Heinz reports 22% drop in Q4 net income

Heinz reported a 22% decline in net earnings in the fourth quarter of 2012 to $175.3m, from $223.9m in 2011, due to one-time costs related to productivity initiatives, slower sales and lower margins.

Sales grew 5.6% to $3.05bn in the quarter ended 29 April 2012, compared to $2.89bn in 2011, due to high sales in the emerging markets, which saw a 17% rise in organic sales. Global ketchup sales rose by 8.3%, driven by strong sales in Latin America, North America, the UK and Russia.

The company’s leading 15 brands witnessed 4.8% organic sales growth, led by Heinz brand products, Complan nutritional beverages in India, Master soy sauce in China, and ABC sauces and drinks in Indonesia.

Heinz chairman, president and CEO William R Johnson said that the company delivered strong fourth-quarter results led by emerging markets, global ketchup and the top 15 brands.

"Excluding special charges, Heinz grew earnings per share by more than 17% and we delivered our 28th consecutive quarter of organic sales growth, supported by increased investments in marketing, productivity and emerging markets capabilities," Johnson added.

Segment wise, US food service – which offers products to restaurants and other businesses – saw a 3.5% rise in organic sales to $382m, while operating income soared 38.4% to $52m, due to higher sales of branded ketchup and sauce.

North American consumer business sales inched down 2.2% to $843m, while operating income dropped 5% to $192m, as pricing actions implemented to offset higher commodity costs affected sales volume.

In Europe, sales grew 1.2% to $905m, while operating income fell 1% to $165m, due to unfavourable foreign exchange and higher marketing investments.

Sales in the Asia Pacific region grew 4% to $673m, while operating income improved by 5.3% to $51m, driven by emerging market businesses.

In the rest of the world, sales jumped 111.1% to $247m, while operating income soared 33.5% to $22m, as a result of the recent acquisition of Brazilian food brand Quero that boosted sales by 75.5%.

For fiscal 2013, the company expects earnings per share to grow 5% to 8%, about $3.52 and $3.62 per share, and for the next three to five years, the company has forecast an earnings-per-share increase of 6% to 9%.

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