Kraft Heinz writes down more than $1bn as first-half revenue slumps
By Richa Naidu and Aishwarya Venugopal - Aug 12th, 12:30
Kraft Heinz’s net income halved in the first six months of the year, the packaged food maker said as it wrote down the value of several business units by more than $1bn in results delayed by an internal investigation into procurement practices.
The company took a charge of about $744m on its US refrigerated, Latin American exports, and Brazil units among others, blaming lower five-year operating forecasts. It also booked an impairment charge of about $474m in the second quarter to write down the value of six brands, including cheese product Velveeta and Cool Whip.
The company added that the impairment charges for the first half of 2019 were preliminary and subject to finalisation of control procedures.
This marks Kraft Heinz’s second major writedown since February 21, when the company knocked $15.4bn off the value of its Kraft and Oscar Mayer brands, posted a surprise quarterly loss, and disclosed a US Security and Exchange Commission (SEC) investigation into its accounting practices.
After an internal review of the accounting missteps, Kraft Heinz said it had increased the initial brand writedown by about $13m due to misstatements in reports for 2016, 2017 and the first nine months of 2018.
The company’s shares fell 6.5% in pre-market trading on Thursday. The stock has lost a third of its value since February.
“The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward,” said Kraft Heinz’s new CEO Miguel Patricio, a 30-year marketing veteran from AB InBev, in the position since April.
Kraft Heinz’s struggles have rocked other major consumer goods companies this year, highlighting the industry’s struggle to cut costs without gutting marketing budgets. Companies from Kellogg to Procter & Gamble have raised prices and invested to keep products relevant amid intense private-label competition from grocers including Walmart, Kroger, and Amazon.
Net income attributable to the company’s shareholders fell to $854m, or 70c a share, in the six months ended June 29, from $1.76bn, or $1.43 a share, a year earlier.
Excluding items, the Chicago-based company earned $1.44 a share, compared with $1.89 a year earlier. Kraft Heinz said net sales fell about 5% to $12.37bn.
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