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.
Economic Profit
Kellanova, economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,013 – 8.08% × 11,675 = 70
The economic profit profile demonstrates a non-linear trajectory characterized by a period of significant value creation between 2020 and 2021, followed by a contraction and a subsequent modest recovery in 2023.
- Net Operating Profit After Taxes (NOPAT)
- A substantial growth phase is observed from 2019 to 2021, with NOPAT rising from 1,016 million to a peak of 1,799 million. This trend reversed sharply in 2022 and 2023, with values descending to 1,089 million and 1,013 million respectively, effectively returning to 2019 baseline levels.
- Cost of Capital
- The cost of capital remained relatively stable over the five-year period, fluctuating within a narrow range between 7.66% and 8.28%. The peak cost of capital occurred in 2022, which coincided with a period of diminished economic profit.
- Invested Capital
- Invested capital exhibited stability from 2019 through 2022, reaching a maximum of 13,587 million in 2021. A significant reduction is noted in 2023, where the capital base decreased to 11,675 million, indicating a strategic contraction of the invested asset base.
- Economic Profit Trends
- Economic profit shifted from a marginal loss of 8 million in 2019 to a peak of 726 million in 2021, signaling a period of strong value creation. A return to value destruction occurred in 2022 with a loss of 3 million, driven by the combined effect of falling NOPAT and rising capital costs. In 2023, a positive economic profit of 70 million was restored, supported by the reduction in invested capital which lowered the total capital charge.
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Net Operating Profit after Taxes (NOPAT)
Kellanova, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in exit cost reserves.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Kellanova.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 653 × 3.60% = 24
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 327 × 21.00% = 69
7 Addition of after taxes interest expense to net income attributable to Kellanova.
8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= -3 × 21.00% = -1
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
The financial data reveals that net income attributable to the company exhibited notable fluctuations over the five-year period. Starting at 960 million US dollars in 2019, net income increased substantially to 1,251 million in 2020 and further to a peak of 1,488 million in 2021. However, this upward trend reversed in the subsequent years, with net income declining sharply to 960 million in 2022 and slightly decreasing again to 951 million in 2023, essentially returning to near the initial 2019 level by the end of the period.
Similarly, net operating profit after taxes (NOPAT) showed strong growth in the first three years, rising from 1,016 million US dollars in 2019 to a high of 1,799 million in 2021. This represents a compound growth phase with substantial improvement in operational profitability. Following this peak, NOPAT saw a marked decline in 2022 to 1,089 million and continued to decrease moderately to 1,013 million in 2023, reaching a figure close to the starting point of 2019.
- Net Income Trends
- Initial growth through 2021 followed by a reversion to earlier levels by 2023.
- NOPAT Trends
- Strong operational profit growth until 2021, then a significant decline over the last two years.
- Overall Pattern
- Both net income and NOPAT peaked in 2021 and subsequently declined, erasing much of the gains made during the growth phase. This suggests challenges in sustaining profitability post-2021.
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Cash Operating Taxes
Kellanova, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
The analysis of the annual financial data over the period from the end of 2019 through the end of 2023 reveals certain fluctuations in tax-related cash outflows.
- Income Taxes
- The amount of income taxes paid has exhibited variability throughout the periods. Starting at 321 million USD at the end of 2019, amounts remained relatively stable in 2020 with 323 million USD. However, there was a significant increase in 2021 to 474 million USD. Subsequently, income taxes declined sharply in 2022 to 244 million USD, followed by a slight increase to 258 million USD in 2023. This pattern suggests a peak in income tax obligations in 2021, with a marked reduction in the following years.
- Cash Operating Taxes
- Cash operating taxes experienced a notable decline from 536 million USD in 2019 to 317 million USD at the end of 2020. Following this dip, there was a gradual increase over the next three years, rising to 399 million USD in 2021, 340 million USD in 2022, and finally 365 million USD in 2023. Despite the upward trajectory from 2020 onwards, the cash operating taxes in 2023 remained below the 2019 level.
Overall, the data indicates a divergent trend between income taxes and cash operating taxes. Income taxes peaked in 2021 but decreased significantly afterwards, whereas cash operating taxes dropped sharply in 2020 but then experienced gradual recovery. This could reflect changes in taxable income, operational performance, or tax policies affecting the timing and amount of tax payments across the years.
