Heinz profits drip downward in first quarter

PITTSBURGH — H.J. Heinz Co., the maker of ketchup and other foods, reported its first-quarter earnings fell 9 percent from its profit a year ago that was boosted by the sale of some of its businesses to Del Monte.

But its sales rose 5.7 percent, helped by the introduction of some new products, and the company's shares closed nearly 3 percent higher.

Heinz said Tuesday it earned $194.8 million, or 55 cents per share, for the three months ended July 28, compared with $214 million, or 60 cents per share, during the same period last year.

The results were in line with expectations by analysts polled Thomson First Call, who were looking for earnings of 55 cents per share.

Excluding results from the Del Monte deal a year ago, when the company sold StarKist tuna, its U.S. baby food business and other units, earnings per share were up 7.8 percent for the quarter.

Sales increased to $2 billion from $1.9 billion last year. It said sales grew 7.8 percent for its top 15 brands.

"Heinz is off to a strong start," and earnings are in line with annual earnings expectations of $2.32 to $2.42, said William Johnson, president and chief executive officer.

Heinz reported strong sales in North America, led by the launch of a new brand of french fries and the frozen dinner brand, Smart Ones Truth About Carbs.

Another low-carbohydrate product, One Carb ketchup, also sold well, the company said.

North American sales also got a bump in sales from the acquisition last year of Canada's Unifine Richardson, which makes salad dressings and sauces.

The company also reported strong sales in Europe, with the largest growth coming from the United Kingdom and Italy. Heinz said it benefited from foreign exchange rates and a 1.9 percent increase in volume.

Volume increases in Europe were offset by a 1 percent drop in pricing, due to market pressure in the Netherlands and New Zealand, the company reported.

While Heinz said its profit margin was down slightly because of increased trade promotion, the company actually reduced spending on consumer marketing.

"Marketing spending was down again in the quarter to 3 percent of revenues from 3.5 percent," said John McMillin, an analyst with Prudential Equity Group. "But (Heinz) is trying to improve its brand strength with new products and promotions and we see some notable successes here."

Heinz' results were satisfactory given the difficult food industry environment, McMillin said.

Sales in the company's food service business were up 2.4 percent due to the acquisition last year of Truesoups, a premium frozen food maker, and 3.8 percent overall.

Shares of Heinz rose $1.03, or 2.8 percent, to close at $37.63 Tuesday on the New York Stock Exchange.