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Source: Kraft Heinz

Kraft Heinz has raised earnings expectations for the year after a strong growth in first quarter sales driven by price hikes helped to expand margins.

Announcing its results for the first three months of the year today, Kraft Heinz said its net sales increased 7.3% compared with a year ago to $6.5bn, including a negative 2.1 percentage point impact from the strong dollar.

Organic net sales were up 9.4% from the same quarter last year, following annualised price hikes of 14.7% across its portfolio.

Those price hikes had a negative effect on sales volumes, with volume/mix down 5.3% driven by elasticity impacts from pricing actions.

The group said the sales volume drop was “anticipated” given pricing actions in February and the ongoing impact from pricing taken in 2022. However, it noted that, on average, elasticities remained still 30% to 40% below historical levels.

The price rises helped net income increase 7.1% to $837m as gross profit margin increased 62 basis points to 32.6%.

Adjusted EBITDA was up some 10.3% to $1.5bn driven by pricing and efficiency gains, which offset higher supply chain costs related to procurement and manufacturing, and higher commodity costs, particularly in soybean and vegetable oils, energy, and sweeteners.

The group expects its 2023 organic sales growth to moderate to between 4%-6%.

However, it raised its 2023 constant currency adjusted EBITDA expecatons to 6%-8% from 4%-6% on the strong first quarter performance.

CEO Miguel Patricio commented: “We delivered strong results in the first quarter of 2023, with net sales growth across both our North America and International zones that continues to be fuelled by foodservice, emerging markets, and US retail.

“I am very proud of the entire Kraft Heinz team as we continue to deliver on what we can control by unlocking efficiencies and reinvesting in our brands and capabilities. Our team’s continued focus on executing against the strategy is coming to fruition, but it’s not time to declare victory just yet.

“We remain committed to advancing our business transformation, and we are confident we have the right strategy in place to win with customers and consumers, and to deliver profitable growth and create value for our stockholders.”

Kraft Heinz shares were up 4.2% to $41.09 on the news.