2018 has not been kind to the 2015 merger between Kraft and Heinz companies, whose iconic brands are instantly recognized by almost everyone. As per the announcement of the 2018 yearly results, the outlook is clouded by unknowns.
Putting a happy face on a loss of $12.6 billion, Kraft Heinz CEO, Bernardo Hees noted, “Our fourth quarter and full year 2018 results reflect our commitment to re-establish 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.”
The company adjusted the value of certain “goodwill” and intangible assets, including the Kraft and Oscar Meyer trademarks, downward by $15.4 billion.
Dividend cut by 36% from $0.625 per share to $0.40 per share and according to CEO Bernardo Hees, “We believe this action will help us accelerate our deleveraging plan, provide us strategic advantage through a stronger balance sheet, support commercial investments and set a payout level that can both grow over time and accommodate additional divestitures. By doing this we can improve our growth and returns over time.”
Under “Supplemental Information,” the company noted that “The Company received a subpoena in October 2018 from the U.S. Securities and Exchange Commission (the "SEC") associated with an investigation into the Company's procurement area, more specifically the Company's accounting policies, procedures, and internal controls related to its procurement function, including, but not limited to, agreements, side agreements, and changes or modifications to its agreements with its vendors.” As per an “internal investigation,” the company “recorded a $25 million increase to costs of products sold as an out of period correction” and improved its internal controls.
Employees should continually check for signs of a mass layoff as one of the oldest CEO tricks in the book to increase profits and please Wall Street is to reduce costs and headcount.
There are no guarantees in life, or promises for a bright future. Just because something bad hasn't happened yet, doesn't mean it won't. It can happen to anyone, anytime, anywhere ... are you now wondering, Am I Next?