Kraft Heinz Co. (NASDAQ:KHC)

The analysis of the provided financial ratios over the quarterly periods reveals several important trends in the financial structure and risk profile.

Debt to Equity Ratio

This ratio initially exhibits a significant decline from 2.00 in early 2015 to approximately 0.43 by the end of 2015, indicating a reduction in reliance on debt relative to equity. Subsequently, it remains relatively stable around the mid-0.5 range, with minor fluctuations and a slight increase toward mid-2020 to 0.64 before declining again to 0.59. This suggests a moderated use of debt financing after a major deleveraging phase.

Debt to Capital Ratio

The debt to capital ratio mirrors a similar pattern, decreasing markedly from 0.67 in early 2015 to around 0.30 by late 2015. Thereafter, it shows modest fluctuations mostly between 0.32 and 0.39, with a gradual upward trend toward 0.39 near early 2020 before slightly decreasing. The ratio indicates a stable, moderate leverage relative to total capital since 2016.

Debt to Assets Ratio

This metric follows the trend of previous debt ratios, dropping from 0.38 in early 2015 to about 0.21 at the end of 2015. Afterward, it stabilizes around 0.26 to 0.30, showing a consistent level of debt relative to total assets, with a slight increase observed in early 2020 before tapering off again. This stability highlights consistent asset financing policies over the latter periods.

Financial Leverage

Financial leverage shows a significant reduction from over 5.3 in early 2015 to just above 2.0 by the end of 2015, coinciding with debt ratio reductions. It remains relatively stable around 2.0 through 2016 to mid-2020, with some minor variation, indicating a consistent degree of balance between total assets and equity after deleveraging.

Interest Coverage Ratio

This ratio starts being reported in late 2015, showing a marked improvement from 1.77 to a strong peak of nearly 5.5 in 2017 and 2018, indicating robust earnings to cover interest expense. However, there is a significant deterioration beginning in late 2018 and continuing through 2019, with the ratio turning negative, highlighting that operating earnings were insufficient to cover interest obligations during this period. There is a recovery in early 2020 with positive but lower levels of interest coverage around 3.0 and decreasing to 1.22 by mid-2020, suggesting persistent challenges in meeting interest expenses though some improvement is seen from the negative trough.

Overall, the data reflects a period of substantial deleveraging through 2015, leading to more moderate and stable debt usage across subsequent years. While leverage and debt ratios stabilized, the ability to cover interest expenses deteriorated significantly in late 2018 and 2019, which may indicate operational or economic challenges affecting profitability or increased financing costs. Partial recovery in coverage ratios in 2020 suggests some improvement but continued caution is warranted regarding earnings strength relative to debt servicing.

The analysis of the quarterly financial data reveals several key trends concerning total debt, shareholders' equity, and the debt to equity ratio over the observed periods.

Total Debt

Total debt experienced a significant increase between March 2015 and June 2015, jumping from $13,627 million to $25,324 million. After this sharp rise, debt levels remained relatively stable around $25,000 to $32,000 million with some fluctuations until the end of 2018. Beginning in 2019, total debt exhibited a general declining trend, reaching a low of $28,860 million by June 2020, indicating possible debt repayment or restructuring efforts.

Shareholders' Equity

Shareholders' equity showed a marked jump from approximately $6,800 million in March 2015 to nearly $58,811 million by September 2015, suggesting a significant capitalization event or accounting adjustment. After this boost, equity levels fluctuated modestly around the $57,000 to $66,000 million range up to the end of 2017. However, starting in early 2018, equity began a gradual decline, with a more pronounced drop observed in 2019, reaching about $49,040 million by June 2020. This downward movement may reflect negative retained earnings, write-downs, or dividend payments exceeding net income during this time frame.

Debt to Equity Ratio

The debt to equity ratio sharply decreased from approximately 2.0 in March 2015 to about 0.43 by September 2015, consistent with the significant increase in equity relative to debt. From then on, this ratio remained relatively steady between 0.44 and 0.60, exhibiting minor fluctuations that correlate with movements in both debt and equity. Towards the latter periods of the dataset, particularly entering 2020, the ratio showed a slight upward trend, reaching 0.59 by June 2020, corresponding with the slight increase in debt ratios and the decline in shareholders' equity noted earlier.

