The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) will today affirm its full year 2022 guidance, announce
a reduced leverage target and outline additional details on its
long-term algorithm, as executives participate in the 2022 Barclays
Global Consumer Staples Conference. Miguel Patricio, Chief
Executive Officer and Chair of the Board of Directors; Andre
Maciel, EVP and Global Chief Financial Officer; and Carlos
Abrams-Rivera, EVP and President, North America Zone, will share
their perspectives as part of a discussion about the ongoing Kraft
Heinz transformation and plans to accelerate profitable growth.
“We have successfully completed two phases of our ongoing
transformation – resetting our foundation and implementing our
operating model,” said Patricio. “With the right people, portfolio
and capabilities in place, we now look ahead to accelerating
profitable growth. Achieving greatness will also include a focus on
personalized marketing and a strong emphasis on innovation. I am
excited about what we have accomplished so far and how it positions
us for the future, but we still have work to do.”
Long-term Financial Profile
The Company’s previously announced long-term algorithm reflects
this accelerated growth profile with targeted:
- Organic Net Sales(1) growth of 2% to 3%;
- Adjusted EBITDA(1) growth of 4% to 6%; and
- Adjusted EPS(1) growth of 6% to 8%.
The Company plans to drive Organic Net Sales growth of 2% to 3%
through its three strategic pillars of growth, each anticipated to
contribute approximately one percentage point of growth with the
following targets:
- North America Zone Retail representing approximately
two-thirds of total Company Organic Net Sales and growing
approximately 1% to 2%, in line with pre-pandemic industry
growth.
- Foodservice representing roughly 15% of total Company
Organic Net Sales and growing mid-to-high single digits.
- Emerging Markets Retail, within the Company’s
International Zone, representing approximately 10% of total Company
Organic Net Sales and growing double digits.
Adjusted EBITDA growth of 4% to 6% is expected to be driven by
Organic Net Sales growth, gross margin expansion enabled primarily
by anticipated gross efficiencies of nearly 3% per year, and flat
overhead as a percentage of Organic Net Sales, while increasing
marketing by approximately one percentage point over time, as a
percentage of Organic Net Sales.
The expected Adjusted EBITDA growth, along with expectations of
declining interest expense, partially offset by anticipated
increasing depreciation, is expected to drive 6% to 8% Adjusted EPS
growth.
The Company is now targeting to maintain capital expenditures at
approximately 4% of Organic Net Sales and generate Free Cash
Flow(1) conversion at approximately 100%.
Capital Allocation
Kraft Heinz is committed to providing stockholders with a strong
return of capital and given current circumstances plans to
prioritize its deployment of capital to: maintain its current
attractive dividend, invest in the organic business to support
brands and profitable growth, pay down debt, maintain commitment to
investment grade, pursue accretive acquisitions and/or repurchase
shares and further increase dividends, subject to the approval by
the Board of Directors.
The Company has updated its long-term net leverage target ratio
from consistently below four times to approximately three times.
With interest rates 100% fixed with a weighted average maturity of
14.5 years, and leverage meaningfully improved, the Company
believes this level will provide Kraft Heinz with a strong balance
sheet through cycles and sufficient financial flexibility.
2022 Outlook
The Company continues to expect 2022 Organic Net Sales growth in
the high single digits versus the prior year period and 2022
Adjusted EBITDA to be in the range of $5.8 billion to $6.0
billion.
The outlook now contemplates inflation for the full year of
approximately 20%, up from the previous expectation for inflation
to be in the high teens. As a result, for the second half of 2022,
the Company now expects Adjusted EBITDA to be split approximately
43% to 57% between the third quarter and the fourth quarter, versus
a 45% to 55% split previously expected, reflecting both the timing
of inflation versus offsetting price realization as well as a 53rd
week in the fourth quarter.
The full-year Adjusted EBITDA outlook continues to reflect
foreign currency headwinds based on current exchange rates, the
impact of divestitures versus the prior year, and strong Organic
Net Sales, as well as the Company’s ongoing efforts to manage
inflationary pressures, including unlocking gross efficiencies, as
it continues to invest in long-term growth.
End Notes
(1)
Organic Net Sales, Adjusted EBITDA, Adjusted EPS, and Free Cash
Flow are non-GAAP financial measures. Please see discussion of
non-GAAP financial measures at the end of this press release for
more information. We provide guidance for Organic Net Sales,
Adjusted EBITDA, Adjusted EPS, and Free Cash Flow on a non-GAAP
basis only because certain information necessary to calculate the
most comparable GAAP measure is unavailable due to the uncertainty
and inherent difficulty of predicting the occurrence and the future
financial statement impact of such items impacting comparability,
including, but not limited to, the impact of currency, acquisitions
and divestitures, divestiture-related license income, restructuring
activities, deal costs, unrealized losses/(gains) on commodity
hedges, impairment losses, certain non-ordinary course legal and
regulatory matters, equity award compensation expense,
losses/(gains) on the sale of a business, other losses/(gains)
related to acquisitions and divestitures (e.g., tax and hedging
impacts), nonmonetary currency devaluation (e.g., remeasurement
gains and losses), debt prepayment and extinguishment costs, and
certain significant discrete income tax items (e.g., U.S. and
non-U.S. tax reform), among other items. Therefore, as a result of
the uncertainty and variability of the nature and amount of future
adjustments, which could be significant, the Company is unable to
provide a reconciliation of these measures without unreasonable
effort.
