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Heinz eyes new products to boost company profits
Wednesday, December 06, 2000 By Patricia Sabatini, Post-Gazette Staff Writer
H.J. Heinz Co. reported yesterday fiscal second-quarter profits in line with Wall Street projections, as Chairman William Johnson again signaled he'd like to unload the company's sagging canned pet food business.
"Would you like to give me a call later if you have any ideas?" Johnson, also chief executive officer, responded when asked at an investors' conference in New York whether the canned business would be sold.
The segment, which includes 9-Lives cat food, continues to be a drag as the nation's tastes shift toward dry pet foods.
Overall, Heinz's sales fell 2 percent in the quarter that ended Nov. 1, to $2.3 billion from $2.34 billion. Excluding year-ago sales from the Weight Watchers diet class business, which Heinz sold last year, sales edged up 1.4 percent.
Besides canned pet food, sales were hurt by the StarKist tuna division, which is struggling in the United States because of the lowest raw tuna prices in 50 years.
Heinz is pinning a turnaround on its just-launched tuna in a pouch, a pricier product that Johnson believes consumers will like so much that they'll abandon tuna packed in cans.
The pouch, which competitor Bumble Bee is expected to copy early next year, "will change the industry dynamics," Johnson said.
He said Heinz would continue to propel growth through new products and a "steady stream of acquisitions."
Besides tuna in a pouch, some recent innovations include EZ Squirt green-colored ketchup targeted at children, and a nonrefillable plastic ketchup bottle aimed at preventing restaurants from refilling Heinz bottles with competing brands.
"Such innovation is a priority in all our businesses," Johnson said.
As for the rapidly consolidating food industry, Johnson indicated Heinz would continue on the sidelines but would snap up tasty morsels being discarded by others as a result of megamergers.
"There are a lot of benefits coming out of the consolidation of these other companies as they realize, from a legal perspective, they have to get rid of some businesses.
"Being on the periphery may be the most profitable place to play," he said.
"Stay tuned. I think over the next three to four months, you will see some fairly significant moves from Heinz on both the retail and food service side."
Net income for the quarter skidded to $190 million, or 54 cents per diluted share, from $415.5 million, or $1.14 a year earlier, when Heinz recorded a big gain on the Weight Watchers sale.
Excluding that gain and restructuring costs in both periods, core profits climbed 5.8 percent to $241.7 million from $228.4 million, while per-share profits jumped 9.5 percent, to 69 cents from 63 cents.
Johnson said Heinz was on track to meet the consensus earnings estimate among analysts of $2.79 a share for the full year.
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