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New-item sales help boost Heinz

| Wednesday, May 26, 2004

H.J. Heinz Co. said fourth-quarter earnings rose 92 percent, helped by lower costs and increased sales of low-carbohydrate ketchup and Ore-Ida Extra Crispy frozen potatoes.

Net income climbed to $196.5 million, or 55 cents a share, from $102.6 million, or 29 cents, a year earlier, when there were costs to sell businesses, the Pittsburgh-based company said. Sales in the quarter ended April 28 rose 6.3 percent to $2.33 billion, the biggest gain in more than a year.

Chief Executive William Johnson, 55, spent more on advertising to spur sales of new items such as Heinz One Carb Ketchup. Low-carbohydrate diets hurt sales of Smart Ones frozen entrees as the company reduced costs by eliminating Hot Bites snacks and slower-selling items.

"Sales of those new products helped overcome negatives in other lines," said Amy Bonkoski, who advises wealthy clients at Cleveland-based National City Corp., which owns 1.7 million Heinz shares among $25 billion in assets.

Heinz said it expects to earn $2.32 to $2.42 a share this fiscal year. It was expected to earn $2.38, the average estimate of 11 analysts surveyed by Thomson Financial. Excluding certain items, profit would have been 58 cents a share, matching analysts' estimate.

A year earlier, sales were $2.19 billion, and Heinz had $82.2 million in costs from spinning off its North American pet food, baby food, tuna and private-label soup businesses and then selling them to Del Monte Foods Co.

Sales fell 2.3 percent in the United States and Canada last quarter as the company cut prices of Smart Ones frozen entrees, Boston Market HomeStyle meals and Classico pasta sauces. Sales to restaurants and other institutions climbed 8.6 percent, spurred by low-carbohydrate versions of Heinz ketchup and higher sales of Dianne's frozen desserts.

"With Smart Ones, we are facing the same issue as everyone else is: low carbohydrates," Johnson told investors on a conference call. In an effort to revive frozen-foods sales, Heinz is introducing six new varieties of its Smart Ones Truth About Carbs line with recipes using fewer fats and carbohydrates and more protein.

The weaker U.S. dollar accounted for all of the 8.3 percent sales increase in Europe and most of the 16.7 percent gain in the Asia-Pacific region, said Heinz, which sells products in about 200 countries.

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