Charges included Oscar Mayer brand

Charges included Oscar Mayer brand

Kraft Heinz today (30 July) booked a fresh set of impairment charges alongside a set of half-year results that included higher sales and underlying earnings.

The Heinz ketchup and Planters nuts owner filed US$2.9m in impairment losses off the back of a review of its business and plans for growth.

Over 2019, Kraft Heinz ran up impairment charges of just shy of $1.2bn, which followed a further $15.4bn writedown in goodwill, which was booked with the company's results for 2018.

The fresh charges came after Kraft Heinz carried out its "annual impairment test" during the second quarter, which completed its "enterprise strategy and five-year operating plan". 

Kraft Heinz insisted the "overall estimated value for the business enterprise" had not "changed substantially" but added the "recalibration of future investments to align with opportunities for which the company sees greater potential for return has resulted in increases in fair value estimates for certain reporting units and intangible assets, and decreases in others".

The group has recorded non-cash goodwill impairment losses of approximately $1.8bn and non-cash intangible asset impairment losses of around  $1.1 billion in certain intangible assets.

The charges included goodwill impairment losses on four of reporting units: some $815m in Kraft Heinz's Canada Retail division, a further $655min its US foodservice arm, another $205m on its foodservice business in Canada, and $142m covering its EMEA East unit.

Kraft Heinz also recorded intangible asset impairment losses of $626m related to its Oscar Mayer brand, $140m on the Maxwell House brand and $290 million related to seven other, unnamed, brands.

In the six months to 27 June, Kraft Heinz grew its net sales on an organic basis by 6.9%. Sales grew in the US, Canada and from Kraft Heinz's third reporting unit for "international markets". In the second quarter, Kraft Heinz's sales were 7.4% higher on an organic basis.

Reported half-year net sales stood at $12.81bn, up 3.6% on the first six months of 2019.

The impairment charges hit Kraft Heinz's profits on a reported basis, with the Plasmon baby food owner booking a six-month operating loss of $569m and a net loss of $1.27bn.

However, the company provided a figure for first-half "adjusted EBITDA" of $3.2bn, which compared to $3.03bn a year earlier.

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