The Kraft Heinz Company (KHC) Q2 2024 [Q&A] earnings summary

Executive summary

• Net sales for Q2 2024 were $6.5 billion, down 3.6% year-over-year, with organic net sales down 2.4% due to lower volume/mix and cautious consumer sentiment.

• Operating income dropped 62.1% year-over-year, mainly from $854 million in non-cash impairment losses in North America; adjusted operating income rose 2.0% to $1.4 billion, driven by 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.

• Gross profit margin improved by 180 basis points to 35.4%; adjusted gross profit margin increased 210 basis points to 35.5%.

• Year-to-date net cash from operating activities rose 8.1% to $1.7 billion; free cash flow increased 8.7% to $1.2 billion.

Financial highlights

• Q2 2024 Organic Net Sales: $6.5B, down 2.4% year-over-year; net sales for the six months ended June 29, 2024, were $12.9 billion, down 2.4% year-over-year.

• Adjusted Gross Profit Margin: 35.5%, up 210bps year-over-year.

• Adjusted Operating Income: $1.4B, up 2.0% year-over-year; Adjusted EPS: $0.78, down 1.3% year-over-year.

• Free Cash Flow Conversion: 65% for the six months ended June 29, 2024.

• Dividend payments for the six months totaled $969 million; 9 million shares repurchased YTD with $2.4 billion remaining authorization.

Outlook and guidance

• Fiscal 2024 organic net sales now expected to be down 2% to flat, revised from prior 0–2% growth outlook.

• Adjusted operating income growth forecast lowered to 1–3% (was 2–4%), with adjusted gross profit margin expansion of 75–125 bps.

• Adjusted EPS guidance reaffirmed at $3.01–$3.07, up 1–3% year-over-year; effective tax rate expected at 20–22%.

• Consumer environment expected to delay top-line recovery, with gradual improvement from Q2 to H2.

• Guidance does not include potential additional share repurchases in 2024.