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Purchase Costs Hurt Del Monte's Earnings

Sharp decrease reflects expenses associated with acquiring Heinz pet foods and other brands.

March 12, 2003|From Reuters

Del Monte Foods Co., the largest U.S. processor of fruits and vegetables, Tuesday reported a sharp drop in quarterly earnings because of costs associated with adding certain brands from H.J. Heinz Co.

The San Francisco-based company, which added Heinz's StarKist tuna, 9 Lives pet food and other brands last year, said it earned $24.4 million, or 13 cents a share, in the third quarter ended Jan. 29. That compares with earnings of $45.7 million, or 29 cents, in the same period last year.

Results include the fruit, vegetable and tomato businesses, known as Del Monte Brands, since Dec. 20, when the company merged the Heinz brands.

The company said its earnings were hurt by the inclusion of interest expense, increased inventory levels related to the merger, a higher tax rate and a loss on foreign exchange.

Excluding merger and restructuring expenses, Del Monte said profit would have been 26 cents a share.

The average estimate of two analysts surveyed by Thomson Financial was 32 cents.

Quarterly sales rose to $559.1 million, from $437.8 million in the year-ago quarter.

"This is the first quarter reporting as the new Del Monte Foods," Richard G. Wolford, chairman and chief executive, said. "We believe we are off to a strong start."

Del Monte shares fell 4 cents to $7.57 on the New York Stock Exchange. The stock has dropped 18% in the last year.

Heinz, the world's biggest ketchup maker, said its third-quarter earnings fell 25% because of expenses related to the transaction.

Heinz shares rose 26 cents to $29.70 on the NYSE.

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