Kraft Heinz writes down US$1.2bn as first half profits shrink 4.8%

USA – Kraft Heinz reported a 4.8% decline in operating profits to US$12.4 billion in the six months to end June due to gloomier prospects for some of its leading brands, including Oscar Mayer meats.

In the US, which makes up more than two-thirds of the company’s revenue, sales were down in the first half by 1.9% impacted by price cuts in North America.

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After the US$15 billion writedown Kraft Heinz took earlier this year, the company has also reported two impairment charges totalling US$1.2 billion in its latest results.

The latest non-cash charges comprised a US$744m goodwill writedown to reflect reduced forecasts for several of its international businesses and a US$474m hit to intangible assets caused by the drop in its share price.

During the period under review, revenue declined to US$6.41 billion, down from US$6.69 billion a year earlier, as sales declined in all regions.

Miguel Patricio, the company’s new chief executive said that he was planning a “comprehensive review” of Kraft Heinz that could include selling some brands.

“The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward,” noted the former Anheuser-Busch marketing executive who became Kraft Heinz CEO in July.

“We have significant work ahead of us to set our strategic priorities and change the trajectory of our business.

“But in my short time with the company, I have developed a strong appreciation for the affinity consumers around the world continue to have for our brands, the talent and determination of our employees, as well as the commitment of our customers,”

Kraft Heinz, which was created in a 2015 merger crafted by billionaire Warren Buffett and Brazilian private equity firm 3G Capital, has been trying to regain its footing and blend into the changing consumer needs with its most iconic brands.

Mr Patricio said that the company was a priority to reduce the company’s debt burden, which stood at US$29.8 billion at the end of June compared with a market capitalisation of about US$33.6 billion.

“We need to become more consumer-obsessed so we can better predict their behaviour even before they know it.

“There are practices that need to change in the product development process, so we can be faster and more consumer-centric with our new products,” he added.

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