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Heinz 2nd-quarter profit falls

Heinz 2nd-quarter profit falls

November 18th, 2011 in News

PITTSBURGH (AP) - H.J. Heinz Co., the world's largest ketchup maker, said Friday its fiscal second-quarter net income fell almost 6 percent but adjusted results narrowly beat expectations as emerging markets remained strong and higher prices offset a volume decline.

Food makers have been raising prices to offset higher ingredient costs. Prices rose 4.4 percent during the quarter in total. But Heinz said it will offer lower priced products in the U.S. and Europe where the economy remains challenged.

New offerings in the U.S. will be priced at 99 cents to $1.99 and offer products in smaller sizes. For example, it plans to sell a 10-ounce Heinz Ketchup pouch for 99 cents and a 1-pound version of Ore-Ida French fries for $1.99.

Heinz has driven its growth for some time by focusing on emerging markets like India, China and Russia while consumers in developed markets have traded down to store brands as they cut spending.

"Overall, we saw a combination of continued strength in emerging markets, the U.K. and much of Europe, and mixed results in other developed markets, where consumer confidence fell to its lowest level in 30 years," said CEO William R. Johnson.

Australia and U.S. Foodservices, which serves restaurants, were the weakest spots during the quarter, he added.

Best sellers during the quarter included Heinz brand products, Complan nutritional beverages in India, ABC soy and chili sauces in Indonesia and T.G.I. Friday's frozen meals in the U.S. Total volume fell 2.9 percent during the quarter.

Net income for the three months ended Oct. 26 fell to $237 million, or 73 cents per share, from $251.4 million, or 78 cents per share last year.

Excluding one-time items related to productivity initiatives, its earnings totaled 81 cents per share. Analysts surveyed by FactSet expected 80 cents per share.

Revenue rose 8 percent to $2.83 billion from $2.61 billion, but that fell short of analyst expectations of $2.9 billion.

Global ketchup sales were strong, helped by higher prices up 9 percent during the quarter.

The Pittsburgh-based company reiterated its fiscal 2012 earnings guidance, excluding one-time items, of $3.24 to $3.32 per share. Analysts expect $3.34 per share.

Its shares slipped 32 cents to $52.50 in premarket trading.