Tags: Heinz | global | ketchup | HNZ

H.J. Heinz: Growth from Global Ketchup Craze

Thursday, 20 Oct 2011 01:54 PM

By Tim Plaehn

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The H.J. Heinz (HNZ) company is proof you can make a global business on the back of one product, in this case, ketchup. The company does not break down exactly how much ketchup it sells in its financial reporting but does provide growth rates for ketchup sales. And the global popularity of ketchup is a growth engine for Heinz.

Heinz divides its business into three product lines: Ketchup and sauces, meals and snacks, and infant nutrition. Ketchups and sauces bring in 43 percent of revenues and meals and snacks follow close behind with 40 percent of sales. Forty-five percent of sales are generated in North America, and Europe produces a little more than 30 percent of revenues. In 2010 the company counted 16 percent of sales from emerging markets.

From 2006 through the company's fiscal 2011, Heinz generated sales growth of 4.8 percent per year and earnings growth of 8.2 percent. In the first quarter of fiscal 2012, which closed at the end of July, revenue increased by 15 percent year-over-year.

The earnings report noted global ketchup sales increased by 14.6 percent. Adjusted earnings per share were 78 cents, up from 75 cents a year earlier. Management's full-year earnings guidance is $3.24 to $3.32 per share, compared to $3.08 earned in 2011.

For the 2012 fiscal year, the dividend was increased to 48 cents per share, up from 45 cents. The $1.92 annual dividend puts the stock yield close to 4 percent. The dividend has been increased at an 8 percent compounded rate over the last six years.

Emerging growth

At the end of 2010, Heinz management put forth a goal of 20 percent of sales from emerging markets by 2013. Emerging market sales hit 23 percent in the first quarter of 2012, up 45 percent year over year.

Long term growth plans have emerging market sales at 40 percent of total sales. Emerging market growth is being fueled by both acquisitions and organic growth.

Recently, UBS analysts upgraded HNZ to buy from neutral. The analysts at Jefferies & Company have just initiated coverage on the stock with a buy rating.

The company reports next on Nov. 21.

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