The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) will present today at the 2024 Consumer Analyst Group of
New York (CAGNY) Conference. CEO Carlos Abrams-Rivera and Global
Chief Financial Officer Andre Maciel will discuss how the Company
plans to deliver on its goal to generate consistent top-tier
stockholder returns by being the leader in elevating and creating
food that makes you feel good.
The Company plans to deliver its long-term growth through its
three Growth Pillars: North America Retail, Global Away From Home,
and Emerging Markets. The Company expects to fuel its top-line
growth through its “Enablers of Growth,” which include investments
in marketing, research and development, and technology, increased
contribution from innovation, expanded collaboration with customers
through sales excellence, and deployment of its Brand Growth
System. The Brand Growth System is a global methodology, new to
Kraft Heinz, designed to enable the Company to measure, monitor and
build a superior brand proposition.
To fund these investments, the Company aims to continue driving
end-to-end efficiencies, through supply chain, revenue management,
working capital, and by expanding centralized services. Powering
these are the Company’s unique competitive advantages: tech-enabled
Agile@Scale methodologies, strategic partnerships, and an
ownership-centric culture.
Also, the Company has further refined its strategy by taking a
longer-term approach, looking out to a 10-year horizon across the
consumer demand landscape to predict trends and associated
opportunities. To capture identified opportunities, the Company
refined the role of portfolio categories based on a combination of
market attractiveness and its right to win.
As a result, the Company has realigned its portfolio around
three new platform roles – Accelerate, Protect, and Balance. It
expects the Accelerate platforms, which include Taste Elevation,
Easy Ready Meals, and Substantial Snacking, to drive outsized
growth and plans to prioritize investments in these platforms. The
Company will further describe these changes in today’s
presentation.
Long-Term Financial Profile
The Company will also detail its long-term growth algorithm. The
targets remain unchanged, with the exception of replacing the
previous Adjusted EBITDA(1) target with a target for Adjusted
Operating Income(1). This is a result of the Company’s work to
rewire the organization to drive a stronger connection to total
shareholder return and create an enhanced level of ownership
throughout the Company. The long-term algorithm consists of:
- Organic Net Sales(1) growth of 2% to 3%.
- Adjusted Operating Income(1) growth of 4% to 6%.
- Adjusted EPS(1) growth of 6% to 8%.
- Free Cash Flow Conversion(1) at approximately 100%.
2024 Outlook
As announced in its fourth quarter and full year 2023 earnings,
the Company reiterates its expectation to deliver:
- Organic Net Sales(1) growth of 0% to 2% versus the prior
year. The Company expects a positive contribution from price
throughout the year, with volumes inflecting positive in the second
half of the year.
- Adjusted Operating Income(1) growth of 2% to 4% versus
the prior year. Adjusted Gross Profit Margin(1) is expected to
expand modestly, in the range of 25 to 75 basis points versus the
prior year.
- Adjusted EPS(1) growth of 1% to 3% versus the prior
year, or in the range of $3.01 to $3.07. The Company expects an
effective tax rate on Adjusted EPS to be in the range of 20% to
22%. Additionally, the Company expects an unfavorable impact of
approximately $45 million within interest expense and other
expense/(income) versus the prior year, primarily driven by foreign
currency headwinds and debt refinancing that will come at a higher
rate. The outlook does not include the possibility of additional
share buyback in 2024.
End Notes
(1)
Organic Net Sales, Adjusted Gross Profit,
Adjusted Gross Profit Margin, Adjusted Operating Income, Adjusted
EBITDA, Adjusted EPS, Free Cash Flow, and Free Cash Flow Conversion
are non-GAAP financial measures. Please see discussion of non-GAAP
financial measures and the reconciliations at the end of this press
release for more information. Guidance for Organic Net Sales,
Adjusted Gross Profit Margin, Adjusted Operating Income, and
Adjusted EPS is provided on a non-GAAP basis only because certain
information necessary to calculate the most comparable GAAP measure
is unavailable due to the uncertainty and inherent difficulty of
predicting the occurrence and the future financial statement impact
of such items impacting comparability, including, but not limited
to, the impact of currency, acquisitions and divestitures,
divestiture-related license income, restructuring activities, deal
costs, unrealized losses/(gains) on commodity hedges, impairment
losses, certain non-ordinary course legal and regulatory matters,
equity award compensation expense, nonmonetary currency
devaluation, and debt prepayment and extinguishment
(benefit)/costs, among other items. Therefore, as a result of the
uncertainty and variability of the nature and amount of future
adjustments, which could be significant, the Company is unable to
provide a reconciliation of these measures without unreasonable
effort.
Webcast Information
A prepared presentation at the CAGNY conference will begin at 11
a.m. Eastern Standard Time today and will be available at
ir.kraftheinzcompany.com. A replay will also be accessible after
the event at ir.kraftheinzcompany.com.
