›By Rick Stouffer PITTSBURGH TRIBUNE-REVIEW May 28, 2010
The H.J. Heinz Co. on Thursday reported record sales for the year ended April 28, and, while profit declined, the company boosted its annual dividend by more than 7 percent.
The maker of Heinz ketchup, Ore-Ida potatoes and Classico pasta sauce reported net income of $864.9 million, or $2.71 per share, down from $923.1 million, or $2.89 per share, in the previous year. The lower figure was caused by a 29 cents-per-share reduction caused by currency fluctuations and losses from the sale of small, discontinued operations, said Chief Financial Officer Art Winkleblack.
Sales jumped to $10.5 billion from slightly more than $10 billion in the year ended April 29, 2009.
Fourth quarter results were strong, with net income jumping 9.8 percent to $192.4 million, or 60 cents a share, from $175.1 million, or 55 cents a share one year ago. Sales rose 8.3 percent to $2.7 billion from $2.5 billion.
Confident that its sales and profit trends will continue growing, Heinz directors increased the quarterly dividend by 3 cents per share, to 45 cents from 42 cents, effective for shareholders of record on June 24. The annual dividend now stands at $1.80 a share, up 67 percent over the past seven years.
For fiscal 2011[ending Apr 2011], Heinz projects profit growth of 7 percent to 10 percent, with sales up 3 percent to 4 percent on a constant-currency basis.
"I like the 2011 outlook," said Dan Popowics, a fund manager at Fifth Third Management in Cincinnati, which has $18 billion under management including Heinz shares. "They have solid sales growth, gross margins are up, and they are investing behind their brands and new launches. Currency and the earnings drag are a headwind for the shares."
H.J. Heinz Co. CEO Bill Johnson and his executive team have seen the packaged food makers' future -- and it's located in China, Russia, India and Indonesia.
"Emerging markets are the growth engine for Heinz -- now and into the future," Johnson said Thursday.
"We see…emerging markets to be at least 20 percent of overall sales from continuing operations by 2013; 25 percent by 2016; and 35 percent to 40 percent of total sales long-term."
Johnson kicked off Pittsburgh-based Heinz's day-long investor and analyst day conference presentations by reviewing Heinz's financial results for its fiscal year 2010 and fourth quarter ended April 28, which were released yesterday, then previewed what the new year holds for the company.
For the year just ended, Heinz said sales in emerging markets totaled $1.6 billion, or 15 percent of its record $10.5 billion in sales worldwide, and comprised 100 percent of overall sales growth. That's a jump from 2005, when emerging market sales were 9 percent of total sales.
Heinz defines its emerging markets as Asia/Pacific, Rest of World and the European individual nations of Poland and Russia. Other regions and countries within these markets include Latin America, Indonesia, India, China and South Africa.
Overall for the year, sales outside the United States totaled 62 percent of total sales.
"In Asia/Pacific, sales for the year were $2 billion, the first time ever," said Chris Warmoth, executive vice president of Heinz Asia/Pacific. "We see plenty of opportunities in new product categories and in new emerging market countries."
Keys to growth in emerging markets, according to Johnson, are bigger increases in overseas economies, a rapidly growing middle class in foreign nations, Heinz making acquisitions, and leveraging Heinz's relationships with global fast-food chains such as McDonald's, Wendy's and Burger King.
Executives said the company plans a major upgrade this year to its Ore-Ida brand, which is on track to become a $1 billion business. It plans to build a new innovation center in Holland in 2012. And it will seek to increase ketchup sales in Germany and France.
Heinz intends to use its strong market share in prepared baby food and infant nutrition, plus a strong marketing push to sell infant nutrition products, its fastest-growing food category.
Infant formula in China has started and will reach 450 cities, as it spends $30 million, up from $11 million, to expand, Heinz managing director C.K. Lee told investors. The company's sales team in China will grow from 1,400 to 6,000 to reach a market worth $3 billion.
A similar infant formula product launch in Russia will start later in the year, Johnson said. Heinz reaches 100 million consumers in Russia compared to 25 million in 2008, and it sees Russia as a $500 million business by 2016.
"We're also looking at potential new markets, including the Philippines, Turkey, Vietnam and Brazil," Johnson said. "We see those countries as a natural fit for Heinz."
Heinz, recently opened its first office in Vietnam, Warmoth said.
Heinz intends to continue spending big money to market its products. For the just-concluded year, Heinz spent $438 million on marketing campaigns, up from $269 million four years ago. Johnson said marketing this fiscal year will be at or slightly above the $438 million figure.
"We're also going to significantly increase our involvement with social media, we see that as a way to reinforce our brand equity," Johnson said.‹
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