CHICAGO – The Kraft Heinz Co.’s fiscal 2021 earnings surged 184% when compared with fiscal 2020 and were buoyed by divestitures and favorable foreign exchange rates. But the results masked difficulties during the fourth quarter that led the company to record a quarterly loss and indicate some of the challenges will last into the second quarter of fiscal 2022.

Net income for the year ended Dec. 25, 2021, totaled $1 billion, equal to 83¢ per share on the common stock, and an improvement over the year prior when the company earned $356 million, or 29¢ per share.

Fiscal 2021 sales were essentially flat at $26 billion, down from $26.1 billion in fiscal 2020. Divestitures of the Planters nut business and some of its cheese brands and assets contributed to the sales result.

Kraft Heinz recorded a loss of $257 million during the fourth quarter that compared unfavorably to the same period of the previous year when the company earned $1 billion, or 84¢ per share. The loss primarily was caused by a $1.3 billion non-cash impairment charge against the Kraft brand following the closing of the cheese transaction with Lactalis Group.

Quarterly sales were $6.7 billion, down from $7 billion during the same period of the previous year.

Carlos Abrams-Rivera, president of Kraft’s North America business unit, said other fourth quarter troubles were specifically attributable to one-time supply challenges, production constraints for some products, and product categories in need of an updated go-to-market strategy. A lack of packaging materials and a shortage of labor affected both the Philadelphia Cream Cheese and Oscar Mayer brands, respectively, during the quarter. The company expects both brands to recover during the first quarter.

Capacity constraints limited the production of Heinz gravy and Lunchables. Mr. Abrams-Rivera said Kraft Heinz is working to ease the constraints and expects the issues to be resolved by the end of the second quarter. He did not say which brands need a strategic update, but that Kraft Heinz is seeking creative ways to deliver strong demand.

Mr. Abrams-Rivera added that, overall, Kraft Heinz needs to do a better job anticipating demand and forecasting more accurately and, as a result, holding on to market share.

“Frankly, our 2021 share performance was not where it needs to be,” he said. “We saw strong share performances in iconic brands such as Heinz ketchup, Kraft Singles, Velveeta, Mio and Capri Sun, we lost share in other parts of the portfolio. That’s the bad news.

“The good news is that we know what needs to be fixed, and how to go about fixing it.”

For fiscal 2022, Kraft Heinz is guiding organic net sales growth of 1% to 2%. In fiscal 2021, organic net sales rose 1.8%. Adjusted EBITDA is forecast to be in a range of $5.8 billion to $6 billion.

To meet its organic sales growth target the company will focus on retaining customers and trips gained during the COVID-19 pandemic; share gains in foodservice channels; ongoing emerging markets expansion; and pricing actions continuing to take hold.

“Input costs have kept going up, and while we ended 2021 having announced or fully implemented all the pricing we had planned, we are now taking additional pricing actions, as appropriate,” said Paulo Basilio, global chief financial officer. “As a result, we continue to expect that percentage margins will remain pressured for the first half of the year as pricing continues to catch up to inflation.”