ABOUT THE KRAFT HEINZ COMPANY
We are driving transformation at The Kraft Heinz Company
(Nasdaq: KHC), inspired by our Purpose, Let’s Make Life Delicious.
Consumers are at the center of everything we do. With 2023 net
sales of approximately $27 billion, we are committed to growing our
iconic and emerging food and beverage brands on a global scale. We
leverage our scale and agility to unleash the full power of Kraft
Heinz across a portfolio of six consumer-driven product platforms.
As global citizens, we’re dedicated to making a sustainable,
ethical impact while helping feed the world in healthy, responsible
ways. Learn more about our journey by visiting
www.kraftheinzcompany.com or following us on LinkedIn.
Forward-Looking Statements
This press release contains a number of forward-looking
statements. Words such as “aim,” “capture,” “deploy,” “expect,”
“increase,” “invest,” “plan,” “predict,” and “will,” and variations
of such words and similar future or conditional expressions are
intended to identify forward-looking statements. Examples of
forward-looking statements include, but are not limited to,
statements regarding the Company's plans, impacts of accounting
standards and guidance, growth, legal matters, taxes, costs and
cost savings, impairments, dividends, expectations, investments,
innovations, opportunities, capabilities, execution, initiatives,
and pipeline. These forward-looking statements reflect management's
current expectations and are not guarantees of future performance
and are subject to a number of risks and uncertainties, many of
which are difficult to predict and beyond the Company's
control.
Important factors that may affect the Company's business and
operations and that may cause actual results to differ materially
from those in the forward-looking statements include, but are not
limited to, operating in a highly competitive industry; the
Company’s ability to correctly predict, identify, and interpret
changes in consumer preferences and demand, to offer new products
to meet those changes, and to respond to competitive innovation;
changes in the retail landscape or the loss of key retail
customers; changes in the Company's relationships with significant
customers or suppliers, or in other business relationships; the
Company’s ability to maintain, extend, and expand its reputation
and brand image; the Company’s ability to leverage its brand value
to compete against private label products; the Company’s ability to
drive revenue growth in its key product categories or platforms,
increase its market share, or add products that are in
faster-growing and more profitable categories; product recalls or
other product liability claims; climate change and legal or
regulatory responses; the Company’s ability to identify, complete,
or realize the benefits from strategic acquisitions, divestitures,
alliances, joint ventures, or investments; the Company's ability to
successfully execute its strategic initiatives; the impacts of the
Company's international operations; the Company's ability to
protect intellectual property rights; the Company’s ability to
realize the anticipated benefits from prior or future streamlining
actions to reduce fixed costs, simplify or improve processes, and
improve its competitiveness; the influence of the Company’s largest
stockholder; the Company's level of indebtedness, as well as our
ability to comply with covenants under our debt instruments;
additional impairments of the carrying amounts of goodwill or other
indefinite-lived intangible assets; foreign exchange rate
fluctuations; volatility in commodity, energy, and other input
costs; volatility in the market value of all or a portion of the
commodity derivatives we use; compliance with laws and regulations
and related legal claims or regulatory enforcement actions; failure
to maintain an effective system of internal controls; a downgrade
in the Company's credit rating; the impact of sales of the
Company's common stock in the public market; the impact of our
share repurchases or any change in our share repurchase activity;
the Company’s ability to continue to pay a regular dividend and the
amounts of any such dividends; disruptions in the global economy
caused by geopolitical conflicts; unanticipated business
disruptions and natural events in the locations in which the
Company or the Company's customers, suppliers, distributors, or
regulators operate; economic and political conditions in the United
States and various other nations where the Company does business
(including inflationary pressures, instability in financial
institutions, general economic slowdown, recession, or a potential
U.S. federal government shutdown); changes in the Company's
management team or other key personnel and the Company's ability to
hire or retain key personnel or a highly skilled and diverse global
workforce; our dependence on information technology and systems,
including service interruptions, misappropriation of data, or
breaches of security; increased pension, labor, and people-related
expenses; changes in tax laws and interpretations and the final
determination of tax audits, including transfer pricing matters,
and any related litigation; volatility of capital markets and other
macroeconomic factors; and other factors. For additional
information on these and other factors that could affect the
Company's forward-looking statements, see the Company's risk
factors, as they may be amended from time to time, set forth in its
filings with the Securities and Exchange Commission (“SEC”). The
Company disclaims and does not undertake any obligation to update,
revise, or withdraw any forward-looking statement in this press
release, except as required by applicable law or regulation.
Non-GAAP Financial Measures
The non-GAAP financial measures provided in this press release
should be viewed in addition to, and not as an alternative for,
results prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) that are
presented in the Company’s filings with the SEC.
