Sales Increased by 11.7% to $2.57 Billion
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PITTSBURGH–(BUSINESS WIRE)–H. J. Heinz Company (NYSE:HNZ – news) today announced results for the second quarter ended October 31, 2001. Heinz reported earnings of 59 cents per diluted share in line with market expectations and the company’s revised outlook on November 8, compared to 54 cents in the year-earlier quarter. Second-quarter net income rose to $208.2 million from $190.0 million in the year-earlier quarter. Excluding special items of 15 cents per share, Heinz earned $241.7 million or 69 cents per share in last year’s second quarter. There were no special items in this year’s second quarter.
Heinz confirmed that it is on track to deliver profits for the second half of Fiscal 2002 (ending May 1, 2002) in line with those of the first half. As indicated previously, Heinz expects third-quarter results to be slightly less than the second quarter; an improved fourth quarter is anticipated. Heinz has scheduled an analysts’ meeting for today to discuss its business strategy and performance, including:
The strong growth of its retail ketchup and frozen food businesses;
Its U.S. foodservice business, which is expected to be back on track in fiscal 2003, assuming a stable economy, and;
Its plans to fix supply chain issues in Australia, New Zealand and Japan.
Heinz also announced today a proposed expansion of its alliance with Kagome, Japan’s leading food brand and that nation’s largest ketchup producer. Under the agreement, Kagome would acquire a 51% stake of a new joint venture named Heinz Japan Limited with Heinz acquiring a 5% stake of Kagome. This new agreement will enable Heinz to significantly improve its Japanese business as it works with Kagome to leverage its highly successful go-to-market capability.
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By GlobalDataFY02 SECOND-QUARTER PERFORMANCE
Second-quarter sales increased 11.7% to $2.57 billion from $2.30 billion last year. Acquisitions (net of divestitures) generated nearly three-quarters of the sales increase. Key acquisitions were Classico® pasta sauces, Honig® and HAK® products in the Netherlands, Delimex® Mexican foods, and Poppers and TGIF® frozen snacks. Price and volume increases also helped to boost sales.
Heinz has fueled its strong sales growth with significant investment in marketing, which the company expects to increase 9-10% in Fiscal 2002.
Heinz® ketchup in the U.S. continued to increase dollar market share with its latest 52-week share now at record levels, reaching nearly 60%, a 4.5 point gain over last year. Heinz® ketchup in the U.K. achieved a record high dollar share of 75%. Frozen meals had strong sales with Boston Market® Homestyle Meals up 30%, Smart Ones® entrees up over 20% and Bagel Bites® snacks sales up 30%.
“After an intense period of restructuring, the Heinz supply, manufacturing, sales and distribution networks will be leveraged for greater productivity and efficiency,” said Heinz Chairman, President and CEO William R. Johnson. “Heinz has a very strong brand focus with five mega brands driving almost 50% of global sales. The Heinz® brand itself, with almost $3 billion in sales, recently ranked number-one in America in consumer satisfaction and loyalty by a University of Michigan brand survey. We will continue to invest in these great brands to provide innovative food solutions to consumers around the world.”
Heinz aims to achieve ongoing cost reduction of 1-2% annually. The company plans to source approximately $700 million in goods and services through E-procurement reverse auctions this year. As a result, Heinz expects E-procurement to deliver annual savings of $50 million during Fiscal 2003.
In addition, Heinz today announced the appointment of Ms. Tracy E. Quinn as President and Chief Operating Officer of Heinz Wattie’s Australasia. A 17-year Heinz veteran, she was most recently chief finance and supply officer at the affiliate. Earlier in her career, she served as corporate controller and as vice president of strategy at World Headquarters, and as managing director of infant feeding at Heinz North America.
SECOND-QUARTER INNOVATIONS
Recent innovations include:
EZ Squirt® Funky Purple has sold 2.5 million bottles in just 3 months.
Boston Market® gravy continues to drive growth in the gravy category. The brand has established a 9.8% dollar share for the latest 52 weeks, and dollar sales for the category are up nearly 10% for the same period.
