BRUSSELS, Belgium, March 11, 2004 (PRIMEZONE) -- Delhaize Group: (Euronext Brussels:DELB) (NYSE:DEG):
-- Organic sales growth of 2.4% due to improving sales trends
throughout the year
-- Operating margin grows to 4.3% (3.9% in 2002)
-- Earnings before goodwill and exceptionals: +15.6% at actual
exchange rates to EUR 386.6 million or EUR 4.20 per share
(+32.1% per share at identical exchange rates)
-- Weaker dollar and exceptional charges push net earnings lower
to EUR 171.3 million (-4.0%)
-- Free cash flow of EUR 357.5 million in 2003 (EUR 300.2
million in 2002)
-- Net debt to equity ratio of 89.8% at year-end (109.4% at the
end of 2002)
-- Net dividend increases by 13.6% to EUR 0.75 (gross dividend of
EUR 1.00)
Results Delhaize America: http://hugin.info/133961/R/937619/130025.pdf
Full press release in pdf-version: http://hugin.info/133961/R/937623/130029.pdf
Delhaize Group (Euronext Brussels:DELB) (NYSE:DEG), the Belgian international food retailer, announced today that in 2003 its earnings per share before goodwill amortization and exceptionals increased by 15.6% to EUR 386.6 million or EUR 4.20 per share. Net earnings decreased by 4.0% to EUR 171.3 million due to exceptional charges and a weakening of the U.S. dollar by 16.4% against the euro.
Delhaize Group realized EUR 357.5 million free cash flow in 2003 compared to EUR 300.2 million in 2002. The Group's net debt decreased from EUR 3.9 billion at the end of 2002 to EUR 3.0 billion at the end of 2003 due to the application of free cash flow and the weaker U.S. dollar. As a consequence, Delhaize Group closed 2003 with a net debt to equity ratio of 89.8%.
"We are pleased with our 2003 results," said Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group. "The focus of our companies on sustainable sales growth initiatives resulted in an accelerating sales trend throughout the year, culminating in organic sales growth of 3.9% in the fourth quarter of 2003, our best quarterly growth rate in almost two years. Good sales growth, combined with our successful cost and expense control efforts, have enabled us to deliver a strong year."
Mr. Beckers continued: "In 2004, Delhaize Group remains dedicated to reinforcing the differentiation of its store concepts and to focusing on executional excellence. Building on the sales and earnings momentum of 2003, management is confident in the Group's ability to continue to grow profitably while deleveraging its balance sheet."
FULL YEAR 2003 EARNINGS
In 2003, Delhaize Group posted an organic sales growth of 2.4%. Total sales decreased by 9.0% to EUR 18.8 billion due to the weakening of the U.S. dollar by 16.4% against the euro. At identical exchange rates, sales would have increased by 4.2%.
Sales were positively impacted by:
-- the improving sales momentum at Food Lion and Kash n'
Karry and continued strong sales at Hannaford, resulting in a
comparable store sales growth of 0.6% in the U.S. operations;
-- the continued strong sales at Delhaize Group's other
operations, with excellent comparable store sales growth in
Belgium (+3.7%);
-- ongoing store openings and the acquisition of 43 Harveys
supermarkets consolidated from October 26, 2003, resulting in
a sales network of 2,559 stores at the end of 2003, an increase
of 32 stores compared to the previous year; and
-- 53 sales weeks in the U.S. versus 52 weeks in 2002 (positive
sales contribution of EUR 272.8 million).
Sales were negatively impacted by:
-- the deconsolidation of Shop N Save (Singapore) from October 1,
2003 due to the sale of this business; and
-- the closing of 41 Food Lion and one Kash n' Karry stores in
January and February 2003.
Operating expenses (excluding depreciation and amortization) improved from 18.5% to 18.0% of sales due to ongoing savings at Food Lion and other companies within the Group. The gross margin decreased to 25.6% of sales (25.9% in 2002). This was primarily due to investments in price competitiveness by Food Lion. The gross margin decrease in the U.S. was partially offset by an increase of the gross margin of the Belgian operations due to several factors including an improved sales mix.
