Kraft and Heinz sales fall short pre-merger

America’s third-largest food and beverage company said revenues in its Kraft unit dropped 4.9 per cent to $4.5 billion (Dh16.53 billion), short of analyst expectations, because of lower volume and prices.

However, the business posted earnings per share of 92 cents, a 15 per cent increase year on year and ahead of market estimates, thanks in part to an asset sale and unrealised gains from hedging activities, the company said on Monday.

Bernardo Hees, chief executive, said the company was “focused on the difficult and challenging process of integrating our two businesses. We have a lot of hard work ahead of us as we continue to design our new organisation.”

Kraft Heinz was created on July 2 out of the combination of the two companies, which produce some of the biggest processed food brands in the US — in some cases, such as Heinz Ketchup, across the world.

The second-quarter results are the first reported by Kraft Heinz since the merger. However, the date of the tie-up means that the companies were still separate during the three-month period.

Investors are expecting big things from the combination. 3G has proved it can slice large costs off companies it controls, and its success at improving operating margins at companies it has taken over has made them a benchmark for rivals in the food sector.

Under a consumer revolution in taste preferences and demand for value, the industry is being forced to spend more wisely, cut costs and introduce products that fit demands for healthier foods with more natural ingredients.

Heinz was taken over by the Buffett-3G partnership in 2013. In a sign that it is still being streamlined in a tricky macroeconomic environment, second-quarter sales dropped and the company fell into a deeper loss.

Heinz reported a loss of 91 cents a share, compared with a 14 cents-a-share loss a year ago, on a 4.1 per cent drop in sales to $2.6 billion. With much bigger overseas operations than Kraft, Heinz was hit hard by the strong dollar. It also divested a UK business.

However, excluding extraordinary items, earnings before interest, tax, depreciation and amortisation rose 6.7 per cent to $739 millio, thanks to better pricing in North America as well as cost cuts, the company said.

Kraft Heinz produced unaudited results showing combined earnings for the quarter. These showed a fall in revenue to $7.1 billion from $7.5 billion, and a decline in net income to $390 million from $494 million.

Kraft Heinz said it was “confident” it would meet its estimates for the merger, including cost cuts of $1.5 billion by the end of 2017.

Its shares fell 2.3 per cent in after-hours trading to $76.99.

— Financial Times