Heinz profit dips as sales outside U.S. climb
Despite a jump in sales, ketchup-maker H.J. Heinz Co. said on Tuesday its quarterly profit declined 5.8 percent because of spending to close plants and increase productivity.
Sales in emerging markets like China, India, Russia and Brazil drove most of the Downtown company's increase in sales, which rose 14.9 percent to almost $2.85 billion for the three months ended July 27.
Emerging market sales ballooned 45 percent, said Chief Financial Officer Art Winkleblack during a conference call. Emerging markets represented a record 23 percent of sales, up from 18 percent a year ago and 17 percent in the fiscal fourth quarter.
Net income for the period was $226.1 million, or 70 cents a share, compared with $240.4 million, or 75 cents, a year earlier. Profit excluding costs related to factories and other productivity expenses totaled 78 cents, beating the 76 cents projected by analysts.
"Heinz exceeded our expectations in terms of sales in Europe and in emerging markets," said Ann Gurkin, an analyst at Davenport & Co., Richmond, Va. Sales in Europe grew more than 17 percent.
"We think that's sustaintable (because) they have made solid investments in those markets," said Gurkin.
CEO William Johnson is seeking to boost sales abroad to counter slowing growth in the United States as Heinz faces higher commodity costs. The company said it will raise prices in the coming months to help offset food inflation, which was about 8 percent in the first quarter.
Heinz also is looking to draw U.S. consumers who "are living paycheck to paycheck" with lower-priced, smaller packages of food, including Ore-Ida potatoes, Edward McMenamin, senior vice president of finance, told analysts.
Heinz made two acquisitions in emerging markets in the past 12 months. It bought a majority stake in the Brazilian food maker of the Quero brand of ketchup and other condiments whose distribution network Heinz is now using. It also acquired Foodstar, a soy sauce maker in China, where Heinz is launching new products.
Excluding the one-time charges, Heinz operating earnings grew 5.9 percent to $255 million in the first fiscal quarter. The company booked a pre-tax charge of $41 million related to closing a factory and other productivity initiatives. Heinz plans to eliminate up to 1,000 jobs globally in fiscal 2012.
Heinz also benefitted from higher currency values relative to the U.S. dollar "in almost all the markets we operate in," McMenamin said.
Heinz shares fell 60 cents, or 1.15 percent, to close at $51.44.
"Our strategy to accelerate growth in emerging markets and through acquisitions in countries with fast-growing populations helped Heinz deliver (sales) growth and solid operating results despite the economic downturn in developed markets," Johnson said in a statement.
Johnson said the company was on track to hit an operating earnings target of $3.24 to $3.32 a year in the fiscal year ending in April, excluding special charges of 35 cents a share to account for more investments in productivity.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- With Malkin out, Penguins fall to Flyers, 4-1
- Wines claimed to be toxic with arsenic won’t be pulled by state Liquor Control Board
- Jeannette teen ordered to stand trial in classmate’s slaying
- Authorities release name of Greensburg man who jumped off overpass onto Route 30
- Former Plum teacher says he warned district about possible inappropriate conduct
- Fear of being grounded keeps some pilots from revealing mental issues
- Former teachers convicted in Atlanta test scandal
- Greensburg Salem school board discusses stricter anti-nepotism policy
- Couple files lawsuit claiming Ruffsdale Gun Club contaminates soil, water
- Coach Jordano providing steady hand for Pitt baseball program
- Ligonier Township business will have to control grease