Heinz and Smucker profits helped by at-home dining

By Brad Dorfman

CHICAGO (Reuters) - Consumers eating more meals at home to help save money lifted quarterly profits at H.J. Heinz Co (HNZ.N) and J.M. Smucker Co (SJM.N), and price increases helped boost sales.

Heinz said sales in North America rose 9.4 percent, but sales volume in Europe fell 2.8 percent after the company imposed substantial price increases on frozen foods in Russia to offset rising commodity costs.

Analysts have been concerned over how consumers around the world will react to rising prices from all food makers amid economic weakness.

Heinz reaped an unexpected gain from currency hedges in the quarter. Excluding that gain, earnings were in line with or slightly below analysts' estimates.

Heinz shares were little changed, while shares of Smucker, which does not have that European exposure, rose 7 percent.

To save money, consumers have been shifting more and more to eating at home instead of at restaurants. Heinz, with products like ketchup and Ore-Ida potatoes, and Smucker, with Pillsbury baking mixes and Jif peanut butter, are helped by the trend, analysts said.

Consumers may also be buying less expensive cuts of meat and cheaper varieties of other foods, using condiments like ketchup to improve the taste, said Matthew Kaufler, portfolio manager for Clover Capital Management, which is sub-adviser for the Touchstone Value Opportunities Fund. Clover owns more than 300,000 Heinz shares.

Sales of Heinz ketchup rose 12 percent, excluding currency fluctuations, helped by price increases and new packaging, Heinz said.

The company has tried to appeal to consumers looking to save money with promotions like "a meal for a pound" on baked beans in the UK, executives said,

"When you're selling beans and ketchup and so forth ...(trading down) doesn't hit many of our products," Chief Executive William Johnson said in a conference call with analysts.

PROFIT UP 22 PCT AT HEINZ, 2.6 PCT AT SMUCKER

Heinz's profit rose to $276.7 million, or 87 cents a share, in the fiscal second quarter ended October 29, from $227 million, or 71 cents a share, a year earlier.

Profit included a $92 million benefit from gains on currency hedging.

Some of that benefit comes from gains on currency hedges for the third and fourth quarters. Analysts treated the gain in different ways, but as they factored out part of the gain, they arrived at earnings of about 72 cents a share, 2 cents below the average Wall Street forecast compiled by Reuters Estimates.

Sales rose 3.5 percent to $2.61 billion. Organic sales, which exclude the impact of currency fluctuations, rose 5.8 percent. As the U.S. dollar strengthens, it reduces the dollar value of sales made overseas, where Heinz does a good percentage of its business.