Aug 26 2010 --- Ahold has reported net sales of € 7.1 billion, up 10.8% in Q2. At constant exchange rates, net sales increased by 4.4%, positively impacted by business acquisitions in the first quarter.

Operating income was € 347 million, up 17.6%. Retail operating income was € 376 million, up € 70 million. Retail operating margin was 5.3% compared to 4.8% in Q2 2009. Underlying retail operating margin was 5.2% compared to 4.9% last year. Corporate Center costs were € 29 million for the quarter, up € 18 million over Q2 2009. Excluding the impact of the Company’s insurance activities, Corporate Center costs were € 17 million, € 1 million higher.

Income from continuing operations increased by 3.6% to € 203 million, reflecting a higher operating income and lower net financial expense partly offset by higher income taxes and lower share in income of joint ventures.

Net income was € 202 million, up € 6 million compared to last year.

Free cash flow was € 260 million, € 104 million lower than last year, mainly due to higher capital expenditures of € 61 million and lower dividends from joint ventures of € 43 million. Dividends from ICA were received in the first quarter of this year, whereas last year dividends were received in the second quarter.

Net debt increased by € 48 million during the quarter to € 938 million. The positive free cash flow of € 260 million and cash from the sale of the loans of BI-LO of € 204 million (these were acquired in the first quarter) were more than offset by dividends paid on common shares of € 272 million, the share buyback of € 123 million and a currency impact of € 89 million.

In the second quarter € 405 million of debt was repaid.

For the second quarter, net sales for Ahold USA were $ 5.5 billion, up 5.5%, partly due to business acquisitions, mainly Ukrop’s ($ 120 million). Identical sales were up 1.4% (up 0.5% excluding gasoline). Operating income was $ 270 million (or 4.9% of net sales), up $ 22 million. Higher operating costs related to acquisitions, reorganization and restructuring activities negatively impacted the operating margin. Specifically, operating income included losses in the quarter of $ 20 million relating to the newly acquired Ukrop’s stores, $ 9 million of reorganization and IT integration costs and $ 6 million of restructuring and related charges. These were largely offset by a $ 20 million release of insurance provisions, impairment reversals of $ 4 million and gains on sale of assets of $ 6 million. Operating income last year included impairments of $ 7 million. Underlying operating margin was 4.8%, unchanged from last year.

In the Netherlands, for the second quarter, net sales increased 4.4% to € 2.3 billion. Identical sales were up 3.5%. Operating income of € 159 million (or 6.8% of net sales) was up € 9 million compared to last year. Operating income included a benefit of € 6 million arising from the settlement of a non-recurring wage tax liability and a € 5 million benefit from cost recoveries. Underlying operating margin was 6.8%, unchanged from last year.

For the second quarter, net sales for Other Europe (Czech Republic and Slovakia) decreased 3.4% to € 370 million. At constant exchange rates, net sales were down 6.3% partly due to store closures and downsizings as part of the restructuring program implemented in 2009. Identical sales decreased 1.2% (1.5% excluding gasoline). Operating income for the quarter was nil compared to a loss of € 25 million in Q2 2009. Included in Q2 2010 operating income were further restructuring charges of € 2 million. Included in Q2 2009 operating income were restructuring and related charges of € 5 million, mainly for the closure of underperforming stores in the Czech Republic. Furthermore, Q2 2009 operating income was impacted by one-off net costs of € 8 million related to the rebranding of Hypernova hypermarkets to the Albert brand. Underlying operating margin was 0.3% compared to 5.0% negative last year.