Heinz reports 22% rise in Q2 net income

American food company HJ Heinz has reported that its net income for the second quarter of fiscal 2013 increased 22.1% to $289.44m, up from $237m in the same period in the previous year, driven by growth in emerging markets, favourable tax rate, and strong performance of its leading brands.

Sales increased 0.5% to $2.83bn, up from $2.81bn in the previous year, although foreign currency exchange rates hit sales by 2.4%; while organic sales, which exclude currency fluctuations, acquisitions and divestitures, grew 3.3%.

Emerging markets, which accounted for about 23% of the company’s total sales, saw an organic sales growth of 13.2%.

The firm’s leading 15 brands witnessed 4.6% organic sales growth, driven by brands such as Heinz, Quero, ABC, Classico, Golden Circle, Master and Ore-Ida, while global ketchup delivered organic sales growth of 5% due to strong performance in Brazil and the US.

Heinz chairman, president and CEO William R Johnson said that the company posted strong results, while investing in the businesses and brands to achieve growth.

"Notably, Heinz delivered its 30th consecutive quarter of organic sales growth, led by our trio of growth engines: emerging markets, global ketchup and the company’s top 15 brands," Johnson added.

In North America, sales increased 0.1% to $795m, organic sales rose 0.4%, and operating income dropped 5.7% to $190m, due to increased investment in marketing.

In Europe, sales fell 4.2% to $808m, organic sales increased 0.1% and operating income decreased 2.8% to $140m, due to the impact of foreign currency and increased investment in marketing.

Sales in the Asia Pacific region increased 2.3% to $606m, organic sales grew by 4.1%; and operating income soared 24.5% to $50m, driven by strong growth in both developed and emerging markets.

US foodservice – which offers products to restaurants and other businesses – saw a 4.1% rise in both organic and reported sales to $348m, while operating income jumped 26.8% to $44m, helped by higher sales and productivity plans.

In the rest of the world, sales increased 8.6% to $270m, organic sales surged 19.8%, and operating income declined 15.6% to $27m, due to unfavourable foreign currency exchange.

For the six months ended 28 October 2012, sales declined 0.5% to $5.62bn, organic sales increased 4%, while operating income grew 10.1% to $802m.

Heinz noted that it is on track to deliver its previously announced forecast for fiscal 2013, which includes earnings per share increase of 5% to 8%, and organic sales growth of 4%.

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Image: Heinz recorded high sales in emerging markets, but struggled with sluggish sales in Europe. Photo courtesy of H.J. Heinz Company.