Kraft Heinz Co. wrote down the value of its Oscar Mayer cold cuts and Maxwell House coffee brands, and several other businesses, reflecting challenges for the food maker despite sales that have been higher of late due to the Covid-19 pandemic.
Kraft on Thursday said it recorded about $2.9 billion in goodwill impairment charges and asset impairment charges for the second quarter, resulting in a loss at the food manufacturer for the period. The charges were non-cash, Kraft said.
The company said it recorded impairment losses related to intangible assets worth $626 million for the Oscar Mayer unit, $140 million related to Maxwell House and $290 million related to seven other brands.
Goodwill impairments included $815 million connected to its business serving retailers in Canada and $655 million tied to its U.S. foodservice unit.
Kraft said the foodservice "impairments reflect the possibility of slightly lower longer-term growth rates in light of Covid-19 impacts."
Kraft reported a second-quarter loss of $1.65 billion, or $1.35 a share, compared with a profit of $449 million, or 37 cents a share, the year earlier.
|KHC||THE KRAFT HEINZ CO.||35.11||+0.43||+1.24%|
The company said excluding the impairment charges and after other adjustments, it earned a second-quarter profit of 80 cents a share, 15 cents more than forecasts from analysts.
Kraft also recorded billions in write-downs last year, moves that weighed on earnings at the company and reflected challenges it faced as consumers sought out fresher foods and items they perceived as healthier.
Overall revenue in the quarter ended June 27 rose to $6.65 billion from $6.41 billion for the second quarter last year and was ahead of the consensus estimate of $6.55 billion.
During the pandemic, consumers have been focused on bigger brands they know well, Kraft Chief Executive Miguel Patricio said in April.
Kraft reported Thursday that comparable sales--which strips out the effects of currency fluctuations, acquisitions and divestitures--rose 7.4% in the second quarter.
Higher demand for its food from retailer chains was stimulated by the pandemic and more than offset lower sales to foodservice operators, the company said.
Food manufacturers gained ground starting this spring when consumers filled up their pantries and refrigerators amid lockdowns to curtail the spread of the coronavirus.
There are signs that consumer pantry loading is easing. Nestle SA said Thursday sales slowed recently, though the maker of Nescafé coffee and DiGiorno pizza reported comparable sales were up 1.3% in the second quarter.