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 – 8.11% × 11,675 = 66
The financial performance from 2019 to 2023 is characterized by significant volatility in economic profit and a fluctuating trend in net operating profit after taxes (NOPAT). Value creation has been inconsistent, with the organization alternating between periods of economic profit and economic loss.
- Net Operating Profit After Taxes (NOPAT)
- A non-linear trend is observed in NOPAT, which grew from 1,016 million in 2019 to a peak of 1,799 million in 2021. This upward trajectory reversed sharply in 2022 and 2023, with the 2023 figure of 1,013 million returning to levels nearly identical to those seen at the start of the period.
- Cost of Capital and Invested Capital
- The cost of capital remained relatively stable, fluctuating within a narrow band between 7.69% and 8.31%. Invested capital showed a moderate increase up to 2021, peaking at 13,587 million. However, a notable reduction occurred by December 30, 2023, where invested capital fell to 11,675 million, indicating a contraction in the capital base.
- Economic Profit Trends
- Economic profit exhibited high variance, moving from a loss of 12 million in 2019 to a peak gain of 722 million in 2021. A return to value destruction occurred in 2022 with an economic profit of -7 million. The recovery to a positive 66 million in 2023 was achieved despite NOPAT remaining low, suggesting that the reduction in invested capital played a critical role in lowering the total capital charge and restoring positive economic profit.
Overall, the analysis indicates that the ability to generate economic value was strongest in 2020 and 2021, driven by peak operating profitability. The subsequent decline in NOPAT coupled with a rising cost of capital in 2022 led to value erosion, while the most recent results suggest a stabilization effort through capital base optimization.
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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 | × | 10.02% | = | 7.49% | ||
| 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 | 8.11% | ||||||||||
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 | × | 10.02% | = | 7.73% | ||
| 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 | 8.31% | ||||||||||
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 | × | 10.02% | = | 7.31% | ||
| 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 | 7.93% | ||||||||||
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 | × | 10.02% | = | 6.93% | ||
| 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 | 7.69% | ||||||||||
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 | × | 10.02% | = | 7.10% | ||
| 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 | 7.85% | ||||||||||
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 | 66) | (7) | 722) | 552) | (12) | |
| Invested capital2 | 11,675) | 13,188) | 13,587) | 13,194) | 13,101) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 0.57% | -0.05% | 5.31% | 4.18% | -0.09% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | 4.38% | 4.07% | 5.60% | — | — | |
| Mondelēz International Inc. | 0.27% | -3.55% | -0.55% | — | — | |
| PepsiCo Inc. | 4.60% | 4.58% | 5.12% | — | — | |
| Philip Morris International Inc. | 9.16% | 12.12% | 26.47% | — | — | |
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 × 66 ÷ 11,675 = 0.57%
4 Click competitor name to see calculations.
The analysis of economic value added indicators between 2019 and 2023 reveals a volatile trajectory in value creation, characterized by a period of significant growth followed by a sharp correction and a marginal recovery.
- Economic Profit Trends
- Economic profit exhibited substantial fluctuation over the five-year period. After starting with a marginal deficit of 12 million USD in 2019, the company achieved a peak of 722 million USD in 2021. However, this upward momentum reversed sharply in 2022, returning to a negative value of 7 million USD, before recovering to 66 million USD by the end of 2023. This pattern indicates instability in the company's ability to consistently generate returns exceeding its cost of capital.
- Invested Capital Dynamics
- The capital base remained relatively stable from 2019 through 2022, fluctuating within a narrow range between 13.1 billion USD and 13.6 billion USD. A notable shift occurred in 2023, where invested capital decreased to 11.675 billion USD. This represents a significant reduction in the total capital employed, which may suggest a strategic deleveraging or the divestment of assets.
- Economic Spread Ratio Performance
- The economic spread ratio closely mirrored the volatility of economic profit. The ratio improved from -0.09% in 2019 to a peak of 5.31% in 2021, signaling a period of efficient value creation. This efficiency collapsed in 2022, with the ratio falling to -0.05%, indicating that the return on invested capital failed to cover the cost of capital. By 2023, the ratio returned to positive territory at 0.57%, although this remains significantly below the performance levels observed in 2020 and 2021.
Overall, the data suggests a cycle of expansion and contraction in economic efficiency. While the company successfully generated positive economic spread for two consecutive years, the subsequent decline and the current low positive spread indicate a challenging environment for sustaining high-level economic value added.
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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 | 66) | (7) | 722) | 552) | (12) | |
| Net sales | 13,122) | 15,315) | 14,181) | 13,770) | 13,578) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.50% | -0.05% | 5.09% | 4.01% | -0.09% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | 7.99% | 7.57% | 11.63% | — | — | |
| Mondelēz International Inc. | 0.46% | -7.20% | -1.17% | — | — | |
| PepsiCo Inc. | 3.77% | 3.68% | 4.50% | — | — | |
| Philip Morris International Inc. | 13.37% | 18.07% | 24.57% | — | — | |
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 × 66 ÷ 13,122 = 0.50%
3 Click competitor name to see calculations.
The financial performance regarding economic value creation exhibits significant volatility over the five-year period from 2019 to 2023. While the company managed to generate positive economic profit in three of the five years, the fluctuations indicate inconsistency in the ability to generate returns above the cost of capital.
- Economic Profit and Margin Volatility
- Economic profit shifted from a marginal deficit of -12 million USD in 2019 to a peak of 722 million USD in 2021. This growth peaked with an economic profit margin of 5.09% in 2021, marking the highest efficiency in value creation during the analyzed period. However, this trend reversed sharply in 2022, with economic profit falling to -7 million USD and the margin contracting to -0.05%, before a slight recovery to 66 million USD and a 0.50% margin in 2023.
- Divergence Between Revenue and Value Creation
- A notable divergence is observed in 2022, where net sales reached a period high of 15,315 million USD, yet economic profit turned negative. This indicates that the increase in sales volume did not translate into economic value, suggesting that the cost of capital or operational expenses exceeded the returns generated by the expanded revenue base.
- Revenue Contraction and Recovery
- By 2023, net sales declined to 13,122 million USD, the lowest level in the five-year sequence. Despite this contraction in top-line revenue, the company returned to a positive economic profit of 66 million USD. This suggests a potential improvement in cost management or capital efficiency, as the company achieved positive economic value on a smaller revenue base compared to the losses experienced during the peak sales year of 2022.
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