Kraft Heinz fell short of Wall Street forecasts for the third quarter and sent shares down almost 9 per cent in after-hours trading, after higher input costs and promotions outweighed an increase in sales.
The company behind pantry fillers such as Kraft Macaroni & Cheese, Heinz Tomato Ketchup and Oscar Mayer hot dogs reported higher net sales than analysts expected, but said investments and higher overheads, as well as promotional and commodity costs that hurt pricing, cut into its earnings.
The results continued a recent trend among food and beverage companies experiencing a jump in costs of raw materials and freight costs.
Net sales rose 1.6 per cent from a year earlier to to $6.38bn in the three months ended September, surpassing expectations for $6.31bn in a survey of analysts by Thomson Reuters.
But net income fell 33 per cent year-on-year to $630m, or 51 cents a diluted share, amid an increase in expenses. Adjusted earnings came in at 78 cents, 3 cents shy of Wall Street estimates, and down from 83 cents a year ago.
“While a number of one-off factors — as well as our desire to insure customer service — held back profit in the quarter, we remain confident that we are well-positioned to deliver sustainable, profitable growth going forward,” chief executive Bernardo Hees said in a statement.
In the US, the biggest region for Kraft Heinz, net sales grew 1.8 per cent to $4.43bn. Pricing declined 2 per cent due to promotional activity in stores and commodity price impacts, the company said.
Kraft Heinz, in addition to food rivals such as General Mills and Mondelez, has announced planned price increases in recent months in response to higher freight and commodity costs. Mondelez, maker of Cadbury chocolates and Oreo cookies, said on Monday it would raise prices on a number of its US brands from early next year.
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