BRUSSEL, Belgium, Aug. 5, 2004 (PRIMEZONE) -- Delhaize Group: (Euronext Brussels:DELB) (NYSE:DEG)
-- Strong Second Quarter Sales, Margins and Earnings:
-- Sales growth at identical exchange rates: +4.9%
-- +1.4% comparable store sales growth in the U.S. and +3.8%
in Belgium
-- Operating margin increase from 4.1% to 4.9%
-- High margins push earnings before goodwill and
exceptionals up by 21.4% to EUR 1.25 per share
-- Net earnings amount to EUR 81.9 million
-- Strong First Half Year Results:
-- Sales growth at identical exchange rates: 5.0%
-- Net earnings increase by 32.9%
-- Divestiture of the loss-making Thai operations
Results Delhaize America: http://hugin.info/133961/R/954611/136222.pdf
Full press release in pdf-version: http://hugin.info/133961/R/954615/136251.pdf
Delhaize Group (Euronext Brussels:DELB) (NYSE:DEG), the Belgian international food retailer, announced today that in the second quarter of 2004, its net earnings amounted to EUR 81.9 million compared to EUR 9.3 million the previous year. Earnings before goodwill and exceptionals grew by 21.4% to EUR 1.25 per share (EUR 1.03 in 2003). Delhaize Group has also announced its decision to divest its loss-making subsidiary, Food Lion Thailand, through the sale and closure of its 26 stores.
"We are very pleased with our strong second quarter results," said Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group. "Our successful commercial strategies resulted in continued strong sales momentum in the U.S. and Belgium. The operating margin in the U.S. and Belgium increased significantly thanks to the good sales and continued cost discipline. As a result, we are confident that we will achieve our goals for the year."
SECOND QUARTER 2004 EARNINGS
In the second quarter of 2004, total sales increased by 0.4% to EUR 4.6 billion and were impacted by the weakening of the U.S. dollar by 5.6% against the euro. Sales growth at identical exchange rates was 4.9%, and organic sales growth was +3.4% due to:
-- the strong sales of the U.S. business, resulting in a comparable
store sales growth of +1.4%; and
-- continued strong sales in Belgium, where comparable store sales
grew by +3.8%.
Operating costs (excluding depreciation and amortization) improved from 18.1% to 17.7% of sales due to ongoing cost and expense discipline. The gross margin increased 20 basis points due to improved shrink control at Food Lion and a good sales mix, particularly in the U.S. and in Belgium.
The operating margin of Delhaize Group rose from 4.1% to 4.9%. Delhaize Group posted an operating profit of EUR 226.2 million, an increase of 19.3% compared to 2003. At identical exchange rates, operating profit would have increased by 25.4%.
Net earnings amounted to EUR 81.9 million due to the strong operational results. Financial income was positively influenced in the second quarter of 2004 by USD 5.6 million in pre-tax interest income related to a U.S. tax refund. Prior year net earnings were negatively impacted by an exceptional charge of EUR 51.8 million after tax related to a change in accounting principle.
Earnings before goodwill and exceptionals were EUR 1.25 per share, 21.4% higher than in the second quarter of 2003. At identical exchange rates, earnings per share before goodwill and exceptionals would have increased by 26.8%.
FIRST HALF 2004 EARNINGS
In the first half of 2004, total sales decreased to EUR 9.0 billion, or 2.8% compared to the first half of 2003 and were influenced by:
-- the weakening of the U.S. dollar by 10.0% against the euro;
-- the closing of 34 Kash n' Karry stores in the first quarter of
2004.
-- the acquisition of 43 Harveys stores in the fourth quarter of
2003; and
-- the divestiture of Shop N Save in the fourth quarter of 2003.
At identical exchange rates sales would have grown by 5.0%. Organic sales growth amounted to +3.6% in the first half of 2004 , on the strength of sales momentum in the U.S. and Belgium.
Operating profit increased by 3.0% to EUR 411.2 million. At identical exchange rates, operating profit would have increased by 12.5% in the first half of 2004.
Net earnings increased by 32.9% compared to the first half of 2003, primarily due to the continued strong sales and an increase in margins.
Earnings before goodwill amortization and exceptionals grew by 5.8% to EUR 2.22 per share in the first half of 2004. At identical exchange rates, earnings per share before goodwill and exceptionals would have grown by 14.1%.
BALANCE SHEET AND CASH FLOW ANALYSIS
Since the beginning of the year, Delhaize Group has generated EUR 241.6 million free cash flow (of which EUR 56.5 million in the second quarter). Capital expenditures remained stable versus prior year in the second quarter of 2004 at EUR 102.6 million. Capital spending will accelerate in the second half of the year.
