Ahold rejig takes toll

The figures show that the core Ahold businesses continue to hold up well, despite the difficulties of the last year, with the 10.5 per cent decline in overall sales for the year attributed to both exchange rate problems and the disposal of a number of non-core units, most notably in Asia.

Total net sales for 2003 were €56.1 billion, the company said, but would have been 2.7 per cent higher than the previous year at constant exchange rates. Acquisitions and divestments contributed 0.7 per cent to sales growth, the company said.

The depreciation of the US dollar against the euro was the main contributor to the adverse currency effect, Ahold added, with retail sales from the US down 14.2 per cent in euros.

In local currency terms, US retail sales were in fact 2.7 per cent higher over the year at $27 billion, while US Foodservice revenues were also higher, rising 2.3 per cent to $17.8 billion with the benefits from acquisitions in late 2002 offsetting the impact of the accounting fraud at the unit revealed earlier in the year.

US Foodservice sales were also 14 per cent lower when translated into euros, however.

In Europe, retail sales were ahead 0.9 per cent for the year at €12.9 billion, but would have been 1.7 per cent higher at constant exchange rates. Outside the euro zone (Netherlands, Spain, Portugal, Sweden), Ahold's European retail business is centred on Czech Republic, Poland and Slovakia.

European retail sales were also impacted by the much-publicised problems at the group's flagship domestic retail chain Albert Heijn, where Ahold was slow to adapt to the difficult economic conditions in the Dutch market and subsequently lost business to cheaper food retailers. Albert Heijn's sales were 1.5 per cent lower than in 2002 at €5.6 billion.

In South America, where Ahold has sold its Chilean and Peruvian units and is finalising the sale of businesses in Brazil and Argentina, 2003 sales were 3.5 per cent higher than in 2002 at €2.2 billion, a good performance in a region where currency exchange rates have taken a toll on most companies' performances in recent years.

But the increase in sales was due mainly to the full-year consolidation of the Disco unit in Argentina (which now looks set to be sold to a consortium including France's Casino group) and a greater contribution from units in Peru and Paraguay, also slated for sale.

The disposal of these units during the course of 2003 is reflected in the sharp decline in fourth quarter sales - 20 per cent lower than in 2002 at €517 million - with the loss of sales from the Chilean arm in particular contributing to the shortfall.

But it was the Asian division which suffered the most during the year, primarily because it was the first to see disposals under Ahold's restructuring plan.

Total Asian sales were 20.7 per cent lower than in 2002 at €363 million, due to the sale of assets in Malaysia and Indonesia during the third quarter.

So, a set of results which perhaps flatters Ahold's overall performance because of the additional contributions from South American units, but one which at least shows that the Dutch group has not entirely lost its touch.

But the real test will come over the next few years, when the impact of disposals in Latin America and Asia, as well as the Spanish unit in Europe, will really be felt. Exchange rates show little sign of an immediate improvement, either, and the increasing importance of Ahold's US businesses as it sells of other units will mean that the weak dollar could play an important part in depressing overall sales for some time.

And Ahold's legal worries are not completely over, either. The company is still facing lawsuits from former directors who lost their jobs following the revelation of widespread fraud at the company, and just this week was summonsed by a group of Dutch shareholders claiming that the company had overstated its accounts for 1998, 1999, 2000, 2001 and 2002 - a claim rejected by the company.