Kraft Heinz reports strong second-quarter 2021 results as it navigates inflation pressures

Kraft Heinz Co. (Nasdaq: KHC) on Aug. 4 reported financial results for the second quarter of 2021, coming out with quarterly earnings of $0.78 a share, exceeding Zacks Consensus Estimate of $0.73 a share, compared with earnings of $0.80 per share a year ago. 

"Our second-quarter results serve as a strong indicator that our Kraft Heinz team will not only deliver a stronger 2021 than we initially anticipated, but will come out of the global pandemic much stronger than we entered,” said Kraft Heinz chief executive Miguel Patricio. 

“We continue to drive our transformation program forward, modernizing our brands and better connecting with our consumers," he added. "And while industry challenges, like cost inflation, certainly remain, the investments we are making in our people, brands, and capabilities are enabling us to leverage our tremendous scale through greater agility and build our advantage in the markets we serve around the world."

KEY POINTS

• Net sales decreased 0.5% versus the year-ago period to $6.6 billion, including a favorable 2.3% impact from currency and a negative 0.7% impact from the divestiture of the Company's nuts business, which closed in the second quarter of 2021. Net sales versus the comparable 2019 period increased 3.2%.
• Organic Net Sales decreased 2.1% versus the prior year period, but increased 5% versus the comparable 2019 period with both comparisons negatively impacted by exiting the McCafé licensing agreement. Pricing was up 1.5% versus the prior year period with growth across each reporting segment that reflected favorable trade expense timing in the United States as well as higher, inflation-justified pricing in foodservice and retail channels. These gains more than offset the negative impact from restoring more normalized promotional activities versus the year-ago period.
• Net income/(loss) increased 98.5% versus the year-ago period to a loss of $25 million primarily driven by favorable changes in non-cash impairment charges versus the year-ago period. This was partially offset by a higher effective tax rate versus the prior year period as well as unfavorable changes in interest expense due to one-time debt extinguishment costs. Net income/(loss) decreased 105.7% versus the comparable 2019 period. Adjusted EBITDA decreased 5.2% versus the year-ago period to $1.7 billion and increased 6.6% versus the comparable 2019 period. 
• Diluted EPS increased to a loss of $0.02, up 98.5% versus the prior year, driven by the net income/(loss) factors discussed above. Adjusted EPS was $0.78, down 2.5% versus the prior year, primarily driven by lower adjusted EBITDA that more than offset lower interest expense and a lower effective tax rate versus the prior year period.
• Year-to-date net cash provided by operating activities was $2 billion, down 8.4% versus the year-ago period reflecting a combination of higher cash outflows related to variable compensation, taxes and promotional activity versus the prior year period.