SOURCE: Ahold NV

August 30, 2007 01:24 ET

Ahold Second Quarter 2007 Earnings

AMSTERDAM, NETHERLANDS--(Marketwire - August 30, 2007) -


* Operating income of EUR 291 million

* Roll-out of Value Improvement Program remains on track

* Net income up EUR 2 billion due to divestment of U.S. Foodservice and Polish operations

* Return to shareholders increased from EUR 3 billion to EUR 4 billion through EUR 1 billion share buyback

Amsterdam, the Netherlands - Ahold today published its interim financial report for the second quarter and half year 2007. John Rishton, CFO and Acting President and CEO, said "The results show that we are continuing to make progress with our strategy for profitable growth. Of particular importance is that the roll-out of the Value Improvement Program at Stop & Shop and Giant-Landover remains on track, with customer perception of price reductions continuing to improve.

"I am pleased to announce that, as a consequence of the successful sale of U.S. Foodservice and our Polish operations, we have decided to return a further EUR 1 billion to our shareholders by way of a share buyback program. This, together with the recently completed reverse stock split and EUR 3 billion capital repayment, takes the total value to be returned to shareholders to EUR 4 billion.

"With lower net debt we are revising our guidance on annual net interest expense for 2007 from a range of EUR 400 to EUR 450 million to between EUR 320 and EUR 340 million".

As announced earlier today, Ahold has decided to delist from the New York Stock Exchange. The decision is consistent with the company's strategy of improving its cost effectiveness by reducing complexity without detracting from the integrity of its governance and control processes. Ahold's ADRs will continue to be traded on the over-the-counter (OTC) market in the United States.

Financial performance

Second Quarter 2007

Net sales were EUR 6.6 billion, up 2% from the same period last year. At constant exchange rates, net sales increased by 5.6%.

Operating income was EUR 291 million, EUR 11 million lower than last year, reflecting an adverse currency exchange impact. Retail operating income was EUR 313 million, an operating margin of 4.7%. Core Corporate Center costs were EUR 22 million for the quarter, down EUR 13 million from a year ago.

Net income was EUR 2.2 billion, up EUR 2 billion from the same period last year as a result of the divestment of U.S. Foodservice and the company's Polish operations.

Cash flow before financing was EUR 5.7 billion positive for the quarter, EUR 5.1 billion better than the same period last year, mainly as a result of the proceeds from the sale of U.S. Foodservice and the company's Polish operations.

First Half 2007

Net sales were EUR 15.2 billion, up 1.6% from the same period last year. At constant exchange rates, net sales increased by 6.1%.

Operating income was EUR 626 million, EUR 24 million lower than last year, reflecting an adverse currency exchange impact. Retail operating income was EUR 696 million, an operating margin of 4.6%. Core Corporate Center costs were EUR 55 million, down EUR 29 million from a year ago.

Net income was EUR 2.5 billion, up EUR 2 billion from the same period last year as a result of the divestment of U.S. Foodservice and the company's Polish operations.

Cash flow before financing was EUR 5.7 billion positive for the first half, EUR 5.2 billion better than the same period last year.

Performance by business segment

Stop & Shop / Giant-Landover

For the second quarter, net sales were $3.9 billion, up 1.9% compared with the same period last year; identical sales were up 1.1% at Stop & Shop (0.6% excluding gasoline net sales) and down 1% at Giant-Landover. Operating income was $161 million, or 4.1% of net sales - down $62 million from the same period last year. Margins were impacted by price investments related to the further roll-out of the Value Improvement Program. Furthermore, second quarter 2007 included restructuring charges of $26 million, partially offset by gains on the sale of assets of $13 million.

For the first half, net sales were $9 billion, up 1.8% compared with the same period last year; identical sales were up 0.7% at Stop & Shop (0.2% excluding gasoline net sales) and down 1.1% at Giant-Landover. Operating income was $389 million, or 4.3% of net sales, down $123 million from the same period last year.

Giant-Carlisle

For the second quarter, net sales were $1 billion, up 13.7% from the same period last year, due in part to the acquisition of the Clemens Markets stores in the fourth quarter of 2006; identical sales were up 2.7% (2.6% excluding gasoline net sales). Operating income increased by $7 million to $56 million or 5.6% of net sales. Similar to the second quarter last year, operating income was favorably impacted by seasonal holiday sales and low promotional spend.

For the first half, net sales were $2.3 billion, up 15% from the same period last year, due in part to the acquisition of the Clemens Markets stores in the fourth quarter of 2006; identical sales were up 3.7% (3.3% excluding gasoline net sales). Operating income increased by $13 million to $113 million or 4.9% of net sales.

