Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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- Income Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2015
- Total Asset Turnover since 2015
- Price to Operating Profit (P/OP) since 2015
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Return on Invested Capital (ROIC)
Kraft Heinz Co., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, 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 NOPAT. See details »
2 Invested capital. See details »
3 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net operating profit after taxes (NOPAT)
- The NOPAT figures demonstrate considerable volatility over the five-year period. Starting at 1,418 million US dollars in 2015, there was a significant increase to 4,237 million in 2016 and a further rise to 5,287 million in 2017. However, this trend reversed sharply in 2018, with NOPAT turning negative to -11,194 million, indicating a substantial operational loss during that year. In 2019, NOPAT partially recovered to 2,719 million, though it remained well below the peak levels observed in 2017.
- Invested capital
- Invested capital showed relative stability with a slight downward trend over the analyzed period. It increased moderately from 105,133 million US dollars in 2015 to a peak of 112,007 million in 2017. Subsequently, it declined to 96,541 million in 2018 and further to 94,307 million in 2019. This decrease in invested capital after 2017 may reflect asset disposals, de-investments, or impairments.
- Return on invested capital (ROIC)
- The ROIC trend mirrors the NOPAT fluctuations. Starting at a low 1.35% in 2015, ROIC improved to 3.81% in 2016 and then to 4.72% in 2017. This improvement indicates increased efficiency in generating returns from the invested capital. However, 2018 presented a significant decline in ROIC to -11.59%, signaling a severe deterioration in capital profitability. In 2019, ROIC partially rebounded to 2.88% but remained below the pre-2018 levels and well below a generally desirable positive return.
- Summary
- The data reveals a period of improving operating performance and capital efficiency from 2015 to 2017, followed by a pronounced negative reversal in 2018. The substantial loss in NOPAT and negative ROIC in 2018 suggest operational and financial challenges during that year. The subsequent partial recovery in 2019 indicates some stabilization but not a full return to previous profitability or efficiency levels. The gradual reduction in invested capital after 2017 may relate to strategic adjustments in the company's asset base or financial structure in response to performance challenges.
Decomposition of ROIC
Kraft Heinz Co., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 28, 2019 | = | × | × | ||||
| Dec 29, 2018 | = | × | × | ||||
| Dec 30, 2017 | = | × | × | ||||
| Dec 31, 2016 | = | × | × | ||||
| Dec 31, 2015 | = | × | × |
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
- Operating Profit Margin (OPM)
- The operating profit margin exhibited significant volatility over the analyzed periods. It increased from 14.04% in 2015 to a peak of 25.67% in 2017. However, in 2018, there was a sharp decline to -38.13%, indicating an operating loss. This was followed by a recovery to 16.14% in 2019, which, while positive, remained lower than the earlier peak margins.
- Turnover of Capital (TO)
- The turnover of capital showed a generally upward trend. Starting from 0.17 in 2015, it rose to 0.24 in 2016 and slightly decreased to 0.23 in 2017. Subsequently, it increased again to 0.27 in 2018 and slightly decreased to 0.26 in 2019. Overall, the trend suggests a modest improvement in asset utilization efficiency with some fluctuations.
- Effective Cash Tax Rate (1 - CTR)
- The effective cash tax rate, expressed as "1 - CTR," increased progressively from 55.07% in 2015 to 100% in 2018, suggesting a decrease in actual cash tax payments relative to earnings or possibly changes in tax strategies or tax timing. In 2019, this ratio decreased to 67.46%, indicating a return towards a more typical tax payment level.
- Return on Invested Capital (ROIC)
- Return on invested capital followed a pattern similar to the operating profit margin, showing improvement from 1.35% in 2015 to 4.72% in 2017. A notable decline occurred in 2018, with ROIC dropping sharply to -11.59%, indicating a loss on invested capital. In 2019, ROIC rebounded to 2.88%, reflecting a partial recovery but remaining below earlier positive returns.
Operating Profit Margin (OPM)
Kraft Heinz Co., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
OPM = 100 × NOPBT ÷ Net sales
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net operating profit before taxes (NOPBT)
- The net operating profit before taxes initially increased significantly from 2,576 million USD in 2015 to 6,053 million USD in 2016, showing a substantial improvement. This upward trend continued into 2017, reaching 6,735 million USD. However, in 2018, there was a notable decline, with NOPBT dropping sharply to a negative value of -10,016 million USD. The figure rebounded in 2019 to 4,031 million USD, indicating a recovery but not reaching the previous peaks.
