PITTSBURGH – H.J. Heinz Co.'s second-quarter earnings rose 9.6 percent on strong sales of ketchup and frozen foods, the company reported Thursday.
Heinz earned $208 million, or 59 cents a share, in the three months ended Oct. 31 compared with $190 million, or 54 cents a share, in the same period a year ago. The results matched analysts' estimates surveyed by Thomson Financial/First Call.
The Pittsburgh-based foodmaker last month revised its earnings downward, expecting fewer people would dine out, particularly at airports, hospitals and theme parks. The decline cost the company as much as 5 cents per share, said Leonard Teitelbaum, an analyst with Merrill Lynch.
Since the Sept. 11 terrorist attacks, restaurant meal purchases fell for the first time in a decade, Heinz said.
"A lot of restaurants traded away brand name ketchup to private labels to lower costs quickly on or after Sept. 11,'' said John McMillin, an analyst with Prudential Securities Inc. "But I think they'll recover from it.''
Heinz warned that third-quarter results will be lower, but expected profits to rebound in the fourth quarter.
"Heinz has a very strong brand focus with five mega brands driving almost 50 percent of global sales,'' said Heinz chairman and chief executive William Johnson.
Heinz acquired Classico pasta sauces, Delimex Mexican foods, and Poppers and TGIF frozen snacks in the second quarter, which helped bolster sales, Johnson said. Sales in tuna and pet food also increased, but profits were lower than last year.
Heinz said it expected its foodservice business to recover next year, but did not give specific targets for 2003. The company added it planned to fix supply problems in Australia, New Zealand and Japan caused by management's restructuring plans, including the closing of a half dozen plants.
"It's not an easy thing to do, especially when your competitors know it,'' said Teitelbaum. "That cost them money in the quarter.''
Heinz also sold a majority stake of its business in Japan to Kagome, that nation's largest ketchup producer, which McMillin said would simplify Heinz's business and make the company more manageable.
The joint venture may prove successful because Kagome will be able to utilize people more familiar with that market, Teitelbaum said.
"It should begin the long-awaited turnaround story,'' McMillin said. "I'm optimistic that it will be a better year for Heinz.''
In the first six months, Heinz reported earnings of $408.7 million, or $1.16 a share, compared with $378 million, or $1.08 a share, in the same period last year.
Revenue rose 11.7 percent to $2.57 billion from $2.3 billion in the same period last year.
In trading Thursday, Heinz rose $1.16 to close at $39.50 on the New York Stock Exchange.