The operating margin of Delhaize Group rose from 3.9% to 4.3% of sales. Delhaize Group posted an operating profit of EUR 809.2 million, an increase of 0.3% compared to prior year. At identical exchange rates, operating profit would have increased by 16.9%. The strong growth reflects the improving sales trend and the effectiveness of the cost and expense measures. The positive contribution to operating profit of the 53rd sales week in the U.S. amounted to EUR 37.9 million.
Financial expense declined substantially to EUR 358.6 million due to the weaker U.S. dollar, lower interest expense and a revaluation of treasury shares as a result of the appreciation of the stock price. The effective tax rate declined to 42.9% due to the higher weight of the Belgian operations in the total profit and to a switch from non-deductible charges on treasury shares in 2002 to non-taxable gains on the treasury shares and on the sale of Shop N Save in 2003.
Net earnings decreased by 4.0% to EUR 171.3 million, due to exceptional expenses of EUR 142.0 million pre-tax (EUR 13.8 million in 2002) and to the weakening of the U.S. dollar. The exceptional charges were primarily related to the closing of 42 stores in the U.S., the implementation of an accounting change to the inventory valuation method at Food Lion and Kash n' Karry, unrecoverable damage due to Hurricane Isabel at Food Lion and various impairment charges. Per share, net earnings were EUR 1.86 in 2003 compared to EUR 1.94 per share in 2002. At identical exchange rates, net earnings would have increased by 9.2%.
In 2003, earnings before goodwill and exceptionals increased by 15.6% to EUR 386.6 million due to the stronger sales trend, the 53rd sales week in the U.S., the increase in operating margin and the lower tax rate. The positive earnings impact of the 53rd sales week in the U.S. amounted to EUR 23.4 million. Per share, earnings before goodwill and exceptionals were EUR 4.20 (EUR 3.63 in 2002). At identical exchange rates, earnings before goodwill and exceptionals would have increased by 32.2%.
At the Shareholders' General Meeting to be held on May 27, 2004, the Board of Directors will propose the payment of a net dividend of EUR 0.75 per share, after deduction of 25% Belgian withholding tax. This is an increase of 13.6% versus prior year. The proposed gross dividend is EUR 1.00.
FOURTH QUARTER 2003 EARNINGS
In the fourth quarter of 2003, the organic sales growth of Delhaize Group was 3.9%, driven by strong comparable stores sales in the U.S. and Belgium. Total sales decreased by 2.1%, impacted by the weakening of the U.S. dollar by 15.9% against the euro. At identical exchange rate, sales would have increased by 11.3%. The additional sales due to the 14th sales week in the U.S. contributed EUR 272.8 million.
The operating margin of Delhaize Group rose from 4.2% to 4.4% of sales. The margin increase reflects the continuing efforts to reduce expenses (operating expense excluding depreciation and amortization improved from 18.2% to 17.6% of sales). Gross margin decreased to 25.2% of sales (26.0% in 2002) due primarily to investments in price competitiveness and increased shrink at Food Lion.
Delhaize Group posted an operating profit of EUR 215.2 million, 2.3% higher than the prior year. At identical exchange rates, operating profit would have increased by 17.9%. The additional operating profit due to the 14th sales week in the U.S. amounted to EUR 32.1 million.
In November 2003, Delhaize Group sold its 49% interest in the Singaporean food retailer Shop N Save with a capital gain of EUR 9.8 million. In the same quarter, Delhaize Group recorded impairment charges to certain fixed assets and goodwill amounting to EUR 12.8 million. The Group also wrote down its investment in the business-to-business platform WorldWide Retail Exchange by EUR 7.1 million. Finally, a charge was recorded to adjust the impact of the change of the inventory valuation method at Food Lion and Kash n' Karry (EUR 3.4 million).
Net earnings increased to EUR 62.2 million. Per share, net earnings were EUR 0.67 in the fourth quarter of 2003 compared to EUR 0.65 per share in the fourth quarter of 2002. At identical exchange rates, net earnings would have increased by 17.4%.
