Exhibit 99.2
Heinz Details Superior Value and Growth Plan for Fiscal Years 2007 and 2008
PITTSBURGH--(BUSINESS WIRE)--June 1, 2006--H.J. Heinz Company
(NYSE:HNZ):
-- $355 million in cost reductions
-- $145 million in reduced trade spend
-- $1 billion in additional share repurchases over FY07 and FY08
-- 16.7 percent increase in dividend to $1.40 per common share
-- 10 percent Earnings Per Share growth for FY07 to $2.35
H.J. Heinz Company (NYSE:HNZ) Chairman, President and CEO William
R. Johnson will outline the company's Superior Value and Growth Plan
for fiscal years 2007 and 2008, this morning at 8:30 a.m. during its
fiscal year 2006 fourth quarter and full-year earnings conference, and
later at the Sanford C. Bernstein Strategic Decisions Conference, both
in New York. Mr. Johnson will be joined by Dave Moran, President and
CEO of North American Consumer Products; Scott O'Hara, President and
CEO of Heinz Europe; and Art Winkleblack, CFO. Speeches and slides
will be available live on www.heinz.com and starting at 9:30 a.m. on
www.heinzsuperiorvalue.com.
During the next two years, Heinz plans to achieve $355 million in
cost savings and $145 million in trade spend reduction. The Company is
committed to reinvesting a portion of the savings in growing its
sharply focused portfolio of leading brands.
Specifically, the company expects to realize the following savings
in the coming two fiscal years:
-- $265 million in cost of goods sold and $90 million in SG&A,
totaling $355 million
-- Reduction of deals and allowances by nearly $145 million
The company will reinvest a significant portion of the
productivity savings in sales growth:
-- $317 million in marketing and advertising in FY07, an 18.7
percent increase over FY06
-- Launch of more than 100 new products in FY07
-- Double-digit increase in research and development funding in
each of the next two years
These actions are expected to produce the following financial
results:
-- EPS growth of 10 percent in FY07 to $2.35 per share and a
further 8 percent to $2.54 in FY08.
-- Sales growth of 3-4 percent in FY07 and 4 percent or better in
FY08.
-- Operating income growth of more than 8 percent in FY07.
Heinz intends to return nearly $2 billion to shareholders over the
next two years as a result of the following:
-- A 16.7 percent dividend increase to $1.40 per common share in
FY07, from $1.20 per share in FY06, for a payout ratio of
approximately 60 percent of expected FY07 EPS, with future
increases indexed to expected EPS growth, maintaining a payout
ratio of about 60 percent
-- $1 billion in share repurchases over the next two years
Following a four-year turnaround, Heinz is now a leaner, sharply
focused business with some of the world's best brands. The Superior
Value and Growth Plan outlined today builds on the progress Heinz has
made and has three key objectives:
1) Reduce costs to improve margins
2) Grow the core portfolio
3) Generate cash to deliver superior shareholder value
Commenting on the plan, Heinz Chairman, President and CEO William
R. Johnson said: "Our board and management are unified in our focus to
deliver superior shareholder value. The Heinz plan sets aggressive but
realistic goals for the next two years. We have the right strategy,
the right brands and the right people to drive the business forward.
We are in fighting shape to deliver high quality earnings growth by
relentlessly attacking non-value-added costs and innovating and
growing some of the world's best brands."
SUPERIOR VALUE AND GROWTH PLAN -- AN OVERVIEW
Below are details of the company's three-part strategy to deliver
superior value and growth over the next two fiscal years:
I. Reduce Costs to Improve Margins:
During the past 18 months, Heinz's Board of Directors and
management team worked together to craft plans for aggressive
cost-cutting, plant closings and employee headcount reductions. During
the next two years, Heinz will:
-- Drive Efficiency in Trade Spend. During the past three years,
Heinz focused its efforts on driving efficiencies and reducing
trade spend in its United States Consumer Products Business
Unit, resulting in a 430 basis point reduction in trade spend
in that unit. During FY07, the company will implement its
successful U.S. trade management model in the other major
business units. The opportunity is particularly large in
Europe, which is expected to provide a significant portion of
the $145 million in trade spend reduction Heinz expects over
the next two fiscal years.
-- Integrate Global Supply Chain. During FY2007 and FY2008, the
company plans to continue integrating its $6 billion global
supply chain by better leveraging direct and indirect
procurement, rationalizing the manufacturing footprint and
driving continuous improvement initiatives. The company has
identified 15 plants that it intends to exit in fiscal 2007,
producing the majority of the company's expected employment
reduction in FY07 of approximately 2,700, or approximately 8
percent. Together, these initiatives should result in at least
$165 million in cost savings in FY2007. Heinz is evaluating
plans to exit up to an additional five plants in FY2008.
