Kraft Heinz Plunges After Earnings Miss, Massive Write-Offs & SEC Subpoena

kraft heinz

Kraft Heinz Co. (NASDAQ: KHC)

Kraft Heinz Co. posted disappointing fourth-quarter earnings on Thursday and disclosed an accounting subpoena from the U.S. Securities and Exchange Commission (SEC).

The packaged-food company said that it received a subpoena from securities regulators in October 2018 associated with an investigation into its accounting policies, procedures, and internal controls regarding procurement agreements.

Kraft Heinz also wrote off more than $15.4 billion related to its key brands such as the Oscar Mayer and Kraft trademarks, a clear acknowledgment that changing consumer preferences are weighing on the value of some of its most well-known products.

Kraft, which owns Heinz ketchup and Velveeta cheese brands, went on to reveal that it would cut its dividend payments from 62.5 cents per share to 40 cents. Shares of the Warren Buffett-backed company were down 20.92% to $48.18 in premarket trade on Friday.

KHC Earnings & Outlook

Kraft Heinz came out with fourth-quarter loss of $12.61 billion, or $10.34 per share (including the $15.4 billion charge for writing down the value of some of its iconic brands). Earnings, adjusted for one-time items, came to $0.84 per share.

Fourth-quarter sales were $6.89 billion, up from $6.84 billion in the same period last year. Analysts expected the company to report adjusted earnings of $0.94 per share on sales of $6.93 billion for the period.

Looking into 2019, the company expects earnings to be in the range of $6.3 billion to $6.5 billion, well short of analysts’ expectations of $7.5 billion.

Kraft Heinz CEO Comments

“Our fourth quarter and full year 2018 results reflect our commitment to re-establish commercial growth of our iconic brands, turn around consumption trends in several key categories, and expand into new category and geographic whitespaces,” said Kraft Heinz CEO Bernardo Hees.

 “We are pleased with those actions, the returns on our investments, and the momentum built for 2019. However, profitability fell short of our expectations due to a combination of unanticipated cost inflation and lower-than-planned savings. Going forward, our global focus will remain on leveraging our in-house capabilities, developing our talented people, and delivering top-tier growth at industry-leading margins.”

Kraft Heinz Co. Profile

The Kraft Heinz Co. engages in the manufacture and market of food and beverage products. It operates through the following geographical segments: United States, Canada, EMEA, and Rest of the World.

The Rest of the World segment is comprised of the Latin America and Asia Pacific segments. Its products include condiments and sauces, cheese and dairy, ambient meals, frozen and chilled meals, and for infant and nutrition. The company was founded on July 2, 2015 and is headquartered in Chicago, IL. – CNN Money