Overall, this financial data suggests a phase of major equity restructuring early in the observed period, which stabilized the company's leverage significantly. Subsequent periods saw stability with moderate variation, followed by a trend towards deleveraging as total debt decreased, though equity also weakened, resulting in marginally increased leverage by mid-2020.

The financial data reveals several key trends in the company's capital structure over the analyzed periods.

Total Debt

The total debt fluctuated throughout the reported quarters. Initially, from early 2015 to the end of 2015, the debt nearly doubled from approximately 13.6 billion USD to 25.3 billion USD, indicating a significant increase in borrowing. From 2016 through mid-2018, total debt remained relatively steady, hovering around the 31 billion to 34 billion USD range. Subsequently, a downward trend is observed towards mid-2020, where total debt decreased to approximately 28.9 billion USD. This suggests efforts to reduce leverage or improve the debt profile.

Total Capital

Total capital experienced a pronounced variation, starting near 20.4 billion USD in early 2015 and sharply increasing to over 84 billion USD by late 2015. This spike coincides with the surge in total debt, suggesting possible capital restructuring or acquisition activity during that period. After peaking around late 2017 to early 2018, with capital values close to 99 billion USD, there is a clear decline through 2019 into 2020, reaching about 77.9 billion USD. The reduction in total capital coincides with the reductions seen in debt, indicating a contraction in the company's overall capital base.

Debt to Capital Ratio

The debt to capital ratio exhibits significant fluctuations in line with changes in debt and capital amounts. In early 2015, the ratio was high at approximately 0.67, reflecting a capital structure with a heavy debt component. This ratio decreased sharply to about 0.30 by the end of 2015, suggesting either an increase in equity or reclassification in capital components. From 2016 to mid-2018, the ratio stabilized between 0.32 and 0.36, indicating a moderately leveraged position. An increasing trend in the debt to capital ratio is noticeable from late 2018 through mid-2020, rising from around 0.33 to 0.39 before slightly receding to 0.37. This indicates a gradual increase in leverage, potentially highlighting increased reliance on debt financing relative to total capital towards the end of the period.

Overall, the data illustrates an initial rapid increase in capital and debt levels around 2015, followed by periods of relative stability and then a general decline in total capital and debt starting in 2018. The debt to capital ratio reflects shifts in the company's leverage strategy, showing a move from very high leverage early on to moderated levels in subsequent years, with some increased leverage observed near the end of the period analyzed.

The analysis of the quarterly financial data reveals notable trends in the company's debt and asset levels over the examined period.

Total Debt

The total debt fluctuated significantly through the period. Initially, the debt stood near $13.6 billion in early 2015, maintaining a stable level before sharply increasing to above $25 billion in the latter half of 2015. Subsequently, debt continued to rise, reaching a peak close to $34 billion in mid-2018. From that point onward, there was a gradual decrease with some fluctuations, ending near $28.9 billion by the second quarter of 2020. This indicates a variable debt management strategy with significant increase phases followed by attempts to reduce liabilities.

Total Assets

Total assets experienced a dramatic increase between the first and third quarters of 2015, growing from approximately $36 billion to over $121 billion. Following this spike, asset levels stabilized around the $120 billion mark through most of the period up to late 2018. However, starting in early 2019, total assets showed a declining trend, decreasing steadily to under $99 billion by mid-2020. This pattern suggests a major asset acquisition or revaluation event in 2015, followed by a prolonged period of asset attrition or disposals in recent years.

Debt to Assets Ratio

The debt to assets ratio exhibited a notable decline initially, dropping from 0.38 in early 2015 to around 0.21 by the end of 2015, reflecting the significant asset growth relative to debt. Thereafter, the ratio increased gradually, fluctuating in the range of 0.26 to 0.31 from 2016 through mid-2020. This upward trend indicates a relative increase in leverage over time, as debt levels remained elevated while assets decreased in the latter period. Despite fluctuations, the ratio remained below the initial high levels observed in early 2015.

