[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / August 8, 2016 / Active Wall St. announces its post-earnings coverage on The Kraft Heinz Company (NASDAQ: KHC). The company announced its second quarter fiscal 2016 financial results on August 04, 2016. The world's fifth-largest food company by revenue beat earnings consensus driven by results from measures to reduce expenditure and lower commodity prices. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
For the three months ended on July 03, 2016, Kraft Heinz reported net income of $770 million, or $0.63 per share, compared to $186 million, or $0.15 per share, in the year earlier quarter, on a pro forma basis, which considers that the two companies were a single entity in both periods. Adjusted earnings of $0.85 per share beat analysts' estimates for $0.72 per share. The packaged-food company, which was formed when Kraft Foods Group merged with H.J. Heinz Co. in July 2015, saw a revenue decline of 4.7% to $6.79 billion for Q2 FY16, in-line with market expectations.
"By implementing our integration program and improving our performance in the marketplace, we continued to drive results in the second quarter," said Kraft Heinz CEO Bernardo Hees.
Segment Discussion
During Q2 FY16, adjusted net sales in its United States unit declined by1.9% to $4.69 billion on y-o-y basis. Volume/mix dropped 3.1% in Q2 FY16 compared to a 0.1% increase in the previous quarter .Gains from innovation in Lunchables and P3 as well as macaroni & cheese were more than offset by lower shipments in foodservice, bacon, and cold cuts.
Adjusted net sales declined 3.9% in Canada to $638 in Q2 FY16 due to currency headwinds. Volume/mix dipped 1.9% on the back of a decline in cheese due to reduced promotional activity as well as lower coffee and ready-to-drink beverages shipments. However, the volume/mix decline was better than the 2.2% drop in the previous quarter.
In Europe, during Q2 FY16, adjusted net sales declined 6.9% on y-o-y basis to $578 million on impact from foreign exchange and divestures. Organically, sales dropped 2.3% amid a challenging consumer and retail environment.
For its Rest of World segment, adjusted net sales of $885 million declined 16.7% as compared to the year ago period.
Although the company's revenue have declined, it is moving ahead with important decisions, such as removing artificial coloring from macaroni and cheese, and it is also launched a new frozen-dinner brand called Devour to target health-conscious consumers moving towards simple ingredients and fresh food.
"Our biggest challenge remains the fact that you continue to have a number of categories where consumption trends are working against us," Mr Hees said.
Lean Machine
Kraft Heinz merger deal was done with the main goal of increasing profitability by reducing department budgets, removing excess manufacturing capacity and merging operations steps such as purchase of ingredients. The company's strict budget control - which consists of a plan to eliminate $1.5 billion from the two companies' premerger annual budgets by the end of 2017 through work-force reductions, factory closures, and consolidations - is helping to shore up its profit margins. In Q2 FY16, Kraft Heinz reduced general and administrative expenses by 19% to $895 million.
The merger was sponsored by Brazilian private equity firm, 3G Capital Partners L.P., which has acquired H.J. Heinz Co. in 2013, and was supported by billionaire investor Warren Buffet.
Mr. Hees and other key Kraft Heinz executives come from 3G Capital, which is known for its ability to shrink expenses and run unusually lean organisations.
Dividend Hike
On the same day of earnings release, Kraft Heinz's board of directors announced a 4.3% increase in the quarterly dividend from $0.57.5 per share to $0.60 per share, payable on October 7, 2016, to shareholders of record as of August 26, 2016.
Stock Performance
On August 5, 2016, Kraft Heinz's shares jumped 3.80%, closing the day at $88.79 with a total volume of 5.11 million shares, which was higher than its 3 months average volume of 3.15 million shares. The company's stock price has advanced 23.79% since the beginning of the year.
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