Kraft Heinz's net income halved in the first six months of the year, the packaged food maker said as it wrote down the value of several business units by over $1 billion in results delayed by an internal investigation into procurement practices.
The company took a charge of about $744 million on its US refrigerated, Latin American exports and Brazil units among others, blaming lower five-year operating forecasts. It also booked an impairment charge of about $474 million in the second quarter to write down the value of six brands, including Velveeta and Cool Whip.
The company added that the impairment charges for the first half of 2019 were preliminary and subject to finalisation of control procedures.
This marks Kraft Heinz's second major write down since February 21, when the company knocked $15.4 billion off the value of its Kraft and Oscar Mayer brands, posted a surprise quarterly loss, and disclosed a U.S. Security and Exchange Commission investigation into its accounting practices.
After an internal review of the accounting missteps, Kraft Heinz said it had increased the initial brand write down by about $13 million due to misstatements in reports for 2016, 2017 and the first nine months of 2018.
The company's shares fell 6.5% in premarket trading on Thursday. The stock has lost a third of its value since February.
"The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward," said Kraft Heinz's new Chief Executive Officer Miguel Patricio. Patricio a 30-year marketing veteran from Anheuser-Busch, was named to the role in April.
Kraft Heinz's struggles have rocked other major consumer goods companies this year, highlighting the industry's struggle to cut costs without gutting marketing budgets. Companies from Kellogg to Procter & Gamble have raised prices and invested to keep products relevant amid intense private-label competition from grocers including Walmart, Kroger and Amazon.
Net income attributable to the company's shareholders fell to $854 million, or 70 cents per share, in the six months ended June 29, from $1.76 billion, or $1.43 per share, a year earlier.
Excluding items, the Chicago-based company earned $1.44 per share, compared with $1.89 a year earlier. Kraft Heinz said net sales fell about 5% to $12.37 billion.
