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H. J. Heinz Management Discusses Q1 2013 Results - Earnings Call Transcript

Stocks in this article: HNZ

In the quarter, we delivered robust organic sales growth, again, driven by our trio of growth engines: Emerging Markets, Global Ketchup and our Top 15 brands; year-over-year gross margin improvement for the first time in 5 quarters despite the tough economic environment and higher commodity costs; continued investment in the business including marketing, Project Keystone and more boots on the ground in Emerging Markets and strong constant currency profit growth driven by higher operating income and a lower tax rate. On a reported basis, results were unfavorably impacted by foreign exchange. So overall, we're off to a very good start for the new year.

On a constant currency basis, net sales grew by more than 4%, operating income increased 5% and EPS rose more than 15% on a like-for-like basis, which excludes the impact of last year's charges for productivity initiatives. In short, strong results in a very challenging environment.

Importantly, Q1 marked our 29th consecutive quarter of organic sales growth at nearly 5%. I think this is an important indicator of our focus on growth, the strength of our portfolio, the effectiveness of our commercial programs and consistency of performance. Our trio of growth engines, Emerging Markets, Global Ketchup and our Top 15 brands, once again drove our organic sales growth. I want to briefly hit some highlights in each of these areas.

Our Emerging Markets posted organic sales growth of almost 20%. The growth was led by Quero in Brazil, Foodstar in China and Heinz in Russia. Importantly, in Russia, Heinz is now the #1 brand in both ketchup and total condiments. We also had strong organic sales growth in Indonesia and India. Overall, Emerging Markets represented a record 26% of Heinz sales in Q1, which is our high watermark in the year for Emerging Market mix given the timing of Ramadan.

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