Rising revenue in Asia and the Pacific outpaced food maker H.J. Heinz Co.'s growth in the U.S. and Europe and helped its fourth-quarter net income climb 9.8 percent, the company said Thursday.
The maker of Ore-Ida potatoes, Classico pasta sauce and its signature ketchup said cutting costs and raising its prices also helped, by making up for rising ingredient prices.
Heinz, based in Pittsburgh, raised its 2011 dividend 12 cents to $1.80 and offered guidance for the next year in line with Wall Street analysts' estimates.
The company earned $192.4 million, or 60 cents per share, in the three months that ended April 28. That compares with $175.1 million, or 55 cents per share, a year earlier.
Revenue rose 8.3 percent to $2.72 billion, while volume rose 1.6 percent, led by ketchup and sauces.
Analysts surveyed by Thomson Reuters on averaged predicted Heinz would earn 59 cents per share on revenue of $2.75 billion.
Shares of Heinz fell 14 cents to $44.12 in midday trading Thursday.
The company spent 63 percent more to market its leading brands during the quarter than it did a year earlier. It said marketing spending fostered much of its growth, and CEO Bill Johnson told investors on a conference call that the company will maintain current levels, and especially in emerging markets, where it wants to position itself early to hook new shoppers on its brands.
Johnson said it's likely that emerging markets like Russia, China, India and Indonesia will make up one-fourth of Heinz's revenue in the next several years and 35 percent to 40 percent in the longer term. Asia and the Pacific now produce 20 percent of Heinz's revenue, while North America and Europe produce 62 percent.
In North America and Europe, revenue rose just under 7 percent each, while revenue in Asia and the Pacific jumped 27.3 percent.
Food makers are increasingly focusing on expanding their businesses in emerging markets like China and India as they deal with slower growth in the U.S. and Europe, where its longtime customers have been switching to less expensive store brands.
That's also why the company has been increasing its marketing — to keep wooing new shoppers to its brands, which also include Bagel Bites, Weight Watchers' Smart Ones and Boston Market meals.
On a basis that excludes acquisitions, the company's ketchup and sauces make up 43.3 percent of its total revenue. Global ketchup sales rose 7.7 percent, led by Russia, Latin America, Egypt, Britain, France, and China, among other countries.
The U.S. food service business — which sells to restaurants and other commercial establishments — posted a 2.4 percent drop in revenue as its customers continued to contend with a market that has people eating out less to save money. The unit's revenue was $365 million, about 13.4 percent of total quarterly revenue.
For fiscal 2011, the company expects, on a constant currency basis, sales growth of between 3 and 4 percent, implying revenue between $10.8 billion and $10.9 billion. It also expects earnings per share to grow 7 percent to 10 percent.
Analysts polled by Thomson Reuters expect earnings of $3.09 per share on revenue of $10.79 billion.
For the full year, Heinz reported net income of $864.9 million, or $2.71 per share, down from $923.1 million, or $2.89 per share, a year earlier. Revenue rose from $10.01 billion to $10.49 billion.
Standard & Poor's analyst Tom Graves reiterated his "Buy" opinion on the stock, and told analysts in a note he continues to expect emerging markets to "be a growing portion of (Heinz's) future sales mix."
But he cut his estimate for the company's fiscal 2011 earnings to $3 per share from $3.05 per share to reflect concerns about currency fluctuations. He maintained his price target of $49.
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