Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A) posted a $25.4 billion loss in the fourth quarter in a rare net loss for the company. According to a statement from the company, the loss was driven by big price declines in Berkshire’s investment portfolio. One investment in particular, in Kraft Heinz Co. (NASDAQ: KHC), pulled the conglomerate’s results down considerably.
Berkshire partnered with private equity firm 3G Capital to finance H.J. Heinz Company’s merger with Kraft Foods Group in 2015. Kraft Heinz, one of Berkshire’s largest holdings, recently reported earnings and revenue sharply lower than estimates, sending its stock down about 30 percent. The drop reduced the value of Berkshire’s stake by more than $4 billion.
In its statement, the company said it took a $3 billion write down last year “arising almost entirely from our equity interest in Kraft Heinz.” The stake had added $2.9 billion in earnings to the company the previous year. Despite the fourth quarter loss, the investment company made $4 billion in profit for 2018. Its overall portfolio is valued at $173 billion.
The troubles at Kraft Heinz do not appear to be dissipating anytime soon. Its sales are stagnating and it has a portfolio of products that are losing favor with consumers. Any changes to its product lineup is likely to come at the expense of quarterly earnings. Investors have just shown how they will respond.
Kraft Heinz also recently revealed that it is the subject of an U.S. Securities and Exchange Commission investigation. Details about the investigation are vague, with Kraft saying that it involves its “accounting policies, procedures, and internal controls.” More details about the investigation will be released as they become available.