The Kraft Heinz Co (KHC, Financial) released its 8-K filing on July 31, 2024, reporting its financial results for the second quarter of 2024. The company, formed by the merger of Kraft and Heinz in July 2015, is the third-largest food and beverage manufacturer in North America and the fifth-largest globally. Its portfolio includes iconic brands such as Oscar Mayer, Velveeta, and Philadelphia, with products sold in over 190 countries and territories.
Performance Overview
The Kraft Heinz Co (KHC, Financial) reported a 3.6% decline in net sales to $6.5 billion for Q2 2024, missing the estimated revenue of $6,553.47 million. Organic net sales decreased by 2.4%, reflecting a cautious consumer sentiment. Despite the revenue decline, the company achieved a gross profit margin increase of 180 basis points to 35.4%, with an adjusted gross profit margin rising by 210 basis points to 35.5%.
Operating income saw a significant drop of 62.1% to $522 million, primarily due to non-cash impairment losses of $854 million. However, adjusted operating income increased by 2.0% to $1.38 billion, driven by gross savings and higher pricing. Diluted EPS fell sharply by 90.1% to $0.08, while adjusted EPS was $0.78, slightly below the previous year's $0.79 but above the estimated $0.74.
Financial Achievements and Challenges
Despite the challenges, The Kraft Heinz Co (KHC, Financial) reported several financial achievements. Year-to-date net cash provided by operating activities increased by 8.1% to $1.7 billion, and free cash flow rose by 8.7% to $1.2 billion. The company also returned $1.5 billion to stockholders through dividends and share repurchases.
"Our second quarter net sales growth came in lower than originally anticipated, as consumer sentiment remains cautious," said Kraft Heinz CEO Carlos Abrams-Rivera. "While we are now expecting a more gradual top-line improvement in the back half of the year, we continue to unlock efficiencies that are allowing us to make accretive investments in our brands, grow profits, and drive future sales growth."
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Net Sales | $6,476 million | $6,721 million | -3.6% |
| Gross Profit | $2,294 million | $2,261 million | 1.5% |
| Operating Income | $522 million | $1,376 million | -62.1% |
| Net Income | $100 million | $998 million | -90.0% |
| Diluted EPS | $0.08 | $0.81 | -90.1% |
| Adjusted EPS | $0.78 | $0.79 | -1.3% |
Analysis and Outlook
The Kraft Heinz Co (KHC, Financial) faces challenges with declining net sales and operating income, primarily due to non-cash impairment losses and cautious consumer sentiment. However, the company has managed to improve its gross profit margins and adjusted operating income, indicating effective cost management and pricing strategies.
Looking ahead, The Kraft Heinz Co (KHC, Financial) has lowered its full-year outlook for organic net sales and adjusted operating income but reaffirmed its adjusted EPS guidance. The company expects organic net sales to be down 2% to flat, adjusted operating income growth of 1% to 3%, and adjusted EPS growth of 1% to 3%, in the range of $3.01 to $3.07.
"We remain confident in our strategy and in the attractive categories in which we compete. We are committed to managing our business in a disciplined manner that preserves our ability to drive sustainable, long-term growth," added Abrams-Rivera.
For more detailed insights, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from The Kraft Heinz Co for further details.
