Retail & Consumer

Kraft Heinz lifts profit view on boost from inflation-prompted price hikes

2 minute read

A Heinz Ketchup bottle sits between a box of Kraft macaroni and cheese and a bottle of Kraft Original Barbecue Sauce on a grocery store shelf in New York March 25, 2015. REUTERS/Brendan McDermid/File Photo

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Oct 27 (Reuters) - Kraft Heinz Co (KHC.O) raised its full-year core profit forecast on Wednesday, as the packaged food maker expects strong demand and increased product prices to counter inflation.

Shares of Kraft were up about 2% in premarket trading after the Chicago-based company topped Wall Street estimates for third-quarter revenue and profit.

Kraft said it expects strong pricing in the first half of 2022 to offset the escalating inflation, as at-home dining trends, which emerged during the pandemic, hold up despite the reopening of dine-in restaurants and bars.

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Packaged food companies, which benefited last year from a pandemic-driven pantry-stocking frenzy, have been wrestling with rising raw material costs and freight expenses due to supply chain disruptions caused by the COVID-19 pandemic.

"2022 will remain a very fluid environment. That said, we continue to believe that, from a topline perspective, we will sustain stronger consumption versus pre-pandemic levels" Global Chief Financial Officer Paulo Basilio said.

Kraft said strong demand was outstripping its current capacity to serve for some categories in the United States, and it was likely to experience the same in the current holiday quarter.

The Philadelphia Cream Cheese maker forecast full-year organic sales to be flat compared to a previous expectation of a low-single-digit percentage decline.

Kraft said it expects full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be over $6.2 billion, above its previous estimate of at least $6.1 billion.

Net sales in the third quarter ended Sept. 25 fell 1.8% to $6.32 billion, but beat analysts' average estimate of $6.05 billion.

Excluding items, Kraft earned 65 cents per share, also above estimates of 58 cents.

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Reporting by Deborah Sophia and Aditi Sebastian in Bengaluru; Editing by Shinjini Ganguli

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