Sales down at Kraft Heinz as US demand weakens

Kraft Heinz, the company behind Jell-O and Heinz baked beans, on Friday reported a decrease in fourth-quarter organic sales as demand weakened in the US.

Net sales edged up 0.3 per cent from a year ago to $6.88 billion (€5.5bn), a shade below analysts’ estimates and including a 0.9 percentage point benefit from currency moves. However stripping out the impact of currency fluctuations and other items, organic sales fell 0.6 per cent compared to a year ago in the fourth quarter.

Organic sales were down 1.1 per cent in the US, the company’s largest market, where prices increased, but the company saw lower shipments across several categories including nuts, natural cheese and cold cuts in the US, which was partially offset by growth in macaroni cheese.

Meanwhile, organic sales fell 8.6 per cent in Canada and were up 0.9 per cent in Europe and 7 per cent in the rest of the world, driven by strong growth in China and Indonesia.

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"There's no question that our financial performance in 2017 did not reflect our progress or potential," said Kraft Heinz chief executive Bernardo Hees. "We made significant improvements in many of our businesses, and were able to accelerate some important business investments at the end of the year. This, together with benefits from the US tax cuts and jobs act and additional investments in our capabilities, should help further advantage our brands and grow our business in 2018 and beyond."

Net income

Net income rose to $8 billion or $6.52 a share, reflecting a benefit from the US tax overhaul. Adjusted earnings fell 1.1 per cent to 90 cent a share and missed analysts’ estimates of 95 cent.

The company, which was created in 2015 through a $100 billion deal devised by Warren Buffett and Brazil’s 3G Capital, on Thursday hinted at plans that it could be open to more M&A as Mr Hees said in an investor presentation that changes in the industry would increase pressure for further consolidation and “we will continue to generate opportunities for us to expand our portfolio”.

The company also said it had met its target of reducing costs by $1.7 billion by the end of last year.

Kraft Heinz shares, which are down 6.5 per cent year-to-date, were down 0.3 per cent pre-market. – Copyright The Financial Times Limited 2018