The company says this loss was due to continued declines in nutritional beverages in India
World's fifth-largest food and beverage company, Kraft Heinz Co, popular in India for its brands like Complan, Glucon-D, Nycil, Heinz and Sampriti Ghee, has recognised a non-cash impairment loss of $48 million (Rs 306 crore) in selling, general and administrative expenses for the three and six months ended July 1, 2017. The company said this loss was due to continued declines in nutritional beverages in India.
The food major employs about 2,500 people in India, and is headquartered in Mumbai with four branch offices in key metros and two large manufacturing facilities in Aligarh and Sitarganj.
Kraft Heinz Co tests indefinite-lived intangible assets for impairment at least annually in the second quarter or when a triggering event occurs. "We performed our 2017 annual impairment test as of April 2, 2017. As a result of our 2017 annual impairment test, we recognised a non-cash impairment loss of $48 million in SG&A for the three and six months ended July 1, 2017. This loss was due to continued declines in nutritional beverages in India. The loss was recorded in our Europe segment as the related trademark is owned by our Italian subsidiary," the company said in a filing with SEC.
Declines in nutritional beverages in India had affected the global foods major in the year ended December 31, 2016, as well.
An emailed query by DNA Money over the company's issues in the country and turnaround plan did not elicit any response.
The company in its recent filings has said that unfavourable volume/mix was primarily driven by lower shipments in India, following implementation of the goods and services tax (GST) and continued deterioration of nutritional beverages.
Global companies like Kraft Heinz usually recognise impairment when individual brand performance does not meet their projections. Additionally, if current assumptions and estimates, including projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors, are not met, or if valuation factors outside of their control change unfavourably, the estimated fair values of indefinite-lived intangible assets are affected. This leads to potential impairments.
WHAT'S IMPAIRMENT?
- Impairment is an accounting principle that describes a permanent reduction in the value of a company's asset, normally a fixed asset. When testing for impairment, the total profit, cash flow or other benefit that's expected to be generated by a specific asset is periodically compared with that same assets book value.
- If it's found that the book value of the asset exceeds the cash flow or benefit of the asset, the difference between the two is written off and the value of the asset declines on the company's balance sheet.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Kraft Heinz")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}