Heinz 2Q profit drops on higher tax rate | VailDaily.com

Heinz 2Q profit drops on higher tax rate

Associated Press

PITTSBURGH – H.J. Heinz Co., which makes ketchup and a range of other foods, said Thursday its fiscal second-quarter profit slipped 6 percent, reflecting a higher tax rate and the impact of discontinued operations.But the Pittsburgh-based company said revenue grew by about 3.5 percent, led by U.S. ketchup sales, and that it had raised its fiscal 2007 earnings outlook.Heinz’s chairman, president and chief executive, William R. Johnson, said the results showed the effects of a growth plan introduced June 1, when Heinz was embroiled in a proxy fight with dissident investors led by billionaire Nelson Peltz.Peltz and his ally Michael Weinstein won seats on the Heinz board after waging a campaign to drive up shareholder returns. The new board has been “working collaboratively,” Johnson said in a conference call with analysts and reporters.”This was a strong quarter for Heinz,” he said. “These results confirm our progress.”Johnson pointed to continued growth in Heinz’s U.S. consumer products business and said Europe, particularly Britain, was “a work in progress.”Heinz said profit for the three months ended Nov. 1 fell to $191.6 million, or 57 cents per share, from $203.8 million, or 60 cents per share, during the same period last year. Year-to-date earnings jumped to $385.7 million from $361.1 million.The results included discontinued operations, including the sale of a European seafood business and a New Zealand poultry operation last year, and a quarterly tax rate of 34.8 percent compared with 23.8 percent during the year-ago period.During the second quarter, Heinz also exited businesses in Indonesia, Botswana and Argentina that were not considered discontinued operations. It said its income from continuing operations was 59 cents per share.Quarterly revenue climbed about 3.5 percent to $2.23 billion from $2.16 billion last year, helped by strong sales of its Heinz brands, Weight Watchers Smart Ones meals, Classico pasta sauces and other products. Revenue for the six months ended Nov. 1 increased to $4.29 billion from $4.06 billion in the same period last year.The results fell short of Wall Street estimates of 60 cents per share on $2.25 billion in revenue, according to a Thomson Financial poll.Heinz raised its fiscal 2007 earnings outlook to a range of $2.35 to $2.39 per share. Earlier in November, Heinz predicted full-year earnings of about $2.35 per share. Analysts expect full-year earnings of $2.35 per share.Alexia Howard, an analyst at Sanford C. Bernstein & Co., said the results were strong.”The top-line growth, particularly here in North America, was solid,” she said. “That seemed to be continuing a fairly solid trend.”Robust sales of Heinz’s healthy option foods were particularly encouraging, underscoring the company’s strong position in that category, she said.The company’s cost-saving measures appear to be coming through in the results, Howard said.Heinz had introduced a growth plan after Peltz and his partners unveiled more aggressive recommendations to improve performance. The company managed to deliver a good quarter even after one in which they were “pulling out all the stops” to strengthen results for the proxy battle, she said.Earlier this month, Heinz said its new board had taken steps to improve corporate governance by approving a proposal requiring director nominees to receive a majority of shareholder votes to win board seats in uncontested elections.It also said the board had agreed to seek shareholder approval within one year if it adopts a shareholder rights plan, or “poison pill,” designed to thwart hostile takeover attempts.Heinz also makes Ore-Ida frozen potatoes and Lea & Perrins sauces, among other products.—On the Net:H.J. Heinz Co.: http://www.heinz.com

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