Heinz Profit Drops 9 Percent, as Expected

Ketchup maker H.J. Heinz Co. (HNZ) on Tuesday reported a 9 percent drop in quarterly profit after spinning off some brands, but demand for new items like Ore-Ida Extra Crispy (search) fries helped to boost sales.

The Pittsburgh-based company said it earned $194.8 million, or 55 cents per share, in the first quarter ended on July 28, compared with $214.0 million, or 60 cents per share, a year earlier, including profits from units spun off to Del Monte Foods Co. (DLM).

Analysts on average expected 55 cents per share, according to Reuters Estimates.

Heinz spun off several of its brands, including its tuna, pet and baby food divisions, to canned foods processor Del Monte. Excluding profits from those brands, first-quarter earnings rose 7.8 percent from the prior year's $179.8 million, or 51 cents per share.

Quarterly sales rose to $2 billion from $1.9 billion a year earlier, helped by demand for new products including Ore-Ida Extra Crispy and Easy Fries.

The food company said its first-quarter earnings were "in line" with its full-year targets of $2.32 to $2.42 in earnings per share and $800 million to $1 billion in free cash flow.

Heinz said its North American consumer products segment recorded an 8.4 percent sales increase thanks to new french fry lines and a wider selection of low-carb items. Like other food makers, Heinz has been hurt by popular diets such as Atkins that shun potatoes and other high-carbohydrate foods in favor of protein.

Operating income in that segment rose 3.1 percent, driven by higher sales volume and lower marketing costs. Higher commodity and fuel costs cut into profits, however.

In Europe, sales rose 7.3 percent, helped by a weak dollar and strong demand in the United Kingdom and Italy. Operating income rose 5.2 percent.

In the Asia-Pacific region, sales rose 1.5 percent thanks to a weak dollar, but poor demand in Japan dragged down results. Operating income fell 5.8 percent, largely because of price cuts in New Zealand.