The Company has presented Organic Net Sales, Adjusted Gross
Profit, Adjusted Gross Profit Margin, Adjusted Operating Income,
Adjusted EBITDA, Adjusted EPS, Free Cash Flow, and Free Cash Flow
Conversion, which are considered non-GAAP financial measures. The
non-GAAP financial measures presented may differ from similarly
titled non-GAAP financial measures presented by other companies,
and other companies may not define these non-GAAP financial
measures in the same way. These measures are not substitutes for
their comparable GAAP financial measures, such as net sales, net
income/(loss), gross profit, diluted earnings per share (“EPS”),
net cash provided by/(used for) operating activities, or other
measures prescribed by GAAP, and there are limitations to using
non-GAAP financial measures.
Management uses these non-GAAP financial measures to assist in
comparing the Company’s performance on a consistent basis for
purposes of business decision making by removing the impact of
certain items that management believes do not directly reflect the
Company’s underlying operations. The Company believes:
- Organic Net Sales, Adjusted Gross Profit, Adjusted Gross Profit
Margin, Adjusted Operating Income, Adjusted EBITDA, and Adjusted
EPS provide important comparability of underlying operating
results, allowing investors and management to assess the Company’s
operating performance on a consistent basis; and
- Free Cash Flow and Free Cash Flow Conversion provide a measure
of the Company’s core operating performance, the cash-generating
capabilities of the Company’s business operations, and are factors
used in determining the Company’s borrowing capacity and the amount
of cash available for debt repayments, dividends, acquisitions,
share repurchases, and other corporate purposes.
Management believes that presenting the Company’s non-GAAP
financial measures is useful to investors because it (i) provides
investors with meaningful supplemental information regarding
financial performance by excluding certain items, (ii) permits
investors to view performance using the same tools that management
uses to budget, make operating and strategic decisions, and
evaluate historical performance, and (iii) otherwise provides
supplemental information that may be useful to investors in
evaluating the Company’s results. The Company believes that the
presentation of these non-GAAP financial measures, when considered
together with the corresponding GAAP financial measures and the
reconciliations to those measures, provides investors with
additional understanding of the factors and trends affecting the
Company’s business than could be obtained absent these
disclosures.
Definitions
Organic Net Sales is defined as net sales excluding, when
they occur, the impact of currency, acquisitions and divestitures,
and a 53rd week of shipments. The Company calculates the impact of
currency on net sales by holding exchange rates constant at the
previous year's exchange rate, with the exception of highly
inflationary subsidiaries, for which the Company calculates the
previous year's results using the current year's exchange rate.
Adjusted Operating Income is defined as net income/(loss)
from continuing operations before interest expense, other
expense/(income), and provision for/(benefit from) income taxes; in
addition to these adjustments, the Company excludes, when they
occur, the impacts of restructuring activities, deal costs,
unrealized losses/(gains) on commodity hedges, impairment losses,
and certain non-ordinary course legal and regulatory matters.
Adjusted EBITDA is defined as net income/(loss) from
continuing operations before interest expense, other
expense/(income), provision for/(benefit from) income taxes, and
depreciation and amortization (excluding restructuring activities);
in addition to these adjustments, the Company excludes, when they
occur, the impacts of divestiture-related license income,
restructuring activities, deal costs, unrealized losses/(gains) on
commodity hedges, impairment losses, certain non-ordinary course
legal and regulatory matters, and equity award compensation expense
(excluding restructuring activities).
Adjusted Gross Profit and Adjusted EPS are defined as
gross profit and diluted earnings per share excluding, when they
occur, the impacts of restructuring activities, deal costs,
unrealized losses/(gains) on commodity hedges, impairment losses,
certain non-ordinary course legal and regulatory matters,
losses/(gains) on the sale of a business, other losses/(gains)
related to acquisitions and divestitures (e.g., tax and hedging
impacts), nonmonetary currency devaluation (e.g., remeasurement
gains and losses), debt prepayment and extinguishment
(benefit)/costs, and certain significant discrete income tax items
(e.g., U.S. and non-U.S. tax reform), and including when they
occur, adjustments to reflect preferred stock dividend payments on
an accrual basis. Adjusted Gross Profit Margin is defined as
Adjusted Gross Profit divided by net sales.
Free Cash Flow is defined as net cash provided by/(used
for) operating activities less capital expenditures. The use of
this non-GAAP measure does not imply or represent the residual cash
flow for discretionary expenditures since the Company has certain
non-discretionary obligations such as debt service that are not
deducted from the measure. Free Cash Flow Conversion is
defined as Free Cash Flow divided by Adjusted Net
Income/(Loss).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240221146866/en/
Alex Abraham (media) Alex.Abraham@kraftheinz.com
Anne-Marie Megela (investors)
Anne-Marie.Megela@kraftheinz.com
Kraft Heinz (NASDAQ:KHC)
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