SOURCE: Ahold NV

March 06, 2008 01:08 ET

Ahold Fourth Quarter and Full Year 2007 Earnings

AMSTERDAM, NETHERLANDS--(Marketwire - March 6, 2008) -



Full-year highlights

  * Full-year operating income up 6.7% to EUR 1.1 billion
  * Full-year net income EUR 2.9 billion
  * Retail operating margin guidance exceeded
  * Value Improvement Program on track and roll-out accelerated
  * Dividend of EUR 0.16 per common share proposed

Amsterdam, the Netherlands - Ahold today published its summary financial report for the full year and fourth quarter 2007. CEO John Rishton said: "Ahold exceeded the targets we set last year. We delivered an underlying retail operating margin of 4.6% against our 4% to 4.5% guidance. We largely completed our planned divestments, returned EUR 4 billion to shareholders, and our investment grade rating was reinstated. We restructured the company into two continental platforms and achieved reductions in Corporate Center costs ahead of schedule.

We are progressing with our strategy for profitable growth, largely thanks to the continuing hard work and commitment of all our employees. In the United States, we rolled out 70% of our VIP program at Stop & Shop and Giant-Landover by year-end while Giant-Carlisle continued its strong performance. In Europe, Albert Heijn continued to exceed expectations, and we saw promising first results from the repositioning program at Albert and Hypernova in the Czech Republic.

I am delighted that our improved performance has enabled us to reinstate an annual dividend. For 2007, the proposed dividend is EUR 0.16 per common share. We plan to increase future annual dividends while meeting the capital needs of the business and maintaining an efficient investment grade capital structure.

In 2008, our focus will be on the completion of the VIP program at Stop & Shop and Giant-Landover, the start of the remodeling of our Giant-Landover stores, further repositioning of Albert/Hypernova, and driving the growth of Albert Heijn. The VIP program will continue to impact margins with improvements expected later in the year. Underlying retail operating margin for the year is projected to be between 4.5% and 5.0%. Capital expenditure will be around EUR 1.1 billion. Gross debt will fall further in 2008 as we progress towards our announced EUR 2 billion debt reduction target. Net interest expense for the year is expected to be in the range of EUR 270 million to EUR 290 million.

Financial performance

Fourth quarter 2007

Net sales were EUR 6.6 billion, up 0.2% from the same period last year. At constant exchange rates, net sales increased by 6.5%.

Operating income was EUR 253 million, EUR 51 million higher than the same period last year. Retail operating income was EUR 289 million, a retail operating margin of 4.4% compared to 3.7% in the same period last year. Corporate Center costs were EUR 29 million for the quarter, down EUR 6 million from the same period last year.

Net income was EUR 262 million, up EUR 22 million from the same period last year, reflecting a higher operating income and lower net financial expense, partially offset by higher income taxes.

Cash flow before financing activities was EUR 582 million positive, EUR 239 million better than the same period last year, mainly as a result of the proceeds from the sale of Tops.

Full year 2007

Net sales were EUR 28.2 billion, up 1.2% compared to last year. At constant exchange rates, net sales increased by 6.1%.

Operating income was EUR 1.1 billion, EUR 71 million higher than last year. Retail operating income was EUR 1.3 billion, EUR 31 million higher compared to last year. Corporate Center costs were EUR 106 million, down EUR 26 million from a year ago.

Net income was EUR 2.9 billion, up EUR 2 billion compared to last year, mainly as a result of the divestment of U.S. Foodservice, Ahold's Polish operations and Tops.

Cash flow before financing activities was EUR 6.6 billion positive, EUR 5.6 billion better than last year, mainly as a result of the proceeds from the sale of U.S. Foodservice, Ahold's Polish operations and Tops.

Performance by business segment

Stop & Shop / Giant-Landover

For the fourth quarter, net sales were $3.9 billion, up 2.0% from the same period last year. Identical sales were up 2.7% at Stop & Shop (1.2% excluding gasoline net sales) and down 0.5% at Giant-Landover. Operating income was $124 million - or 3.2% of net sales - down $38 million from the same period last year. Margins were impacted by price investments related to the further roll-out of the Value Improvement Program as well as by restructuring and related charges of $19 million.

For the full year, net sales were $16.7 billion, up 1.5% compared to last year. Identical sales were up 1.3% at Stop & Shop (0.6% excluding gasoline net sales) and down 1.1% at Giant-Landover. Operating income was $663 million - or 4% of net sales - down $176 million compared to last year.

