Aug. 13 (Bloomberg) -- Sysco Corp., North America's largest distributor of food to restaurants, said fourth-quarter profit and sales climbed more than analysts estimated on moves to reduce expenses and higher prices.

The company said annual per-share profit will rise at a ``low- to mid-double digit'' rate on a percentage basis, with revenue gaining as much as 9 percent.

Sysco, based in Houston, charged some customers more to help blunt steeper costs for dairy, beef and other foods. The company reduced expenses as a percentage of sales by using more efficient delivery routes that saved diesel fuel.

``Investors should be reassured that Sysco is regaining the upper hand on expense leverage,'' Ajay Jain, an analyst at UBS Securities, wrote in a note today. He rates the shares ``buy.''

Net income increased 19 percent to $303.4 million, or 49 cents a share, from $254.1 million, or 41 cents, a year earlier, Sysco said today in a statement. Revenue advanced 8.5 percent to $9.23 billion in the three months through June 30.

Analysts had estimated profit of 46 cents a share, the average of six projections compiled by Bloomberg. Sales were estimated at $9.15 billion.

Sysco shares rose $1.16, or 3.6 percent, to $33.56 at 4:01 p.m. in New York Stock Exchange composite trading. They have dropped 8.7 percent this year.

The price Sysco paid for food rose 6.1 percent in the quarter as commodity costs jumped. Corn futures reached a 10- year high in late February, and dairy prices averaged 61 percent more in Sysco's fourth quarter compared with a year earlier.

Commodity Costs

Sysco was able to pass on some of the higher costs to its customers. Certain clients have contracts that call for the prices they pay to automatically increase in line with Sysco's costs for food commodities.

The company has expanded its sales force in the past year to give its 400,000 customers more personalized attention and tell them about new products and services. Sysco built central distribution hubs to take shipments and make deliveries to local warehouses more efficiently, and is also moving toward more central purchasing, rather than having its units buy goods.

Sysco plans to add 4 percent to 5 percent more sales representatives in 2008, Chief Operating Officer Ken Spitler said on a conference call with analysts and investors.

Operating expenses as a percentage of sales declined to 14 percent from 14.7 percent a year earlier. The company increased the number of cases it delivered per trip to 695 in 2007 from 585 in 2000, Spitler said. Sysco is also working to reduce the number of miles driven per route to save on energy costs.

Wendy's, Aramark

``Our operating companies worked with their customers to effectively pass along higher product costs, while doing an excellent job managing expenses,'' Spitler said.

Sysco sells fish, meat, poultry, desserts and prepared foods as well as butter, flour and soup stocks. Its biggest clients include Wendy's International Inc., Aramark Corp. and Sodexho Alliance SA.

Gross margin, or the percent of sales remaining after subtracting the cost of goods sold, narrowed to 19.5 percent from 19.9 percent a year earlier, hurt by higher food costs.

Sales at the Sysco division that sells to independent restaurants rose 9.4 percent to $7.29 billion. Revenue at the unit that serves chain restaurants such as Wendy's climbed 6.7 percent to $1.14 billion.

Royal Ahold NV's U.S. Food Service unit, which competes with Sysco, was sold to KKR & Co. and Clayton Dubilier & Rice Inc. in July for $7.1 billion. The unit is the second-largest food distributor, and Performance Food Group Co. is the third biggest.

Of the nine analysts covering Sysco in the past year, four rate the shares ``buy'' and five say ``hold.''

To contact the reporters on this story: Josh Fineman in New York at jfineman@bloomberg.net.

Last Updated: August 13, 2007 16:11 EDT