Vending

Kraft Heinz reports Q3 sales gain, surpasses expectations

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October 29, 2020

The Kraft Heinz Co. net sales rose 6%, from $6.07 billion in 2019's third quarter to $6.4 billion for the quarter ending Sept. 26, 2020, despite an unfavorable 0.3 percentage point impact from currency, according to an earnings report.

The company reported growth across all six consumer platforms due to sustained at-home consumption momentum.

Organic net sales increased 6.3%, surpassing expectations of 5.1%, according to Seeking Alpha.

Shares traded at $30.68 today against a 52-week range of $19.99-$36.37, according to Seeking Alpha.

Organic sales increased despite a negative 1.2% impact from exiting the McCafé licensing agreement, according to the earnings report. Pricing was up 3.7% versus the prior year period, with positive pricing in each business segment. Higher pricing primarily resulted from reduced promotional activity compared to the year-ago period, with gains also reflecting planned pricing actions in select categories and markets and pricing to offset dairy inflation.

Both basic and diluted earnings per share fell from 74 cents to 49 cents compared to last year's third quarter.

The company declared a 40 cent per share quarterly dividend, payable Dec. 18 for shareholders of record Nov. 27, according to Seeking Alpha.

Volume/mix was up 2.6% versus the year-ago period, driven by strong growth in retail, e-commerce and club channels supported by continued growth of at-home consumption due, in part, to the COVID-19 pandemic. This growth more than offset lower but improving foodservice sales and the negative impact from exiting the McCafé licensing agreement.

"We are heading into 2021 with our new operating model fully implemented, our platform strategy coming to life in the marketplace, and our growth investments ramping up," CEO Miguel Patricio said in a prepared statement. "And although there are multiple future scenarios we must plan for and manage against, we are in a strong position to both accelerate and exceed the strategic plan we finalized earlier this year."

Net income attributable to common shareholders decreased 33.7% versus the year-ago period to $597 million and diluted EPS decreased to 49 cents, down 33.8% versus the prior year driven by charges related to the pending cheese transaction in the current period and a gain on sale of the Canadian natural cheese business in the year-ago period.

Adjusted EPS increased to 70 cents, up 1.4% versus the prior year as adjusted EBITDA growth more than offset a higher effective tax rate, unfavorable changes in other income and higher non-cash equity award compensation expenses versus the year-ago period.

Adjusted EBITDA increased 13.5% versus the year-ago period to $1.7 billion, including an unfavorable 0.1% impact from currency.

Excluding the impact of currency, adjusted EBITDA growth was driven by pricing gains, volume growth and favorable mix versus the year-ago period, as well as procurement savings in the U.S. This growth more than offset higher variable compensation, unfavorable key commodity costs, specifically in dairy, as well as increased marketing investment in the United States and incremental COVID-19-related operating expenses globally.

Based on performance to date, the company believes mid-single-digit organic net sales growth and high-single-digit constant currency adjusted EBITDA growth versus the prior year period are reasonable expectations for fourth-quarter performance. This would result in mid-single-digit organic net sales growth and high-single-digit constant currency adjusted EBITDA growth for the full year.