In the fourth quarter of 2003, earnings before goodwill and exceptionals decreased by 9.7% to EUR 99.7 million. Per share, earnings before goodwill and exceptionals were EUR 1.08. At identical exchange rates, earnings before goodwill and exceptionals would have increased by 2.0%. The additional earnings before goodwill and exceptionals due to the 14th sales week in the U.S. amounted to EUR 15.5 million.
FULL YEAR 2003 CASH FLOW ANALYSIS AND BALANCE SHEET
In 2003, Delhaize Group generated strong free cash flow of EUR 357.5 million (after capital expenditures and the payment of the dividend declared for 2002) compared to EUR 300.2 million in 2002 due to lower investments and a reduced dividend. Capital expenditures (excluding the acquisition of 43 Harveys supermarkets) fell to EUR 448.3 million compared to EUR 634.9 million in 2002 due to the U.S. dollar weakening and disciplined capital spending.
Delhaize America generated USD 332.7 million free cash flow in 2003. Since the beginning of 2001, Delhaize America has recorded USD 999.5 million free cash flow, in line with its target of USD 1 billion. Delhaize Group has generated EUR 1,113.5 million free cash flow over this same time frame despite the weakening dollar.
Delhaize Group's net debt amounted to EUR 3.0 billion at the end of 2003, a decrease of EUR 873.2 million compared to EUR 3.9 billion at the end of 2002. At identical exchange rates, net debt would have decreased by EUR 363.6 million. The net debt to equity ratio was reduced to 89.8% at the end of 2003 compared to 109.4% at the end of 2002 and significantly below the target of 100% that Delhaize Group had set three years earlier.
In 2003, Delhaize Group repurchased 63,900 of its shares and used 80,314 shares in conjunction with stock option exercises. Delhaize Group owned 318,890 treasury shares at the end of December 2003, when they were valued at EUR 40.78.
In the course of the fourth quarter of 2003, two capital increases occurred following the exercise of warrants by optionees under the Delhaize Group 2002 Stock Incentive Plan primarily targeted at management of Delhaize America and its subsidiaries. A total of 231,853 new shares were issued. This transaction was accounted for as an equity transaction. The capital and share premium accounts increased in the aggregate by EUR 9.1 million, and the group reserves decreased by EUR 3.3 million, an amount equal to the part of the subscription price funded by Delhaize America. It is anticipated that further capital increases will occur under the Delhaize Group 2002 Stock Incentive Plan and that under Belgian GAAP such capital increases will be recorded in the same way.
GEOGRAPHICAL OVERVIEW
-- In 2003, the contribution of the operations in the United States
to the sales of Delhaize Group amounted to USD 15.5 billion
(EUR 13.7 billion), an increase of 3.5% over 2002 in local
currency. Comparable store sales increased by 0.6%. While
sales continued to be strong at Hannaford during 2003, the
sales trend at Food Lion and Kash n' Karry gained momentum
throughout the year. All U.S. companies realized positive
comparable store sales growth in the second half of the year.
U.S. sales of Delhaize Group were also influenced by the closing
of 42 stores in the first quarter, the acquisition of 43
Harveys stores in the fourth quarter and a 53rd sales week
compared to 52 weeks in the prior fiscal year
(USD 308.6 million additional sales).
In 2003, Delhaize Group opened or acquired 79 stores in the United States, including 3 relocated stores, and closed 46 stores, resulting in a net increase of 30 stores to a total of 1,515 stores. In addition, Delhaize America remodeled or expanded 94 supermarkets. The remodelings included 68 Food Lion stores in the Raleigh, North Carolina market, the first time Food Lion has undertaken a complete market remodeling program.
In 2003, Delhaize America's operating margin increased from 4.4% to 4.7% of sales. Food Lion continued to make investments in their price competitiveness, but these investments were largely offset by ongoing initiatives in cost and expense reductions, the positive impact of the stronger sales trend and the better sales mix. Food Lion realized approximately USD 100 million cost and expense savings in 2003 with a focused program of management reorganization, closure of underperforming stores and other expense initiatives. The operating profit of Delhaize America increased by 11.1% to USD 734.3 million (EUR 649.2 million) due to the sales improvement and strong margins. The positive impact of the 53rd sales week on operating profit amounted to USD 42.8 million.