- Net sales
- Net sales exhibited growth from 18,338 million USD in 2015 to a peak of 26,487 million USD in 2016, representing a strong increase. Sales remained relatively stable in 2017 and 2018, with values of 26,232 million USD and 26,268 million USD respectively, before showing a slight decline to 24,977 million USD in 2019. Overall, sales figures display a growth phase followed by a plateau and mild reduction towards the end of the period.
- Operating profit margin (OPM)
- The operating profit margin saw an upward trajectory from 14.04% in 2015 to 22.85% in 2016, further increasing to 25.67% in 2017, aligning with the growth in profitability measures. However, in 2018, the margin inverted dramatically to -38.13%, reflecting the negative profitability that correlates with the loss in net operating profit before taxes. The margin recovered in 2019, reaching 16.14%, although it remained below the levels recorded in 2016 and 2017.
Turnover of Capital (TO)
Kraft Heinz Co., TO 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) | ||||||
| Net sales | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, 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 Invested capital. See details »
2 2019 Calculation
TO = Net sales ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period under review.
- Net Sales
- Net sales showed a significant increase from 18,338 million USD in 2015 to a peak of 26,487 million USD in 2016. Thereafter, sales remained relatively stable around 26,000 million USD in 2017 and 2018, before experiencing a modest decline to 24,977 million USD in 2019.
- Invested Capital
- Invested capital rose from 105,133 million USD in 2015 to a high of 112,007 million USD in 2017. Following this peak, a downward trend was observed, with invested capital decreasing to 96,541 million USD in 2018 and further to 94,307 million USD in 2019. This reduction suggests a possible strategy to optimize asset utilization or divest non-core assets during the latter years.
- Turnover of Capital (TO)
- The turnover of capital ratio, which indicates how efficiently the invested capital is used to generate sales, improved steadily from 0.17 in 2015 to 0.24 in 2016. It remained fairly stable at 0.23 in 2017, then increased to 0.27 in 2018, before a slight decline to 0.26 in 2019. The general upward trend in this ratio, particularly notable between 2017 and 2018, aligns with the reduction in invested capital and stable net sales, implying enhanced efficiency in capital utilization.
Overall, the data indicates a period of revenue growth followed by stabilization and slight decline, accompanied by a strategic reduction in invested capital and improved capital turnover. These developments suggest a focus on increasing operational efficiency and optimizing capital use over the period.
Effective Cash Tax Rate (CTR)
Kraft Heinz Co., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data reveals notable fluctuations in key metrics over the five-year period. Trends observed include variations in tax payments, operating profits, and effective tax rates that affect overall financial performance.
- Cash Operating Taxes
- Cash operating taxes exhibited a rising trend from 2015 through 2016, increasing from 1157 million US dollars to 1815 million US dollars. Subsequently, there was a decline in 2017 to 1448 million, followed by a further decrease in 2018 to 1177 million. In 2019, the cash operating taxes increased again to 1312 million US dollars. This pattern suggests a degree of volatility in tax payments, potentially linked to changes in profitability or tax planning strategies.
- Net Operating Profit Before Taxes (NOPBT)
- Net operating profit before taxes showed significant variation across the years. In 2015, the NOPBT was 2576 million US dollars, which more than doubled in 2016 to 6053 million and further increased in 2017 to 6735 million. However, there was a sharp reversal in 2018 when the NOPBT fell dramatically to a negative value of -10016 million US dollars, indicating a substantial operating loss before taxes. In 2019, the figure rebounded to 4031 million US dollars but did not return to the peak levels seen in 2016 and 2017. These swings may indicate operational challenges or extraordinary items affecting profitability in 2018.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate declined consistently from 44.93% in 2015 to 30.00% in 2016 and further to 21.5% in 2017. There is no data available for 2018, possibly due to the negative NOPBT that year. In 2019, the tax rate increased again to 32.54%. The initial downward trend suggests improved tax efficiency or changes in tax legislation, while the increase in 2019 might correspond to the recovery in profitability and a return to more normalized tax expense levels.
Overall, the data highlights a period of rising profitability through 2017 followed by a significant loss in 2018, impacting the tax expense and effective tax rate calculations. The recovery in 2019 points toward improving operations but does not fully restore the previous highs in operating profit. The fluctuations in cash operating taxes and effective tax rate reflect the underlying volatility in profit levels and potential tax strategy adaptations over the observed timeframe.