01—Abstract
Summary
Summary of the 10-Q filed April 29, 2025. Cited figures are marked; the original filing is the authoritative source.
The Kraft Heinz Company's first-quarter 2025 Form 10-Q (quarter ended March 29, 2025) shows net sales of $5.999 billiona, down 6.4% from $6.411 billion a year earlier, with Organic Net Sales down 4.7% to $6.083 billion.
The decline was driven primarily by unfavorable volume/mix (down 5.6 percentage points), which more than offset higher pricing (up 0.9 percentage points). Operating income fell 8.1% to $1.196 billionb, net income fell 11.2% to $714 million, and diluted EPS fell 10.6% to $0.59 from $0.66. Adjusted EPS declined 10.1% to $0.62.
The filing attributes the margin pressure to unfavorable volume/mix, increased procurement cost inflation, and a higher effective tax rate of 29.9% versus 21.9% a year earlier, partly offset by lower SG&A and higher pricing. Cash and balance sheet activity was notable. Operating cash flow was $720 millionc, versus $771 million in the prior-year period.
The company issued $1.62 billiond of new long-term debt (the 2025 Notes, including 600 million euros and $1.0 billion of U.S. dollar notes), and long-term debt including the current portion rose to $21.6 billion from $19.9 billion. Cash and cash equivalents increased to $2.113 billion, and the company bought $673 million of marketable securities. Management stated it expects 2025 capital expenditures of approximately $1.0 billion.
The company repurchased 6.6 million shares during the quarter and had approximately $1.7 billion remaining under its $3.0 billion program. The filing flags several risks for investors. Goodwill of $28.8 billion and indefinite-lived brands of $36.5 billion carry heightened impairment risk, since several reporting units have 20% or less excess fair value over carrying amount.
A planned North America reporting unit reorganization will require a transition impairment test in the third quarter of 2025. The company also disclosed an IRS transfer-pricing dispute with proposed additional U.S. federal tax of approximately $200 million for 2018 and $210 million for 2019, plus penalties of about $85 million for each year, which the company is contesting and for which it has recorded no reserves.
02—Key points
Key Highlights
- Net sales declined 6.4% to $5.999 billion; Organic Net Sales declined 4.7%, driven by volume/mix down 5.6 percentage points, partially offset by pricing up 0.9 percentage points.
- Operating income fell 8.1% to $1.196 billion, and net income fell 11.2% to $714 million.
- Diluted EPS was $0.59, down 10.6% from $0.66; Adjusted EPS was $0.62, down 10.1% from $0.69.
- The effective tax rate rose to 29.9% from 21.9%, primarily due to a less favorable geographic mix of pre-tax income following the December 2024 corporate entity structure changes.
- Operating cash flow was $720 million versus $771 million; capital expenditures were $238 million, and 2025 capital expenditures are expected to be approximately $1.0 billion.
- Long-term debt including current portion rose to $21.6 billion from $19.9 billion after issuing 2025 Notes, and the company paid $477 million in dividends and repurchased $225 million of common stock in the quarter.
- Goodwill of $28.8 billion and indefinite-lived brands of $36.5 billion face heightened impairment risk; a reorganization of North America reporting units is expected to require a transition impairment test in Q3 2025.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, Kraft Heinz kept $0.12.
- Revenue$6.00B100.0%
- Cost of revenue−$3.94B65.6%
- Gross profit$2.06B34.4%
- Operating costs−$868.0M14.5%
- Operating income$1.20B19.9%
- Interest, other & tax−$484.0M8.1%
- Net income$712.0M11.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed April 29, 2025Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $6.00B$6.41B | −6.4% |
| Cost of Revenue | $3.94B$4.17B | −5.6% |
| Gross Profit | $2.06B$2.24B | −8.0% |
| SG&A Expenses | $868.00M$941.00M | −7.8% |
| Operating Income | $1.20B$1.30B | −8.1% |
| Interest Expense | $229.00M$226.00M | +1.3% |
| Net Income | $712.00M$801.00M | −11.1% |
| EPS (Basic) | $0.60$0.66 | −9.1% |
| EPS (Diluted) | $0.59$0.66 | −10.6% |
| Shares Outstanding (Basic) | 1.19B1.21B | −1.6% |
| Shares Outstanding (Diluted) | 1.20B1.22B | −2.0% |
05—Questions
Frequently Asked Questions
How did Kraft Heinz perform in the first quarter of 2025?
Net sales fell 6.4% to $5.999 billion, and Organic Net Sales fell 4.7%, mainly due to unfavorable volume/mix. Operating income declined 8.1% to $1.196 billion, and net income declined 11.2% to $714 million. Diluted EPS was $0.59 versus $0.66 a year earlier.
What drove the decline in profitability?
The filing cites unfavorable volume/mix, unfavorable changes in unrealized commodity hedge gains and losses, and increased procurement cost inflation, which more than offset efficiency initiatives. Lower SG&A, primarily from lower variable compensation and decreased advertising, and higher pricing partially offset these effects. Net income was also reduced by a higher effective tax rate.
How is the company's balance sheet and liquidity position?
Cash and cash equivalents rose to $2.113 billion from $1.334 billion, aided by $1.62 billion of debt issuance. Total debt including the current portion increased to $21.6 billion from $19.9 billion. The company had no commercial paper outstanding and no amounts drawn on its $4.0 billion Senior Credit Facility, and stated it was in compliance with all financial covenants.
What are the main risks flagged in the filing?
Key risks include impairment of goodwill and indefinite-lived brands, with several reporting units and brands having 20% or less excess fair value over carrying amount. The company also faces an IRS transfer-pricing dispute with proposed additional U.S. federal tax and penalties, which it is contesting without recording reserves. Tariffs and trade policy changes are also cited as a potential material impact on cost of products sold.
Is the dividend and share repurchase program continuing?
The Board declared a $0.40 per share dividend payable June 27, 2025. The company repurchased 6.6 million shares under its $3.0 billion program during the quarter and had approximately $1.7 billion remaining authorization as of March 29, 2025.
06—Continue