Kraft Heinz reported a loss of $12.61 billion in its fourth quarter and announced it received a subpoena from the US Securities and Exchange Commission (SEC) about its accounting and procurement policies.
The company wrote down the value of assets including its Kraft and Oscar Mayer brands by $15 billion. As a result of the poor figures, CFO David Knopf said the firm now “expects to take a step backwards in 2019”.
Following the initial SEC request, the company launched an investigation into the procurement area. In the fourth quarter of 2018, as a result of findings from the investigation, Kraft Heinz recorded a $25 million increase to costs of products sold, but said it does not expect the matter to be material to the current or past quarters.
Kraft Heinz said regulators are investigating matters “including, but not limited to, agreements, side agreements, and changes or modifications to its agreements with its vendors”.
For the year, the company’s net sales rose 0.7% to $26.26 billion, despite a dip in performance in the US – a market which makes up more than two-thirds of revenue. Losses for the year stood at $10.23 billion.
In an earnings call, Knopf revealed the company is considering selling off additional assets. Last October, it offloaded a range of its Indian brands, including children’s milk drink Complan, to Zydus Wellness for around INR 46 billion ($628 million).
It has since acquired US condiments and sauces brand Primal Kitchen for approximately $200 million.
Kraft Heinz CEO Bernardo Hees said: “Our fourth quarter and full-year 2018 results reflect our commitment to reestablish commercial growth of our iconic brands, turn around consumption trends in several key categories, and expand into new category and geographic whitespaces.
“We are pleased with those actions, the returns on our investments, and the momentum built for 2019. However, profitability fell short of our expectations due to a combination of unanticipated cost inflation and lower-than-planned savings.
“Going forward, our global focus will remain on leveraging our in-house capabilities, developing our talented people, and delivering top-tier growth at industry-leading margins.”
© FoodBev Media Ltd 2020