Heinz Reports 14% Growth in Third-Quarter Sales, 8% Growth in Operating Income and EPS of $0.68

Pittsburgh, Feb. 26 - H. J. Heinz Company today reported 14% growth in third-quarter sales to $2.6 billion and 8% growth in operating income to $406 million. The strong sales results were driven by successful innovation and a 16% increase in marketing, as stronger volume and pricing behind the Company's top brands fueled broad-based growth. Foreign exchange also contributed 5.3% of the sales growth.

“I am very pleased with our continued strong performance and growth momentum. Consumers across the globe are embracing our leading brands and innovative new products. We continue to succeed by driving consumer-validated innovation and investing in top-line growth,” said Heinz Chairman, President and CEO William R. Johnson. “Heinz remains on track to achieve record full-year sales and an EPS growth rate of 9% to 10% for the fiscal year.”

Heinz generated robust organic sales growth of 8.6% during the quarter, reflecting a 5.2% increase in volume and a 3.4% increase in net price. All of the Company’s Top 15 Brands achieved sales growth, led by 15% growth in the Heinz® brand, which includes such products as ketchup, soups, beans and infant/nutrition, and strong increases in Classico® pasta sauces, Ore-Ida® potatoes, Weight Watchers® Smart Ones® meals, Weight Watchers® meals, and ABC® soy sauce.

Operating income grew 8% from the year-earlier quarter, driven by continuing momentum in North American Consumer Products, Europe, Asia/Pacific and Rest of World, partially offset by the U.S. Foodservice business. Heinz achieved these outstanding financial results in the face of continuing commodity cost inflation, and sustained double-digit growth in marketing and R&D investments. Our profit success reflects cost-based pricing initiatives, innovation, productivity gains and favorable foreign exchange. Heinz, with its diversified global portfolio of brands and businesses, generated approximately 60% of its third-quarter sales in markets outside the United States.

Heinz reported third-quarter net income of $219 million, the same as a year ago despite a 560 basis point increase in the income tax rate. Heinz had a tax rate of 31.6% in this year’s third quarter, versus a rate of 26% a year ago. Per-share earnings rose 3% to $0.68 even with the higher tax rate. The Company anticipates a full-year tax rate of approximately 31% for the fiscal year ending April 30, 2008.

Third-Quarter Highlights

THIRD-QUARTER SEGMENT HIGHLIGHTS

NORTH AMERICAN CONSUMER PRODUCTS

North American Consumer Products continued to deliver strong results, driven by solid execution and innovation. Sales and operating income grew at double-digit rates, up 13% and 13.3% respectively. Organic sales grew approximately 10%, with volume up 5.4%, due primarily to strong growth of Weight Watchers^® Smart Ones^® and Boston Market® frozen entrees and Classico® pasta sauces. New products, including Fruit Inspirations® and Anytime Selections® frozen entrees propelled sales of the Smart Ones^® brand. Net pricing increased 4.5% largely due to Fiscal 2008 price increases on Ore-Ida^® frozen potatoes, Heinz® Ketchup and Smart Ones® frozen entrees.

Operating income increased 13.3% as strong sales growth more than offset commodity cost inflation and increased marketing and R&D investments. Operating income also benefited from productivity improvements and favorable mix.

EUROPE

Heinz Europe posted sales and operating income growth of 13.5% and 8.2% respectively. Organic sales increased 6.6%, driven by solid volume growth of 3.9% and price of 2.7%. The volume increase was principally due to the strong performance of Heinz^® Ketchup and soup, Pudliszki^® branded products in Poland, and the favorable impact of new product introductions such as Weight Watchers® Big Soups in Germany, Austria and Switzerland and new Honig® convenience meal varieties in the Netherlands. Net pricing increased primarily as a result of commodity-related pricing initiatives. Divestitures reduced sales 1.2% and favorable exchange translation rates increased sales by 8.1%.

Operating income increased 8.2%, driven largely by increased volume and price, along with favorable foreign exchange rates. These gains more than offset increased commodity costs and increased manufacturing costs in our U.K. and European frozen businesses.

ASIA/PACIFIC

Heinz Asia/Pacific continued to drive very strong growth in sales and operating income, up 27.4% and 38.2% respectively. Volume improvements of 9.8% drove 14% growth in organic sales, led by strong performances in Australia, Indonesia, China and India and improved results across all businesses within the segment. New product introductions and increased marketing helped propel growth. Pricing increased 4.2% reflecting increases on ABC^® soy sauce and beverages in Indonesia, Long Fong^® frozen products in China and nutritional beverages in India. Acquisitions, net of divestitures, increased sales 2.8%, and favorable exchange translation rates increased sales by 10.7%.

Operating income increased 38.2% due to increased volume and pricing, a favorable sales mix and favorable foreign exchange translation rates, partially offset by increased commodity and marketing costs.

U.S. FOODSERVICE

U.S. Foodservice organic sales increased 3.8%. Volume rose 4.3% primarily due to frozen desserts and soups sold to casual dining customers and driven by new products and promotions. These increases were partially offset by reduced guest traffic reported by many Heinz Foodservice customers. Pricing decreased 0.5%.

Operating income decreased 13.9% as increased volume was more than offset by higher commodity and energy costs.

REST OF WORLD

Sales for Rest of World increased 18.7%, driven by organic sales growth of 17.5%. Volume increased 2.5% due primarily to increased infant/nutrition sales in Latin America. Higher pricing increased sales by 15%, largely due to commodity-related price increases in Latin America and South Africa.

Operating income increased 11%, due mainly to increased pricing, higher volume and improved business mix.

YEAR-TO-DATE HIGHLIGHTS

Sales for the nine months ended January 30, 2008 increased 12.1% to $7.38 billion from $6.59 billion in the prior year. Organic sales increased 7.3%, reflecting growth in all five business segments. Volume increased 4.4%, as continued growth in the North American Consumer Products segment, Australia, New Zealand and the emerging markets combined with a strong performance by Heinz^® Ketchup, beans and soup in Europe and Italian infant/nutrition. Net pricing increased sales by 2.9%, mainly in the North American Consumer Products, U.S. Foodservice and European segments, as well as our businesses in Latin America and Indonesia. Foreign exchange translation rates increased sales by 4.9%.

Operating income increased at a double-digit rate, up 10.6%, reflecting the strong sales growth, favorable foreign exchange and productivity improvements which were partially offset by increased commodity costs. Year-to-date, Heinz has significantly increased its investment in marketing and R&D, up 21% and 16% respectively. Net income increased 7.6% to $651 million compared to $605 million in the prior year. The current year-to-date effective tax rate was 29.4% compared to 27.5% for the prior year.

Year-to-date diluted earnings per share from continuing operations increased 9.8% to $2.01 in the current year compared to $1.83 in the prior year.

FY08 Forecast

The Company anticipates full-year earnings per share of $2.60 to $2.62, including a full-year tax rate of approximately 31% for the fiscal year ending April 30, 2008.