PITTSBURGH — In its first quarterly report as a combined company, The Kraft Heinz Co. said sales fell 4.9% at Kraft Foods Group, Inc. and 4.1% at H.J. Heinz Holding Corp. prior to the completion of the merger in July. Lower prices and weak demand hurt Kraft in the quarter, while Heinz’s results were affected by unfavorable currency translation.
|Bernardo Hees, c.e.o. of Kraft Heinz.|
“The company is focused on the difficult and challenging process of integrating our two businesses,” said Bernardo Hees, chief executive officer of Kraft Heinz. “We have a lot of hard work ahead of us as we continue to design our new organization, always putting our consumers first.”
For the second quarter ended June 27, Northfield, Ill.-based Kraft Foods had net earnings of $551 million, or 93c per share on the common stock, up from $482 million, or 81c per share, for the year-ago period. The company recorded expenses of $56 million in cost savings initiatives and $37 million of merger-related costs that were partly offset by $20 million in unrealized gains on hedging activities within cost of sales and a gain on sale of assets of $21 million.
Net revenues were $4,515 million, which compared with $4,747 million the year before, reflecting a negative impact from foreign currency translation, lower sales of ready-to-drink beverages from decreased promotional activity and lower net pricing in the cheese and food service businesses, which were partially offset by pricing increases taken in previous quarters.
For the second quarter ended June 28, Heinz sustained a loss of $164 million, which compared with net income of $127 million the year before. Adjusted earnings before tax, interest, depreciation and amortization increased 6.7% to $739 million, driven by increased sales in North America and Venezuela and cost savings initiatives that were partially offset by unfavorable currency translation and increased marketing spending in North America.
Sales slipped 4.1% to $2,616 million from $2,729 million, as the negative impact of foreign exchange translation and a reduction from the divestiture of a frozen food business in the United Kingdom more than offset benefits of higher pricing across all segments and volume gains in the United States.
Kraft Heinz said it does not expect to issue earnings guidance going forward, but the company expressed confidence in its ability to generate aggressive run-rate cost savings of $1.5 billion by the end of 2017, which includes productivity and cost savings planned prior to the merger.Heinz and Kraft combined in July to create the third-largest food company in North America with estimated sales of $28 billion.