Q1 2006 Earnings Release

 

           Pre-tax income doubles to €316 million

 

           Operating income of €455 million (including real estate gains of €66 million) up 31.5%

 

           U.S. Foodservice operating margin increases from 0.4% to 1.4%

 

 

Amsterdam, the Netherlands, June 21, 2006 - Ahold today published its interim financial report for the first quarter of 2006. Anders Moberg, President and CEO of Ahold, said today: "In the first quarter, retail performance was mixed. We saw encouraging retail performance from Albert Heijn, Giant-Carlisle and ICA. The competitive environment continued to be challenging for Stop & Shop / Giant-Landover and conditions remained difficult in Central Europe and at Tops, especially in North East Ohio. U.S. Foodservice performed well as the new strategy takes effect. At the Stop & Shop / Giant-Landover Arena, work continued towards the progressive implementation of its value improvement program later this year. At a group level, the review of underperforming assets and the strategic review to drive and fund identical sales volume growth across our global retail businesses have started and will be completed in the fall."

 

 

 

Net sales were €14.1 billion, an increase of 8.6% compared with Q1 2005. Net sales, excluding currency impact, increased by 2.1%.

 

Operating income increased by €109 million (31.5%) to €455 million (including gains on the sale of property, plant and equipment of €66 million and impairments of non-current assets of €17 million). Retail operating income was up €44 million (11.6%) to €424 million, an operating margin of 4.6%. U.S. Foodservice operating income was up €50 million to €66 million, an operating margin of 1.4%, and Group Support Office costs fell by €15 million to €35 million.

 

Income before tax increased by €156 million to €316 million, reflecting increased net sales, improved operating income, reduced financing costs, and improved net income from joint ventures and associates. Net income attributable to common shareholders increased by €102 million (76.1%) to €236 million.

 

Net debt increased in the quarter by €170 million to €5.7 billion as the reduction in cash balances more than offset gross debt reductions of €200 million. The cash balance reduction of €370 million was primarily due to the first payment of €536 million relating to the class action settlement (final cash payment due in December).

 

 

Net sales of $5 billion fell by 0.8% compared with the same period last year. Identical sales fell by 1.3% at Stop & Shop (2.2% excluding gasoline net sales) and by 2.5% at Giant-Landover. Operating income was $283 million or 5.7% of net sales, down $24 million as pressure on margins continued due to higher utility and fuel costs, and their impact on consumer behavior.

 

Net sales of $1.8 billion fell by 5.6% compared with the same period last year, but increased by 2.2% excluding the impact of stores divested in 2005. Identical sales at Giant-Carlisle increased by 2.9% (1.5% excluding gasoline net sales) and at Tops fell by 6.5% (7.3% excluding gasoline net sales). Operating income at $49 million was down $2 million compared with the same period last year. Performance across the arena continued to vary significantly with Tops in North East Ohio remaining weak.

 

Net sales of €2.1 billion increased by 4.8% compared with the same period last year, with identical sales of the Albert Heijn banner up 3%. Operating income, up 13.3% at €102 million, or 4.9% of net sales, also improved due to a more selective approach to promotional activity and operational efficiency actions.

 

Net sales increased by 37.4% to €558 million, reflecting a change of the reporting calendar, net growth of the store portfolio (including the acquisition of the Julius Meinl stores in the Czech Republic in Q3 2005 and the divestment of the large hypermarkets in Poland in Q1 2005) and currency impact. Identical sales for the arena fell 5.6%. Operating income was €16 million although this included gains of €41 million on real estate disposals; operating losses excluding gains on real estate disposals were slightly higher compared to the same period last year.

 

Net sales increased by 1% to €951 million. Operating income increased by 11.1% to €30 million, an operating margin of 3.2%. The improvement in operating income came primarily from procurement efficiencies and the non-repetition of last year's impairment losses, partially offset by increased marketing spend.

 

Net sales increased by 3.8% to $5.8 billion, despite the exit of the Sofco business in the third quarter of 2005. Operating income increased to $80 million from $22 million for the same period last year, due to improvements in both net sales and margins.

 

Net sales at its Broadline company increased by 3.9% to $5.1 billion. Operating income increased to $87 million (operating margin of 1.7%) compared to $26 million for the same period last year, due to higher volumes and administrative expense reductions that more than offset unfavorable fuel costs. Additionally, approximately $20 million of the improvement relates to annual vendor allowances that were previously principally recognized in the fourth quarter.

 

Net sales at North Star Foodservice increased by 3.6% to $747 million. Operating loss increased to $7 million from $4 million for the same period last year. Improvements in gross profit margins and productivity did not fully offset the year over year increases in fuel costs.

 

Net sales increased by 1% (2.3% excluding currency impact). The share in net income of joint ventures and associates increased by 30.8% to €34 million, mainly attributable to improved margins and increased net sales at ICA Sweden and a gain on the sale of a shopping center at ICA Norway. Ahold's share of ICA's net income rose 45% to €29 million.

 

Please open the links below for the Interim Financial Report Q1 2006 and the Q1 2006 Earnings Release: