Heinz Sees Strong Results for First-Quarter 2011, while Del Monte Results Mixed

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading food producers H.J. Heinz Company (NYSE:HNZ) (Pittsburgh, Pennsylvania) and Del Monte Foods (NYSE:DLM) (San Francisco, California) saw different results for the first quarter of fiscal year 2011. Heinz benefited strongly from rapid sales growth in emerging markets and solid sales growth in North American consumer products, with net income for the quarter reported to be $240.43 million, a 13.11% increase from the same period last year. Del Monte, however, saw lower revenue from its consumer business, but was buoyed by strong results from its pets business, with net income at $59.4 million, a 1.37% increase from first-quarter 2010.

Total sales at Heinz stood at $2.48 billion, a 1.6% increase from the same period last year, while total sales at Del Monte stood at $804.6 million, a 1.12% decrease.

Del Monte's Consumer Products segment was negatively impacted by declines in retail and non-retail volumes, the latter largely affected by reduced government bid sales. However, stronger volume growth and pricing in the Pet Products segment offset much of the damage.

"Our pet business, dry food and snacks were the primary growth drivers," said Richard Wolford, the chairman and chief executive officer of Del Monte, in a conference call. "In consumer [services], our lower top-line performance was largely the result of reduced retail vegetable sales, combined with lower non-retail sales from both fruit and vegetables."

Heinz saw a volume growth of 12% in emerging markets and 5% in North American consumer products, with very strong results from ketchup sales in Russia, one of the world's largest markets for the product. The company also saw a volume growth of almost 30% in India, led by nutritional beverages.

"I'm proud of the fact that Heinz has now delivered 21 consecutive quarters of organic sales growth," said William Johnson, the president and chief executive officer of Heinz, in another conference call. "Importantly, emerging markets continued their accelerating momentum as the most powerful growth engine for Heinz, accounting for almost 18% of our total sales, a company record, and generating virtually all of our organic sales growth."

Both of Del Monte's major divisions saw mixed results in net sales and operating income:

• The Pet Products segment reported net sales of $427.3 million, a 3.64% increase from first-quarter 2010, while operating income stood at $98.7 million, a 3.99% decrease.
• The Consumer Products segment reported net sales of $377.3 million, a 5.93% decrease from the same period last year, while operating income stood at $34.3 million, a 6.85% increase.

Heinz was boosted by the company's famous ketchup label, which more than offset small losses in other segments:

• The Ketchup and Sauces segment reported net sales of $1.09 billion, a 2.19% increase from first-quarter 2010.
• The Meals and Snacks segment reported net sales of $917.82 million, a 0.7% decrease from the same period last year.
• The Infant/Nutrition segment reported net sales of $280.78 million, a 3.83% decrease from first-quarter 2010.
• Other segments reported total net sales of $190.03 million, a 21.25% increase from the same period last year.

Both companies expect business to improve in the near future. Wolford said Del Monte's performance will return to historical levels, especially during the holiday season. For fiscal year 2011, Del Monte expects to see net sales growth of 1% to 3% over fiscal year 2010. "Our retail business is the one that has seen the strongest headwinds, and this is where we expect to see the strongest improvements in the second half," Wolford said in the Del Monte conference call.

Meanwhile, Heinz expects net sales growth of 3% to 4%. "I would expect the second quarter to mirror our first-quarter profit, with slightly higher earnings in the third and fourth quarters," Johnson said in the Heinz conference call.

Industrial Info is tracking four active Heinz and Del Monte projects in the U.S. that are worth a total of $10 million, including the $6 million expansion of Del Monte's pet food plant in Topeka, Kansas. Del Monte plans to construct a receiving building and install equipment in existing facilities to improve production efficiency and increase the output of dry and wet pet food products. For more information, visit Industrial Info's North American Food and Beverage Project Database.

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