Jack Daniels® sauces continues to grow, capturing 12% of the premium barbecue sauce segment.
The launch of Hot Bites(TM) hand-held snacks is driving the Heinz frozen snacks business up more than 40% year-to-date.
StarKist® Pouch Tuna, including the new Lunch-to-Go, has a 7.0% market share after less than a year.
Sales in soft and chewy dog snacks, led by Pup-Peroni®, have jumped 17% for the past 12 weeks, driven by new product introductions. Pup-Peroni® Nawsomes(TM) quickly captured an 8.5% share to become the third biggest brand in the segment.
Heinz also successfully launched versions of EZ Squirt® Blastin’ Green Kids Condiment in the U.K., Ireland, Netherlands, Germany and Belgium. In the U.K., Eazy Squirt® Green ketchup added an incremental 5 points to push ketchup total market share to a record 75% 4-week share.
SECOND-QUARTER HIGHLIGHTS
In the United States, Heinz® Frozen Foods had another strong quarter with sales up 18.7% due to acquisitions and the strong performance of three key brands: Boston Market®, Smart Ones® and Hot Bites®. Base volume was up 3.8%.
Higher pricing, primarily in Europe and Africa, increased global sales by 3.0%.
Sales of Heinz North America increased 6.8%. As Heinz announced previously, the positive performance in the U.S. retail business and Canada was more than offset by softness in foodservice, related to the economic downturn and reductions in travel, conventions and tourism.
Sales in the U.S. Pet Products and Seafood segment increased 3.8% and volume increased 4.6%, primarily in pet snacks and tuna, although profits were lower than last year due to increased costs and less favorable sales mix.
Heinz Europe’s sales increased 20.4%, driven by acquisitions and by increased pricing. Profits were partially offset by increased marketing for innovation in key brands and integration costs associated with recent acquisitions.
The effective tax rate for the quarter was 35.0% compared to 34.3% last year. Excluding Fiscal 2001 special items, the effective rate was 35.0% for both periods.
INTERNET BROADCASTS OF MEETING WITH SECURITIES ANALYSTS
Heinz Chairman, President and CEO William R. Johnson will host a meeting with securities analysts today at 8:30 a.m. in New York. The meeting will be Webcast live on www.heinz.com and via conference call at 1-888-423-3275. The Heinz website will contain the slides for the presentation beginning at 7:30 a.m. The Webcast will be archived for repeat broadcast beginning at 10:30 a.m. Participants will also include Paul F. Renne, Executive Vice President and Chief Financial Officer; Tracy E. Quinn, President and Chief Operating Officer — Heinz Wattie’s Australasia; and Jack Runkel, Vice President — Investor Relations.
SIX-MONTH RESULTS
In the six-month period, Heinz reported net income of $408.7 million or $1.16 per diluted share versus $378.0 million or $1.08 per diluted share in the year-earlier period. Excluding special items in both years and the cumulative effect of an accounting change in Fiscal 2001, diluted earnings per share decreased to $1.20 from $1.38. First half sales rose 6.3% to $4.75 billion from $4.47 billion last year.
ABOUT HEINZ: With sales approaching US$10 billion and a pantheon of icon brands, H. J. Heinz Company is one of the world’s leading marketers of high quality ketchup, sauces, meals, soups, snacks and infant foods to consumers everywhere, whether in supermarkets, restaurants or on the go. Its 50 companies operate in some 200 countries, with more than 20 power brands, including the Heinz® brand with nearly US$3 billion in annual sales. Among the company’s famous brands are Heinz®, StarKist®, Ore-Ida®, 9-Lives®, Wattie’s®, Plasmon®, Classico®, Smart Ones®, Bagel Bites®, Delimex®, Poppers®, John West®, Petit Navire®, Kibbles `n Bits®, Pounce®, Pup-Peroni®, Orlando®, ABC®, Olivine®, Jufran® and Pudliszki®. Heinz also uses the famous brands Weight Watchers®, Boston Market®, TGIF® and Linda McCartney® under license. Information on Heinz is available at http://www.heinz.com.
