Thursday, September 07, 2000
Royal Ahold, the food provider, achieved second quarter 2000 net earnings of Euro 256.2 million, a 48.2% increase. Sales rose 57.7% to Euro 12.4 billion and operating results increased by 68.0% to Euro 539.9 million. Earnings per share for the quarter rose 31.8% to Euro 0.35. Excluding currency fluctuations, specifically the higher average exchange rate of the U.S. dollar, earnings per common share
grew 18.8%.
Ahold President Cees van der Hoeven commented that the results were fully in line with the outlook the company has consistently announced. Our various operating units have performed well and the company is right on track. Our autonomous sales growth is robust while recent acquisitions and new joint ventures have contributed to the significant growth of sales and results.
Van der Hoeven reiterated the companys excitement about the adapted multi-channel strategy. Our activities in the American foodservice sector, targeting the market for
out-of-home consumption, are highly promising. This strategy enables us to reach consumers when they are eating out, which they are doing more regularly. We will be prominently positioned across the United States in this rapidly-growing food consumption segment thanks to our acquisition of U.S. Foodservice (UFS), the countrys second largest food distributor, and our planned purchase of PYA/Monarch.
In the meantime, the Ahold President said, we are identifying significant synergy benefits among our foodservice and food retail operations. Jointly, our food retail and foodservice activities are prospering, and that applies to our operations in the United States, Europe and Latin America. We are very positive about the state of business and about our future.
Ahold 2nd quarter / 1st half 2000 results compared to 1999
X Euro 1 million 2nd quarter 1st half
2000 1999 Change in % 2000 1999 Change in %
Sales 12,449.7 7,892.7 57.7 23,403.8 17,173.1 36.3
EBIT 539.9 321.4 68.0 992.3 667.3 48.7
As % of sales 4.34 4.07 4.24 3.89
EBITDA 814.9 523.4 55.7 1,558.7 1,107.6 40.7
As % of sales 6.6 6.6 6.7 6.4
Net earnings 256.2 172.9 48.2 486.4 348.0 39.8
Net earnings after preferred dividend 253.4 170.2 48.9 479.8 341.5 40.5
Earnings per share in Euro 0.35 0.26 31.8 0.70 0.53 32.3
In the second quarter, sales and results were positively influenced by the higher average exchange rate of the U.S. dollar (Euro 0.96 vs Euro 1.07). Excluding currency impact, earnings per share grew 18.8% in the second quarter and 19.7% in the first half 2000.
United States
X USD 1 million 2nd quarter 1st half
2000 1999 Change in % 2000 1999 Change in %
Sales 6,733.4 4,696.7 43.4 13,133.3 10,793.1 21.7
Operating results 353.0 238.9 47.8 666.7 505.6 31.9
In the United States, sales rose 43.4%. This increase mainly reflects the acquisition of U.S. Foodservice and, to a lesser degree, the Golden Gallon and Sugar Creek convenience store chains. The supermarket chains also contributed to sales growth.
Operating results in the United States rose 47.8%, partially reflecting the consolidation of U.S. Foodservice, whose results were fully in line with expectations. All U.S. operating companies achieved higher operating results.
At Edwards, a division of Giant-Carlisle, preparations are underway for its conversion to the successful Stop & Shop format, expected to be completed in January 2001. The corporate support structure in the United States was considerably strengthened in the second quarter to better position the company to capture increasing synergy opportunities and economies of scale. At the end of the quarter, Ahold USA took a 51% stake in internet grocer Peapod.
Europe
X Euro 1 million 2nd quarter 1st half
2000 1999 Change in % 2000 1999 Change in %
Sales 3,898.6 2,398.9 62.5 7,098.6 5,282.0 34.4
Operating results 142.1 92.6 53.5 264.5 204.4 29.4
European sales rose 62.5%. This sharp sales increase largely reflects the newly-established joint venture with the ICA Group. The store chains in other European countries also contributed to sales growth. In The Netherlands, sales grew by 6.6%, partially reflecting the earlier acquisition of Dutch foodservice company Gastronoom. Sales increases in Portugal, the Czech Republic and Poland reflected the opening of new supermarkets and hypermarkets. The Czech Republic and Poland generated high identical sales growth, particularly through their hypermarkets.
Operating results in Europe increased 53.5%, partly attributable to the results of the ICA Group, that were fully in line with expectations. Operating results in The Netherlands grew by 7.5%. The results in Poland and the Czech Republic improved somewhat after absorption of costs, due to store openings and remodelings.
