Study of KHC
02/25/2019 – Warren Buffett: I Overpaid for Kraft Heinz
Berkshire Hathaway doesn’t plan to change its ownership stake in Kraft Heinz despite the struggles, he says
Mr. Buffett’s Berkshire Hathaway owns 27% of Kraft Heinz.
“The interesting thing about Kraft Heinz is it’s still a wonderful business,” Mr. Buffett said. But “the business does not earn more because you pay more for it.”
Berkshire and Brazilian private-equity firm 3G Capital partnered in 2013 to buy Heinz and then financed Heinz’s 2015 merger with Kraft. Mr. Buffett on CNBC said Berkshire Hathaway doesn’t plan to change its ownership stake in Kraft Heinz despite the struggles.
“We don’t pull the plug…It isn’t our style,” he said.
But he said he also wouldn’t buy more Kraft Heinz, even after its share prices slumped last week, because “it isn’t worth as much.”
02/21/2019 – Kraft Heinz Divulges SEC Investigation, Swings to Loss
Food maker also cuts dividend as merger savings dry up
Kraft Heinz Co. KHC -27.23% on Thursday wrote down the value of its Kraft and Oscar Mayer brands by $15.4 billion, disclosed an investigation by federal securities regulators and slashed its dividend, sending its stock down more than 20% in after-hours trading.
Kraft Heinz said it faced unexpectedly higher costs last year, and it has seen significant pressure on the value of its brands since its $49 billion merger in 2015. The write-down caused Kraft Heinz to swing to a fourth-quarter loss, marking a striking reversal after several years of radical cost-management efforts and higher profit margins that were seen as a model for the packaged-food industry.
“We were overly optimistic on delivering savings that did not materialize,” Chief Executive Bernardo Hees said on a conference call with investors.
Kraft Heinz also said Thursday the Securities and Exchange Commission is investigating its accounting practices in its procurement division. The company said it has concluded an internal investigation into the matter, which led to a separate $25 million charge in the quarter. The charge related to higher costs for ingredients and other expenses that should have been recorded in previous quarters.
Kraft Heinz said that it is cooperating with the agency and that the charge isn’t material to earnings, as the company spends more than $11 billion on procurement annually.
With sales stubbornly declining, Kraft Heinz spent an additional $300 million last year on marketing its brands, developing new ones and renovating recipes to make them trendier.
The move accelerated what would have been three years of investments into one year. The money also went into making improvements to its supply chain and adding more salespeople to visit stores and make sure products are stocked correctly.
Kraft Heinz’s profit, excluding things like interest payments, taxes and restructuring costs, fell 14% in the quarter. For years, this measure, known as adjusted Ebitda, had routinely risen at the company thanks to its attention to cost cutting.
Some of the company’s efforts to orchestrate a turnaround helped boost sales of products like Planters nuts, Oscar Mayer deli meat and Capri Sun. Comparable sales rose 2.4% in the fourth quarter.
Kraft Heinz also slashed its quarterly dividend to 40 cents a share from 62.5 cents, which Mr. Knopf said would better position Kraft Heinz for industry consolidation.
Overall, Kraft Heinz posted a loss of $10.34 a share largely due to the write-down of its assets. On an adjusted basis, it logged earnings of 84 cents a share, down 6.7% from a year ago, and revenue of $6.89 billion, a 0.7% rise. Both measures fell below analyst projections, according to FactSet.
02/21/2019 – Kraft Heinz posts huge loss, slashes dividend and reveals SEC investigation
02/21/2019 – Kraft Heinz Sinks Near Record Low on $15.4 Billion Writedown
