Highlights
Amsterdam, the Netherlands, June 7, 2007 - Ahold today published its interim financial report for the first quarter of 2007. Anders Moberg, President and CEO of Ahold, said: "The first quarter showed an encouraging start to the year. We registered positive identical sales at all banners except Giant-Landover, core retail operating margins are developing in-line with our expectations, and significant progress was made on reducing core Corporate Center costs. Our divestment program is progressing well; we recently announced the agreement on the sale of U.S. Foodservice, subject to shareholder approval. Our Value Improvement Program at Stop & Shop and Giant-Landover is being rolled out as planned and we see encouraging improvements in the way customers perceive price and quality."
Financial performance
First Quarter 2007
Net sales were €13.2 billion, down 0.7% from the same period last year. At constant exchange rates, net sales increased by 5.8%.
Operating income was €421 million, €3 million lower than last year. Retail operating income was €383 million, an operating margin of 4.4%. U.S. Foodservice operating income was €79 million, an operating margin of 1.7%. Core Corporate Center costs were €33 million for the quarter, down €16 million from a year ago.
Cash flow before financing was €2 million negative for the quarter - €100 million better than the same period last year. Year-over-year comparisons are distorted by large payments made under the class action settlement (€284 million paid in 2007 and €536 million in 2006) and significant proceeds from divestments in 2006.
Performance by business segment
Stop & Shop / Giant-Landover
For the first quarter, net sales of $5.1 billion were up 1.8% compared with the same period last year; identical sales were up 0.3% at Stop & Shop (down 0.1% excluding gasoline net sales) and down 1.1% at Giant-Landover. Operating income was $228 million -- or 4.5% of net sales -- down $61 million from the same period last year. First quarter 2007 included restructuring charges of $9 million whereas the first quarter 2006 was positively impacted by a one-time post-employment benefits adjustment of $27 million. Furthermore, margins were impacted by price investments related to the further roll-out of the Value Improvement Program.
Giant-Carlisle
For the first quarter, net sales of $1.3 billion were up 16% from the same period last year, partially reflecting the impact of the Clemens acquisition; identical sales were up 4.4% (3.9% excluding gasoline net sales). Operating income increased by $5 million to $56 million or 4.3% of net sales.
Albert Heijn
For the first quarter, net sales of €2.4 billion were up 12.6% compared with the same period last year, partially reflecting the impact of the Konmar acquisition. Identical sales increased at Albert Heijn supermarkets by 8.6%. Operating income was €150 million or 6.3% of net sales - up €48 million from the prior year, as Albert Heijn benefited from higher identical sales, effective cost control and lower pension charges.
Albert / Hypernova (Czech Republic and Slovakia)
For the first quarter, net sales increased 9.9% to €434 million. At constant exchange rates net sales increased 6.7%. Identical sales increased 3.4%. Operating losses were €5 million compared to a loss of €10 million in the same period last year.
Schuitema
For the first quarter, net sales grew 3.8% to €987 million. Identical sales increased 3.2%. Operating income of €22 million, or 2.2% of net sales, was down €9 million from the same period last year, as a result of improved conditions for Schuitema's franchisees and increased commercial activities.
U.S. Foodservice
For the first quarter, net sales increased 4.4% to $6.1 billion. Operating income was $104 million compared to $80 million in the same quarter last year; operating margin was 1.7%. The improvement was primarily attributable to lower operating costs.
Unconsolidated joint ventures and associates
For the first quarter, Ahold's share in income of joint ventures and associates decreased 24% to €22 million. The decrease was primarily attributable to ICA, due to the continuing weak performance of Norway and higher costs including logistic expenses at ICA in Sweden associated with a new distribution network and warehouse. These should improve the future cost-efficiency of ICA's supply chain.
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 quarter of 2007 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 positive 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 Management, 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 (loss) in local currency . In certain instances, operating income (loss) 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.
This earnings release should be read in conjunction with Ahold's interim financial report for the first quarter 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 unaudited and are accounted for in accordance with RS 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 the planned sale of U.S. Foodservice, statements as to plans for a reverse stock split and capital repayment 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, such as Ahold's ability to complete planned divestments on terms acceptable to Ahold, including the closing of the sale of U.S. Foodservice, the ability to satisfy, or delays in satisfying, closing conditions to such divestments, the actions of Ahold's shareholders, competitors, courts, government agencies 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, the actions of Ahold's customers, including their acceptance of Ahold's plans and strategies, 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, the costs or other results of legal proceedings, and other factors discussed in Ahold's public filings. Many of these and other risk factors are detailed in Ahold's publicly filed reports. 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."
