Kraft Heinz has painted a more pessimistic outlook for sales and profits for the year, as the US-based food and beverage business reported a decline in volumes in the third quarter.
While emerging markets withstood the decline in volumes and organic sales revenue in the three months to September 27 (as seen across the group), Kraft Heinz predicts the reporting division is likely to experience a slowdown in growth.
Kraft Heinz’s previously forecast 1.5% to 3.5% decline in organic sales for the full year has now been adjusted to a 3% to 3.5% decline.
“This contemplates slower growth in emerging markets, driven by continued declines in Indonesia and pressure on US retail,” the company warned today (Oct. 29) when Kraft macaroni and cheese and coffee brand owner Maxwell House released its latest results.
That pessimistic outlook came even though sales in emerging markets grew 3.8% in the third quarter on a reported basis, to $701 million, and 4.7% organically. Volume/mix increased 0.7% with price up 4%.
In what would otherwise be a limited operating environment in the quarter, CEO Carlos Abrams-Rivera said: “Our third quarter results reflect a modest year-over-year improvement in our top-line performance relative to the first half of the year.
“While the operating environment remains challenging, we are seeing improvements driven in part by the targeted investments we are making to deliver superior, affordable products to our consumers.”
Kraft Heinz reiterated that the split of the business into two separate companies, as first confirmed in September, is planned to be completed in the second half of 2026, but also provided a bleak assessment of operating income and earnings per share for the current fiscal year.
Constant currency adjusted operating income is now forecast to fall 10% to 12% instead of the previous outlook for a 5-10% decline. The adjusted gross profit margin is expected to decline by about 100 basis points.
That revenue metric fell 16.9% in the third quarter to $1.1 billion, “driven primarily by inflationary pressures in commodity and manufacturing costs that outweighed our efficiency initiatives, unfavorable volume/mix, and higher selling, general and administrative expenses, primarily due to increased advertising,” Kraft Heinz explained.
The margin fell 230 basis points to 31.9% and was down 200 points on an adjusted basis to 32.3%.
Meanwhile, adjusted EPS is forecast to be in the range of $2.50 to $2.57, compared to previous guidance of $2.51 to $2.67.
“The company continues to expect an effective tax rate on adjusted EPS to be approximately 26%, reflecting a headwind of approximately $0.23 year over year,” was the explanation given.