Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Paying user area
Try for free
Kraft Foods Group Inc. pages available for free this week:
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Kraft Foods Group Inc. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Kraft Foods Group Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | |
|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||
| Cost of capital2 | ||||
| Invested capital3 | ||||
| Economic profit4 | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2014 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data indicates notable fluctuations in key performance metrics over the three-year period under review.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT increased significantly from approximately $2,340 million in 2012 to $3,734 million in 2013, reflecting a positive growth trend. However, in 2014, there was a substantial decline to $989 million, indicating a sharp downturn in operating profitability.
- Cost of Capital
- The cost of capital showed a gradual increase each year, rising from 12.34% in 2012 to 12.69% in 2013 and reaching 12.96% in 2014. This trend suggests a steadily increasing required return on invested capital, potentially reflecting rising risk or changes in market conditions.
- Invested Capital
- Invested capital grew from $13,807 million in 2012 to $16,041 million in 2013, signaling expansion or increased investment. In 2014, invested capital decreased to $14,787 million, which might indicate divestitures or asset reductions.
- Economic Profit
- The economic profit exhibited substantial volatility. It rose from $636 million in 2012 to a peak of $1,699 million in 2013, evidencing strong value creation above the cost of capital. Conversely, in 2014, economic profit turned negative, amounting to a loss of $928 million, suggesting that the company generated returns below its cost of capital during that year.
Overall, the data reveals a peak in financial performance in 2013, followed by significant declines in 2014 across several key indicators. The increase in cost of capital alongside the drop in profitability and economic profit in 2014 may point to operational challenges or adverse market factors impacting the company’s value generation capacity during that period.
Net Operating Profit after Taxes (NOPAT)
Kraft Foods Group Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances related to accounts receivable.
3 Addition of increase (decrease) in restructuring costs liability.
4 Addition of increase (decrease) in equity equivalents to net earnings.
5 2014 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2014 Calculation
Tax benefit of interest and other expense, net = Adjusted interest and other expense, net × Statutory income tax rate
= × 35.00% =
7 Addition of after taxes interest expense to net earnings.
The financial data reveals notable fluctuations in both net earnings and net operating profit after taxes (NOPAT) over the three-year period under consideration.
- Net Earnings
- Net earnings increased significantly from 1,642 million US dollars in 2012 to 2,715 million US dollars in 2013. However, in 2014, net earnings declined sharply to 1,043 million US dollars, representing a substantial decrease relative to the prior year and even falling below the 2012 level.
- Net Operating Profit After Taxes (NOPAT)
- Similar to net earnings, NOPAT demonstrated strong growth from 2,340 million US dollars in 2012 to 3,734 million US dollars in 2013. Yet, there was a pronounced decline in 2014, with NOPAT dropping to 989 million US dollars, marking a significant reduction compared to both preceding years.
Overall, the data suggests that although the company experienced robust profitability improvements in 2013, this positive trend was not sustained, with a marked downturn occurring in 2014. Both profitability indicators reflect this pattern, highlighting sensitivity to potentially adverse operational or market conditions during the latter year.
Cash Operating Taxes
Kraft Foods Group Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
The analysis of the provided annual financial data reveals notable fluctuations in the tax-related expenses over the three-year period ending December 27, 2014.
- Provision for Income Taxes
- There is a significant fluctuation observed in the provision for income taxes. In 2012, the provision was reported at 811 million US dollars, which increased substantially to 1,375 million US dollars in 2013, representing a considerable rise. However, in 2014, this figure sharply declined to 363 million US dollars, indicating a substantial reduction from the previous year. This large variance may reflect changes in pre-tax income, tax policies, or adjustments related to prior periods.
- Cash Operating Taxes
- The cash operating taxes also show an upward trend throughout the examined period. Starting at 437 million US dollars in 2012, the amount nearly doubled to 849 million US dollars in 2013 and saw a further increase to 899 million US dollars in 2014. The consistent increase may indicate higher taxable income or changes in tax payment practices.
Overall, while cash operating taxes steadily increased each year, the provision for income taxes displayed considerable volatility, peaking in 2013 before dropping sharply the following year. This divergence between the provision and cash taxes could denote timing differences in tax recognition or other accounting factors affecting recorded tax expense versus actual cash payments.
Invested Capital
Kraft Foods Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of restructuring costs liability.
5 Addition of equity equivalents to equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
- Total Reported Debt & Leases
- The total reported debt and leases remained relatively stable over the three-year period, with a slight increase from 10,353 million USD in 2012 to 10,402 million USD in 2013. It then remained almost constant at 10,401 million USD in 2014, indicating a stable capital structure in terms of debt obligations.
