BRUSSELS Belgium, May 8, 2003 (PRIMEZONE) -- Delhaize Group:
Net Earnings per Share of EUR 0.50 * Delhaize Group delivers net earnings per share of EUR 0.50 (EUR 0.52 in 2002) despite 18.3% weaker dollar and charge for store closings in the U.S. * Net earnings per share would have increased 14.9% at identical exchange rates * Earnings before goodwill and exceptionals per share: +16.9% to EUR 1.07, or +38.0% at identical exchange rates * 18.3% weaker dollar pushes sales 13.9% lower than in first quarter 2002 * Operating margin of 4.5% (4.0% in first quarter 2002) * Strong free cash flow of EUR 245 million
Full press release in pdf versionhttp://reports.huginonline.com/902606/117429.pdf
Financial statement Delhaize America http://reports.huginonline.com/902604/117427.pdf
Pursuant to directives under the Sarbanes-Oxley Act in the United States, new regulations became effective on March 28, 2003 concerning the use of measures not defined as standard accounting measures. As a consequence Delhaize Group has stopped using the term "cash earnings" and we are reporting quarterly "operating profit" for our geographical divisions instead of "adjusted EBITDA". We have also added reconciliation tables to clarify the relationship between non-standard and standard measures. For the new definitions, see at the end of this press release.
Delhaize Group (Euronext Brussels:DELB)( NYSE:DEG), the Belgian international food retailer, announced today that in the first quarter of 2003 its net earnings per share amounted to EUR 0.50 despite a 18.3% weaker dollar and exceptional expenses of EUR 32.7 million. Earnings before goodwill and exceptionals grew by 16.9% to EUR 1.07 per share. Delhaize Group realized EUR 244.9 million free cash flow in the first quarter of 2003. The Group's net debt decreased from EUR 3.9 billion at the end of 2002 to EUR 3.5 billion at the end of the first quarter 2003 due to the application of free cash flow and the weaker dollar.
"We are pleased with our first quarter results and our EUR 0.50 net earnings per share, nearly in line with last year despite a huge negative movement in the U.S. dollar and an exceptional charge for store closings," said Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group. "The significant cost savings program at Food Lion and continued commercial successes at Hannaford, Delhaize Belgium and in Greece, offset the negative impact of the dollar weakening and the continued weak sales at Food Lion and Kash n' Karry. The strong free cash flow generation and the weaker dollar led to another significant debt reduction."
First quarter 2003 EARNINGS
In the first quarter of 2003, total sales decreased by 13.9% to EUR
4.7 billion and were impacted by:
* the weakening of the dollar by 18.3% (organic sales growth
amounted to 0.5%);
* the Easter holiday situated in the second quarter of 2003 instead
of the first quarter of 2002;
* the closing of 41 Food Lion stores and one Kash n' Karry store in
January-February 2003;
* continued soft sales at Food Lion and Kash n' Karry; and
* the continued strong sales of the other operations, with high
comparable store sales growth in Belgium (+6.5%), Greece and at
Hannaford in the U.S.
The operating margin of Delhaize Group increased to 4.5% (4.0% in
2002) due to major cost savings, primarily at Food Lion, resulting in
a reduction of operating costs (excluding depreciation and
amortization) to 18.2% of sales (18.8% in 2002). The gross margin
decreased 20 basis points due to the negative impact of the U.S.
dollar depreciation on the contribution of the high margin U.S.
operations to the Group result. Operating profit amounted to EUR
209.4 million, 2.8% lower than the prior year due to the U.S. dollar
weakening. At identical exchange rates the operating profit of
Delhaize Group would have increased by 16.8%.
Net earnings decreased by 4.2% primarily due to an exceptional
expense and the weakening of the U.S. dollar. Exceptional expense was
EUR 32.7 million in the first quarter of 2003 due to charges for the
closing of the 42 U.S. stores and the reduction of approximately 400
support and management positions at Food Lion. Net earnings would
have increased by 14.9% at identical exchange rates.
In the first quarter of 2003, earnings before goodwill and
exceptionals were EUR 1.07 per share, an increase of 16.9% compared
to 2002 (+38.0% at identical exchange rates). This increase was
better than the evolution of operating income due to lower financial
expenses and a decreased effective tax rate.
First quarter 2003 Balance Sheet and Cash Flow
Delhaize Group continued to generate strong free cash flow of EUR 244.9 million in the first quarter of 2003 due to solid earnings and reduced capital spending. Delhaize Group's net debt amounted to EUR 3.5 billion at the end of the first quarter of 2003, a decrease of EUR 376.5 million compared to EUR 3.9 billion at the end of 2002. At identical exchange rates, net debt would have decreased by EUR 261.5 million. Delhaize Group applied EUR 244.9 million free cash flow to net debt reduction and decreased lease obligations by EUR 11.2 million. The net debt to equity ratio was reduced to 99.2% at the end of the first quarter of 2003 compared to 109.4% at the end of 2002.
GEOGRAPHICAL OVERVIEW
* In the first quarter of 2003, the contribution of Delhaize
America to the sales of Delhaize Group amounted to USD 3.7
billion (EUR 3.4 billion), a decrease of 1.4% over the first
quarter of 2002 due to a decrease of comparable store sales by
2.2%, the absence of store openings and the closing of 41 Food
Lion stores and one Kash n' Karry store. Sales continued to be
soft at Food Lion and Kash n' Karry due to the weak economy and
the competitive environment, while Hannaford continued to perform
strongly. Also the timing of the Easter holiday - included in the
first quarter of 2002 and the second quarter of 2003 - impacted
sales negatively. Excluding the Easter effect, comparable store
sales of Delhaize America would have declined by 1.1%.
