The first big move by Kraft Heinz CEO Miguel Patricio was the blessing of two food giants, arguably the most important board members since taking the top job in July 2019.
On Tuesday at the company’s long-awaited Investor’s Day, Patricio revealed that Kraft would sell part of its cheese business to France’s Group Lactalis for $ 3.2 billion. The sale – reflecting Patricio’s efforts to recoup investment on the strong brand, cut costs and reduce debt – will hand over the group crafted cheese, cheese blocks, breaststone cheese and cracker barrel brands to Group Liverlis.
Patricio told Yahoo Finance’s The First Trade that Berkshire Hathaway’s Greg Abell and Tim Kennessy – whose job is to save Warren Buffett’s 26% investment in the cheese maker from under pressure – supported the deal.
“Look Berkshire Hathaway Greg Abell and Tim Kennessy have two board members who are very active board members and very important. They inspire me, they inspire me. They give me their advice, which is what you would expect from great board members. So this relationship has been very good during the 12 months that I am leading the company. He gave his support behind this transaction. And they have been supporting me from the beginning. “
Not bad for that type of support. Kraft Heinz shares rose 2% on Tuesday in response to the deal.
The former Anheuser-Busch marketing wizard officially took over as CEO of Kraft Heinz on July 4 last year. Patricio set fire to a house without question.
The company reduced investment in major brands by 3G Capital to meet aggressive operational profit targets. Top talent left the company. Buffett himself expressed displeasure at his investment – the stock has been down nearly 60% since Kraft’s merger with Heinz in July 2015 (Buffett joined the merger).
One of the last black eyes in February 2019, when Kraft Heinz took a $ 15.4 billion write-down on its natural cheese, Oscar Mayer cold cuts and Canadian retail businesses.
But Patricio has started to get some wins under his belt after an in-depth review of the business. In addition to the new cheese business sale, Patricio outlined a more streamlined business on Investor’s Day on Tuesday. He promised to boost marketing among the top brands by 30%, while cutting costs by $ 2 billion through 2024.
Investor Day should go a long way to restore confidence in Kraft Heinz’s future.
Meanwhile, the company’s top and bottom lines have gained tailwinds during the COVID-19 epidemic as homegrown consumers.
Kraft Heinz said organic sales were expected to increase by a mid-single digit percentage in the third quarter, not far from the 7.4% gain in the second quarter. Adjusted earnings before interest, taxes and depreciation are expected to improve by a high-single-digit percentage in the third quarter.
Brian Sozzi Is an editor-at-large and co-anchor First trade In Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi And on Linkedin.
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