PITTSBURGH & CHICAGO–(BUSINESS WIRE)–The Kraft Heinz Company (Nasdaq: KHC) today reported financial results for the second quarter of 2023.
“We delivered strong second quarter results, growing net sales, profits and profitability. This is consistent with our strategy to accelerate profitable growth,” said Kraft Heinz CEO and Chair of the Board Miguel Patricio. “We grew across each of our three pillars: Foodservice, Emerging Markets, and U.S. Retail Grow Platforms. Importantly, we grew profits while also investing in marketing, research & development, and technology, which we funded through gross efficiencies.”
“While we did face headwinds in the second quarter, particularly within U.S. market share performance, the action plans we laid out in the first quarter resulted in share trend improvement each month. We expect these action plans, along with continued strong execution from our teams, to drive momentum through the second half of the year. Overall, our results give me confidence in the direction we are headed. As a result, we are reiterating our full-year outlook.”
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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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July 1, |
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June 25, |
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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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$ |
5,079 |
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$ |
5,039 |
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0.8% |
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1.3% |
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9.4 pp |
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(8.1) pp |
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International |
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1,642 |
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1,515 |
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8.5% |
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13.2% |
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16.5 pp |
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(3.3) pp |
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Kraft Heinz |
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$ |
6,721 |
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$ |
6,554 |
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2.6% |
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4.0% |
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11.0 pp |
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(7.0) pp |
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For the Six Months Ended |
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North America |
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$ |
9,964 |
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$ |
9,640 |
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3.4% |
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3.9% |
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11.3 pp |
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(7.4) pp |
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International |
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3,246 |
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2,959 |
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9.7% |
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15.6% |
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17.8 pp |
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(2.2) pp |
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Kraft Heinz |
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$ |
13,210 |
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$ |
12,599 |
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4.9% |
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6.6% |
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12.8 pp |
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(6.2) 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 Six Months Ended |
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July 1, |
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June 25, |
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% Chg vs |
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July 1, |
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June 25, |
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% Chg vs |
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Gross profit |
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$ |
2,261 |
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$ |
1,984 |
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14.0% |
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$ |
4,374 |
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$ |
3,915 |
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11.7% |
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Operating income/(loss) |
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1,376 |
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542 |
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154.4% |
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2,619 |
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1,657 |
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58.1% |
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Net income/(loss) |
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998 |
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265 |
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277.0% |
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1,835 |
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1,046 |
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75.4% |
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Net income/(loss) attributable to common shareholders |
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1,000 |
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265 |
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277.8% |
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1,836 |
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1,041 |
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76.4% |
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Diluted EPS |
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$ |
0.81 |
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$ |
0.21 |
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285.7% |
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$ |
1.49 |
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$ |
0.84 |
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77.4% |
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Adjusted EPS(1) |
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0.79 |
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0.70 |
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12.9% |
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1.48 |
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1.30 |
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13.8% |
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Adjusted EBITDA(1) |
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$ |
1,612 |
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$ |
1,520 |
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6.0% |
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$ |
3,092 |
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$ |
2,862 |
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8.0% |
Q2 2023 Financial Summary
- Net sales increased 2.6 percent versus the year-ago period to $6.7 billion, including a negative 1.2 percentage point impact from foreign currency and a negative 0.2 percentage point impact from acquisitions and divestitures. Organic Net Sales(1) increased 4.0 percent versus the prior year period. Price increased 11.0 percentage points versus the prior year period, with increases in both reportable segments that were primarily driven by list price increases. Volume/mix declined 7.0 percentage points versus the prior year period, with declines in both reportable segments that were primarily driven by elasticity impacts from pricing actions.
- Net income/(loss) increased 277.0 percent versus the year-ago period to $998 million, primarily driven by lapping non-cash impairment losses in the prior year period, higher Adjusted EBITDA versus the prior year period, and unrealized gains on commodity hedges in the current year period compared to unrealized losses on commodity hedges in the prior year period. These factors more than offset unfavorable changes in other expense/(income). Adjusted EBITDA(1) increased 6.0 percent versus the year-ago period to $1.6 billion, primarily driven by higher pricing and efficiency gains. These factors more than offset higher supply chain costs (reflecting inflationary pressure in procurement and manufacturing costs), unfavorable volume/mix, investments in marketing, people, technology, and research & development, and an unfavorable impact from foreign currency (1.3 pp).
- Diluted EPS was $0.81, up 285.7 percent versus the prior year period, primarily driven by the net income/(loss) factors discussed above. Adjusted EPS(1) was $0.79, up 12.9 percent versus the prior year period, primarily driven by higher Adjusted EBITDA, lower taxes on adjusted earnings, and lower interest expense. These factors more than offset unfavorable changes in other expense/(income).
- Year-to-date net cash provided by operating activities was $1.6 billion, up 101.2 percent versus the year-ago period. This was driven by lower cash outflows for inventories primarily related to stock rebuilding in the prior year, lower cash outflows 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, and higher Adjusted EBITDA. These impacts were partially offset by unfavorable changes in accounts payable, due in part to lower inventory purchase volume in the current period compared to the prior year period. Year-to date Free Cash Flow(1) was $1.1 billion, up 205.8 percent versus the prior year period, driven by the same net cash provided by operating activities as discussed above. This more than offset an increase in capital expenditures in the current year.
Outlook
For fiscal year 2023, the Company expects:
- Organic Net Sales(2) growth of 4 to 6 percent versus the prior year.
- Constant Currency Adjusted EBITDA(1)(2) growth of 4 to 6 percent versus the prior year, or 6 to 8 percent when excluding the impact from lapping a 53rd week in 2022. Adjusted Gross Profit Margin(1)(2) expansion is expected to contribute to Constant Currency Adjusted EBITDA growth. The Company now expects Adjusted Gross Profit Margin expansion of 150 to 200 basis points versus the prior year, as compared to the Company’s previous expectation of 125 to 175 basis points. The current expectation for Adjusted Gross Profit Margin now reflects mid-to-high single-digit inflation for the full year and low-to-mid single-digit inflation in the second half of the year, with pricing and efficiencies continuing to contribute to Adjusted Gross Profit Margin recovery.
- Adjusted EPS(2) to be in the range of $2.83 to $2.91, which includes a negative impact of approximately $0.04 from expected unfavorable changes in non-cash pension and post-retirement benefits and a currency headwind of approximately $0.02 at current foreign exchange rates. The expected 2023 year-over-year Adjusted EPS change reflects a negative $0.06 impact from lapping a 53rd week in 2022. Additionally, the Company continues to expect an effective tax rate on Adjusted EPS to be in the range of 19 to 21 percent.
End Notes
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(1) |
Organic Net Sales, Adjusted EBITDA, Constant Currency Adjusted EBITDA, Adjusted Gross Profit Margin, 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, Constant Currency Adjusted EBITDA, Adjusted Gross Profit Margin, 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, and equity award compensation expense, 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 2022 net sales of approximately $26 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.
