanding of the factors and trends affecting the
Company’s business than could be obtained absent these
disclosures.
Definitions
Organic Net Sales is defined as net sales excluding, when
they occur, the impact of currency, acquisitions and divestitures,
and a 53rd week of shipments. The Company calculates the impact of
currency on net sales by holding exchange rates constant at the
previous year's exchange rate, with the exception of highly
inflationary subsidiaries, for which the Company calculates the
previous year's results using the current year's exchange rate.
Adjusted Operating Income is defined as operating
income/(loss) excluding, when they occur, the impacts of
restructuring activities, deal costs, unrealized gains/(losses) on
commodity hedges (the unrealized gains and losses are recorded in
general corporate expenses until realized; once realized, the gains
and losses are recorded in the applicable segment’s operating
results), impairment losses, and certain non-ordinary course legal
and regulatory matters. The Company also presents Adjusted
Operating Income on a constant currency basis (Constant Currency
Adjusted Operating Income). The Company calculates the impact
of currency on Adjusted Operating Income by holding exchange rates
constant at the previous year's exchange rate, with the exception
of highly inflationary subsidiaries, for which it calculates the
previous year's results using the current year's exchange rate.
Adjusted Gross Profit, Adjusted Net Income/(Loss), and
Adjusted EPS are defined as gross profit, net income/(loss),
and diluted earnings per share, respectively, excluding, when they
occur, the impacts of restructuring activities, deal costs,
unrealized losses/(gains) on commodity hedges, impairment losses,
certain non-ordinary course legal and regulatory matters,
losses/(gains) on the sale of a business, other losses/(gains)
related to acquisitions and divestitures (e.g., tax and hedging
impacts), nonmonetary currency devaluation (e.g., remeasurement
gains and losses), debt prepayment and extinguishment
(benefit)/costs, and certain significant discrete income tax items
(e.g., U.S. and non-U.S. tax reform), and including when they
occur, adjustments to reflect preferred stock dividend payments on
an accrual basis. Adjusted Gross Profit Margin is defined as
Adjusted Gross Profit divided by net sales.
Net Leverage is defined as debt less cash, cash
equivalents and short-term investments divided by Adjusted EBITDA.
Adjusted EBITDA is defined as net income/(loss) from
continuing operations before interest expense, other
expense/(income), provision for/(benefit from) income taxes, and
depreciation and amortization (excluding restructuring activities);
in addition to these adjustments, the Company excludes, when they
occur, the impacts of divestiture-related license income,
restructuring activities, deal costs, unrealized losses/(gains) on
commodity hedges, impairment losses, certain non-ordinary course
legal and regulatory matters, and equity award compensation expense
(excluding restructuring activities).
Free Cash Flow is defined as net cash provided by/(used
for) operating activities less capital expenditures. The use of
this non-GAAP measure does not imply or represent the residual cash
flow for discretionary expenditures since the Company has certain
non-discretionary obligations such as debt service that are not
deducted from the measure.
Schedule
1
The Kraft Heinz Company
Condensed Consolidated Statements
of Income
(in millions, except per share
data)
(Unaudited)
For the Three Months
Ended
For the Six Months
Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Net sales
$
6,476
$
6,721
$
12,887
$
13,210
Cost of products sold
4,182
4,460
8,350
8,836
Gross profit
2,294
2,261
4,537
4,374
Selling, general and administrative