Despite the weak sales performance, Delhaize America grew its
operating profit by 11.0% to USD 190.3 million (EUR 177.3 million)
thanks to strong margin increase. The operating margin of Delhaize
America grew to 5.2% (4.6% in 2002) due to major reductions in costs
and expenses. In January-February 42 stores were closed. The
reduction in the support and management structure of Food Lion by 400
positions has begun in the quarter. Food Lion has identified USD 100
million cost savings in 2003 to strengthen its competitive position
through low price leadership and to protect is profitability.
* Delhaize Belgium sales grew by 8.1% to EUR 869.2 million thanks
to the expansion of the sales network and comparable store sales
growth of 6.5%. The ongoing strong comparable store sales growth
was due to the continued success of Delhaize Belgium's commercial
policy introduced a year ago. The market share of Delhaize
Belgium increased.
Despite the major price investments the previous year that
accompanied the introduction of the new commercial policy, the
operating margin of Delhaize Belgium grew strongly to 4.2% (2.9% in
2002) because of disciplined cost management. The strong sales and
operating margin resulted in an increase of the operating profit of
Delhaize Belgium to EUR 36.2 million (EUR 23.2 million in 2002).
* In the first quarter of 2003, sales in the Southern and Central
European operations of Delhaize Group (Greece, Czech Republic,
Slovakia and Romania) grew by 4.9% to EUR 290.2 million. In
Greece, the Alfa-Beta stores, including the converted Trofo
stores, continued to perform very well. Delvita's sales remained
weak due to price deflation and the competitive environment, but
its operating margin evolved favorably thanks to an improved
sales mix and expense reductions. The operating profit of the
Southern and Central European operations of Delhaize Group grew
to EUR 2.6 million.
* Sales of the Asian operations of Delhaize Group amounted to EUR
52.9 million (EUR 52.7 million in 2002). In the first quarter of
2003, the sales contribution of the Asian operations was weak due
to the depreciation of the Asian currencies, particularly the
Singaporean dollar, and competitive activity in Thailand. The
operating loss of the Asian activities of Delhaize Group amounted
to EUR -1.9 million.
2003 Financial Outlook
Delhaize Group confirms the earlier guidance for the expected sales
and earnings for the year 2003 as it was detailed in the press
release of March 13, 2003.
Conference Call and Webcast The Delhaize Group management will comment on the first quarter 2003 results during a conference call starting May 8, 2003 at 03.00 p.m. CET / 09:00 a.m. EDT. The meeting can be attended by calling + 44 20 7950 1251 (U.K. participants) or + 1 630 395 0034 (U.S. participants), 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.
DELHAIZE GROUPDelhaize Group is a Belgian food retailer present in ten countries on three continents. At the end of 2002, Delhaize Group's sales network consisted of 2,527 stores. In 2002, Delhaize Group posted EUR 20.7 billion (USD 19.6 billion) in sales and EUR 178.3 million (USD 168.6 million) in net earnings. Delhaize Group employs approximately 144,000 people. Delhaize Group is listed on Euronext Brussels (DELB) and the New York Stock Exchange (DEG).
REPORT OF THE STATUTORY AUDITORS
We have conducted a limited review of the quarterly consolidated
accounts of Delhaize Group as at March 31, 2003. 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 quarterly consolidated accounts as
presented. - Deloitte & Touche Reviseurs d'Entreprises, represented
by Mr James Fulton.
FINANCIAL CALENDAR
* Final date for depositing shares for the General Meeting of
Shareholders May 16, 2003
* General Meeting of Shareholders May 22, 2003
* ADR dividend record date May 23, 2003
* Dividend for the financial year 2002 becomes payable to owners of
ordinary shares May 26, 2003
* Dividend for the financial year 2002 becomes payable to ADR
holders June 5, 2003
* Press release - 2003 second quarter results August 1, 2003
* Press release - 2003 third quarter results November 6, 2003
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
* 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 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 short-term investments (excl. treasury shares)
and cash.
* Organic sales growth: sales growth excluding sales from
acquisitions and divestitures at identical currency exchange
rates
* 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
Adjusted EBITDA and earnings before goodwill and exceptionals arepresented as additional analytical information. We do not representadjusted EBITDA and earnings before goodwill and exceptionals asalternative measures to net earnings, which is determined inaccordance with Belgian GAAP. Adjusted EBITDA and earnings beforegoodwill and exceptionals as reported by Delhaize Group might differfrom similarly titled measures by other companies.
This press release is available in English, French and Dutch. You canalso find it on the web site http://www.delhaizegroup.com. Questionscan be sent to investor@delhaizegroup.com.
Some of the statements in this press release and other written andoral statements made from time to time by Delhaize Group and itsrepresentatives are "forward-looking statements" within the meaningof Section 27A of the Securities Act of 1933, as amended, and Section21E of Securities Exchange Act of 1934, as amended, and involve anumber of risks and uncertainties. These statements include, but arenot limited to, statements about strategic options, future strategiesand the anticipated benefits of these strategies. These statementsare based on Delhaize Group's current expectations. Delhaize Group'sactual results could differ materially from those stated or impliedin such forward-looking statements. Risks and uncertainties thatcould cause actual results to differ materially from those stated orimplied by such forward-looking statements are described in DelhaizeGroup's Annual Report on Form 20-F for the year ended December 31,2001 and other periodic filings made by Delhaize Group and DelhaizeAmerica with the U.S. Securities and Exchange Commission, which riskfactors are incorporated herein by reference. Delhaize Group andDelhaize America disclaim any obligation to update developments ofthese risk factors or to announce publicly any revision to any of theforward-looking statements contained in this release, or to makecorrections to reflect future events or developments. http://reports.huginonline.com/902606/117429.pdf