Q1 net sales increased 3.9% and Organic Net Sales(1) increased 2.5%
Q1 gross profit increased 18.5%
Q1 operating income increased 41.3%, net income increased 49.0%, and diluted EPS increased 48.4%
Adjusted EBITDA(1) increased 11.6% and Adjusted EPS(1) increased 24.1%
PITTSBURGH & CHICAGO--(BUSINESS WIRE)-- The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the “Company”) today reported financial results for the first quarter of 2021 that reflected solid net sales growth, favorable product mix, and lower general corporate expenses versus the year-ago period, with strong performance across all business segments.
“Our first quarter was better than expected, with our team delivering strong results on top of exceptional growth last year,” said Kraft Heinz CEO Miguel Patricio. “Looking forward, we will continue to focus on leveraging our tremendous scale by investing to improve our capabilities and overall agility. As we do, we believe we will come out of this period much stronger, operationally and financially, than we entered.”
Net Sales In millions Net Sales Organic Net Sales(1) Growth March 27, 2021 March 28, 2020 % Chg vs PY YoY Growth Rate Price Volume/Mix For the Three Months Ended
United States $ 4,608 $ 4,495 2.5% 2.5% 1.0 pp 1.5 pp
International 1,394 1,301 7.2% 2.7% 2.2 pp 0.5 pp
Canada 392 361 8.8% 2.5% 4.9 pp (2.4) pp
Kraft Heinz $ 6,394 $ 6,157 3.9% 2.5% 1.5 pp 1.0 pp
Net Income/(Loss) and Diluted EPS In millions, except per share data
For the Three Months Ended March 27, 2021March 28, 2020 % Chg vs PY
Gross profit $ 2,201 $ 1,858 18.5%
Operating income/(loss) 1,089 770 41.3%
Net income/(loss) 568 381 49.0%
Net income/(loss) attributable to common shareholders 563 378 48.9%
Diluted EPS $ 0.46 $ 0.31 48.4%
Adjusted EPS(1) 0.72 0.58 24.1%
Adjusted EBITDA(1) $ 1,580 $ 1,415 11.6%
Q1 2021 Financial Summary
Net sales increased 3.9 percent versus the year-ago period to $6.4 billion, including a favorable 1.4 percentage point impact from currency, and increased 7.3 percent versus the comparable 2019 period, including a favorable 0.5 percentage point impact from currency. Organic Net Sales increased 2.5 percent versus the prior year period and increased 8.7 percent versus the comparable 2019 period with positive contributions from all reporting segments, and despite a negative impact from exiting the McCafélicensing agreement. Pricing was up 1.5 percentage points versus the prior year period reflecting a combination of reduced retail promotions and revenue management gains that were partially offset by unfavorable trade expense timing versus the year-ago period. Volume/mix was up 1.0 percentage points versus the year-ago period, driven by favorable changes in retail inventory levels, particularly in developed markets where retail consumption remained strong, as well as continued growth in emerging markets. This growth was partially offset by ongoing foodservice declines, the negative impact from exiting the McCafélicensing agreement, and lower retail takeaway versus the prior year period that benefited from strong, COVID-19-related consumer demand.
Net income/(loss) of$568 million increased 49.0 percent versus the year-ago period driven by strong gross profit growth, which included favorable changes in unrealized losses/(gains) on commodity hedges, and a lower effective tax rate that more than offset unfavorable changes in interest expense due to one-time extinguishment costs, as well as unfavorable other expense/(income) as compared to the prior year period. Net income/(loss) increased 40.6 percent versus the comparable 2019 period. Adjusted EBITDA of $1.6 billion increased 11.6 percent versus the year-ago period and 10.4 percent versus the comparable 2019 period. Excluding a favorable 1.2 percentage point impact from currency, year-over-year Adjusted EBITDA growth was driven by favorable pricing and product mix, as well as lower general corporate expenses versus the prior year period that more than offset supply chain inflation and increased spending behind strategic investments.
Diluted EPS increased to $0.46, up 48.4 percent versus the prior year, driven by the net income/(loss) factors discussed above. Adjusted EPS increased to $0.72, up 24.1 percent versus the prior year, driven by Adjusted EBITDA growth, a lower effective tax rate, and lower depreciation and amortization costs that more than offset unfavorable changes in non-cash other expense/(income) and higher non-cash equity award compensation relative to the year-ago period.
Net cash provided by operating activities increased to $810 million, up 281.8 percent versus the year-ago period. This reflected favorable changes in trade receivables, largely due to the timing of receipts, Adjusted EBITDA growth, and favorable changes in cash related to commodity margin requirements and inventories versus the prior year period. These impacts were partially offset by higher cash outflows for variable compensation versus the year-ago period. Free Cash Flow(1) for the first quarter of 2021 increased to $583 million, up 619.4 percent versus the comparable prior year period as net cash provided by operating activities was partially offset by higher capital expenditures versus the prior year period.
The Company continues to expect it will deliver 2021 financial performance ahead of its strategic plan.
For the second quarter of 2021, and based on performance to date, the Company currently expects a mid-single-digit percentage increase in both Organic Net Sales(2) and Constant Currency Adjusted EBITDA(2) versus the comparable 2019 period. The Company views comparison to the 2019 period to be more meaningful than the comparable 2020 period given the exceptional, COVID-19-related consumer demand changes experienced in the 2020 period. This outlook is, therefore, equivalent to a low-single-digit percentage decline in Organic Net Sales(2) and a mid-single-digit percentage decline in Constant Currency Adjusted EBITDA(2) versus the comparable 2020 period.
Organic Net Sales, Adjusted EBITDA, Adjusted EPS, Constant Currency Adjusted EBITDA, and Free Cash Flow are non-GAAP financial measures. Please see discussion of non-GAAP financial measures and the reconciliations at the end of this press release for more information.
Second quarter 2021 guidance for Organic Net Sales and Constant Currency Adjusted EBITDA is provided 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, restructuring expenses, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, and equity award compensation expense, 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.
Earnings Discussion and Webcast Information
A pre-recorded management discussion of The Kraft Heinz Company's first quarter 2021 earnings is available at ir.kraftheinzcompany.com. The Company will host a live question and answer session beginning today at 9:00 a.m. Eastern Daylight Time. A webcast of the session will be accessible at ir.kraftheinzcompany.com
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