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Sales decline at Heinz; company focuses on cost-cutting

| Tuesday, Aug. 12, 2014, 5:57 p.m.

Sales dropped 4 percent at H.J. Heinz Co. in the second quarter but profit increased because of aggressive cost-cutting by the investment firms that took Heinz private last year.

The Downtown-based food company reported sales of $2.73 billion in the 13 weeks ended June 29, compared with sales of $2.85 billion in the 13 weeks ended June 23, 2013.

The ketchup maker is “discontinuing unprofitable sales” and reducing expenses so that it can “increase investment in our brands and accelerate innovation,” according to a written statement from spokesman Michael Mullen. He did not specify how much of the sales decline was from eliminating unprofitable business.

Under ownership by Warren Buffett's Berkshire Hathaway and investment firm 3G Capital, which acquired Heinz for $28 billion in June 2013, expense reduction has become a major focus. Administrative expenses were down 16 percent in the quarter to $511.1 million, compared with $605.2 million last year.

The company laid off office workers in North America, including hundreds in Pittsburgh, and closed factories in the United States, Canada and Europe.

This year it offered remaining Pittsburgh employees the chance to accept a buyout and leave if they weren't happy with the corporate culture established by 3G.

Officials have declined to say how many workers accepted the offer.

As of June 29, Heinz said it eliminated 3,800 corporate positions across its global business, according to a Securities and Exchange Commission filing Tuesday that reported the second-quarter financial results. Previously, Heinz disclosed that 3,400 positions were eliminated as of Dec. 29. The company also has eliminated 1,600 factory jobs in North America.

Before the buyout offer, Heinz employed about 775 people in Pittsburgh. The company had 28,700 total employees at the end of 2013.

The cost-cutting boosted Heinz's bottom line. Net income was $126.7 million in the quarter, compared with a net loss of $123.9 million a year ago. The year-ago results included merger-related expenses of $200.2 million.

“Heinz remains on track to deliver our goals for 2014,” Mullen said. “We are committed to driving efficiencies that will strengthen our business.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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