-- Reduce Selling, General and Administrative Costs. In FY2007,
the company expects to generate SG&A savings of $60 million.
About $30 million will be sourced from headcount and salary
reductions; $20 million from reduced professional fees as a
result of our expanded indirect procurement program and $10
million from reduced costs in its U.S. distribution network.
The company expects another $30 million in SG&A savings in
FY2008.
II. Grow the Core Portfolio:
During the past four years, the company has improved its portfolio
to ensure that it is operating in three value-added core categories
and in markets where Heinz has a mix of leading brands, strong
profitability and unique capabilities.
Three Value-Added Categories
The company's three categories, all with strong underlying
consumption trends, are:
-- Ketchup and Sauces, which leverages clear competitive
advantages and Heinz's unparalleled food industry heritage
-- Meals and Snacks, which has a portfolio of well-positioned,
leading and growing brands, including Ore-Ida(R), Smart
Ones(R), Heinz(R), Weight Watchers(R) from Heinz(R) and
Wattie's(R), and
-- Infant Food, a high-margin business with commanding leadership
positions in each of the seven markets where Heinz competes
under two strong brands: Plasmon(R) and Heinz(R)
Heinz's tighter category focus has resulted in a greater emphasis
on developing new products that deliver superior taste, better
nutrition and more convenient packaging that appeals to its consumers
and their diverse lifestyles. In FY2007, the company expects to launch
over 100 new products in all three categories. Some examples include:
-- Fridge Door Fit Ketchup
-- Ore-Ida(R) Easy Breakfast Potatoes
-- New varieties of Classico(R) sauce, including new organic
varieties
-- New Smart Ones(R) entrees and desserts
-- The launch of Smart Ones(R) and TGI Friday's(R) in Canada
-- Mean Beanz and international soups in Australia
-- New recipe meals for toddlers in the U.K.
-- Wattie's(R) Sweet and Sour sauces in New Zealand
One innovation that has garnered significant recent attention with
tremendous potential in New Zealand and the U.K. is Baked Bean
Toasties, a convenient twist on a healthy Heinz-inspired British
staple, beans on toast, which seals the beans inside the bread like a
toaster pastry.
With its legacy of pure food products, Heinz is focused on helping
consumers to live healthier lives, while enjoying great-tasting foods.
The company now offers a wide range of foods catering to the
fast-growing health and wellness trend. These include products that
are organic, contain reduced sodium and sugar or provide enhanced
functional benefits, such as Heinz(R) Organic and reduced sugar
Ketchup, and the entire range of Smart Ones(R) and all-natural
Classico(R), and new products such as Heinz(R) Spaghetti Plus with
calcium and Omega 3 in Australia, and low sodium beans and soups and
multigrain pasta in the U.K. Heinz(R) and Plasmon(R) infant foods also
cater to a wide range of infant nutritional, allergenic and digestive
concerns.
Heinz plans a double-digit increase in investment in research and
development in each of the next two years, and is committed to
increasing marketing spend by $50 million, or approximately 19
percent, in FY07, as it builds on its strong brand equities and
supports the new product launches.
Focused Global Markets
Together with its sharper portfolio focus, Heinz will devote its
energy and resources primarily to its six developed markets of the
U.S., Canada, U.K., Italy, Western Europe and Australia/New Zealand
and five emerging markets. The developed markets account for half of
the $1.5 trillion global packaged food market and generate more than
85 percent of Heinz's sales and approximately 95 percent of economic
profit.
Heinz's fast-growing emerging markets are Russia, India, China,
Indonesia and Poland, which represent over 40 percent of the world's
population and 15 percent of the world's GDP growth. Heinz expects to
generate one-quarter of its total sales growth in fiscal 2007 from
these five markets, which are forecast to grow sales by over 10
percent.
In these emerging markets, Heinz has strong local partnerships,
and leading brands, such as Picador(R) in Russia, Complan(R) in India,
Long Fong(R) in China, ABC(R) in Indonesia and Pudliszki(R) in Poland,
as well as the Heinz(R) brand in all of them. Heinz expects
double-digit profit margins in FY07 in these markets, where fixed
costs are among the lowest in the company.
