After taking price actions, Kraft Heinz’s organic net sales increase.
Kraft Heinz Co. executives cited a strong start to 2022 as seen by the company’s organic net sales growth and ongoing inventory rebuild.
In the first quarter that concluded on March 26, organic net sales rose by 7% as a result of a 9 percentage point pricing increase by the company over the same period last year.
The CEO, Miguel Patricio, stated in pre-recorded remarks made accessible on April 27 that “this year-over-year growth was driven by a stronger contribution from price realization, relatively resilient demand, and strong foodservice across geographies.” “In addition, we were able to better capitalize on the robust demand for our brands by alleviating some of the supply constraints that hindered us during the previous quarter.”
Compared to earlier guidance of low-single-digit percentages, Kraft Heinz increased the expected increase in fiscal-year organic net sales to mid-single-digit percentages.
In pre-recorded remarks, global chief financial officer Andre Maciel stated, “This is based on our strong results to date, particularly in the US, as well as the momentum we see in foodservice and emerging markets.” Furthermore, our forecast takes into account increased price elasticity affecting volume and mix in the remaining portion of the year. In the first half of the year, we also anticipate that supply chain bottlenecks will continue to have an impact.
The president of North America, Carlos A. Abrams, stated during an earnings teleconference on April 27 that retail inventories are still flexible.
“As you may remember, we ended the previous year with fewer days of inventory than usual—both in our warehouse and in terms of trade,” he stated. “To support the inventory recovery, we expect that our actual production volume in Q1 was actually 10% higher than it was a year ago, and we plan to maintain this through the end of the year.”
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In the first quarter of this year, Kraft Heinz’s net income increased by 38% to $776 million, or 63¢ per share, on common stock, from $563 million, or 46¢ per share, in the same period the previous year. From $6.39 billion to $6.05 billion, net sales decreased by 5%. 11.2 percentage points were negatively impacted by divestitures net of acquisitions and 1.1 from currency as a percentage. Volume/mix decreased by 2.2 percentage points, with demand from retail products and a sustained rebound in the foodservice channels offsetting supply restrictions to some extent.
From $1.58 billion, or 72¢ per share, to $1.34 billion, or 60¢ per share, adjusted EBITDA fell by 15% during the quarter. The decline was caused more by increased supply chain expenses and commodity costs (mostly in meat, dairy, and packaging materials) than by increased pricing and productivity gains.
According to Mr. Maciel’s pre-recorded remarks, Kraft Heinz has increased its forecast for cost of goods inflation to the mid-teen percentages for the fiscal year, from the previous guideline of low-teen percentages.