expenses, excluding impairment losses
918
885
1,859
1,755
Goodwill impairment losses
854
—
854
—
Selling, general and administrative
expenses
1,772
885
2,713
1,755
Operating income/(loss)
522
1,376
1,824
2,619
Interest expense
229
228
455
455
Other expense/(income)
(55)
(24)
(8)
(59)
Income/(loss) before income taxes
348
1,172
1,377
2,223
Provision for/(benefit from) income
taxes
248
174
473
388
Net income/(loss)
100
998
904
1,835
Net income/(loss) attributable to
noncontrolling interest
(2)
(2)
1
(1)
Net income/(loss) attributable to common
shareholders
$
102
$
1,000
$
903
$
1,836
Basic shares outstanding
1,212
1,228
1,213
1,227
Diluted shares outstanding
1,216
1,235
1,219
1,235
Per share data applicable to common
shareholders:
Basic earnings/(loss) per share
$
0.08
$
0.81
$
0.74
$
1.50
Diluted earnings/(loss) per share
0.08
0.81
0.74
1.49
Schedule
2
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Three Months Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions and
Divestitures
Organic Net Sales
Price
Volume/Mix
June 29, 2024
North America
$
4,921
$
(9)
$
—
$
4,930
International Developed Markets
885
(11)
—
896
Emerging Markets
670
(30)
2
698
Kraft Heinz
$
6,476
$
(50)
$
2
$
6,524
July 1, 2023
North America
$
5,079
$
—
$
—
$
5,079
International Developed Markets
932
—
—
932
Emerging Markets
710
19
16
675
Kraft Heinz
$
6,721
$
19
$
16
$
6,686
Year-over-year growth rates
North America
(3.1)%
(0.2) pp
0.0 pp
(2.9)%
1.3 pp
(4.2) pp
International Developed Markets
(5.0)%
(1.1) pp
0.0 pp
(3.9)%
(1.5) pp
(2.4) pp
Emerging Markets
(5.7)%
(7.0) pp
(2.1) pp
3.4%
1.9 pp
1.5 pp
Kraft Heinz
(3.6)%
(1.0) pp
(0.2) pp
(2.4)%
1.0 pp
(3.4) pp
Schedule
3
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Six Months Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions and
Divestitures
Organic Net Sales
Price
Volume/Mix
June 29, 2024
North America
$
9,749
$
(7)
$
—
$
9,756
International Developed Markets
1,740
(5)
—
1,745
Emerging Markets(a)
$
1,398
$
(46)
$
12
$
1,432
Kraft Heinz
$
12,887
$
(58)
$
12
$
12,933
July 1, 2023
North America
$
9,964
$
—
$
—
$
9,964
International Developed Markets
1,792
—
—
1,792
Emerging Markets(a)
$
1,454
$
49
$
34
$
1,371
Kraft Heinz
$
13,210
$
49
$
34
$
13,127
Year-over-year growth rates
North America
(2.2)%
(0.1) pp
0.0 pp
(2.1)%
1.9 pp
(4.0) pp
International Developed Markets
(2.9)%
(0.3) pp
0.0 pp
(2.6)%
0.5 pp
(3.1) pp
Emerging Markets(a)
(3.8)%
(6.6) pp
(1.6) pp
4.4%
2.9 pp
1.5 pp
Kraft Heinz
(2.4)%
(0.8) pp
(0.1) pp
(1.5)%
1.8 pp
(3.3) pp
(a)
Emerging Markets represents the
aggregation of our WEEM and AEM operating segments.
Schedule
4
The Kraft Heinz Company
Reconciliation of Operating
Income/(Loss) to Adjusted Operating Income
(dollars in millions)
(Unaudited)
For the Three Months
Ended
For the Six Months
Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Operating income/(loss)
$
522
$
1,376
1,824
2,619
Restructuring activities
3
(10)
—
(20)
Unrealized losses/(gains) on commodity
hedges
1
(16)
(33)
(5)
Impairment losses
854
—
854
—
Certain non-ordinary course legal and
regulatory matters
—
1
—
2
Adjusted Operating Income
$
1,380
$
1,351
$
2,645
$
2,596
Segment Adjusted Operating Income:
North America
$
1,341
$
1,247
$
2,556
$
2,456
International Developed Markets
126
140
262
247
Total Segment Adjusted Operating
Income
1,467
1,387
2,818
2,703
Emerging Markets Segment Adjusted
Operating Income(a)
66
97
148
198
General corporate expenses
(153)
(133)
(321)
(305)
Adjusted Operating Income
$
1,380
$
1,351
$
2,645
$
2,596
(a)
Segment Adjusted Operating Income for
Emerging Markets, which represents the combination of our WEEM and
AEM operating segments, is defined and presented consistently with
the Segment Adjusted Operating Income of our reportable segments -
North America and International Developed Markets.
