Heinz sees annual profit growth

February 15, 2008 9:56:01 AM PST
H.J. Heinz Co., one of the world's largest food companies, said Friday it anticipates earnings for fiscal 2008 to exceed results for the previous year as sales continue to grow.The Pittsburgh-based company narrowed its profit forecast to the top end of an earlier projected range of $2.60 to $2.62 per share, a 9 percent to 10 percent increase from the prior year. In September, Heinz said it expected profit near the upper end of previous earnings guidance of $2.54 to $2.60 per share.

Analysts polled by Thomson Financial on average predict full-year net income of $2.62 per share.

Heinz, which makes packaged foods and condiments, anticipates third-quarter earnings between 67 cents and 68 cents per share, reflecting a higher tax rate. It expects sales growth of about 14 percent, partly due to the strength of its Heinz brand.

Analysts forecast profit of 63 cents per share on revenue of $2.54 billion for the three months ended in January.

Heinz expects third-quarter operating income will rise 8 percent on solid performance in North American consumer products, Europe, Asia/Pacific and other areas, partially offset by the U.S. foodservice business.

The company, known for its namesake ketchup, said each of its business segments was due to post sales growth, supported by double-digit increases in spending on product marketing and research and development.

Heinz said it was overcoming expected high commodity cost inflation in the third quarter with higher prices, productivity gains and favorable foreign exchange. Sixty percent of Heinz's sales revenue comes from outside the United States.

"We believe Heinz will have several price increases going into place this month, especially in North America," Stifel Nicolaus & Co. analyst Christopher Growe wrote in a client note. "This represents a sequential acceleration in pricing which we estimate will continue into the fourth quarter and perhaps early fiscal 2009."

Growe, whose firm raised its fiscal 2009 estimate by a penny to $2.86 per share, wrote that "Heinz will continue to reinvest more heavily in the form of marketing investments and we believe that is at work in the fourth quarter."

Heinz shares rose $1.86, or 4.3 percent, to $44.76 in midday trading Friday. They have traded in a 52-week range of $41.37 to $48.75.

Heinz is scheduled to report its third-quarter results on Feb. 26.


On the Net:

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