CHICAGO – Packaged foods maker H.J. Heinz Co.(HNZ) on Tuesday posted better-than-expected quarterly profit, helped by acquisitions and a lower tax rate.
The maker of Heinz ketchup, Ore-Ida frozen potatoes and Smart Ones frozen meals reported profit of $203.8 million, or 60 cents share, for the fiscal second quarter ended October 26, up from $199.0 million, or 56 cents a share, a year earlier.
Heinz is in the process of trying to sell its European seafood and frozen food operations as it looks to improve profit in that region, after completing a similar restructuring in its U.S. business.
"We are making good progress on our potential divestitures and will carefully assess offers to ensure good value for our shareholders," William Johnson, chairman and chief executive, said in a news release.
The company posted pretax charges of $50.9 million for severance and other restructuring items. It had $32 million in income from discontinued operations related to the resolution of tax liabilities for businesses spun off to Del Monte Foods Co. (DLM).
Excluding one-time items, quarterly earnings from continuing operations were 62 cents a share, 8 cents above the average forecast among analysts polled by Reuters Estimates.
Sales rose 6.3 percent to $2.34 billion, with much of the increase coming from acquisitions such as the purchase of Lea & Perrins sauce maker HP Foods. Analysts' average forecast was $2.30 billion, according to Reuters Estimates.
Volume, a measure of units sold that factors out currency and price fluctuations, rose only 0.6 percent, weighed down by declines in Europe, the Tegel poultry business in New Zealand and the U.S. Foodservice segment.
Profit in Europe rose 8.6 percent excluding one-time items, as the HP Foods acquisition helped offset lower volume and higher manufacturing costs in Northern Europe and Italy.
North American profit rose 9.3 percent, helped by higher volume and acquisition, which offset rising commodity and other costs.
The company's effective tax rate fell to 24.8 percent from 32 percent a year earlier, due to reversal of a tax provision related to a foreign affiliate. The company said it now expects its tax rate to be 30 percent to 31 percent for the year, down from its previous forecast of 31 percent to 33 percent.
Heinz shares trade at about 15 times estimated fiscal 2006 earnings, compared with a multiple of about 16 for the Dow Jones U.S. Food Producers Index.