Kraft Heinz reported disappointing quarterly results on Thursday, including a $15 billion charge against the value of its marquee Kraft and Oscar Mayer brands, and said it had received a subpoena from the Securities and Exchange Commission about its accounting practices.

Kraft, which owns the Velveeta cheese and Heinz ketchup brands, also cut its dividend, and its chief financial officer said he expected the company to “take a step backwards in 2019.”

The company’s shares fell 11 percent in extended trading on Thursday.

Kraft said the S.E.C. subpoena, which it received in October, covered an accounting investigation related to procurement.

Kraft said it had taken a $25 million charge related to this matter and did not expect it to be material to the current or past quarters. But it said it had started an investigation into its processes after the subpoena.

“The company is in the process of implementing certain improvements to its internal controls to mitigate the likelihood of this occurring in the future and has taken other remedial measures,” Kraft said.

Kraft also took a $15.4 billion good-will write-down related to its U.S. Refrigerated and Canada Retail units and certain brands, meaning the company views those assets as less valuable than when H. J. Heinz and Kraft Foods Group merged in 2015 to create the third-largest North American food company.

The charge pushed Kraft to a net loss of $12.6 billion attributable to shareholders in the quarter that ended Dec. 29. It earned 84 cents per share on an adjusted basis, missing Wall Street estimates of 94 cents, according to data from Refinitiv.

Kraft said it expected adjusted earnings before interest, tax, depreciation and amortization between $6.3 billion and $6.5 billion in 2019, lower than analysts’ estimates of $7.47 billion, according to data from Refinitiv.

The company also cut its quarterly dividend to 40 cents per share from around 63 cents, saying the industry will remain challenged by cost inflation in the near term.

Kraft’s results underscore the challenges of an industry that is already struggling with rising costs for raw materials and operations.

“Profitability fell short of our expectations due to a combination of unanticipated cost inflation and lower-than-planned savings,” said Kraft’s chief executive, Bernardo Hees.

Nearly every major consumer goods company in the United States struggled with skyrocketing commodity and transportation costs last year, exacerbated by a shortage of truck drivers.

Kraft’s net sales of $6.89 billion fell short of analysts’ estimates of $6.94 billion in the reported quarter.

Warren E. Buffett’s Berkshire Hathaway and 3G Capital of Brazil control Kraft Heinz, which is based in Chicago. While Berkshire owns a slightly larger stake, nearly 27 percent, 3G handles day-to-day operations.

Source: Read Full Article