Thursday, September 02, 1999
Zaandam, The Netherlands, September 2, 1999 – Royal Ahold, the leading international food retailer, achieved second quarter 1999 net earnings of E172.9 million (1998: E123.0 million), a 40.6% increase for the 12 week period ended July 18, 1999. Net earnings totaled E170.2 million (1998: E121.0 million) after deduction of the preferred dividend. Earnings per common share amounted to E0.27 (1998: E0.21), an increase of 27.0%. Excluding currency fluctuations, specifically the higher average exchange rate of the US dollar (E0.96 vs. E0.92), the earnings per common share growth was 20.2%.
Consolidated sales rose 34.5% to E7.9 billion (1998: E5.9 billion).
Operating results rose 42.3% to E321.4 million (1998: E225.9 million). As a percentage of net sales, operating results rose from 3.9% to 4.1%. Operating results before depreciation (EBITDA) rose 38.1% to E523.4 million (1998: E379.1 million). As a percentage of net sales, EBITDA rose from 6.5% to 6.6%.
The United States: sales +34.6%; operating results +45.7%
In the United States, sales increased 34.6% to USD 4.7 billion (1998: USD 3.5 billion). This increase is largely attributable to the consolidation of Giant-Landover and substantial sales growth at Stop & Shop. Operating results in the U.S. rose 45.7% to USD 238.9 million (1998: USD 164.0 million) All U.S. operating companies, most notably Stop & Shop, achieved higher operating results. Cost controls and good margin management at Giant-Carlisle, Tops and BI-LO also contributed to higher operating results. Operating results at Giant-Landover again exceeded expectations due to strong sales supported by increased promotional activity and cost savings.
The Netherlands: sales +5.1%; operating results +9.6%
Sales in The Netherlands grew 5.1% to E1.8 billion (1998: E1.7 billion). Sales at Albert Heijn rose 1.9%. Market share in second quarter 1999 was slightly lower compared with second quarter 1998. Sales at Schuitema rose 9.2%, accompanied by a further increase in market share. The specialty stores experienced modest sales growth.
Operating results in The Netherlands rose 9.6% to E70.7 million (1998: E64.5 million). Albert Heijn, Schuitema and Ahold Institutional Food Supply achieved better operating results than the previous year. Gastronoom, the recently acquired institutional food supplier, could make only small contributions to consolidated results due to consolidation from July 6, 1999. Operating results at specialty stores and production companies were lower than in 1998.
Other European Countries: sales +32.8%; operating results +21.7%
In other European countries, sales rose 32.8% to E551.6 million (1998: E415.5 million). Portugal, Poland and notably the Hypernova hypermarkets in the Czech Republic, contributed to sales growth. The consolidation of the Spanish supermarket chains acquired in January 1999, also contributed to the increase in sales.
Operating results in other European countries increased 21.7% to E21.9 million (1998: E18.0 million). In Portugal, the Pingo Doce supermarkets and Feira Nova hypermarkets again achieved higher results. Operating results at the newly acquired Spanish chains improved and practically achieved break-even. Operating results in Poland and the Czech Republic remained slightly negative.
Latin America: sales +115.7%; operating results +89.7%
Latin American sales rose 115.7% to E872.7 million (1998: E404.6 million), a doubling largely due to the consolidation of Disco and Santa Isabel. In Brazil, sales in local currency also increased during the second quarter.
Operating results in Latin America rose 89.7% to E22.0 million (1998: E11.6 million), mainly reflecting the consolidation of Disco. Operating results at Santa Isabel were still slightly negative.
Asia: sales rise 29.7%; operating results remain negative
Sales in Asia rose 29.7% to E125.0 million (1998: E96.4 million). Operating results in Asia amounted to a loss of E10.8 million (1998: operating loss of E9.7 million).
Corporate Costs
Corporate costs totaled E10.9 million (1998: E8.8 million).