Webcast Information
The Kraft Heinz fireside chat at the Barclays 2022 Global
Consumer Staples conference will begin at 9:45 a.m. Eastern Time
today, and a live webcast will be available at
ir.kraftheinzcompany.com. A replay will be accessible after the
event on the same website.
ABOUT THE KRAFT HEINZ COMPANY
We are driving transformation at The Kraft Heinz Company
(Nasdaq: KHC), inspired by our Purpose, Let's Make Life Delicious.
Consumers are at the center of everything we do. With 2021 net
sales of approximately $26 billion, we are committed to growing our
iconic and emerging food and beverage brands on a global scale. We
leverage our scale and agility to unleash the full power of Kraft
Heinz across a portfolio of six consumer-driven product platforms.
As global citizens, we're dedicated to making a sustainable,
ethical impact while helping feed the world in healthy, responsible
ways. Learn more about our journey by visiting
www.kraftheinzcompany.com or following us on LinkedIn and
Twitter.
Forward-Looking Statements
This press release contains a number of forward-looking
statements. Words such as “accelerate,” “anticipate,” “believe,”
“contribute,” “decline,” “drive,” “enable,” “evaluate,” “expect,”
“focus,” “generate,” “grow,” “identify,” “increase,” “invest,”
“maintain,” “manage,” “plan,” “provide,” “reduce,” “represent,”
“return,” “support,” “target,” "unlock," “will,” and variations of
such words and similar future or conditional expressions are
intended to identify forward-looking statements. Examples of
forward-looking statements include, but are not limited to,
statements regarding the Company's plans, impacts of accounting
standards and guidance, growth, legal matters, taxes, costs and
cost savings, impairments, dividends, expectations, investments,
innovations, opportunities, capabilities, execution, initiatives,
and pipeline. These forward-looking statements reflect management's
current expectations and are not guarantees of future performance
and are subject to a number of risks and uncertainties, many of
which are difficult to predict and beyond the Company's
control.
Important factors that may affect the Company's business and
operations and that may cause actual results to differ materially
from those in the forward-looking statements include, but are not
limited to, the impacts of COVID-19 and government and consumer
responses; operating in a highly competitive industry; the
Company’s ability to correctly predict, identify, and interpret
changes in consumer preferences and demand, to offer new products
to meet those changes, and to respond to competitive innovation;
changes in the retail landscape or the loss of key retail
customers; changes in the Company's relationships with significant
customers or suppliers, or in other business relationships; the
Company’s ability to maintain, extend, and expand its reputation
and brand image; the Company’s ability to leverage its brand value
to compete against private label products; the Company’s ability to
drive revenue growth in its key product categories or platforms,
increase its market share, or add products that are in
faster-growing and more profitable categories; product recalls or
other product liability claims; climate change and legal or
regulatory responses; the Company’s ability to identify, complete,
or realize the benefits from strategic acquisitions, alliances,
divestitures, joint ventures, or other investments; the Company's
ability to successfully execute its strategic initiatives; the
impacts of the Company's international operations; the Company's
ability to protect intellectual property rights; the Company's
ownership structure; the Company’s ability to realize the
anticipated benefits from prior or future streamlining actions to
reduce fixed costs, simplify or improve processes, and improve its
competitiveness; the Company's level of indebtedness, as well as
our ability to comply with covenants under our debt instruments;
additional impairments of the carrying amounts of goodwill or other
indefinite-lived intangible assets; foreign exchange rate
fluctuations; volatility in commodity, energy, and other input
costs; volatility in the market value of all or a portion of the
commodity derivatives we use; compliance with laws and regulations
and related legal claims or regulatory enforcement actions; failure
to maintain an effective system of internal controls; a downgrade
in the Company's credit rating; the impact of future sales of the
Company's common stock in the public market; the Company’s ability
to continue to pay a regular dividend and the amounts of any such
dividends; unanticipated business disruptions and natural events in
the locations in which the Company or the Company's customers,
suppliers, distributors, or regulators operate; economic and
political conditions in the United States and in various other
nations where the Company does business (including inflationary
pressures, general economic slowdown, or recession and the Russia
and Ukraine conflict and its regional and global ramifications);
changes in the Company's management team or other key personnel and
the Company's ability to hire or retain key personnel or a highly
skilled and diverse global workforce; risks associated with
information technology and systems, including service
interruptions, misappropriation of data, or breaches of security;
increased pension, labor, and people-related expenses; changes in
tax laws and interpretations; volatility of capital markets and
other macroeconomic factors; and other factors. For additional
information on these and other factors that could affect the
Company's forward-looking statements, see the Company's risk
factors, as they may be amended from time to time, set forth in its
filings with the Securities and Exchange Commission (“SEC”). The
Company disclaims and does not undertake any obligation to update,
revise, or withdraw any forward-looking statement in this press
release, except as required by applicable law or regulation.
