Key Takeaways Kraft Heinz beat Q4 EPS estimates, but sales fell 3.4% and organic sales dropped 4.2%.KHC is investing $600M in marketing, R&D and pricing to drive recovery and growth.Kraft Heinz sees 2026 organic sales down 1.5%-3.5% and EPS at $1.98-$2.10.The Kraft Heinz Company (KHC) posted fourth-quarter 2025 results, with the top line missing the Zacks Consensus Estimate but the bottom line exceeding the same. However, both metrics declined year over year. The company has greater-than-expected potential ...

Core Insights - The Kraft Heinz Company reported a decline in both top and bottom lines for Q3 2025, primarily due to weaker volumes in key categories, but management highlighted progress in productivity initiatives and brand investments [1][10] - The company is preparing for its planned separation into two standalone public companies, "Global Taste Elevation Co." and "North American Grocery Co." in the second half of 2026 [3][10] Financial Performance - Adjusted earnings were 61 cents per share, exceeding the Zacks Consensus Estimate of 57 cents, but fell 18.7% year over year due to lower adjusted operating income and increased taxes [4] - Net sales totaled $6,237 million, down 2.3% year over year, missing the Zacks Consensus Estimate of $6,247 million, with organic net sales declining 2.5% [5] - Adjusted gross profit was $2,015 million, down from $2,189 million in the prior year, with an adjusted gross margin contraction of 200 basis points to 32.3% [7] Segment Performance - North America: Net sales of $4,641 million declined 3.8% year over year, with organic sales also down 3.8% [9] - International Developed Markets: Net sales of $895 million increased 1.6% year over year, but organic sales fell 1.4% [9] - Emerging Markets: Net sales rose 3.8% year over year to $701 million, with organic sales growing 4.7% [11] Future Outlook - The company updated its full-year 2025 outlook, expecting organic net sales to decline by 3% to 3.5%, reflecting market softness [14] - Adjusted operating income is projected to fall by 10% to 12%, with an adjusted gross profit margin decline of approximately 100 basis points [15] - Adjusted EPS is forecasted in the range of $2.50 to $2.57, down from the previous outlook [15]

Financial Data and Key Metrics Changes - The company reported net revenue of BRL 15.4 billion, a 3% increase compared to the same period in 2024 [5] - EBITDA for the quarter was BRL 2.5 billion, contributing to a year-to-date total of BRL 5.3 billion, which is 11% higher than the same period last year [5][6] - Net income for the quarter was BRL 735 million, with a total of BRL 1.9 billion for the semester [5] - Free cash flow was approximately BRL 850 million, or BRL 1.3 billion when excluding the impact of the Hannon plant acquisition in China [5] - The company achieved a leverage ratio of 0.43 times LTM EBITDA, the lowest in its history [6] Business Line Data and Key Metrics Changes - In Brazil, EBITDA reached BRL 1.3 billion with a margin of 16.4%, driven by volume growth in processed products [7] - The international market showed healthy margins, with an EBITDA margin of 170.3% for the quarter [9] - The ingredients and pets segment reported EBITDA of BRL 52 million, with an 8% increase in the customer base for pet products [11] Market Data and Key Metrics Changes - The company expanded its active customer base in Brazil to over 330,000 points of sale, achieving the highest second-quarter sales volume [7] - In Turkey, processed product volumes grew by 7% year-over-year, maintaining market share leadership [9] - The company gained 1.4 percentage points in market share in processed products in the GCC region [9] Company Strategy and Development Direction - The company emphasized its market diversification strategy, which is essential for growth and resilience against market fluctuations [15][17] - The launch of the Sadia Fresh line in Saudi Arabia is part of the strategy to strengthen its halal market presence [15] - The company continues to focus on expanding its portfolio of value-added products through strategic partnerships [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's journey towards sustainable growth, emphasizing operational excellence and financial discipline [18] - The company is prepared for potential challenges in the market, including the impact of avian influenza, and has contingency plans in place [25][66] - Management highlighted the importance of maintaining a competitive edge through data intelligence and timely decision-making [17] Other Important Information - The company reported a reduction in net debt to BRL 4.7 billion, the lowest since 2011, contributing to lower interest expenses [14] - The company has made significant progress in ESG initiatives, including greenhouse gas emission management and community education programs [12] Q&A Session All Questions and Answers Question: Impact of avian flu and market recovery potential - Management noted that the impact of avian flu was limited due to the opening of 198 new export permits, allowing for agile market reallocation [21][24] - The company is optimistic about recovering margins as markets, particularly in China, are expected to reopen soon [25] Question: Cost expectations in light of commodity price changes - Management indicated that a decrease in animal feed costs is anticipated in the second half of the year, with a potential 2% reduction in costs [30] - The company is monitoring labor costs closely, which may face inflationary pressures due to low unemployment [68] Question: Price resilience and future pricing strategies - Management confirmed that prices in Brazil have increased by 11% year-over-year for processed products, with further price adjustments expected [37] - The company is confident in maintaining price resilience due to strong domestic demand and employment levels [34] Question: Gross margin and production capacity - Management stated that the gross margin achieved was the highest since 2015, with expectations of maintaining profitability levels [40] - The company has effectively utilized its production capacity, reducing idle capacity significantly since 2022 [43] Question: Industry fundamentals and future outlook - Management believes that demand will continue to outpace supply in the poultry and beef sectors, with no significant changes expected in fundamentals [50] - The company is well-positioned to navigate competitive pressures and maintain strong margins [56]