Sauce and spam boost Heinz, Hormel profits 

Source: www.heinz.comHeinz tomato sauce

Packaged food makers HJ Heinz Co and Hormel Foods Corp both posted better-than-expected quarterly profits as consumers eat more at home to save money, lifting sales of products like tomato sauce and Spam.

Heinz, which makes Ore-Ida potatoes in addition to tomato sauce, said that it also benefited from strength in emerging markets and price increases, although the stronger US dollar cut into sales outside the United States, causing net income to fall.

Hormel, which also makes Dinty Moore canned stew, saw profits boosted by lower costs for livestock feed in its Jennie-O turkey business.

Most US food companies have benefited over the past year from consumers trying to cut costs by eating more at home during the recession rather than at restaurants.

"People are willing to sacrifice convenience and make their own meals," Edward Jones analyst Matthew Arnold said of consumers cutting costs.

It remains to be seen, however, whether people who rediscovered eating at home because of the recession will continue to do so when the economy picks up, or whether they will flock back to restaurants.

"When they can afford to eat away again, they will do it, I think," Arnold said. "We're a busy, busy society and we're not getting less busy. When people can afford convenience, they're going to pounce on convenience."

Food companies also raised prices last year as costs for commodities like wheat, corn and oil soared. Even as many of those costs have fallen, they have largely been able to maintain their pricing.

Hormel has benefited more from falling commodity costs than Heinz, which is still facing rising prices for tomatoes, tin-plate and potatoes, even as resin and dairy prices fall.

Heinz profit fell to $US219.1 million, or 67 cents a share, in the first quarter ended July 29, from $US234.3 million, or 72 cents a share, a year earlier.

Analysts on average forecast earnings of 62 cents a share, according to Reuters Estimates.

Sales fell 4.3% to $US2.47 billion, topping the analysts' forecast of $US2.44 billion.

Excluding the impact of currency, sales rose 4.5%, the company said.

For fiscal 2010, Heinz expects sales to rise 4% to 6%, excluding the impact of currency fluctuations, with earnings per share up 5% to 8% on that basis.

Hormel's net earnings rose to $77.2 million, or 57 cents a share, in the third quarter ended July 26, from $51.9 million, or 38 cents a share, a year earlier.
 
Analysts on average forecast profit of 52 cents a share, according to Reuters Estimates.

Sales fell 6.2 percent to $1.57 billion as the company cut back on turkey production and the weak economy hurt sales to restaurants.

Earlier this month, Hormel raised its full-year earnings forecast to a range of $2.36 to $2.42 a share, citing its better-than-expected third quarter. The company stood by that outlook on Thursday.

Heinz shares were up 63 cents or 1.66 percent at $38.58 on the New York Stock Exchange late on Thursday morning, while Hormel was up 17 cents or 0.5 percent at $37.41, off an earlier high at $38.25.