Restructuring Savings Should Fuel Growth

Article Excerpt

H.J. HEINZ CO. $40 (New York symbol HNZ; Income Portfolio, Consumer sector; WSSF Rating: Above average) aims to save $355 million over the next two years, mainly through plant closings. It also plans to cut the allowances it grants to retailers in exchange for premium shelf space. That should save it $145 million over two years. To put these figures in context, Heinz earned $2.10 a share (total $717.7 million) before unusual items in the fiscal year ended May 3, 2006. That’s down 5.0% from $2.21 a share ($779.8 million) a year earlier. Sales grew 6.2%, to $8.6 billion from $8.1 billion. If you exclude the impact of changes in foreign-exchange rates, Heinz’s sales would have grown 8.2%. The company plans to use its savings to expand development of new products and increase marketing spending by about 20%. It also plans to buy back $1 billion of its stock in the next two years. Heinz just raised its quarterly dividend 16.7%, from $0.30…

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