Kraft Heinz Sales Rise on Growth Outside U.S.-- 2nd Update

By Annie Gasparro and Maria Armental Features Dow Jones Newswires

Kraft Heinz Co. reported its first sales increase since its namesake companies merged two years ago, joining other food makers that have found growth abroad as longstanding brands fall out of favor in the U.S.

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Kraft Heinz's quarterly revenue rose 0.7% to $6.31 billion, despite a 0.4% decline in revenue in the U.S. On a comparable basis, global sales increased 0.3%. Analysts had expected an even wider increase and a stronger profit margin, and Kraft Heinz shares fell 1.7% to $76.40 in after-hours trading.

"There's no question that the retail environment, particularly in the United States, will remain both dynamic and challenging," said Chief Executive Bernardo Hees.

Kellogg Co., Mondelez International Inc., Hershey Co. and other food makers have reported better-than-expected quarterly earnings over the past week. At Kraft Heinz, some brands are struggling, including Planters nuts, Kraft cheese and Maxwell House coffee. Others, like Lunchables packed meals, posted sales growth.

Kraft Heinz has pared back some of its low-selling products and reformulated the recipes of others, hoping to boost sales by making them trendier. The company recently began making pre-sliced, processed deli meat from animals that were never treated with antibiotics, and it removed the artificial yellow dye from its classic boxed Kraft macaroni and cheese.

Kraft Heinz was formed in 2015 and is run by executives from Brazilian firm 3G Capital Partners LP, known for their aggressive cost-cutting. Kraft Heinz has said the merger will save it some $2 billion in annual operating costs. Its operating profit margin rose to 26% of sales in the third quarter, from 23% the prior year.

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The company tried to buy Unilever PLC earlier this year, and analysts believe Kraft Heinz will keep looking to buy competitors and further streamline operations. Mr. Hees said Kraft Heinz would wait for good opportunities to buy brands that have the potential for higher sales abroad and online.

"We know how to be fast when applicable," he said.

The company reported a 12% rise in its third-quarter profit to $944 million. Excluding restructuring-related costs, earnings were unchanged at 83 cents a share, topping analysts expectations of 82 cents, according to FactSet.

Write to Annie Gasparro at annie.gasparro@wsj.com and Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

November 01, 2017 19:07 ET (23:07 GMT)