Kraft Heinz shares fall 28 percent after writedown, dividend cut

Warren Buffett swallowed a $4 billion loss from Kraft Heinz in half a day

Warren Buffett swallowed a $4 billion loss from Kraft Heinz in half a day

Ketchup-maker Heinz merged with Kraft in 2015 in a deal engineered by 3G.

"Kraft Heinz results confirmed all our worst fears - plus more", Guggenheim Partners analyst Laurent Grandet said in a note.

Kraft Heinz shares fell to a record low on a slew of bad news, mainly centering on a multibillion-dollar write-down, which had investors wondering if years of rigorous cost cuts came at the expense of losing the value of its marquee Kraft and Oscar Mayer brands.

Kraft Heinz said it began an internal investigation in the fourth quarter and does not expect the matters to be material to the current period or any prior period financial statements. The trend hasn't been good for some of Kraft Heinz' standbys like Jell-O and Kool-Aid and Oscar Mayer hot dogs.

But the strategy apparently didn't work as planned at Kraft Heinz.

"The company continues to cooperate fully with the US Securities and Exchange Commission", it said.

On Friday afternoon, shares of Kraft Heinz traded at $34.87, down more than 27% from Thursday's closing price of $48.11. Since Unilever rebuffed the proposal, though, the Buffett-backed company has been on a steady decline.

"We have been bullish on KHC for its role as a likely consolidator in packaged food, but now believe we likely were overly optimistic in both its likelihood of getting a sizable deal done and of the quality of the growth profile for any ensuing company", Piper Jaffray analyst Michael Lavery said in a client note Friday. The writedown reported late Thursday, essentially a charge to reduce the goodwill value of its biggest-name trademarks, was more proof that the company has not managed its brands well, Shea said.

In addition to lower-than-expected earnings, the company disclosed it had been subpoenaed by the U.S. Securities and Exchange Commission in October, related to an investigation into its accounting policies, procedures and internal controls related to procurement.

For the quarter ended December 29, Kraft had a net loss of $12.6 billion.

As for the SEC investigation, Kraft Heinz said the subpoena prompted it to launch its own review, which resulted in a $25 million charge for expenses that should have been accounted for previously. There have also been rumors it could look outside the food space in order to diversify its portfolio and grow into developing markets with the acquisition of a consumer products company.

"It is more than fair to ask if any fundamental value for 3G [Capital] has been created since the Kraft Heinz merger", Goldman wrote.

Kraft Heinz's biggest investor, the Warren Buffett-led Berkshire Hathaway, is seeing a substantial loss as shares were poised to open at a record low on Friday. "It's hard to take share away from Philadelphia Cream Cheese". "You are in an industry that has very significant structural headwinds and one of the things you can do to try to offset that is to put some of these companies together".

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