Overall, the company experienced a substantial balance sheet expansion in 2015, followed by more stable but high leverage levels. The subsequent decline in assets alongside relatively high debt levels toward 2020 suggests a cautious financial position with potential challenges in asset retention or value preservation. The debt to assets ratio trends imply increased financial risk compared to the earlier years, warranting attention to debt servicing capacity and asset management strategies.

Total Assets

The total assets exhibit significant variation early in the period, with an initial level near 36 billion US dollars in the first two quarters of 2015, followed by a sharp increase to over 120 billion US dollars from the third quarter of 2015 onward. After this substantial rise, total assets remain relatively stable with a slight downward trend observed toward the later quarters, declining from approximately 123 billion in early 2016 to under 99 billion US dollars by mid-2020.

Shareholders’ Equity

Shareholders’ equity also shows a pronounced increase from about 6.8 billion US dollars in early 2015 to nearly 59 billion by the third quarter of 2015, aligning with the jump observed in total assets. Subsequently, equity fluctuates moderately around the 57 to 66 billion range until the end of 2017. From 2018 onward, a declining trend is evident, with equity decreasing from the mid-60 billion level down to roughly 49 billion US dollars by the second quarter of 2020, indicating a contraction in retained earnings or other equity components.

Financial Leverage

The financial leverage ratio, defined as total assets divided by shareholders’ equity, reflects these changes clearly. Initially, leverage is notably high at approximately 5.3 in early 2015, then it drops significantly to around 2 by the third quarter of 2015, consistent with the surge in equity relative to assets. Over the following quarters, leverage remains relatively stable near the 2 mark, with minor fluctuations between 1.8 and 2.0. A slight increase in leverage is observable toward mid-2019 and early 2020, rising back to around 2.0, implying a modest increase in the use of debt or other liabilities relative to equity in recent periods.

Summary of Trends

The early part of the period shows a major restructuring or revaluation event reflected by the sharp increase in assets and equity. Following this, the company's financial structure stabilizes with a leverage ratio around 2, indicating a balanced approach between debt and equity financing. Despite the overall stability, the gradual reduction in total assets and shareholders’ equity from 2018 to 2020 could suggest asset disposals, write-downs, or operational challenges. The leverage ratio’s slight rise in the last few periods may signal increased reliance on debt financing amid this decline in equity.

Earnings before interest and tax (EBIT)

The EBIT values show significant fluctuations over the observed periods. Initially, the EBIT experienced moderate values in early 2015, ranging roughly between US$199 million and US$1,296 million, with a peak in the last quarter of 2015. This upward trend continued into 2016 and 2017, reaching values as high as US$1,897 million in mid-2017. However, after late 2017, there was a notable decline, culminating in a sharp negative figure of approximately US$-14,149 million in the last quarter of 2018. Following this large loss, EBIT returned to positive, yet more variable amounts between US$653 million and US$1,560 million until early 2020, before again dipping into negative territory by mid-2020 with US$-1,261 million. Overall, the data indicates periods of strong performance interrupted by exceptional downturns, suggesting possible one-time expenses or impairments impacting EBIT substantially.

Interest expense

Interest expense remained relatively stable throughout the entire period, fluctuating narrowly between approximately US$201 million and US$460 million. While some minor variation is observable, such as a peak around US$460 million in late 2015 followed by a settling around US$300 million in subsequent periods, the overall trend does not show dramatic increases or decreases. This steady interest expense indicates consistent borrowing costs and financial obligations over the timeline.

Interest coverage ratio

The interest coverage ratio displays considerable variability, reflecting the fluctuations in EBIT relative to interest expenses. The ratio started around 1.77 in early 2016 but quickly rose, peaking around 5.49 during the second half of 2017 and early 2018, indicating a strong ability to cover interest obligations during this period. However, the ratio sharply declined in late 2018 and early 2019, turning negative (down to about -8.69), illustrating an inability to cover interest expenses due to negative EBIT. Subsequently, the ratio gradually improved but remained low and volatile around 2.9 and below 2.0 by mid-2020, suggesting ongoing challenges in maintaining consistent earnings relative to interest costs. The negative and low coverage ratios indicate periods of financial stress and reduced earnings capacity.