The Global Demographic Tailwind

[DewDiligence]

HNZ strong earnings for FY3Q10 are attributable to (among other things)
The Global Demographic Tailwind! Reading this PR, one can’t miss the
degree to which TGDT has become the company’s raison d’etre. (The
actual FY3Q10 earnings release is on 2/25/10.)

http://finance.yahoo.com/news/Heinz-Expects-to-Report-bw-1819279674.html?x=0&.v=1

›Heinz Expects to Report Third-Quarter EPS of Around 82 Cents from Continuing Operations; Company Raises Fiscal 2010 EPS Outlook to a Range of $2.82 to $2.85

Wednesday February 17, 2010, 4:06 pm EST

PITTSBURGH--(BUSINESS WIRE)--H.J. Heinz Company (NYSE: HNZ) expects to report strong third-quarter earnings per share of around 82 cents from continuing operations and is raising its Fiscal 2010 outlook for EPS from continuing operations to a range of $2.82 to $2.85, Heinz Chairman, President and CEO William R. Johnson announced today at the annual conference of the Consumer Analyst Group of New York (CAGNY).

…In a presentation today at the CAGNY conference in Boca Raton, Florida, Mr. Johnson said:

“On a continuing operations basis, Heinz expects to report approximately 3% growth in organic sales, almost 14% growth in operating income and very strong earnings per share of around 82 cents for the third quarter ended January 27, despite a higher tax rate. Importantly, the third quarter is expected to mark our 19th consecutive quarter of organic sales growth.”

Mr. Johnson said: “Our expected third-quarter results reflect dynamic growth in Emerging Markets and volume growth of around 4% in our U.S. Retail business and around 9% in the U.K. business, driven by robust marketing initiatives.”

He noted that “the third quarter is expected to show substantial improvement in margins, a more than 40% increase in marketing investments and exceptionally strong operating free cash flow of around $425 million, up more than 80% from a year ago.”

Mr. Johnson’s presentation focused on the state of the Packaged Foods industry and how “Heinz is more nimble, focused, and stronger than ever, and why it is, therefore, well-positioned for the long term in this changing and challenging environment.”

Here are other highlights of Mr. Johnson’s presentation today.

The State of the Packaged Foods Industry

Mr. Johnson said there are “four reasons why I believe the industry has a strong upside:

• First, the growth potential of Emerging Markets, where the ranks of new middle-class, brand-conscious consumers are increasing at a rapid rate;

• Second, the industry’s renewed focus on innovation and marketing in response to the challenge of store brands;

• Third, the opportunity to improve margins; and

• Finally, the ‘consolidation mood’ among manufacturers and customers.”

Heinz Dividend

Mr. Johnson said Heinz is “delivering very strong cash flow and, to that end, we expect to deliver a dividend increase for Fiscal 2011 [the FY ending Apr 2011] commensurate with our strong profit growth.”

Emerging Markets

Mr. Johnson said, “Emerging Markets represent a target-rich base of consumers who are likely to spend more and more of their income on branded packaged foods as they prosper.”

He said, “Emerging Markets are on track to deliver at least 20% of Heinz’s total sales by 2013, more than double their contribution five years ago and that is just the beginning. Heinz is well-positioned in Emerging Markets, with strong brands, talented local management, and localized manufacturing, supported by the advantage of global scale.”

Heinz Marketing Initiatives

Mr. Johnson discussed the Company’s increased marketing investments and new marketing initiatives that helped drive volume growth in the third-quarter, led by the U.S. Retail and U.K. businesses.

“We now anticipate that marketing spending will grow at least 20% this year (Fiscal 2010),” versus the Company's original projections of 7-10%, Mr. Johnson said.

A new marketing campaign in the U.K. called It has to be Heinz is “driving significant volume and market share growth while enhancing our iconic consumer equity,” Mr. Johnson said.

In the U.S., Heinz has launched a Consumer Value Program, initially focused on Heinz Ketchup and now expanding to Weight Watchers® Smart Ones®, Ore-Ida® and brands like Classico® and TGI Fridays®. Supported by increased marketing and innovation, “the early results for the program are encouraging with improving shares and volume trends,” Mr. Johnson said.

Heinz Ketchup

Referring to Heinz Ketchup, Mr. Johnson said, “Globally, Ketchup remains a significant growth opportunity.” He added, “We are turning our focus to markets where the penetration of Heinz® Ketchup has substantial room for growth like Germany, France and Sweden. Driving penetration in Europe is a big opportunity for Heinz.”

Infant/Nutrition

“I believe the greatest long-term opportunity for Heinz resides at the intersection of our highest-growth category, Infant/Nutrition, and our fast-growing Emerging Markets,” Mr. Johnson said. “Growing from a base of jarred foods and cereals, our Infant/Nutrition business has been expanding into the white space of Emerging Markets while extending our reach through up-aging into toddler foods, and down-aging into formula.”

Mr. Johnson said the Company plans to “launch Heinz infant formula in Russia and China, where we have great expectations.”

Private Label / Store Brands

“Let me say right here that the Private Label battle is far from over, but it is equally true that well-managed brands can still win as our recent U.K. results show,” Mr. Johnson said.

He added, “I continue to believe that the biggest casualties of the weakened economy will ultimately be tertiary brands with poor consumer equities. Strong brands or category leaders like Heinz that leverage consumer insights to drive innovative and successful new product development should win.”

Productivity Improvements

Mr. Johnson said, “We have established a goal of delivering better than $1 billion in incremental cost savings over the next five years through our global supply chain initiatives,” including the continued rollout of the Company’s Global Performance System and Project Keystone.

These global initiatives are “aimed at realizing economies of scale and reducing costs by leveraging people, process and technology across the global supply chain,” he added.

Industry Consolidation

Mr. Johnson said, “On the subject of industry consolidation, the industrial logic has never been more compelling. Ultimately, however, the goal is to win by creating value in the most efficient and effective manner possible, whether it be by organic growth, M&A, or transformative initiatives and for that reason, I don’t see consolidation as a necessity.”

Q3 Earnings Release

Heinz will host a conference call and Webcast for Securities Analysts and Media (listen only) to discuss the Company’s Third-Quarter Fiscal 2010 results and its Fiscal 2010 outlook at 8:30 a.m. Eastern time on Thursday, February 25, 2010.

The meeting will be hosted by:

• Art Winkleblack, Executive Vice President and Chief Financial Officer
• Ed McMenamin, Senior Vice President, Finance and Corporate Controller
• Margaret Nollen, Vice President, Investor Relations

The call and presentation slides also will be available to the general public in real-time on www.heinz.com.‹