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H.J. Heinz Company : Heinz Profit Slips 5.3% on Discontinued Operations

02/21/2013 | 07:06pm US/Eastern

By Nathalie Tadena

H.J. Heinz Co.'s (HNZ) fiscal third-quarter earnings slipped 5.3% as the ketchup maker recorded a larger loss from discontinued operations, though organic sales continued to improve in emerging markets.

The earnings report comes a week after Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) and private-equity firm 3G Capital unveiled plans to buy Heinz in a $23 billion deal, one of the largest acquisitions ever in the food industry. As part of the deal, shareholders will receive $72.50 in cash for each share. The deal will take Heinz private as it tries to expand sales in emerging economies while managing a challenging environment in developed markets.

Heinz sells 650 million bottles of ketchup in 140 countries annually and also sells baked beans under its flagship brand and offers baby food, Tater Tots and soup under a variety of other brand names.

For the quarter ended Jan. 27, Heinz reported a profit of $269.5 million, or 83 cents a share, down from $284.7 million, or 88 cents a share, a year earlier. The latest period included a $38.7 million loss from discontinued operations, compared with a year-earlier loss of $3.6 million. The latest period also included a special charge of four cents a share related to an early earnout payment of $60 million made in connection with its 2010 acquisition of soy-sauce maker Foodstar. Excluding special items, earnings from continuing operations rose to 99 cents a share from 96 cents a share.

Sales improved 2% to $2.93 billion. Organic sales, which exclude currency fluctuations, acquisitions and divestitures, rose 2.3%.

Analysts polled by Thomson Reuters most recently projected earnings of 90 cents a share and revenue of $2.99 billion.

Gross margin widened to 37.7% from 36%.

The company said its primary growth driver was emerging markets, which saw organic sales growth of 18% led by Latin America, Indonesia and China. Emerging markets represented 23% of total company sales in the latest period.

Global ketchup sales rose 4.2% on an organic basis, driven by strong performance in Russia, Latin America and Canada.

Overhead expenses were up 5.2%

Shares closed at $72.19 and were unchanged after hours.

-Write to Nathalie Tadena at nathalie.tadena@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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