HJ Heinz Q1 Profit Declines On Currency Fluctuations - Update
8/20/2009 11:34 AM ET
(RTTNews) - Packaged food products maker HJ Heinz Co. (HNZ: News ) Thursday reported a decline in profit for the first quarter, as unfavorable currency effects drove down sales. The company also backed its full-year earnings per share and sales growth outlook.
First-quarter net income attributable to company was $212.56 million or $0.67 per share, compared with $228.96 million or $0.72 per share last year.
Analysts polled by Thomson Reuters expected the company to report earnings of $0.62 per share for the quarter. Analysts' estimates typically exclude special items.
Sales for the quarter totaled $2.47 billion, lower than $2.58 billion in the prior-year quarter. Ten analysts had a consensus revenue estimate of $2.44 billion for the quarter.
HJ Heinz said that the impact of currency reduced sales by 9%, and both net income and earnings per share by 17%. On a constant currency basis, Heinz achieved 4.5% sales growth. Carryover pricing and tight cost controls were key factors in driving higher constant currency profit, the company noted.
According to the company, the results reflected 14% organic sales growth in Emerging Markets, led by Latin America, India and Russia, 2.2% organic sales growth in top 15 brands and the positive impact of carryover pricing, despite a tough economic environment. Emerging Markets generated approximately 16% of the company's total sales, led by higher sales of Complan and Glucon-D nutritional beverages in India, and higher volume and pricing in infant/nutrition products and ketchup in both Latin America and Russia.
Solid performances in North America and Europe, significantly higher profit in the U.S. Foodservice business, and disciplined cost management also contributed to the results. While net pricing increased 6%, total volume declined 4.3%, HJ Heinz noted.
Further, the company said that its top 15 brands globally generated approximately 70% of its reported sales, led by the Heinz brand, Ore-Ida potatoes and T.G.I. Friday's snacks and skillet meals.
As anticipated, the costs for key commodities such as tomatoes, tin plate and potatoes rose during the quarter. Overall, the company's net input costs were up 6% in the first quarter.
By geography, North American Consumer Products reported sales of $727.24 million, down 1.9% from $741.18 million a year ago. Unfavorable Canadian exchange translation rates decreased sales by 2.4%. Organic sales growth was 0.5%. Net prices were up 5.4%, reflecting the company's focus on full-price sales and the carryover impact of price increases taken across the majority of the product portfolio in fiscal 2009. Volume decreased 4.9%.
(RTTNews) - Europe reported quarterly sales of $788.84 million, down 14.1% from $918.19 million in the previous year, reflecting the carryover impact of price increases taken in fiscal 2009, as well as reduced promotional activity on Heinz Ketchup, beans, soup and frozen products in the UK. Unfavorable foreign exchange translation rates decreased sales by 17.1%. Organic sales in Europe were up 0.8%. Volume decreased 4.3% in the quarter.
Heinz Asia/Pacific generated sales of $469.23 million, up 2.5% from last year's $457.81 million. Organic sales increased 1.9% for the quarter. While pricing rose 4.1%, volume decreased 2.2%, largely reflecting softness in Australia. Unfavorable exchange translation rates decreased sales by 12%.
U.S. Foodservice segment's sales declined to $346.50 million from $353.41 million in the previous year. Pricing increased sales by 5.6%, largely due to the carryover impact of prior year price increases as well as decreased promotional spending on portion control condiments. Meanwhile, volume was down 6%, reflecting lower U.S. restaurant traffic and SKU reductions. Divestitures reduced sales by 1.6%.
Rest of World sales totaled $136.11 million, higher than $112.61 million in the same quarter last year. Higher pricing increased sales by 26.2% to cover inflation. Volume was down 3.3%, despite increases in ketchup and baby food in Latin America. Foreign exchange translation rates decreased sales by 3.1%.
Among others in the sector, Campbell Soup Co. (CPB: News ) is slated to announce its fourth-quarter results on September 11. Analysts are looking for earnings of $0.26 per share on revenues of $1.52 billion.
Another peer, ConAgra Foods, Inc., (CAG: News ) has reported a 13% decline in its profit for the fourth quarter compared with last year, which included a gain from the sale of the company's commodity trading unit. The Omaha, Nebraska-based company's net income declined to $174.7 million or $0.39 per share from $201.3 million or $0.41 per share, in the prior-year quarter.
Looking ahead, for fiscal 2010, Heinz continues to expect earnings per share growth in a range of 5%-8% and sales growth in a range of 4%-6% on a constant currency basis. Analysts expect the company to report earnings of $2.69 per share on revenues of $10.35 billion for fiscal 2010.
HNZ is trading at $38.72, up $0.78, on a volume of 1.54 million shares.
