SOURCE: Ahold NV

March 02, 2009 00:55 ET

Ahold Fourth Quarter and Full Year 2008 Earnings

AMSTERDAM, NETHERLANDS--(Marketwire - March 2, 2009) -


Highlights

  * Fourth quarter operating income up 49% to EUR  365 million
  * Fourth quarter net income up 9% to EUR  285 million
  * Full year operating income up 12% to EUR  1.2 billion
  * Full year net income EUR  1.1 billion
  * Full year underlying retail operating margin 5%
  * Dividend increased by 12% to EUR  0.18 per share

Ahold today published its summary financial report for the fourth quarter and full year 2008. CEO John Rishton said: "In 2008, we delivered solid performance with particularly strong results in the last quarter and achieved an underlying retail operating margin of 5% for the full year. We have achieved our annual targets for each of the last three years thanks to the hard work and dedication of our employees. I am pleased to announce that we propose to increase our annual dividend for 2008 by 12% to EUR 0.18 per common share.

"During 2008, we completed the Value Improvement Program, including the rebranding of Stop & Shop and Giant-Landover. This strengthened our relative price position and led to market share gains and improved financial results in the second half of the year. Meanwhile, Giant-Carlisle continued its strong performance, gaining significant market share. In Europe, Albert Heijn had another excellent year, including the conversion of 54 Schuitema stores to the Albert Heijn banner following the divestment of our stake in Schuitema. Albert/Hypernova was able to maintain its market position and break even in very competitive markets in the Czech Republic and Slovakia.

"Although the economic environment continues to deteriorate, we believe that the business is well prepared to respond to the effects of recession. We have a strong balance sheet and we have repositioned our businesses over recent years to give better value to our customers. We continue to improve our offer and reduce costs. As a business, we have the skills and capabilities to respond quickly and effectively to changes in consumer behavior. Despite the continued deterioration of the economic environment, in the first weeks of 2009 we have seen no significant changes in consumer behavior.

"We are confident that we have the right strategy, business model and customer offering. However we recognize that in the current conditions we may need to adjust the balance between sales, market share, profits and cash even more rapidly than we have in the past. Consequently, we will work to balance these elements in the near-term to ensure we are able to deliver our longer-term goals of sustainable 5% sales growth and 5% retail operating margin.

"Capital expenditure in 2009 will be below EUR 1 billion. At current exchange rates, we expect our net interest expense to increase and be in the range of EUR 290 million to EUR 310 million, primarily due to the stronger dollar and lower yields on cash."

Financial performance

Fourth quarter 2008

Net sales were EUR 6.6 billion, up 12.9% from the same period last year. At constant exchange rates, net sales increased by 5.9%.

Operating income was EUR 365 million, EUR 120 million higher than in the same period last year. Retail operating income was EUR 392 million, a retail operating margin of 5.9% compared to 4.9% in the same quarter last year. Corporate Center costs were EUR 27 million for the quarter, down EUR 6 million from the same period last year.

Net income was EUR 285 million, up EUR 23 million compared to the same quarter last year, reflecting a higher operating income, partially offset by lower income from discontinued operations and higher income taxes.

Cash flow before financing was EUR 319 million, EUR 263 million lower than in the same period last year, primarily as a result of higher capital expenditures (related to both remodeling at Giant-Landover and converting former Schuitema stores into the Albert Heijn format) and proceeds from the divestment of Tops in the fourth quarter of 2007.

Full year 2008

Net sales were EUR 25.7 billion, up 3.3% compared to last year. At constant exchange rates, net sales increased by 6.9%.

Operating income was EUR 1.2 billion, EUR 130 million higher than last year. Retail operating income was EUR 1.3 billion, an underlying retail operating margin of 5.0%. This was in line with the 4.8% to 5.3% guidance for 2008. Corporate Center costs were EUR 96 million, down EUR 24 million from a year ago.

Net income was EUR 1.1 billion, down EUR 1.9 billion compared to last year, which included a EUR 2.0 billion gain on divestments.

Cash flow before financing was EUR 1.3 billion, EUR 5.4 billion lower than last year which included EUR 5.4 billion proceeds from the divestments of U.S. Foodservice, Tops and Ahold's operations in Poland.


(Euros in             Q4      Q4        %       FY       FY         %
millions)           2008    2007   Change     2008     2007    Change
Net sales          6,595   5,840   12.9%*   25,722   24,893     3.3%*
Operating income     365     245    49.0%    1,198    1,068     12.2%
Income from
continuing           283     205    38.0%      868      753     15.3%
operations
Net income           285     262     8.8%    1,079    2,945   (63.4%)

* At constant exchange rates, net sales increased by 5.9% in the fourth quarter and 6.9% in the full year.

