Heinz 2Q Profit Rises, Sales Gain

H.J. Heinz Co., one of the world's largest food companies, said Thursday its second-quarter profit climbed almost 19 percent as strong sales in Europe and emerging markets helped offset rising commodity costs.

The Pittsburgh-based maker of ketchup and sauces also raised the top end of its projected full-year earnings range.

Profit rose to $227 million, or 71 cents per share, for the three months ended in October, from $191.6 million, or 57 cents per share, during the same period last year, the company said.

Sales jumped 13 percent, to $2.52 billion from $2.23 billion.

In a conference call with analysts and reporters, William R. Johnson, Heinz's chief executive, said the company hoped to sustain its momentum through core portfolio and emerging market growth.

"Heinz is executing extremely well, which is not only contributing to our strong growth, but also helping us overcome the significant commodity inflation the food industry is experiencing," he said.

Johnson said Heinz's revenue line was so healthy the company was looking to add capacity in a number of areas.

The results were well ahead of the 67 cents per share on revenue of $2.4 billion that Wall Street analysts had been expecting, according to a survey by Thomson Financial.

Shares of Heinz rose 41 cents to $47.60 in afternoon trading Thursday.

Heinz has been restructuring its business to focus mainly on ketchup and sauces, meals and snacks and infant nutrition. The company said Thursday it had increased its quarterly marketing spending by 23 percent.

Sales of Heinz's top 15 brands jumped by 14 percent, the company said, with infant nutrition gaining 26 percent. Heinz products include its namesake ketchup, Ore-Ida potato products, Smart Ones meals and Classico pasta sauces, among others.

Global ketchup sales rose 5 percent, driven by strong results in Europe, while soup sales grew 18 percent.

Sales in emerging markets _ including Russia, India, China, Indonesia, Poland and countries in Latin America _ increased 24 percent, fueled by new products and packaging improvements.

In China, sales of Long Fong frozen dumplings, rice balls, appetizers and hot pot soups grew more than 25 percent. Infant nutrition product sales soared more than 40 percent there.

During the quarter, Heinz said it raised prices an average of 2.6 percent and continued to improve productivity. Favorable foreign exchange rates offset some commodity costs, according to a company statement.

Like other food makers, Heinz has faced soaring commodity costs for dairy, sweeteners and oils. It has raised prices this year as a result. Heinz executives have said the company is witnessing its worst commodity inflation in years.

In August, Heinz shareholders re-elected activist investor Nelson Peltz and an ally, former Snapple executive Michael F. Weinstein, to the company's board of directors. Peltz and Weinstein won seats a year earlier after a lengthy proxy battle.

In September, Peltz increased his stake in the company to 6 percent, or about 19 million shares, from about 5.6 percent.

Heinz was expecting full-year earnings of $2.54 to $2.60 per share, but on Thursday raised the top end of the range to $2.62 per share. It said it is on track to post record full-year sales.

For the first half of the fiscal year, Heinz reported earnings of $432.3 million, or $1.34 a share, versus $385.7 million, or $1.15 a share, a year ago. Six-month revenue rose to $4.77 billion from $4.29 billion.

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H.J. Heinz Co.: http://www.heinz.com