Kraft Heinz (KHC 51.01, -5.19, -9.23%) has given up 9.23% after
reporting mixed quarterly results.
The food company reported below-consensus third quarter earnings of $0.78 per share on a 1.6% yr/yr increase in revenue to $6.38 bln, which was ahead of expectations.
Organic net sales grew 2.6% yr/yr while acquisitions and divestitures increased the total revenue growth rate by 60 bps. Pricing declined 0.9% yr/yr due to higher promotional support and lower pricing in the United States, which outweighed higher pricing in other markets. Volume/mix grew 3.5% thanks to increases in every segment. Profitability in all segments was impacted by non-food inflation.
Adjusted EBITDA declined 14.4% yr/yr to $1.60 bln due to investments in strategic capabilities, higher overhead costs, and higher input costs. CEO Bernardo Hess commented on the quarter, drawing attention to the company's solid top-line growth. Mr. Hess said he is confident that the company's commercial investments are working, evidenced by a "strong pipeline of marketing, new product, and whitespace initiatives now in the marketplace." Mr. Hess added that profitability was impacted negatively during the quarter by one-off factors.
Net sales in the United States grew 1.8% yr/yr to $4.43 bln with organic sales growth responsible for the entire growth rate. Pricing declined 2.0% due to increased in-store activity. Volume/mix increased 3.8% thanks to all-around strength. Segment adjusted EBITDA fell 16.2% yr/yr to $1.20 bln as lower pricing outweighed increased volume. Higher logistics costs, increased investments, and higher overhead costs also weighed on profitability.
Net sales in Canada declined 5.6% yr/yr to $525 mln while organic sales fell 1.4%. Pricing declined 1.5% due to increased promotional activity, which more than offset favorable pricing in foodservice. Volume/mix was little changed. Segment adjusted EBITDA fell 10.3% yr/yr to $144 mln due to lower pricing, higher overhead costs, and higher input costs.
Europe, Middle East, and Africa sales declined 3.3% yr/yr to $629 mln while organic sales increased 0.6%. The divestiture of a joint venture in South Africa reduced the revenue growth rate by 200 basis points. Pricing declined 0.7% as lower prices in the Middle East and Africa outweighed higher prices in the United Kingdom, Italy, and the Netherlands. Volume/mix grew 1.3% due to foodservice gains from all regions. Segment adjusted EBITDA fell 11.7% to $161 mln due to higher supply chain costs in the Middle East and Africa and higher go-to-market investments.
Rest of World revenue grew 9.9% yr/yr to $793 mln while organic sales jumped 12.5%. The acquisition of Cerebros contributed 680 basis points to the revenue growth rate. Pricing rose 6.2% due to a highly-inflationary environment in Latin America. Volume/mix grew 6.3% due to higher sales of condiments and sauces in Latin America. Segment adjusted EBITDA rose 5.9% yr/yr to $148 mln as higher organic net sales outweighed higher input costs.
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