Dive Brief:
- Kraft Heinz quadrupled its pro forma net income attributable to the company in the second quarter, which hit $770 million, or $0.63 per share, compared to $186 million, or $0.15 per share, in the same quarter last year.
- Pro forma net revenue fell 4.7% to $6.8 billion, including a 1.9% dip in U.S. sales, due in part to lower sales for Maxwell House ground coffee and Smart Ones frozen dinners.
- The company also boosted its quarterly dividend by 4.3% to $0.60 per share, up from the previous rate of $0.575 per share.
Dive Insight:
Cost-cutting, synergies and profitability have always been at the heart of the Kraft Heinz merger, with plans to slice $1.5 billion out of the two companies' premerger annual budgets by the end of 2017.
This narrative is increasingly common across the food and beverage industry: profits are up, while sales continue to decline. Earlier this week, Kellogg reported a 26% jump in net income but a 6.6% decrease in net revenue. For fiscal 2016, General Mills reported a 6% decrease in net sales while diluted earnings per share rose 41%.
As sales decline across various categories in packaged foods, manufacturers have launched aggressive cost-cutting initiatives, including massive layoffs, factory closures and the implementation of techniques like zero-based budgeting. But cost-cutting won't appease investors forever — improvements to the top line will eventually have to come into play.
Kraft Heinz has also been at the center of acquisition speculation to buy companies such as Kellogg. But Kraft Heinz CEO Bernardo Hees said on the earnings calls that it is busy focusing on the continued integration of the two companies, though "we always are going to be looking for opportunities," he said.
Kraft Heinz has been noted in the past for bucking the industrywide trend of focusing on overhauling products to fit consumer health trends. That's with the exception of efforts like removing certain artificial ingredients from its iconic macaroni and cheese brand without announcing the changes had hit shelves. The company announced the new ingredients list months later to demonstrate that loyal consumers didn't notice changes in flavor or appearance.
Kraft Heinz's stock popped as high as 4.5% on the earnings news Thursday during after-hours trading.