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Heinz 3Q profit slip as rising sales offset by higher tax rate, rising commodity costs

Heinz 3Q profit slip as rising sales offset by higher tax rate, rising commodity costs

H.J. Heinz Co., one of the world's largest food companies, said Tuesday its third-quarter profit edged slightly lower as a steeper tax rate and rising commodity costs offset sales growth fueled by increased marketing and higher prices.
The Pittsburgh-based maker of its namesake ketchup, Ore-Ida potatoes and Classico pasta sauces reported earnings of $218.5 million (euro146.9 million), or 68 cents per share, for the three months ended in January. In the same period last, when it had more shares outstanding, it earned $219 million (euro147.24 million), or 66 cents per share.
Sales jumped 14 percent to $2.61 billion (euro1.75 billion) from $2.30 billion (euro1.55 billion) last year.
The results exceeded Wall Street estimates. Analysts polled by Thomson Financial, on average, were looking for profit of 67 cents per share on sales of $2.58 billion (euro1.73 billion).
The company remains on track to achieve record full-year sales and per-share growth of 9 percent to 10 percent for the fiscal year, William R. Johnson, Heinz's CEO, said in a statement.
Heinz shares slipped 28 cents to $45.70 in midday trading.
The company said product innovation and a 16 percent increase in marketing spending drove its quarterly sales results. Favorable foreign exchange contributed to 5.3 percent of the growth.
The company faced continuing pressure from soaring commodity costs.
It also had a tax rate of 31.6 percent during the quarter compared with a rate of 26 percent a year earlier. Heinz anticipates a full-year tax rate of about 31 percent for the fiscal year ending April 30.
Heinz saw sales growth among Heinz-branded ketchup, soups, beans, baby food and toddler food; Classico sauces; Ore-Ida potatoes; Weight Watchers Smart Ones meals; and ABC soy sauce.
Emerging markets accounted for 23 percent of Heinz's sales growth, with the Asia/Pacific region showing a 27.4 percent gain with strong results in Australia, Indonesia, China and India.
Sixty percent of Heinz's sales revenue comes from outside the United States.
"Consumers across the globe are embracing our leading brands and innovative new products," Johnson said.
In a conference call with reporters and analysts, Heinz's chief financial officer, Art Winkleblack, said the company expected to finish the fiscal year well ahead of the goals outlined in a growth plan unveiled in June 2006.
He said Heinz would raise prices as necessary to cover most of its rising commodity costs.
Alexia Howard, an analyst with Sanford C. Bernstein & Co., said Heinz continued to perform solidly with strong sales in North America and emerging markets and despite a slight slowdown in Europe and its struggling food service business.
"The margins were somewhat disappointing in the sense that a lot of companies are under pressure right now," she said. "The commodities stepped up again this quarter. It's getting a lot tougher before it gets easier."
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On the Net:
http://www.heinz.com


Updated : 2021-03-02 23:02 GMT+08:00