Non-GAAP Financial Measures
The non-GAAP financial measures provided should be viewed in
addition to, and not as an alternative for, results prepared in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”) that are presented in the
Company’s filings with the SEC.
The Company has presented Organic Net Sales, Adjusted EBITDA,
Adjusted EPS, and Free Cash Flow, which are considered non-GAAP
financial measures. The non-GAAP financial measures presented may
differ from similarly titled non-GAAP financial measures presented
by other companies, and other companies may not define these
non-GAAP financial measures in the same way. These measures are not
substitutes for their comparable GAAP financial measures, such as
net sales, net income/(loss), diluted earnings per share ("EPS"),
net cash provided by/(used for) operating activities, or other
measures prescribed by GAAP, and there are limitations to using
non-GAAP financial measures.
Management uses these non-GAAP financial measures to assist in
comparing the Company's performance on a consistent basis for
purposes of business decision making by removing the impact of
certain items that management believes do not directly reflect the
Company's underlying operations. Management believes that
presenting the Company's non-GAAP financial measures (i.e., Organic
Net Sales, Adjusted EBITDA, Adjusted EPS, and Free Cash Flow) is
useful to investors because it (i) provides investors with
meaningful supplemental information regarding financial performance
by excluding certain items, (ii) permits investors to view
performance using the same tools that management uses to budget,
make operating and strategic decisions, and evaluate historical
performance, and (iii) otherwise provides supplemental information
that may be useful to investors in evaluating the Company's
results. The Company believes that the presentation of these
non-GAAP financial measures, when considered together with the
corresponding GAAP financial measures and the reconciliations to
those measures, provides investors with additional understanding of
the factors and trends affecting the Company's business than could
be obtained absent these disclosures.
Organic Net Sales is defined as net sales excluding, when they
occur, the impact of currency, acquisitions and divestitures, and a
53rd week of shipments. The Company calculates the impact of
currency on net sales by holding exchange rates constant at the
previous year's exchange rate, with the exception of highly
inflationary subsidiaries, for which the Company calculates the
previous year's results using the current year's exchange rate.
Organic Net Sales is a tool that can assist management and
investors in comparing the Company's performance on a consistent
basis by removing the impact of certain items that management
believes do not directly reflect the Company's underlying
operations.
Adjusted EBITDA is defined as net income/(loss) from continuing
operations before interest expense, other expense/(income),
provision for/(benefit from) income taxes, and depreciation and
amortization (excluding restructuring activities); in addition to
these adjustments, the Company excludes, when they occur, the
impacts of divestiture-related license income (e.g., income related
to the sale of licenses in connection with the Cheese Transaction),
restructuring activities, deal costs, unrealized losses/(gains) on
commodity hedges, impairment losses, certain non-ordinary course
legal and regulatory matters, and equity award compensation expense
(excluding restructuring activities). Adjusted EBITDA is a tool
that can assist management and investors in comparing the Company's
performance on a consistent basis by removing the impact of certain
items that management believes do not directly reflect the
Company's underlying operations.
Adjusted EPS is defined as diluted earnings per share excluding,
when they occur, the impacts of restructuring activities, deal
costs, unrealized losses/(gains) on commodity hedges, impairment
losses, certain non-ordinary course legal and regulatory matters,
losses/(gains) on the sale of a business, other losses/(gains)
related to acquisitions and divestitures (e.g., tax and hedging
impacts), nonmonetary currency devaluation (e.g., remeasurement
gains and losses), debt prepayment and extinguishment costs, and
certain significant discrete income tax items (e.g., U.S. and
non-U.S. tax reform), and including, when they occur, adjustments
to reflect preferred stock dividend payments on an accrual basis.
The Company believes Adjusted EPS provides important comparability
of underlying operating results, allowing investors and management
to assess operating performance on a consistent basis.
Free Cash Flow is defined as net cash provided by/(used for)
operating activities less capital expenditures. The Company
believes Free Cash Flow provides a measure of the Company's core
operating performance, the cash-generating capabilities of the
Company's business operations, and is one factor used in
determining the amount of cash available for debt repayments,
dividends, acquisitions, share repurchases, and other corporate
purposes. The use of this non-GAAP measure does not imply or
represent the residual cash flow for discretionary expenditures
since the Company has certain non-discretionary obligations such as
debt service that are not deducted from the measure.
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version on businesswire.com: https://www.businesswire.com/news/home/20220907005576/en/
Alex Abraham (media) Alex.Abraham@kraftheinz.com
Anne-Marie Megela (investors) ir@kraftheinz.com
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