In 2003, net earnings of the U.S. operations of Delhaize Group amounted to USD 93.1 million (EUR 82.3 million) compared to USD 146.4 million (EUR 154.8 million) in 2002. The earnings decrease was the result of exceptional pre-tax expenses for a total of USD 161.2 million (EUR 142.5 million) primarily related to the charge for closing 42 stores in the first quarter, a charge related to the implementation of an accounting change in inventory valuation method at Food Lion and Kash n' Karry, and damage due to Hurricane Isabel in Food Lion's territory.
In 2004, Delhaize Group expects to open 58 new supermarkets in the U.S., including seven relocated stores. Delhaize Group plans to close 45 stores in the U.S. resulting in a net increase of six stores to a total number at the end of 2004 of 1,521 stores. The numbers of store openings and closings include 10 Food Lion stores that will be temporarily closed to be converted and reopened under the Harveys brand.
Additionally, 111 existing stores will be remodeled and/or expanded. The successful focused market remodeling program that Food Lion has undertaken in 2003 in the Raleigh, North Carolina market, has led Food Lion to identify the Charlotte, North Carolina market for a second focused remodeling of a complete market in 2004. Charlotte is the second most important Food Lion market in sales.
As previously announced, 34 of the 45 stores to be closed were Kash n' Karry stores that were closed before the end of February. The 34 store closings are part of a strategy at Kash n' Karry to refocus on its core positions on the west coast of Florida where it will open or remodel 20 stores, mostly in the Ft. Myers/Naples market in 2004. As part of the new strategy, Kash n' Karry will be rebranded over the coming three years to the new banner name "Sweetbay Supermarkets" to communicate the changes more dynamically to Florida customers.
Exceptional after-tax expenses in the range of approximately USD 88 million will be recorded in the first quarter of 2004 related to the closing of the Kash n' Karry stores and the re-branding of the business.
-- In 2003, Delhaize Belgium sales grew by 7.4% thanks to the
expansion of the network by 21 stores (728 stores at year-end
2003) and comparable store sales growth of 5.6%. This was due to
the success of commercial initiatives and the emphasis on
continued renewal of the store concept, which led to an
increase of the average sales basket. The market share of
Delhaize Belgium increased from 24.8% to 25.2% (source: A.C.
Nielsen).
Despite continued price investments during 2003, the operating margin of Delhaize Belgium grew significantly to 4.8% (3.6% in 2002) due to the strong sales momentum, the improved sales mix and disciplined cost management. The strong sales and operating margin resulted in an operating profit at Delhaize Belgium of EUR 177.5 million compared to EUR 122.5 million in 2002. Net earnings increased by 43.0% to EUR 131.4 million.
In 2004, Delhaize Belgium plans to enlarge its sales network by 25 stores (including three company-operated Delhaize "Le Lion" supermarkets) and to remodel 21 company-operated supermarkets. In addition, Delhaize Belgium will launch the construction of a new distribution center for fresh products.
-- In 2003, sales in the Southern and Central European operations
of Delhaize Group (Greece, Czech Republic, Slovakia and
Romania) grew 2.8% to EUR 1.2 billion. Alfa-Beta (Greece)
continued to perform well, positively influenced by the
remodelings of the Trofo stores and the development of the
franchisee network (Trofo Markets). Delvita sales remained
under pressure due to significant price deflation and the
competitive environment, but its operating margin evolved
favorably due to improved sales mix and effective cost
management.
Operating profit of the Southern and Central European operations of Delhaize Group increased by 7.9% to EUR 15.2 million. In 2003, the net loss of the Southern and Central European operations of Delhaize Group amounted to EUR -10.6 million. In 2004, the sales network of the Southern and Central European operations will be extended by 25 stores to a total of 267 stores.
-- In 2003, the operations of Delhaize Group in Asia reported
sales of EUR 203.3 million, a decrease of 6.8% compared to
2002 due the depreciation of the Asian currencies against
the euro and the deconsolidation of Shop N Save from October
1, 2003. At the end of 2003, Delhaize Group operated 74
supermarkets in Asia, including 36 in Thailand and 38 in
Indonesia. In 2003, the operating loss of the Asian activities
of Delhaize Group amounted to EUR -6.4 million, while the net
loss was EUR -10.2 million.