III. Generate Cash to Deliver Superior Shareholder Value:
On May 31, 2006, the Heinz Board of Directors approved an increase
of $0.20 per share to its annual dividend on the company's 25 cent par
value Common Stock. This represents a 16.7 percent increase from $1.20
per share in FY06 to $1.40 per share in FY07, effective with the July
10, 2006 payment of 35 cents per share to all shareholders of record
at the close of business on June 24, 2006. The payout ratio will
increase to approximately 60 percent of projected FY07 EPS, and will
be indexed to future EPS growth to maintain a payout of approximately
60 percent. The Heinz Board of Directors also declared a quarterly
dividend of 42.5 cents per share on the company's Third Cumulative
Preferred Stock, $1.70 First Series, payable July 1, 2006 to all
shareholders of record at the close of business on June 24, 2006.
The Board also approved the additional repurchase of $1 billion in
shares over FY07 and FY08.
Heinz increased operating free cash flow by nearly 2.5 times in
the past four years versus the previous four-year period, and achieved
the highest cumulative four-year cash flow in company history. Heinz
will continue driving cash flow to build shareholder value. In the
next two fiscal years, the key sources of cash flow are expected to be
faster earnings growth, continued reduction of the cash conversion
cycle (CCC) by 2 to 3 days per year, strong discipline on capital
spending, in a range of 2.5 to 3.0 percent per year, and the sale of
under-utilized assets.
Strengthening the Global Management Team
Over the past four years, the company has assembled a deep bench
of proven executives from both within and outside the company. Some
examples of recent executive changes are:
-- Dave Moran, Executive Vice President, President and CEO, North
American Consumer Products, will assume responsibility for a
combined North American Consumer Products and Foodservice
divisions at the beginning of FY2008. Mr. Moran has been
working in tandem with Jeff Berger, CEO of Heinz Foodservice,
to pursue synergies across the two businesses, which represent
50 percent of global sales. By unifying the North American
business under a single leader, the opportunity for additional
growth and cross-fertilization is tremendous. Since the
establishment of the Consumer Products unit in 2003, Mr. Moran
and the energized U.S. and Canadian teams have delivered
cumulative sales growth of 21 percent and profit growth
(excluding special items) of 30 percent.
-- Jeff Berger, who has been President and CEO of Heinz
Foodservice since 1994 and has overseen the dynamic growth of
the Foodservice division for two decades, will become Chairman
of Global Foodservice. Mr. Berger will provide Mr. Moran with
invaluable expertise and customer relationship advice through
FY2009.
-- Scott O' Hara joined Heinz on Jan 1, 2006 and is President and
CEO of Heinz Europe. Mr. O'Hara is a food industry executive
steeped in aggressive cost reduction and growth and is veteran
of the European market with a strong track record of results.
-- David Woodward will join Heinz on June 26, 2006, as the new
President of Heinz U.K. & Ireland. Mr. Woodward will leverage
his extensive experience following his successful record with
several large consumer packaged goods companies in the U.K.
-- Mike Hsu, under whose leadership the Ore-Ida(R) and Smart
Ones(R) brands have blazed the trail of disciplined new
product development for Heinz, has been appointed President
and Chief Operating Officer of U.S. foodservice. Mr. Hsu's
brand-building skills will be instrumental in accelerating the
growth of the largely branded Foodservice business with its
growing customers, while helping bridge the narrowing divide
between the converging retail and foodservice businesses.
-- John Hans, one of the architects of the successful U.S.
Consumer Products trade spend efficiency model, has assumed
the role of Vice President of Sales for the U.K., where he
will migrate that successful model to drive substantial and
immediate trade spend improvement.
-- Suzanne Douglas, General Manager of Marketing for Australia,
who has overseen a significant improvement in new product
development and success rates in her native country, has been
appointed Chief Marketing Officer for the U.K., where she will
be charged with energizing the family of Heinz(R) brands.
Further information about Heinz's Superior Value and Growth Plan
and updates on its progress can be found at
www.heinzsuperiorvalue.com, an informational website dedicated to
Heinz's efforts to drive long-term sustainable growth and shareholder
value.
Heinz also today issued a separate release on its fourth quarter
and year end FY2006 financial results.
MEETING WITH SECURITIES ANALYSTS -- INTERNET BROADCASTS
Heinz will host a conference call with security analysts today at
8:30 a.m. (Eastern Time). The call will be webcast live on
www.heinz.com and will be archived for playback beginning at 2 p.m.
The call is available live via conference call at 800-955-1760 (listen
only). It will be hosted by William R. Johnson, Chairman, President &
CEO; Art Winkleblack, Executive Vice President and Chief Financial
Officer; Dave Moran, Executive Vice President -- Heinz North America
Consumer Products; Scott O'Hara, Executive Vice President -- Heinz
Europe; and Jack Runkel, Vice President -- Investor Relations.
SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
generally identified by the words "will," "expects," "anticipates,"
"believes," "estimates" or similar expressions and include our
expectations as to future revenue growth, earnings, capital
expenditures and other spending, as well as anticipated reductions in
spending. These forward-looking statements reflect management's view
of future events and financial performance. These statements are
subject to risks, uncertainties, assumptions and other important
factors, many of which may be beyond Heinz's control, and could cause
actual results to differ materially from those expressed or implied in
these forward-looking statements. Factors that could cause actual
results to differ from such statements include, but are not limited
to:
-- sales, earnings, and volume growth,
-- general economic, political, and industry conditions,
-- competitive conditions, which affect, among other things,
customer preferences and the pricing of products, production,
energy and raw material costs,
-- the ability to identify and anticipate and respond through
innovation to consumer trends,
-- the need for product recalls,
-- the ability to maintain favorable supplier relationships,
-- currency valuations and interest rate fluctuations,
-- change in credit ratings,
-- the ability to identify and complete and the timing, pricing
and success of acquisitions, joint ventures, divestitures and
other strategic initiatives,
-- approval of acquisitions and divestitures by competition
authorities, and satisfaction of other legal requirements,
-- the ability to successfully complete cost reduction programs,
-- the results of shareholder proposals,
-- the ability to limit disruptions to the business resulting
from the emphasis on three core categories and potential
divestitures,
-- the ability to effectively integrate acquired businesses, new
product and packaging innovations,
-- product mix,
-- the effectiveness of advertising, marketing, and promotional
programs,
-- the ability to maintain sales growth while reducing spending
on advertising, marketing and promotional programs,
-- supply chain efficiency,
-- cash flow initiatives,
-- risks inherent in litigation, including tax litigation, and
international operations, particularly the performance of
business in hyperinflationary environments,
-- changes in estimates in critical accounting judgments and
other laws and regulations, including tax laws,
-- the success of tax planning strategies,
-- the possibility of increased pension expense and contributions
and other people-related costs,
-- the possibility of an impairment in Heinz's investments,
-- and other factors described in "Cautionary Statement Relevant
to Forward-Looking Information" in the Company's Form 10-K for
the fiscal year ended April 27, 2005.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by the
securities laws.
Heinz will file a proxy statement in connection with its 2006
annual meeting of stockholders. Heinz stockholders are strongly
advised to read the proxy statement and the accompanying WHITE proxy
card when they become available, as they will contain important
information. Stockholders will be able to obtain this proxy statement,
any amendments or supplements to the proxy statement and other
documents filed by Heinz with the Securities and Exchange Commission
for free at the Internet website maintained by the Securities and
Exchange Commission at www.sec.gov. Copies of the proxy statement and
any amendments and supplements to the proxy statement will also be
available for free at Heinz's Internet website at www.heinz.com or by
writing to H. J. Heinz Company, World Headquarters, 600 Grant Street,
Pittsburgh, Pennsylvania 15219. In addition, copies of the proxy
materials may be requested by contacting our proxy solicitor,
MacKenzie Partners, Inc. at (800) 322-2885 toll-free or by email at
proxy@mackenziepartners.com. Detailed information regarding the names,
affiliations and interests of individuals who are participants in the
solicitation of proxies of Heinz's shareholders is available on
Schedule 14A filed with the Securities and Exchange Commission on
March 3, 2006.
ABOUT HEINZ: H.J. Heinz Company, offering "Good Food, Every
Day(TM)," is one of the world's leading marketers and producers of
branded foods in ketchup and condiments; meals & snacks; and infant
foods. Heinz delights consumers in every outlet, from supermarkets to
restaurants to convenience stores and kiosks. Heinz is a global family
of leading brands, including Heinz(R) Ketchup, sauces, soups, beans,
pasta and infant foods (representing nearly one-third of total sales
or close to $3 billion), HP(R) and Lea & Perrins(R), Ore-Ida(R) french
fries and roasted potatoes, Boston Market(R) and Smart Ones(R) meals,
and Plasmon(R) baby food. Heinz's has leading brands in six core
developed geographies and five developing geographies. Information on
Heinz is available at www.heinz.com/news.
CONTACT: H.J. Heinz Company, Pittsburgh
Media:
Ted Smyth, 412-456-5780
Michael Mullen, 412-456-5751
Michael.mullen@us.hjheinz.com
or
Investors:
Jack Runkel: 412-456-6034