Latest news with #CarlosAbrams-Rivera
Reuters
30-07-2025
- Business
- Reuters
Kraft Heinz sauces boost quarterly results as home-cooking rises
July 30 (Reuters) - Kraft Heinz (KHC.O), opens new tab beat estimates for quarterly results on Wednesday, helped by resilient demand for its pantry staples and condiments in the United States as consumers tried to stretch their household budgets. A mix of sticky inflation and heightened economic uncertainty has forced consumers to cook more affordable meals at home instead of eating out. People prioritizing protein in their diets has also boosted demand for Kraft Heinz's steak sauce and Worcestershire sauce. The company's board is "working with urgency" to evaluate strategic options for some brands, executives said on a post-earnings call, following media reports earlier this month that it was exploring a spin-off of the grocery business. Kraft Heinz recorded a $9.3 billion impairment charge in the second quarter due to a steady decline in its market capitalization to $33.8 billion, with the stock value dropping about 30% since 2022. The company reiterated its annual targets and now expects a cost impact of about 100 basis points this year from President Donald Trump's tariffs. Its shares were up 1% in early trade. The Philadelphia Cream Cheese maker has worked on introducing healthier options in some categories such as desserts to capture consumer demand, and has said it would remove food dyes from its portfolio. It also announced plans to change the packaging for Kraft Mayonnaise to highlight the absence of dyes and artificial flavors, weeks after snacks giant PepsiCo (PEP.O), opens new tab said it will rebrand its Lay's and Tostitos chips without those substances. While Kraft Heinz's quarterly volumes fell about 2.7 percentage points due to some weakness in categories such as coffee, cold meat cuts and ready-to-eat meals, the decline was lower than the prior quarter's drop of 5.6 percentage points. In North America, its biggest market by revenue, volumes fell 3.4 percentage points. "Looking ahead, we continue to expect growth in our international business, but we are not contemplating an improvement in the U.S. industry for the rest of 2025," CEO Carlos Abrams-Rivera said in a statement. With consumers seeking value, the company has been investing in promotions, and that, along with inflation, could pressure margins in the current quarter, said Arun Sundaram, analyst at CFRA Research. Net sales for the three months ended June 28 came in at $6.35 billion, beating analysts' average estimate of $6.26 billion, according to data compiled by LSEG. Its adjusted profit of 69 cents per share also beat estimates.
Yahoo
14-07-2025
- Business
- Yahoo
Ill-fated 2015 merger comes to fore amid Kraft Heinz spin-off speculation
A 'strategic transaction' proposition put forward by Kraft Heinz in May could well be about to emerge with a business split a tad over the ten-year anniversary of the mega-merger of Kraft Foods and HJ Heinz. Such a development would surely not be much of a surprise to market watchers following a slew of poor results from Kraft Heinz and perhaps a veiled submission of what might be considered as the failed combination of 2015 – the company's shares are currently trading at $27.14 in New York compared to circa $88 when that deal was completed on 2 July of that year. Berkshire Hathaway, the US investment group led by Warren Buffett, is reportedly weighing up the disposal of its estimated 27% share in the Heinz ketchup maker, while private-equity firm 3G Capital, which joined the billionaire in the 2015 business combination, is long gone having sold its shares in 2023. Kraft Heinz pledged in May to 'unlock shareholder value' as the company assessed strategic options for a business that generated revenue of $26bn last year. CEO Carlos Abrams-Rivera, in the job for only 18 months, may well have been encouraged by the split initiated by Kellogg Company in 2023. Confectionery giant Ferrero announced a $3.1bn deal for WK Kellogg last week, the North American breakfast cereals business that emerged from that separation. The other portion, Kellanova, is in the throes of a $35.9bn takeover by another sweets heavyweight, Mars. A valuation of $20bn has been attached to a potential spin-off by Kraft Heinz, according to unnamed sources at The Wall Street Journal, which reported on Friday (11 July) a demerger may feature a 'large chunk of its grocery business'. Sauces, condiments and spreads such as its namesake ketchup brand and the Grey Poupon Dijon mustard line would remain as Kraft Heinz. Industry analysts were quick off the blocks to comment on the speculation, no doubt galvanised by the speed in which the Ferrero-WK Kellogg deal came to fruition last week, from speculation through to fact the same day. The WSJ report, meanwhile, came days after Kraft Heinz announced the sale of a handful of brands in Italy to the recently created NewPrinces for €120m ($140.2m). Investment bank Stifel, in a report led by Matthew Smith, threw some perspective on what might emerge. 