Performance by business segment

Stop & Shop/Giant-Landover

For the fourth quarter, net sales of $ 4.0 billion were up 2.8% from the same period last year. Net sales included $ 15 million of sales to Tops (prior to its divestment, such sales were recorded as inter-company sales). Identical sales were up 2.3% at Stop & Shop (4.0% excluding gasoline net sales) and up 1.1% at Giant-Landover (1.0% excluding gasoline net sales), despite lower pharmacy sales. Operating income was $ 207 million (or 5.1% of net sales), up $ 84 million from the same period last year.

For the full year, net sales of $ 17.1 billion were up 2.4% compared to last year. Net sales included $ 114 million of sales to Tops. Identical sales were up 2.4% at Stop & Shop (2.1% excluding gasoline net sales) and down 0.4% at Giant-Landover (0.5% excluding gasoline net sales), impacted by lower pharmacy sales. Operating income was $ 701 million (or 4.1% of net sales), up $ 39 million from last year.

Giant-Carlisle

For the fourth quarter, net sales of $ 1.1 billion were up 7.9% compared to the same period last year. Identical sales were up 4.6% (5.7% excluding gasoline net sales). Operating income was $ 60 million (or 5.4% of net sales), up $ 12 million compared to the same period last year.

For the full year, net sales of $ 4.7 billion were up 10.0% compared to last year. Identical sales were up 6.3% (4.7% excluding gasoline net sales). Operating income was $ 233 million (or 4.9% of net sales), up $ 20 million compared to last year.

Albert Heijn

For the fourth quarter, net sales of EUR 2.2 billion were up 11.6% compared to the same period last year. Net sales increased at Albert Heijn supermarkets by 12.2% to EUR 2.0 billion due in part to the conversion of former Schuitema stores into the Albert Heijn format in the second half of the year. Identical sales at Albert Heijn supermarkets increased 5.2%. Operating income was EUR 180 million (or 8.1% of net sales), up EUR 19 million from last year.

For the full year, net sales of EUR 9.0 billion were up 12.9% compared to last year. Identical sales at Albert Heijn supermarkets were up 9.2%. Operating income was EUR 648 million (or 7.2% of net sales), up EUR 75 million compared to last year, benefiting from lower pension charges.

Albert / Hypernova (Czech Republic and Slovakia)

For the fourth quarter, net sales increased 3.0% to EUR 440 million. At constant exchange rates, net sales decreased 2.7%. Identical sales were down 3.1%. Operating income was EUR 9 million, up EUR 4 million from the same period last year.

For the full year, net sales increased 13.9% to EUR 1.8 billion. At constant exchange rates, net sales increased 2.8%. Identical sales were up 3.2%. Operating income was EUR 1 million, up EUR 1 million from last year.

Unconsolidated joint ventures

For the fourth quarter, Ahold's share in income of joint ventures decreased 6.5% to EUR 29 million. For the full year, Ahold's share in income of joint ventures was down 21.0% to EUR 109 million. The decrease was primarily due to ICA, mainly as a result of lower gains on the sale of assets and weak performance in Norway.

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.

  * Net sales in local currency. In certain instances, net sales are
    presented in local currency. Ahold's management believes this
    measure provides 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 a better insight into the growth of its
    identical store 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 and related
    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)      Q4 2008      Q4 2007     FY 2008     FY 2007
Cash flow before             319          582       1,272       6,627
financing
Net cash from              (214)      (1,051)     (1,717)     (5,140)
financing activities
Net cash from
operating, investing         105        (469)       (445)       1,487
and
financing activities


Ahold's financial year

  * Ahold's reporting calendar is a 52 or 53 week period ending on
    the Sunday nearest to December 31 in any given year.

  * The 2008 reporting calendar was a 52 week period ending December
    28, 2008. The quarters were:

      First Quarter (16 weeks)    December 31, 2007 through April 20, 2008
      Second Quarter (12 weeks)   April 21 through July 13, 2008
      Third Quarter (12 weeks)    July 14 through October 5, 2008
      Fourth Quarter (12 weeks)   October 6 through December 28,


  * The 2009 reporting calendar will be a 53 week period ending on
    January 3, 2010. The quarters in 2009 are:

        First Quarter (16 weeks)  December 29, 2008 through April 19, 2009
        Second Quarter (12 weeks) April 20 through July 12, 2009
        Third Quarter (12 weeks)  July 13 through October 4, 2009
        Fourth Quarter (13 weeks) October 5 through January 3, 2010


This earnings release should be read in conjunction with Ahold's summary financial report for the full year and fourth quarter, which is available on www.ahold.com and Ahold's 2008 annual report, which is expected to be published on March 9, 2009.

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 annual dividend for 2008, Ahold's response to the economic environment and its ability to give better value to its customers and to continue to improve its offer and cost reduction, Ahold's ability to respond to changes in consumer behavior and market conditions, Ahold's strategy and business model and the expected sales growth, underlying retail operating margin, capital expenditure and net interest expense for full year 2009. 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 Fourth Quarter and Full Year 2008 Summary Financial Report : http://hugin.info/130711/R/1294179/293474.pdf



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