H.J. Heinz Company (NYSE:HNZ) today reported solid third-quarter results, with growth in sales, operating income, net income and earnings per share from continuing operations, excluding special items.
Third-Quarter Results - Continuing Operations
In the third quarter ended January 27, 2013, reported sales increased 2.0% to $2.93 billion. Organic sales grew 2.3% with net pricing up by 2% and volume up 0.3%. Divestitures reduced total sales by 0.3%. Foreign currency reduced sales by 0.1%.
The primary growth driver was once again Emerging Markets, which delivered organic sales growth of 17.6% (18.8% reported) led by Latin America, Indonesia and China. Emerging Markets represented 23% of total Company sales in the third quarter.Global Ketchup delivered organic sales growth of 4.2% (4.7% reported), driven by strong performance in Russia, Latin America and Canada. The Top 15 Brands achieved organic sales growth of 2.6% (2.2% reported) and generated more than 70% of the Company's total sales, driven by the Heinz ®, ABC ®, Quero ®, Classico ® and Master ® brands. The growth was negatively impacted by the Company's prior-year decision to exit T.G.I. Friday's ® frozen meals. Gross profit of $1.11 billion grew 7.1% and gross margin increased 170 basis points to 37.7%. Excluding charges for productivity initiatives in Fiscal 2012, gross profit increased 4.8% and gross margin increased 100 basis points, despite higher commodity costs, largely due to higher pricing and productivity improvements. Operating income of $468 million grew 9.7%. Excluding special items, operating income increased 4.3% to $480 million. The effective tax rate in this year's third quarter was 19.9% compared to 18.8% a year ago on a reported basis. Excluding special items, the effective tax rate decreased to 19.3% from 20.0% a year ago. Net income from continuing operations grew 6.9% to $308 million on a reported basis. Excluding special items, net income from continuing operations increased to $320 million, growth of 3.0%.