American food company Kraft Heinz Co. has reported a substantial slide in profits and revenue in the latest earnings report for the three months ended in September. This was the first report of the company after it became a single entity after the merger in July.

The results showed profits at the packaged-foods giant having slid in the latest quarter despite the cost control exercises of the company by way of budget cuts and job eliminations.

The food company is famous for the Oscar Mayer deli meat and Jell-O desserts. The report showed earnings for the quarter having fallen 3.4 percent to US$1.5 billion (AU$2.1 billion) because of the impact of stronger US dollar. Its comparable sales also fell 2 percent driven by weak demand for beverages and boxed dinners in the US, reported The Wall Street Journal.

According to The Wall Street Journal’s report, comparable sales, is a measure of combined revenue that strips out currency fluctuations and other one-time factors. The report from Market Watch also noted pro forma revenue fell 9 percent t0 $6.36 billion, but it was hurt by a 6.7 percentage point impact from currencies.

In that context, on an organic basis, under the closely-watched metric that filters out the impact of foreign exchange and divestitures, pro forma sales showed a decline of 2 percent, the report added.

"We are instituting new routines that represent the discipline, accountability and methodology for how we will operate,” Chief Executive Bernardo Hees said.

“The actions under the resulting plan will take us two years to be complete, but will make us more globally competitive and accelerate our future growth," he added.

Factory closures

Meanhile, the earnings call was preceded by Kraft Heinz announcing the closure of seven factories and cutting 2,600 jobs. The following factories to be closed are spread in the US and Canada.

  • Fullerton
  • San Leandro
  • Federalsburg
  • St. Marys, Canada
  • Campbell
  • Lehigh Valley
  • Madison

According to a CNBC report , the job cuts were announced by Michael Mullen, senior Vice president for corporate and government affairs. The new job cuts will account for almost 6 percent of its workforce and will be effected over the next two years.

Kraft and Heinz merged in a US$46 billion (AU$64.34 billion) deal in July 2015 to create North America's third biggest food company. With the unit closures, the new company is trying to save about US$1.5 billion (AU 2.1 billion) in operating costs by the end of 2017, reports BBC.

Share holding

In the company, Warren Buffett's Berkshire Hathaway owns 26.8 percent of shares. The company, co-headquartered in Chicago and Pittsburgh had announced chopping of 2,500 non-factory jobs soon after the merger.

Calling the new move “difficult but necessary,” Mullen said the closures would cut 2,600 positions from the company's North American factory-based employee population. The company has a total workforce of 44,100 employees.

The decision came after “an extensive review of the Kraft Heinz North American supply chain footprint, capabilities and capacity utilisation," the official said.

Notwithstanding the factory closures, Kraft Heinz will invest “hundreds of millions of dollars in improving capacity utilization and modernizing many of our facilities with the installation of state-of-the-art production lines," Mullen added in his statement.

For feedback/comments, contact the writer at feedback@ibtimes.com.au or let us know what you think below.

RELATED STORIES