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Kraft Heinz’s US Segment Contributed 77% to Revenue

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US segment

Kraft Heinz (KHC) operates in four segments—the US, Canada, Europe, and the Rest of World. The US segment’s net sales were $4.5 billion—a fall of 3.7% compared to the same quarter last year. The adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for this segment rose by 1.4% to $1.1 billion. Cost saving initiatives and favorable pricing of net commodity costs, mainly in the cheese and meat category, drove the rise in the EBITDA.

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Canada

The Canada segment’s net sales were $539 million. The net sales fell by 18.9% compared to the same quarter last year. It was mainly due to a currency effect of -16.3%. The organic net sales fell 2.6% compared to 3Q14. The Canada segment’s adjusted EBITDA fell 20.3% to $110 million. It was mainly driven by a currency effect of -17.9%.

Europe

The Europe segment’s net sales were $599 million. The net sales fell 13.9% compared to 3Q14. It was due to a currency impact of -11.1% and a -3.3% effect from divestitures. The organic net sales rose 0.5% compared to 3Q14. The segment’s adjusted EBITDA rose 8.3% to $222 million. The profit from cost saving initiatives, lower input costs, and favorable volume or mix led to the rise.

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Rest of World

The Rest of World segment is comprised of Asia-Pacific, Latin America, Russia, India, the Middle East, and Africa. The segment’s net sales were $684 million—down 25.3% compared to the same quarter a year ago. A currency impact of -32.4% caused the fall. Also, a -12.8% effect from the devaluation of the Venezuelan bolivar, taken in June, partly played a role in the fall. The organic net sales rose 7.1% compared to 3Q14. The Rest of World segment’s adjusted EBITDA fell 29.4% to $125 million. It was mainly due to a -43.7% currency impact. However, cost savings initiatives partially offsetted the gains.

The company’s peers in the industry include Pilgrim’s Pride (PPC), McCormick & Company (MKC), and Keurig Green Mountain (GMCR). They reported net margins of 6.5%, 9.0%, and 11.7%, respectively, in their last reported quarter. The Vanguard Mid-Cap Growth ETF (VOT) invests 0.53% of its portfolio in Keurig Green Mountain stock.

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