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Invested Capital
Kellanova, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
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 exit cost reserves.
5 Addition of equity equivalents to total Kellanova equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
- Debt and Leases
- There is a clear downward trend in the total reported debt and leases over the analyzed periods. From approximately 8.47 billion USD at the end of 2019, the debt load steadily decreased each year, reaching about 6.53 billion USD by the end of 2023. This suggests a consistent effort toward deleveraging or reducing liabilities during this timeframe.
- Equity
- Total equity exhibited growth from 2019 to 2022, increasing from roughly 2.75 billion USD to around 3.94 billion USD. However, in the final period ending 2023, there is a noticeable decline to approximately 3.18 billion USD. This drop could indicate either a return of capital to shareholders, losses, or other equity-reducing events experienced in that year.
- Invested Capital
- The invested capital values show relative stability but with a downward move in the most recent period. From about 13.1 billion USD in 2019, invested capital slightly increased to a peak near 13.59 billion USD by the end of 2021, before modestly declining to roughly 11.68 billion USD by the end of 2023. This decline may reflect asset sales, reduced capital expenditure, or other adjustments in company investments or assets employed.
- Overall Insights
- The company appears to have focused on reducing its financial leverage throughout the examined years, improving its debt profile. Despite an increase in equity until 2022, the sharp reduction in 2023 warrants attention as it contrasts with prior growth trends. The decline in invested capital in 2023 aligns with lower equity, suggesting a contraction in the company's operational or investment base. These patterns indicate strategic financial restructuring or responses to external market conditions that have impacted the company's capital structure and asset base in recent years.
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Cost of Capital
Kellanova, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 19,122) | 19,122) | ÷ | 25,559) | = | 0.75 | 0.75 | × | 9.98% | = | 7.46% | ||
| Notes payable and long-term debt3 | 5,784) | 5,784) | ÷ | 25,559) | = | 0.23 | 0.23 | × | 3.06% × (1 – 21.00%) | = | 0.55% | ||
| Operating lease liability4 | 653) | 653) | ÷ | 25,559) | = | 0.03 | 0.03 | × | 3.60% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 25,559) | 1.00 | 8.08% | ||||||||||
Based on: 10-K (reporting date: 2023-12-30).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 23,556) | 23,556) | ÷ | 30,510) | = | 0.77 | 0.77 | × | 9.98% | = | 7.70% | ||
| Notes payable and long-term debt3 | 6,347) | 6,347) | ÷ | 30,510) | = | 0.21 | 0.21 | × | 3.23% × (1 – 21.00%) | = | 0.53% | ||
| Operating lease liability4 | 607) | 607) | ÷ | 30,510) | = | 0.02 | 0.02 | × | 2.90% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 30,510) | 1.00 | 8.28% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 22,592) | 22,592) | ÷ | 30,959) | = | 0.73 | 0.73 | × | 9.98% | = | 7.28% | ||
| Notes payable and long-term debt3 | 7,749) | 7,749) | ÷ | 30,959) | = | 0.25 | 0.25 | × | 2.90% × (1 – 21.00%) | = | 0.57% | ||
| Operating lease liability4 | 618) | 618) | ÷ | 30,959) | = | 0.02 | 0.02 | × | 2.70% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 30,959) | 1.00 | 7.90% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 20,382) | 20,382) | ÷ | 29,448) | = | 0.69 | 0.69 | × | 9.98% | = | 6.90% | ||
| Notes payable and long-term debt3 | 8,429) | 8,429) | ÷ | 29,448) | = | 0.29 | 0.29 | × | 3.13% × (1 – 21.00%) | = | 0.71% | ||
| Operating lease liability4 | 637) | 637) | ÷ | 29,448) | = | 0.02 | 0.02 | × | 2.60% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 29,448) | 1.00 | 7.66% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 22,063) | 22,063) | ÷ | 31,137) | = | 0.71 | 0.71 | × | 9.98% | = | 7.07% | ||
| Notes payable and long-term debt3 | 8,527) | 8,527) | ÷ | 31,137) | = | 0.27 | 0.27 | × | 3.27% × (1 – 21.00%) | = | 0.71% | ||
| Operating lease liability4 | 547) | 547) | ÷ | 31,137) | = | 0.02 | 0.02 | × | 2.90% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 31,137) | 1.00 | 7.82% | ||||||||||
Based on: 10-K (reporting date: 2019-12-28).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kellanova, economic spread ratio calculation, comparison to benchmarks
| Dec 30, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 28, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 70) | (3) | 726) | 556) | (8) | |
| Invested capital2 | 11,675) | 13,188) | 13,587) | 13,194) | 13,101) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 0.60% | -0.02% | 5.34% | 4.21% | -0.06% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | 4.42% | 4.11% | 5.64% | — | — | |