'We believe the potential spin of a part of the grocery business would include the company's slower growth and highly competitive/commoditised categories, with the remaining entity keeping Kraft's priority platforms including sauces/condiments and snacking/easy meals. Smith said the Stifel analysts believe the faster-growing assets to remain would include Kraft Heinz's North America retail "accelerate" platforms, the company's global away-from-home unit and its emerging markets businesses. The assets spun off could house the retail portions of the company's "protect" and "balance" platforms. Stifel's analysts quantified the accelerate platforms as including condiments, ready-meals brands Mac & Cheese and Ore-Ida, plus snacking lines such as Lunchables and Delimex. The assets that could be spun off would include Oscar Mayer meats, Jell-O desserts, drinks brands Capri-Sun and Kool-Aid, cheese with Kraft and Velveeta, plus coffee, as in Maxwell House and Gevalia. Meanwhile, Peter McDonald, a food-industry consultant and former General Mills executive of 20-plus years, weighed in on the failed merger angle of 2015 in what he described as one of the 'darkest chapters in CPG food during my career'. McDonald explained his thoughts in a LinkedIn post: 'The new entity pursued a new-to-the-industry aggressive margin expansion playbook that sent competitors chasing 'zero-based budgeting' and other nonsensical corporate initiatives in a desperate attempt to avoid being gobbled up themselves. 'Investors lapped it up and Kraft Heinz hit a maximum enterprise value of $140bn in 2017. Since then, food-industry reality has reasserted itself and the margin extraction from innovation, marketing, talent, and pricing aggression has taken its toll,' he wrote, putting Kraft Heinz's current enterprise value at $50bn. And acknowledging the reports of a spin-off are only based on speculation at this point, he added: 'Now the company may be broken up into constituent parts not unlike things were when the whole fiasco started'. Kraft Heinz's 2024 reported sales dropped 3% to $25.85bn, with organic growth down 2.1% in what CEO Abrams-Rivera described as 'a challenging year with our top-line results coming in below our expectations'. Net income fell to $2.74bn, from the $2.86bn booked for 2023. The company also reported a 63.2% slump in full-year operating profit to $1.7bn, which was linked to $3.7bn in non-cash impairment losses. It was a poor performance echoed in the opening quarter of 2025, too. Net sales dropped 6.4% on a reported basis and declined 4.7% in organic terms to just shy of $7bn. In the three months to 29 March, operating income decreased 8.1% to $1.2bn. Net income stood at $712m versus $801m a year earlier. Alongside the first-quarter numbers, Kraft Heinz also cut its 2025 outlook across a range of metrics to factor in the potential upward pressure on input-cost inflation from changes in tariffs. 'There can be no assurance that the company's assessment process will result in any transaction, or any assurance as to its outcome or timing,' Kraft Heinz said in a statement in May as it revealed the strategic transaction proposition. 'The company has not set a timetable for completion of this process and does not intend to make any further announcements regarding the process unless and until it determines that further disclosure is appropriate or necessary.' Picking up on the WSJ report, TD Cowen analyst Robert Moskow estimated the likely valuation of the part of the Kraft Heinz grocery business spin-off at $14.5bn, short of the $20bn put forward by the publication. He, too, linked his observations to the Kellogg demerger. 'Bankers and board members of the food industry certainly have noticed the value capture of the 2023 Kellogg split up. After accounting for the Mars and Ferrero acquisitions of the two parts, investors will have realised 41% since the spin, while consumer staples stocks (by our math) fell 6% and fundamentals deteriorated due to changes in consumer preferences and external factors like GLP-1s,' Moskow wrote in a research note. The TD Cowen analyst also speculated a buyer might step in – whether that's Kraft Heinz's intention or not – to snap up the offload, naming McCormick as a potential suitor. 'Our sum-of-the-parts analysis indicates 11% upside to KHC's current enterprise value based on eight times EV/EBITDA for grocery and 10.5x EV/EBITDA for sauces, condiments and spreads,' Moskow suggested. 'However, we could see another 20% upside if a strategic acquirer steps up to buy the sauces and condiments business (about 44% of KHC sales), which will look a lot like the original pre-merger Heinz business of 2013. For example, we see a good strategic fit with McCormick, which has been expanding into the condiments space for several years through tack-on deals, and a high degree of EPS accretion.' Moskow added to his thesis by explaining that 'mega-mergers in food have low success rates and that 'depth' tends to beat 'breadth''. He continued: 'The skill set and investment requirements to succeed in disparate parts of the grocery store (e.g. refrigerated, frozen, shelf-stable, and snacks) tend to differ. 'We believe that food companies with focused portfolios and category leadership (e.g. Hershey) have a better chance of long-term success than diversified companies trying to leverage operating and marketing capabilities across a wide range of categories.' A common theme emanating from food-industry analysts is the throw back to the pre-2015 merger, what AllianceBernstein's Alexia Howard deemed as a 'reversal'. 