Earnings: Heinz Reports Lower Profit, Says It Will Cut 2,700 Jobs

Earnings: Heinz |

Heinz Reports Lower Profit, Says It Will Cut 2,700 Jobs

PITTSBURGH - (AP) - Food producer H.J. Heinz Co. (HNZ) on Thursday said fiscal fourth-quarter profit dropped 19 percent, and said it plans to cut 2,700 jobs, or 8 percent of its work force, and exit 15 plants this year as part of a plan to cut costs and resume earnings growth. Its shares rose nearly 4 percent to a new 52-week high in morning trading.

Heinz is facing pressure from billionaire investor Nelson Peltz to improve shareholder return. Earlier in the month Peltz and his Trian Group outlined a plan, which was rejected by Heinz, to improve profit by cutting costs and reducing incentives to retailers.

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The maker of ketchup, sauces, pasta and frozen foods said profit for the quarter ended May 3 declined to $167.9 million, or 50 cents per share, from $206.5 million, or 59 cents per share during the same period last year.

Results include charges totaling 5 cents per share relating to the sale of assets and a write-down of the company's operations in Zimbabwe, offset by a gain from the sale of its European Seafood and Tegel poultry business. Increased interest costs and a substantially higher quarterly tax rate compared to last year also hurt results, the company said

Revenue grew nearly 8 percent to $2.4 billion from $2.23 billion, helped by double-digit growth in brands including Smart Ones meals, Classico pasta sauce and Ore-Ida potatoes.

Analysts, on average, predicted a profit of 49 cents on revenue of $2.36 billion, according to a Thomson Financial poll.

Heinz also outlined a growth plan for 2007 and 2008. The plan includes reducing costs by $355 million, in part by cutting 2,700 jobs and exiting 15 plants in fiscal 2007. It did not identify the plants in a news release. Heinz also said it was considering exiting five additional plants in fiscal 2008.

Heinz's plan also includes cutting $145 million "in deals and allowances" to those who carry its products.

At the same time, the company said it is authorizing a $1 billion share repurchase program in fiscal 2007 and 2008, and would boost its dividend by 16.7 percent to $1.40 a share in fiscal 2007 from $1.20 a share last fiscal year.

For all of fiscal 2006, profit declined 14 percent, to $645.6 million, or $1.89 per share, from $752.7 million, or $2.13 per share last year. Revenue grew 7 percent to $8.64 billion, from $8.1 billion last year.

The company expects to earn $2.35 per share in 2007 and $2.54 per share in 2008. The company expects sales growth of 3 percent to 4 percent in 2007 and 4 percent or higher in 2008.

Heinz shares rose $1.60, or 3.8 percent, to $43.95 in morning trading on the New York Stock Exchange, surpassing its previous 52-week high of $43.65.

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