Kraft Heinz, the food giant, whose products include Jell-O and Oscar Mayer meat, gave on Thursday a surprising amount of bad news that included a million dollar write-down signaling a fall in the value of some of the best-known brands.
In addition to the $ 15.4 billion write-down, Kraft Heinz said last year's application had been filed with the Securities and Exchange Commission for an investigation of the company's accounts and control. It also reported disappointing fourth-quarter earnings that suffered some analysts asking if the company's rigorous cost controls could be reversing.
Kraft's CEO, Bernardo Hees, said the company's earnings were short because it did not provide sufficient cost savings.
"For that we take full responsibility," he said Thursday to a conversation with investors and analysts.
The big write-down seems to come from a shift in how consumers eat, and emphasizes fresh food over processed products. The write-down reduced the value of the balance between the United States and Canada, and the Kraft and Oscar Mayer brands, the company said.
In 2015, Kraft and Heinz, two stalwarts of grocery retailers, merged into an agreement that combined the investments of 3G Capital, a Brazilian private investment group, and Warren E. Buffett's Berkshire Hathaway. Together, the two investment companies owned almost half of Kraft Heinz at the end of last year. Mr. Buffett resigned from the company's board last year.
But the company has struggled with both changing tastes of customers and with cutting costs. On the latter question, the SEC survey could add to investor problems.
Kraft Heinz said the regulator looked at "deals, side agreements and changes or modifications to the agreements with their suppliers". With external accounting and legal advisers, Kraft conducted a survey that led to a $ 25 million increase in expenses in the fourth quarter. The company said it should have recorded $ 25 million in earlier periods.
Kraft Chief Financial Officer, David H. Knopf, told the investor interview that the misinformation was not material to our current and previous annual accounts. " Kraft said it would make changes to reduce the chances of making similar accounting mistakes in the future and added that it continued to work with the Commission.
3G Capital is known to pursue lower costs on the companies it owns An analyst on Thursday pushed Mr. Hees about Kraft's belt tension had gone too far and now damaged some of the most prominent brands.
"We still strongly believe our model is working and has a lot of potential for the future," Hees said. 19659013]