After disclosing $15 billion in goodwill impairment losses and the US Securities and Exchange Commission's subpoena, food giant Kraft Heinz's share price plummeted 20%, bringing more than $3 billion in book losses to Warren Buffett.
After the US stock market on Thursday, food giant Kraft Heinz announced its fourth quarter and full-year results for 2018.
In the fourth quarter, Kraft Heinz's adjusted earnings per share were $0.84 and revenue was $6.89 billion. According to Refinitiv consensus, these results are less than Wall Street's estimated earnings of $0.94 per share and $6.93 billion in revenue.
Kraft Heinz CEO Bernardo Hees said: "Because of the unexpected cost expansion and lower than planned savings, profitability is lower than our expectations."
More importantly, the card In the financial report, Mr. Heinz disclosed that in the fourth quarter, more than $15 billion in goodwill impairment was included, which turned the net profit directly into a negative value:
based on several factors in the fourth quarter of development The fair value of these goodwill and intangible assets is lower than their book value. As a result, the company included up to $15.4 billion in non-cash impairment charges to reduce the book value of goodwill in certain sectors (mainly US refrigeration and Canadian retail sectors), as well as certain intangible assets (mainly Kraft and Oscar). Book value of goodwill of Mayer trademark). This directly led to a net loss attributable to common stockholders of $12.6 billion.
In addition, Kraft Heinz also disclosed that in October 2018, a subpoena of the SEC of the US Securities and Exchange Commission related to the company's internal procurement investigation was received. Specifically, the survey includes the company's accounting policies, procedures, and internal control processes related to procurement. According to the preliminary requirements of the US SEC, Kraft Heinz conducted an investigation into the procurement field with external lawyers. According to the survey results, the company's product sales cost in the fourth quarter increased by 25 million US dollars. Kraft Heinz stressed that this has no significant impact on current and past earnings.
Kraft Heinz also announced a sharp cut in dividends to speed up the “deleveraging process and increase the flexibility of the balance sheet”, reducing the quarterly dividend to $0.40, a decrease of 36 from the previous quarter's $0.625. %.
Close on ThursdayAt the time, Kraft Heinz closed at $48.18 and closed down 0.2%. However, in the after-hours trading after the announcement, Kraft Heinz's share price surged nearly 20%, and is now at $38.56. The stock price hit a new low since 2015.
The stock of Warren Buffett’s Berkshire Hathaway Company just disclosed its position in the fourth quarter last week, in which the holdings of Kraft Heinz’s shares reached 325,634,800 shares. It is one of only six stocks with stocks worth more than $10 billion (the other five are Apple, Bank of America, Wells Fargo, Coca-Cola, American Express).
Assuming that Berkshire’s positions have not changed in the first quarter of this year, the wave of Kraft Hein’s after-hours has caused Buffett’s book losses of more than $3 billion.
Kraft Foods was launched in 1924. In 2015, Buffett and Brazilian private equity giant 3G Capital contributed to the merger of Kraft Foods and Heinz. Kraft Heinz is the fifth largest food and beverage manufacturer in the world and the third largest in North America. Berkshire Hathaway is the largest shareholder of Kraft Heinz and holds nearly 27% of the shares.
Kraft Heinz's development strategy has always been to create profitable growth through debt-driven acquisitions and constant cost cutting to compensate for the lack of income and internal investment. But this strategy is now fading.
In addition, the fast-changing food market has made this historic company and the capital behind it feel overwhelmed. Consumers are increasingly favoring healthy foods, and Kraft Heinz's products are known for their high calories.
3G Capital co-founder Lemann said last year that the fast-changing consumer goods market made him feel like a "dinosaur."