Kraft Heinz’s Financial Performance in 2024

Kraft Heinz, the global food and beverage company, has released its financial results for the fiscal year 2024. The report provides insights into the company’s financial performance, operational highlights, and future outlook.

Overview of Financial Performance

In 2024, Kraft Heinz reported net sales of $25.8 billion, a 3.0% decrease compared to the previous year. This decline was primarily driven by unfavorable volume/mix (3.5 percentage points), which offset higher pricing (1.4 percentage points). The company’s Organic Net Sales, which excludes the impact of currency, acquisitions, and divestitures, decreased by 2.1% to $25.9 billion.

Despite the decline in net sales, Kraft Heinz’s Adjusted Operating Income, which excludes the impact of restructuring activities, impairment losses, and other one-time items, increased by 1.2% to $5.4 billion. This improvement was driven by higher pricing, lower variable compensation expense, and lower procurement and logistics costs, partially offset by unfavorable volume/mix, increased manufacturing expenses, and higher selling, general, and administrative (SG&A) expenses.

Net income attributable to common shareholders decreased by 3.9% to $2.7 billion, primarily due to the higher non-cash impairment losses recorded in 2024 compared to the previous year. However, the company’s effective tax rate was a benefit of 220.5% in 2024, compared to an expense of 21.7% in 2023, primarily due to the recognition of a $3.0 billion non-U.S. deferred tax asset as a result of the movement of certain business operations to a wholly-owned subsidiary in the Netherlands.

Adjusted Earnings per Share (Adjusted EPS), which excludes the impact of certain one-time items, increased by 2.7% to $3.06 per share, driven by the higher Adjusted Operating Income, the favorable impact of common stock repurchases, and favorable changes in other expense/income, which more than offset higher taxes on adjusted earnings.

Segment Performance

Kraft Heinz operates through four reporting segments: North America, International Developed Markets, and Emerging Markets (which includes West and East Emerging Markets and Asia Emerging Markets).

North America Net sales in the North America segment decreased by 2.9% to $19.5 billion, primarily due to unfavorable volume/mix (4.2 percentage points), which more than offset higher pricing (1.4 percentage points). Segment Adjusted Operating Income increased by 1.2% to $5.1 billion, driven by higher pricing, lower procurement and logistics costs, and lower variable compensation expense, partially offset by unfavorable volume/mix, increased manufacturing expenses, and higher SG&A expenses.

International Developed Markets Net sales in the International Developed Markets segment decreased by 2.4% to $3.5 billion, primarily due to unfavorable volume/mix (2.8 percentage points), while pricing remained flat. Segment Adjusted Operating Income increased by 3.0% to $537 million, driven by lower procurement and logistics costs, lower variable compensation expense, and the favorable impact of foreign currency, partially offset by unfavorable volume/mix and increased manufacturing expenses.

Emerging Markets Net sales in the Emerging Markets segment decreased by 4.3% to $2.8 billion, including the unfavorable impacts of foreign currency (6.2 percentage points) and acquisitions and divestitures (2.1 percentage points). Organic Net Sales increased by 4.0%, primarily driven by higher pricing (3.5 percentage points) and favorable volume/mix (0.5 percentage points). Segment Adjusted Operating Income decreased by 14.7% to $321 million, primarily due to higher supply chain costs reflecting inflationary pressures, the unfavorable impact of foreign currency, and increased SG&A expenses, partially offset by higher pricing and favorable volume/mix.

Liquidity and Capital Resources

Kraft Heinz’s cash flow from operating activities was $4.2 billion in 2024, compared to $4.0 billion in 2023. The company used $1.0 billion in investing activities, primarily for capital expenditures and the acquisition of the TGI Friday License, offset by proceeds from net investment hedge settlements.

In financing activities, the company used $3.0 billion, primarily for common stock repurchases and debt repayments. Kraft Heinz had $1.3 billion in cash and cash equivalents at the end of 2024, with $781 million held by international subsidiaries.

The company maintains a $4.0 billion senior unsecured revolving credit facility, which was extended to July 2029 during the year. Kraft Heinz’s long-term debt stood at $19.9 billion at the end of 2024, down from $20.0 billion in the previous year, primarily due to changes in foreign currency exchange rates and the repayment of senior notes.

Acquisitions and Divestitures

In 2024, Kraft Heinz closed the sale of its infant nutrition business in Russia and the sale of its subsidiary in Papua New Guinea, both within the Emerging Markets segment.

In 2022, the company completed the acquisitions of Hemmer, a Brazilian food and beverage manufacturing company, and Just Spices, a German-based direct-to-consumer spice blend company, as part of its strategic growth initiatives.

Inflation and Supply Chain Impacts

During 2024, Kraft Heinz experienced moderate inflation in its supply chain costs compared to the prior year, which the company expects to continue through 2025. While inflationary pressures had a negative impact on the results of operations, the company experienced increased stability in these costs compared to the prior year. Kraft Heinz continues to take measures to mitigate the impact of inflation through efficiency initiatives, pricing actions, and hedging strategies.

Outlook and Risks

The company’s future performance is subject to various risks and uncertainties, including the ability to protect its information systems against cybersecurity threats, the potential for future successful cyberattacks, and the impact of changes in the international tax environment.

Kraft Heinz’s Chief Information Security Officer oversees the company’s cybersecurity risk management program, which includes ongoing audits of third-party service providers, employee training, incident response planning, and collaboration with external advisors. The company also maintains cybersecurity insurance to protect against certain potential losses arising from cybersecurity incidents.

The company’s effective tax rate is expected to increase by approximately 5 percentage points due to legislative developments related to the OECD’s proposed global minimum tax and changes to Kraft Heinz’s corporate entity structure, which included the transfer of certain business operations to a wholly-owned subsidiary in the Netherlands.

Conclusion

Kraft Heinz’s financial performance in 2024 was mixed, with a decline in net sales offset by an increase in Adjusted Operating Income and Adjusted EPS. The company’s North America and International Developed Markets segments performed relatively well, while the Emerging Markets segment faced challenges from higher supply chain costs and the unfavorable impact of foreign currency.

Looking ahead, Kraft Heinz will need to navigate the ongoing inflationary environment, manage cybersecurity risks, and adapt to changes in the international tax landscape. The company’s ability to execute its strategic initiatives, optimize its operations, and effectively manage its risks will be crucial in driving future growth and profitability.