Ahold's 2Q Results Reveal a Company Still in Transition; Supervisory Chairman to Depart
ZAANDAM, The Netherlands - Ahold yesterday posted its second-quarter results, which the financially troubled company admitted were reflective of difficult economic times as it looked to the future for its current business strategies have a positive impact.
Net sales were 12.3 billion euros ($14.9 billion), a decrease of 4.9 percent compared to the same period in 2003. Net sales growth was 3.0 percent, excluding currency impact and the impact of divestments. Operating income came to 169 million euros ($204.5 million), compared to EUR 222 million for the second quarter last year.
Europe Retail and U.S. Foodservice reported higher operating income, while U.S. Retail reported significantly lower operating income. U.S. Retail and South America were both negatively affected by fixed-asset impairment charges. The costs related to the settlement with AIG Europe (Netherlands) N.V., as announced on July 16, have also been included. The improvement of net income to 32 million euros ($38.7 million) in the second quarter of 2004, as opposed to a net income of 3 million euros ($3.6 million) in the year-ago period, was primarily due to lower net interest expenses related to the early repayment of debt in the second quarter and during 2003.
Net debt changed only marginally during the quarter. Gross debt, however, was further reduced from 10.6 billion euros ($12.8 billion) at the end of the first quarter of 2004 to 9.6 billion euros ($11.6 billion) at the end of the second quarter of 2004, the result of Ahold's ongoing efforts to bolster its balance sheet. In the second quarter a small net cash outflow before financing activities of 5 million euros ($6.05 million) was reported, compared with a net cash inflow of 399 million euros ($482.8 million) in the second quarter of 2003. This decrease was mainly attributable to lower real estate divestments, higher income taxes paid, and a net cash outflow for working capital.
"Many of our main operating companies showed improved performance against the same quarter of last year," said Anders Moberg, Ahold president and c.e.o., in a statement. "The recovery of U.S. Foodservice is well under way, and we are pleased to show a positive operating income this quarter. In Europe the ongoing repositioning of Albert Heijn is strengthening the company's market leadership, while cost reductions have led to higher operating income.
"Our results for U.S. Retail continue to be impacted by strong competition. We've also experienced pressure on operating expenses and incurred certain fixed asset impairment charges and costs associated with the integration of Giant-Landover and Stop & Shop into one business arena," Moberg continued. "This integration process, a part of our Road to Recovery program, is proceeding according to plan. As this huge task and other ongoing projects progress toward completion, we will begin to see the full impact on our competitive position."
According to Ahold, its divestment program is also on schedule. Based on the current state of the processes under way, the company expects to close the divestments of its operations in Spain and at BI-LO/Bruno's later in 2004. Ahold says that the general economic outlook in the United States has become more difficult to predict for the rest of the year, because of the uncertainty of macroeconomic developments.
Additionally, Karel Vuursteen has decided to resign as chairman of the supervisory board of Royal Ahold N.V. because of what the company described as "personal circumstances." He will remain a member of the board until the next annual general meeting of shareholders to be held on May 18, 2005. In his stead, René Dahan will serve temporarily as chairman.
Net sales were 12.3 billion euros ($14.9 billion), a decrease of 4.9 percent compared to the same period in 2003. Net sales growth was 3.0 percent, excluding currency impact and the impact of divestments. Operating income came to 169 million euros ($204.5 million), compared to EUR 222 million for the second quarter last year.
Europe Retail and U.S. Foodservice reported higher operating income, while U.S. Retail reported significantly lower operating income. U.S. Retail and South America were both negatively affected by fixed-asset impairment charges. The costs related to the settlement with AIG Europe (Netherlands) N.V., as announced on July 16, have also been included. The improvement of net income to 32 million euros ($38.7 million) in the second quarter of 2004, as opposed to a net income of 3 million euros ($3.6 million) in the year-ago period, was primarily due to lower net interest expenses related to the early repayment of debt in the second quarter and during 2003.
Net debt changed only marginally during the quarter. Gross debt, however, was further reduced from 10.6 billion euros ($12.8 billion) at the end of the first quarter of 2004 to 9.6 billion euros ($11.6 billion) at the end of the second quarter of 2004, the result of Ahold's ongoing efforts to bolster its balance sheet. In the second quarter a small net cash outflow before financing activities of 5 million euros ($6.05 million) was reported, compared with a net cash inflow of 399 million euros ($482.8 million) in the second quarter of 2003. This decrease was mainly attributable to lower real estate divestments, higher income taxes paid, and a net cash outflow for working capital.
"Many of our main operating companies showed improved performance against the same quarter of last year," said Anders Moberg, Ahold president and c.e.o., in a statement. "The recovery of U.S. Foodservice is well under way, and we are pleased to show a positive operating income this quarter. In Europe the ongoing repositioning of Albert Heijn is strengthening the company's market leadership, while cost reductions have led to higher operating income.
"Our results for U.S. Retail continue to be impacted by strong competition. We've also experienced pressure on operating expenses and incurred certain fixed asset impairment charges and costs associated with the integration of Giant-Landover and Stop & Shop into one business arena," Moberg continued. "This integration process, a part of our Road to Recovery program, is proceeding according to plan. As this huge task and other ongoing projects progress toward completion, we will begin to see the full impact on our competitive position."
According to Ahold, its divestment program is also on schedule. Based on the current state of the processes under way, the company expects to close the divestments of its operations in Spain and at BI-LO/Bruno's later in 2004. Ahold says that the general economic outlook in the United States has become more difficult to predict for the rest of the year, because of the uncertainty of macroeconomic developments.
Additionally, Karel Vuursteen has decided to resign as chairman of the supervisory board of Royal Ahold N.V. because of what the company described as "personal circumstances." He will remain a member of the board until the next annual general meeting of shareholders to be held on May 18, 2005. In his stead, René Dahan will serve temporarily as chairman.