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Heinz Raises Earnings Growth Forecast

Reuters
Thursday, 29 May 2008 | 10:05 AM ET

Heinz raised its forecast for annual earnings growth, with health and wellness products and emerging markets helping fuel the increase.

Heinz ketchup.
Keith Srakocic
Heinz ketchup.

The company also posted a 7 percent increase in fiscal fourth-quarter profit, in line with analysts' estimates, helped by price increases and the weak U.S. dollar.

The maker of Heinz ketchup , Ore-Ida frozen potatoes and a host of other packaged foods said it expects earnings per share to grow 8 percent to 11 percent annually over the next two years, up from a previous target of 7 percent to 9 percent.

In those same years, it forecast an annual increase of 6 percent or more in organic sales—which factor out currency fluctuations and acquisitions and divestitures—lifted by increased marketing spending and new product development.

Heinz said it plans to launch 400 new products over the next two years and spend an additional $60 million to $100 million to market them.

The company, less than two years removed from a proxy fight in which activist investor Nelson Peltz and a colleague won seats on the Heinz board, said profit was $194.1 million, or 61 cents a share, in the fourth quarter, ended April 30, up from $181.0 million, or 55 cents a share, a year earlier.

Sales rose 11 percent to $2.69 billion, with 4.5 percent of the rise coming from higher pricing and 1.2 percent from higher volume. The company's sales are also helped by the weak dollar, which boosts the dollar value of overseas sales.

Like many food companies, Heinz has been hit by soaring commodity costs and has been investing in increased marketing and new products to boost sales.

"This is very reminiscent of the late '70s and early 1980s and we're dealing with the pressures of significant cost inflation, which has risen twice as fast in half the time, along with weak economies and related uncertain consumer behavior," William Johnson, Heinz chairman and chief executive, said during a meeting with analysts.

But the current environment is different due to rapid growth in emerging markets and more interest by consumers in buying products with health and wellness

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