BRUSSELS, Belgium, August 1, 2002 (PRIMEZONE) --
Second Quarter
-- Organic sales growth of 2.5% (adjusted for Easter) despite
difficult economic and competitive environment, but weak dollar
and unfavorable comparisons push sales 4.4% below prior year
-- Operating cash flow margin remains strong at 7.4%; EBITDA
decreases by 6.3%
-- Cash earnings per share of EUR 0.84
-- Net earnings stable at EUR 46.5 million
Half Year
-- Sales increase by 1.6%; Organic sales growth of 3.0%
-- Operating cash flow margin of 7.5% (7.4% in 2001)
-- Cash earnings: +23%; Reported earnings: +29%
-- Cash earnings per share: -11%; Reported earnings per share: -7%
-- Free cash flow of EUR 226.6 million
-- Net debt reduced by EUR 635.0 million to EUR 4.1 billion
Delhaize Group (Euronext Brussels:DELB) (NYSE:DEG), the Belgian international food retailer, today reported that in the second quarter of 2002 cash earnings decreased by 11.1% to EUR 77.3 million compared to last year and reported earnings remained stable at EUR 46.5 million. On a per share basis cash EPS amounted to EUR 0.84 (EUR 1.07 in 2001) and net earnings to EUR 0.50 (EUR 0.58 in 2001).
"The second quarter of 2002 was very challenging, but even in the face of weaker than expected sales our results show evidence of underlying strength in the Group," said Pierre-Olivier Beckers, President and Chief Executive Officer. "Our U.S. operations' sales were negatively impacted by the difficult economic and competitive environment. In Belgium sales evolved satisfactory due to the growing success of the new commercial policy. In Greece sales grew impressively. Careful margin management and cost control in the U.S. helped mitigate the impact of low sales. Despite the difficult environment, Delhaize continued to generate significant cash flow. We are confident that the actions that we are taking in the U.S. and Belgium to improve our already successful business will translate into strengthening sales growth even in highly competitive markets."
"Delhaize Group is a successful and committed organization, that can count on an experienced and capable management team," said Pierre-Olivier Beckers. "Despite a lack of economic growth and intensified competition in some of our key markets, the Group's depth of resources and fundamental health is reflected in the fact that even at the current weak dollar exchange rate our cash earnings will increase by more than 10% this year."
In the second quarter of 2002, Delhaize Group achieved sales of EUR 5.3 billion, a decrease of 4.4% compared to 2001 due to the depreciation of the U.S. dollar, the closing of Super Discount Markets in the fourth quarter of 2001 and weak sales in the U.S. Organic sales growth was positive at 2.5% adjusted for the seasonal impact of Easter (+1.7% non-adjusted). Delhaize Group added 25 stores to its sales network in the quarter, reaching a total of 2,481 stores. During the first six months of 2002, sales of Delhaize Group increased by 1.6% to EUR 10.7 billion. Organic sales growth was 3.0% in the first six months of 2002.
In the second quarter, cash flow from operations (EBITDA) of Delhaize Group decreased by 6.3% to EUR 386.6 million due to the weak U.S. dollar and low sales growth in the U.S. Despite lower sales, EBITDA margin was strong at 7.4% of sales, one of the highest profitability margins in the sector. During the first six months of 2002, EBITDA of Delhaize Group amounted to EUR 795.3 million, an increase of 2.1% compared to 2001 (7.5% of sales).
Reported earnings remained almost stable for the quarter, and at EUR 94.8 million year-to-date, they are 28.9% above prior year. Cash earnings, eliminating exceptional charges and goodwill amortization, dropped 11.1% for the quarter. They are 22.8% ahead of prior year through six months.
Per share numbers are negatively impacted, by the averaging of lower outstanding share levels prior to the share exchange in 2001, and year-to-date reported earnings per share are down 6.6%. Cash earnings per share decreased year-to-date 11.0% versus 2001. Cash earnings per share in the second quarter were EUR 0.84 compared to EUR 1.07 the prior year.
