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Heinz gobbles up Kraft in major food industry merger


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2015 Mar 25, 5:25am   1,394 views  3 comments

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http://www.centralvalleybusinesstimes.com/stories/001/?ID=28017

Will create worlds fifth largest food company •  This is my kind of transaction Assuming its approved by shareholders and government regulators, the worlds fifth largest food company and the third largest in the U.S. will be created as privately held H.J. Heinz Company swallows Kraft Foods Group Inc. (NASDAQ: KRFT).

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1   anonymous   2019 Feb 21, 3:44pm  

Kraft Heinz Sinks Near Record Low on $15.4 Billion Writedown

Kraft Heinz Co. recorded a $15.4 billion non-cash charge to write down assets including some of its most well-known brands, a striking acknowledgment that changing consumer tastes have destroyed the value of some of the company’s most iconic products.

The packaged food giant’s charge to reduce the goodwill value of the Kraft and Oscar Mayer trademarks and other assets, coupled with disappointing fourth-quarter earnings and an accounting subpoena from securities regulators, sent the shares tumbling toward what would be a record low if the declines hold in trading Friday.

The charges resulted in a net loss of $12.6 billion, or $10.34 a share. Kraft Heinz shares plummeted as much as 18 percent as of 6:30 p.m. in New York



Formed in a 2015 merger orchestrated by Warren Buffett’s Berkshire Hathaway Inc. and the private equity firm 3G Capital, Kraft Heinz’s portfolio plays mainly in the center of the grocery store, an area hit hard by secular shifts in eating and shopping habits, and the one at greatest risk of being disrupted by Amazon.com Inc.

The company has tried to spruce up a tired suite of brands -- from organic Capri Sun to natural Oscar Mayer hot dogs. But the bigger question in the mind of investors has been management’s ability to pull off the large, transformative deals that shareholders crave.

Kraft Heinz tried to purchase Unilever in 2017 in a move that would have allowed management to do what it does best: slash overhead costs. But Unilever rebuffed the $143 billion deal, and Kraft Heinz shares have since lost about half their value as investors wait for the next big move.

On Thursday, the company’s fourth-quarter earnings missed even the lowest analyst estimate. It also flagged to investors in its quarterly results a subpoena it received last year from the U.S. Securities and Exchange Commission related to its procurement practices. Kraft Heinz said that as a result of an investigation with the help of an outside lawyer, it recorded a $25 million “increase to costs of products sold.”

Berkshire Hathaway’s investment declined from a valuation of about $15.7 billion to $12.9 billion as the stock plunged to $39.66 at 6:15 p.m. in New York. Thursday’s announcement marks the second time this year that a Berkshire holding has disclosed unfavorable news after the markets closed, hurting its stock. Apple Inc. trimmed its revenue outlook in January, which pummeled shareholders. That stock has since recovered.

Kraft Heinz will cut its quarterly dividend to 40 cents a share from 62.5 cents, helping it pay down debt more quickly and adjust to its smaller size after selling some businesses. The company had been paying out dividends at the highest ratio to earnings of its U.S. packaged-food peers.

https://www.bloomberg.com/news/articles/2019-02-21/kraft-heinz-slumps-on-sec-subpoena-15-4-billion-in-writedowns?srnd=premium
2   anonymous   2019 Feb 26, 12:35am  

Kraft Heinz Stock Falls Again Because There’s Plenty of Bad News

Kraft Heinz stock (ticker: KHC) slid again on Monday, building on Friday’s bitter slide, after Bernstein joined the numerous analysts who have downgraded the shares.

The back story. Kraft hasn’t been having a great year to begin with. The stock tumbled more than 8% after its previous earnings report in November fell short of expectations. Kraft’s bottom-line results not only missed, but the results showed it had sacrificed pricing for growth, and investors reacted negatively. The quarter showed that what used to be considered safe stocks just aren’t so safe anymore.

On Friday, it became clear that Kraft’s problems ran deeper than the staples slump. Not only did its fourth quarter and guidance disappoint, but the company also cut its dividend, took a $15.4 billion asset write-down related to its Kraft and Oscar Mayer brands, and disclosed that the Securities and Exchange Commission has been investigating its procurement division’s accounting practices since October 2018.

The company didn’t immediately respond to a request for comment Monday.

The plot twist. Not surprisingly, Kraft’s trouble led to steep stock declines and plenty of analyst downgrades for the shares. On Monday, Bernstein’s Alexia Howard added her voice to the chorus of caution, downgrading the stock to Market Perform and cutting $11 from her price target, to $50. She wrote that her bull thesis was undercut by high cost pressures in the fourth quarter, a problem Kraft warns will persist this year.

Howard was disappointed not only with the downbeat earnings and guidance, along with other problems, but worries that issues don’t bode well for Kraft’s ability to raise prices later this quarter—something investors clearly want to see. She also warns there is a lack of catalysts that can boost the stock’s valuation, despite how far it has fallen. (Likewise, Warren Buffett, who owns Kraft, said he doesn’t think the shares look particularly cheap despite their plunge.)

Moving forward. Howard writes that “the company's visibility into future financial performance is limited,” and without some bottom-line improvement, Kraft’s multiple will have little fuel to expand. Perhaps an even bigger issue: “It will take quite some time for management to rebuild credibility with investors.”

That seems to be an understatement.

It isn’t that Kraft doesn’t have a valuable portfolio of brands—after all Heinz ketchup is so dominant it has spawned listicles testifying to its irreplaceable taste. But consumer brands are being squeezed—both by changing tastes that favor fresh, organic alternatives to shelf-stable packaged goods and by shoppers choosing lower margin-store brand alternatives. Kraft may have the quality products to weather the storm, but management hasn’t done much to demonstrate it has the ability to navigate the new normal.

Kraft was down 1.8% to $34.34 in recent trading.

https://www.barrons.com/articles/spark-therapeutics-roche-buyout-51551117025?mod=hp_DAY_10
3   Booger   2019 Feb 26, 5:56am  

Why the fuck should I buy their overpriced ketchup when the stuff from Aldi tastes the same?

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