Kraft Heinz stock plunges after revealing SEC investigation

Credit Illustration by Ad Age Composite images Kraft

Credit Illustration by Ad Age Composite images Kraft

Kraft Heinz also disclosed an accounting subpoena from the SEC that it received previous year regarding its procurement practices. The company said that it is fully cooperating with the SEC.

It was truly a last-minute blow to Berkshire, as the investment conglomerate is slated to release fourth-quarter earnings on Saturday.

The Pittsburgh company said that it is making improvements to its internal controls and taking other actions to prevent similar mistakes going forward.

Changing consumer tastes and shopping habits have decimated sales at the largest food companies in the USA, as shoppers gravitate to more natural and organic options, rather than pre-packaged and sugar-laden products. The loss follows an $8 billion profit in the same period previous year.

Kraft Heinz and other food makers that dominated grocery shelves for much of the post-World War II era have been whipsawed by a seismic shift in what consumers want.

Families, particularly in the USA, have pivoted sharply away from processed foods and toward more simple and fresh ingredients.

When Kraft Heinz was created, analysts wondered where the growth would come with a suite of aging brands, which also includes Jell-O and Kool-Aid.

Brazil's buyout fund 3G Capital and Warren Buffett's Berkshire Hathaway Inc together own more than 50 percent of Kraft Heinz.

Berkshire Hathaway's investment declined from a valuation of about $15.7 billion to $11.4 billion as the stock plunged below $35 on Friday.

It has cut costs aggressively, but it appears that the effect has not been what was expected.

The company made a decision to cut its dividend to 40 cents per share from 62.5 cents per share, which frees up $1.1 billion of extra cash this year. Thursday's announcement marks the second time this year that a Berkshire holding has disclosed unfavorable news after the markets closed, hurting its stock.

Mr Hees said he was encouraged by revived appetite for brands such as Philadelphia creamed cheese. "They're defending their corporate-debt rating with this dividend cut, and that should enhance cash flow".

Packaged food giant Kraft Heinz Company, best known for its Heinz Tomato Ketchup and Kraft Macaroni & Cheese, saw the worst market disaster in its history on Thursday evening after company shares fell 25 percent in reaction to its hugely disappointing fourth-quarter results.

"The weak underlying performance of the business and the continued need to reinvest back into the business likely keeps the company from pursuing consolidation any time soon", Growe said.

"Investors for years have asked if 3G's extreme belt-tightening model ultimately would result in brand equity erosion", Goldman wrote. Its overall global sales also edged up, but its profit when excluding one-time charges still fell short of Wall Street expectations.

A year later, 3G was praised for making Kraft Heinz's operating margin the best among its peers, but that came at the cost of closing six factories and cutting 7,000 jobs in 18 months.

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