Why Kraft Heinz Co (NASDAQ: KHC) stock is crashing

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Kraft Heinz Co (NASDAQ: KHC) stock nosedived over 28% on Feb 22nd, 2019 (as of 10:47 am GMT-5; Source: Google finance) after the company wrote down $15.4 billion on two of its most iconic brands, slashed its dividend and disclosed it received a subpoena from the Securities and Exchange Commission on its accounting policies and internal controls in October. The higher costs coupled with a $15.4 billion impairment charge on the company’s namesake Kraft and iconic Oscar Mayer brands led to Kraft reporting a net loss of $12.61 billion in the fourth quarter.

Further, KHC has cut its dividend to 40 cents per share, a 36 percent decrease from its previous quarterly dividend of 62.5 cents per share.

Moreover, Kraft has also disclosed the SEC subpoena is part of an investigation into its procurement and accounting policies. The company said it launched an internal investigation into the matter after receiving the subpoena. After its investigation, Kraft Heinz said it posted a $25 million increase to the cost of products sold

KHC in the fourth quarter of FY 18 has reported the adjusted earnings per share of 84 cents, missing the analysts’ estimates for the adjusted earnings per share of 93 cents. The company had reported the adjusted revenue growth of 0.7 percent to $6.89 billion in the fourth quarter of FY 18, missing the analysts’ estimates for revenue by 0.85%. This includes an unfavorable 2.2 percentage point impact from currency and a net 0.5 percentage point benefit from acquisitions and divestitures. Organic Net Sales increased 2.4 percent versus the year-ago period. Pricing was down 1.6 percentage points, as increased promotional activity and pricing to reflect lower key commodity costs in North America, particularly the United States, more than offset higher pricing in EMEA and Rest of World markets. Volume/mix increased 4.0 percentage points, driven by a combination of strong consumption gains in North America and condiments and sauces growth across Latin America, North America, and EMEA.

Additionally, the adjusted EBITDA decreased by 13.9 percent versus the year-ago period to $1.7 billion, including a negative 2.4 percentage point impact from currency.

In the United States, KHC will be launching a record level of innovation, improving base consumption, velocities and leveraging brands and go-to-market investments. In Canada, the priority is reignite consumption in peanut butter as well as sauces and condiments. In Europe and Rest of the World markets, whitespace initiatives will focus on driving incremental sauces consumption and opening new geographies.

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