Kraft Heinz, the Warren Buffett- backed food company, has disclosed another $1.2bn of writedowns, on top of the $15bn charge it took earlier this year to reflect how shoppers have been shunning its brands.
Its shares fell 13 per cent on Thursday morning, taking the decline for the year to 38 per cent. The company, whose products include Heinz ketchup, Kraft macaroni and cheese and HP Sauce, said on Thursday that first-half profits had halved from a year ago.
The Chicago-based group had promised to transform the food industry when it was created in 2015 by the combination of Kraft and Heinz in a deal engineered by the investment firm 3G Capital and Mr Buffett. But it has since become the poster child for struggling consumer goods companies. Products that had been household staples for generations have gone out of fashion.
On top of that, the company is also being investigated by the US Securities and Exchange Commission over its bookkeeping.
Kraft Heinz’s new chief executive Miguel Patricio, who is 40 days into the job, said on Thursday: “The level of decline versus previous year is nothing we are proud
of.” Net income in the six months to the end of June fell from $1.76bn a year ago to $852m
The latest non-cash charges included a $744m goodwill writedown, which Kraft Heinz said reflected reduced “five-year operating forecasts” for several of its international businesses. The company also booked a $474m charge on intangible assets, citing “a higher discount rate to reflect the markets’ perceived risk in the company’s valuation”.
The $15bn writedown earlier this year was due to gloomier prospects for some of its best-known brands, including Kraft and Oscar Mayer meats. Kraft Heinz went on to restate almost three years of earnings after an internal investigation uncovered errors in the way it had accounted for supplier contracts. An internal probe pointed the finger at misconduct by employees in procurement.
David Knopf, chief financial officer, said on Thursday that the company was “taking extensive actions” to strengthen internal controls, including over financial reporting.
Mr Patricio, who was drafted in from brewer Anheuser-busch Inbev to replace Bernardo Hees, said the company still had a bright long-term future. “Our brands are icons,” he said, noting many of them had been around for over a century.
