Heinz adapts to new reality, keeps 2012 forecast

Austin,TX 11/18/11 (StreetBeat) --H.J. Heinz Co (NYSE: HNZ) is adapting to a more difficult operating environment by closing more factories around the world and offering cheaper products in the United States.

The maker of Heinz ketchup, Ore-Ida frozen potatoes and other packaged foods said it is shutting down three more factories on top of closings it has already announced. It is also launching new products priced around $1 to appeal to cash-strapped consumers.

"Developed markets are experiencing low consumer confidence, high unemployment and economic uncertainty," said Heinz Chief Executive William Johnson.

Heinz reported weaker-than-expected quarterly sales, as price increases and cost-cutting did not fully offset higher commodity costs and slower sales, especially in the company's U.S. food-service business and in Australia. Heinz's quarterly profit beat expectations by a penny, but it did not raise its full-year forecast. The company's shares were down less than 1 percent in light premarket trading.

$1 KETCHUP, $2 FRIES

Heinz said on Friday net income fell to $237 million, or 73 cents per share, in its fiscal second quarter, ended on October 26, from $251.4 million, or 78 cents per share, a year earlier.

Excluding items, it earned 81 cents per share. On that basis, analysts on average were expecting 80 cents per share, according to Thomson Reuters I/B/E/S. Sales rose 8 percent to $2.83 billion, but fell short of analysts' average estimate of $2.91 billion.

To appeal to U.S. consumers with tight grocery budgets, Heinz is launching new products including a 10-ounce pouch of ketchup for 99 cents, a nine-ounce package of mustard for 99 cents and a one-pound package of Ore-Ida French fries for $1.99. The company said it is on track to meet its goal for fiscal 2012 earnings of $3.24 to $3.32 per share, excluding items.

Heinz is often seen as a darling among its U.S. food industry peers because of its large exposure to fast-growing emerging markets, with recent deals in China and Brazil. In the latest quarter, sales from emerging markets rose nearly 16 percent organically and accounted for 20 percent of total sales.

Heinz shares fell to $51.51 in light premarket trading from their close at $52.82 on Thursday on the New York Stock Exchange.

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