Heinz reports sales rise, raises guidance

Posted by Daniel Palmer on 25th November 2009

Food manufacturer Heinz has reported sales growth of 2.5 per cent in the second quarter on the back of growth in emerging markets, higher prices and the strong performance of their ‘Top 15’ brands.

Pre-tax profit, however, declined 15.2% due to a $92 million pre-tax gain in last year’s second quarter related to translation hedges on key currencies.

“Heinz delivered a strong financial performance in an adverse economic climate, led by our growing strength in Emerging Markets,” Heinz Chairman, President and CEO William Johnson said. “Looking forward, the Company is raising its full-year outlook for earnings and cash flow and we expect increased top-line momentum in the second half of the fiscal year.”

Globally, infant nutrition achieved 8.8% reported sales growth to lead the Company’s three core categories. The Company’s Top 15 brands delivered 5% reported sales growth, led by the Heinz brand.

Acquisitions net of divestitures increased sales by 3.1%, driven by the December 2008 acquisition of Golden Circle in Australia, which has ‘expanded Heinz’s Health & Wellness platform in beverages’. Net pricing improved 4.6%, more than offsetting a 4.1% decline in volume – a decline that Heinz does not anticipate to continue in the third quarter.
“We expect solid volume growth in the second half, fueled by significant increases in marketing, consumer-driven innovation and brand support initiatives that are underway to further leverage our strong brand equities, especially in developed markets,” Mr Johnson advised.

Rest of World led all segments with organic sales growth of 23.3%, followed by Europe and Asia-Pacific.

Total sales in Asia-Pacific actually climbed 27.4% but this was skewed by the impact of the Golden Circle acquisition. Sales were further assisted in the region by the weakness of the American currency.

Raised outlook
Heinz continued the recent trend of food manufacturers raising guidance, increasing their earnings per share target by around 4.5%.

The upgraded outlook is based on “strong first-half results, the improving currency climate, the company’s plans to significantly increase marketing and value-focused innovation in the second half of the year and confidence in its operating momentum,” Heinz advised.