PITTSBURGH — Executives of Kraft Heinz Co. pointed to organic net sales growth and a continued rebuilding of inventory as examples of a successful start to 2022.
Organic net sales increased 7% in the first quarter ended March 26 as the company increased prices by 9 percentage points when compared with the previous year’s first quarter.
“This year-over-year growth was driven by a stronger contribution from price realization, relatively resilient demand and strong foodservice across geographies,” said Miguel Patricio, chief executive officer, in pre-recorded comments made available April 27. “Additionally, we relieved some of the supply constraints that held us back last quarter, enabling us to better capture the strong demand for our brands.”
Kraft Heinz raised the expected increase in fiscal-year organic net sales to mid-single-digit percentages as compared to a previous guidance of low-single-digit percentages.
“This is based on our strong results to date, particularly in the US, as well as the momentum we see in foodservice and emerging markets,” said Andre Maciel, global chief financial officer, in pre-recorded comments. “Additionally, our outlook contemplates greater price elasticity impacting volume and mix during the balance of the year. We also expect continued impact of supply chain constraints in the first half of the year.”
Retail inventories remain fluid, said Carlos A. Abrams, president of North America, in an April 27 earnings call.
“If you recall, we exited last year below normal days of inventory from a historical perspective that were both in terms of the trade and in our warehouse,” he said. “If you look at Q1, our actual production volume was actually 10% higher than it was a year ago, and we expect that to continue through the yearend so that we can support the inventory recovery.”
Kraft Heinz in the first quarter had net income of $776 million, or 63¢ per share on the common stock, which was up 38% from $563 million, or 46¢ per share, in the previous year’s first quarter. Net sales dipped 5% to $6.05 billion from $6.39 billion. Negative impacts were 11.2 percentage points from divestitures net of acquisitions and 1.1 percentage points from currency. Volume/mix declined 2.2 percentage points, reflecting supply constraints partially offset by demand from products in retail and a continued recovery in foodservice channels.
Adjusted EBITDA decreased 15% in the quarter to $1.34 billion, or 60¢ per share, from $1.58 billion, or 72¢ per share. The decrease reflected higher commodity costs (primarily in dairy, packaging materials and meat) and higher supply chain costs more than offsetting higher pricing and efficiency gains.Kraft Heinz now expects inflation for cost of goods to be in mid-teen percentages for the fiscal year, up from previous guidance of low-teen percentages, Mr. Maciel said in pre-recorded comments.