Kraft Heinz boosted by retail in second quarter but takes $3bn write-down

Kraft Heinz has posted net sales growth of 3.8% to $6.65 billion in Q2, but taken a nearly $3 billion write-down on the value of several business units and brands.

The Philadelphia cream cheese owner was positively impacted by rising retail demand for at-home consumption, amid stay-home restrictions to curb the spread of coronavirus.

As a result, organic net sales, which exclude the impact of divestitures and currency, increased 7.4%.

However, its US and Canadian food service businesses, which provide sauces and other products to restaurants, offices and school cafeterias, were adversely affected by lockdowns.

These units were included in a nearly $1.8 billion write-down taken during Q2, according to Reuters. The consumer goods giant also took nearly $1.1 billion in total off the value of Oscar Mayer, Maxwell House and seven other brands.

As a result of these impairment charges, Kraft Heinz reported a Q2 net loss attributable to common shareholders of $1.65 billion, versus a profit of $449 million in the year-ago quarter.

In the US, net sales were up 8.5% year-over-year to $4.9 billion as retail consumption rose across nearly all categories and promotional activity was down on the previous year.

International net sales decreased 0.7% versus Q2 2019, to $1.3 billion, as a negative impact from currency more than offset organic net sales growth of 5.5%.

In the quarter ended 27 June, the company’s Canada segment saw net sales decrease by 23.9% year-over-year to $426 million.

According to Kraft Heinz, this decline primarily reflected the impact of the divestiture of its Canadian natural cheese business. However, on an organic basis net sales increased 2% despite a negative impact from exiting the McCafé licensing agreement.

“Our response to the ongoing Covid-19 pandemic reflects the hard work and dedication of our remarkable employees around the world,” said Kraft Heinz CEO Miguel Patricio.

“We are now starting to realise the benefits of agility and scale, while implementing changes across the company to further drive agility, both internally and in how we go to market.

“We believe this will be the key to returning the company to sustainable long-term growth and profitability, and we look forward to providing greater details on these initiatives during our investor day in September.”