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    Ahold's Global Year, Q4 Results Better; U.S. Picture Still Mixed

    AMSTERDAM -- Ahold's extensive restructuring to build its way back from financial free-fall seems to be working on a companywide basis, but its U.S. performance continues to be spotty, judging from the retail conglomerate's latest financial results released yesterday.

    AMSTERDAM -- Ahold's extensive restructuring to build its way back from financial free-fall seems to be working on a companywide basis, but its U.S. performance continues to be spotty, judging from the retail conglomerate's latest financial results released yesterday.

    Ahold reported operating income for 2006 of 1.3 billion euros (US $1.7 billion), up 1 billion euros ($1.3 billion) from last year; and full-year net income of 915 million euros ($1.2 billion), an increase of 769 million euros ($1.0 billion) from the prior fiscal year, while net debt was down 884 million euros ($1.2 billion), to 4.6 billion euros ($6.1 billion). Net sales came to 44.9 billion euros ($59.9 billion), a 2 percent rise over 2005.

    The company yesterday also announced a 3 billion euro ($4 billion) share-buyback program, subject to the divestment of U.S. Foodservice -- up 1 billion euros ($1.3 billion) from the last announcement. Details of the program "will be announced in due course," said Ahold president and c.e.o. Anders Moberg.

    At a press conference, Moberg said that the selling process of the scandal-plagued unit was "progressing well," with "lots of interest" from various unidentified suitors.

    For the fourth quarter, net income was 240 million euros ($319.9 million), an increase of 132 million euros ($175.9 million) over last year, and net debt was down 498 million euros ($663.8 million). Net sales for the quarter were 10.4 billion ($13.9 billion), a decline of 3 percent from the year-ago period, but at constant exchange rates net sales actually increased 3 percent, according to the company.

    "Ahold met the targets we set last year," said Moberg in a statement. "U.S. Foodservice delivered 1.7 percent operating margin; our retail operations performed in line with our margin guidance and exceeded sales growth guidance. Group Office Support costs are down, and we have reduced net debt even more than we said we would. Our Value Improvement Program at Stop & Shop is on track, and we have already seen encouraging improvements in the way customers perceive our produce department, both in terms of price and quality."

    However, the performance at the company's American holdings was more equivocal. At the Stop & Shop/Giant-Landover Arena, quarterly sales edged up 0.1 percent over last year to $3.8 billion, while identical sales slipped 2 percent (2.3 percent excluding gas net sales) at Stop & Shop and 2.1 percent at Giant-Landover.

    Operating income for the quarter declined $18 million at $162 million, or 4.2 percent of net sales, as margins were affected by costs related to the further implementation of the Value Improvement Plan, which slashes costs across categories.

    Full-year net sales in the arena were $16.4 billion, an increase of 0.6 percent from last year, with identical sales down 1.3 percent (2 percent excluding gas net sales) at Stop & Shop and 1.6 percent at Giant-Landover. Operating income decreased $15 million to $839 million, or 5.1 percent of net sales.

    For the Giant-Carlisle/Tops Arena, fourth-quarter sales of $1.4 billion were down 2.7 percent from last year, due to the impact of divestments of Tops stores in northeast Ohio. Identical sales were up 3.1 percent (1.8 percent excluding gas net sales) at Giant-Carlisle, but down 2.9 percent (4.3 percent excluding gas net sales) at Tops. Operating losses during the quarter included $109 million in costs and charges connected with the Tops divestment.

    Full-year net sales in the arena were $6.6 billion, a 3.3 percent decrease from the year-ago period. Identical sales rose 3.9 percent (2.1 excluding gas net sales) at Giant-Carlisle, but fell 5.5 percent (6.6 percent excluding gas net sales) at Tops. Operating income was down $28 million from 2005, to $62 million.

    At the embattled U.S. Foodservice unit, fourth-quarter net sales grew 5.1 percent, to $4.4 billion, and operating income was $81 million, vs. a loss of $9 million last year. Ahold mainly attributed this improvement to a higher gross margin, continued operating efficiencies and cost reductions, and the nonrepetition of last year's $52 million restructuring and related charges.

    For the full year, U.S. Foodservice sales rose 4.1 percent, to $19.2 million, and operating income was $325 million, leading to an operating margin of 1.7 percent, vs. 0.6 percent in the year-ago period.

    "Our focus in 2007 will be the ongoing implementation of the strategy we announced last November," noted Moberg. "In our new company structure of two continental platforms, we have new management in key positions, both in the United States and Europe. Our major focus in the United States is the continued rollout of the Value Improvement Program."

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