Kraft Heinz Co's net income halved in the first six months of the year, the packaged food maker said on Thursday as it wrote down the value of several business units by over $1 billion (€890 million) in results delayed by an internal investigation into procurement practices.
The company took a charge of about $744 million (€665.3 million) on its US refrigerated, Latin American exports and Brazil units among others, blaming lower five-year operating forecasts.
It also booked an impairment charge of about $474 million (€423.9 million) in the second quarter to write down the value of six brands, including Velveeta and Cool Whip.
The company added that the impairment charges for the first half of 2019 were preliminary and subject to finalisation of control procedures.
Second Major Writedown
This marks Kraft Heinz's second major writedown since 21 February, when the company knocked $15.4 billion (€13.8 billion) off the value of its Kraft and Oscar Mayer brands, posted a surprise quarterly loss, and disclosed a US Security and Exchange Commission investigation into its accounting practices.
After an internal review of the accounting missteps, Kraft Heinz said it had increased the initial brand writedown by about $13 million (€11.6 million) due to misstatements in reports for 2016, 2017 and the first nine months of 2018.
"The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward," said Kraft Heinz's new chief executive officer Miguel Patricio.
Patricio a 30-year marketing veteran from Anheuser-Busch InBev, was named to the role in April of this year.
Kraft Heinz's struggles have rocked other major consumer goods companies this year, highlighting the industry's struggle to cut costs without gutting marketing budgets.
Private-Label Competition
Companies from Kellogg to Procter & Gamble have raised prices and invested to keep products relevant amid intense private-label competition from grocers including Walmart, Kroger and Amazon.com.
Net income attributable to the company's shareholders fell to $854 million (€763.7 million), or 70 cents per share, in the six months ended 29 June, from $1.76 billion (€1.6 billion), or $1.43 per share, a year earlier.
Excluding items, the Chicago-based company earned $1.44 per share, compared with $1.89 a year earlier. Kraft Heinz said net sales fell about 5% to $12.37 billion (€11.1 billion).
Outlook
Commenting on the company's outlook, Patricio, said, "We have significant work ahead of us to set our strategic priorities and change the trajectory of our business.
"We have a lot to work with and build upon, and our team is motivated by the opportunity to drive the next phase of growth and profitability for Kraft Heinz and our shareholders," he added.
News by Reuters, additional reporting by Dayeeta Das. Click subscribe to sign up to ESM: European Supermarket Magazine.
