Kraft Heinz takes nearly US$3B writedown, signals weaker second-half earnings growth
Kraft Heinz Co on Thursday said second-half core earnings growth would be weaker-than-expected and took a nearly Us$3-billion charge on the value of several businesses, highlighting uncertainty in the food industry due to the novel coronavirus.
Shares of the Chicago-based company, which makes Philadelphia
cream cheese and Kraft Singles, closed down about three per cent on Thursday in New York trading.
Higher employee bonuses, foreign exchange fluctuations and climbing commodity costs — particularly the price of cheese — are expected to soften second-half results, Kraft Heinz said.
Adjusted EBITDA growth will now be about nine percentage points lower than last year, versus the seven-percentage-point hit the company predicted in April.
With movement outdoors restricted due to lockdowns to curb the spread of the coronavirus, people around the world bought significantly more groceries during the period for meals at home.
While Kraft Heinz’s retail sales rose, the lockdown took its toll on its U.S. and Canadian food service businesses, which provide ketchup, mayonnaise and other products to restaurants, offices and school cafeterias. These units were included in a nearly Us$1.8-billion writedown taken during the quarter.
Kraft Heinz — which has written down about US$20 billion of its brands and businesses since February 2019 — also took nearly US$1.1 billion off the value of Oscar Mayer, Maxwell House and seven other brands.
Due to the most recent impairment charges, the company reported a second-quarter loss attributable to common shareholders of US$1.65 billion, versus a profit of US$449 million a year earlier. Excluding items, adjusted earnings were US80 cents per share, handily beating analysts’ average estimate of US65 cents.