- Equity
- Equity experienced a notable increase from 3,572 million USD in 2012 to 5,187 million USD in 2013, representing a significant growth. However, this was followed by a decrease to 4,365 million USD in 2014. This fluctuation suggests some variability in shareholder value or retained earnings within this timeframe.
- Invested Capital
- Invested capital showed an upward trend from 13,807 million USD in 2012 to 16,041 million USD in 2013, before declining to 14,787 million USD in 2014. This pattern aligns with the changes in both equity and debt, reflecting adjustments in the company’s total funding and asset base.
- Overall Analysis
- The financial data reveals that while debt levels were largely maintained, equity and invested capital exhibited growth followed by contraction over the three years. The rise in equity and invested capital in 2013 may reflect increased investment or retained earnings that year, but the subsequent decline in 2014 indicates a pullback or redistribution. Stability in debt suggests a consistent leverage approach, but the variations in equity and invested capital warrant further investigation to understand the underlying causes, such as potential asset disposals, dividend payments, or changes in profitability.
Cost of Capital
Kraft Foods Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2014-12-27).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2013-12-28).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2012-12-29).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kraft Foods Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Economic profit1 | ||||
| Invested capital2 | ||||
| Performance Ratio | ||||
| Economic spread ratio3 | ||||
| Benchmarks | ||||
| Economic Spread Ratio, Competitors4 | ||||
| lululemon athletica inc. | ||||
| Nike Inc. | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 Economic profit. See details »
2 Invested capital. See details »
3 2014 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data over the three annual periods reveals significant fluctuations in key performance indicators, indicative of changing operational effectiveness and capital efficiency.
- Economic Profit
- The economic profit demonstrated a marked increase from 636 million US dollars in the first period to 1,699 million US dollars in the second period, indicating enhanced profitability and value creation. However, the third period showed a substantial decline, falling into negative territory at -928 million US dollars. This suggests a reduction in the company’s ability to generate returns above its cost of capital during the latest year.
- Invested Capital
- Invested capital increased steadily from 13,807 million US dollars to 16,041 million US dollars between the first and second periods, indicating a rise in the company's investment base. Nevertheless, there was a slight decrease in the third period to 14,787 million US dollars, which may reflect divestitures, asset write-downs, or a strategic reduction in capital deployment.
- Economic Spread Ratio
- The economic spread ratio, representing the spread between return on invested capital and cost of capital, improved significantly from 4.6% to 10.59% between the first two periods, highlighting a more efficient utilization of capital and higher returns relative to costs. In the final period, this ratio turned negative to -6.28%, indicating that the returns failed to cover the cost of capital, thus eroding shareholder value.
Overall, the data portrays a trajectory of growth and improved financial performance initially, followed by a sharp reversal characterized by losses and diminishing capital efficiency in the concluding period.
Economic Profit Margin
Kraft Foods Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Economic profit1 | ||||
| Net revenues | ||||
| Performance Ratio | ||||
| Economic profit margin2 | ||||
| Benchmarks | ||||
| Economic Profit Margin, Competitors3 | ||||
| lululemon athletica inc. | ||||
| Nike Inc. | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 Economic profit. See details »
2 2014 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance over the three-year period exhibits notable fluctuations, particularly in economic profit and its margin, despite relatively stable net revenues.
- Net Revenues
- The net revenues remained consistent throughout the years, with values of approximately 18,339 million USD in 2012, 18,218 million USD in 2013, and 18,205 million USD in 2014. This indicates that the company’s sales or service income experienced minimal change, suggesting stable market demand or pricing during this period.
- Economic Profit
- Economic profit saw substantial variation. In 2012, it was positive at 636 million USD, surged significantly to 1,699 million USD in 2013, but then declined sharply to a negative 928 million USD in 2014. This trend highlights a strong improvement in profitability in 2013, followed by a deterioration that resulted in economic losses by 2014.
- Economic Profit Margin
- The economic profit margin mirrored the trajectory of economic profit, increasing from 3.47% in 2012 to 9.33% in 2013, signifying improved efficiency and value creation relative to revenues. In 2014, the margin turned negative to -5.1%, indicating that economic profit was not generated relative to revenue and that the company was destroying value that year.
Overall, while revenue levels were stable, there was significant volatility in profitability measures. The sharp increase and subsequent decline in economic profit and its margin suggest underlying issues impacting financial performance in 2014. This could be due to increased costs, operational inefficiencies, or other adverse factors negatively affecting value generation despite consistent sales.