Ahold Net Profits Drop Sharply in Q2

Operating income was EUR 235 million, EUR 39 million lower than in the same period last year. Retail operating income was EUR 247 million, an operating margin of 4.3% compared to 5.1% in the same period last year.

28/08/08 Retail giant Ahold has said that net sales were EUR 5.8 billion for the second quarter 2008, down 0.8% from the same period last year. At constant exchange rates, net sales increased by 7.3%.

Operating income was EUR 235 million, EUR 39 million lower than in the same period last year. Retail operating income was EUR 247 million, an operating margin of 4.3% compared to 5.1% in the same period last year. Corporate Center costs were EUR 12 million for the quarter, down EUR 7 million from the same period last year.

Income from continuing operations was EUR 177 million, EUR 7 million higher than the same period last year. Net income was EUR 338 million, which includes EUR 162 million related to the divestment of Schuitema. Net income is down EUR 1.9 billion compared to the same quarter last year, which included EUR 2 billion related to the divestment of U.S. Foodservice and the Company's operations in Poland.
 
Cash flow before financing was EUR 635 million, EUR 5 billion lower than the same period last year, which included EUR 5.2 billion proceeds from the divestment of U.S. Foodservice and the Company's operations in Poland. In the second quarter of 2008 EUR 952 million of debt was repaid as part of our targeted EUR 2 billion debt reduction.

Ahold CEO John Rishton said "We continued to invest in price and gave increased focus to promotions, both of which helped to drive sales and win customers but, as anticipated, impacted margins.

"In Europe, as part of Albert Heijn's price positioning strategy, food price inflation was only partially passed on to customers during the quarter, and strong promotions including the Euro 2008 Football Championships temporarily impacted margins. At Albert/Hypernova, we also did not pass on all food price inflation to customers this quarter, as we continued the repositioning started a year ago.
 
"In the United States, the Value Improvement Program has now expanded beyond price repositioning to marketing and branding. We unveiled new logos and a number of brand initiatives for Stop & Shop and Giant-Landover last week as a further step in Ahold's global strategy to build powerful local consumer brands. Giant-Carlisle continued to gain share in a highly competitive market.
 
"We are confident we will manage the balance between sales growth and margin and deliver our underlying retail operating margin guidance for 2008 of 4.8-5.3%."