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Kraft Heinz withdraws fiscal FY'19 EBITDA guidance; shares tank to fresh lows

The Kraft Heinz Co. withdrew its guidance for its 2019 fiscal year on Aug. 8 as its stock tanked and plunged to a new low.

Shares of Kraft Heinz were about 13% lower at $26.87 in early afternoon trading after Kraft Heinz Executive Vice President and CFO David Knopf said the company was rescinding its outlook for full-year adjusted EBITDA of between $6.3 billion and $6.5 billion. Kraft first provided the guidance in February.

The lowest previous intraday price for the stock in the past 52 weeks was $26.96, according to S&P Global Market Intelligence. Company executives declined to provide new full-year 2019 forecasts for the company on a conference call with analysts.

Kraft Heinz CEO and interim President of the U.S. zone Miguel Patricio said "setting short-term targets publicly won't be productive" as he develops a new strategic plan for the company. The CEO said he plans to present the plan to Kraft Heinz's board of directors by the end of 2019, with a public version expected in early 2020. Knopf said the company expects to see "better year-on-year performance" on the top line and bottom line in the second half of the year versus the first half.

Kraft Heinz said it would write down $1.22 billion related to select underperforming businesses and the declining value of the company in results released before U.S. markets opened Aug. 8. Those charges came after $15.44 billion in write-downs in February.

Kraft Heinz disclosed in February that it was the subject of an SEC investigation into its procurement accounting practices. CFO Knopf told analysts Aug. 8 that the food company has since made changes to its internal controls, including having its procurement finance team report directly to its whole-company finance organization.

Patricio joined Kraft Heinz in June after more than a decade at Anheuser-Busch InBev SA. He said his focus will be on growing the company's sales and spending efficiently, not just reducing expenses in the coming quarters.

The CEO said he is looking at ways to use Kraft Heinz's existing investments more effectively, noting that the company has benefited from its zero-based budgeting approach, which involves justifying all expenses on a regular basis. He added that implementing the model came at the expense of developing the business in other ways.

"It's not just about cutting costs," Patricio told analysts during a call to discuss the company's first-half results. "It's becoming more about efficiency and making dollars already in our base work harder elsewhere."

Patricio declined to provide details on a range of topics during the call, from the company's outlook to its plans on divesting certain underperforming brands.

But Patricio did say that he sees opportunities to grow the company's top line. In the U.S., which accounts for about 70% of Kraft Heinz's sales, the company lacks products and marketing campaigns tailored to the fast-growing Hispanic population, Patricio said.

In China, where soy sauce represents a multibillion-dollar industry, Kraft Heinz's brands are growing at 8% annually, well above the entire company's net sales growth rate, Patricio said. But the company's products are distributed only in two of China's 26 provinces, and its portfolio does not include other types of locally popular condiments.

"I see it as a big opportunity," the CEO said. "It's a white space that we have to organize ourselves for growth."

The Aug. 8 call was the first since Patricio joined the company, as well as Kraft Heinz's first since February. In the nearly six months in between, the company restated some financial figures, including EPS, going back to 2016.