Kraft Heinz's sales fall while profits rise

Dive Brief:

  • Kraft Heinz reported a 3.7% decrease in net sales to $6.85 billion for the fourth quarter of fiscal 2016, according to the company’s latest earnings report. Meanwhile, organic net sales grew 1.6%. 
  • The company’s operating income grew 22.8% since last year, while net income attributable to common shareholders grew from $285 million to $944 million, beating analyst expectations.
  • The company's U.S. sales decreased 3.1%, Canadian sales fell 2.4%, European sales dropped 27.3%, and rest of the world sales slipped slightly by 0.7% year-over-year. 

Dive Insight:

Since the 2015 megamerger between food giants Kraft Foods and the H.J. Heinz Co, the combined company Kraft Heinz has been looking to create cost savings in its business. 

The growth in earnings despite the decline in sales reflects this initiative. Higher prices also drove more profitable sales for the company despite headwinds from commodities deflation. 

Despite the decline in sales, CEO Bernardo Hees said the company ended the year consistent with expectations and sees good momentum heading into 2017.

“Looking forward, our objectives and opportunities are clear,” he said in the report. “But we need to sharpen our focus on profitable sales, and further improve our capabilities and execution to deliver another year of strong, sustainable growth in 2017."

The company has seen "significant progress in the marketplace and improved execution during the year of significant transformation," George Zoghbi, COO at Kraft Heinz, said on an earnings call. He added that  the company's U.S. strategy for 2017 is focused on driving top-line growth and improving challenged categories; better leveraging the company's "scale at retail with increased in-store activity"; and using the company's supply chain modernization project (in which it has invested $1 billion) to invest further in innovation. 

Analysts see growth opportunities in segments such as condiments and sauces, cheese, meals, nuts and baby food. Kraft Heinz has also long been speculated to be on the lookout for acquisitions. Previously, Hees said on earnings calls the company is busy focusing on the continued integration of the two companies, though "we always are going to be looking for opportunities."

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Filed Under: Manufacturing Grocery Corporate