Kraft Heinz has on Wednesday reported lower sales and earnings for the third quarter of 2025, as inflationary pressures and weak demand in key markets continued to weigh on performance.
However, the food giant said it remains on track to separate into two companies next year and is seeing signs of improvement from targeted brand investments.
The maker of Heinz sauces and Kraft Mac & Cheese said net sales fell 2.3 per cent to $6.2 billion (£4.7bn) in the three months to 27 September, with organic sales down 2.5 per cent. Price increases of 1 per cent - mainly in coffee – were offset by a 3.5 per cent decline in volume and mix, reflecting weaker demand for coffee, cold cuts, frozen snacks and condiments.
Operating income jumped more than 1,100 per cent to $1bn, largely due to last year’s impairment charges, but adjusted operating income fell 16.9 per cent to $1.1bn. This was attributed to higher commodity and manufacturing costs and increased marketing spend, only partly offset by price hikes and currency benefits.
Adjusted EPS declined 18.7 per cent to $0.61, while reported diluted EPS was $0.52, up sharply from a year ago because of those prior-year impairments.
CEO Carlos Abrams-Rivera said the company’s “modest year-over-year improvement in top-line performance” reflected early benefits from investments aimed at strengthening its brands and delivering more affordable products.
“While the operating environment remains challenging, we’re seeing improvement driven in part by targeted investments we’re making to deliver superior and affordable products,” he said. “We’re funding these through best-in-class productivity, while at the same time generating strong cash flow, maintaining our target Net Leverage ratio, and returning capital to stockholders.”
Indeed, free cash flow rose 23.3 per cent to $2.5bn in the first nine months of the year, driven by better working capital management and lower capital expenditure. Year-to-date, Kraft Heinz returned $1.8bn to shareholders, including $1.4bn in dividends and $435m in share repurchases.
Split into two companies on track
The group reaffirmed that its planned separation into two listed businesses – announced in September – remains on track for the second half of 2026. The move will create:
- Global Taste Elevation Co., home to international brands like Heinz, Philadelphia, and Kraft Mac & Cheese, and
- North American Grocery Co., focused on staples such as Oscar Mayer, Kraft Singles, and Lunchables.
Abrams-Rivera said the split would “allow each business to better focus resources, improve execution, reduce complexity, and drive further efficiencies.”
Kraft Heinz plans to maintain a net leverage ratio of around 3x, and could use excess cash to pay down debt ahead of the separation.
Weaker outlook for full year
Reflecting softer sales in Indonesia and ongoing pressure in US retail, Kraft Heinz cut its full-year sales forecast. It now expects organic net sales to fall 3–3.5 per cent, versus a prior forecast of 1.5–3.5 per cent decline.
Constant-currency adjusted operating income is projected to fall 10–12 per cent, compared with previous guidance of 5–10 per cent, and adjusted EPS is expected at $2.50–$2.57, slightly narrowing the range.
The company still expects free cash flow conversion of at least 100 per cent, supported by strong working capital discipline, though it warned of higher cash tax outflows due to new global minimum tax regulations.
Despite the challenging environment, Kraft Heinz insisted it is investing to strengthen its brand portfolio and innovation pipeline, with marketing and R&D spend stepping up.
“We remain focused on driving performance within our current business, and ultimately positioning both companies for long-term success,” Abrams-Rivera said.