| Mondelēz International Inc. | 0.31% | -3.52% | -0.51% | — | — | |
| PepsiCo Inc. | 4.63% | 4.62% | 5.16% | — | — | |
| Philip Morris International Inc. | 9.19% | 12.15% | 26.50% | — | — | |
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 70 ÷ 11,675 = 0.60%
4 Click competitor name to see calculations.
The financial performance regarding economic value creation demonstrates significant volatility between 2019 and 2023, characterized by a strong mid-period surge followed by a sharp correction and a subsequent modest recovery.
- Economic Profit Trends
- Economic profit exhibited substantial fluctuations, starting at a deficit of 8 million USD in 2019 and rising sharply to a peak of 726 million USD by 2021. A significant reversal occurred in 2022, where the figure dropped to -3 million USD, indicating a failure to exceed the required return on capital. A partial recovery was noted in 2023, with economic profit returning to a positive 70 million USD.
- Invested Capital Dynamics
- Invested capital remained relatively stable from 2019 to 2022, fluctuating within a narrow range between 13,101 million USD and 13,587 million USD. However, a notable reduction occurred in 2023, with capital decreasing to 11,675 million USD, representing a significant contraction in the capital base compared to previous years.
- Economic Spread Ratio Analysis
- The economic spread ratio closely mirrors the trajectory of economic profit, reflecting the efficiency of capital deployment relative to the cost of capital. The ratio improved from -0.06% in 2019 to a high of 5.34% in 2021, indicating peak value creation. The subsequent drop to -0.02% in 2022 indicates a period of value destruction, while the 0.60% reported in 2023 suggests a return to marginal value creation.
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Economic Profit Margin
Kellanova, economic profit margin calculation, comparison to benchmarks
| Dec 30, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 28, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 70) | (3) | 726) | 556) | (8) | |
| Net sales | 13,122) | 15,315) | 14,181) | 13,770) | 13,578) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.53% | -0.02% | 5.12% | 4.04% | -0.06% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | 8.06% | 7.64% | 11.71% | — | — | |
| Mondelēz International Inc. | 0.52% | -7.13% | -1.10% | — | — | |
| PepsiCo Inc. | 3.80% | 3.71% | 4.53% | — | — | |
| Philip Morris International Inc. | 13.42% | 18.12% | 24.60% | — | — | |
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 70 ÷ 13,122 = 0.53%
3 Click competitor name to see calculations.
The analysis of economic value added indicates a period of significant volatility in value creation, characterized by a performance peak in 2021 followed by a sharp decline and a marginal recovery in the subsequent years.
- Economic Profit Volatility
- Economic profit exhibited substantial variance over the five-year period. Following a marginal deficit of 8 million in 2019, profit rose sharply to 556 million in 2020 and peaked at 726 million in 2021. This positive trajectory reversed abruptly in 2022, with profit falling to -3 million, before returning to a positive 70 million in 2023.
- Divergence Between Revenue and Value Creation
- A notable divergence between revenue growth and economic value occurred between 2021 and 2022. While net sales increased from 14,181 million to a period high of 15,315 million, economic profit plummeted from 726 million to -3 million. This indicates that the increase in sales volume did not translate into economic gain and was likely offset by rising operational expenses or an increase in the cost of capital.
- Economic Profit Margin Trends
- The economic profit margin, which measures the ability to generate returns above the cost of capital, fluctuated significantly. The margin shifted from -0.06% in 2019 to a peak of 5.12% in 2021. A subsequent collapse to -0.02% in 2022 was followed by a modest recovery to 0.53% in 2023. Notably, the 2023 recovery in margin occurred despite net sales falling to 13,122 million, the lowest level observed in the five-year period, suggesting an improvement in capital efficiency or cost management despite shrinking top-line revenue.
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