Heinz 2Q profit falls 16 percent

AP News
Posted: Nov 24, 2009 4:55 PM

H.J. Heinz Co.'s says its business is thriving in emerging markets but the recession continued to drag down its U.S. and European sales during the second quarter as shoppers limited spending or chose lower-priced products.

"Even though the global recession appears to be abating, there's no question that consumers and customers remain intensely focused on value, which they are more often defining as price," said Heinz CEO Bill Johnson "Consumers in particular are looking for bargains wherever they shop for food and household items."

The food maker reported Tuesday that its quarterly profit fell 16 percent from last year, when the company's results were boosted by currency shifts. But it boosted its full-year guidance, saying it will invest heavily in market to spur growth in its sluggish markets.

Heinz earned $231.4 million, or 73 cents per share, for the quarter, down from $276.7 million, or 87 cents per share, a year earlier. The prior year's results included a gain of 18 cents per share related to currency hedging.

Revenue climbed 2.5 percent to $2.67 billion.

The results topped the forecast of analysts polled by Thomson Reuters, who predicted a profit of 69 cents per share on revenue of $2.63 billion. These estimates generally exclude one-time items.

But Heinz _ the maker of Ore-Ida french fries and other foods, as well as ketchup _ remained optimistic moving forward and raised its full year earnings expectations.

The company said it plans to invest heavily in marketing, increasing its spending by at least 15 percent this year, to spur sales growth in the sluggish markets and anticipates continued strength in emerging markets.

The company _ which is based in Pittsburgh but derives much of its business in foreign markets _ also expects to benefit from the dollar weakening.

Heinz increased its earnings from operations outlook to a range of $2.72 to $2.82 per share for fiscal 2010. Its prior guidance was for earnings between $2.60 and $2.70 per share.

Analysts expect a full-year profit of $2.75 per share.

Morningstar equity analyst Erin Swanson said the sluggish sales in the U.S. will be an ongoing concern for investors as Heinz has been more reticent to lower its prices in the tough economy than some of its competitors and it will soon be lapping some of the price increases it put in place last year.

The company also hinted at a number of new products in the pipeline but would not elaborate further on them. Swanson said it will be critical for Heinz to come up with innovation that really resonates with today's price-conscious consumer to stir some sales growth for itself.

Shares of the company rose 6 cents to close at $43.23 Tuesday after hitting a 52-week high of $43.70 earlier in the session.


AP Retail Writer Michelle Chapman contributed to this report from New York.