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Kraft Heinz plans more price hikes as sales, earnings beat estimates

by jcp
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By Deborah Mary Sophia and Mehr Bedi

(Reuters) -Kraft Heinz Co said on Wednesday it would raise the prices of its snacks and condiments further to counter soaring costs of raw materials and transportation, after posting quarterly earnings above market expectations.

Shares of the Chicago-based company rose as much as about 6% in morning trading.

Packaged food makers were among the biggest pandemic winners last year as stuck-at-home consumers stockpiled on frozen meals, sauces and soups.

A strained supply chain, however, has driven up freight and labor expenses and aggravated problems for companies like Kraft, Conagra and Kellogg that are grappling with surging costs of grains, meat and edible oils.

“Kraft Heinz is doing a better job of navigating rising costs and driving demand than we thought,” Edward Jones analyst John Boylan said, adding that the company has laid a good foundation by lowering costs and divesting sluggish businesses.

Kraft, whose brands include Philadelphia Cream Cheese and Heinz ketchup, said it raised prices by 3.8 percentage points in the fourth quarter when demand for its products was also robust. Margins in 2021, as a result, were higher than in pre-pandemic 2019.

The company expects inflation to be in the low-teens percentage range for 2022, with higher levels in the first half than in the second, said Chief Financial Officer Paulo Basilio.

Kraft also sees full-year organic sales growing by a low-single-digit percentage, compared with a 1.8% rise in 2021.

Its net sales declined 3.3% to $6.71 billion in the fourth quarter ended Dec. 25, owing to some acquisitions and divestitures, but beat the Refinitiv IBES estimate of $6.61 billion.

Excluding items, Kraft earned 79 cents per share, beating analysts’ average estimate of 63 cents.

(Reporting by Deborah Sophia and Mehr Bedi in Bengaluru; Editing by Ramakrishnan M.)

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