Delhaize Group built on its excellent first quarter generation of free cash flow, producing EUR 119.2 million in the second quarter after capital expenditure and before the payment of a EUR 135.8 million dividend. Free cash flow after capital expenditure and dividends is EUR 226.6 million year-to-date. With the weaker dollar translation and the application of free cash flow to debt balances, net debt in euros has decreased by EUR 635.0 million since the beginning of the year to EUR 4.1 billion. The Group's net debt to equity ratio stood at the end of June 2002 at 113.5% compared to 127.3% at the end of 2001.
Financial Outlook
On the basis of the first six months results and the expected development in the second half of the year, Delhaize Group has reviewed its earlier guidance for 2002 and has revised it as follows:
-- The sales network is expected to grow by approximately 102 stores
to a total of 2,546 stores.
-- At constant exchange rates, it is expected that sales of Delhaize
Group will grow in 2002 by 3 to 4% (excl. Super Discount Markets).
-- Delhaize America's comparable store sales growth is projected to
be positive but below +1.0%.
-- At constant exchange rates, it is expected that cash earnings per
share of Delhaize Group will be at approximately the same level as
in 2001.
There are no other changes to our previous guidance and more particularly for the following items:
-- Delhaize Group is committed to realize EUR 1 billion free cash
flow in the period 2001-2003 and reach a net debt to equity ratio
of approximately 100% at the end of 2003.
-- Delhaize Belgium expects to maintain its operating cash flow
margin at the 2001 level.
GEOGRAPHICAL OVERVIEW
United States
In the second quarter of 2002, the sales contribution of Delhaize America to the Delhaize Group results increased by 0.7% to U.S. $3.7 billion (EUR 4.1 billion). The difficult economic and competitive environment in the Southeast of the United States resulted in a comparable store sales decline of 1.2%. Increased unemployment -- a 7.0% unemployment rate in North Carolina -- particularly hampered consumer spending. The timing of the Easter holiday negatively impacted sales during the second quarter of 2002. Excluding the Easter seasonal effect, comparable store sales of Delhaize America would have decreased by 0.3%.
In the second quarter of 2002, Delhaize America opened 13 new or relocated stores and closed five stores, resulting in a net increase of eight stores to a total of 1,472 stores. In addition, Delhaize America remodeled or expanded 18 supermarkets.
The EBITDA-margin of Delhaize America remained at the high level of 8.1% despite the negative impact of weak sales on SG&A as a percentage of sales. Notwithstanding the competitive climate and the continued competitive price positioning of the U.S., banners of Delhaize Group, gross margin of Delhaize America was essentially unchanged because of the continued implementation of zone pricing and improved sales mix.
Europe
In the second quarter of 2002, Delhaize Belgium sales grew by 4.6% to EUR 838.6 million. The sales growth was due to the expansion of the store network by 13 stores and the rise in comparable store sales of 2.0% despite low food inflation. Delhaize Belgium again increased its market share in a competitive environment. EBITDA grew by 7.2% due to the sales growth and the increase of the operating cash flow margin to 5.5% (5.3% in 2001).
At the beginning of 2002, Delhaize Belgium introduced a new commercial policy further differentiating the Company as the Belgian food specialist with an outstanding offer in fresh products, private label products, meal solutions, and organic and health products. After a first quarter influenced by the introduction of this new policy and other non-recurring elements such as the introduction of the Euro, customers reacted increasingly positively to the new commercial policy resulting in an increase of the number of items purchased. At the same time, the prices of more than 2,800 products were reduced in the first quarter of 2002 and of an additional 600 products in the second quarter, enabling us to reach our targeted price level on the majority of categories.
In the second quarter of 2002, sales in the other European operations of Delhaize Group (Greece, Czech Republic, Slovakia and Romania) amounted to EUR 291.0 million, a decrease of 8.5%. Adjusted for the Trofo sales for the first quarter of 2001, which are included in the second quarter of 2001, sales would have grown by 8.1%. The successful integration of Trofo in Alfa-Beta continued at a fast pace, resulting in comparable store sales growth in the Trofo stores of more than 20%. In the second quarter of 2002, Delvita continued the major remodeling program of its store base. EBITDA of the Central and Southeastern European operations of Delhaize Group increased by 13.6% to EUR 12.1 million.
