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ZAANDAM, Netherlands - Dutch retailer Ahold today unveiled a strategy and funding plan designed to rebuild its value over the next three years. The plan includes divesting of retail operations that likely won't maintain the number one or two positions in their markets within three to five years.
"With the financing plan that we are proposing, I am pleased to say that we finally draw a line under this difficult year," said Ahold president and c.e.o. Anders Moberg. "We can now focus wholeheartedly on strengthening the competitiveness of our business. At the same time, we are in the process of setting the highest possible standards for accountability, controls and corporate governance, to keep Ahold's investors, customers, employees and partners secure in the knowledge that this company is being run in their best interests.
"So today we launch the new Ahold," he announced.
Strategically, Ahold is now focused on portfolio optimization and organic growth rather than acquisitions. Financially, the company has redirected its planning processes towards maximizing cash flow and reducing debt. In addition, the company expects to generate significant proceeds from disposals.
The "Road to Recovery" program covers several key areas:
-- Re-engineering food retail: Ahold said it would increase its focus by optimizing its retail portfolio with an active disposals program and changes to the organizational structure. It will continue to invest in companies that can achieve sustainable number one or two positions in their markets within three to five years. Companies not capable of meeting these objectives will be divested. Ahold said it is committed to generating at least Euro 2.5 billion in proceeds from disposals by 2005.
In line with this, Ahold announced its intention to divest of its Spanish operations. It has initiated a preparatory review and said it expects to launch the formal sale process as soon as it is ready.
With the new organizational framework in place, Ahold is rolling out several strategic initiatives to improve competitiveness and ultimately drive higher sales and profitability. Areas of improvement include sourcing, infrastructure, store operations and product mix.
-- Recovering U.S. Foodservice: "U.S. Foodservice is an under-managed business, but it has a great market position and great potential to improve its financial performance," said Moberg. While the company holds the number two position in the growing $180 billion wholesale foodservice market, its integration process was "never properly executed," said Moberg.
Larry Benjamin, the new c.e.o., is implementing a three-step plan for recovering the value of U.S. Foodservice, which includes implementing a rigorous control environment and strong financial organization; focusing on the restoration of profitability and cash flow; and making changes in the mix of customers, products and brands to support sustainable profitable growth.
-- Restoring Ahold's financial health: The company has redirected its planning processes toward maximizing cash flow and reducing debt through more selective capital expenditures and initiatives to improve working capital. For 2003, Ahold is on track to scale back capex by Euro 800 million from the original plan, and to improve working capital by approximately Euro 100 million.
In addition, the company has committed to generate at least Euro 2.5 billion in proceeds from disposals by 2005. The company believes that these actions combined with a proposed Euro 2.5 billion rights issue will put Ahold on course to return to an investment grade profile by the end of 2005.