Kraft Heinz(US:KHC)2024-07-31 14:06Financial Data and Key Metrics Changes - Organic net sales declined by 2.4% year-over-year, which was lower than expectations due to consumer pressure and unexpected impacts from Lunchables sales [7][36] - Adjusted operating income grew by 2.0%, with adjusted operating income margin increasing by 120 basis points, driven by productivity gains [50][55] - Adjusted EPS declined by 1.3%, primarily due to lapping a one-time tax benefit in the prior year [54] Business Line Data and Key Metrics Changes - North America Organic net sales declined by 2.9%, impacted by lower Lunchables sales and a temporary plant closure [49] - The innovation pipeline is gaining momentum, with a year-to-date increase in organic net sales attributed to new product launches [2][5] - The Taco Bell partnership has exceeded expectations, with sales in Dollar General increasing by 47% year-over-year across Oscar Mayer products [3] Market Data and Key Metrics Changes - In Emerging Markets, organic net sales grew by 3.4%, although challenges in China and Brazil limited growth [68] - International Developed Markets saw a decline in organic net sales by 3.9%, primarily due to price reductions in the U.K. [49] - The company gained 60 basis points of share in Emerging Markets, while losing share in U.S. Away From Home and North America Retail [14][15] Company Strategy and Development Direction - The company is focused on long-term sustainable growth, avoiding short-term wins at the expense of future success [39][78] - Investments are being made in marketing, R&D, and technology to drive top-line growth and brand superiority [6][21] - The company is committed to managing its business in a disciplined manner, preserving profitability while responding to top-line headwinds [36][67] Management's Comments on Operating Environment and Future Outlook - The consumer environment remains challenging, with expectations for a gradual recovery in top-line growth [36][55] - Management is optimistic about the potential for sequential improvement in the second half of the year, driven by innovation and selective investments [75][76] - The company anticipates a continued ramp-up of innovation and renovation to improve top-line performance, particularly in North America Retail [57] Other Important Information - The company has increased its CapEx spend by $35 million, or 7%, focusing on growth and digital advancements [21] - Free cash flow conversion improved to 65%, driven by working capital improvements [53] - The company returned approximately $1.3 billion to stockholders in the first half of the year, maintaining a target net leverage ratio of approximately three times [73] Q&A Session Summary Question: What are the expectations for top-line growth in the second half of the year? - Management expects a gradual improvement in top-line growth, driven by innovation and selective investments, despite a challenging consumer environment [36][55] Question: How is the company addressing the challenges in Emerging Markets? - The company is focusing on increasing distribution and leveraging global activations to drive growth in Emerging Markets [58][68] Question: What is the outlook for adjusted operating income growth? - Adjusted operating income growth is now expected to be in the range of 1% to 3%, reflecting a slower recovery than previously anticipated [55]