Ahold losses deepen in year-to-date

The chances of Anders Moberg, the new chief executive of Ahold,
achieving the bonus targets announced yesterday look increasingly
unlikely as the Dutch supermarket group today announced a further
slide into the red for the first nine months of 2003.

Sales for the period were down 10.5 per cent to €43.3 billion, due entirely to adverse currency effects (sales would have been 3.3 per cent higher at constant currency rates), but it was the 53.4 per cent decline in operating profits to €857 million which caused particular concern.

Even excluding the currency impact, the decline was 45.5 per cent, caused primarily by poor performances at the US retail and foodservice businesses and by costs related to the accounting fraud at the US Foodservice division.

Net losses for the nine months were €62 million, a sharp decline from profits of €17 million a year earlier, but this included €110 million in exceptional items related to the sale of a number of assets, in particular Santa Isabel in Chile.

While the US business was to blame for the majority of the decline - US retail operating profits were hit by increased promotional expenditure while the foodservice arm continued to suffer from the repercussions of the accounting scandal - Europe was not spared either.

Albert Heijn, Ahold's main banner in the Netherlands, was forced to reduce its prices after sales plummeted as shoppers looked elsewhere for cheaper products, and this had a devastating effect on operating profits. Overall operating profits in Europe were ahead of the previous year, however, mostly due to other Dutch units: Ahold's businesses in Spain and Poland both incurred losses.

Sales in South America were up 13.6 per cent for the period, although this was solely due to the consolidation of Disco and Santa Isabel in Argentina and Chile respectively since the previous year. Santa Isabel has now been sold, and negotiations over the sale of Disco are currently underway.

Asian sales dropped by 17.7 per cent during the period, primarily due to the disposal of operations in Malaysia and Indonesia in September and a decline in net sales in Thailand due to strong competition.

Full-year sales are expected to be slightly higher than last year, Ahold said, as the US retail operations continue to improve. But this will be partially offset by the weakened global economy and strong competition in other markets, as well as the ongoing fallout from the accounting scandal. Further divestments will also impact total sales.

Rights offering announced

Ahold has also finally released the details of its proposed rights issue, a move designed to raise cash and help pay off some of the €1 billion losses incurred as a result of the accounting irregularities.

The issue is expected to raise around €3.0 billion, and is being underwritten by a syndicate of banks. The rights offering is part of Ahold's 'Road to Recovery' programme announced by Moberg on 7 November, aimed at restoring the company's financial health with the goal of returning Ahold to an investment grade profile by the end of 2005.

Under the rights offering, existing shareholders will be granted rights to new common shares at €4.83 per share on a two-for-three basis. The rights offering comprises a public offering of common shares in the Netherlands and Switzerland and a private placement elsewhere.

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