Heinz Chairman Reaffirms Fiscal Year 2009 EPS Outlook
In a speech which focused on how Heinz is optimizing its performance by focusing on its Five C’s: Consumers, Costs, Commodities, Cash and Currency, Mr. Johnson said, “We remain confident in the strategies that have produced industry-leading top and bottom-line results over the past three years."
20/02/09 At the Annual Consumer Analyst Group of New York (CAGNY) Conference in Boca Raton, Florida, Heinz Chairman, President and Chief Executive Officer William R. Johnson reaffirmed Heinz’s fiscal year 2009 earnings per share outlook of $2.87 to $2.91, a growth rate of 9% to 11%.
Commenting on Fiscal 2009, Mr. Johnson said, “We expect to deliver Heinz’s key financial targets for Fiscal 2009:
• Organic sales growth (combined volume and net price) of 6 percent;
• EPS in a range of $2.87 to $2.91, a growth rate of 9% to 11%; and
• Operating free cash flow (cash from operations less capital expenditures net of proceeds from disposal of PP&E) of around $850 million.”
In a speech which focused on how Heinz is optimizing its performance by focusing on its Five C’s: Consumers, Costs, Commodities, Cash and Currency, Mr. Johnson said, “We remain confident in the strategies that have produced industry-leading top and bottom-line results over the past three years.
These strategies are:
1. Grow the Core Portfolio;
2. Accelerate Growth in Emerging Markets;
3. Leverage Our Global Scale; and
4. Make Talent an Advantage.”
Mr. Johnson continued, “Our dividend has grown in each of the last six years since adjusting for the Del Monte spin-off and continuing to grow the dividend is a top priority, supported by strong cash flow metrics, which have historically been among the best in the industry.”
“Consumers are not only eating in more often, they are becoming increasingly more particular and sophisticated shoppers. The weekly trip to the supermarket is now accompanied with grocery lists and coupons or replaced altogether with multiple trips in different channels geared specifically to cost-effectively optimizing the family’s day-to-day menu.”
“Private label and strong brands can indeed co-exist. Private label needs strong brands to innovate and bring news and excitement to consumers. We understand our role in driving traffic in our categories, while our retail customers strategically use store brands to accommodate a discount-oriented subset of consumers. These economic times will clearly test consumer goods companies; but research confirms that consumers still prefer leading brands in most categories.”
“Going forward, our innovation will be focused more on well-tested ideas, as well as breakthrough ideas like Ore-Ida Steam n’ Mash. Now is the time to emphasize core products and categories, and avoid experimentation.”
“Emerging Markets remain among the most significant long-term growth opportunities for Heinz. We have built capable manufacturing, distribution and sales infrastructures, that have given us a significant leg up in these markets, but we still have only scratched the surface of their potential. Heinz’s Emerging Markets have generated excellent returns over the last several years and they now contribute an increasing share of both sales and profits. We expect that trend to accelerate in the coming years.”
“We have seen significant changes in consumer dining patterns as QSR’s have benefited at the expense of virtually every other segment. We are uncertain as to how these trends will evolve as economic conditions improve, but regardless, we need to reposition our business to take advantage of our strong brands, while also driving out cost and improving margins. We are placing a higher emphasis on our branded front-of-house business, particularly Heinz Ketchup.”
“Reducing costs to drive margins will become increasingly important going forward as we anticipate an industry-wide slow down in price-driven top-line growth.”
“Despite a general decline in commodity inflation, some key inputs remain above historic levels and we are still working through hedged positions. We do see some improvement coming.”
“I would note that the majority of our pricing to offset commodity inflation has been implemented.”
“Global currency shifts continue to be among the most volatile in history. We have, in many cases, seen five years of increasing dollar weakness more than wiped out in three months. The currency issue, we believe, is cyclical and, therefore, we will not allow it to deter us from our strategy or long-term plans.”
Finally, Mr. Johnson noted that, “We will not provide any guidance for Fiscal 2010 since our new year does not commence until May. The current global economic environment, particularly as it pertains to currency and commodities, remains too volatile and unpredictable to make reliable forecasts this far in advance. What I can say at this point is that we expect positive top and bottom-line growth on a constant currency basis.”
