Kraft Heinz reined in costs and increased prices — and it worked
By Aishwarya Venugopal and Richa Naidu - Nov 5th, 11:28
Kraft Heinz beat analyst expectations for third-quarter profit on Thursday as the packaged food company reined in costs and increased prices in the face of slowing demand for some of its key brands.
Shares in the Chicago-based maker of Heinz ketchup and Velveeta cheese were indicated up about 7% at $30.45 in pre-market trading.
The earnings beat comes after a rough year for Kraft Heinz, which slashed dividends and scrapped its full-year forecast after booking billions of dollars in writedowns on the value of some of its most well-known brands, including Oscar Mayer.
The company’s procurement practices are also under investigation by the US Securities and Exchange Commission (SEC).
Kraft Heinz shares have fallen by about 40% since February when it disclosed the investigation and its first writedown.
Earnings excluding items fell 9.2% to 69c per share but beat the 54c expected by analysts, according to IBES data from Refinitiv. Expenses fell by nearly 25% drop to $767m in the quarter. The company increased product prices by 1% while sales volumes fell 2.1 percentage points.
“Price increases are evident in categories with cost inflation and the profit beat is a positive surprise,” said Wells Fargo analyst John Baumgartner.
Net sales fell nearly 5% to $6.08bn, missing analysts’ estimates of $6.13bn.
Net income attributable to shareholders rose 45% to $899m in the third quarter ended September 28.BusinessLive
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