Del Monte Posts Profit on Convenience Foods

Del Monte Foods Co., the largest U.S. produce canner and distributor, Thursday reported a quarterly profit on lower costs and stronger demand for convenience foods such as single-serve fruit cups, up from a year-ago loss.

Earnings in its first quarter ended Sept. 30 were $400,000, or 1 cent a share, compared with a loss of $5.3 million, or 10 cents, a year earlier.

The company’s revenue rose 5% to $284.7 million, primarily because of higher shipments, strength in its vegetable business and increased retail fruit sales. San Francisco-based Del Monte said convenience products and premium lines such as fruit in glass containers were helping to drive growth.

The company agreed in June to buy several North American brands from ketchup maker H.J. Heinz Co., including Star-Kist tuna and Kibbles ‘n Bits pet food. On Thursday, it reaffirmed expectations for the deal to close later this year or in early 2003.

In addition to higher sales, Del Monte’s earnings were boosted by lower unit costs, a reduction in interest expense and lower losses related to the fair market value of interest rate swaps, the company said.

“The numbers came in pretty much as we were looking for,” said Merrill Lynch & Co. analyst Leonard Teitelbaum. Merrill’s outlook for the stock is on hold until the Heinz deal closes.

Under the terms of the transaction, Del Monte is buying the Heinz assets by issuing 157 million new Del Monte shares to Heinz shareholders, who will get 0.45% of a Del Monte share for every Heinz share they own. Heinz shareholders will control 74.5% of the new Del Monte company, with current Del Monte holders owning the remainder.

Shares of Del Monte fell 23 cents, or 2.8%, to $8.02 in New York Stock Exchange trading. The stock has fallen 30% since the Heinz deal was announced June 13.