Kraft Heinz to Highlight Path to Deliver Consistent Profitable Growth at 2024 CAGNY Conference
The Company plans to deliver its long-term growth through its three Growth Pillars: North America Retail, Global Away From Home, and Emerging Markets. The Company expects to fuel its top-line growth through its “Enablers of Growth,” which include investments in marketing, research and development, and technology, increased contribution from innovation, expanded collaboration with customers through sales excellence, and deployment of its Brand Growth System. The Brand Growth System is a global methodology, new to
To fund these investments, the Company aims to continue driving end-to-end efficiencies, through supply chain, revenue management, working capital, and by expanding centralized services. Powering these are the Company’s unique competitive advantages: tech-enabled Agile@Scale methodologies, strategic partnerships, and an ownership-centric culture.
Also, the Company has further refined its strategy by taking a longer-term approach, looking out to a 10-year horizon across the consumer demand landscape to predict trends and associated opportunities. To capture identified opportunities, the Company refined the role of portfolio categories based on a combination of market attractiveness and its right to win.
As a result, the Company has realigned its portfolio around three new platform roles – Accelerate, Protect, and Balance. It expects the Accelerate platforms, which include Taste Elevation, Easy Ready Meals, and Substantial Snacking, to drive outsized growth and plans to prioritize investments in these platforms. The Company will further describe these changes in today’s presentation.
Long-Term Financial Profile
The Company will also detail its long-term growth algorithm. The targets remain unchanged, with the exception of replacing the previous Adjusted EBITDA(1) target with a target for Adjusted Operating Income(1). This is a result of the Company’s work to rewire the organization to drive a stronger connection to total shareholder return and create an enhanced level of ownership throughout the Company. The long-term algorithm consists of:
-
Organic
Net Sales (1) growth of 2% to 3%. - Adjusted Operating Income(1) growth of 4% to 6%.
- Adjusted EPS(1) growth of 6% to 8%.
- Free Cash Flow Conversion(1) at approximately 100%.
2024 Outlook
As announced in its fourth quarter and full year 2023 earnings, the Company reiterates its expectation to deliver:
-
Organic
Net Sales (1) growth of 0% to 2% versus the prior year. The Company expects a positive contribution from price throughout the year, with volumes inflecting positive in the second half of the year. - Adjusted Operating Income (1) growth of 2% to 4% versus the prior year. Adjusted Gross Profit Margin(1) is expected to expand modestly, in the range of 25 to 75 basis points versus the prior year.
-
Adjusted EPS
(1) growth of 1% to 3% versus the prior year, or in the range of
$3.01 to$3.07 . The Company expects an effective tax rate on Adjusted EPS to be in the range of 20% to 22%. Additionally, the Company expects an unfavorable impact of approximately$45 million within interest expense and other expense/(income) versus the prior year, primarily driven by foreign currency headwinds and debt refinancing that will come at a higher rate. The outlook does not include the possibility of additional share buyback in 2024.
End Notes
(1) |
Organic |
Webcast Information
A prepared presentation at the CAGNY conference will begin at
ABOUT
We are driving transformation at
Forward-Looking Statements
This press release contains a number of forward-looking statements. Words such as “aim,” “capture,” “deploy,” “expect,” “increase,” “invest,” “plan,” “predict,” and “will,” and variations of such words and similar future or conditional expressions are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding the Company's plans, impacts of accounting standards and guidance, growth, legal matters, taxes, costs and cost savings, impairments, dividends, expectations, investments, innovations, opportunities, capabilities, execution, initiatives, and pipeline. These forward-looking statements reflect management's current expectations and are not guarantees of future performance and are subject to a number of risks and uncertainties, many of which are difficult to predict and beyond the Company's control.