Schedule
5
The Kraft Heinz Company
Reconciliation of Adjusted
Operating Income to Constant Currency Adjusted Operating Income
For the Three Months Ended
(dollars in millions)
(Unaudited)
Adjusted Operating
Income
Currency
Constant Currency Adjusted
Operating Income
June 29, 2024
North America
$
1,341
$
(2)
$
1,343
International Developed Markets
126
—
126
Emerging Markets
66
(3)
69
General corporate expenses
(153)
—
(153)
Kraft Heinz
$
1,380
$
(5)
$
1,385
July 1, 2023
North America
$
1,247
$
—
$
1,247
International Developed Markets
140
—
140
Emerging Markets
97
3
94
General corporate expenses
(133)
—
(133)
Kraft Heinz
$
1,351
$
3
$
1,348
Year-over-year growth rates
North America
7.5%
(0.2) pp
7.7%
International Developed Markets
(10.0)%
(0.2) pp
(9.8)%
Emerging Markets
(32.7)%
(6.6) pp
(26.1)%
General corporate expenses
15.3%
(0.4) pp
15.7%
Kraft Heinz
2.0%
(0.7) pp
2.7%
Schedule
6
The Kraft Heinz Company
Reconciliation of Adjusted
Operating Income to Constant Currency Adjusted Operating Income
For the Six Months Ended
(dollars in millions)
(Unaudited)
Adjusted Operating
Income
Currency
Constant Currency Adjusted
Operating Income
June 29, 2024
North America
$
2,556
$
(1)
$
2,557
International Developed Markets
262
4
258
Emerging Markets
148
(7)
155
General corporate expenses
(321)
(1)
(320)
Kraft Heinz
$
2,645
$
(5)
$
2,650
July 1, 2023
North America
$
2,456
$
—
$
2,456
International Developed Markets
247
—
247
Emerging Markets
198
9
189
General corporate expenses
(305)
—
(305)
Kraft Heinz
$
2,596
$
9
$
2,587
Year-over-year growth rates
North America
4.0%
(0.1) pp
4.1%
International
6.4%
1.6 pp
4.8%
Emerging Markets
(25.4)%
(7.7) pp
(17.7)%
General corporate expenses
5.1%
0.2 pp
4.9%
Kraft Heinz
1.9%
(0.6) pp
2.5%
Schedule
7
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Three Months
Ended
June 29, 2024
Gross profit
Selling, general and
administrative expenses
Operating
income/(loss)
Interest expense
Other expense/(income)
Income/(loss) before income
taxes
Provision for/(benefit from)
income taxes
Net income/(loss)
Net income/(loss) attributable
to noncontrolling interest
Net income/(loss) attributable
to common shareholders
Diluted EPS
GAAP Results
$
2,294
$
1,772
$
522
$
229
$
(55)
$
348
$
248
$
100
$
(2)
$
102
$
0.08
Items Affecting Comparability
Restructuring activities
1
(2)
3
—
1
2
—
2
—
2
—
Unrealized losses/(gains) on commodity
hedges
1
—
1
—
—
1
1
—
—
—
—
Impairment losses
—
(854)
854
—
—
854
—
854
—
854
0.70
Losses/(gains) on sale of business
—
—
—
—
1
(1)
13
(14)
—
(14)
—
Nonmonetary currency devaluation
—
—
—
—
(1)
1
—
1
—
1
—
Adjusted Non-GAAP Results
$
2,296
$
1,380
$
943
$
0.78
Schedule
8
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Three Months
Ended
July 1, 2023
Gross profit
Selling, general and
administrative expenses
Operating
income/(loss)
Interest expense
Other expense/(income)
Income/(loss) before income
taxes
Provision for/(benefit from)
income taxes
Net income/(loss)
Net income/(loss) attributable
to noncontrolling interest
Net income/(loss) attributable
to common shareholders
Diluted EPS
GAAP Results
$
2,261
$
885
$
1,376
$
228
$
(24)
$
1,172
$
174
$
998
$
(2)
$
1,000
$
0.81
Items Affecting Comparability
Restructuring activities
(6)
4
(10)
—
—
(10)
(2)
(8)
—
(8)
(0.01)
Unrealized losses/(gains) on commodity
hedges
(16)
—
(16)
—
—
(16)
(3)
(13)
—
(13)
(0.01)
Certain non-ordinary course legal and
regulatory matters
—
(1)
1
—
—
1
—
1
—
1
—
Losses/(gains) on sale of business
—
—
—
—
(1)
1
—
1
—
1
—
Nonmonetary currency devaluation
—
—
—
—
(15)
15
—
15
—
15
0.01
Certain significant discrete income tax
items
—
—
—
—
—
—
17
(17)
—
(17)
(0.01)
Adjusted Non-GAAP Results
$
2,239
$
1,351
$
977
$
0.79
Schedule
9
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Six Months
Ended
June 29, 2024
Gross profit
