01—Abstract
Summary
Summary of the 8-K filed July 31, 2024. Cited figures are marked; the original filing is the authoritative source.
The Kraft Heinz Company reported second-quarter 2024 results for the period ended June 29, 2024, in a press release furnished as Exhibit 99.1.
Net sales declined 3.6% to $6.48 billiona, and Organic Net Sales decreased 2.4%, with volume/mix down 3.4 percentage points partly offset by price up 1.0 percentage point. Management attributed the weaker top line to cautious consumer sentiment. Operating income fell 62.1% to $522 million, primarily due to a non-cash goodwill impairment loss of $854 million, while Adjusted Operating Income rose 2.0% to $1.38 billion on gross savings, lower commodity and logistics costs, and higher pricing.
Diluted EPS was $0.08b, down 90.1%, reflecting the impairment. Adjusted EPS was $0.78, down 1.3%, mainly because the prior year included a one-time tax benefit. Year-to-date operating cash flow was $1.71 billion, up 8.1%, and Free Cash Flow was $1.17 billion, up 8.7%.
The company paid $969 millionc in dividends and repurchased $537 million of stock year to date, with $2.4 billion remaining under its repurchase authorization. For fiscal 2024, Kraft Heinz now expects Organic Net Sales to be down 2% to flat, compared with prior guidance of 0% to 2% growth, and Adjusted Operating Income growth of 1% to 3%, down from 2% to 4%. Adjusted EPS guidance was reaffirmed at $3.01 to $3.07, and the outlook excludes any additional share repurchases in 2024.
02—Key points
Key Highlights
- Net sales decreased 3.6% to $6.48 billion; Organic Net Sales decreased 2.4%, with volume/mix down 3.4 percentage points.
- Goodwill impairment loss of $854 million drove operating income down 62.1% to $522 million and diluted EPS down 90.1% to $0.08.
- Adjusted Operating Income rose 2.0% to $1.38 billion, driven by gross savings, lower commodity and logistics costs, and higher pricing.
- Adjusted EPS was $0.78, down 1.3%, mainly from lapping a one-time prior-year tax benefit.
- Full-year 2024 Organic Net Sales outlook lowered to down 2% to flat from 0% to 2% growth; Adjusted Operating Income growth outlook narrowed to 1% to 3%.
- Adjusted EPS outlook reaffirmed at $3.01 to $3.07; no additional share repurchases are contemplated for 2024.
- Year-to-date Free Cash Flow was $1.17 billion, up 8.7%, and capital return totaled $1.5 billion including $969 million in dividends.
03—Questions
Frequently Asked Questions
Why did Kraft Heinz's reported operating income and EPS fall so sharply in the second quarter?
The decline was primarily due to a non-cash goodwill impairment loss of $854 million recorded in the quarter. Operating income fell to $522 million from $1.38 billion, and diluted EPS was $0.08 versus $0.81 a year earlier. Excluding the impairment, Adjusted Operating Income increased 2.0%.
What caused the decline in net sales?
Net sales fell 3.6%, including a negative 1.0 percentage point currency impact and a negative 0.2 percentage point divestiture impact. Organic Net Sales fell 2.4%, as volume/mix declined 3.4 percentage points, primarily due to waning consumer sentiment, partly offset by a 1.0 percentage point price increase.
How did the company change its 2024 outlook?
Management lowered its Organic Net Sales outlook to down 2% to flat from 0% to 2% growth and narrowed Adjusted Operating Income growth to 1% to 3% from 2% to 4%. Adjusted EPS guidance of $3.01 to $3.07 was unchanged, and the company expects Adjusted Gross Profit Margin expansion of 75 to 125 basis points.
How is Kraft Heinz returning cash to shareholders?
Year to date, the company paid $969 million in cash dividends and repurchased $537 million of common stock, including $350 million under its publicly announced program and $187 million to offset equity-based compensation dilution. As of June 29, 2024, $2.4 billion remained authorized under the repurchase program.
04—Continue