Kraft Heinz Co. (NASDAQ:KHC)

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibited significant volatility over the analyzed period. It started at 1,418 million US dollars in 2015, rose substantially to 4,237 million in 2016, and continued to increase to 5,287 million in 2017. However, in 2018, the figure turned negative, showing a considerable loss of 11,194 million, before recovering to 2,719 million in 2019. This pattern indicates inconsistency in operational profitability with a notable downturn in 2018.

Cost of Capital

The cost of capital displayed a gradual and steady decline from 12.5% in 2015 to 10.09% in 2019. This decrease suggests a reduction in the required return by investors, potentially reflecting improved perceived stability or lower risk associated with the company over time.

Invested Capital

Invested capital slightly increased from 105,133 million US dollars in 2015 to 112,007 million in 2017, but then decreased to 96,541 million in 2018 and further to 94,307 million in 2019. This trend shows an initial expansion in capital investment, followed by a drawdown in the later years, which may be associated with operational challenges or strategic divestments.

Economic Profit

The economic profit remained negative throughout the period, indicating that the returns did not meet the cost of capital. While the negative economic profit improved marginally from a loss of 11,718 million in 2015 to 8,096 million in 2017, it significantly worsened in 2018 to a loss of 21,192 million, consistent with the negative NOPAT in that year. In 2019, economic profit improved but remained negative at 6,798 million. These figures suggest persistent value destruction, especially pronounced in 2018.

Summary

Overall, the company's financial data reveals considerable instability, marked by fluctuating operating profit, a declining cost of capital, and persistent negative economic profit. The sharp drop in 2018 in both NOPAT and economic profit suggests operational or market challenges during that period. Despite recovering somewhat in 2019, the company has not demonstrated sustained value creation over the analyzed years.

Net Income (Loss) Attributable to Kraft Heinz

The net income showed significant volatility over the five-year period. Starting at $634 million in 2015, it experienced a substantial increase to $3,632 million in 2016 and peaked at $10,999 million in 2017. However, this trend reversed sharply in 2018, resulting in a significant net loss of $10,192 million. The company partially recovered in 2019, reporting net income of $1,935 million. This pattern suggests the company faced exceptional events or impairments in 2018 that drastically affected profitability.

Net Operating Profit After Taxes (NOPAT)

The NOPAT followed a similar trajectory to net income, indicating alignment between operating performance and net profitability. NOPAT increased from $1,418 million in 2015 to $4,237 million in 2016 and further to $5,287 million in 2017, reflecting improving operational efficiency or profitability. The figure then dropped markedly to a negative $11,194 million in 2018, consistent with the reported net loss. In 2019, NOPAT rebounded to $2,719 million, indicating a recovery in operating profit after taxes but remaining below the peak levels observed in 2017. This pattern underscores a volatile period with a significant downturn followed by a partial recovery.

Summary of Trends

Overall, both net income and NOPAT exhibited growth from 2015 to 2017, followed by a substantial deterioration in 2018, which indicates major adverse developments during that year. The recovery in 2019 points to improvement but not a full restoration to prior peak levels. Such fluctuations suggest the presence of extraordinary losses or impairments in 2018, impacting both reported net income and operating profit after taxes.

The financial data reveals notable fluctuations in the provision for (benefit from) income taxes over the five-year period. Initially, the provision increased significantly from 366 million US dollars in 2015 to 1381 million US dollars in 2016. Subsequently, there was a sharp reversal, with the provision moving into a substantial benefit position, showing -5460 million US dollars in 2017 and a continued benefit of -1067 million US dollars in 2018. In 2019, the provision returned to a positive value of 728 million US dollars, indicating a reversion to a tax expense position.

In contrast, cash operating taxes exhibited a different pattern, showing more stability and less volatility. The amount rose from 1157 million US dollars in 2015 to a peak of 1815 million US dollars in 2016, followed by a decline to 1448 million US dollars in 2017. Afterward, cash operating taxes decreased further to 1177 million US dollars in 2018 but increased again to 1312 million US dollars in 2019. Overall, cash operating taxes remained within a narrower range compared to the provision for income taxes, reflecting relatively steadier tax cash payments despite fluctuations in tax provisions.

The divergence between the provision for income taxes and cash operating taxes suggests that significant non-cash tax items affected the income tax provision, particularly in 2017 and 2018. These years experienced considerable tax benefits recorded in the provision, which could be linked to one-time adjustments, changes in tax laws, or deferred tax asset/liability movements. Meanwhile, cash taxes paid remained consistently positive and relatively stable, highlighting the difference between accounting tax expenses and actual cash outflows related to taxes.