Selling, general and
administrative expenses
Operating
income/(loss)
Interest expense
Other expense/(income)
Income/(loss) before income
taxes
Provision for/(benefit from)
income taxes
Net income/(loss)
Net income/(loss) attributable
to noncontrolling interest
Net income/(loss) attributable
to common shareholders
Diluted EPS
GAAP Results
$
4,537
$
2,713
$
1,824
$
455
$
(8)
$
1,377
$
473
$
904
$
1
$
903
$
0.74
Items Affecting Comparability
Restructuring activities
2
2
—
—
1
(1)
(1)
—
—
—
—
Unrealized losses/(gains) on commodity
hedges
(33)
—
(33)
—
—
(33)
(7)
(26)
—
(26)
(0.02)
Impairment losses
—
(854)
854
—
—
854
—
854
—
854
0.70
Losses/(gains) on sale of business
—
—
—
—
(79)
79
25
54
—
54
0.05
Nonmonetary currency devaluation
—
—
—
—
(4)
4
—
4
—
4
—
Adjusted Non-GAAP Results
$
4,506
$
2,645
$
1,790
$
1.47
Schedule
10
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Six Months
Ended
July 1, 2023
Gross profit
Selling, general and
administrative expenses
Operating
income/(loss)
Interest expense
Other expense/(income)
Income/(loss) before income
taxes
Provision for/(benefit from)
income taxes
Net income/(loss)
Net income/(loss) attributable
to noncontrolling interest
Net income/(loss) attributable
to common shareholders
Diluted EPS
GAAP Results
$
4,374
$
1,755
$
2,619
$
455
$
(59)
$
2,223
$
388
$
1,835
$
(1)
$
1,836
$
1.49
Items Affecting Comparability
Restructuring activities
—
20
(20)
—
(2)
(18)
(3)
(15)
—
(15)
(0.01)
Unrealized losses/(gains) on commodity
hedges
(5)
—
(5)
—
—
(5)
(1)
(4)
—
(4)
—
Certain non-ordinary course legal and
regulatory matters
—
(2)
2
—
—
2
—
2
—
2
—
Losses/(gains) on sale of business
—
—
—
—
(2)
2
—
2
—
2
—
Nonmonetary currency devaluation
—
—
—
—
(18)
18
—
18
—
18
0.01
Certain significant discrete income tax
items
—
—
—
—
—
—
17
(17)
—
(17)
(0.01)
Adjusted Non-GAAP Results
$
4,369
$
2,596
$
1,821
$
1.48
Schedule
11
The Kraft Heinz Company
Adjusted Gross Profit Margin
(dollars in millions)
(Unaudited)
For the Three Months
Ended
For the Six Months
Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Adjusted Gross Profit
$
2,296
$
2,239
$
4,506
$
4,369
Net sales
6,476
6,721
12,887
13,210
Adjusted Gross Profit Margin
35.5%
33.3%
35.0%
33.1%
Schedule
12
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Three Months
Ended
June 29, 2024
July 1, 2023
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)(b)
$
0.94
$
0.92
$
0.02
Interest expense
(0.16)
(0.16)
—
Other expense/(income)
0.04
0.03
0.01
Effective tax rate
(0.05)
—
(0.05)
Effect of share repurchases
0.01
—
0.01
Adjusted EPS
$
0.78
$
0.79
$
(0.01)
(a)
Includes non-cash amortization of
definite-lived intangible assets, which accounted for a negative
impact to Adjusted EPS from results of operations of $0.04 for the
three months ended June 29, 2024 and July 1, 2023.
(b)
Includes divestiture-related license
income, which accounted for a benefit to Adjusted EPS from results
of operations of $0.01 for the three months ended June 29, 2024 and
July 1, 2023.
Schedule
13
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Six Months
Ended
June 29, 2024
July 1, 2023
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)(b)
$
1.76
$
1.73
$
0.03
Interest expense
(0.30)
(0.30)
—
Other expense/(income)
0.05
0.05
—
Effective tax rate
(0.06)
—
(0.06)
Effect of share repurchases
0.02
—
0.02
Adjusted EPS
$
1.47
$
1.48
$
(0.01)
(a)
Includes non-cash amortization of
definite-lived intangible assets, which accounted for a negative
impact to Adjusted EPS from results of operations of $0.09 for the
six months ended June 29, 2024 and $0.08 for the six months ended
July 1, 2023.
(b)
Includes divestiture-related license
income, which accounted for a benefit to Adjusted EPS from results
of operations of $0.02 for the six months ended June 29, 2024 and
July 1, 2023.
