Heinz Second Quarter EPS Rises 20% to $0.71, Sales Increase 13%

Pittsburgh, Nov. 29 - H. J. Heinz Company today reported strong double-digit growth in second-quarter sales, operating profit and earnings per share and announced that it is on track to achieve record full-year sales in Fiscal 2008.

Second-quarter results were fueled by the Company’s focus on innovation, accelerated growth in Europe and emerging markets, and a 26% increase in infant nutrition sales. Heinz spent 23% more on marketing in support of the Company’s consumer-driven innovation initiatives. As a result of its momentum, Heinz today raised the top end of its Fiscal 2008 range to $2.62 per share.

“Heinz is connecting well with consumers across the world through creative marketing and a full pipeline of innovation. This has contributed to our strong momentum, including the excellent sales and profit performance in the second quarter and our improved outlook for Fiscal 2008,” said Heinz Chairman, President and CEO William R. Johnson.

Mr. Johnson continued, “Based on our momentum, we expect to achieve Fiscal 2008 earnings per share growth of approximately 9-10%, while incrementally investing in marketing, global processes and systems, and managing continuing commodity inflation. Heinz is driving strong operating income and is managing commodity inflation with faster sales growth, strong net pricing, productivity gains, and currency tailwinds resulting from our unique international scale.”

In the second quarter, Heinz sales increased 13.0% to $2.52 billion, from $2.23 billion a year ago. Organic sales, which exclude the impact of foreign currency exchange rates and acquisitions/divestitures, grew 8.1%. Second-quarter net income rose 15% to $227 million or 71 cents per share, compared with income from continuing operations of $197 million, or 59 cents per share, a year ago.

Operating income in the second quarter rose 9.9% to $421 million despite the incremental marketing investments and the impact of higher commodity costs affecting the entire food industry. The strong growth in operating income reflected broad-based profit growth in Europe, Asia/Pacific, and North American Consumer Products, driven by strong volume, net price gains, the success of productivity initiatives and Heinz’s increased investments in marketing and R&D to drive innovation and growth, especially in its top 15 brands.

Second Quarter Highlights

• Sales of the Company’s top 15 brands grew 14%.
• Core categories -- Heinz’s consumer-validated innovation and marketing produced compelling sales growth in each of its core categories in the quarter. Ketchup and Sauces grew 9%, Meals and Snacks increased 14%, and Infant Nutrition posted an impressive increase in sales of 26%.
• Ketchup & Sauces -- Global ketchup sales were up 5% driven by strong performance in Europe. In the U.K., Heinz® Ketchup achieved its highest household penetration in over three years as new varieties such as Reduced Sugar & Salt, Organic Top Down, and Tomato Ketchup with a Twist brought new consumers into the category.
• Meals & Snacks -- Globally, soup sales increased 18% and beans rose 13%. Sales of Heinz soups in the U.K. rose 23.4% and achieved record value share following the launch of the new Taste of Home, Farmers’ Market, and Soups of the World ranges.
• Infant Nutrition -- Sales of Plasmon, Italy’s leading brand of infant nutrition products, rose 18.9%, reflecting increased innovation, higher volume on existing products, and increased net pricing.
• Emerging Markets -- Heinz’s emerging markets continued to excel, with sales up 24% in the quarter driven by new products and packaging improvements. In China, sales of Long Fong frozen dumplings, rice balls, appetizers, and hot pot soups increased more than 25%, and sales of Heinz infant nutrition products in China increased more than 40% following the successful relaunch of both Heinz infant cereals and jars.

Heinz managed commodity inflation with strong growth, price increases averaging 2.6% and continued productivity gains. Favorable foreign exchange offset a small portion of commodity cost increases in the quarter.

The tax rate for the quarter was 29.8% versus a rate of 34.8% in the prior year. Heinz expects its full-year tax rate to be around 31%, compared to last year’s full year rate of 29.6%.

SECOND-QUARTER SEGMENT HIGHLIGHTS

NORTH AMERICAN CONSUMER PRODUCTS

Sales of the North American Consumer Products segment increased 12.6%, with organic sales up 9.7%. Volume increased an impressive 6.7%, driven primarily by Smart Ones^® frozen entrees and desserts, Boston Market® frozen entrees and Classico® pasta sauces. Net price increases on Ore-Ida^® frozen potatoes, along with reduced promotions on Classico® pasta sauces, resulted in overall price gains of 3.0%. The prior year acquisition of Renee’s Gourmet Foods increased sales 0.9% and favorable Canadian exchange translation rates increased sales 1.9%.

