PITTSBURGH, Pa. & NORTHFIELD, Ill.--(BUSINESS WIRE)--The Kraft Heinz Company today reported second quarter results for Kraft Foods Group, Inc. and H.J. Heinz Holding Corporation for the periods ended June 27, 2015, and June 28, 2015, respectively. Kraft Heinz filed a Form 8-K with the U.S. Securities and Exchange Commission (“SEC”) containing a detailed discussion of Kraft’s second quarter results as well as a Form 10-Q containing a detailed discussion of Heinz’s second quarter results. Subsequent to the end of the second quarter, the company successfully completed the merger of Kraft and Heinz.
The company remains confident in its ability to deliver against its initial financial expectations for the merger of Kraft and Heinz, including its expectation to generate aggressive, run-rate cost savings of $1.5 billion by the end of 2017, inclusive of savings from productivity and cost savings initiatives contemplated prior to the merger. As a matter of practice, however, Kraft Heinz does not expect to issue or update earnings guidance going forward.
Kraft Q2 2015 Results
- Kraft Q2 net revenues decreased 4.9% and Kraft Organic Net Revenues1 decreased 3.3%
- Kraft Q2 diluted EPS of $0.92 included higher spending on cost savings initiatives and costs related to the merger with Heinz that were partly offset by gains on an asset sale and unrealized gains from hedging activities
Kraft’s net revenues decreased 4.9 percent including a negative 1.4 percent impact from currency. Kraft Organic Net Revenues decreased 3.3 percent driven by a 2.6 percent decline from volume/mix and a 0.7 percent decline from lower net pricing. Volume/mix included an approximate one percentage point negative impact from the timing of Easter-related shipments and an approximate one percentage point negative impact from lower ready-to-drink beverage sales resulting from decreased promotional activity versus the prior year quarter as well as retail inventory shifts this year. Lower net pricing reflected pricing actions in the Cheese and Foodservice businesses related to lower dairy costs that were partially offset by the carryover impact of price increases taken in prior quarters.
Operating income of $923 million and diluted EPS of $0.92 included $56 million ($0.06 per diluted share) in spending on cost savings initiatives, $37 million ($0.04 per diluted share) in merger-related costs, a $21 million ($0.02 per diluted share) gain on the sale of assets, and $20 million ($0.02 per diluted share) in unrealized gains from hedging activities.
Excluding the impact of these factors in both years, operating income grew at a mid-single-digit rate and EPS grew at a double-digit rate. This growth was primarily driven by a combination of favorable commodity costs (mainly in the dairy and meat categories) net of pricing; lower selling, general and administrative (“SG&A”) expenses driven by reductions in less effective advertising spending; and lower manufacturing costs driven by net productivity. EPS growth was further enhanced by a lower effective tax rate and lower net interest expense versus the prior year quarter.
Free Cash Flow2 through the first six months of 2015 was $802 million, up from $454 million for the same period during the prior year, reflecting working capital improvements that more than offset an increase in capital expenditures. Full report.