Kraft Heinz takes another $1 billion hit, shares plunge
Kraft Heinz released its second quarter earnings report delayed by accounting problems and revealed continued fall-out related to those issues on top of weak sales.
The company that makes Oscar Mayer hot dogs, Kool-Aid, Heinz ketchup and Velveeta took charges in excess of $1 billion in the first half due in part to the “perceived risk” to the value of the company during a very rough year in which its stock has been cut in half.
Shares of The Kraft Heinz Co. tumbled another 14% to an all-time low Thursday.
The company, created in a 2015 merger crafted by billionaire Warren Buffett and Brazilian private equity firm 3G Capital, had been trying to regain its footing and follow vast changes in what people eat and how they perceive the company’s most iconic brands.
Then, early this year, Kraft Heinz disclosed an investigation into its accounting practices by federal regulators and said it would slash the value of its Oscar Mayer and Kraft brands by more than $15 billion.
While company executives were cleared in the investigation which focused on a relatively small number of people in its procurement operations, Kraft Heinz was forced to adjust past results reported to the Securities and Exchange Commission. In May, it restated its financial results for the years 2016, 2017, and for the first nine months of 2018.
That damage continued to play out in the quarterly results released Thursday.
Kraft recorded charges of $474 million in the quarter, “primarily driven by the application of a higher discount rate to reflect the markets’ perceived risk” to the company’s value.
It took additional charges of $744 million in the first half related to its export and refrigerated businesses, among others.
Profit during the first half of 2019 dropped almost 55%.
“The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward,” said CEO Miguel Patricio. “We have significant work ahead of us to set our strategic priorities and change the trajectory of our business.
Kraft earned $449 million, or 37 cents per share, for the three months ended June 29. A year ago it earned $754 million, or 62 cents per share.
Stripping out the $474 million impairment charge related to writing down the value of brands including Maxwell House and Lunchables and other items, earnings were 78 cents per share, which was 3 cents better than Wall Street had expected, according to a survey by Zacks Investment Research.
Revenue was $6.41 billion, down from $6.69 billion a year earlier, as sales declined in all regions. That number fell short of projections from industry analysts.
Report: Facebook offering ‘millions’ to publishers for news
SAN FRANCISCO — Facebook is reportedly in talks with news publishers to offer “millions of dollars” for the rights to publish their material on its site. The move follows years of criticism over its growing monopolization of online advertising to the detriment of the struggling news industry.
The Wall Street Journal reported Thursday that Facebook representatives had told news executives that they’d pay as much as $3 million a year to license stories, headlines and other material. Facebook declined to comment but confirmed that the company is working on launching a “news tab” for its service this fall. Facebook CEO Mark Zuckerberg began talking about a news section on the service in April.
A person familiar with the matter confirmed that Facebook has approached News Corp. about paying to license Wall Street Journal stories. The person requested anonymity because they were not authorized to speak publicly about the matter.
The Journal report was not clear as to whether Facebook was offering $3 million to individual publishers or in total to all news organizations.
Many in the news industry have long blamed Facebook and Google for using their content for free while the social network slurped up the majority of digital ad dollars, imperiling the news industry. A bipartisan bill introduced in Congress this year would grant an antitrust exemption to news companies, letting them band together to negotiate payments from the big tech platforms.
The Washington Post, which was also named in the report as a company Facebook approached, declined to comment. The Walt Disney Co., which owns ABC, did not immediately respond to a message for comment.
Airline industry says demand up 5% in June
BERLIN — The International Air Transport Association says passenger traffic grew by a “solid” 5% in June compared with the same month last year, despite the impact of U.S.-China trade tensions.
The airline industry group said today that June also saw a record load factor, a gauge of the percentage of seats filled per flight, for the month of 84.4%.
The lowest passenger growth was seen in North America, where carriers recorded increased demand of 3.5%. Geneva-based IATA said the modest increase reflects U.S.-China trade tensions, which have also affected air travel in Asia.
Airline traffic has been rising steadily in recent years, fueling calls for measures to curb its growing share of global greenhouse gas emissions.