Asia
In the second quarter of 2002, the operations of Delhaize Group in Asia reported sales growth of 20.1% to EUR 54.3 million. At the end of the second quarter of 2002, Delhaize Group operated 92 supermarkets in Asia, including 30 in Thailand, 31 in Indonesia and 31 in Singapore. Cash flow from operations of the Asian activities of Delhaize Group was in the second quarter of 2002 EUR 0.9 million.
DELHAIZE GROUP
Delhaize Group is a Belgian food retailer present in ten countries on three continents. At the end the second quarter of 2002, Delhaize Group's sales network consisted of 2,481 stores. In 2001, Delhaize Group posted EUR 21.4 billion in sales and cash earnings of EUR 339.0 million. Delhaize Group employs approximately 147,000 people. Delhaize Group is listed on Euronext Brussels and the New York Stock Exchange.
REPORT OF THE STATUTORY AUDITORS
We have conducted a limited review of the half-year accounts of Delhaize Group as at June 30, 2002. Our limited review did not reveal any significant adjustments, which would be required to be made to the half year accounts as presented. -- Deloitte & Touche Reviseurs d'Entreprises, represented by James Fulton.
FINANCIAL CALENDAR
Press release: 2002 third quarter results -- November 7, 2002 Press release: 2002 sales -- January 9, 2003 Press release: 2002 results -- March 13, 2003 Press release: 2003 first quarter results -- May 8, 2003
DEFINITIONS
Cash flow from operations: EBITDA or earnings before interest, taxes, depreciation, amortization, store closing charges in the normal course of business, exceptional items and minority interests
Cash earnings: reported earnings plus goodwill amortization, store closing charges in the normal course of business and exceptional items, net of taxes and minority interests
Cash EPS: cash earnings divided by the weighted average number of shares during the period
Comparable store sales: sales from the same stores, including relocations and expansions.
Free cash flow: cash flow before financing activities less dividends and directors' share of profit, less dividends paid by subsidiaries to minority interests.
Net debt: long-term financial liabilities, including current portion and capital leases, plus short-term financial liabilities, minus short-term investments (excl. treasury shares) and cash and banks.
Organic sales growth: sales growth excl. sales from acquisitions, divestitures and currency fluctuations.
Outstanding shares: the number of shares issued by the Company, including treasury shares.
Weighed average number of shares: number of shares outstanding at the beginning of the period (less treasury shares), adjusted by the number of shares cancelled, repurchased or issued during the period multiplied by a time-weighting factor.
This press release is available in English, French and Dutch. You can also find it on the web site http://www.delhaizegroup.com Questions can be sent to investor@delhaizegroup.com
Delhaize Group's management will be discussing the financial results for the second quarter 2002 during an investors' conference call that will start at 3 p.m. CET (9: a.m. EST) on August 1, 2002. To participate in the conference call, please call +44.20.8781.0577 (U.K.) or +1.303.713.7929 (U.S.) and ask for "Delhaize". The conference call will also be broadcast live over the Internet on August 1, 2002 at 3 p.m. CET (9 a.m. EST) at www.delhaizegroup.com. A replay of this web cast will be available at the same website starting at 6 p.m. CET (12 p.m. EST) on August 1, 2002.
Some of the statements in this press release and other written and oral statements made from time to time by Delhaize Group and its representatives are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of Securities Exchange Act of 1934, as amended, and involve a number of risks and uncertainties. These statements include, but are not limited to, statements about strategic options, future strategies and the anticipated benefits of these strategies. These statements are based on Delhaize Group's current expectations. Delhaize Group's actual results could differ materially from those stated or implied in such forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements are described in Delhaize Group's Annual Report on Form 20-F for the year ended December 31, 2001 and other periodic filings made by Delhaize Group and Delhaize America with the U.S. Securities and Exchange Commission, which risk factors are incorporated herein by reference. Delhaize Group and Delhaize America disclaim any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.
The full text release with financial tables can be found at the following link: http://www.primezone.com/media/temp_nr/delhaizegrp.pdf