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.
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Economic Profit
Kraft Heinz Co., economic profit calculation
US$ in millions
| 12 months ended: | Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data displays volatility in several key performance metrics over the analyzed five-year period.
- Net operating profit after taxes (NOPAT)
- The NOPAT shows significant fluctuation. Starting at 1,418 million USD in 2015, there is a marked increase to 4,237 million USD in 2016 and further growth to 5,287 million USD in 2017. However, 2018 experienced a sharp decline, with NOPAT turning negative to -11,194 million USD, before recovering partially to 2,719 million USD in 2019. This volatility indicates challenges during 2018 that severely impacted operating profitability.
- Cost of Capital
- The cost of capital exhibits a downward trend over the period, decreasing from 12.5% in 2015 and 2016 to 10.1% by 2019. This gradual reduction reflects potentially lower risk perceptions or changes in the company’s capital structure and financing costs.
- Invested Capital
- Invested capital shows moderate fluctuation with a rise from 105,133 million USD in 2015 to a peak of 112,007 million USD in 2017, followed by a reduction to 96,541 million USD in 2018 and a slight further decline to 94,307 million USD in 2019. This suggests a period of divestment or write-downs coinciding with the negative NOPAT year.
- Economic Profit
- Economic profit remains negative during all periods, although there is an improving trend. It starts at -11,727 million USD in 2015, increasing steadily to -8,104 million USD in 2017 before plunging further negatively in 2018 to -21,198 million USD, then recovering to -6,803 million USD in 2019. Persistent negative economic profit indicates the company has not been generating returns above its cost of capital, with 2018 being a particularly difficult year.
Overall, the data reveals a period marked by operational challenges, especially in 2018, which significantly affected profitability and economic value creation. The declining cost of capital and stabilization in invested capital towards the end of the period may offer a foundation for recovery, but the consistent negative economic profit suggests ongoing issues with value generation relative to capital costs.
Net Operating Profit after Taxes (NOPAT)
Kraft Heinz Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances related to trade accounts receivable.
3 Addition of increase (decrease) in liability balance for Integration Program and restructuring project costs.
4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Kraft Heinz.
5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income (loss) attributable to Kraft Heinz.
- 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 $2,719 million, indicating a recovery in operating profit after taxes but remaining below the peak levels observed in 2017. This pattern underscores a volatile period with a significant downturn followed by a partial recovery.
- Summary of Trends
- Overall, both net income and NOPAT exhibited growth from 2015 to 2017, followed by a substantial deterioration in 2018, which indicates major adverse developments during that year. The recovery in 2019 points to improvement but not a full restoration to prior peak levels. Such fluctuations suggest the presence of extraordinary losses or impairments in 2018, impacting both reported net income and operating profit after taxes.
Cash Operating Taxes
Kraft Heinz Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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.
Invested Capital
Kraft Heinz Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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 liability balance for Integration Program and restructuring project costs.
5 Addition of equity equivalents to shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
- 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.
Cost of Capital
Kraft Heinz Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-28).
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 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-29).
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: 2017-12-30).
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: 2016-12-31).
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: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kraft Heinz Co., economic spread ratio calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibits a generally negative trend throughout the observed periods, with persistent losses each year. The loss peaked significantly in 2018, reaching -21,198 million US dollars, which is a marked deterioration compared to the prior years. However, in 2019, the economic loss reduced substantially to -6,803 million US dollars, representing an improvement but still indicating a negative economic profitability.
- Invested Capital
- Invested capital shows fluctuations over the years, rising from 105,133 million US dollars at the end of 2015 to a peak of 112,007 million US dollars in 2017. Subsequently, it declined notably in 2018 to 96,541 million US dollars and continued to decrease slightly to 94,307 million US dollars by the end of 2019. This pattern indicates a reduction in capital employed after 2017, which may reflect asset divestitures or operational restructuring.
- Economic Spread Ratio
- The economic spread ratio remained negative throughout the period, aligning with the negative economic profits. It experienced a consistent decline from -11.15% in 2015 to its worst point of -21.96% in 2018. In 2019, this ratio notably improved to -7.21%, which, although still negative, suggests progress in narrowing the gap between returns and the cost of capital.
- Summary of Trends
- The data reflects a challenging financial situation characterized by sustained negative economic profits and economic spreads over the five-year period. The peak in economic losses and the deepest negative economic spread in 2018 suggest that this year was particularly problematic, potentially due to operational or market factors. Despite this, the improvements in 2019 in both economic profit and economic spread ratio potentially indicate the beginning of recovery or improved capital efficiency. The invested capital contracting post-2017 supports the possibility of strategic adjustments in the asset base.
Economic Profit Margin
Kraft Heinz Co., economic profit margin calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated a fluctuating yet overall negative trend throughout the analysed period. Starting from -11,727 million US dollars in 2015, it improved to -8,104 million in 2017, indicating a reduction in economic losses. However, a significant decline occurred in 2018, with economic profit falling sharply to -21,198 million US dollars, the lowest point during the period. In 2019, there was a partial recovery to -6,803 million, suggesting some improvement but still maintaining a considerable negative economic profit.
- Net Sales
- Net sales increased substantially from 18,338 million US dollars in 2015 to 26,487 million in 2016, marking the highest sales figure within the period. Thereafter, sales remained relatively stable with minor fluctuations, maintaining levels around 26,000 million US dollars through 2017 and 2018. In 2019, a slight decline occurred, with net sales decreasing to 24,977 million US dollars. Overall, net sales showed growth in the initial years and relative stability towards the end with a modest downturn in the final year.
- Economic Profit Margin
- The economic profit margin remained consistently negative across all years, reflecting that the company was generating losses relative to its revenues. Starting at -63.95% in 2015, there was an improvement in margins through 2016 and 2017, reaching -30.89%. This indicated a narrowing gap between economic profit losses and net sales. However, 2018 saw a sharp deterioration in economic profit margin to -80.7%, mirroring the steep decline in economic profit. By 2019, the margin improved again to -27.24%, the best margin in the period, suggesting enhanced operational or financial efficiency relative to sales despite the persistent negative values.