H.J. Heinz Co. Chairman William R. Johnson said Friday he has replaced top executives in New Zealand, Australia and Japan and in an undisclosed North American unit and will further consolidate management after issuing Heinz's second profit warning in less than a year.
Johnson said second quarter earnings, to be announced Dec. 13, will be in the range of 59 to 60 cents a share. Heinz originally forecast earnings in the range of 64 to 66 cents. Johnson also said third and fourth quarter earnings for fiscal 2002 will be roughly equal to the first half of the year.
The company's poor results in Asia and the Pacific, coupled with a plunge in its previously strong-performing food service business, and aggravated by fallout from the Sept. 11 terrorist attacks, brought about yesterday's warning, Johnson said.
It comes despite the fact that sales are expected to increase 10 percent for the quarter, primarily due to acquisitions. Johnson will travel to New York on Dec. 13 to issue Heinz's second-quarter earnings report.
Heinz shares closed down $2.80 yesterday at $39.90.
Asked by analyst John McMillan of Prudential Securities if the company's Asia-Pacific problems stemmed from "management screw-ups," Johnson bluntly answered, "Yes."
"The breadth of the company geographically is stretching our resources," Johnson said, indicating he will bring wider swathes of the business under the purview of his most effective and experienced managers.
Heretofore, food service had been Heinz's best performing business segment, posting double-digit growth in each of the past four years and accounting for nearly 20 percent of the company's $9.5 billion in sales.
"There has been a precipitous fall-off in dining out, airline traffic and other travel-related dining experiences," Johnson said, indicating that food service will suffer a $25 million to $30 million decline in the second quarter compared to the year earlier period.
"We have not seen any signs of improvement," Johnson said of the remainder of the fiscal year.
He believes the business will rebound in fiscal 2003, which begins next May, if the economy stabilizes and people return to past routines.
McMillan said he was frustrated by what he called Heinz's "leaky bucket" syndrome, where once one problem in the business is eradicated, new ones emerge to replace it.
"I share your frustration," Johnson said.
Johnson tried to turn attention to what Heinz is doing right. He said the company's frozen meals and snacks business, pet treats and ketchup, condiments and sauces, are all performing better than anticipated due to new product innovations such as Hot Bites frozen snacks, Boston Market meals and gravies and EZ Squirt colored ketchup, in addition to improvement in its tuna business in North America and Europe.
"Heinz has strong brands, good cash flow and is increasing its presence in growing categories," Johnson said.
