Ahold Reports Strong Profits in Q4

Net sales were EUR 25.7 billion, up 3.3% compared to last year. At constant exchange rates, net sales increased by 6.9%. Operating income was EUR 1.2 billion, EUR 130 million higher than last year. Retail operating income was EUR 1.3 billion, an underlying retail operating margin of 5.0%. This was in line with the 4.8% to 5.3% guidance for 2008.

02/03/09 Ahold published its summary financial report for the fourth quarter and full year 2008. CEO John Rishton said: "In 2008, we delivered solid performance with particularly strong results in the last quarter and achieved an underlying retail operating margin of 5% for the full year. We have achieved our annual targets for each of the last three years thanks to the hard work and dedication of our employees. I am pleased to announce that we propose to increase our annual dividend for 2008 by 12% to EUR 0.18 per common share.

"During 2008, we completed the Value Improvement Program, including the rebranding of Stop & Shop and Giant-Landover. This strengthened our relative price position and led to market share gains and improved financial results in the second half of the year. Meanwhile, Giant-Carlisle continued its strong performance, gaining significant market share. In Europe, Albert Heijn had another excellent year, including the conversion of 54 Schuitema stores to the Albert Heijn banner following the divestment of our stake in Schuitema. Albert/Hypernova was able to maintain its market position and break even in very competitive markets in the Czech Republic and Slovakia.

"Although the economic environment continues to deteriorate, we believe that the business is well prepared to respond to the effects of recession. We have a strong balance sheet and we have repositioned our businesses over recent years to give better value to our customers. We continue to improve our offer and reduce costs. As a business, we have the skills and capabilities to respond quickly and effectively to changes in consumer behavior. Despite the continued deterioration of the economic environment, in the first weeks of 2009 we have seen no significant changes in consumer behavior.

"We are confident that we have the right strategy, business model and customer offering. However we recognize that in the current conditions we may need to adjust the balance between sales, market share, profits and cash even more rapidly than we have in the past. Consequently, we will work to balance these elements in the near-term to ensure we are able to deliver our longer-term goals of sustainable 5% sales growth and 5% retail operating margin.

"Capital expenditure in 2009 will be below EUR 1 billion. At current exchange rates, we expect our net interest expense to increase and be in the range of EUR 290 million to EUR 310 million, primarily due to the stronger dollar and lower yields on cash."

Net sales were EUR 6.6 billion in Q4, up 12.9% from the same period last year. At constant exchange rates, net sales increased by 5.9%.

Operating income was EUR 365 million, EUR 120 million higher than in the same period last year. Retail operating income was EUR 392 million, a retail operating margin of 5.9% compared to 4.9% in the same quarter last year. Corporate Center costs were EUR 27 million for the quarter, down EUR 6 million from the same period last year.

Net income was EUR 285 million, up EUR 23 million compared to the same quarter last year, reflecting a higher operating income, partially offset by lower income from discontinued operations and higher income taxes.

Cash flow before financing was EUR 319 million, EUR 263 million lower than in the same period last year, primarily as a result of higher capital expenditures (related to both remodeling at Giant-Landover and converting former Schuitema stores into the Albert Heijn format) and proceeds from the divestment of Tops in the fourth quarter of 2007.

Net sales for the full year were EUR 25.7 billion, up 3.3% compared to last year. At constant exchange rates, net sales increased by 6.9%.

Operating income was EUR 1.2 billion, EUR 130 million higher than last year. Retail operating income was EUR 1.3 billion, an underlying retail operating margin of 5.0%. This was in line with the 4.8% to 5.3% guidance for 2008. Corporate Center costs were EUR 96 million, down EUR 24 million from a year ago.

Net income was EUR 1.1 billion, down EUR 1.9 billion compared to last year, which included a EUR 2.0 billion gain on divestments.

Cash flow before financing was EUR 1.3 billion, EUR 5.4 billion lower than last year which included EUR 5.4 billion proceeds from the divestments of U.S. Foodservice, Tops and Ahold's operations in Poland.

Performance by business segment

Stop & Shop/Giant-Landover

For the fourth quarter, net sales of $ 4.0 billion were up 2.8% from the same period last year. Net sales included $ 15 million of sales to Tops (prior to its divestment, such sales were recorded as inter-company sales). Identical sales were up 2.3% at Stop & Shop (4.0% excluding gasoline net sales) and up 1.1% at Giant-Landover (1.0% excluding gasoline net sales), despite lower pharmacy sales. Operating income was $ 207 million (or 5.1% of net sales), up $ 84 million from the same period last year.

For the full year, net sales of $ 17.1 billion were up 2.4% compared to last year. Net sales included $ 114 million of sales to Tops. Identical sales were up 2.4% at Stop & Shop (2.1% excluding gasoline net sales) and down 0.4% at Giant-Landover (0.5% excluding gasoline net sales), impacted by lower pharmacy sales. Operating income was $ 701 million (or 4.1% of net sales), up $ 39 million from last year.

Giant-Carlisle

For the fourth quarter, net sales of $ 1.1 billion were up 7.9% compared to the same period last year. Identical sales were up 4.6% (5.7% excluding gasoline net sales). Operating income was $ 60 million (or 5.4% of net sales), up $ 12 million compared to the same period last year.

For the full year, net sales of $ 4.7 billion were up 10.0% compared to last year. Identical sales were up 6.3% (4.7% excluding gasoline net sales). Operating income was $ 233 million (or 4.9% of net sales), up $ 20 million compared to last year.

Albert Heijn

For the fourth quarter, net sales of EUR 2.2 billion were up 11.6% compared to the same period last year. Net sales increased at Albert Heijn supermarkets by 12.2% to EUR 2.0 billion due in part to the conversion of former Schuitema stores into the Albert Heijn format in the second half of the year. Identical sales at Albert Heijn supermarkets increased 5.2%. Operating income was EUR 180 million (or 8.1% of net sales), up EUR 19 million from last year.

For the full year, net sales of EUR 9.0 billion were up 12.9% compared to last year. Identical sales at Albert Heijn supermarkets were up 9.2%. Operating income was EUR 648 million (or 7.2% of net sales), up EUR 75 million compared to last year, benefiting from lower pension charges.

Albert / Hypernova (Czech Republic and Slovakia)

For the fourth quarter, net sales increased 3.0% to EUR 440 million. At constant exchange rates, net sales decreased 2.7%. Identical sales were down 3.1%. Operating income was EUR 9 million, up EUR 4 million from the same period last year.

For the full year, net sales increased 13.9% to EUR 1.8 billion. At constant exchange rates, net sales increased 2.8%. Identical sales were up 3.2%. Operating income was EUR 1 million, up EUR 1 million from last year.

Unconsolidated joint ventures

For the fourth quarter, Ahold's share in income of joint ventures decreased 6.5% to EUR 29 million. For the full year, Ahold's share in income of joint ventures was down 21.0% to EUR 109 million. The decrease was primarily due to ICA, mainly as a result of lower gains on the sale of assets and weak performance in Norway.