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Shares of Kraft Heinz Inc. are heading into record lows on Thursday after trading after normal business hours after the food conglomerate giant announced bad news with nothing to soften it.
Kraft Heinz
KHC, -0.17%
equities plummeted by more than 20% in the enlarged session, with shares sent below $ 39; the stock has not dropped below $ 41 since Kraft was separated from what is now Mondelez International Inc.
MDLZ, + 0.88%
in 2012. Kraft and Heinz merged in 2015 as part of a transaction supported by Warren Buffett's Berkshire Hathaway Inc.
BRK.B, -0.40%
, which plunged 0.6% in extended trading Thursday. Kraft Heinz ended Thursday's regular trading session with a market capitalization of nearly $ 59 billion, suggesting that the company's valuation could be reduced by more than $ 10 billion if losses persist during of the Friday trading session.
In his earnings report on Thursday, Kraft Heinz revealed a host of problems:
• Fourth quarter results were much weaker than expected. On an adjusted basis, the company posted earnings of 84 cents per share, down 90 cents per share and below the average estimate by analysts of 94 cents per share. Revenues were $ 6.89 billion, up from $ 6.84 billion, but remained below consensus estimates of $ 6.94 billion, according to FactSet.
• Without adjustment, this result is much worse. Kraft Heinz recorded a quarterly loss of $ 12.61 billion, or $ 10.34 per share, thanks to a write-down of more than $ 15 billion related to the decline in valuation of many of its businesses, including the trademarks Kraft and Oscar Mayer.
• The company reduced its dividend by more than a third at a quarterly rate of 40 cents per share, compared with 62.5 cents per share.
• Oh, there is also a Kraft Heinz accounting investigation that resulted in a subpoena from the Securities and Exchange Commission that the company disclosed in its announcement.
The leaders did not say that the problems would be solved in 2019 either. In fact, they pointed to the 2020 outlook while forecasting an adjusted Ebitda total profit of $ 6.3 billion to $ 6.5 billion for this year, down from $ 7.08 billion in 2018 and well below the average estimate of 7.5 billion set by analysts, according to FactSet.
"We plan to take a step back in 2019, but we remain confident in the steady growth of our earnings from 2020, driven by the exploitation of our brands, our cost structures and our advantageous capabilities." said David Knopf, chief financial officer, during a conference call Thursday afternoon. .
Kraft Heinz has not proposed more accurate figures for its forecast for 2019, which is typical for the company. The Ebitda forecast was out of place for a company that does not usually provide specific advice.
Knopf also revealed that the company was evaluating the sale of unnamed companies this year in order to reduce its debt. Kraft Heinz has already announced two planning forecasts and said the proceeds from these sales would also go to restructuring the debt burden.
Knopf also referred to the SEC's investigation at Thursday's teleconference.
"The company has been informed by the SEC of a survey of the company's public markets. After that, we conducted a very thorough internal investigation with the support of a law firm and an independent accounting firm, and determined that we would have reported $ 25 million in prior periods we recorded in the fourth quarter of 2018, "said Knopf. "To put the comparison in context, the total purchase amounts to more than $ 11 billion, which excludes spending on the four major products. This anomaly was therefore not material to our financial statements for the current year or the prior year and, ultimately, we made several improvements to internal controls and took steps to address the situation.
Even before any post-profit decline, Kraft Heinz shares have fallen 28.6% over the past year, as the S & P 500 index
SPX, -0.35%
gained 2.7%.
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