CHICAGO – Ketchup and packaged food producer H.J. Heinz Co. (HNZ) Monday said quarterly profit fell 19 percent because of weak demand for seafood and soup in parts of Europe and costs related to planned asset sales. But its results excluding items beat Wall Street expectations.
Heinz said it was still on track to meet full-year profit targets despite steep commodity costs and a stronger dollar that pressures international results, and its shares edged up 1 percent in New York Stock Exchange (search) trading.
Net income fell to $157.3 million, or 45 cents a share, in the fiscal first quarter ended July 27, compared with $194.8 million, or 55 cents per share, a year earlier.
Excluding one-time items, Pittsburgh-based Heinz earned 52 cents per share, 2 cents per share better than the average estimate among analysts polled by Reuters Estimates.
Net earnings included after-tax charges of $24.5 million for job cuts and other restructuring efforts.
"Headlines look good but the devil is in the details," Prudential Equity Group analyst John McMillin wrote in a note to clients, pointing out that a lower-than-expected 27.9 percent tax rate added to earnings, while exchange rates and acquisitions lifted sales.
"European trends remain the principal challenge," he said.
Heinz announced in May that it was considering selling some assets such as its European seafood business and New Zealand poultry operations, both of which weighed on first-quarter profits.
However, the company Monday said only that it was "making good progress" on those plans and would give further details at a September 20 analyst meeting.
"We will keep you posted as decisions are made," Art Winkleblack, Heinz's chief financial officer, said on a conference call with analysts.
The company expects to incur $100 million in restructuring costs for the full fiscal year, which includes the charges recorded in the first quarter.
Analysts are hoping that selling those divisions to focus on bigger brands will boost profits.
First-quarter sales rose to $2.1 billion from $2.0 billion a year earlier, driven by Heinz's North American consumer products segment. The company reported strong demand for its namesake Heinz brand as well as TGI Friday's (search) and Ore-Ida (search) frozen food.
Sales were flat in Europe as declines in the company's seafood business and weakness in the British soup market offset strong ketchup sales. European operating profit dropped nearly 16 percent, primarily because of weakness in Britain and Northern Europe.
The company said results improved dramatically in its Italian baby food business, which had been a problem area in previous quarters.
For the full year, Heinz said it still expects earnings in the range of $2.35 to $2.45 per share, excluding one-time items. Sales growth is still expected to be between 4 percent and 6 percent, Winkleblack said on the conference call.
Analysts, on average, expect a full-year profit of $2.39 per share, according to Reuters Estimates.