'When we looked into the relative growth rates of the legacy Heinz company since the companies were merged in 2015, it looks as though the legacy Heinz business has grown retail sales at a 5.3% CAGR over the past decade, while the legacy Kraft brands have grown at only 2%,' Howard wrote in a research note. 'Looking at how the company could break up might mean that the remaining faster-growing company comprises the 25% of companywide sales in international markets plus another 30% of the 75% of the US sales for a total of around 47.5% of companywide sales.' Howard explained further: 'Looking at how the sales could break down, it seems that the faster-growing remaining company could represent around 47.5% of company-wide sales. Clearly, the margins in the international markets are significantly lower than in North America, which could mean that 38.2% of the total company's adjusted EBITDA of $6.36bn in 2024 potentially sits with the faster-growing remaining company, while the remaining 61.8% sits with the spin-off.' The Stifel analysts added: 'The hypothetical slower growth 'Spin Co' would incorporate the retail protect platform featuring a projected low-single digit, ten-year, industry CAGR, high gross margins and low private-label penetration, as well as the retail balance commoditised business platform featuring a flat projected ten-year industry CAGR, low gross margins, and high private-label penetration. 'We view a potential spin of the lower growth and lower-margin retail businesses as a way to unlock value within the higher growth and higher-margin remaining businesses.' "Ill-fated 2015 merger comes to fore amid Kraft Heinz spin-off speculation" was originally created and published by Just Drinks, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Yahoo
22-05-2025
- Business
- Yahoo
Disposals – and M&A – on cards as Kraft Heinz looks to craft new future
Given Kraft Heinz's ongoing difficulties in growing its top line, the news the US food and drinks major is weighing its options isn't the biggest surprise. But what comes next for the Heinz ketchup and Jell-O desserts owner remains the subject of some speculation among Wall Street analysts. On Tuesday, Kraft Heinz put out a brief statement, revealing the company is considering 'strategic transactions to unlock shareholder value'. The deliberations have apparently been going on for months. 'At Kraft Heinz, our goal has always been to make high-quality, great-tasting food for all and to keep consumers at the forefront of all we do, enabling us to drive profitable long-term growth and value creation,' Kraft Heinz CEO Carlos Abrams-Rivera said. 'Consistent with this goal, over the past several months we have been evaluating potential strategic transactions to unlock shareholder value. As we look to the future, we will continue to inspire and delight consumers with our iconic brands, fulfilling our mission.' Abrams-Rivera is into his second year as Kraft Heinz CEO, having moved into the top job at the start of 2024. He joined the company in 2020 after four years at the then Campbell Soup Co. and another four at Mondelez International. Abrams-Rivera's career has, in a way, come full circle, with his CV including more than a decade at the former Kraft Foods Group from 1998 to 2010. He succeeded Miguel Patricio as Kraft Heinz CEO after the Portuguese stabilised the company somewhat after a troubling period for the baked beans and soup manufacturer. However, despite Patricio's efforts to get Kraft Heinz on firmer footing, Abrams-Rivera faced challenges upon taking the hot seat, not least seeing if he could return the company's closely-watched volume/mix sales metric to growth. So far, that has proved elusive. This embedded content is not available in your region. 2024 was another year in which Kraft Heinz's sales declined across a number of metrics and it was 12 months Abrams-Rivera described as 'challenging' when the company reported its annual results in the February. Kraft Heinz's top line, Abrams-Rivera said, was 'below our expectations', though he sought to accentuate the positives. 'We remained disciplined in protecting profitability, while driving industry-leading margins, generating strong cash flow, and returning $2.7bn in capital to stockholders.' However, the first quarter of the new year also proved tough, with net sales dropping 6.4% on a reported basis in the first quarter of 2025 and declining 4.7% in organic terms to just shy of $7bn. In the three months to 29 March, operating income decreased 8.1% to $1.2bn. Net income stood at $712m versus $801m a year earlier. Alongside the first-quarter numbers, Kraft Heinz also cut its 2025 outlook across a range of metrics to factor in the potential upward pressure on input-cost inflation from changes in tariffs. 'There can be no assurance that the company's assessment process will result in any transaction, or any assurance as to its outcome or timing,' Kraft Heinz said in its statement on Tuesday. 