Kraft Heinz Q4 Earnings And Revenues Miss Estimates

The Kraft Heinz Company (KHC – Free Report) posted fourth-quarter 2017 results, wherein earnings and revenues missed the Zacks Consensus Estimate.

Earnings

Adjusted earnings per share of 90 cents missed the Zacks Consensus Estimate of 96 cents. Also, the bottom-line declined 1.1% from the year-ago figure on higher effective tax rate.

Sales

Reported sales of $6.88 billion fell marginally short of the Zacks Consensus Estimate of $6.90 billion by 0.3%. However, the top line inched up only 0.3% year over year owing to soft consumer demand in North America and Canada. The reported figure includes a favorable 0.9% impact from currency. Organically sales decreased 0.6%.

Volume/mix declined 1.6% compared with a decrease of 0.2% in the previous quarter. This was due to lower shipments across several categories in the United States as well as cheese and coffee in Canada.

Pricing was up 1% compared with an increase of 0.5% in the preceding quarter driven by price improvement in Rest of World markets and the United States.

Operating Highlights

Gross profit of $2.4 billion decreased 4% year over year.

Adjusted EBITDA was up 4% to $2 billion in the fourth quarter owing to cost initiatives, lower overhead costs and favorable pricing, partially offset by higher input costs and lower volume/mix.

Quarterly Segment Discussion

Kraft Heinz reports through four segments – the United States, Canada, Europe and Rest of World.

United States: Net sales of $4.8 billion declined 1.1% year over year. Organic sales also fell 1.1% on lower volumes. Volume/mix decreased 1.7% due to some distribution losses on Planters in the club channel, lower shipments in natural cheese and service-related losses in cold cuts. However, this was partially offset by higher demand in Lunchables, P3, Capri Sun ready-to-drink beverages, macaroni, and cheese category. Pricing was up 0.6% owing to higher prices in cheese and seasonal items.

Canada: Net sales of $591 million declined 4.1% year over year with a 4.5% favorable impact from currency. Organically, sales declined 8.6% as well. Volume/mix was down 8.6% on lower inventory levels at retail, the discontinuation of select cheese products and lower shipments of coffee. Meanwhile, pricing remained flat compared with the prior-year quarter.