updated 6/1/2006 11:17:38 AM ET 2006-06-01T15:17:38

Food producer H.J. Heinz Co. on Thursday said fiscal fourth-quarter profit dropped 19 percent, weighed down by increased interest costs and a higher quarterly tax rate, and the company outlined a growth plan for the next two years that includes job cuts and share buybacks.

The maker of ketchup, sauces, pasta and frozen foods said profit for the quarter ended May 3 declined to $167.9 million, or 50 cents per share, from $206.5 million, or 59 cents per share during the same period last year.

Results include charges totaling 5 cents per share relating to the sale of assets and a write-down of the company's operations in Zimbabwe, offset by a gain from the sale of its European Seafood and Tegel poultry business. Increased interest costs and a substantially higher quarterly tax rate compared to last year also hurt results, the company said

Revenue grew nearly 8 percent to $2.4 billion from $2.23 billion, helped by double-digit growth in brands including Smart Ones meals, Classico pasta sauce and Ore-Ida potatoes.

Analysts, on average, predicted a profit of 49 cents on revenue of $2.36 billion, according to a Thomson Financial poll.

Heinz also outlined its growth plan for 2007 and 2008. The plan includes reducing costs by $355 million, in part by cutting 2,700 jobs, or about 8 percent of its work force, in fiscal 2007. Heinz also said it was considering exiting five plants in fiscal 2008.

Heinz's plan also include cutting $145 million "in deals and allowances" and authorizing a $1 billion share repurchase program in fiscal 2007 and 2008.

For all of fiscal 2006, profit declined 14 percent, to $645.6 million, or $1.89 per share, from $752.7 million, or $2.13 per share last year. Revenue grew 7 percent to $8.64 billion, from $8.1 billion last year.

Heinz is facing pressure from billionaire investor Nelson Peltz to improve shareholder return. Earlier in the month Peltz and his Trian Group outlined a plan, which was rejected by Heinz, to improve profit by cutting costs and reducing incentives to retailers.

The company expects its own plan will produce a 10 percent earnings surge, to $2.35 per share in 2007 and $2.54 per share in 2008. The company expects sales growth of 3 percent to 4 percent in 2007 and 4 percent or higher in 2008.

Heinz also said it will boost its fiscal 2007 dividend by 16.7 percent to $1.40 per share, from $1.29 per share in 2006.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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