Kraft Heinz has tweaked its guidance to the “low end” of a previous range after reporting declines in sales revenue and volumes.
The deterioration was evident in both the third quarter and year-to-date figures issued today (30 October), although the performance in emerging markets bucked those trends.
Group sales fell 2.8% on a reported basis in the three months to 28 September and were down 2.2% in organic terms at $6.3bn. Volumes fell 3.4% based on positive pricing of 1.2%.
“While a recovery is taking longer than originally anticipated, we are not losing sight of our long-term strategy,” Kraft Heinz CEO Carlos Abrams-Rivera said.
“We remain confident in our ability to drive profitable growth, generate strong cash flow and return capital to our stockholders.”
Abrams-Rivera also noted prolonged softness in Kraft Heinz’s largest market of North America. “When we look at our US retail business, we are expecting more of an elongated recovery, driven by specific categories that continue to experience pressure,” he said.
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By GlobalData
Organic net sales, which were down 1.7% year to date at $19.2bn, are now expected to be at the “low end” of the previously cited range of flat to down 2%, Kraft Heinz said.
The same low-end descriptive is expected to be evident for adjusted operating income, the gross profit margin and adjusted EPS.
Operating income had been guided to positive 1-3% growth, while the adjusted gross margin was previously envisaged as being up 75-125 basis points for the year.
Adjusted EPS was previously seen coming in at a $3.01 to $3.07 range, or growth of 1-3%.
Operating income dropped 116% in the third quarter, due to a non-cash impairment charge of $1.4bn, but increased 1.4% on an adjusted basis.
The gross margin was down 20 basis points at 34.2%. It increased 30 points in adjusted terms to 34.3%. Adjusted EPS declined 4.2% to $0.75.
“In the third quarter, our top-line performance across two of our strategic pillars, global away from home and emerging markets, grew in line with our expectations,” Abrams-Rivera explained. “As we look forward, we are expecting continued momentum in these two pillars.
“We continue to make investments in marketing, research and development, and technology as we look to bring solutions to the table that both create value for our consumers and support future top-line growth.”
Over the nine months, Kraft Heinz’s group volumes dropped 3.3% based on pricing of 1.6%. In North America, the business delivered respective results for those metrics of minus 4.1% and plus 1.6%.
Emerging markets were the standout, with third-quarter organic sales increasing 4.9% to $675m and volumes rising 1.1%.
It was a similar picture for the nine months, with organic sales up 4.6% at $2bn, while volumes rose 1.3%.
Kraft Heinz’s net income also slumped, turning to a third-quarter $290m loss from a $254m profit a year earlier. The profit drop for the nine months was more pronounced, coning in at $614m versus $2.1bn for the corresponding cycle.
Last week, Reuters reported Brazil-based meat giant JBS and Mexico’s Sigma Alimentos were among companies to have made initial bids for assets housed under Kraft Heinz’s Oscar Mayer meats business.
In May, The Wall Street Journal said Kraft Heinz was reportedly exploring a sale of its Oscar Mayer business, having hired financial advisors to work on the process.
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