Metro sale shelved as revenues rise
sell its extensive property portfolio after lengthy negotiations
with the prospective buyer ended in failure. The decision came as
the group announced solid sales growth for the first nine months.
Metro, the German wholesale and retail group, has scrapped plans to sell its extensive property portfolio after lengthy negotiations with the prospective buyer ended in failure.
Metro said that the sales of the €3 billion property business would not now be completed after it failed to reach an agreement on price with the consortium slated to buy the business. The main stumbling block was Metro's fear that too low a price would fail to generate sufficient profits to offset a growing tax risk and have the necessary beneficial effect on debt levels.
The German group announced the decision to withdraw the business from sale as it revealed nine-month revenues of €37.75 billion, up 4.2 per cent or 5.8 per cent on a constant currency basis.
Earnings before interest and tax (EBIT) soared 22.3 per cent to €445 million during the period.
The company said that its third quarter results built on the solid base it had created in the first half, with revenues for the three months up 3.6 per cent to €12.8 billion (or 5.0 per cent excluding currency impact).
Currency translation is likely to play an increasingly important role in Metro's business over the next few years as it pursues its policy of expanding to relatively underdeveloped markets with its core cash & carry format. Both Ukraine and India have been targeted in the current year, although the group is also present in Russia, France, Spain, Italy, the Netherlands, Bulgaria and Romania, among others.
In fact, non-German sales now account for 48.4 per cent of total turnover, reaching €17.74 billion during the year-to-date period, up 6 per cent or 9.2 per cent on a constant currency basis. German sales were up 2.6 per cent in the nine-month period at €20.01 billion.
The Metro cash & carry unit saw sales rise 5.1 per cent to €17.89 billion during the period, with particularly strong growth from the eastern European operations. But the Real hypermarket unit showed only minimal growth (0.3 per cent to €5.89 billion) with the hot weather in July and August and currency effects in Poland and Turkey, taking their toll.
Sales were down at the Extra supermarket unit, although this was primarily as a result of the store reduction programme introduced earlier in the year. Revenues dropped 1.4 per cent to €2.05 billion during the first nine months of the year, with 12 Extra supermarkets deconsolidated during the third quarter alone: five were closed, four were converted into franchise outlets and three were integrated into the Real sales network.
"The course of business during the first nine months and in the third quarter clearly demonstrates that our strategy of sustained profitable growth is bearing fruit," said Dr Hans-Joachim Körber, chairman and CEO of Metro.
"Against this background we are confirming our forecast for 2003: we will improve the sales revenues net of currency adjustments by at least 5.5 per cent. The increase in earnings per share is expected to be in the upper range of the forecast bracket of 6 to 10 per cent."
