BRUSSELS, Belgium, Nov. 10, 2004 (PRIMEZONE) -- Delhaize Group:
Strong Earnings Growth and Increase in Profit Outlook for the Year*
Strong Third Quarter Earnings:
-- Net earnings rise by 33.2% to EUR 71.2 million
-- Earnings before goodwill and exceptionals up by 15.3% to EUR
1.17 per share
-- Comparable store sales growth of +1.7% in the U.S. and +0.4%
in Belgium
* Year-to-date Sales and Profit Progress Well:
-- Sales growth at identical exchange rates: 4.2%
-- Net earnings increase by 33.0%
-- Free cash flow of more than EUR 300 million year-to-date
after dividend payment
* Increase of earnings outlook for the year
Results Delhaize America: http://hugin.info/133961/R/968417/141289.pdf
Full press release in pdf-version: http://hugin.info/133961/R/968419/141290.pdf
Delhaize Group (Euronext Brussels:DELB) (NYSE:DEG), the Belgian international food retailer, announced today that in the third quarter of 2004 its net earnings increased by 33.2% to EUR 71.2 million due to continued good sales momentum and improved margins. Earnings before goodwill and exceptionals grew by 15.3% to EUR 1.17 per share despite an 8.0% weaker U.S. dollar against the euro.
These strong results and a positive outlook for the remainder of the year have resulted in an upward revision of the company's earnings guidance for the year. At identical exchange rates, Delhaize Group expects earnings before goodwill and exceptionals in 2004 to grow by approximately 10% despite the fact that the U.S. business reported 53 weeks of results in 2003. Previous guidance was for mid-single digit growth in 2004.
"Our excellent third quarter report demonstrates the continued success of our focus on sustainable sales building initiatives and good operational management," said Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group. "We are particularly pleased with the 1.7% comparable store sales growth and the margin increase in our U.S. operations. Our Belgian operations increased sales and market share despite a difficult comparison to prior year."
Commenting on the recent decision by U.S. regulatory authorities allowing the previously announced acquisition of Victory Super Markets to proceed, Mr. Beckers said: "We look forward to completing this transaction before year-end. We see it as an excellent opportunity to expand our successful Hannaford banner in Massachusetts and New Hampshire."
THIRD QUARTER 2004 EARNINGS
In the third quarter of 2004, total sales of Delhaize Group decreased by 3.2% to EUR 4.5 billion due to the weakening of the U.S. dollar by 8.0% against the euro. At identical exchange rates, sales grew by 2.8% Organic sales growth was +1.9% due to:
-- Positive sales momentum at the U.S. banners, resulting in a
comparable store sales growth at Delhaize U.S. of +1.7%; and
-- Continued sales growth at Delhaize Belgium, despite comparing
with a very strong third quarter in 2003. The prior year was
positively influenced by exceptionally hot summer weather.
Comparable store sales grew by 0.4% in Belgium.
The gross margin increased by 73 basis points to 26.3% of sales (25.6% in 2003) despite continued reinvestments in our price competitiveness particularly in our European businesses. Good shrink and margin management, particularly in the U.S., and an improved sales mix allowed us to increase gross margins.
Operating costs (excluding depreciation and amortization) remained almost stable at 18.2% of sales despite higher energy costs globally and an increase of labor costs in Belgium due to the legally mandatory indexation of salaries.
The operating margin of Delhaize Group rose significantly from 4.2% to 4.8% of sales. Delhaize Group posted an operating profit of EUR 217.9 million, 11.8% higher than the prior year. At identical exchange rates, operating profit would have increased by 20.4%.
Exceptional charges amounted to EUR 10.9 million, including a charge of EUR 1.2 million related to the divestiture of Food Lion Thailand and EUR 8.7 million related to hurricane damage in the U.S. The closure charge for Food Lion Thailand was significantly below the initial expectations due to the successful sale of 21 stores to Central Food Retail Company (Thailand). The exceptional charge related to four hurricanes and one tropical storm in the U.S. remained below the total of previous year's damage related to one hurricane.
Net earnings increased 33.2% to EUR 71.2 million. Per share, net earnings were EUR 0.77 in the third quarter of 2004 compared to EUR 0.58 per share in the third quarter of 2003.
In the third quarter of 2004, earnings before goodwill and exceptionals were EUR 1.17 per share, 15.3% higher than in the third quarter of 2003. At identical exchange rates, earnings before goodwill and exceptionals per share would have increased by 21.3%.
