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BRUSSELS - International food retailer Delhaize Group announced today that in the third quarter of 2003 its net earnings per share increased to 0.58 euros from 0.26 euros in 2002.
Sales improved in the United States and continued to be strong in Belgium. Operating margin showed good improvement throughout Delhaize Group, compared with weak margins in 2002, and financial charges benefited from lower interest expense and treasury share revaluation. Earnings before goodwill and exceptionals grew by 63.8 percent to 1.02 euros per share (0.62 euros in 2002), despite a 12.5 percent weaker U.S. dollar against the euro.
For the first nine months of 2003, Delhaize Group realized a 270.4 million-euro free cash flow due to solid earnings. Delhaize Group?s net debt decreased from 3.9 billion euros at the end of 2002 to 3.3 billion euros at the end of the third quarter 2003, due to the use of free cash flow and the weaker U.S. dollar.
"Our excellent third quarter improvement demonstrates the success of our commitment to deliver systematic improvements to our business," said Pierre-Olivier Beckers, president and c.e.o. of Delhaize Group. "Our results confirm our sales momentum in the U.S. and our good margin management at all our key banners. We are particularly pleased with the U.S. comparable-store sales growth of 1 percent due to reinforced operational execution and the success of sustainable sales growth initiatives. The sales growth and continued cost discipline enabled us to increase our profitability despite continued reinvestments in our price competitiveness and in other sales-building activities."
In the third quarter of 2003, total sales of Delhaize Group decreased by 7.0 percent to 4.7 billion euros due to the weakening of the U.S. dollar by 12.5 percent against the euro. Organic sales growth was up 2.6 percent, compared with a 2.0 percent increase the previous year. The improvement of the sales trend was due to improving sales momentum at Food Lion and Kash n' Karry and continued strong sales at Hannaford, resulting in a comparable-store sales growth of Delhaize America of 1.0 percent and continued strong sales at Delhaize Group?s other operations, with very good comparable-store sales growth in Belgium (5.7 percent).
Operating costs (excluding depreciation and amortization) improved from 18.7 percent to 18.1 percent of sales, due to ongoing cost and expense savings at Food Lion and other banners within the group. The gross margin increased slightly to 25.6 percent of sales (25.5 percnet in 2002), despite continued reinvestments in the company?s price competitiveness, both in the United States and Belgium. Better supplier negotiations, an improved sales mix, and an optimized use of zone pricing allowed Delhaizr Group to sustain gross margins.
The operating margin of Delhaize Group rose significantly from 3.4 percent to 4.2 percent of sales. Delhaize Group posted an operating profit of 194.9 million euros, 12.2 percent higher than the prior year. At identical exchange rates, operating profit would have increased by 25.5 percent. The strong growth reflects a recovery from the low levels of the previous year, when the U.S. operations were first affected by the slowdown of the U.S. economy and management reorganization costs in the United States
Net earnings increased 124.8 percent to 53.5 million euros, notwithstanding an exceptional charge of 14.4 million euros pretax related to hurricane Isabel and the 12.5 percent weaker U.S. dollar. Financial expense declined substantially due to the weaker dollar, lower interest expense, and a revaluation of the treasury shares. Per share, net earnings were 0.58 euros in the third quarter of 2003, compared to 0.26 euros per share in the third quarter of 2002.
In the third quarter of 2003, earnings before goodwill and exceptionals were 1.02 euros per share, 63.8 percent higher than in the third quarter of 2002. At identical exchange rates, earnings before goodwill and exceptionals would have increased by 80.6 percent.