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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Kellanova pages available for free this week:
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- Analysis of Debt
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Economic Profit
Kellanova, economic profit calculation
US$ in millions
| 12 months ended: | Dec 30, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 28, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The financial data indicates that net operating profit after taxes (NOPAT) experienced a significant increase from 2019 to 2021, rising from 1,016 million US dollars to a peak of 1,799 million US dollars. However, this upward trend reversed in the subsequent years, with NOPAT declining to 1,089 million US dollars in 2022 and further to 1,013 million US dollars in 2023, returning close to the 2019 level.
The cost of capital showed minor fluctuations over the analyzed period. It started at 7.04% in 2019, decreased slightly to 6.89% in 2020, then increased to a high of 7.43% in 2022 before settling at 7.26% in 2023. These changes suggest a relatively stable but slightly rising cost of capital in the latest years.
Invested capital remained relatively stable between 2019 and 2022, with a moderate increase from 13,101 million US dollars in 2019 to 13,587 million US dollars in 2021, then slightly declined to 13,188 million US dollars in 2022. A more notable decrease occurred in 2023, with invested capital dropping to 11,675 million US dollars, indicating a reduction in the capital base.
Economic profit showed a pattern similar to NOPAT, with a strong increase from 94 million US dollars in 2019 to 835 million US dollars in 2021, followed by a sharp decline to 109 million US dollars in 2022. Despite some recovery to 166 million US dollars in 2023, economic profit remains well below its peak of 2021.
Overall, the data reflects a period of growth in profitability and economic profit until 2021, followed by a marked contraction in both metrics alongside a reduction in invested capital by 2023. The cost of capital remained relatively steady but showed a mild increase in recent years, which may have influenced the declining economic profit. The contraction in invested capital and profitability in the last two years indicates potential operational or market challenges affecting the company’s performance.
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
= × =
6 2023 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 attributable to Kellanova.
8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
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.
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.
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.
Cost of Capital
Kellanova, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Notes payable and long-term 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 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 | ||||||
| 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: 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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated significant growth from 94 million USD in 2019 to a peak of 835 million USD in 2021. However, this positive trend reversed notably in the following years, with economic profit declining to 109 million USD in 2022 before a slight recovery to 166 million USD in 2023. This pattern reflects a strong performance period followed by a downturn, suggesting fluctuating operational efficiency or market conditions impacting profitability.
- Invested Capital
- The invested capital remained relatively stable and slightly increased from 13,101 million USD in 2019 to a high of 13,587 million USD in 2021. Following this period, there was a decline to 13,188 million USD in 2022 and a more pronounced decrease to 11,675 million USD in 2023. The reduction in invested capital in the last two reported periods could indicate divestitures, asset sales, or a strategic scaling back of capital investment.
- Economic Spread Ratio
- The economic spread ratio, an indicator of the returns generated over the cost of capital, increased substantially from 0.72% in 2019 to a peak of 6.15% in 2021. It then dropped sharply to 0.83% in 2022 but showed some improvement up to 1.42% in 2023. These fluctuations parallel the trends in economic profit and imply a volatile return on invested capital relative to the cost structure over the observed period.
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 | ||||||
| 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: 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 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit has shown substantial variability over the analyzed period. Beginning at 94 million USD in 2019, it surged significantly to 656 million USD in 2020 and continued to increase to 835 million USD in 2021. However, in 2022, a notable decline occurred, with economic profit decreasing sharply to 109 million USD. The figure recovered moderately in 2023, rising to 166 million USD, though it remained below the peaks observed in 2020 and 2021.
- Net Sales
- Net sales demonstrated a steady upward trend from 2019 to 2022. Starting at 13,578 million USD in 2019, sales increased marginally to 13,770 million USD in 2020 and further to 14,181 million USD in 2021. The upward trajectory continued more robustly in 2022, reaching a peak of 15,315 million USD. However, in 2023, net sales declined noticeably to 13,122 million USD, reversing the growth trend observed in the prior years.
- Economic Profit Margin
- The economic profit margin exhibited significant fluctuations across the period. It began at a low of 0.69% in 2019 and increased sharply to 4.77% in 2020. Further improvement was seen in 2021, with the margin peaking at 5.89%. Subsequently, the margin experienced a steep fall to 0.71% in 2022, closely mirroring the low level of 2019. In 2023, there was a slight recovery to 1.26%, although this remained well below the higher margins from the peak years.
- Overall Observations
- The period from 2019 through 2023 reflects a pattern of initial growth followed by a downturn and partial recovery in both economic profit and its margin. Net sales increased consistently until 2022 but then declined in the final year. The sharp decrease in economic profit and margin in 2022 is notable despite the peak in net sales that year, suggesting increased costs or reduced efficiency impacting profitability. The moderate rebound in 2023 indicates some recovery, but profitability metrics remain below their earlier highs.