Kraft, Heinz Sales Fall; Integration Efforts Apace

(RTTNews) - Kraft Heinz Co (KHC), the merged business of packaged foods maker Kraft Foods and ketchup maker H.J. Heinz, on Monday reported lower sales at both divisions, hurt by factors ranging from lower beverage sales and pricing pressures to a stronger dollar and weak European demand.

However, Kraft managed to reap a quarterly profit, driven by cost saving measures, but Heinz slipped to a loss, hurt by unfavorable currency and increased spending in North America.

"The company is focused on the difficult and challenging process of integrating our two businesses," said Kraft Heinz CEO Bernardo Hees in a statement.

Kraft Heinz said it continues to expect savings of $1.5 billion by 2017, and does not plan to provide guidance now onward.

Kraft reported second-quarter sales of $4.52 billion, an increase of 4.9 percent from $4.75 billion in the prior year.

Kraft's volume/mix was hurt by the impact of Easter shipment, lower ready-to-drink beverage sales, and lower pricing in the cheese and food service businesses.

But cost saving measures and some gains from hedging activities drove up net earnings to $551 million or $0.92 per share from $482 million or $0.80 per share last year.

Meanwhile, Heinz's sales for the quarter fell 4.1 percent to $2.62 billion from $2.73 billion in the prior year.

Volumes were down in Indonesia, Russia and Europe, somewhat offset by growth in the U.S.

Heinz's net loss for the quarter was $344 million or $0.91 per share, and included $180 million of preferred dividends. This compares with a loss of $53 million or $0.14 per share last year.

Heinz suffered a negative 9.4 percent impact from foreign exchange translation and a 0.6 percent reduction from the divestiture of a frozen food business in the U.K.

This is Kraft Heinz Co's first earnings report after the closure of its July merger, which created the third-largest food and beverage company in North America and the fifth largest internationally.

For Kraft, which has been facing sales pressures, the Heinz deal is expected to act as a bulwark; the combined company is expected to generate annual sales of about $28 billion, with an array of billion dollar brands in its arsenal.

KHC closed Monday at $78.81, up $0.35 or 0.45%, on a volume of 2.4 million shares on the Nasdaq. In after hours, the stock dropped $1.31 or 1.66% at $77.50.