Kraft Heinz’s Stock Plummets 20% After Company Slashes Dividend, Discloses SEC Probe

February 22, 2019, 12:30 AM UTC

The stock price of Kraft Heinz plunged 20% late Thursday after the food giant disclosed it received a subpoena from the Securities and Exchange Commission and reported a large net loss due to the reduction of goodwill in some of its best-known brands.

Kraft Heinz also said in a conference call discussing earnings that it cut its quarterly dividend to 40 cents a share from 62.5 cents and that it was considering selling off some of its businesses to help pay down debt. The company reported $30.9 billion in long-term debt at the end of 2018, up from $28.3 billion a year earlier.

In its earnings release, Kraft Heinz said it received a subpoena last October related to its “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.”

After launching an investigation into its procurements accounting, Kraft Heinz said it recorded a $25 million increase in its cost of products sold after determining the amount was “immaterial” to previous reporting periods. The company is also working to improve its internal accounting controls.

The financials reported in Kraft Heinz’s earnings report were well below investor expectations. The company’s revenue rose 0.7% to $6.9 billion, missing analyst estimates by $50 million, while its GAAP net loss came in at $10.34 a share. That net loss was largely caused by an impairment charge of $15.4 billion to adjust the goodwill in some of its businesses, including the Kraft and Oscar Mayer trademarks.

Kraft Heinz was formed in 2015 by a merger of the two food companies that was engineered in part by Warren Buffett’s Berkshire Hathaway. Buffett has previously spoken about how changing consumer tastes are affecting the appeal of brands belonging to Kraft Heinz. The company’s stock is currently down 64% from the levels it was trading at two years ago.