Ahold 1998 net earnings surge 29% to NLG 1.2 billion

Tuesday, March 09, 1999

1998 RESULTS
The average number of common shares outstanding increased by 9% to 575.7 million, largely reflecting the global offerings of new equity to finance acquisitions in Latin America and the United States, and the placement of shares by issuing optional stock dividends.

The significant increase in net earnings was mainly attributable to further growth in the United States. The acquisition of US supermarket company Giant Food Inc. ('Giant-Landover') on October 28, 1998, contributed to the increase in net earnings. The Netherlands, Portugal, Brazil and Argentina all made healthy contributions.

The results in guilders were marginally influenced by the higher US dollar (NLG 1.98 in 1998 vs NLG 1.95 in 1997). At a constant exchange rate, the growth in earnings per share amounted to 17%.

1998 sales rise 15% to NLG 58.4 billion Consolidated sales in guilders rose 15% to NLG 58.4 billion (1997: NLG 50.6 billion).

Sales in the United States rose 13% to USD 16.2 billion (1997: USD 14.3 billion), all operating companies contributing to the increase. In particular, Stop & Shop and Giant-Carlisle generated markedly higher sales. The consolidation of Giant-Landover in the 1998 fourth quarter also impacted positively.

In The Netherlands, sales rose 7% to NLG 17.0 billion (1997: NLG 15.9 billion), reflecting growth at Albert Heijn (6%), the Schuitema wholesale organization (10%), the Institutional Food Supply company and at specialty stores Etos and Gall & Gall. As in previous years, Albert Heijn, Schuitema, Etos and Gall & Gall boosted market share, slightly to significantly.

In other European countries (Portugal, Spain, the Czech Republic and Poland), sales rose 20% to NLG 3.8 billion (1997: NLG 3.2 billion). Sales at Feira Nova and Pingo Doce in Portugal were significantly higher. The newly-opened Polish stores and Czech hypermarkets also contributed to sales growth.

In Latin America, sales rose 78% to NLG 4.7 billion (1997: NLG 2.6 billion). This sharp rise reflects the full-year consolidation of Bompreço Bahia in Brazil. The consolidation of Disco in Argentina and Santa Isabel based in Chile, both as of the 1998 fourth quarter, also boosted sales.

In Asia, sales amounted to NLG 0.9 billion, almost identical to last year. In local currency, sales rose considerably in each country.

1998 operating results rise 22% to NLG 2.2 billion Consolidated operating results rose 22% to NLG 2.2 billion (1997: NLG 1.8 billion).

Operating results in the United States rose 24% to USD 713.5 million (1997: USD 574.2 million), with all operating companies, particularly Stop & Shop and Tops, contributing. The consolidation of Giant-Landover as of October 28, 1998, also impacted positively on operating results. Its integration is on schedule and operating results were above expectations.

In The Netherlands, operating results rose 11% to NLG 671.3 million (1997: NLG 606.8 million). Albert Heijn and Schuitema achieved markedly higher operating results. The specialty stores improved strongly and considerably higher operating results at Ahold Institutional Food Supply contributed to the gains.

In other European countries, operating results rose 20% to NLG 215.2 million (1997: NLG 179.0 million). In Portugal, Feira Nova and Pingo Doce achieved significantly higher operating results. Operating losses in Poland and the Czech Republic reflected the high cost of opening a large number of new stores.

In Latin America, operating results rose 72% to NLG 138.5 million (1997: NLG 80.5 million). This sharp rise reflects the strongly improved results at Bompreço Bahia in Brazil and the consolidation of Disco in Argentina as of the 1998 fourth quarter. Santa Isabel based in Chile recorded a slight operating loss.

In Asia, operating losses amounted to NLG 103.3 million (1997: NLG 78.6 million), reflecting costs incurred for the expansion of existing activities and the unfavorable economic climate.

Corporate costs amounted to NLG 88.1 million (1997: NLG 71.3 million). The higher costs are primarily attributable to the start-up and development of new activities.

Net financial expense
Net financial expense rose to NLG 515.4 million (1997: NLG 473.8 million), mainly caused by the consolidation of the interest expenses of Disco and Santa Isabel and the interest on the funding of the Giant-Landover acquisition including the newly issued convertible subordinated notes.

Tax rate
The tax rate, expressed as a percentage of pre-tax earnings, was reduced to 25% (1997: 28%). The decrease reflects changes in the composition of pre-tax earnings.