YEAR-TO-DATE 2004 EARNINGS
In the first nine months of 2004, total sales decreased to EUR 13.5 billion, or 3.0% compared to the previous year due to the weakening of the U.S. dollar by 9.3%. At identical exchange rates sales would have grown by 4.2%.
Operating profit increased by 5.9% to EUR 629.1 million. The operating margin grew from 4.3% to 4.7%. At identical exchange rates, operating profit would have increased by 15.1% in the first nine months of 2004.
Net earnings increased by 33.0% compared to the first nine months of 2003, primarily due to the strong sales and the increase in margins. Earnings before goodwill amortization and exceptionals grew by 8.9% to EUR 3.39 per share in the first nine months of 2004. At identical exchange rates, earnings per share before goodwill and exceptionals would have grown by 16.5%.
BALANCE SHEET AND CASH FLOW ANALYSIS
Since the beginning of the year, Delhaize Group has generated EUR 307.2 million free cash flow, including EUR 65.6 million in the third quarter, due to strong earnings growth. Delhaize Group's net debt amounted to EUR 2.8 billion at the end of the third quarter of 2004, a decrease of EUR 265.5 million compared to EUR 3.0 billion net debt at the end of 2003 despite the 1.8% stronger U.S. dollar between the end of the year 2003 and the end of the third quarter 2004.
GEOGRAPHICAL OVERVIEW
-- In the third quarter of 2004, the sales contribution of Delhaize U.S. to the sales of Delhaize Group rose by 3.1% to USD 4.0 billion. Comparable store sales grew by 1.7%, despite the continued competitive environment in the U.S. including an increasing number of competitive store openings in the Northeast.
In the third quarter of 2004, Delhaize U.S.'s operating margin increased from 4.6% to 5.6% of sales. Good shrink and margin management and ongoing initiatives in cost and expense control are the main reasons for that improvement. The operating profit of Delhaize U.S. increased by 26.6% to USD 223.4 million.
In early October, Food Lion relaunched its stores in Charlotte, North Carolina. This second full market remodel builds on the continued success of the market remodel in Raleigh, North Carolina last year. These successful, focused programs have led Food Lion to identify the Greensboro, North Carolina market for a third relaunch of a complete market scheduled for mid 2005. Greensboro is one of the most important markets in sales for Food Lion.
During the third quarter, the number of Bloom stores increased to four. Bloom is a new supermarket format introduced by Food Lion and focused on driving convenience to a level of distinction. In 2004, 12 Food Lion stores in southern Georgia have been converted to Harveys stores, resulting in strong sales growth since conversion. Building on this success, it has been decided to convert 12 additional Food Lion stores in 2005 to the Harveys banner.
Delhaize Group has reached an agreement to acquire a package of 10 Winn-Dixie stores in North Carolina and Virginia. These stores will reinforce the store network of Food Lion in two of its core markets.
At the end of September, Delhaize Group announced the USD 175 million acquisition of Victory Super Markets, operating 19 stores primarily in Massachusetts, an area where Hannaford has a limited presence. The acquisition is consistent with the strategy of reinforcing Delhaize Group's presence in its current or contiguous geographic territory. Subsequent to a favorable decision by the U.S. Federal Trade Commission, Delhaize Group expects to complete the acquisition before the end of the year.
During the third quarter, an exceptionally high number of hurricanes and tropical storms affected Kash n' Karry, Food Lion and Harveys. Our teams showed tremendous energy and successful planning in responding to these storms. With advance preparation, stores were able to re-open quickly after the storms passed, and damage and product losses were reduced. The net impact of the storms on sales of Delhaize U.S. was almost neutral, and the exceptional charge related to loss and damage was USD 10.7 million (EUR 8.7 million) before taxes compared to USD 16.1 million (EUR 14.4 million) before taxes in 2003 related to Hurricane Isabel.
Kash n' Karry is in preparation for the launch of Sweetbay Supermarket in Naples and Ft. Myers, Florida. The first Sweetbay Supermarket opened in early November in St. Petersburg. Four more stores -- all conversions -- are expected to open in December 2004 in Naples, and 11 to 15 additional stores, including new and converted units, are scheduled to open during the first quarter of 2005 in the Naples and Ft. Myers areas.
-- In the third quarter of 2004, Delhaize Belgium sales grew by 4.2% to EUR 952.5 million due to the expansion of the sales network (+22 stores compared to last year) and comparable store sales growth of 0.4%. Comparable stores sales growth was 2.1% including an additional selling day in the third quarter of 2004. In the third quarter of 2003, sales benefited from exceptionally hot summer weather resulting in both volume and price increases particularly of fruit and vegetables. In the third quarter of 2004, national retail prices of fruit and vegetables were more than 7% lower than last year. During the third quarter, Delhaize Belgium continued to invest in its price competitiveness and increased its market share by approximately 20 basis points to 25.7%. The rollout of the new assortment of basic goods under the "365" brand continued successfully, and at the end of the third quarter, Delhaize Belgium offered 165 "365" products.
