Kraft Heinz Bonds Lead Declines in High-Grade Index on Writedown

Kraft Heinz stock plunges after revealing SEC investigation

Before noon, the company had lost $16 billion of its market value.

Kraft Heinz and other food companies have faced pressure from Amazon, Walmart and Costco and lower prices. The SEC declined to comment.

Kraft Heinz, like others in the industry, is facing increased competition from less expensive, retailer brands, as well as growing consumer preference for non-processed food.

Meanwhile, the prices of many commodities that food companies use are rising, such as agricultural products and materials like aluminum and pulp for packaging. The trend hasn't been good for some of Kraft Heinz' standbys like Jell-O and Kool-Aid and Oscar Mayer hot dogs.

Investors eagerly await Berkshire's fourth-quarter earnings report and Buffett's annual letter to shareholders due out on Saturday. Its overall global sales also edged up, but its profit when excluding one-time charges still fell short of Wall Street expectations. Under 3G's stewardship, the new company embarked on extreme cost cutting that risked stifling investment in innovation and marketing.

But the strategy apparently didn't work as planned at Kraft Heinz.

"We were overly optimistic on delivering savings that did not materialize by year end", said CEO Bernardo Vieira Hees "For that, we take full responsibility".

"We expect to take a step backwards in 2019", Chief Financial Officer David Knopf told analysts on a post earnings conference call, promising "consistent profit growth" starting in 2020.

"We think the answer arguably came yesterday in the form of a $15 billion intangible asset write-down for the Kraft and Oscar Mayer brands", said Goldman, who cut his rating to "neutral" from "overweight".

Shares of Kraft Heinz fell 27% in early trading. Over the years, speculation about potential targets has centered on food peers like Mondelez International Inc., General Mills Inc., Campbell Soup Co. and Kellogg Co.

The shares opened at $35.85, down 27 percent, and wiped almost $16 billion off its market value. The company said the litigation costs related to the SEC probe had incurred an extra expense of $25 million on top of regular costs of products for the quarter.

"It is more than fair to ask if any fundamental value for 3G [Capital] has been created since the Kraft Heinz merger", Goldman wrote.

The company is also facing an accounting subpoena from securities regulators.

Warren Buffett swallowed a $4 billion loss from Kraft Heinz in half a day.

"The weak underlying performance of the business and the continued need to reinvest back into the business likely keeps the company from pursuing consolidation any time soon", Growe said.

Two years after the merged Kraft Heinz tried - and failed - to buy Unilever for $143 billion in a deal that would let it continue slashing costs and improving profit margins, it has struggled to boost sales with a portfolio of exhausted brands, including Capri Sun and Maxwell House.

Related:

Comments

Latest news

Hamilton not anxious by Ferrari pace
Leclerc believes Ferrari have the tools and the drivers to shatter Mercedes' iron-grip on the sport with Hamilton's outfit having swept the last five.

Chelsea Receives Two-Transfer Window Ban By FIFA
Eden Hazard has been linked with a move away from Chelsea , possibly to Real Madrid , and this doesn't really change that. The rules were brought in to help stop possible exploitation and trafficking of children.

Broncos won't receive any 2019 compensatory National Football League draft picks
The Bengals also accrued a sixth round pick in a 2017 trade that sent cornerback Bene Benwikere to the Dallas Cowboys . The team has been awarded 50 extra selections since the system started in 1994, eight more than the next-closest teams.

Karl Lagerfeld was very specific about his funeral plans
Lagerfeld was not one of the designers who boycotted or refused to dress the Trumps after the controversial 2016 election. I'm not American, but he's a democratically elected president of America, so people have to deal with it".

Other news