Chief executive William Johnson outlines Heinz growth prospects

Chief executive William Johnson outlines Heinz' growth prospects

Shares in US food group Heinz rose yesterday (17 February) as the firm said it expects to report "very strong" third-quarter earnings per share, helped by improved margins and growth in its emerging markets.

Speaking to analysts at the CAGNY conference in Florida, William Johnson, president, chairman and CEO of Heinz, said the firm now expects to report third-quarter earnings of around US$0.82 per share from continuing operations and full-year earnings per share of $2.82 to $2.85.

This is up from Heinz’s November forecast of $2.72 to $2.82 per share.

“Heinz is stronger and better positioned than at any previous point in its history,” Johnson told analysts. “We also expect to deliver a dividend increase for fiscal 2011, effective with the July payment, commensurate with our strong profit growth.”

The US food maker also revealed plans to launch Heinz infant formula in Russia and China as the growth potential of emerging markets increases at a “rapid rate”.

“Clearly emerging markets represents a target-rich base of consumers that are likely to spend more of their disposable income on branded packaged foods as they prosper. Based on our own experiences, succeeding in these markets will require superior brands and quality of products, superior local marketing, localised manufacturing, effective and efficient distribution platforms, strong leaders … profitable cash-flow businesses to support the investment, and the ability to apply this on a global scale,” Johnson insisted.

Johnson told his audience of analysts and investors that Heinz views the likes of international retailers Wal-Mart, Carrefour and Tesco as its primary competition in these markets.

Johnson said emerging markets are on track to deliver “at least” 20% of total sales for the firm by 2013, with its main focus on the launch of infant nutrition in Russia and China.

“Globally I’m pleased with our pipeline of infant nutrition, led by our plans to launch Heinz infant formula in Russia and China where we have great expectations,” Johnson told analysts.

“We will launch infant formula in China in the late spring with an aggressive, far-reaching marketing campaign. Using 100% imported product, which is preferred by Chinese mothers over domestic brands. We are very enthused about the launch in China and I think we are well-prepared to take the market a great brand like Heinz.”

He added: “The Heinz brand in China is a very strong brand. We’re going to get everyone’s attention, we know that and we’re not going to back away from an opportunity that is significant.”

In addition, Johnson said that the Indian and Indonesian markets are on track to deliver sales this year approaching $450m. “We expect them to be pushing $500m by fiscal 2011,” he added.

In the US, while Johnson conceded that sales in its frozen nutritional meals category were “terrible”, the firm announced plans to expand the range along with “aggressive” promotional activity beginning 1 March.

Plans were also announced for an advertising campaign and launch of further “value size” packages and additions to its Ore-Ida range, also in the US.

The company will report third-quarter results on 25 February. Shares closed at $45.02 at 20.00 ET yesterday, up $0.50 or 1.12%.