AMSTERDAM, NETHERLANDS -- 08/28/08 --
Q2 2008 highlights
* Sales increased 7.3% at constant exchange rates
* Operating income EUR 235 million, down EUR 39 million
* Income from continuing operations up EUR 7 million to EUR 177
million
* New logos and brand initiatives unveiled for Stop & Shop and
Giant-Landover
* Underlying retail operating margin guidance for the year
unchanged at 4.8-5.3%
Amsterdam, the Netherlands - Ahold today published its interim
financial report for the second quarter and half year 2008. Ahold CEO
John Rishton said "We continued to invest in price and gave increased
focus to promotions, both of which helped to drive sales and win
customers but, as anticipated, impacted margins.
"In Europe, as part of Albert Heijn's price positioning strategy,
food price inflation was only partially passed on to customers during
the quarter, and strong promotions including the Euro 2008 Football
Championships temporarily impacted margins. At Albert/Hypernova, we
also did not pass on all food price inflation to customers this
quarter, as we continued the repositioning started a year ago.
"In the United States, the Value Improvement Program has now expanded
beyond price repositioning to marketing and branding. We unveiled new
logos and a number of brand initiatives for Stop & Shop and
Giant-Landover last week as a further step in Ahold's global strategy
to build powerful local consumer brands. Giant-Carlisle continued to
gain share in a highly competitive market.
"We are confident we will manage the balance between sales growth and
margin and deliver our underlying retail operating margin guidance
for 2008 of 4.8-5.3%."
Financial performance
Second Quarter 2008
Net sales were EUR 5.8 billion, down 0.8% from the same period last
year. At constant exchange rates, net sales increased by 7.3%.
Operating income was EUR 235 million, EUR 39 million lower than in
the same period last year. Retail operating income was EUR 247
million, an operating margin of 4.3% compared to 5.1% in the same
period last year. Corporate Center costs were EUR 12 million for the
quarter, down EUR 7 million from the same period last year.
Income from continuing operations was EUR 177 million, EUR 7 million
higher than the same period last year. Net income was EUR 338
million, which includes EUR 162 million related to the divestment of
Schuitema. Net income is down EUR 1.9 billion compared to the same
quarter last year, which included EUR 2 billion related to the
divestment of U.S. Foodservice and the Company's operations in
Poland.
Cash flow before financing was EUR 635 million, EUR 5 billion lower
than the same period last year, which included EUR 5.2 billion
proceeds from the divestment of U.S. Foodservice and the Company's
operations in Poland. In the second quarter of 2008 EUR 952 million
of debt was repaid as part of our targeted EUR 2 billion debt
reduction.
Half year 2008
Net sales were EUR 13.3 billion, down 1.1% from the same period last
year. At constant exchange rates, net sales increased by 7.0%.
Operating income was EUR 571 million, EUR 16 million lower than in
the same period last year. Retail operating income was EUR 617
million, an operating margin of 4.6% compared to 4.9% in the same
period last year. Corporate Center costs were EUR 46 million, down
EUR 15 million from the same period last year.
Income from continuing operations was EUR 398 million, EUR 72 million
higher than the same period last year. Net income was EUR 599
million, down EUR 1.9 billion compared to the same period last year,
which included a EUR 2 billion result on divestments.
Cash flow before financing was EUR 906 million, EUR 4.8 billion lower
than the same period last year which included EUR 5.2 billion
proceeds from the divestment of U.S. Foodservice and the Company's
operations in Poland.
(Euros in Q2 Q2 % Change HY 2008 HY 2007 % Change
millions) 2008 2007
Net sales 5,783 5,832 (0.8%)* 13,321 13,466 (1.1%)*
Operating 235 274 (14.2%) 571 587 (2.7%)
income
Income from
continuing 177 170 4.1% 398 326 22.1%
operations
Net income 338 2,228 (84.8%) 599 2,469 (75.7%)
* At constant exchange rates, net sales increased by 7.3% in the
second quarter and 7.0% in the first half year.
