Kraft Heinz Q3 results show ‘sequential improvement’

Kraft Heinz reported a 4.8% decrease in net sales in its third quarter compared to the same period last year following weak performance in the US, its biggest market.

The owner of Philadelphia and Lunchables posted net sales of $6.08 billion for the three months to the end of September, negatively impacted by unfavourable currency and divestitures.

Meanwhile Kraft Heinz saw a 45.4% increase in net income which reached $899 million, driven by the gain from selling its Canadian natural cheese business to Lactalis-owned dairy company Parmalat for $1.23 billion.

Organic sells fell 1.6% in the US and 0.5% in Canada, while Europe and the rest of the world saw slight growth. Volume was 2.1% percentage points lower than the prior year period as global growth in condiments and sauces was more than offset by lower shipments in the US.

In the US, net sales were down by 1.6%, primarily driven by ‘lower retail takeaway in natural cheese, cold cuts and Lunchables, as well as unfavourable changes in retail inventory levels.’

Pricing increased 1% versus the prior year period, due to higher pricing in the US, Rest of World and EMEA segments that more than offset lower pricing in Canada. According to Kraft Heinz the decline in Canada’s pricing was driven by increased promotional activity and unfavourable trade expense in cheese.

With regards to volume, Kraft Heinz’s Rest of World saw a decrease of 0.7 percentage points as ongoing weakness in infant nutrition offset growth of condiments and sauces, and Indonesian beverages, while in EMEA volume rose by 0.2 percentage points due to favourable shipment timing in Russia and food service growth across most regions.

Kraft Heinz CEO Miguel Patricio said: “While our third-quarter results remain below our potential, we showed sequential improvement versus the first half, and I believe we are beginning to operate the business better.”

Earlier this year, the US food company announced that its operating income in the first half of the year was half the size it was than the same period last year. The news came six months after Kraft Heinz reported a loss of $12.61 billion in its fourth quarter.

Patricio added: “We are making good progress in identifying and addressing the root causes of past performance, as well as setting our strategic direction. Although there is still much work ahead, we’re encouraged by our improving performance, and are even more confident in our ability to turn around the company and set a path of long-term growth and profitability.”