The operating margin of Delhaize Belgium remained solid at 4.3% (4.5% in 2003) due to disciplined cost management, good sales and an improved sales mix. The slight margin decrease was the result of continued investments in price competitiveness and an increase of labor costs due to the mandatory indexation of salaries. The operating profit at Delhaize Belgium amounted to EUR 40.5 million, almost unchanged compared to EUR 40.9 million in 2003, a strong base of comparison.
-- In the third quarter of 2004, sales in the Southern and Central European operations of Delhaize Group (Greece, Czech Republic, Slovakia and Romania) grew by 2.6% to EUR 290.7 million. Summer sales were less robust than earlier quarters in Greece due to price deflation and the Olympics because of Athenians leaving the city during the games. The operating margin was impacted primarily by price reductions in Greece, the Czech Republic and Romania. The operating profit of the Southern and Central European operations of Delhaize Group decreased to EUR 1.0 million in the third quarter of 2004.
-- Sales of the Asian operations of Delhaize Group decreased to EUR 31.1 million compared to EUR 54.2 million in 2003 due to the sale of Shop N Save, Delhaize Group's former Singaporean business, in the fourth quarter of 2003, and due to the closing of the Thai operations in the third quarter of 2004. The operating loss of the Asian activities of Delhaize Group amounted to EUR -1.5 million in the third quarter.
In line with its strategy to focus its resources on markets where Delhaize Group has or can obtain a strong local presence with attractive return prospects, Delhaize Group has divested its loss-making Thai operations. Delhaize Group has sold 21 of its 26 Thai stores to Central Food Retail Company and closed the remaining stores in August. As a result of this withdrawal from the Thai market, Delhaize Group has recorded, in the third quarter of 2004, an exceptional charge of EUR 1.2 million, significantly less than initially expected due to the successful sale of most Thai stores.
2004 FINANCIAL OUTLOOK
The strong third quarter results and continued positive prospects lead the management of Delhaize Group to revise upward the earnings outlook for the Company for 2004.
This outlook is at identical exchange rates (EUR 1 = USD 1.1312) and is negatively impacted by the inclusion in 2003 of a 53rd sales week in the United States. Adjusting for this extra sales week in 2003, the outlook below would be 1.5 percentage points higher for sales and 7.0 percentage points higher for earnings before goodwill and exceptionals.
-- In 2004, the sales network of Delhaize Group is expected to grow by approximately 22 stores net to a total of 2,581 (including the impact of the 34 Kash n' Karry store closings in the first quarter of 2004, the divestiture of Food Lion Thailand and the acquisition of Victory Super Markets and 10 Winn-Dixie stores).
-- 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
expected to be above the previous projection of 1.5% and below
the year-to-date figure of 1.9%.
-- At identical exchange rates, Delhaize Group expects earnings
before goodwill and exceptionals in 2004 to grow approximately
10%, an improvement compared to the previous guidance of
mid- single digit growth.
-- At identical exchange rates and taking into account the
exceptional charges made through the third quarter of 2004,
10% growth of earnings before goodwill and exceptionals would
yield a growth of approximately 25% in net earnings.
Delhaize Group
Delhaize Group is a Belgian food retailer present in nine countries on three continents. At the end of September 2004, Delhaize Group's sales network consisted of 2,530 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. At the end of 2003, Delhaize Group employed 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 third quarter 2004 results during a conference call starting November 10, 2004 at 03.00 p.m. CET / 09:00 a.m. EST. The conference call can be attended by calling + 44 20 7019 0810 (U.K.) or + 1 712 923 4251 (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 interim consolidated accounts of Delhaize Group as at September 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 interim consolidated accounts as presented. -- Deloitte & Touche Reviseurs d'Entreprises, represented by Mr. James Fulton.
FINANCIAL CALENDAR
* Press release - 2004 sales January 13, 2005
* Press release - 2004 fourth quarter and full year results
March 10, 2005
* Press release - 2005 first quarter results May 12, 2005
* Ordinary general meeting of shareholders May 26, 2005
* Press release - 2005 second quarter results August 11, 2005
* Press release - 2005 third quarter results November 10, 2005
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/968417/141289.pdf
Full press release in pdf-version: http://hugin.info/133961/R/968419/141290.pdf