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Kraft Heinz Shares Rise as Sales, Earnings Top Forecasts

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The Kraft Heinz Company (NASDAQ:KHC) reported financial results for the fourth quarter of 2021 on Wednesday, showing sales of $6.7 billion, which surpassed the $6.6 billion projected by analysts.

Despite surprising Wall Street, revenue decreased 3.3% versus the year-ago period, including a 7.3% headwind from acquisitions and divestitures and a favorable 0.1% impact from currency. Net sales versus the comparable 2019 period increased 2.6%, including a favorable 0.2% impact from currency and despite a negative 7.0% impact from acquisitions and divestitures.


Organic net sales increased 3.9% versus the prior-year period and 9.4% versus the comparable 2019 period, with growth versus 2019 negatively impacted by 1.6% from exiting the McCafe licensing agreement.

Pricing was up 3.8% versus the prior-year period with growth across each reporting segment that primarily reflected inflation-justified price increases in foodservice and retail channels. Volume/mix was essentially flat versus the year-ago period as benefits from continued recovery in foodservice channels were offset by a combination of comparisons with extraordinary Covid-19-related retail demand in 2020 and temporary supply constraints.

The net loss decreased to $255 million, primarily driven by non-cash impairment losses of $1.3 billion, largely due to the impairment of the Kraft brand following the closing of the Cheese Transaction, higher interest expense due to one-time debt extinguishment costs, lower adjusted Ebitda and unrealized losses on commodity hedges in the current year period compared to unrealized gains on commodity hedges in the prior year period, the company reported. These factors were partially offset by a lower effective tax rate and favorable changes in other expense/(income) category versus the prior-year period.

The beat comes despite supply chain challenges and inflation. However, Kraft Heinzs management said they plan to increase prices on snacks and condiments to combat fast-rising costs of raw materials and transportation. Reuters said that supply chain problems have driven up freight and labor expenses and aggravated problems for companies like Kraft, Conagra (NYSE:CAG) and Kellogg (NYSE:K) that are grappling with surging costs of grains, meat and edible oils."

Edward Jones analyst John Boylan said, "Kraft Heinz is doing a better job of navigating rising costs and driving demand than we thought."

The consumer goods company also announced on Wednesday that its board of directors declared a regular quarterly dividend of $0.40 per share of common stock payable on March 25 to stockholders of record as of March 11.

Its stock finished trading on Wednesday at $36.62 per share, up 5.59%, or $1.94 per share, on the positive news. After hours, share prices dipped slightly to $36.39.

Our strategic transformation has powered another year of outstanding performance, said Kraft Heinz CEO Miguel Patricio in the release. Our achievements are proof that our scale and agility have led to better results and greater relevance with customers and consumers. We are generating efficiencies to fuel incremental investments in our business, which, along with successful pricing, are mitigating inflationary pressures. I'm proud of our incredible team and have great confidence that we will build on our momentum in 2022.

Executives said they expect a low-single-digit percentage increase in 2022 organic net sales versus the prior year, reflecting continued stronger consumption versus pre-pandemic levels. Adjusted Ebitda is expected to be in the range of $5.8 billion to $6.0 billion, reflecting a 53rd week in 2022, the impact of divestitures versus the prior year, strong organic net sales as well as the company's ongoing efforts to manage inflationary pressures as it continues to invest in long-term growth.

This article first appeared on GuruFocus.