Total Reported Debt & Leases

The total reported debt and leases increased significantly from 25,825 million USD in 2015 to a peak of 32,787 million USD in 2016. After reaching this peak, the amount decreased slightly over the next three years, ending at 29,845 million USD in 2019. This indicates an overall rise in leverage in 2016, followed by some reduction, although debt levels remained higher than in 2015.

Shareholders’ Equity

Shareholders’ equity showed variability during the period. It was relatively stable between 2015 (57,685 million USD) and 2016 (57,358 million USD), then increased notably to 66,034 million USD in 2017. After this peak, equity declined sharply in 2018 to 51,657 million USD and remained nearly constant through 2019 at 51,623 million USD. This pattern suggests a significant equity event or adjustment between 2017 and 2018, followed by stabilization at a lower level.

Invested Capital

The invested capital gradually increased from 105,133 million USD in 2015 to a peak of 112,007 million USD in 2017. However, this was followed by a marked decline over the next two years, reaching 94,307 million USD by 2019. This trajectory shows an initial expansion of capital investment, succeeded by a contraction, which aligns with the observed reductions in debt and equity during the latter years.

The financial data reveals notable trends across the reviewed periods concerning economic profit, invested capital, and economic spread ratio.

Economic Profit

Economic profit remains negative throughout the observed years, indicating consistent underperformance relative to the company's cost of capital. The loss appears to narrow slightly from -11,718 million USD in 2015 to -8,096 million USD in 2017, suggesting some improvement during this segment. However, a substantial decline occurs in 2018 with economic profit dropping sharply to -21,192 million USD, representing a significant reduction in value creation before improving again in 2019 to -6,798 million USD. This pattern suggests volatility in profitability with a major setback in 2018 followed by partial recovery.

Invested Capital

Invested capital shows an initial upward trend, increasing from 105,133 million USD in 2015 to a peak of 112,007 million USD in 2017. After reaching this peak, invested capital declines steadily over the last two years, falling to 96,541 million USD in 2018 and further to 94,307 million USD in 2019. The reduction in invested capital during the final two years may reflect divestitures, asset sales, or operational downsizing.

Economic Spread Ratio

The economic spread ratio consistently stays negative, confirming that returns generated on invested capital are below the cost of capital. Values improve somewhat from -11.15% in 2015 to -7.23% in 2017, aligning with the modest improvement seen in economic profit during that timeframe. In 2018, a dramatic deterioration to -21.95% occurs, mirroring the sharp decline in economic profit. The ratio recovers moderately by 2019 to -7.21%, indicating reduced but still negative economic returns.

Overall, the trends suggest that the company struggled to generate positive economic value throughout the period, with a pronounced adverse event or series of factors affecting performance in 2018. While there was some recuperation in 2019, the recovery was incomplete, and economic returns remained below cost levels. The declining invested capital in later years might have been an attempt to optimize resources or reduce risk, though it did not fully restore profitability to positive territory.

Economic Profit

The economic profit exhibited a largely negative trend throughout the analyzed period. Beginning at -11,718 million US dollars in 2015, it showed some improvement in 2016 and 2017, reaching -9,668 million and -8,096 million respectively. However, 2018 marked a significant decline with economic profit plummeting to -21,192 million, followed by a recovery to -6,798 million in 2019. Despite the fluctuations, economic profit remained negative in all reported years.

Net Sales

Net sales experienced substantial growth from 2015 to 2016, rising from 18,338 million to 26,487 million US dollars. Following this sharp increase, sales stabilized, with values of 26,232 million in 2017 and 26,268 million in 2018, before slightly declining to 24,977 million in 2019. Overall, the sales figures indicated an expansion phase peaking in 2016, and a subsequent plateau with minor decrease by the end of the period.

Economic Profit Margin

The economic profit margin displayed high volatility but remained negative across all years. Starting at -63.9% in 2015, it improved steadily to -36.5% in 2016 and -30.86% in 2017. In 2018, the margin deteriorated dramatically to -80.68%, indicating worsening profitability conditions relative to sales. By 2019, the margin improved again to -27.22%, suggesting a partial recovery but still reflecting underperformance.

Summary of Trends

The data reflects a challenging profitability situation over the five-year span despite generally stable to strong net sales. Economic profit remained negative throughout, with notable volatility and a substantial dip in 2018. The recovery in 2019 indicates some operational improvement but profitability margins have not returned to earlier levels. The figures suggest that the company faced significant cost or capital charges negatively impacting economic profit despite maintaining relatively high sales volumes.