'The company has not set a timetable for completion of this process and does not intend to make any further announcements regarding the process unless and until it determines that further disclosure is appropriate or necessary.' However, Kraft Heinz's announcement sparked speculation on Wall Street about the different options the company could consider. And, after a series of stories in recent years about Kraft Heinz looking at disposals – and managing to find buyers for some assets – it was understandable the reaction among analysts centred on the possibility of more parts of the company being divested. Robert Moskow, an analyst covering Kraft Heinz at investment bank TD Cowen, said he took the company's announcement 'to mean more divestitures'. Moskow, who believes Kraft Heinz should "slim down" its portfolio, said it was TD Cowen's 'understanding' the company 'has considered selling coffee and meats in the past', although he noted it was 'unclear at this time whether today's announcement marks an acceleration in these efforts'. Last year, The Wall Street Journal and Reuters said the company was exploring a sale of its Oscar Mayer meat-products business. In 2019, it was reported Kraft Heinz was trying to sell its Maxwell House coffee brand but struggling because of what appeared to be an inflated price tag. When weighing up what Kraft Heinz may now look to offload, it's critical to understand how the company groups its assets together. Kraft Heinz has shuffled its assets into three groups dubbed 'accelerate', 'protect' and 'balance'. At the CAGNY investment conference in Florida in February 2024, Kraft Heinz outlined the attributes of each group. The 'balance' side of the business includes the business' meats, cheese and coffee brands. It was said to enjoy 'high' market shares but margins were deemed to be 'low' in 'flat' categories. Private-label was also described as 'high, with exposure to commodity-driven volatility'. 'We believe the company will prioritise selling brands in the 'balance' platform of its portfolio, representing about 24% of sales,' Moskow said. 'In the same [CAGNY] presentation, they also described coffee, meats, and cheese as low on 'market attractiveness' and meats and coffee as low on 'right to win'.' Bernstein analyst Alexia Howard echoed Moskow's thoughts, pointing to brands like Oscar Mayer and Lunchables. She suggests the sales of Lunchables have suffered in the wake of research by US non-profit Consumer Reports that led to the removal of the brand from school-lunch menus. 'Oscar Mayer and Lunchables, which former CEO Mr. Miguel Patricio considered a highly strategic part of the portfolio, given its protein-rich products and potential to create a stepping stone to more healthy longer-shelf life refrigerated snacks like P3 protein packs and beyond, now seem to be weighing the portfolio down,' Howard said. In her a note to clients, however, Howard also put forward the idea of a couple of bolder moves. 'A somewhat larger scale idea could be to spin-off the faster-growing legacy Heinz business,' she suggests, estimating that part of Kraft Heinz represents around a quarter of the company's total sales. When Kraft Foods Group and HJ Heinz combined a decade ago, a central rationale – as per the then playbook of 3G Capital – was 'cost synergies rather than any deeper strategic logic', Howard said. 'With Kraft Heinz now trading at just 8.8x next-twelve-months EBITDA, it could be argued that a faster-growing Heinz might be valued by the market at a higher multiple than the base Kraft business but obviously cost dis-synergies could be dilutive.' On a grander scale, Howard also outlines another scenario: a combination with another major US-centric food group such as General Mills or Conagra Brands. The prospect of further consolidation in the US food industry has been the subject of much chatter since Mars' move for Kellanova last year and the macro backdrop could, Howard suggests, provide the conditions for similar deals. 'The US packaged food sector is still the most fragmented space among staples sectors in the developed world and a merger of equal activity could occur as top- and bottom-line pressures play out,' Howard says. 'Past deals suggest that the average expected level of cost synergy from mergers is around 8% of the acquired company's sales in overlapping regions, which suggests that for US-centric food companies, a lot of money is being left on the table. Such a boost to EPS growth could be very attractive for a set of companies that are currently struggling with multiple headwinds including rising consumer interest in longevity and hence shunning of heavily-processed foods, which is being exacerbated by both RFK Jr.'s Make America Healthy Again initiative as well as the arrival of GLP-1 weight-loss drugs.' Larger-scale consolidating transactions would provide a greater opportunity for cost savings and we believe Kraft Heinz would be well suited for integrating businesses Matthew Smith, Stifel Stifel analyst Matthew Smith has similar thoughts. '[The US packaged-food industry's] fundamentals remain challenged primarily by weak consumption trends across centre-of-store categories,' he said. 'While we believe Kraft Heinz and peers are focused on smaller transactions in the near term to improve their portfolios, we believe the likelihood of an investment cycle and margin reset is building. 