Important factors that may affect the Company's business and operations and that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, operating in a highly competitive industry; the Company’s ability to correctly predict, identify, and interpret changes in consumer preferences and demand, to offer new products to meet those changes, and to respond to competitive innovation; changes in the retail landscape or the loss of key retail customers; changes in the Company's relationships with significant customers or suppliers, or in other business relationships; the Company’s ability to maintain, extend, and expand its reputation and brand image; the Company’s ability to leverage its brand value to compete against private label products; the Company’s ability to drive revenue growth in its key product categories or platforms, increase its market share, or add products that are in faster-growing and more profitable categories; product recalls or other product liability claims; climate change and legal or regulatory responses; the Company’s ability to identify, complete, or realize the benefits from strategic acquisitions, divestitures, alliances, joint ventures, or investments; the Company's ability to successfully execute its strategic initiatives; the impacts of the Company's international operations; the Company's ability to protect intellectual property rights; the Company’s ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes, and improve its competitiveness; the influence of the Company’s largest stockholder; the Company's level of indebtedness, as well as our ability to comply with covenants under our debt instruments; additional impairments of the carrying amounts of goodwill or other indefinite-lived intangible assets; foreign exchange rate fluctuations; volatility in commodity, energy, and other input costs; volatility in the market value of all or a portion of the commodity derivatives we use; compliance with laws and regulations and related legal claims or regulatory enforcement actions; failure to maintain an effective system of internal controls; a downgrade in the Company's credit rating; the impact of sales of the Company's common stock in the public market; the impact of our share repurchases or any change in our share repurchase activity; the Company’s ability to continue to pay a regular dividend and the amounts of any such dividends; disruptions in the global economy caused by geopolitical conflicts; unanticipated business disruptions and natural events in the locations in which the Company or the Company's customers, suppliers, distributors, or regulators operate; economic and political conditions in
Non-GAAP Financial Measures
The non-GAAP financial measures provided in this press release should be viewed in addition to, and not as an alternative for, results prepared in accordance with accounting principles generally accepted in
The Company has presented Organic
Management uses these non-GAAP financial measures to assist in comparing the Company’s performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes do not directly reflect the Company’s underlying operations. The Company believes:
-
Organic
Net Sales , Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Income, Adjusted EBITDA, and Adjusted EPS provide important comparability of underlying operating results, allowing investors and management to assess the Company’s operating performance on a consistent basis; and - Free Cash Flow and Free Cash Flow Conversion provide a measure of the Company’s core operating performance, the cash-generating capabilities of the Company’s business operations, and are factors used in determining the Company’s borrowing capacity and the amount of cash available for debt repayments, dividends, acquisitions, share repurchases, and other corporate purposes.
Management believes that presenting the Company’s non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating the Company’s results. The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provides investors with additional understanding of the factors and trends affecting the Company’s business than could be obtained absent these disclosures.
Definitions
Organic
Adjusted Operating Income is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), and provision for/(benefit from) income taxes; in addition to these adjustments, the Company excludes, when they occur, the impacts of restructuring activities, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, and certain non-ordinary course legal and regulatory matters.
Adjusted EBITDA is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), provision for/(benefit from) income taxes, and depreciation and amortization (excluding restructuring activities); in addition to these adjustments, the Company excludes, when they occur, the impacts of divestiture-related license income, restructuring activities, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, certain non-ordinary course legal and regulatory matters, and equity award compensation expense (excluding restructuring activities).
Adjusted Gross Profit and Adjusted EPS
are defined as gross profit and diluted earnings per share excluding, when they occur, the impacts of restructuring activities, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, certain non-ordinary course legal and regulatory matters, losses/(gains) on the sale of a business, other losses/(gains) related to acquisitions and divestitures (e.g., tax and hedging impacts), nonmonetary currency devaluation (e.g., remeasurement gains and losses), debt prepayment and extinguishment (benefit)/costs, and certain significant discrete income tax items (e.g.,
Free Cash Flow is defined as net cash provided by/(used for) operating activities less capital expenditures. The use of this non-GAAP measure does not imply or represent the residual cash flow for discretionary expenditures since the Company has certain non-discretionary obligations such as debt service that are not deducted from the measure. Free Cash Flow Conversion is defined as Free Cash Flow divided by Adjusted Net Income/(Loss).
View source version on businesswire.com: https://www.businesswire.com/news/home/20240221146866/en/
Alex.Abraham@kraftheinz.com
Anne-Marie.Megela@kraftheinz.com
Source: