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
Copyright � Hugin AS 2008. All rights reserved.
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