Financial Performance

Kraft Heinz Protects Profit With Price Hikes

The company offset rising input costs in Q2 by raising prices of its packaged foods and condiments by 1.3 percentage points.
Matthew HellerAugust 6, 2018

Kraft Heinz shares jumped more than 8% on Friday after the packaged food giant reported better-than-expected quarterly results and predicted improved profitability by the end of the year.

Kraft Heinz’s net income fell to $756 million, or 62 cents per share, in the second quarter from $1.16 billion, or 94 cents per share, a year earlier. But excluding items, the company earned $1 per share, beating analysts’ estimate of 92 cents.

Revenue rose less than 1% to $6.69 billion as sales in Europe and Asia helped offset declines in the U.S. and Canada. Sales in the U.S., Kraft Heinz’s biggest market, dropped 1.9% to $4.51 billion.

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Analysts had forecast total sales of $6.58 billion and U.S. sales of $4.43 billion. It was the company’s first U.S. revenue beat in at least five quarters.

“Our results through the first half were stronger than the expectations we put forward as recently as three months ago, and we have been even more encouraged by our recent performance in the marketplace,” CEO Bernardo Hees said.

“We believe we are now in a position to drive sustainable top-line growth from a strong pipeline of new product, marketing and whitespace initiatives that are backed by investments in capabilities for brand and category advantage,” he added. “And while cost inflation on many fronts has been holding back our bottom line, we expect our profitability to improve by year-end, with further momentum into 2019.”

As The Associated Press reports, “The maker of Oscar Mayer meats, Jell-O pudding and Velveeta cheese has had a difficult time boosting sales in [the U.S.] as more people avoid processed foods.”

“General Mills Inc., Kellogg Co., Hershey Co. and Mondelez International Inc., are all adapting to that shift, and some are seeking growth outside of traditional paths, including the acquisition of fast-growing pet food brands,” the AP noted.

Kraft Heinz helped offset rising commodity and transportation costs in the second quarter by raising prices of its packaged foods and condiments by 1.3 percentage points. In the U.S., pricing increased 0.4 percentage points.

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