卡夫亨氏 (KHC) 2015 Q2 法說會逐字稿

Good day.

My name is Amanda and I will be your conference operator today.

At this time, I would like to welcome everyone to The Kraft Heinz Company second-quarter 2015 earnings conference call.

This listen-only call is being recorded at the request of The Kraft Heinz Company for replay purposes.

I will now turn the call over to Chris Jakubik, Vice President of Investor Relations.

Mr. Jakubik, you may begin.

Thank you, Amanda.

And welcome to the Q2 2015 business update for Kraft Heinz Company bondholders.

With me is our Chief Financial Officer Paulo Basilio.

During our remarks we will make some forward-looking statements.

Statements are based on how we see things today.

Actual results may differ due to risks and uncertainties.

These are discussed in our Earnings Release which can be found in the investors section of kraftheinzcompany.com.

We'll also be discussing some non-GAAP financial measures during the call.

You can find the GAAP to non-GAAP reconciliations in our Earnings Release.

Before we get started, please note that the merger between Kraft Foods Group and H.J. Heinz Holding Corporation to form The Kraft Heinz Company was completed on July 2, 2015, which was after the close of the second quarters for each respective company.

So, in keeping with Heinz's practice prior to the merger, this call will be a review of the pre-merger standalone financial results for each company in Q2 2015 as outlined in the press release we issued on August 10.

With that, I'll hand it over to Paulo.

Thank you, Chris.

Turning first to Kraft, net revenues decreased 4.9% including a negative 1.4% impact from currency.

Kraft organic net revenues decreased 3.3%, consisting of a 2.6% decline from volume mix and a 0.7% decline from lower net pricing.

The volume mix decline included an approximate 1 percentage point negative impact from the timing of Easter-related shipments and approximate 1 percentage point negative impact from lower ready-to-drink beverage sales resulting from decreased promotional activity versus the prior-year quarter, as well as retailer inventory shifts through the year.

Lower net pricing reflected pricing actions in the cheese and foodservices businesses related to lower dairy costs.

These were partially offset by the carryover impact of price increases taken in prior quarters.

Operating income was $923 million, and diluted EPS was $0.92, inclusive of one-off factors in the quarter.

Excluding the impact of these factors in both years, operating income grew at the mid-single-digit rate and EPS grew at the double-digit rate.

This growth was primarily driven by a combination of favorable commodity costs net of pricing, mainly in the dairy and meat categories; lower SG&A expenses, driven by a reduction in 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 prior-year quarter.

Free cash flow through the first six months of 2015 was $802 million, up from $454 million from the same period during the prior year.

This reflected working capital improvements that more than offset an increase in capital expenditures.

Now turning to Heinz, sales declined 4.1% due to a negative 9.4% impact from foreign exchange translation and a 0.6% reduction from the divestiture of a frozen food business in the UK.

Heinz organic net sales grew 5.9%.

Net pricing increased by 4.2% driven by higher pricing across all segments, primarily North America.

Volume increased 1.7% driven by higher inventory stock at US retailers in the first quarter of 2014 prior to implementation of SAP, as well as raw material and packaging supply constraints in Venezuela.

These volume gains were partially offset by volume declines due to the timing of Ramadan festive season in Indonesia, reduced trade promotion in Russia, product rationalization in Europe, and category declines in Italy.

Adjusted EBITDA increased $46 million, or 6.7%, to $739 million, primarily driven by gross profit as a result of increased sales in North America and Venezuela, cost of goods sold productivity initiatives, and an overall reduction in SG&A.

These gains were partially offset by unfavorable foreign exchange translation rates in all segments and increased marketing spend in North America.

organic adjusted EBITDA grew 16.3% driven by increased sales and lower SG&A.

I will now turn the call back to Chris Jakubik for closing remarks.

Thanks, Paulo.

And thank you for listening to our call.

For any investors or analysts who have follow-up questions, I will be available at your convenience.

And for anybody in the media who has further questions Michael Mullen will be available to take your calls, as well.

Thank you and have a good day.

This concludes the conference call.

You may now disconnect from the line.