Kraft’s strong Q3 gives management an optimistic view of short-term performance.

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Kraft Heinz reported an up and down swing in its third quarter results.
The management gave an optimistic outlook for the fourth quarter and the year 2020.
The company noted that it is “attracting and retaining more customers than before”.

Global food giant Kraft Heinz Co. (NASDAQ: KHC) announced its third quarter results on Thursday morning, prompting management to revise its outlook upward.

Q3 Results

Kraft reported that it earned 70 cents per share in the third quarter on revenues of $6.44 billion. Both figures were better than the 62 cents per share and $6.31 billion analysts had expected. Other key figures in the report include an increase in adjusted EBITDA to $1.667 billion from last year’s $1.469 billion, and net cash flow from operations increased by 67% to $3.3 billion since the beginning of the year.

Comparable revenues also increased 6.3% for the quarter as grocery store sales accelerated in the last half of September against the backdrop of rising COVID-19 infection rates in many parts of the U.S.

Net sales increased 7.4% in the U.S. and 3.9% internationally, while sales in Canada declined 2.2%. Company-wide total net sales for the quarter were 6.0% higher.

Organic net sales increased 6.3% despite a 1.2 percentage point negative impact from the end of a McDonald’s licensing agreement. Prices were 3.7 percentage points higher and each business segment reported positive prices.

The company experienced strong growth in the retail channel, e-commerce and club stores, which more than offset the low sales in the foodservice category.

During the Company’s earnings conference call, management attributed its strong performance to its ability to retain new consumers “at a higher rate than before,” according to the Wall Street Journal.

Strong outlook

Kraft’s strong third quarter reflects the “agility we are creating as an organization” and justifies an increase in management’s earlier guidance, Kraft Heinz CEO Miguel Patricio said in the results report. Management’s confident and optimistic view of the business is reflected as follows:

Mid-single-digit organic net sales growth in the fourth quarter.
High single-digit currency-adjusted EBITDA growth in constant currencies in the fourth quarter.
Mid-single-digit mid-single-digit organic net revenue growth for the full year 2020.
High single-digit net currency adjusted EBITDA growth in high single digits for the full year 2020.
Preparing for the future

The course of the COVID 19 pandemic remains as unclear as ever, and some hope that a vaccine and new drugs can dramatically help turn the tide. But Kraft is not sitting back and hoping for the best, as the company continues to actively help retailers prepare for a potential unprecedented vacation rush.

According to WSJ, Kraft is also expanding its factory capacity and adjusting its production lines to focus on high-demand items. The company is also prioritizing marketing campaigns for products that are in plentiful supply, such as Kraft macaroni and cheese in boxes instead of single portions in microwave cups, which are not so easy to find.

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