# Kraft Heinz flags margin pressure from inflation, shares fall
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-08-04
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Kraft Heinz Co's Margin Warning Amid Rising Ingredient Costs
Meta Description: Kraft Heinz Co warns of margin pressure from higher prices of ingredients, sending shares down 4%. Despite this, the company forecasts annual core earnings to
URL: https://financedigest.com/kraft-heinz-flags-margin-pressure-from-inflation-shares-fallhtml

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By Praveen Paramasivam and Mehr Bedi

(Reuters) -Kraft Heinz Co on Wednesday warned of margin pressure from higher prices of ingredients, sending its shares down 4%, even as the packaged food maker forecast [annual](https://www.financedigest.com/manchester-united-renews-adidas-partnership-in-1-1-billion-10-yr-deal.html) core earnings to top pre-pandemic levels.

Companies across sectors have been plagued by a double whammy of higher raw material costs, and increased spending on shipments aimed at easing the strain on their supply chains due to the COVID-19 pandemic.

To add to packaged [food makers’ woes](https://www.financedigest.com/we-are-going-to-die-food-shortages-add-to-sri-lankas-woes.html "‘We are going to die’: Food shortages add to Sri Lanka’s woes"), analysts have said they would be forced to offer higher discounts and spend more on marketing to sustain high sales levels.

Kraft, however, has announced [price increases across its portfolio to counter the impact of higher](https://www.financedigest.com/wall-street-seen-opening-higher-but-u-s-recession-priced-in.html "Wall Street seen opening higher but U.S. recession priced in") expenses, while noting that inflation was “manageable.

The company forecast annual [inflation to be above the midpoint of a mid-single-digit range compared with the prior estimate of it being at the lower](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") end of the range.

Kraft also cautioned it was too early to gauge how demand would stabilize between at-home and away-from-home channels amid the pandemic-related [uncertainty that has forced companies across sectors](https://www.financedigest.com/combatting-economic-uncertainty-in-2023-with-the-payments-sector.html "Combatting economic uncertainty in 2023 with the payments sector") to flag supply chain and demand-related concerns.

The Jell-O maker projects annual adjusted [earnings](https://www.financedigest.com/uk-workers-see-record-pay-rises-but-inflation-eats-them-up.html) before interest, taxes, depreciation, and amortization (EBITDA), including the impact of divestitures of cheese and nuts businesses, to be above the $6.1 [billion it recorded](https://www.financedigest.com/uks-first-green-gilt-draws-record-137-billion-demand.html "UK’s first green gilt draws record 7 billion demand") in 2019.

J.P. Morgan’s Ken Goldman wrote “it still potentially stands below consensus.”

Kraft, known for brands such as Philadelphia cream cheese and Heinz ketchup, beat estimates for the reported [quarter after demand for snacks and packaged meals remained strong](https://www.financedigest.com/italys-mps-sees-safe-habour-ahead-after-strong-quarter.html "Italy’s MPS sees ‘safe habour’ ahead after strong quarter") even as people started venturing out following the easing of coronavirus restrictions.

Net [sales were $6.62 billion](https://www.financedigest.com/allianz-puts-n26-stake-up-for-sale-at-3-billion-valuation-ft.html "Allianz puts N26 stake up for sale at billion valuation – FT") in the second quarter, topping estimates of $6.55 billion. Adjusted [earnings of 78 cents per share](https://www.financedigest.com/european-shares-rebound-with-focus-on-italian-politics-earnings.html "European shares rebound with focus on Italian politics, earnings") was also above Refinitiv IBES estimates of 72 cents.

(Reporting by Mehr Bedi and Praveen Paramasivam in Bengaluru; editing by Vinay Dwivedi)


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