Kraft Heinz Stock Drops After Announcement Of Big Loss, SEC Probe

Kraft Heinz stock dropped 28 percent Friday after the company announced it was being investigated by the Securities and Exchange Commission.
Kraft Heinz stock dropped 28 percent Friday after the company announced it was being investigated by the Securities and Exchange Commission.
Arnd Wiegmann/Reuters

When Heinz and Kraft merged in 2015, it created one of the world's largest food and beverage companies, encompassing a who's who of brands including their namesakes as well as Oscar Mayer, Jell-O, Maxwell House and Planters.

But all is not well with Kraft Heinz Co.

On Friday, its stock dropped 28 percent after the company announced a $12.6 billion loss for the fourth quarter (compared with an $8 billion profit a year earlier) as it saw higher operating costs and wrote down the value of the Kraft and Oscar Mayer names by $15.4 billion. And it said the Securities and Exchange Commission is investigating the company's "accounting policies, procedures, and internal controls" related to vendor agreements.

After receiving a subpoena from the SEC for documents, Kraft Heinz said the company launched an investigation into its work with suppliers and other vendors. As a result of that investigation, it said it recorded a $25 million increase to the cost of its products. Kraft Heinz said it is making "certain improvements to its internal controls to mitigate the likelihood of this occurring in the future and has taken other remedial measures. The Company continues to cooperate fully with the U.S. Securities and Exchange Commission."

The bad news didn't stop with the SEC probe. The company also announced a 36 percent cut in its quarterly dividend.

Warren Buffett's Berkshire Hathaway is Kraft Heinz's largest shareholder. In 2015, Buffett teamed up with 3G Capital, a Brazilian-American hedge fund, to take majority control of Kraft Heinz. Berkshire stock was down nearly 2 percent Friday morning.

Heinz Kraft and other big name brands have been under pressure to cut costs as consumer tastes have been changing. Many are turning to cheaper store brands or are doing their shopping online.

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