The Kraft Heinz Company (KHC) Q2 2024 Prepared Remarks earnings summary

Executive summary

• Organic net sales declined 2.4% year-over-year in Q2 2024, with net sales at $6.5 billion, reflecting continued consumer pressure, inflation concerns, and value-seeking behavior, especially in North America and away-from-home channels.

• Operating income dropped 62.1% due to an $854 million non-cash goodwill impairment in North America, while adjusted operating income rose 2.0% on productivity gains, lower commodity costs, and higher pricing.

• Diluted EPS fell 90.1% to $0.08, while adjusted EPS was $0.78, down 1.3% year-over-year, impacted by lapping a one-time tax benefit in the prior year.

• Gross profit margin improved by 180 basis points to 35.4%; adjusted gross profit margin expanded 210 basis points to 35.5% on efficiencies outpacing inflation.

• The company remains committed to long-term growth, prioritizing sustainable profitability, innovation, and increased investments in brands and technology.

Financial highlights

• Adjusted Operating Income grew 2% to $1.38 billion; Adjusted EPS for Q2 was $0.78, down 1.3% year-over-year.

• Free cash flow conversion reached 65% year-to-date, up 6 percentage points, with net cash from operating activities at $1.7 billion.

• CapEx spend increased by 7% year-over-year to $543 million, focused on growth, technology, and digital advancements.

• Returned $969 million in dividends and $350–$537 million in share repurchases in H1 2024; $2.4 billion remains under repurchase authorization.

• Effective tax rate for Q2 was 71.1%, up from 14.9% last year, mainly due to non-deductible goodwill impairments.

Outlook and guidance

• Full-year 2024 organic net sales outlook revised down to a range of down 2% to flat, reflecting slower recovery in the U.S. and emerging markets.

• Adjusted operating income growth now expected at 1%–3% (previously 2%–4%), with adjusted gross profit margin expansion of 75–125 basis points.

• Adjusted EPS guidance reaffirmed at $3.01–$3.07, with an expected effective tax rate of 20–22%.

• No additional share repurchases contemplated in 2024 outlook.

• Anticipates sequential top-line improvement in the second half, supported by innovation, increased marketing, and selective trade investments.