Performance by business segment
Stop & Shop/Giant-Landover
For the second quarter, net sales of USD 4 billion were up 1.7%
compared with the same period last year. Net sales included USD 29
million of sales to Tops (prior to its divestment, such sales were
recorded as inter-company sales). Identical sales were up 2.2% at
Stop & Shop (1.0% excluding gasoline net sales) and down 1.5% at
Giant-Landover (1.7% excluding gasoline net sales), impacted by lower
pharmacy sales. Operating income was USD 125 million (or 3.1% of net
sales), down USD 36 million from the same period last year. Margins
were impacted by price investments related to the roll-out of the
Value Improvement Program, with improvements expected later in the
year. Furthermore, operating income in the quarter included
restructuring, severance and related charges of USD 37 million and
impairment charges of USD 7 million, partially offset by gains on the
sale of assets of USD 22 million.
For the first half, net sales of USD 9.2 billion were up 1.5%
compared with the same period last year. Net sales included USD 85
million of sales to Tops. Identical sales were up 1.6% at Stop & Shop
(0.6% excluding gasoline net sales) and down 1.5% at Giant-Landover
(1.6% excluding gasoline net sales). Operating income was
USD 327 million (or 3.6% of net sales), down USD 62 million from the
same period last year.
Giant-Carlisle
For the second quarter, net sales of USD 1.1 billion were up 11.5%
compared with the same period last year. Identical sales were up 7.0%
(4.1% excluding gasoline net sales). Operating income was USD 51
million (or 4.6% of net sales), down USD 10 million compared to the
same period last year. Operating income in the quarter included
restructuring related charges of USD 8 million.
For the first half, net sales of USD 2.5 billion were up 10.2%
compared with the same period last year. Identical sales were up 6.3%
(3.9% excluding gasoline net sales). Operating income was USD 123
million (or 4.9% of net sales), and was flat compared to the same
period last year.
Albert Heijn
For the second quarter, net sales of EUR 2.1 billion were up 14.2%
compared with the same period last year. Net sales increased at
Albert Heijn supermarkets by 14.4% to EUR 1.9 billion. Identical
sales at Albert Heijn supermarkets increased 11.8%. Operating income
was EUR 138 million (or 6.6% of net sales), up EUR 8 million from the
prior year, primarily due to lower pension charges. Second quarter
2008 operating income included gains on the sale of assets of EUR 10
million (Q2 2007: EUR 9 million).
For the first half, net sales of EUR 4.8 billion were up 13.8%
compared with the same period last year. Identical sales at Albert
Heijn supermarkets were up 11.5%. Operating income was EUR 327
million (or 6.9% of net sales), up EUR 47 million compared to the
same period last year.
Albert / Hypernova (Czech Republic and Slovakia)
For the second quarter, net sales increased 20.2% to EUR 411 million.
At constant exchange rates net sales increased 4.6%. Identical sales
were up 5.6%. Operating losses were EUR 4 million compared to an
operating income of EUR 5 million in the same quarter last year.
For the first half, net sales increased 18.9% to EUR 923 million. At
constant exchange rates net sales increased 6.4%. Identical sales
were up 6.8%. Operating losses were EUR 5 million compared to nil in
the same period last year.
Schuitema
We completed the sale of our majority interest in Schuitema to CVC
Capital Partners on June 30, 2008. We expect to complete the transfer
of stores and conversion to the Albert Heijn brand by the end of
2008.
Unconsolidated joint ventures
For the second quarter, Ahold's share in income of joint ventures
increased 15.6% to EUR 37 million. The increase was primarily due to
ICA, mainly as a result of strong performance in Sweden and the
Baltics.
For the first half, Ahold's share in income of joint ventures was
down 7.4% to EUR 50 million, mainly due to lower gains on the sale of
assets at ICA.