Schedule
14
The Kraft Heinz Company
Condensed Consolidated Balance
Sheets
(in millions, except per share
data)
(Unaudited)
June 29, 2024
December 30, 2023
ASSETS
Cash and cash equivalents
$
900
$
1,400
Trade receivables, net
2,160
2,112
Inventories
3,573
3,614
Prepaid expenses
273
234
Other current assets
624
566
Assets held for sale
—
3
Total current assets
7,530
7,929
Property, plant and equipment, net
7,038
7,122
Goodwill
29,501
30,459
Intangible assets, net
42,347
42,448
Other non-current assets
2,381
2,381
TOTAL ASSETS
$
88,797
$
90,339
LIABILITIES AND EQUITY
Current portion of long-term debt
669
638
Accounts payable
4,448
4,627
Accrued marketing
724
733
Interest payable
260
258
Other current liabilities
1,385
1,781
Total current liabilities
7,486
8,037
Long-term debt
19,265
19,394
Deferred income taxes
10,173
10,201
Accrued postemployment costs
137
143
Long-term deferred income
1,400
1,424
Other non-current liabilities
1,305
1,418
TOTAL LIABILITIES
39,766
40,617
Redeemable noncontrolling interest
10
34
Equity:
Common stock, $0.01 par value
12
12
Additional paid-in capital
52,086
52,037
Retained earnings/(deficit)
1,297
1,367
Accumulated other comprehensive
income/(losses)
(2,738)
(2,604)
Treasury stock, at cost
(1,762)
(1,286)
Total shareholders' equity
48,895
49,526
Noncontrolling interest
126
162
TOTAL EQUITY
49,021
49,688
TOTAL LIABILITIES AND EQUITY
$
88,797
$
90,339
Schedule
15
The Kraft Heinz Company
Condensed Consolidated Statements
of Cash Flows
(in millions)
(Unaudited)
For the Six Months
Ended
June 29, 2024
July 1, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)
$
904
$
1,835
Adjustments to reconcile net income/(loss)
to operating cash flows:
Depreciation and amortization
469
436
Amortization of postemployment benefit
plans prior service costs/(credits)
(4)
(7)
Divestiture-related license income
(27)
(27)
Equity award compensation expense
65
77
Deferred income tax
provision/(benefit)
(48)
(34)
Postemployment benefit plan
contributions
(9)
(11)
Goodwill and intangible asset impairment
losses
854
—
Nonmonetary currency devaluation
4
18
Loss/(gain) on sale of business
79
2
Other items, net
(56)
(26)
Changes in current assets and
liabilities:
Trade receivables
(113)
(114)
Inventories
(101)
(232)
Accounts payable
(40)
(156)
Other current assets
(114)
(2)
Other current liabilities
(150)
(175)
Net cash provided by/(used for) operating
activities
1,713
1,584
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(543)
(508)
Proceeds from sale of business, net of
cash disposed and working capital adjustments
3
—
Payments to acquire intangible assets
(140)
—
Other investing activities, net
48
33
Net cash provided by/(used for) investing
activities
(632)
(475)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
(606)
(822)
Proceeds from issuance of long-term
debt
593
657
Dividends paid
(969)
(982)
Repurchases of common stock
(537)
(38)
Other financing activities, net
(46)
(2)
Net cash provided by/(used for) financing
activities
(1,565)
(1,187)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(18)
(14)
Cash, cash equivalents, and restricted
cash
Net increase/(decrease)
(502)
(92)
Balance at beginning of period
1,404
1,041
Balance at end of period
$
902
$
949
Schedule
16
The Kraft Heinz Company
Reconciliation of Net Cash
Provided By/(Used For) Operating Activities to Free Cash Flow
(in millions)
(Unaudited)
For the Six Months
Ended
June 29, 2024
July 1, 2023
Net cash provided by/(used for) operating
activities
$
1,713
$
1,584
Capital expenditures
(543)
(508)
Free Cash Flow
$
1,170
$
1,076
Adjusted Net Income/(Loss)
$
1,790
$
1,821
Free Cash Flow Conversion
65%
59%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240731280115/en/
Alex Abraham (media) Alex.Abraham@kraftheinz.com
Anne-Marie Megela (investors)
anne-marie.megela@kraftheinz.com
Kraft Heinz (NASDAQ:KHC)
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