In April 2004, Delhaize Group successfully issued a convertible bond for an amount of EUR 300 million. A part of its proceeds were used to decrease the euro-denominated short-term debt of the Company. Delhaize Group repaid EUR 166.2 million short-term debt in the second quarter of 2004.
Delhaize Group's net debt amounted to EUR 2.9 billion at the end of the second quarter of 2004, a decrease of EUR 144.8 million compared to the end of 2003 despite a strengthening of the U.S. dollar by 3.9% between the two balance sheet measurement dates. At identical exchange rates, net debt would have decreased by EUR 231.3 million in the first six months of 2004. The net debt to equity ratio was reduced to 82.1% at the end of the second quarter of 2004 compared to 89.8% at the end of 2003 and 98.2% at the end of June 2003, continuing the positive trend in this measure.
GEOGRAPHICAL OVERVIEW
-- In the second quarter of 2004, the contribution of the U.S. operations to the sales of Delhaize Group amounted to USD 4.0 billion, an increase of 5.4% over the second quarter of 2003 due to the rise of comparable store sales by 1.4% and the expansion of the store network to 1,493 stores. The sales trend remained strong in the second quarter at the four U.S. banners. The U.S. sales of Delhaize Group grew by 5.2% to USD 7.9 billion in the first six months of 2004 compared to the previous year, supported by the acquisition of Harveys in the fourth quarter of 2003 and despite the closing of 34 Kash n' Karry stores in the first quarter of 2004.
In the second quarter of 2004, the operating profit of the U.S. operations increased by 24.3% to USD 203.4 million due to the continued sales growth and a significant increase of the operating margin to 5.1% compared to 4.3% the previous year. The margin increase was supported by ongoing initiatives in cost and expense reductions at Food Lion and Hannaford, better shrink control at Food Lion and a better sales mix throughout the organization. During the first half of 2004, operating profit in the U.S. grew by 9.0% to USD 385.8 million.
In May 2004, Food Lion successfully opened its first Bloom store, a new supermarket format focused on driving convenience to a level of distinction. Four more Bloom stores are planned to be opened in the fall of this year. Food Lion is also on track for a grand re-opening in the fall of 2004 in Charlotte, North Carolina. This second full market remodel is building on the continued success of the first full market remodel in Raleigh, North Carolina last year. Kash n' Karry is in preparation for the launch of Sweetbay Supermarket in Naples and Ft. Myers, Florida in late 2004.
-- In the second quarter of 2004, sales of the Belgian operations grew by 5.9% to EUR 965.3 million due to the expansion of the sales network and comparable store sales growth of 3.8%. In June 2004, Delhaize Belgium successfully opened its first company-operated supermarket in the Grand-Duchy of Luxembourg. The ongoing strong comparable store sales growth was due to the continued success of Delhaize Belgium's commercial strategy. The market share of Delhaize Belgium continued to grow in the second quarter of 2004, reinforcing its position as second largest Belgian food retailer. During the first half of 2004, sales at Delhaize Belgium grew by 7.0% to EUR 1.9 billion.
In the second quarter of 2004, while continuing to invest in its price competitiveness, Delhaize Belgium grew its operating margin to 6.1% (5.6% in 2003) due to the good sales momentum and disciplined cost management. The sales and margin increase resulted in an operating profit of EUR 59.3 million (EUR 51.0 million in 2003), while the operating profit rose 16.2% in the first half year to EUR 101.4 million.
In May 2004, Delhaize Group launched a new European private label brand of day-to-day products: the "365" brand. The new brand will offer quality basic products at prices in line with those of the hard discounters in our respective European markets. "365" was launched initially in Belgium, followed by Greece and the Czech Republic and is planned to be launched in Romania. The "365" brand packaging shows a common logo and displays up to eight languages. The "365" brand will replace the existing lines of generic and lowest-price products at Delhaize Group's European operations.
-- In the second quarter of 2004, sales in the Southern and Central European operations of Delhaize Group (Greece, Czech Republic, Slovakia and Romania) grew by 0.4% to EUR 304.5 million (+0.8% in the first half of 2004 to EUR 598.3 million). Sales in the Alfa-Beta supermarkets continued to grow, supported by a reinforced price position due to price reductions on approximately 2,300 products in the first half year. This good sales performance was partially offset by weaker sales at our "ENA" Greek cash and carry business, and at Mega Image in Romania because of increased competitive hypermarket openings.
The operating margin of the Southern and Central European operations evolved favorably due to an improved sales mix and effective cost management. The operating profit grew 12.3% to EUR 5.6 million in the second quarter of 2004 and 4.4% to EUR 7.9 million in the first half of 2004.
Delhaize Group has increased its shareholding in Mega Image from 70% to 100%. Mega Image operates 16 supermarkets in Romania; 14 of these are located in the capital, Bucharest. Delhaize Group has progressively increased its shareholding in Mega Image since it took an initial stake of 51% in 2000.
