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Financial Analysis of H.J. Heinz Company

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Douglas Solowey

on 25 April 2013

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Transcript of Financial Analysis of H.J. Heinz Company

Acquisition by Berkshire Hathaway and 3G Capital H.J. Heinz Company Founded in 1869 by Henry John Heinz
Brands include Heinz Ketchup, Ore-Ida, Bagel Bites, Weight Watchers, T.G.I. Fridays
$11.6 billion global revenue
Heinz products manufactured on 6 continents
Marketed in over 200 countries
650 million Heinz ketchup bottles sold annually
In more than 140 countries
Sales greater than $1.5 billion Financial Analysis of H.J. Heinz Sarita Laracy
Kevin Rybicki
Douglas Solowey
Lauren Walker 2010-2012 Profit Margin Gross Margin on Net Sales There was a slight decrease in Gross Margin percentage, but Heinz is still comfortably able to cover expenses and make a healthy profit. Was this acquisition a good investment for Warren Buffett and Berkshire Hathaway? This Investment was a good investment as long as several conditions are met:
The management team that takes over for the current Heinz staff effectively cuts costs and eliminates excess debt
The company continues global marketing while continuing an aggressive concentration on primary products
Heinz maintains its status as a major competitor in the food processing industry Although Profit Margin decreased in 2012 (due to an increase in Selling and Administrative Expenses), H.J. Heinz Company has had relatively stable profit margins over the past several years, indicating consistent growth. Purchased for 28 Billion dollars (including debt) by investment firm Berkshire Hathaway (under CEO Warren Buffett) and 3G Capital
3G Capital has a history of acquiring companies and inserting a more efficient management team (Burger King, Anheuser-Busch InBev)
Stockholders will receive $72.50/share, a 20% premium on February 13, 2013 closing stock price
Bernardo Hees, current CEO of Burger King Worldwide, set to become 7th CEO of Heinz, taking over for Bill Johnson Heinz increased Liquidity by a wide margin, thus allowing it to pay off its current debts with its current assets. The Net Working Capital Ratio in 2011 indicated financial distress, but Heinz was able to increase its Working Capital relative to Debt in 2012. Although Cash flow to Debt Ratio decreased slightly in 2012, this was a consequence of restructuring of short term and long term debt.
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