RECONCILIATION OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
In addition to its quarterly, half year and yearly publication of consolidated results in accordance with Belgian GAAP, Delhaize Group also publishes an annual reconciliation of its net income and shareholders' equity to US GAAP in accordance with its obligations as a foreign company listed on the New York Stock Exchange. The unaudited reconciliation for the year 2003 will be published in the annual report of Delhaize Group, followed by the audited reconciliation in the Form 20-F filed with the Securities and Exchange Commission.
The main reconciling items affecting net income follow, shown as
increases (decreases) to the US GAAP statements versus the Belgian
GAAP statements:
-- EUR 97.0 million, net of tax, due to the application of
the Statement of Financial Accounting Standards (SFAS) No. 142.
Under US GAAP, Delhaize Group does not amortize goodwill and other
intangible assets with indefinite lives as from January 1, 2002.
This resulted in 2003 in a difference in net income between Belgian
and US GAAP of EUR 104.1 million net of tax. Additionally, a charge
of EUR 7.2 million is recorded by Delhaize Group under US GAAP,
representing the different results between Belgian GAAP and US GAAP
in the impairment testing of goodwill and other intangible assets.
In 2003, Delhaize Group recorded an asset impairment charge of
approximately EUR 15.9 million under US GAAP associated with Mega
Image. Under Belgian GAAP rules and valuation methodology, Delhaize
Group recorded charges in 2003 of approximately EUR 8.7 million
related to Food Lion Thailand and Mega Image.
-- (EUR 14.0 million) representing tax adjustments recorded
as a reduction to income tax under Belgian GAAP and as a reduction
to Goodwill under US GAAP.
-- (EUR 10.52 million) net of tax relating to the adoption
of EITF 02-16, a new US GAAP rule, under which certain allowances
received from suppliers are included in inventory and recognized as
income only when the product is sold.
2004 FINANCIAL OUTLOOK
The 2004 sales and profit growth of Delhaize Group is negatively impacted by the 53rd sales week in the United States in 2003. Without a 53rd week of sales in comparable 2003 results, the following outlook would be 1.5% higher for growth of sales and 6.5% higher for growth in earnings before goodwill and exceptionals at identical exchange rates (EUR 1 = USD 1.1312).
-- In 2004, the sales network of Delhaize Group is expected
to grow by approximately 61 stores to a total of 2,620
stores (including the impact of the 34 Kash n' Karry store
divestitures).
-- At identical exchange rates, it is expected that sales of
Delhaize Group will grow in 2004 by 2.5% to 3.5%.
-- Delhaize America's comparable store sales growth in 2004 is
projected to be in the range of 0.5% to 1.5%.
-- At identical exchange rates, Delhaize Group expects earnings
before amortization of goodwill and intangibles and exceptional
items in 2004 to grow in mid single digits.
-- At identical exchange rates and with the forecasted charge for
Kash n' Karry store closings and the rebranding of the business,
the growth of net earnings would be slightly better in 2004 than
the growth of earnings before amortization of goodwill and
intangibles and exceptional items
Conference Call and Webcast
The Delhaize Group management will comment on the financial year 2003 results during an analysts' meeting starting March 11, 2004 at 03.00 p.m. CET. The meeting will be available by conference call by calling + 44 20 7162 0182 (U.K. participants) or + 1 334 323 6203 (U.S. participants), with "Delhaize" as password. The meeting will also be broadcast live over the internet at http://www.delhaizegroup.com. By clicking on the appropriate button, you will be able to submit your written questions to the management. An on-demand replay of the web cast will be available after the investors' meeting at http://www.delhaizegroup.com.
Delhaize Group
Delhaize Group is a Belgian food retailer present in ten countries on three continents. At the end of 2003, Delhaize Group's sales network consisted of 2,559 stores. In 2003, Delhaize Group posted EUR 18.8 billion (USD 21.3 billion) in sales and EUR 171.3 million (USD 193.7 million) in net earnings. Delhaize Group employs approximately 142,000 people. Delhaize Group is listed on Euronext Brussels (DELB) and the New York Stock Exchange (DEG).
