Kraft Heinz will sell a dairy brand. What will happen with shares?



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American producer of packaged food products Kraft Heinz will continue selling off its brands as part of a full-scale reorganization of the business. Now the food concern is reducing its assets in order to reduce the debt burden. Kraft should restructure about $ 3billion of debt in 2020.

Now the food conglomerate is considering selling its oldest business, Breakston’s, which produces cottage cheese, butter and sour cream. The assessment of the business with the possibility of its further sale will Royal Bank of Canada. The food conglomerate can get about $400 million for its curd-sour brand.

Last year, Kraft Heinz announced the sale of its Canadian natural cheese company to the Italian dairy group Parmalat for $1.23 billion. The sale, as well as lower expectations for growth in sales of cheese business, led to a depreciation of $4 in February. $1 billion for the Kraft brand.

The problem in the dairy industry is only one of the many problems that the food concern has recently encountered. At the end of February, Kraft Heinz announced that it did not meet expectations of profit, cut dividends and write off $ 15.4 billion. Then the concern’s shares collapsed by 25%.

But there is also good news. CFRA analysts believe that shares in the food conglomerate will cost $46 at the end of the year. This is almost 44% higher than the current price of the company's securities.

Experts expect revenue growth in 2019 to be no more than 1% due to continuing problems in North America. This region accounts for up to 78% of the company's sales.

Kraft Heinz will retain its leadership in the pre-packaged food segment. However, the company, as well as its competitors, will experience the negative effect of rising transportation costs, rising prices for raw materials and unfavourable exchange rate differences. Therefore, experts expect EBITDA margin to decline from 27% in 2018 to 24.6% in 2019th. The gross margin will also decrease from 34.1% in 2018 to 33.5% in the 2019th.

 The information above cannot be considered as an investment advice and past results do not indicate future performance.

 **Investors should have experience and understand the risks of losing all the initial investment.

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