-- Sales of the Asian operations of Delhaize Group decreased to EUR 37.5 million compared to EUR 53.8 million in the second quarter of 2003 due to the deconsolidation of Shop N Save, Delhaize Group's former Singaporean business, from October 1, 2003 and due to the depreciation of the Asian currencies against the euro. The operating loss of the Asian activities of Delhaize Group amounted to EUR -1.3 million in the second quarter and EUR -2.2 million in the first half of 2004.
In line with its strategy to focus the resources on markets where Delhaize Group has or can obtain a strong local presence, the Board of Directors of Delhaize Group decided, on August 4, 2004, to divest its loss-making Thai operations. Delhaize Group is in an advanced stage of negotiations on the possible sale of a significant number of stores. Any store not sold will be closed. As a result of this operation, Delhaize Group expects to record an exceptional charge between EUR 12 million and EUR 16 million after tax in the third quarter of 2004. In 2003, Food Lion Thailand contributed EUR 54.5 million to Delhaize Group's sales and realized a net loss of EUR -10.5 million.
2004 FINANCIAL OUTLOOK
On the basis of its first half results and its expectations for the remainder of the year, Delhaize Group expects the following results at identical exchange rates (EUR 1 = USD 1.1312). The 2004 sales and profit growth of Delhaize Group will be negatively impacted by the inclusion of a 53rd sales week in the United States in 2003. Adjusting for this 53rd week of sales in 2003, the outlook below would be 1.5 percentage points higher for growth of sales and 6.5 percentage points higher for growth in earnings before goodwill and exceptionals at identical exchange rates.
-- In 2004, the sales network of Delhaize Group is expected to grow by approximately 14 stores to a total of 2,573 (including the impact of the 34 Kash n' Karry store closings and the divestiture of Food Lion Thailand).
-- At identical exchange rates, it is expected that sales of Delhaize Group will grow in 2004 by 2.5% to 3.5%.
-- Comparable store sales growth of the U.S. business in 2004 is projected to be in the higher end of the previously announced range of 0.5% to 1.5%.
-- At identical exchange rates, Delhaize Group expects earnings before goodwill and exceptionals in 2004 to grow in mid single digits, including the impact of the divestiture of Food Lion Thailand.
-- At identical exchange rates, and including the first quarter exceptional charge related to Kash n' Karry and the third quarter charge anticipated for Food Lion Thailand, the mid single digits growth of earnings before goodwill and exceptionals should yield net earnings growth that is higher than the growth of earnings before goodwill and exceptionals.
Delhaize Group
Delhaize Group is a Belgian food retailer present in ten countries on three continents. At the end of June 2004, Delhaize Group's sales network consisted of 2,549 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).
Conference Call and Webcast
The Delhaize Group management will comment on the second quarter 2004 results during a conference call starting August 5, 2004 at 03.00 p.m. CET / 09:00 a.m. EDT. The meeting can be attended by calling + 44 20 7162 0197 (U.K.) or + 1 334 420 4951 (U.S.), with "Delhaize" as password. The meeting will also be broadcast live over the internet at http://www.delhaizegroup.com. An on-demand replay of the web cast will be available after the conference call at http://www.delhaizegroup.com.
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.
REPORT OF THE STATUTORY AUDITORS
We have conducted a limited review of the half year consolidated accounts of Delhaize Group as at June 30, 2004. Our limited review consisted, for the most part, of analyzing and discussing financial information and was consequently less extensive than a review the purpose of which was to form an opinion on annual accounts. Our limited review did not reveal any significant adjustments which would be required to be made to the half year consolidated accounts as presented. - Deloitte & Touche Reviseurs d'Entreprises, represented by Mr James Fulton.
FINANCIAL CALENDAR
-- 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
-- Operating expenses: 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
-- Organic sales growth: sales growth excluding sales from acquisitions and divestitures at identical currency exchange rates, adjusted for a 53rd sales week in the U.S.
-- Outstanding shares: the number of shares issued by the Company, including treasury shares
-- 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.
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 forward-looking statements generally can be identified as statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee," "likely," "will," "should" or other similar words or phrases. Although such statements are based on current information, actual outcomes and results may differ materially from those projected depending upon a variety of factors, including, but not limited to, changes in the general economy or the markets of Delhaize Group, in consumer spending, in inflation or currency exchange rates or in legislation or regulation; competitive factors; adverse determination with respect to claims; inability to timely develop or remodel stores; and supply or quality control problems with vendors. Additional 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, 2003 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/954611/136222.pdf
Full press release in pdf-version: http://hugin.info/133961/R/954615/136251.pdf