Heinz Posts Profit Increase

Earnings grow 15% and sales 13% in its fiscal second quarter.
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Heinz

(HNZ)

lapped up fatter profits in the fiscal second quarter.

The Pittsburgh-based company, best known for its ubiquitous ketchup product, on Thursday posted earnings of $227 million, or 71 cents a share -- 15% higher than continuing-operations income it booked a year earlier. Analysts polled by Thomson Financial were looking for 67 cents a share.

Sales gained 13% year over year to $2.52 billion, likewise topping the $2.4 billion average estimate. Excluding foreign exchange, acquisitions and divestitures, the figure grew 8.1%.

But that had very little to do with the company's U.S. foodservice segment, which encompasses the ketchup, condiments and sauces with which Heinz is most readily identified. Those domestic sales were only fractionally higher, and the "disproportionate" impact of mounting commodity costs pressured the business' operating income down 13.5%.

Far better ketchup sales in Europe, however, pushed that product's worldwide growth figure to 5%, and all other international results ramped up substantially. Likewise for the company's North American consumer products segment, with products such as frozen dinners, which currently constitutes a larger chunk of its overall revenue than does the U.S. foodservice business.

In a press release, Chief Executive William Johnson said Heinz is managing commodity inflation with "faster sales growth, strong net pricing, productivity gains, and currency tailwinds resulting from our unique international scale."

One of the most impressive showings was in the company's infant-food products, sales of which soared 26.1% thanks to robust growth in Italy and China. And revenue from emerging markets, such as China, leapt 24%.

Heinz also said sales from its top 15 brands -- which as of mid-2007 generated nearly 70% of its total sales -- swelled 14%.

Encouraged by this "strong momentum," the company lifted the top end of its fiscal 2008 guidance by 2 cents, which resets the range at $2.54 to $2.62 a share. Wall Street is looking for $2.61 a share.

Heinz shares were recently adding 41 cents, or 0.9%, to $47.60.