01—Abstract
Summary
Summary of the 8-K filed October 30, 2024. Cited figures are marked; the original filing is the authoritative source.
The Kraft Heinz Company reported third quarter 2024 results on October 30, 2024, furnished as Exhibit 99.1 to this Form 8-K.
Net sales decreased 2.8% to $6.38 billiona, and Organic Net Sales decreased 2.2%, with price up 1.2 percentage points and volume/mix down 3.4 percentage points. North America net sales fell 3.4%, International Developed Markets was down 0.2%, and Emerging Markets declined 2.4%. Operating income was a loss of $(101) million, driven by $1.4 billion of non-cash impairment losses, including an intangible asset impairment largely on the Lunchables brand and a goodwill impairment related to the Continental Europe reporting unit.
Diluted EPS was $(0.24), while Adjusted EPS rose 4.2% to $0.75b and Adjusted Operating Income rose 1.4% to $1.33 billion. Year-to-date net cash provided by operating activities was $2.8 billion, up 6.7%, and Free Cash Flow was $2.0 billion, up 9.7%. The company paid $1.5 billion in cash dividends and repurchased $538 million of common stock year to date, with approximately $2.4 billion remaining under its publicly announced repurchase authorization as of September 28, 2024.
For fiscal 2024, Kraft Heinz now expects Organic Net Sales, Adjusted Operating Income growth, and Adjusted EPS growth at the low end of its previous guidance ranges, with Adjusted EPS of $3.01 to $3.07c. Management said a recovery in U.S. Retail is taking longer than originally anticipated, with pressure in specific categories, while Global Away From Home and Emerging Markets are expected to maintain momentum.
02—Key points
Key Highlights
- Net sales of $6.38 billion declined 2.8%; Organic Net Sales declined 2.2%, with volume/mix down 3.4 percentage points partly offset by price up 1.2 percentage points.
- Operating loss of $(101) million reflects $1.4 billion of non-cash impairment losses, primarily on the Lunchables intangible asset and Continental Europe goodwill.
- Diluted EPS was $(0.24) versus $0.21 a year earlier; Adjusted EPS rose 4.2% to $0.75.
- Adjusted Operating Income increased 1.4% to $1.33 billion, driven by higher pricing, procurement efficiencies and lower variable compensation.
- Year-to-date operating cash flow of $2.8 billion (up 6.7%) and Free Cash Flow of $2.0 billion (up 9.7%).
- Fiscal 2024 guidance narrowed to the low end of prior ranges for Organic Net Sales, Adjusted Operating Income growth and Adjusted EPS growth; Adjusted EPS expected at $3.01 to $3.07.
- Year-to-date capital return of $2.0 billion, including $1.5 billion in dividends and $538 million in share repurchases, with about $2.4 billion of repurchase authorization remaining.
03—Questions
Frequently Asked Questions
Why did Kraft Heinz report a operating loss in the third quarter of 2024?
Operating income/(loss) was $(101) million, driven by non-cash impairment losses of $1.4 billion. The impairments consisted of an intangible asset impairment largely on the Lunchables brand and a goodwill impairment related to the Continental Europe reporting unit. Excluding these losses, operating income increased $12 million.
How did underlying performance compare with reported results?
Adjusted Operating Income rose 1.4% to $1.33 billion and Adjusted EPS rose 4.2% to $0.75, excluding impairment losses and other items affecting comparability. These non-GAAP measures are reconciled in the filing's schedules.
What drove the sales decline in the quarter?
Net sales fell 2.8%, including a 0.4 percentage point negative currency impact and a 0.2 percentage point negative divestiture impact. Volume/mix declined 3.4 percentage points, primarily from continued shifts in consumer behavior amid economic uncertainty and a decline in Lunchables, while price added 1.2 percentage points.
What changed in Kraft Heinz's 2024 outlook?
The company now expects Organic Net Sales, Adjusted Operating Income growth and Adjusted EPS growth at the low end of its previous guidance ranges. Adjusted EPS is expected to be in the range of $3.01 to $3.07, with an effective tax rate on Adjusted EPS of approximately 21 percent.
How much cash did Kraft Heinz return to shareholders and generate?
Year to date, the company paid $1.5 billion in cash dividends and repurchased $538 million of common stock, including $350 million under its public program. Operating cash flow was $2.8 billion and Free Cash Flow was $2.0 billion for the nine months ended September 28, 2024.
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