Wires

UPDATE 3-Kraft Heinz takes $666 million charge, misses sales expectations

Richa Naidu

(Adds full-year outlook, details; updates shares)

CHICAGO, Feb 13 (Reuters) - Kraft Heinz Co on Thursday missed quarterly sales estimates, forecast lower full-year core earnings, and wrote down the value of some businesses - including coffee brand Maxwell House - by $666 million.

Shares in Kraft Heinz, which makes Philadelphia cream cheese and Planters peanuts, were down 7.7% in morning trading.

Kraft Heinz's sales have been muted for fourteen straight quarters as consumers turn to cheaper private label brands, online shopping and fashionable, non-processed and organic food. Thursday's results mark the one-year anniversary of Kraft Heinz reporting a surprise loss and taking a $15.4 billion writedown of key brands - a move that rocked the consumer goods industry and led to the ousting of former Chief Executive Bernardo Hees and several other executives.

"Our turnaround will take time, but we expect to make significant progress in 2020," CEO Miguel Patricio said. The industry veteran was recruited last year to stabilize the struggling company.

The company said on a post-earnings call that currency fluctuations, divestitures, supply chain costs and bonuses related to the turnaround would likely lead to a decline of about $460 million in full-year earnings before interest, taxes, depreciation and amortization (EBITDA).

Kraft Heinz took a $453 million charge in the fourth quarter ended Dec. 28 due to lower goodwill in businesses in Australia, New Zealand and Latin America. It also wrote down the value of its Maxwell House brand by about $213 million. According to media reports, Kraft Heinz hired investment bankers last year to review options - including a potential sale - for the nearly 130-year-old coffee brand.

The company, which makes Oscar Mayer cold-cuts and Kraft cheese slices, said fourth-quarter sales declined 5.1% due to lower U.S. demand for cheese, coffee, bacon and other products. The company said this was prompted by higher costs for key raw materials - including dairy and meat - that forced Kraft Heinz to raise U.S. prices by 3.1 percentage points. The company also cut down promotions deemed ineffective.

Net earnings were $183 million, or 15 cents per share, compared with a loss of $12.63 billion, or $10.30 cents per share, the year earlier.

At the time, the company also slashed its dividend by 36% and disclosed an investigation into its accounting practices by the U.S. Securities and Exchange Commission. In the year since, Kraft Heinz has announced further writedowns, scrapped its full-year adjusted earnings outlook, and is still under SEC investigation.

Brazilian private equity firm 3G and billionaire Warren Buffett engineered the merger of H.J. Heinz and Kraft Foods in 2015 - the value of Kraft Heinz's stock has sunk about 60% since the deal. Under top executives installed by 3G, the company made aggressive cost cuts that critics say ate into investment in brands and marketing.

The Chicago-based company, which also makes Philadelphia cream cheese and Jell-O, said sales fell to $6.54 billion from $6.89 billion, short of the analyst estimate of $6.61 billion. Excluding items, the company earned 72 cents a share, beating analyst expectations of 68 cents per share according to Refinitiv. Wells Fargo analyst John Baumgartner said the beat was against very low market expectations. (Reporting by Richa Naidu; editing by Jason Neely and Steve Orlofsky)