Heinz profits fall 11% in competitive market

THE Irish arm of US food giant Heinz recorded an 11% drop in pre-tax profits last year to €16.6 million.

According to accounts filed with the Companies’ Office, Dublin-based HJ Heinz (Ireland) also experienced an 8% drop in turnover from €118.7m to €108.9m to the year ended April 29, 2009.

The filings show the producer of such iconic brands as Heinz Ketchup and Heinz Baked Beanz also sustained a 13% drop in operating profits from €18.24m to €15.9m.

Its Irish operations, north and south, are engaged in the sale, marketing and distribution of Heinz brands.

Heinz also sells and markets former brands of HP Foods, including HP and Lea Perrins.

“Despite volume growth year on year, both turnover and profit have reduced compared with 2008,” according to the accounts.

In their report, the directors highlight “significant sales pricing activity and commodity cost inflation” as two of the reasons for the drop in turnover and profit.

The filings show that the company’s cost of sales last year dropped by 8%, from €94.7m to €86.8m.

The accounts show that the company employed 39 people in Ireland last year, with staff costs, including that of executive directors, increasing by 5% to €2.8m.

The accounts show that the company had accumulated profits of €25.9m at the end of April last year.

The filings show that the company paid a dividend of €12.2m last year, compared to a €12.8m dividend paid in 2008.

The accounts show that directors’ remuneration last year increased by 14% from €488,394 to €557,915.

On the ‘future outlook’, the directors state “the commercial environment is expected to remain highly competitive in the year ahead, with further retailer share consolidation and pressures on the availability of space in store, from food and also non-food categories, as retailers continue to expand their services beyond traditional grocery”.

The directors said: “In addition to competition from other third party branded players, retailers are also expanding their own brand range recognising the more challenging economic, retail and consumer environment.

“However, with a continuing focus on product quality, reinforcing the brand value equation and relevant innovation to meet changing consumer needs, we remain confident that the business will be further sustained in the future.”

On the business environment, the directors state: “The grocery trade continues to be a highly competitive market with a number of strong indigenous and international brands across the various sectors in which the business operates.

“The grocery retailer set is highly concentrated with three main players, Tesco, Dunnes and Musgrave SuperValu, accounting for in excess of 70% of the total market, while discounters Aldi and Lidl are growing their participation in the grocery market, north and south.”

Globally, Heinz employs 32,500 people and recorded a turnover of $10.1 billion last year, which includes the sale of 650m bottles of its ketchup brand every year.

Heinz was founded in Sharpsburg – a suburb of Pittsburgh – Pennsylvania, in 1869 by entrepreneur Henry John Heinz.