H.J. Heinz Co. announced a major gain Thursday in its push into emerging markets — the purchase of an 80 percent stake in a Brazilian food company.
Heinz, the world's largest ketchup maker, has relied recently on emerging markets like China, India and Russia to fuel its growth. Its plan to acquire the stake in S.A. Industrias Alimenticias, a Brazilian maker of Quero brand tomato sauce and ketchup, would double its sales in Latin America.
Terms of the deal, which will also give Heinz a factory and distribution service that could be critical to its future in the fast-growing region, were not disclosed. But the company said it will pay with cash on hand.
"This is a major growth step under our emerging-market strategy," Heinz CEO William R. Johnson said.
The deal would make Heinz one of few U.S. consumer products companies with a key holding in this region. It is to close in the next few months.
The news came as Heinz reported that its revenue from the U.S. and emerging markets, along with recent price increases, helped drive its third-quarter net income up 20 percent.
Heinz earned $273.9 million, or 85 cents per share, for the quarter. That's up from $228.5 million, or 72 cents per share, in the same quarter last year. The earnings beat analysts' average forecast for earnings of 83 cents per share, according to FactSet.
Revenue rose nearly 2 percent to $2.72 billion, matching estimates.
The company benefited from recent price increases it put in place to cope with higher input costs. Its sales rose in most markets around the globe outside Europe.
As evidence that its emerging-markets strategy may be working, revenue in those regions jumped 15 percent. Overall volume edged up 0.5 percent, helped by acquiring Foodstar in China in November.
Food and consumer product makers are putting a heavy emphasis on opportunities in countries where the middle class is expanding rapidly and consumers' appetite for western goods is growing. This helps many companies offset softer sales in mature markets like the U.S. and Europe, where consumers have slowed their spending in the weak economy.
Heinz, based in Pittsburgh, reiterated its outlook announced last month for full-year net income of $3.04 to $3.10 per share. Analysts expect $2.26 per share. The company forecast does not include the impact of the Industrias Alimenticias deal, which could bring 3 cents per share in transaction costs.