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Nov 1, 2018

Kraft Heinz misses estimates as higher costs weigh

Kraft Singles

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Kraft Heinz Co. (KHC.O) shares sank in late trading on Thursday after the packaged-food company posted quarterly profit that missed estimates, dragged down by sluggish sales growth and higher costs.

  • Earnings per share were 78 cents in the quarter, excluding some items, trailing the average analysts’ estimate of 81 cents.

Key Insights

  • Adjusted EBITDA in the key U.S. region was down 16 per cent as Kraft faced higher overhead costs and increased spending on logistics. Known as aggressive cost-cutters, the management has been able to boost profit despite sluggish sales. But it has run into trouble amid a trucker shortage in the U.S. that has driven up freight costs.
  • The company has completed the expense reductions it targeted when it was created in 2015, raising pressure to make a deal. Investors have been hungry for an acquisition since Kraft’s bid for Unilever was rejected in 2017. Kraft’s stock has dipped more than 40 per cent since that deal collapsed.
  • Changing consumer tastes have been hard on the company and its competitors in the U.S. packaged food industry. The Kraft Heinz portfolio of traditional brands includes Oscar Mayer, Maxwell House and Capri Sun.

Market Reaction

  • The shares fell as much as 9.2 per cent in late trading to US$51.03. The stock had dropped 28 per cent this year through Thursday’s close, underperforming consumer peers.