H.J. Heinz Company unveiled its growth and innovation strategy, which when completed is expected to drive annual revenue growth of 3% to 4%, earnings per share growth near the upper end of a 6% to 8% range off the fiscal year 2006 pro forma base, and operating free cash flow (cash from operations less capital expenditures) of approximately $800 million to $1 billion a year.

Heinz's plans include focusing on three attractive food categories where it has unique strengths -- Ketchup, Condiments & Sauces; Meals & Snacks; and Infant Nutrition. Heinz said it is the "category champion" in these businesses by virtue of its detailed knowledge of consumer preferences, its distribution and channel expertise (including its world-class foodservice business), its operational capabilities with leading-edge tomato technologies, and the strength of its brands, especially the iconic Heinz brand, which has approximately $3 billion in sales and represents one-third of global revenue.

Heinz's growth plans include increased innovation in new products, creative recipes and packaging as a key contributor to sales and profit margin growth. The company also opened a new Global Innovation and Quality Center in Pittsburgh where more than 100 chefs, nutritionists and researchers will be the driving force for product development in Heinz's three core categories.

STRONGER CORE CATEGORY FOCUS In addition to focusing on three food categories where it claims leading brands and superior capabilities, Heinz will drive for greater scale and leverage in key markets and countries. The company is in discussion with its investment bankers regarding the potential divestiture of non-core businesses, representing approximately $1.4 billion of annualized sales. These potential sales would include seafood, vegetable and frozen businesses in Europe (including the Petit Navire, John West and HAK brands) and the Tegel poultry business in New Zealand.

Following these potential divestitures, Heinz Europe would generate annual revenue of $2.5 billion, representing approximately 30% of Heinz's global sales, with leading brands and a streamlined, less costly organization. Heinz has retained the services of J.P. Morgan & Company and UBS to assist with the potential divestitures.

FISCAL YEAR 2006 Heinz confirmed it is on track to achieve its previously forecasted EPS range for fiscal 2006 of $2.35 to $2.45. (This represents results from continuing operations, excluding special items currently estimated to be $100 million which include costs associated with organizational streamlining.) Net sales growth for the year is expected to be at the upper end of the 4% to 6% range. EPS results are likely to be at the lower end of the range as a result of much higher fuel costs and the significant strengthening of the U.S. dollar.

For the second quarter, Heinz expects a modest increase in operating income excluding special items versus the prior year. Largely due to the timing of tax expenses and higher interest rates, the company anticipates second-quarter EPS to be below the prior year.

Heinz expects a net dilution range from the potential divestitures of $0.25 to $0.29 per share, which includes the impact of the tax-advantaged status of the potentially divested businesses. Reflecting the effect of these potential divestitures as of the beginning of fiscal year 2006, the pro forma EPS of the remaining core businesses would be $2.10 to $2.16, excluding special items. The sale proceeds are estimated to be approximately $1 billion, of which a portion would be used for share repurchase, with the remainder being applied to debt reduction. Importantly, gross profit margins would be expected to improve by at least 200 basis points and the cash conversion cycle by approximately five days. Heinz also expects future dividend increases of between 4% to 6% a year from its current $1.20 annualized payout per share.

Commenting on the new growth plans, Heinz chairman, president and chief executive officer William R. Johnson said "Heinz is becoming an even more attractive investment opportunity as we focus on three strong categories where we have the consumer expertise, the leading brands and operational capabilities to generate stronger and higher-quality growth in profits and sales. Heinz has successfully demonstrated the effectiveness of this model in North America and in Australasia, and we will extend it to Europe and to the fast-growing emerging markets of China, India, Russia and Indonesia. Our recent acquisitions of the iconic condiments and sauces brands Lea & Perrins and HP, together with Petrosoyuz in Russia, reinforce and strengthen this global strategy. Meanwhile, Heinz's record improvement in cash conversion cycle over the last three years gives us the balance sheet strength and the financial flexibility to support dividend growth and share repurchases, enabling us to maximize shareholder value as we go forward."