Shares in mustard and ketchup maker Kraft Heinz (NASDAQ:KHC) were pummeled on the last Friday of February, a day after the company cut its dividend and disclosed that it received a subpoena from the Securities and Exchange Commission in October.
KHC said Thursday it is lowering its quarterly dividend to 40 cents per share as it seeks to accelerate the "deleveraging process to provide greater balance sheet flexibility."
The processed food giant, which also reported fourth-quarter earnings and revenue that were sharply lower than estimates, said the subpoena is part of an investigation into its procurement accounting policies.
Kraft Heinz said it launched an internal investigation into the matter after receiving the subpoena. Following its investigation, Kraft Heinz said it posted a $25-million increase to the cost of products sold after determining it was "immaterial to the fourth quarter of 2018 and its previously reported 2018 and 2017 interim and year to date periods."
The company said it is cooperating fully with the SEC. Kraft Heinz also said it is improving internal controls and procedures to prevent something like this from recurring.
Kraft Heinz revealed the development in its fourth-quarter and full-year earnings release. The company said, however, that it does not expect this issue to be material to financial statements for this period or previous ones.
For the fourth quarter, Kraft Heinz reported earnings of 84 cents a share on $6.89 billion in revenue. Those results fell well short of Wall Street expectations in an analysts’ survey for earnings per share of 94 cents on revenue of $6.93 billion.
Indeed, shares of Kraft Heinz dropped $12.85, or 26.7%, to $35.34.
