Q2 2006 Earnings

 

  Pre-tax income doubles to €298 million

  Operating income up 55% to €376 million

  Retail operating margin increases from 3.8% to 4.8%

 

  USF operating margin increases from 1% to 1.8%

Amsterdam, the Netherlands, September 7, 2006 - Ahold today published its interim financial report for the second quarter and half year 2006. Anders Moberg, President and CEO of Ahold, said: "The second quarter showed an encouraging improvement of the profitability of the business despite competitive trading conditions and higher energy costs. Strong performances at Albert Heijn, Giant-Carlisle, Giant-Landover and USF Broadline contributed to substantial increases in operating income and margins. However, consumer confidence in the US is being affected by less favorable business conditions, and competitive activity continues to intensify in some markets. Our expectation for the full year retail operating margin of 4 to 4.5% remains unchanged. At the Stop & Shop / Giant-Landover Arena, work on the value improvement program continues. At a group level, the review of underperforming assets and the strategic review to drive and fund identical sales growth across our retail businesses are well underway and will be completed in the fall."

 

 

 

Net sales were €10.5 billion, virtually unchanged from the same period last year. At constant exchange rates, net sales were up 2.2%.

 

Operating income increased by €134 million or 55% to €376 million. Retail operating income was up €73 million at €338 million, an operating margin of 4.8%, 1 percentage point better than last year. U.S. Foodservice operating income was up €27 million to €62 million, an operating margin of 1.8%, compared to 1% in the same period last year. Group Support Office costs - at €24 million - were €34 million lower than last year.

 

Cash flow before financing was €582 million positive for the quarter and €91 million better than last year; net debt resumed its downward trend to €5.2 billion (€531 million lower than at the end of the first quarter of 2006) after the payment in the prior quarter of €536 million relating to the class action settlement.

 

Net sales were €24.6 billion, up 4.9% from the same period last year. At constant exchange rates, net sales were up 2.1%. Operating income increased by €253 million or 43% to €836 million. Retail operating income was up €127 million at €767 million, an operating margin of 4.7%, compared to 4.1% in the same period last year. U.S. Foodservice operating income was up €77 million to €128 million, an operating margin of 1.6%, compared to 0.6% in the same period last year. Group Support Office costs - at €59 million - were €49 million lower than last year. Cash flow before financing of €480 million positive was €857 million lower than last year, reflecting the class action settlement payment and proceeds from prior year divestments.

 

 

 

For the second quarter of 2006, net sales of $3.9 billion were up 1.3% compared with the same period last year; on an identical basis, net sales were down 0.5% at Stop & Shop (1.7% excluding gasoline net sales) and 0.9% at Giant-Landover. Operating income was up $43 million at $223 million - 5.8% of net sales. Operating income was positively impacted by further improvements at Giant-Landover.

 

For the first half, net sales of $8.9 billion were essentially flat compared to last year; on an identical basis, net sales were down 1% at Stop & Shop (2% excluding gasoline net sales) and 1.8% at Giant-Landover. Operating income was up $33 million at $512 million - 5.8% of net sales.

 

 

For the second quarter of 2006, net sales of $1.4 billion were 3.9% down on the same period last year; on an identical basis, net sales were up 5% at Giant-Carlisle (2.4% excluding gasoline net sales) but down 5.3% at Tops (6.9% excluding gasoline net sales). Operating income, up 9.3% on a year ago, was $59 million or 4.2% of net sales. The improvement in operating margin was mainly driven by the store portfolio rationalization at Tops.

 

For the first half, net sales of $3.3 billion were 4.9% down from last year; on an identical basis, net sales were up 3.8% at Giant-Carlisle (1.9% excluding gasoline net sales) but down 6% at Tops (7.1% excluding gasoline net sales). Operating income, up 1.9% on a year ago, was $108 million or 3.3% of net sales.

 

 

For the second quarter of 2006, Arena net sales of €1.7 billion were up 8.5% on the same period last year, boosted by a successful marketing campaign linked to the World Cup and the exceptional warm weather. On an identical basis, net sales increased at Albert Heijn by 6.8%. Arena operating income was €102 million or 6.2% of net sales - up 52% from the prior year, as Albert Heijn benefitted from increased sales leverage.

 

For the first half, Arena net sales of €3.8 billion were up 6.4% on the same period last year. On an identical basis, net sales increased at Albert Heijn by 4.6%. Arena operating income was €204 million or 5.4% of net sales - up 30% from the prior year.

 

 

For the second quarter of 2006, net sales increased 2.7% to €423 million - an increase more than explained by acquisitions and exchange rate changes. On an identical basis, Arena net sales fell 6.3%. The three markets remain disappointing with a combined operating loss of €9 million.

 

For the first half, net sales of €981 million were up 19.9% on last year. On an identical basis, Arena net sales fell 5.9%. Operating income was up €21 million at €7 million - 0.7% of net sales.

 

 

For the second quarter of 2006, net sales grew 4.4% to €767 million - an increase predominantly due to identical sales, which were up 4.3%. Operating income - at €25 million - was 3.3% of net sales and almost double last year's results reflecting gross margin improvements, net sales growth and lower impairments.

 

For the first half, net sales of €1.7 billion were up 2.4% on the same period last year; on an identical basis, net sales were up 2.1%. Operating income, up 38% on a year ago, was €55 million or 3.2% of net sales.

 

 

For the second quarter of 2006, net sales increased 2.3% to $4.4 billion; 1.8% at USF Broadline and 5.4% at North Star Foodservice. Operating income was $79 million, and operating margin was 1.8%, compared to 1% in the same period last year.

USF Broadline operating income was $84 million, an operating margin of 2.2% compared to 1.3% in the same period last year, mainly reflecting increased operating efficiencies.

North Star Foodservice operating loss was $5 million, essentially flat compared to last year in terms of operating margin.

 

For the first half, net sales increased 3.2% to $10.2 billion; 3.0% at USF Broadline and 4.4% at North Star Foodservice. Operating income was $159 million, and operating margin was 1.6%, compared to 0.6% in the same period last year.

USF Broadline operating income was $171 million, an operating margin of 1.9% compared to 0.9% in the same period last year.

North Star Foodservice operating loss was $12 million, an operating margin of -0.9% compared to -0.8% in the same period last year.

 

 

For the second quarter of 2006, net sales increased 4.4% (4.3% at constant exchange rates). Ahold's share of net income increased 77% to €39 million, driven by ICA, where Ahold's share of net income increased 83% to €33 million reflecting improved margins, strong net sales at ICA Sweden and gains on the sale of real estate.

 

For the first half, net sales increased 2.3% (2.8% at constant exchange rates). Ahold's share of net income increased 55% to €73 million, driven by ICA, where Ahold's share of net income increased 68% to €62 million.