Kraft Heinz has painted a more bearish outlook for the year’s sales and profits as the US-based food and drinks business reported a third-quarter decline in volumes.
While emerging markets bucked the fall off in volumes and organic sales revenue in the three months to 27 September – as seen across the wider group – Kraft Heinz predicts the reporting division is likely to see slowing growth.
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The previously predicted 1.5% to 3.5% drop in Kraft Heinz’s organic sales for the full year has now been adjusted to a decrease of 3% to 3.5%.
“This contemplates slower growth in emerging markets, driven by continued declines in Indonesia and pressure in US retail,” the company warned today (29 October) as the Kraft mac & cheese and Maxwell House coffee brand owner issued its latest results.
That downbeat outlook ensued despite emerging-market sales growing 3.8% in the third quarter on a reported basis to $701m and 4.7% in organic terms. Volume/mix was up 0.7% with pricing of 4%.
In what was otherwise a constrained operating environment in the quarter, CEO Carlos Abrams-Rivera said: “Our third-quarter results reflect a modest year-over-year improvement in our top-line performance relative to the first half of the year.
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By GlobalData“While the operating environment remains challenging, we’re seeing improvement driven in part by targeted investments we’re making to deliver superior and affordable products to our consumers.”
Kraft Heinz reiterated the split of the business into two separate companies – as first confirmed in September – is on target to be completed in the second half of 2026 but it also provided a gloomy assessment for operating income and EPS for the current fiscal year.
Adjusted operating income in constant currency is now forecast to fall 10% to 12% instead of the previous outlook for a 5-10% decrease. The adjusted gross profit margin is expected to be down by about 100 basis points.
That income metric slumped 16.9% in the third quarter to $1.1bn, “primarily driven by inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavourable volume/mix, and increased selling, general and administrative expenses, primarily due to increased advertising”, Kraft Heinz explained.
The margin fell 230 basis points to 31.9% and was down 200 points in adjusted terms at 32.3%.
Meanwhile, adjusted EPS is predicted in the $2.50 to $2.57 range, compared to previous guidance of $2.51 to $2.67.
“The company continues to expect an effective tax rate on adjusted EPS to be approximately 26%, which reflects an approximate $0.23 headwind year over year,” was the explanation given.
North America, Kraft Heinz’s largest market by sales, led the decline in volume/mix during the quarter compared to the wider group results and those for international sales destinations.
Volume/mix was down 4.2% with pricing of 0.4%, while organic sales for North America fell 3.8% to $4.64bn.
In international, volume/mix dropped 2.4% based on pricing of one percentage point. Organic sales decreased 1.4% to $895m.
For Kraft Heinz as a whole, volume/mix was a negative 3.5% with pricing of 1%. Organic sales fell 2.5% for the group to $6.24bn.
CEO Abrams-Rivera reflected: “Informed by insights from our ‘brand growth system’, we’re making strategic investments in marketing and R&D to strengthen our portfolio through product enhancements, more effective communication with consumers, and stronger execution.
He added: “I’m confident the separation will allow each business to better focus resources, improve execution, reduce complexity, and drive further efficiencies.”
