Heinz reports 14% rise in Q1 net income

American food company HJ Heinz has reported that its net income for the fiscal first quarter ended 29 July 2012 increased 14% to $258.02m, up from $226.11m in 2011, driven by growth in emerging markets, strong results in the US and Australia, and higher pricing action.

Sales, however, fell 1.5% to $2.79bn, compared with $2.83bn in 2011, due to the unfavourable effect of foreign currency exchange rates, while organic sales, which represent volume and price increases, grew 4.8%.

Emerging markets, which accounted for about 26% of the company’s total sales, saw an organic sales growth of 19.3%.

The firm’s leading 15 brands witnessed 5.9% organic sales growth, led by brands such as Quero, Maste, Golden Circle, ABC, Weight Watchers Smart Ones, Heinz and Ore-Ida, while global ketchup delivered organic sales growth of 3.7%.

Heinz chairman, president and CEO William R Johnson said that the company posted strong results, despite the challenging economic environment, higher commodity costs and the unfavourable impact of foreign currency.

"Heinz is off to a good start in fiscal 2013, led by our trio of growth engines – emerging markets, global ketchup and our top 15 brands," Johnson added.

In North America, reported sales inched down 2% to $759m and operating income dropped 3.9% to $183m, while organic sales rose 0.9%, helped by US retail business.

In Europe, reported sales fell 7.2% to $778m due to unfavourable impact of foreign exchange translation rates. Organic sales increased 2% and operating income was flat at $137m.

Reported sales in the Asia Pacific region declined 1.9% to $658m due to the impact of foreign exchange translation rates; organic sales grew by 4.1%; and operating income soared 18.9% to $73m.

US foodservice – which offers products to restaurants and other businesses – saw a 2.4% rise in both organic and reported sales to $315m, while operating income jumped 12.7% to $37m.

In the rest of the world, reported sales increased 16.5% to $281m; organic sales surged 31.7%, due to strong results in Brazil; and operating income declined 4% to $31m.

Heinz noted that it is on track to deliver its previously announced forecast for fiscal 2013, which includes earnings of $3.52 to $3.62 per share and organic sales growth of 4%.

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Image: Heinz has seen high sales in emerging markets, but struggled with sluggish sales in North America and Europe. Photo: H.J. Heinz Company.