REPORT OF THE STATUTORY AUDITOR
The statutory auditor Deloitte & Touche Reviseurs d'Entreprises SCC, represented by Mr. James Fulton, issued an unqualified opinion on the consolidated accounts of Delhaize Group on March 10, 2004. The annual financial information included in the press release is in accordance with the annual accounts approved by the Board of Directors on March 10, 2004.
FINANCIAL CALENDAR
-- Press release -- 2004 first quarter results: May 6, 2004
-- Ordinary General Meeting: May 27, 2004
-- Press release -- 2004 second quarter results:
August 5, 2004
-- Press release -- 2004 third quarter results:
November 10, 2004
DEFINITIONS
-- Adjusted EBITDA: earnings before interest, taxes,
depreciation, amortization, other income/(expense), exceptional
income/(expense) and minority interests
-- Comparable store sales: sales from the same stores,
including relocations and expansions, and adjusted for calendar
effects
-- Earnings before goodwill and exceptionals: net earnings
plus amortization of goodwill and intangibles and exceptional
items, net of taxes and minority interests
-- Earnings before goodwill and exceptionals per share:
earnings before goodwill and exceptionals divided by the
weighted average number of shares during the period
-- Free cash flow: cash flow before financing activities
and financial investments, less dividends and directors' share
of profit and less dividends paid by subsidiaries to minority
interests
-- Gross profit: sales minus cost of goods sold (excluding
shipping and handling costs, and income from suppliers for
in-store promotions and cooperative advertising)
-- Net debt: long-term financial liabilities, including
current portion and capital leases, plus short-term financial
liabilities, minus trust fundings, short-term investments (excl.
treasury shares) and cash.
-- Organic sales growth: sales growth excluding sales from
acquisitions and divestitures at identical currency exchange
rates, and adjusted for calendar effects
-- Outstanding shares: the number of shares issued by the
Company, including treasury shares
-- Salaries, miscellaneous goods and services and other
operating income/expense (excluding depreciation and amortization
of goodwill): include shipping and handling costs and income from
suppliers for in-store promotions and cooperative advertising
-- Weighted average number of shares: number of shares
outstanding at the beginning of the period less treasury shares,
adjusted by the number of shares cancelled, repurchased or issued
during the period multiplied by a time-weighting factor
-- Working capital: inventories, long-term receivables,
short-term receivables, prepayments and accrued income, trade
creditors, liabilities for taxes, salaries and social security
(except income taxes liabilities), other liabilities and accruals
and deferred income (except accruals for interest expenses)
Adjusted EBITDA and earnings before goodwill and exceptionals are presented as additional analytical information. We do not represent adjusted EBITDA and earnings before goodwill and exceptionals as alternative measures to net earnings, which is determined in accordance with Belgian GAAP. Adjusted EBITDA and earnings before goodwill and exceptionals as reported by Delhaize Group might differ from similarly titled measures by other companies.
This press release is available in English, French and Dutch. You can also find it on the web site http://www.delhaizegroup.com. Questions can be sent to investor@delhaizegroup.com.
Some of the statements in this press release and other written and oral statements made from time to time by Delhaize Group and its representatives are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of Securities Exchange Act of 1934, as amended, and involve a number of risks and uncertainties. These statements include, but are not limited to, statements about strategic options, future strategies and the anticipated benefits of these strategies. These statements are based on Delhaize Group's current expectations. Delhaize Group's actual results could differ materially from those stated or implied in such forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements are described in Delhaize Group's Annual Report on Form 20-F for the year ended December 31, 2002 and other periodic filings made by Delhaize Group and Delhaize America with the U.S. Securities and Exchange Commission, which risk factors are incorporated herein by reference. Delhaize Group and Delhaize America disclaim any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.
Results Delhaize America: http://hugin.info/133961/R/937619/130025.pdf
Full press release in pdf-version: http://hugin.info/133961/R/937623/130029.pdf