No. of Recommendations: 1
" In an effort to improve the company’s financial position and return to profitable growth, Kraft Heinz (KHC) has paused the execution of its separation plan.
“My number one priority is returning the business to profitable growth, which will require ensuring all resources are fully focused on the execution of our operating plan,” Kraft Heinz CEO Steve Cahillane said Wednesday. "As a result, we believe it is prudent to pause work related to the separation, and we will no longer incur related dis-synergies this year.”
Instead of pursuing a divestiture, the company will invest $600M in marketing, research and development, as well as “select pricing.”
Cahillane’s decision gained the support of Board Chairman John Cahill, who said the decision to pause the separation and fully focus the company’s resources towards growth “is the right move at this time.”
Shares are down 7% in Wednesday’s premarket trading.
This story is developing. Check for updates."
No. of Recommendations: 1
" Kraft Heinz’s (KHC) fourth quarter results reflected higher commodity costs and targeted price increases that undermined sales in certain categories, resulting in a significant erosion in the company’s unadjusted profit and compressed its profit margin.
Led by softer sales in North America, net sales were down 3.5% in the final quarter of the year to $6.35B, missing expectations by $20M. The 4.1 percentage point decline in volume/mix was primarily driven by declines in cold cuts, coffee, bacon, and its Ore-Ida frozen business.
Accordingly, softer sales and other charges contributed to an unadjusted profit of $0.55, down 69% from a year ago. This reflected a recognized $3.0B non-U.S. deferred tax asset and associated valuation allowance of $600M related to the transfer of certain businesses to a Netherlands subsidiary. Excluding these and other items, earnings declined 20% to a less than feared $0.67 per share, beating expectations by $0.06.
Adjusted gross profit margin decreased 130 basis points to 33.1%.
For FY26, Kraft Heinz (KHC) expects organic net sales to be down 1.5% to down 3.5%, which includes a ~100 basis point impact from SNAP headwinds. This will contribute to an adjusted profit of $1.98 to $2.10 per share, below the consensus estimate of $2.49.
The results, however, were eclipsed by the company’s announcement to pause its divestiture plan and invest $600M to return the business to profitable growth.
“Since joining the company, I have seen that the opportunity [to build meaningful shareholder value, better serve customers, and contemporize iconic brands] is larger than expected and that many of our challenges are fixable and within our control.” said Kraft Heinz CEO Steve Cahillane. “My number one priority is returning the business to profitable growth, which will require ensuring all resources are fully focused on the execution of our operating plan. As a result, we believe it is prudent to pause work related to the separation and we will no longer incur related dis-synergies this year.”
With the blessing of the board of directors, Kraft Heinz (KHC) announced plans to split into two separate companies last year, capitalizing on the growth in its condiments and boxed meals segment, while separating its stagnant Lunchables and Oscar Mayer brands. The split was expected to take place during the second half of 2026.
Although the board was behind the split, it was not wholly endorsed by the company’s largest shareholder and the architect of the original merger of the Kraft and Heinz businesses.
"If we are approached about selling our shares, we wouldn’t accept the block bid unless the same offer is made to other Kraft Heinz holders," Warren Buffett told CNBC. "It certainly didn't turn out to be a brilliant idea to put them together, but I don't think taking them apart will fix it."
The Kraft and Heinz businesses were joined in 2015 by Buffett’s Berkshire Hathaway (BRK.B) (BRK.A) and 3G Capital under the terms which gave Kraft shareholders a 49% stake in the combined company and Heinz shareholders a 51% stake, creating North America’s third-largest food and beverage company.
The KHC results and reaction by the stock to the split announcement are weighing on peers such as Campbell's Company (CPB), Post Holdings (POST), and General Mills (GIS)."
I wonder what Don Lemon thinks? ::))
No. of Recommendations: 1
Warren & Berkshire told them a year ago and millions of dollars ago that a split made no sense. The uncertainty and waste of time & resources looks pretty bad! It’s becoming comical. I imagine Greg may ultimately want to sell the position but Not at this price of $23.
No. of Recommendations: 17
I imagine Greg may ultimately want to sell the position but Not at this price of $23.
Kraft Heinz certainly isn't covering itself in glory. Like a bad smell coming from your shoe.
But on the other hand, it isn't in any immediate danger. The dividend seems covered currently and their pricing can probably keep up with inflation. So if you were able to be comfortable considering it a 6.5% inflation protected perpetual bond, it's not a bad place to have the firm's money. Emphasis on "if", but the right answer might just be "throw it in the corner and ignore it".
Unless a whopping great elephant comes along and you could redeploy the capital better, of course. For now it's still "too much capital, too few opportunities".
Jim