The conversion in the Czech Republic to the supermarket format Albert was completed in the second quarter. The central organization for Europe as a whole was considerably strengthened, facilitating the capture of economies of scale and synergy benefits. The Ahold European Competence Center also became fully operational.
Latin America
X Euro 1 million 2nd quarter 1st half
2000 1999 Change in % 2000 1999 Change in %
Sales 1,224.3 872.7 40.3 2,337.9 1,642.1 42.4
Operating results 35.3 22.0 60.5 64.0 41.4 54.6
Latin American sales rose 40.3%, partly as a result of the acquisition of La Fragua in Guatemala. Other Ahold operating units in the region, specifically Disco in Argentina and Bompreo in Brazil, also contributed to sales growth.
Operating results in Latin America increased by 60.5%, partially reflecting the acquisition of La Fragua. The higher operating results of store chains in other countries - specifically Brazil - also contributed to the increase. Ahold assumed full control of its Brazilian operations following its acquisition of the Paes Mendona familys stake in Bompreo.
Asia
X Euro 1 million 2nd quarter 1st half
2000 1999 Change in % 2000 1999 Change in %
Sales 96.7 125.0 (22.6) 200.0 256.9 (22.1)
Operating results (5.5) (10.8) 49.1 (11.6) (25.0) 53.6
Compared to last year, sales in Asia decreased, reflecting the discontinuation at the end of 1999
of Ahold activities in China and Singapore. In local currency, sales were higher in Thailand and Indonesia. Operating results improved at all store chains.
Corporate Costs
X Euro 1 million 2nd quarter 1st half
2000 1999 Change in % 2000 1999 Change in %
(11.0) (10.9) (0.9) (24.0) (22.5) (6.7)
Corporate costs were almost identical to those in the second quarter of last year.
Net Financial Expense
X Euro 1 million 2nd quarter 1st half
2000 1999 Change in % 2000 1999 Change in %
(167.3) (73.1) (128.9) (295.7) (192.2) (53.9)
Net financial expense amounted to Euro 167.3 million. This considerable increase is attributable
to the financing of acquisitions and the consolidation of interest expenses at U.S. Foodservice, the ICA Group and La Fragua.
The rolling annual interest coverage ratio was 3.58 and the rolling annual ratio of net interest bearing debt/EBITDA amounted to 2.28.
Tax rate
The tax rate, expressed as a percentage of pre-tax earnings, amounted to 25.5%.
Group equity
Group equity, expressed as a percentage of the balance sheet total, amounted to 7.7% (at year-end 1999: 18.8%). After the conversion of the outstanding convertible subordinated notes, group equity will amount to 15.5%. Capital accounts amounted to 16.3% of the balance sheet total.
Stockholders equity amounted to Euro 862 million. During the first half of 2000, proceeds from the issue of common stock and from exercised option rights, and the positive balance of exchange rate fluctuations were added to stockholders equity. In addition, first half 2000 net earnings, after deduction of the preferred dividend, were added to stockholders equity. Goodwill paid for acquisitions amounting to Euro 4.9 billion (primarily for U.S. Foodservice and the ICA Group) was fully charged to stockholders equity.
The Ahold Corporate Executive Board is considering capitalizing the goodwill paid in the current fiscal year and amortizing it over a 20 year period in anticipation of new accounting rules.
Interim dividend
The Corporate Executive Board, with the approval of the Supervisory Board, has decided to declare an interim dividend of Euro 0.18 in cash, either to be paid as a cash sum or as a pay-out of
1% in stock per outstanding common share, charged to the tax exempt, paid-in capital (1999: Euro 0.14 or 1% in common stock). The interim dividend is payable as of September 18, 2000. Also payable from that date is the interim dividend on cumulative preferred financing shares.
Outlook for full year 2000: EPS to grow by 17-20%
Ahold reconfirms its earlier expectation that sales and operating results for the full-year 2000 will increase in all regions, reflecting healthy autonomous growth and acquisitions. It is expected that net earnings will be sharply higher than in 1999. Earnings per common share, excluding currency impact, are expected to rise by 17-20%.
Additional information
Issue of preferred financing shares
Ahold intends to issue cumulative preferred financing shares in October 2000 to strengthen stockholders equity and finance investments in The Netherlands. A proposal to amend the Articles of Association will be put before an Extraordinary Annual General Meeting of Stockholders on October 9, 2000.
Spain
Ahold also announced today its plans to acquire all outstanding shares of the Spanish food retailer Superdiplo, with sales approaching Euro 1.5 billion. The planned acquisition will boost Aholds position in Spain and will be paid in Ahold shares.