Ahold Press Office: +31 (0)20 509 5291
Other information
Non-GAAP financial measures
* Net sales, at constant exchange rates. Net sales, at constant
exchange rates, exclude the impact of using different currency
exchange rates to translate the financial information of Ahold
subsidiaries or joint ventures to euros. Ahold's management
believes this measure provides a better insight into the
operating performance of Ahold's foreign subsidiaries or joint
ventures.
* Identical sales, excluding gasoline net sales. Because gasoline
prices have experienced greater volatility than food prices,
Ahold's management believes that by excluding gasoline net sales,
this measure provides a better insight into the effect of
gasoline net sales on Ahold's identical sales.
* Underlying retail operating income. Total retail operating
income, adjusted for impairment of non-current assets, gains and
losses on the sale of assets and restructuring charges. Ahold's
management believes this measure provides better insight into
underlying operating performance of Ahold's retail operations.
* Operating income in local currency. In certain instances
operating income is presented in local currency. Ahold's
management believes this measure provides better insight into the
operating performance of Ahold's foreign subsidiaries.
* Cash flow before financing activities. Cash flow before financing
activities is the sum of net cash from operating activities and
net cash from investing activities. Ahold's management believes
that because this measure excludes net cash from financing
activities, this measure is useful where such financing
activities are discretionary, as in the case of voluntary debt
prepayments.
(Euros in millions) Q2 2008 Q2 2007 HY 2008 HY 2007
Cash flow before financing 635 5,678 906 5,676
Net cash from financing (1,298) (217) (1,418) (472)
activities
Net cash from operating,
investing and (663) 5,461 (512) 5,204
financing activities
Ahold's financial year
* Ahold's reporting calendar is based on 13 periods of four weeks.
The quarters in 2008 are as follows:
First Quarter December 31, 2007 through April 20, 2008
Second Quarter April 21 through July 13, 2008
Third Quarter July 14 through October 5, 2008
Fourth Quarter October 6 through December 28, 2008
This earnings release should be read in conjunction with Ahold's
interim financial report for the second quarter and half year 2008,
which is available on www.ahold.com. The data provided in this
earnings release are unaudited and are accounted for in accordance
with IFRS, unless otherwise stated.
Cautionary notice
This press release includes forward-looking statements, which do not
refer to historical facts but refer to expectations based on
management's current views and assumptions and involve known and
unknown risks and uncertainties that could cause actual results,
performance or events to differ materially from those included in
such statements. These forward-looking statements include, but are
not limited to, statements as to the progress with Ahold's strategy
on sales growth and price positioning, the balance between sales
growth and margin, the expected impact of price investments and other
initiatives related to the roll-out of the Value Improvement Program
on margins and sales, the transfer of the acquired Schuitema stores
and conversion thereof into Albert Heijn stores, the expected
underlying retail operating margin, capital expenditure and net
interest expense for full year 2008. These forward-looking statements
are subject to risks, uncertainties and other factors that could
cause actual results to differ materially from future results
expressed or implied by the forward-looking statements. Many of these
risks and uncertainties relate to factors that are beyond Ahold's
ability to control or estimate precisely, such as the effect of
general economic or political conditions, fluctuations in exchange
rates or interest rates, increases or changes in competition, Ahold's
ability to implement and complete successfully its plans and
strategies, the benefits from and resources generated by Ahold's
plans and strategies being less than or different from those
anticipated, changes in Ahold's liquidity needs, the actions of
competitors and third parties and other factors discussed in Ahold's
public filings. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of
this press release. Koninklijke Ahold N.V. does not assume any
obligation to update any public information or forward-looking
statements in this release to reflect subsequent events or
circumstances, except as may be required by securities laws. Outside
the Netherlands, Koninklijke Ahold N.V., being its registered name,
presents itself under the name of "Royal Ahold" or simply "Ahold".
Ahold Earnings Q2 2008: http://hugin.info/130711/R/1246771/269686.pdf
Ahold Earnings Q2 2008 Interim Financial Report:
http://hugin.info/130711/R/1246771/269687.pdf
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