Net Financial Expense
Net financial expense amounted to E72.7 million (1998: E50.2 million), an increase largely attributable to the consolidation of interest expenses at Disco, Santa Isabel and Giant-Landover.
The interest coverage ratio was 3.32 (1998: 3.43).
Tax rate
The tax rate, expressed as a percentage of pre-tax earnings, amounted to 27.4% (1998: 26.2%). The increase is due to changes in the geographic composition of earnings before tax.
Equity ratio
Group equity, expressed as a percentage of the balance sheet total, amounted to 16.3% (at year-end 1998: 15.7%). After the conversion of convertible subordinated notes, group equity will amount to 21.7%. Capital accounts totaled 23.0% of the balance sheet total (at year-end 1998: 23.2%).
Shareholders’ equity amounted to E2.0 billion (at year-end 1998: E1.6 billion). During the first half of 1999, proceeds from exercised option rights, paid-in equity attributable to the optional dividend of 1998, and the positive balance of exchange rate fluctuations were added to shareholders’ equity. In addition, first half net earnings, after deduction of the preferred dividend and after deduction of the interim dividend on common shares outstanding as of the balance sheet date were added to shareholders’ equity. Goodwill paid for acquisitions amounted to E250 million (primarily Gastronoom in The Netherlands, Dialco and Dumaya in Spain and Los Americanos in Argentina) and was fully charged to shareholders’ equity.
NET EARNINGS FOR FIRST HALF 1999 RISE 35.9% TO E348.0 MILLION
Net earnings for the 28-week period ended July 18, 1999 amounted to E348.0 million (1998: E256.1 million), an increase of 35.9%. Earnings per common share for first half 1999 amounted to E0.54 (1998: E0.45), an 18.9% increase. Excluding currency fluctuations, earnings per common share rose 19.6%.
Sales +30.4%
Consolidated sales for first half 1999 amounted to E17.2 billion (1998: E13.2 billion), an increase of 30.4%. In the U.S., sales increased 35.8% to USD 10.8 billion (1998: USD 7.9 billion). This increase was largely attributable to the consolidation of Giant-Landover. Sales in The Netherlands rose 4.1% to E4.2 billion (1998: E4.0 billion). In other European countries, sales rose 35.7% to E1.1 billion (1998: E0.8 billion). Latin American sales totaled E1.6 billion (1998: E0.8 billion). The doubling of sales reflects primarily the consolidation of Disco and Santa Isabel. In Asia, sales amounted to E0.3 billion (1998: E0.2 billion).
Operating results +37.7%
Consolidated operating results for the first half of 1999 amounted to E667.3 million (1998: E484.5 million), an increase of 37.7%. In the U.S., operating results amounted to USD 505.6 million (1998: USD 346.4 million), a 46.0% increase. In The Netherlands operating results were E161.4 million (1998: E146.8 million), a 9.9% increase. In other European countries, operating results rose 20.1% to E43.0 million (1998: E35.8 million). In Latin America, operating results doubled to E41.4 million (1998: E20.8 million). Operating losses in Asia amounted to E25.0 million (1998: losses of E19.3 million). Corporate costs for the first half totaled E22.5 million (1998: E19.5 million).
1999 interim dividend per common share: E0.14 or 1% in common stock
The Corporate Executive Board of Royal Ahold has decided to declare an interim dividend of E0.14 in cash, or 1% in stock per common share, from tax exempt, paid-in capital (1998: E0.12 in cash or 1% in common stock). The interim dividend is payable as of September 9, 1999. Also payable from that date is the interim dividend on cumulative preferred financing shares.
Outlook for full year 1999: EPS to grow by 20%, excluding currency fluctuations
Based on the results from the first half of 1999, the Corporate Executive Board of Royal Ahold anticipates a rise in earnings per common share, excluding currency fluctuations, of approximately 20% for the full year 1999.
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Royal Ahold press releases may contain ‘forward-looking’ statements. Actual results may differ from such statements as they may have been influenced by factors beyond the Company’s ability to control.
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