Heinz will continue to deliver against its commitment to Health & Wellness with the December 3 launch of Smart Ones Fruit Inspirations™, the first line of frozen meals to contain a half-serving of fruit.

Operating income increased almost 7%, due to volume and pricing increases, which were partially offset by continued increases in commodity costs.

EUROPE

Heinz Europe posted very strong results in the quarter as sales increased 18.0%, with organic sales growth of 10.4%. Volume increased 9.1%, principally due to excellent performance on Heinz^® ketchup, soup, beans and salad cream, Italian infant nutrition, and Pudliszki^® branded products in Poland. Net pricing increased sales 1.3%. Divestitures reduced sales 1.6%, while favorable exchange translation rates increased sales by 9.2%.

Operating income increased 14.8%, driven largely by increased volume and price along with favorable foreign exchange rates. These increases were partially offset by increased commodity costs and incremental marketing investments.

ASIA/PACIFIC

Heinz Asia/Pacific also generated very strong results in the quarter as sales increased 16.8%. Organic sales growth was 6.1% reflecting strong results in India, China and Australia, related primarily to new product introductions. Volume rose 3.5% behind increased marketing to support new products. Pricing increased sales 2.6% and acquisitions, net of divestitures, increased sales 2.2%, primarily due to the first quarter acquisition of the Cottee’s® and Rose’s® premium branded jams, jellies and toppings business in Australia and New Zealand. Favorable exchange translation rates increased sales by 8.4%.

Operating income increased 21.8%, due to increased volume and pricing, favorable sales mix and favorable foreign exchange translation rates, partially offset by increased commodity costs and marketing expense.

U.S. FOODSERVICE

Sales of the U.S. Foodservice segment increased slightly behind a 2.1% improvement in net price largely related to commodity driven price increases and reduced promotional spending on Heinz Ketchup, tomato products and frozen soup. Volume decreased 1.7% reflecting decreases in tomato products and frozen appetizers, partially offset by increases in frozen desserts. Divestitures reduced sales 0.3%.

Operating income decreased 13.5%, as U.S. Foodservice was disproportionately hit by rising commodity costs, particularly dairy and oil. This performance is factored into the Company’s outlook for the full year.

REST OF WORLD

Sales for Rest of World increased 21.7% due to organic sales growth of 20.5%. Volume was up 6.7% due primarily to strong performances in the emerging markets, led by infant nutrition sales in Latin America. Higher pricing increased sales by 13.8%, due primarily to price increases and reduced promotions in Latin America. Favorable foreign exchange translation rates increased sales 1.3%. These strong commercial gains drove an increase in operating income of 23.4%.

YEAR-TO-DATE HIGHLIGHTS

Sales for the six months ended October 31, 2007 increased 11.2%, well above the long-term target growth rate of 4%. Organic sales increased 6.7%, with organic growth generated in all five business segments. Volume increased 4.0%, reflecting strong volume growth of 5.9% in Europe and sustained growth in North American Consumer Products, Australia, New Zealand, and the emerging markets. Net pricing increased sales by 2.7%, mainly in North America, as well as Heinz’s businesses in the U.K. and Latin America. Divestitures, net of acquisitions, decreased sales by 0.3%. Foreign exchange translation rates increased sales by 4.8%.

Operating income increased 12.1%, as strong volume, net price increases, and productivity improvements, were partially offset by continued increased commodity costs. For the first half of the year, SG&A excluding marketing is favorable by 110 basis points as a percentage of sales. On a year-to-date basis, the tax rate is consistent with last year at 28.3%. Income from continuing operations was $432 million compared to $392 million in the prior year, an increase of 10.4%. Diluted earnings per share from continuing operations was $1.34 in the current year compared to $1.17 in the prior year, up 14.5%, which also benefited from a 3.3% reduction in fully diluted shares outstanding. Net income was $432 million compared to $386 million, an increase of 12.1%.