Giant-Carlisle

For the fourth quarter, net sales were $1 billion, up 8.6% compared to last year, due in part to the acquisition of Clemens Markets in the fourth quarter of 2006. Identical sales were up 4.8% (3.8% excluding gasoline net sales). Operating income increased by $6 million to $43 million or 4.2% of net sales.

For the full year, net sales were $4.3 billion, up 13.0% compared to last year, due in part to the acquisition of Clemens Markets in the fourth quarter of 2006. Identical sales were up 3.7% (3.2% excluding gasoline net sales). Operating income increased by $24 million to $194 million or 4.5% of net sales.

Albert Heijn

For the fourth quarter, net sales were EUR 2 billion, up 12.9% from the same period last year, due in part to the acquisition of the Konmar stores in the fourth quarter of 2006. Identical sales increased at Albert Heijn supermarkets by 9.3%. Operating income was EUR 161 million or 8% of net sales - up EUR 61 million from the same period last year as a result of higher identical sales, effective cost control and lower pension charges.

For the full year, net sales were EUR 8 billion, up 12.1% compared to last year, due in part to the acquisition of the Konmar stores in the fourth quarter of 2006. Identical sales increased at Albert Heijn supermarkets by 7.9%. Operating income was EUR 573 million, or 7.2% of net sales, up EUR 162 million compared to last year.

Albert / Hypernova (Czech Republic and Slovakia)

For the fourth quarter, net sales increased 16.7% to EUR 427 million. At constant exchange rates, net sales increased 10.8%. Identical sales increased 10.1%. Operating income was EUR 5 million compared to a EUR 15 million operating loss in the same period last year.

For the full year, net sales increased 12.5% to EUR 1.6 billion. At constant exchange rates, net sales increased 9.1%. Identical sales increased 6.8%. Operating income was nil compared to an operating loss of EUR 55 million last year.

Schuitema

For the fourth quarter, net sales grew 3.1% to EUR 773 million. Identical sales increased 2.0%. Operating income was EUR 8 million, or 1% of net sales, up EUR 1 million from the same period last year.

For the full year, net sales grew 2.4% to EUR 3.3 billion. Identical sales increased 1.3%. Operating income was EUR 66 million, or 2% of net sales, down EUR 8 million compared to last year.

In January 2008, Ahold announced that it has entered into negotiations with Schuitema and CVC Capital about the potential divestment of its majority interest in Schuitema.

Unconsolidated joint ventures

For the fourth quarter, Ahold's share in income of joint ventures was EUR 31 million, up EUR 1 million from the same period last year.

For the full year, Ahold's share in income of joint ventures was EUR 138 million, down EUR 14 million compared to last year.


Ahold Press Office: +31 (0)20 509 5291


Other information

Non-GAAP financial measures:

  * Net sales at constant exchange rates. In certain instances, net
    sales exclude the impact of using different currency exchange
    rates to translate the financial information of certain of
    Ahold's subsidiaries to euros. For comparison purposes, the
    financial information of the previous period is adjusted using
    the average currency exchange rates for the fourth quarter and
    full year 2007, as the case may be, in order to understand this
    currency impact. In certain instances, net sales are presented in
    local currency. Ahold's management believes these measures
    provide a better insight into the operating performance of
    Ahold's foreign subsidiaries.

  * 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 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 the
    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.

(In millions)                                Q4 2007          Q4 2006
Cash flow before financing activities   EUR      582         EUR   343
Net cash from financing activities      EUR      (1,051)     EUR   (358)
Net cash from operating, investing and  EUR      (469)       EUR   (15)
financing activities

(In millions)                                 FY 2007        FY 2006
Cash flow before financing activities   EUR      6,627       EUR   1,028
Net cash from financing activities      EUR      (5,140)     EUR   (1,277)
Net cash from operating, investing and  EUR      1,487       EUR   (249)
financing activities

This earnings release should be read in conjunction with Ahold's summary financial report for the full year and fourth quarter 2007, which is available on www.ahold.com and Ahold's 2007 annual report, which is expected to be published on March 13, 2008.

In case of any discrepancy between the English and Dutch versions of this release, the English prevails.


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 expected impact of the Value Improvement Program on margins, the expected underlying retail operating margin for full year 2008, capital expenditure, further debt reduction, net interest expense and Ahold's intention to divest its majority interest in Schuitema. 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".





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