Heinz, Hormel optimistic about sales in 2010
CHICAGO (Reuters) - U.S. food makers H.J. Heinz Co <HNZ.N> and Hormel Foods Corp <HRL.N> said they expect sales to rise in the coming months as consumers stick to more frugal habits such as eating meals at home instead of going out.
Heinz, which makes ketchup and Ore-Ida frozen potatoes, posted a lower quarterly profit on Tuesday, hurt by sales declines in North America and Europe. But it said it is optimistic about sales heading into the second half of its fiscal year and raised its full-year profit forecast.
This year, Heinz has faced intense promotional discounting in the frozen food section by competitors like Nestle SA's <NESN.VX> Lean Cuisine. It plans to significantly increase marketing spending and bring out products focused on value.
Hormel, which makes Spam lunch meat and Jennie-O turkey, posted a higher-than-expected quarterly profit on Tuesday due to lower hog prices and stronger sales of its namesake chili. It said earnings should rise in the current fiscal year.
Shares of Hormel rose 1.3 percent to $39.40 in premarket trading, while Heinz shares fell 1.2 percent to $42.65.
HEINZ SALES UP DESPITE FOREX
Heinz earned $231.4 million, or 73 cents a share, for the second quarter ended October 28, down from $276.7 million, or 87 cents per share, a year earlier. The previous year's results included a sizable gain from currency hedging.
Heinz earned 76 cents per share from continuing operations, down 10 cents per share from a year earlier.
Sales rose 2.5 percent to $2.67 billion. Heinz said foreign exchange cut sales by 1 percentage point. The company not only is impacted by the strength or weakness of the dollar, but also by exchange rates in Europe for transactions on that continent.
Like many food companies, Heinz raised prices in the past year to help offset what were soaring commodity costs. The company has since seen the benefit of those price increases while costs for commodities have eased.
Heinz raised its full-year outlook for earnings and cash flow and expects increased sales momentum in the second half of the fiscal year, Chairman and Chief Executive William Johnson said in a statement.
The company completed the sale of its private-label frozen desserts business in the United Kingdom on Monday, which will result in a $33 million pre-tax loss in the third quarter.
HORMEL BEATS STREET DESPITE SALES SLIDE
Hormel earned $103.9 million, or 77 cents a share, for the fourth quarter ended October 25, up from $67.8 million, or 50 cents a share, a year earlier. Analysts, on average, had expected a profit of 68 cents per share, according to Thomson Reuters I/B/E/S.
While profit blew past expectations, Hormel's sales fell a steeper-than-expected 10 percent, to $1.68 billion.
Hormel expects to restore annualized sales growth in 2010, Chairman and CEO Jeffrey Ettinger said in a statement.
Hormel forecast fiscal 2010 earnings of $2.63 to $2.73 per share, up from a fiscal 2009 profit of $2.53 per share. Analysts' average forecast has been $2.59 per share.
The company raised its annual dividend by 10.5 percent to 84 cents per share.
(Additional reporting by Brad Dorfman; editing by John Wallace)
