Kraft Heinz Co.

is pausing work on its planned separation as new

chief executive

Steve Cahillane works to improve results.

“My number one priority is returning the business to profitable growth, which will require ensuring all resources are fully focused on the execution of our operating plan,” Cahillane said Wednesday in a press release that also reported earnings. “As a result, we believe it is prudent to pause work related to the separation and we will no longer incur related dis-synergies this year.”

Kraft Heinz shares fell as much as 5.3 per cent on Wednesday. The stock had gained 2.7 per cent this year, compared with a 1.4 per cent rise in the S&P 500 index.

Last year, Kraft Heinz said it planned to split into two companies to

separate its fastest-growing brands

,

including condiments

such as Heinz ketchup, and boxed meals, from its

slower-growing grocery staples

, such as Oscar Mayer deli meats and Lunchables. The company had said previously it expected to complete the split in the second half of this year.

But Cahillane, who took over the top role on Jan. 1, said he has found that the company’s “challenges are fixable and within our control.” Instead of proceeding with the split at this time, the company will invest US$600 million in marketing, research and development and “select pricing,” he said.

Cahillane’s move marks another twist in a saga dating back a decade, when Kraft Heinz completed a

US$46 billion merger

spearheaded by the former CEO of Berkshire Hathaway Inc., Warren Buffett. The deal hasn’t delivered for investors, with the stock falling by two-thirds since then. Buffett nevertheless was disappointed by the split, and Berkshire Hathaway indicated last month it was seeking to sell its 28 per cent stake in the packaged food company.

“Investors will view this negatively because it indicates that the businesses are not in strong enough condition to operate on a standalone basis, and it is uncertain when they will,” TD Cowen analyst Robert Moskow said in a note Wednesday.

Kraft Heinz board chairman John Cahill said he was confident that the “decision to pause the work related to the separation and fully focusing our resources in service of growth is the right move at this time.”

In September, the company said the goal of the planned split had been to siphon off

lagging grocery staples

into a new entity expected to generate reliable cash flow, while giving the company’s top-performing sauces and spreads more room to run.

Bloomberg.com

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