Albert Heijn

For the second quarter, net sales were EUR 1.8 billion, up 10.3% compared with 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 6.2%. Operating income was EUR 130 million, or 7.1% of net sales, up EUR 28 million from the same period last year, as a result of higher identical sales, effective cost control and lower pension charges. Operating income in the second quarter of 2007 included gains on the sale of assets of EUR 9 million.

For the first half, net sales were EUR 4.2 billion, up 11.6% compared with 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 7.6%. Operating income was EUR 280 million, or 6.7% of net sales, up EUR 76 million from the same period last year.

Albert / Hypernova (Czech Republic and Slovakia)

For the second quarter, net sales increased 10.7% to EUR 342 million. At constant exchange rates, net sales increased 9.4%. Identical sales increased 6.5%. Operating income was EUR 5 million compared to a EUR 4 million operating loss in the same period last year.

For the first half, net sales increased 10.2% to EUR 776 million. At constant exchange rates, net sales increased 7.9%. Identical sales increased 4.7%. Operating income was nil compared to an operating loss of EUR 14 million in the same period last year.

Schuitema

For the second quarter, net sales grew 0.5% to EUR 771 million. Identical sales decreased 0.6%. Operating income was EUR 17 million, or 2.2% of net sales, down EUR 8 million from the same period last year as a result of improved conditions for Schuitema's franchisees and increased commercial activities.

For the first half, net sales grew 2.3% to EUR 1.8 billion. Identical sales increased 1.5%. Operating income was EUR 39 million, or 2.2% of net sales, down EUR 16 million from the same period last year.

Unconsolidated joint ventures and associates

For the second quarter, Ahold's share in income of joint ventures and associates was EUR 32 million, down EUR 1 million from the same period last year as a consequence of lower net income at ICA.

For the first half, Ahold's share in income of joint ventures and associates was EUR 54 million, down EUR 8 million from the same period last year.


Ahold Press Office: +31 (0)20 509 5343

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 first half or the second quarter of 2007 as the case may be in order to understand this currency impact. In certain instances, net sales are presented in local currency. Management believes these measures provide a better insight into the operating performance of foreign subsidiaries.

* Identical sales, excluding gasoline net sales. Given that gasoline prices have recently experienced greater volatility than food prices, management believes that by excluding gasoline net sales, this measure provides a better insight into the recent effect of gasoline net sales on Ahold's identical sales.

* Core Corporate Center costs. Core Corporate Center costs relate to the core responsibilities of the Corporate Center, including Corporate Finance, Corporate Strategy, Internal Audit, Legal, Human Resources, Information Technology, Communications and the Corporate Executive Board. Total corporate costs also include results from other activities co-ordinated centrally but not allocated to any operating company. Management believes that this measure provides a better insight into the company's operating performance.

* Operating income in local currency. In certain instances, operating income is presented in local currency. Management believes this measure provides a better insight into the operating performance of foreign subsidiaries.

* Cash flow before financing. Cash flow before financing is the sum of net cash from operating activities and net cash from investing activities. 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)                        Q2 2007      Q2 2006
Cash flow before financing           EUR  5,678   EUR    582
Net cash from financing activities   EUR   (217)  EUR   (532)
                                     ----------   ----------
Net cash from operating, investing   EUR  5,461   EUR     50
and financing activities

(In millions)                        HY 2007      HY 2006
Cash flow before financing           EUR  5,676   EUR    480
Net cash from financing activities   EUR   (472)  EUR   (764)
                                     ----------   ----------
Net cash from operating, investing   EUR  5,204   EUR   (284)
and financing activities

This earnings release should be read in conjunction with Ahold's interim financial report for the second quarter and half year 2007, which is available on www.ahold.com. This release contains certain non-GAAP financial measures which are further discussed in the interim financial report. The data provided in this earnings release are un-audited and are accounted for in accordance with IFRS unless otherwise stated.

Forward-looking statements notice

Certain statements in this earnings release are forward-looking statements within the meaning of the U.S. federal securities laws. These statements include, but are not limited to, statements as to plans for a EUR 1 billion share buyback program and the timing thereof, plans to delist from the NYSE and plans and expectations for the Value Improvement Program. These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the 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, the actions of Ahold's shareholders, competitors, customers, and other third parties, Ahold's liquidity needs exceeding expected levels, 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 and to meet its targets, the benefits from Ahold's plans and strategies being less than those anticipated, 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 earnings release. Ahold does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this earnings release, except as may be required by applicable 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 Second Quarter 2007 Earnings: http://hugin.info/130711/R/1149939/220233.pdf

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