Kraft Heinz (Baa2/BBB; S) {KHC US Equity} 1Q24 Results

Results in-line; weak volumes offset by price growth for net flat results. Could see local supply on €550m line rolling off this month.

• Sales at $6.4b at organic -0.5% growth dragged on by volumes (-3.2%) with pricing +2.7%. Gross/reported was -1.2%.
• Strong improvement in gross profit margins; +240bp to 35% and adj. +170bps to 34.5% - both above consensus 34%. Reported EBIT was €1.27b (+1.7%yoy) while adj. was €1.3b (+4.7%yoy)
• Cash flow from operations was $771m (+59%) attributed to favourable inventory dynamics though it did note somewhat offset by "higher variable compensation" yoy. FCF was $447m (+116.8%), strong operating cash flows offsetting a +28m capex bump.
• $486m in dividends & $330m in buybacks more than taking up FCF. $2.6b remaining in buyback programme that runs till end of '26.
• Guidance affirmed; organic 0 to +2% growth (c+1%) driven by prices (c+1.6%) - volume to turn positive in 2H. Adj. operating income +2-4% - kept unch despite bumping adj. gross margins to a +50-100bp improvement yoy (prev. +25-70bp).
• Only has single May €550m line rolling off this year - could see refi on it - net leverage at end of FY23 was already at target 3x.