H.J. Heinz Co.'s profit for the fiscal first quarter fell 6 percent as the world's largest ketchup maker shuttered plants and slashed jobs. But, excluding these cost-cutting measures, results beat Wall Street estimates because of sales growth in emerging markets.
Officials said the company's performance exceeded their expectations despite the fact that it faced tough economies in developed markets like the U.S. because of strong growth in places such as China and Brazil. Heinz, like most food and beverage companies, has been working to improve efficiency as it faces higher costs for commodities and American consumers that continue to cut back on spending during the economic downturn.
"We are off to a solid start to the year while continuing to adapt our strategies and tactics to meet the changing consumer dynamic," said Art Winkleblack, Heinz chief financial officer told investors Tuesday.
Heinz said that it's raising prices and making other efficiency improvements to offset rising costs for tomatoes and other commodities. In May, the company announced that it would be cutting jobs, closing plants and raising prices to boost profit. Additionally, Heinz plans to shed up to 1,000 jobs globally in fiscal 2012.
Because of its efforts to cut costs and improve productivity, Heinz on Tuesday reported profit of $226.1 million, or 70 cents per share, during the three months that ended July 27. That's down from $240.4 million, or 75 cents per share, during the three-month period a year ago.
After adjusting for costs associated with closing four factories, job reductions and other productivity initiatives, the company earned 78 cents per share. That beats the 76 cents per share analysts were expecting, according to data from FactSet
Revenue rose 15 percent to $2.85 billion, helped by sales growth in emerging markets and acquisitions. Wall Street expected revenue of $2.79 billion.
For growth, the company is focusing on emerging markets like China, India, Russia and Brazil. As part of that effort, Heinz acquired the Quero brand in Brazil in April and Chinese soy sauce maker Foodstar in November. The buyouts boosted quarterly sales by 4.6 percent.
The strategy is working. Heinz earned about 32 percent of its revenue during the quarter in the U.S., while emerging markets made up 23 percent of all sales during quarter, up from 18 percent in the prior-year period. The company said it is confident in its growth potential as it expands globally.
Heinz reaffirmed its fiscal 2012 earnings of $3.24 to $3.32 per share, which excludes productivity initiative costs. Analysts expect earnings of $3.35 per share.
Shares fell 60 cents, or 1.15 percent, to close at $51.44 Tuesday.
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AP Business Writer Sarah Skidmore contributed to this report from Portland, Ore. Michelle Chapman contributed from New York.