Equity ratio
The capital accounts totaled 23.2% of the balance sheet total (1997: 21.4%.) Group equity, expressed as a percentage of the balance sheet total, amounted to 15.7% (1997: 19.3%). Assuming full conversion of the outstanding convertible subordinated notes (NLG 1495 million), group equity expressed as a percentage of the balance sheet total would amount to 21.7%. Stockholders' equity at 1998 year-end amounted to NLG 3.4 billion (1997: NLG 3.1 billion). Added to stockholders' equity were the proceeds of the global offerings (NLG 4.8 billion), the preferred financing shares issue (NLG 160.9 million), the paid-in capital attributable to optional dividends (NLG 401.5 million), exercised option rights (NLG 80.4 million) and retained earnings (NLG 659.2 million). Goodwill paid on acquisition, primarily for Disco, Santa Isabel and Giant-Landover (in total NLG 5.2 billion) and the negative impact of exchange rate fluctuations (NLG 532.4 million) were charged to stockholders' equity.

Fourth Quarter 1998 results
Fourth quarter net earnings rise 36% In the fourth quarter of 1998 (13 weeks), net earnings rose 36% to NLG 385.0 million (1997, 12 weeks: NLG 282.3 million). Earnings per common share rose 15% to NLG 0.60 (1997: NLG 0.52). Earnings in guilders in this quarter were negatively impacted by the lower average exchange rate of the US dollar (NLG 1.88 vs NLG 1.98). At a constant US dollar exchange rate, earnings per share rose 19%. The considerable growth in net earnings partly reflects the consolidation of Giant-Landover in the United States and Disco in Argentina, both as of the 1998 fourth quarter.

Fourth quarter sales rise 33%
Consolidated sales in the 1998 fourth quarter rose 33% to NLG 16.8 billion (1997: NLG 12.6 billion) due partly to the impact of the extra week in the fiscal fourth quarter of 1998.

In the United States, sales rose 41% to USD 4.8 billion (1997: USD 3.4 billion). This considerable increase reflects the consolidation of Giant-Landover in this quarter. Ahold's four other operating companies also generated higher sales. In The Netherlands, sales rose 12% to NLG 4.4 billion (1997: NLG 3.9 billion). In other European countries, sales rose 20% to NLG 1.1 billion (1997: NLG 0.9 billion). In Latin America, sales amounted to NLG 2.1 billion (1997: NLG 0.9 billion). This sharp increase reflects the consolidation in this quarter of Disco in Argentina and Santa Isabel in Chile. In Asia, sales rose 26% to NLG 252.6 million (1997: NLG 201.3 million).

Fourth quarter operating results rise 31%
Consolidated operating results in the 1998 fourth quarter rose 31% to NLG 703.1 million (1997: NLG 538.1 million).

In the United States, operating results rose 48% to USD 221.3 million (1997: NLG 149.2 million). This sharp rise reflects operating results at Giant-Landover and the increased contribution of all other US operating companies. In The Netherlands, operating results rose 12% to NLG 194.1 million (1997: NLG 173.5 million), all companies contributing to the improvement. In other European countries, operating results rose 19% to NLG 82.4 million (1997: NLG 69.1 million), largely attributable to the performance at Feira Nova and Pingo Doce in Portugal. Operating losses in Poland and the Czech Republic reflect the high costs of opening a large number of new stores. In Latin America, fourth quarter operating results rose 86% to NLG 64.3 million (1997: NLG 34.5 million). This sharp increase reflects the consolidation of the results of Disco in Argentina and the significantly higher results of Bompreço in Brazil. In Asia, operating losses amounted to NLG 26.9 million (1997: NLG 14.9 million), as anticipated. Corporate costs amounted to NLG 26.1 million (1997: NLG 19.1 million).

Net financial expense amounted to NLG 144.2 million (1997: NLG 111.1 million), reflecting the consolidation of interest-bearing debt of Disco and Santa Isabel as well as the interest on the funding of the Giant-Landover acquisition, including interest on the convertible subordinated notes.

The tax rate was reduced to 25% (1997: 27%).

1998 dividend proposal
It is proposed that an increased dividend of NLG 0.86 (1997: NLG 0.72) per common share of NLG 0.50 par value be paid from the 1998 results; of this amount, NLG 0.26 has already been paid as interim dividend. Stockholders can choose to receive the 1998 final dividend of NLG 0.60 (1997: NLG 0.51) per common share in the form of a pay-out of 2%, charged to the tax-free additional paid-in capital. This dividend will be made payable on May 25, 1999. The General Meeting of Stockholders will be held at the Circus Theater in The Hague on May 11, 1999 at 2:00 pm. The 1998 annual report will be available as of April 12, 1999.

Outlook for 1999
Sales and earnings in 1999 are expected to improve in all regions. The Ahold Corporate Executive Board anticipates that 1999 earnings per share, excluding currency fluctuations, will rise by 15 to 20%.

Highlights

• Net earnings rise strongly by 29% to NLG 1.2 billion
• Earnings per common share increase 19% to NLG 2.06
• Operating results rise 22% to NLG 2.2 billion
• 1998 dividend proposal: NLG 0.86 (1997: NLG 0.72) per common share
• 1999 outlook: 15-20% higher earnings per share