Kraft Heinz: Reports Q4 and Full Year 2021 Results

Chicago / IL. (khc) The Kraft Heinz Company reported financial results for the fourth quarter and full year 2021. «Our strategic transformation has powered another year of outstanding performance,» said Kraft Heinz CEO Miguel Patricio. «Our achievements are proof that our scale and agility have led to better results and greater relevance with customers and consumers. We are generating efficiencies to fuel incremental investments in our business, which, along with successful pricing, are mitigating inflationary pressures. I’m proud of our incredible team and have great confidence that we will build on our momentum in 2022.»

Q4 2021 Financial Summary

  • Net sales decreased 3.3 percent versus the year-ago period to USD 6.7 billion, including a negative 7.3 percentage point impact from acquisitions and divestitures and a favorable 0.1 percentage point impact from currency. Net sales versus the comparable 2019 period increased 2.6 percent, including a favorable 0.2 percentage point impact from currency and despite a negative 7.0 percentage point impact from acquisitions and divestitures. Organic Net Sales increased 3.9 percent versus the prior year period and 9.4 percent versus the comparable 2019 period, with growth versus 2019 negatively impacted by 1.6 percentage points from exiting the «McCafé» licensing agreement. Pricing was up 3.8 percentage points versus the prior year period with growth across each reporting segment that primarily reflected inflation-justified price increases in foodservice and retail channels. Volume/mix was essentially flat versus the year-ago period as benefits from continued recovery in foodservice channels were offset by a combination of comparisons with extraordinary Covid-19-related retail demand in 2020 and temporary supply constraints.
  • Net income/(loss) decreased to a loss of USD 255 million primarily driven by non-cash impairment losses of USD 1.3 billion, largely due to the impairment of the «Kraft» brand following the closing of the Cheese Transaction, higher interest expense due to one-time debt extinguishment costs, lower Adjusted Ebitda, as well as unrealized losses on commodity hedges in the current year period compared to unrealized gains on commodity hedges in the prior year period. These factors were partially offset by a lower effective tax rate and favorable changes in other expense/(income) versus the prior year period. Net income/(loss) decreased versus the comparable 2019 period primarily driven by non-cash impairment losses as well. Adjusted Ebitda decreased versus the year-ago period to USD 1.6 billion and increased versus the comparable 2019 period. Current year Adjusted Ebitda performance included an unfavorable impact from divestitures of approximately 3.5 percentage points against each of the 2020 and 2019 periods. Excluding a favorable 0.2 percentage point impact from currency, year-over-year Adjusted Ebitda also reflected higher commodity costs, including key commodity and packaging costs, as well as inflation in procurement, logistics, and manufacturing costs. These factors were partially offset by Organic Net Sales gains and operating efficiencies.
  • Diluted EPS decreased to a loss of USD 0.21, down 125.0 percent versus the prior year, driven by the net income/(loss) factors discussed above. Adjusted EPS decreased to USD 0.79, down 1.3 percent versus the prior year, primarily driven by lower Adjusted Ebitda that more than offset lower taxes on adjusted earnings, lower interest expense, and favorable changes in other expense/(income) versus the prior year period.
  • Net cash provided by operating activities was USD 5.4 billion in 2021, up 8.8 percent versus the year-ago period, primarily driven by one-time proceeds of approximately USD 1.6 billion from the sale of licenses in connection with the Cheese Transaction, favorable changes in accounts payable compared to the prior year, largely due to favorable payment terms, and lower cash outflows for inventories. These impacts were partially offset by higher cash tax payments on divestitures in 2021 related to the divestiture of the Company’s nuts business, higher cash outflows for variable compensation in 2021 compared to 2020, higher cash outflows from increased promotional activity versus the prior year period, and lower Adjusted Ebitda. Free Cash Flow was USD 4.5 billion in 2021, up 2.9 percent versus the comparable prior year period due to higher net cash provided by operating activities, partially offset by higher capital expenditures versus the prior year period.

Outlook

The Company expects to deliver strong financial performance in 2022. The Company currently expects a low-single-digit percentage increase in 2022 Organic Net Sales versus the prior year period, reflecting continued stronger consumption versus pre-pandemic levels. Adjusted Ebitda is expected to be in the range of USD 5.8 billion to USD 6.0 billion, reflecting a 53rd week in 2022, the impact of divestitures versus the prior year, strong Organic Net Sales as well as the Company’s ongoing efforts to manage inflationary pressures as it continues to invest in long-term growth.

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