Krafts Heinz Posts $12.6 Billion Loss

Food giant Kraft Heinz has posted a loss of $12.6 billion and wrote down the value of its Kraft and Oscar Mayer brands by $15 billion.

Adding salt to the injury its stock plunged by 20% in after-hours trading and cut its dividend by 36%.

The company announced that its accounting practices are under investigation by the Securities and Exchange Commission.

Inspite of sales going up by 1 percent the company’s CEO Bernardo Hees blamed higher-than-expected manufacturing and logistics costs for the loses.

He said,”The prices of many commodities that food companies use are rising, such as agricultural products and materials like aluminum and pulp for packaging. Transportation costs have also added pressure on food companies, in part because of a shortage of trucks.In addition food companies have faced pressure from lower food prices and retailers.”
Heinz anticipated savings from its 2015 merger would continue to help lower costs, but those efficiencies dried up.
The company had been praised for its supply chain management after merging Kraft with Heinz. But rapidly rising costs pinched profits to such an extent that the company’s earnings were about $1 billion below its own expectations. That forced it to write down two of its most recognizable brands as well as the company’s Canadian business.
Kraft Heinz said it recorded a $25 million increase to product costs as a result of that investigation.
Kraft said cutting the dividend will help the company cut debt faster, improve the balance sheet, support its commercial investments and help the company divest businesses that aren’t supporting the bottom line.

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