Kraft Heinz delivers results ahead of expectations in Q3 report

Kraft Heinz Co. (Nasdaq: KHC) this week reported financial results for the third quarter of 2021, which reflected gains in organic net sales on top of strong growth in 2020. The company also reported better-than-expected results, enabled by improvements in its operating model and an agile approach to managing supply and services through volatile markets.

Kraft Heinz third-quarter key points

• Net sales decreased 1.8% versus the year-ago period to $6.3 billion, including a negative 4 percentage point impact from the divestiture of the company's nuts business, which closed in the second quarter of 2021, and a favorable 0.9% impact from currency. Net sales versus the comparable 2019 period increased 4.1%
• Organic net sales increased 1.3% versus the prior year period and 7.6% versus the comparable 2019 period, with growth versus 2019 negatively impacted by 1.4% from exiting the McCafé licensing agreement. Pricing was up 1.5% versus the prior year period with growth across each reporting segment that primarily reflected inflation-justified price increases in foodservice and retail channels across all geographies.
• Net income/(loss) increased 23.2% to $736 million, primarily driven by a $300 million non-cash goodwill impairment loss in the prior year period related to the Cheese Transaction, a lower effective tax rate versus the prior year period and favorable changes in other expense/(income). These factors were partially offset by lower adjusted EBITDA, higher interest expense due to debt extinguishment costs/
• Adjusted EBITDA decreased 11.3% versus the year-ago period to $1.5 billion and increased 0.7% versus the comparable 2019 period, with performance against each period including an unfavorable impact from divestitures of approximately 3%.
• Diluted EPS increased to $0.59, up 20.4% versus the prior year, driven by the net income/(loss) factors discussed above. Adjusted EPS decreased to $0.65, down 7.1% versus the prior year, primarily driven by lower adjusted EBITDA, higher equity award compensation expense and unfavorable changes in other expense/(income) that more than offset lower taxes on adjusted earnings and lower interest expense versus the prior year period.
• Year-to-date net cash provided by operating activities was $2.4 billion, down 26.4% versus the year-ago period, primarily driven by higher cash tax payments on divestitures in 2021 related to the divestiture of the company's nuts business, higher cash outflows for variable compensation in 2021 compared to 2020, higher cash outflows from increased promotional activity versus the prior year period and lower adjusted EBITDA.