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Heinz Earnings Fall

Costs rise and its tax provision widens.
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Updated from 7:43 a.m. EST



third-quarter earnings fell 23% from a year ago as costs rose faster than sales and the company's tax rate blew up.

The stock fell 90 cents, or 2.4%, to $36.70 just after the market's open.

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Heinz earned $116.6 million, or 35 cents a share, in the quarter, compared with $152.4 million, or 43 cents a share, a year ago. The latest quarter had a loss of $16.6 million from discontinued operations, before which earnings were 39 cents a share. Before other items, Heinz earned 50 cents a share, missing estimates by 6 cents.

Sales rose 5.6% from a year ago to $2.19 billion, while the cost of sales rose 9% to $1.41 billion. Analysts expected sales of $2.36 billion in the most recent quarter.

Heinz's tax rate was 35.5% and its income tax expense was $85.9 million in the latest quarter, compared with 22.3% and $58.8 million a year ago. The company sees a full-year tax rate of 30% to 31%.

Heinz said fourth-quarter volume rose 2.9% from year ago, driven primarily by good results in the North American consumer products segment, as well as the Australian and U.K. businesses, with every operating segment posting year-on-year volume growth, although the growth was partially offset by declines in the European Frozen Food and the Italian infant nutrition businesses. Net pricing was "virtually flat," and foreign exchange translation rates decreased sales by 3.7%. Acquisitions, net of divestitures, increased sales by 6.6%.

Heinz put pro forma earnings for the current fiscal year at $2.10 to $2.16 a share and sees fiscal 2007 earnings at $2.22 to $2.23 a share on sales growth of 3% to 4%. Analysts surveyed by Thomson First Call were estimating $2.35 a share this year and $2.47 a share next year.