US: Heinz reports Q3 sales and income growth
Food group HJ Heinz Company has posted net income for the third quarter of US$219.0m, or $0.66 per diluted share, against $116.6m, or $0.35 per diluted share, for the corresponding quarter the year before. Excluding discontinued operations and special items, net income in the corresponding quarter last year was $168.0m.
The company said the profit improvement was due to higher sales, improved gross margins, a 9% increase in operating income, and a lower effective tax rate for the quarter of 26.0% compared to 35.5% a year ago, excluding prior year special items.
Third-quarter sales increased by 5.0% to $2.30bn, with volume increases accounting for 1.4%, net pricing 2.3% and currency exchange variations contributing 4.0%, offset by a 2.7% decline from the impact of divestitures. The volume increase was driven primarily by the North American Consumer Products, Italian infant nutrition and Australian businesses, the company said.
"We are pleased to report another excellent quarter at Heinz," said chairman, president and CEO William Johnson. "Our increased strategic focus on health and wellness, increased marketing support for successful innovations, and accelerating growth in fast-growing emerging economies like China, Indonesia, Poland and India is driving continued performance improvements."
Johnson added that based on results to date and on its forecasts, Heinz remained on track to meet its full-year EPS projection of $2.35 to $2.39, an increase of 12% to 14% from last year.
On a region by region basis, sales at the company's North American Consumer Products segment increased by 8.5%, with volumes up 5.2% on the back of continued strong growth from the Smart Ones and Boston Market ready meal ranges and desserts, as well as solid growth in Heinz ketchup. Sales at the company's US Foodservice segment fell by 3.8%, with volumes down by 4.3%.
In Europe, sales increased by 5.3%. Higher pricing increased sales by 2.0%, the company stated, driven primarily by reduced promotional activity for Heinz soup in the UK, as well as increases in infant feeding in both Italy and the UK. Reported volume decreased by 0.6%, as improvements in the Italian infant nutrition business, Heinz ketchup across Europe, Heinz beans in the UK, Weight Watchers from Heinz frozen ready meals and the Pudliszki range in Poland were offset by reduced sales of Heinz soup and the softness in the European non-branded frozen desserts business.
Sales in the company's Rest of World division increased by 10.9%, primarily driven by increased demand and marketing support for nutritional drinks in India and increases in ketchup and baby food sales in Latin America.
Group sales for the nine-month period rose by 5.5%, Heinz reported, with adjusted operating income for the nine months increasing by 9.9%, on the back of higher volumes and an improved gross profit margin of 37.5% versus 37.0% last year. Income from continuing operations was $1.83 per diluted share for the nine months, compared to income from continuing operations, excluding special items, in the first three quarters of the previous fiscal year of $1.56 per share.
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