Shares of food company Kraft Heinz Co KHC were trading lower by 25 percent early Friday in reaction to a concerning earnings report, dividend reduction and disclosure of a SEC investigation.
What Happened
Kraft Heinz said after the close Thursday that it earned 84 cents per share in the fourth quarter on revenue of $6.891 billion versus expectations of 94 cents and $6.94 billion.
The earnings report included a $15.4-billion writedown of the Kraft and Oscar Mayer brands, which resulted in a net loss of $12.6 billion and a diluted loss per share of $10.34.
Kraft Heinz slashed its quarterly dividend from 62.5 cents per share to 40 cents per share. The company said the savings will be allocated toward accelerating a deleveraging plan, supporting commercial investments and setting a payout level that can grow over time and accommodate additional divestitures.
Finally, the company disclosed it received a subpoena in October from the SEC related to an investigation into the company's accounting policies, procedures and international controls. Kraft Heinz said it began an internal investigation in the fourth quarter and does not expect the matters to be material to the current period or any prior period financial statements.
Why It's Important
Kraft Heinz's earnings report showed net sales rose 0.7 percent from last year and organic net sales rose 2.4 percent. Both metrics imply that the company's biggest problem isn't customers buying its products, according to CNN Business: the company's woes stem from a combination of unanticipated cost inflation and lower-than-expected savings.
What's Next
Kraft Heinz said that its "global focus" will remain on leveraging its in-house capabilities, developing talented people and showing top-tier growth with superior margins versus its peers.
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