(Bloomberg) – Kraft Heinz Co. posted a non-cash charge of $ 15.4 billion for asset write-offs, including some of its best known brands. This is a notable finding that a changing consumer taste has destroyed the value of some of the company's most iconic products.
The charges resulted in a net loss of $ 12.6 billion, or $ 10.34 per share. The Kraft-Heinz share collapsed at 18:30 clock by 18 percent. in New York.
Kraft Heinz's merger, staged in 2015 by Warren Buffett Berkshire Hathaway Inc. and private equity firm 3G Capital, is primarily at the heart of grocery, an area hit hard by secular food shifts and shopping habits, and the greatest threat to be disturbed by Amazon.com Inc.
The company has been trying to spice up a tired suite of brands – from Organic Capri Sun to Oscar Mayer's Natural Hot Dogs. However, the bigger question in the eyes of investors has been the ability of management to complete the large, transforming businesses that shareholders are longing for.
Kraft Heinz tried to buy Unilever in 2017. This would have allowed management to do what it does best: reduce overheads. But Unilever rejected the deal of $ 143 billion and Kraft Heinz shares have since lost about half their value as investors wait for the next big step.
On Thursday, the company's fourth-quarter earnings even missed the lowest analyst estimate. Its quarterly results also announced a subpoena from the US Securities and Exchange Commission regarding its procurement practices. Kraft said Heinz found a "$ 20 million increase in the cost of goods sold" as a result of an investigation by an outside lawyer.
Berkshire Hathaway's Investment Decreased from $ 15.7 Billion to $ 12.9 Billion The stock dropped to $ 39.66 in New York at 18:15. Thursday's announcement marks the second time this year that a Berkshire holding has released unfavorable news after the close, which adversely affects its stock. Apple Inc. cut its revenue guidance in January, shattering shareholders. This share has since recovered. Kraft will cut its quarterly dividend from 62.5 to 40 cents a share, helping it to reduce its debt faster and adjust to its smaller size following the sale of some companies. The company had paid dividends in the highest proportion to the earnings of its US food counterparts.
(value of Buffett's investment in the 8th paragraph.)
– With support from Katherine Chiglinsky.
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