H.J. Heinz Co. (NYSE: HNZ) cut its long term growth outlook a bit, citing investments in business amid a feeble and volatile global economic environment.
On Thursday, Heinz reported a 22% drop in fiscal fourth-quarter profit due to costs related to productivity initiatives, however, the company also said that it expects adjusted per-share earnings to climb between 5% and 8% in fiscal 2013 to $3.52 to $3.62 a share.
For the next three to five years, Heinz estimates that earnings will soar 6% to 9% per year. Still, the projections failed to excite the Wall Street, as last year; the Company projected its earnings to grow by 7% to 10%, for the same period
Amid fragile economic environment, the outlook for the packaged-food industry has turned lackluster.
While developed markets continue to reel under recessionary pressure thereby hurting revenues, any price increases are being met with resistance- which in turn hit the margins.
To just get some glimpse of how market dynamics have changed in the recent past, consider this: Heinz is now offering more of its products at prices which are much lower than before even as packages size shrunk.
For instance, Heinz recently introduced a 99-cent ketchup pouch in the U.S., to keep lower-income customers buying its products.
The Company said that it intends to spend an additional $120 million in fiscal 2013 on marketing and other brand-building plans to lift the growth.
Heinz in recent quarters, focused on its existing capabilities. The Company concentrated on three areas for most of its growth: emerging markets, its iconic ketchup business and its 15 largest brands.
In the latest quarter reported, emerging markets continued to be main driver of growth with organic sales up 17%. Ketch up sales climbed by 4.5% even as revenues from largest brands increased 4.8%.
Nevertheless, margins trimmed to 32.9%, down from 36.3%, due to higher marketing costs.
For the quarter ended April 29, the Company profits stood at $175.3 million, or 54 cents a share, down from $223.9 million, or 69 cents, a year earlier.
Heinz shares are marginally lower in early trading today. At last check, the stock was trading 0.50% lower at $53.28.
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