Kraft Heinz Affirms Full Year 2022 Guidance, Reduces Leverage Target and Details Long-term Algorithm
“We have successfully completed two phases of our ongoing transformation – resetting our foundation and implementing our operating model,” said Patricio. “With the right people, portfolio and capabilities in place, we now look ahead to accelerating profitable growth. Achieving greatness will also include a focus on personalized marketing and a strong emphasis on innovation. I am excited about what we have accomplished so far and how it positions us for the future, but we still have work to do.”
Long-term Financial Profile
The Company’s previously announced long-term algorithm reflects this accelerated growth profile with targeted:
Net Sales(1) growth of 2% to 3%;
- Adjusted EBITDA(1) growth of 4% to 6%; and
- Adjusted EPS(1) growth of 6% to 8%.
The Company plans to drive Organic
North America Zone Retail representing approximately two-thirds of total Company Organic
Net Salesand growing approximately 1% to 2%, in line with pre-pandemic industry growth.
Foodservice representing roughly 15% of total Company Organic
Net Salesand growing mid-to-high single digits.
Emerging Markets Retail, within the Company’s
International Zone, representing approximately 10% of total Company Organic Net Salesand growing double digits.
Adjusted EBITDA growth of 4% to 6% is expected to be driven by Organic
The expected Adjusted EBITDA growth, along with expectations of declining interest expense, partially offset by anticipated increasing depreciation, is expected to drive 6% to 8% Adjusted EPS growth.
The Company is now targeting to maintain capital expenditures at approximately 4% of Organic
The Company has updated its long-term net leverage target ratio from consistently below four times to approximately three times. With interest rates 100% fixed with a weighted average maturity of 14.5 years, and leverage meaningfully improved, the Company believes this level will provide
The Company continues to expect 2022 Organic
The outlook now contemplates inflation for the full year of approximately 20%, up from the previous expectation for inflation to be in the high teens. As a result, for the second half of 2022, the Company now expects Adjusted EBITDA to be split approximately 43% to 57% between the third quarter and the fourth quarter, versus a 45% to 55% split previously expected, reflecting both the timing of inflation versus offsetting price realization as well as a 53rd week in the fourth quarter.
The full-year Adjusted EBITDA outlook continues to reflect foreign currency headwinds based on current exchange rates, the impact of divestitures versus the prior year, and strong Organic
We are driving transformation at
This press release contains a number of forward-looking statements. Words such as “accelerate,” “anticipate,” “believe,” “contribute,” “decline,” “drive,” “enable,” “evaluate,” “expect,” “focus,” “generate,” “grow,” “identify,” “increase,” “invest,” “maintain,” “manage,” “plan,” “provide,” “reduce,” “represent,” “return,” “support,” “target,” "unlock," “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, the impacts of COVID-19 and government and consumer responses; 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, alliances, divestitures, joint ventures, or other 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 ownership structure; 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 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 future sales of the Company's common stock in the public market; the Company’s ability to continue to pay a regular dividend and the amounts of any such dividends; 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 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. Management believes that presenting the Company's non-GAAP financial measures (i.e., Organic
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 (e.g., income related to the sale of licenses in connection with the Cheese Transaction), 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 EBITDA is a tool that can assist management and investors in comparing the Company's performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect the Company's underlying operations.
Adjusted EPS is defined as 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 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 Company believes Free Cash Flow provides a measure of the Company's core operating performance, the cash-generating capabilities of the Company's business operations, and is one factor used in determining the amount of cash available for debt repayments, dividends, acquisitions, share repurchases, and other corporate purposes. 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.