'Larger-scale consolidating transactions would provide a greater opportunity for cost savings and we believe Kraft Heinz would be well suited for integrating businesses leveraging its investment spending over the past five years and track record of unlocking productivity savings.' And it is important to note Kraft Heinz, while very likely to be considering offloading assets, could also be in the market for smaller acquisitions, too. It would be wrong to say the company has solely shedded assets in recent years. Businesses in Brazil and Turkey have been added to the portfolio. Condiments, sauces and snacks could be areas Kraft Heinz's management might evaluate, Smith suggests. 'Kraft Heinz already holds high market shares in these platforms and the gross margin and expected growth rates of the categories are attractive,' he adds. Kraft Heinz also said on Tuesday representatives of Berkshire Hathaway, the investment vehicle owned by Warren Buffett, were stepping down from the company's board. Berkshire Hathaway owns just over 27% of Kraft Heinz. The group said the departures 'are not the result of any disagreement with management or the board related to the company's operations, policies or practices'. Might another change be the exit of Berkshire Hathaway from the Kraft Heinz share roster, especially as Buffett is set to step down as the investor's CEO this year? Berkshire Hathaway came on board at the time of the 2015 deal that created Kraft Heinz. Ten years on, we could be set to see more significant change at one of the world's largest food and drinks manufacturers. "Disposals – and M&A – on cards as Kraft Heinz looks to craft new future" was originally created and published by Just Food, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
21-05-2025
- Business
- Yahoo
The Kraft Heinz Company (KHC) Exploring M&A Opportunities Amid Changing Consumer Trends
The Kraft Heinz Company (NASDAQ:KHC) has been looking for potential strategic transactions over the last several months, the company has announced. CEO Carlos Abrams-Rivera was quoted as follows in a press release shared on Tuesday: 'At Kraft Heinz, our goal has always been to make high-quality, great-tasting food for all and to keep consumers at the forefront of all we do, enabling us to drive profitable long-term growth and value creation. Consistent with this goal, over the past several months, we have been evaluating potential strategic transactions to unlock shareholder value. As we look to the future, we will continue to inspire and delight consumers with our iconic brands, fulfilling our mission.' The recent development comes amid weakening demand for The Kraft Heinz Company (NASDAQ:KHC)'s snacks and ready-to-eat meals due to higher prices and an uncertain economic environment, which is forcing consumers to seek affordable options. There has also been a noticeable shift toward healthier foods and weight-loss drugs, resulting in waning demand for packaged meals. A closeup of an assembly line worker inspecting a newly produced jar of condiments and sauces. According to a report in October last year, several buyers, including Mexico's Sigma Alimentos and Brazilian meatpacker JBS, were eyeing The Kraft Heinz Company (NASDAQ:KHC)'s hot dogs and cold cuts business, Oscar Mayer. Sources told Reuters that the deal could fetch an estimated $3 billion if it goes through. On April 29, The Kraft Heinz Company (NASDAQ:KHC) slashed its full-year organic sales and profit guidance, citing a 'volatile' operating environment. However, analysts believe the cuts were not surprising given the economic and political uncertainty. While we acknowledge the potential of KHC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than KHC and that has 100x upside potential, check out our report about this cheapest AI stock. READ NEXT: ChatGPT Stock Advice: Top 12 Stock Recommendations and 10 Cheap Rising Stocks to Buy Right Now. Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-05-2025
- Business
- Yahoo
Kraft Heinz looking at M&A opportunities as packaged foods demand slows
(Reuters) -Packaged foods giant Kraft Heinz said it was looking at strategic transactions as consumer demand for its pricey snacks and ready-to-eat meals weakens due to an uncertain economic environment and high inflation. The company has been looking for potential merger and acquisition opportunities "over the past several months", chief executive officer Carlos Abrams-Rivera said in a statement. Consumers are turning to healthier processed food products and a surge in the use of weight-loss drugs has also cast a shadow on demand for packaged foods. Additionally, tariffs were adding to Kraft's woes as it lowered its annual organic sales and profit forecasts last month. Its hot dogs and cold cuts business, Oscar Mayer, was attracting interest from several buyers for a deal that could be worth $3 billion, Reuters reported in October last year. The company declined to comment further on the nature of the strategic transactions. Kraft Heinz also said Timothy Kenesey and Alicia Knapp, executives at Berkshire Hathaway-owned companies, were leaving the board of directors after Warren Buffett's conglomerate said it would no longer hold board seats. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
