BRUSSELS, Belgium, May 7, 2002 (PRIMEZONE) -- Delhaize Group (Euronext Brussels:DELB) (NYSE:DEG), the Belgian international food retailer, reported today that in the first quarter of 2002 cash earnings rose to EUR 86.5 million from EUR 46.4 million last year; on a per share basis this was an increase of 5.3% to EUR 0.94. On a pro-forma basis*, cash EPS grew in the first quarter of 2002 by 7.2%.
* Sales rise by 8.2% to EUR 5.4 billion * Cash flow from operations increase by 11.6% to EUR 408.7 million * Operating cash flow margin of 7.6% (7.3% in 2001) * Cash earnings per share up by 5.3% to EUR 0.94 * Net debt decreases by EUR 186.4 million * Confirmation of 2002 financial outlook
"The management of Delhaize Group is satisfied with the performance of the Company in the first quarter of 2002," said Pierre-Olivier Beckers, President and Chief Executive Officer. "A comparable store sales increase of 1.5% at Delhaize America and continued improvement of its margins helped to put us on track to achieve our goals for 2002. Delhaize Belgium maintained its market share notwithstanding a change in commercial policy that lowered average prices but reduced promotional activity. The renovation of the Delvita stores and the integration of the Trofo stores, in Alfa-Beta, started to deliver significant sales increases in both cases. The strong cash flow generation lowered our net debt significantly during the period."
* First quarter 2001 figures of Delhaize Group adjusted on a pro-forma basis to consolidate the impact of the share exchange with Delhaize America and the acquisition of Trofo from January 1, 2001, and to deconsolidate Super Discount Market from the same date.
In the first quarter of 2002, Delhaize Group achieved sales of EUR 5.4 billion, an increase of 8.2% compared to 2001, or 8.8% on a pro-forma basis. Organic sales growth was 4.3%. Notwithstanding the competitive environment both in the United States and Europe, sales continued to grow in the existing stores due to successful sales initiatives in the different banners. Comparable store sales rose by 1.5% at Delhaize America and 2.1% in Belgium. In the first quarter of 2002, Delhaize Group added 12 stores to its sales network, reaching a total of 2,456 stores at the end of the first quarter.
In the first quarter of 2002, Delhaize Group successfully continued focusing on gross margin improvements, cost control, the generation of synergies and the exchange of successful practices. As a result, cash flow from operations (EBITDA) of Delhaize Group grew by 11.6% to EUR 408.7 million, or 7.6% of sales (7.3% in the first quarter of 2001).
Due to the strong operational improvements and the elimination of the minority interests at Delhaize America, Delhaize Group earned EUR 86.5 million in the first quarter of 2002 before goodwill amortization and exceptional items, compared to EUR 46.4 million in the first quarter of 2001. Cash earnings per share rose by 5.3% to EUR 0.94. On a pro-forma basis, cash earnings per share increased by 7.2%.
Net earnings after goodwill amortization and exceptional items of Delhaize Group grew to EUR 48.3 million in first quarter of 2002 from EUR 26.7 million in the first quarter of 2001. Reported earnings per share rose by 2.2% to EUR 0.52 from EUR 0.51.
In the first quarter of 2002, Delhaize Group generated EUR 243.2 million free cash flow. The working capital decrease of EUR 38.8 million was due to a combination of seasonal fluctuations and continued working capital improvement initiatives. Capital expenditure totaled EUR 130.6 million for the quarter. Due to the strong generation of free cash flow, net debt of Delhaize Group decreased by EUR 186 million to EUR 4,590 million at the end of the first quarter of 2002.
Financial Outlook
Delhaize Group confirms its earlier guidance for 2002
-- At constant exchange rates, it is expected that sales of Delhaize
Group will grow in 2002 in mid single digits (excl. discontinued
operations) and cash earnings per share by 10 to 12%.
-- The sales network is expected to grow by approximately 131 stores
to a total of 2,575 stores.
-- Comparable store sales growth of Delhaize America is estimated to
be between +1% and +2% for the year 2002.
-- Delhaize Belgium expects to maintain its operating cash flow
margin at the 2001 level.
GEOGRAPHICAL OVERVIEW
United States
In the first quarter of 2002, Delhaize America successfully maintained its market positions and increased its operating margins. The sales contribution of Delhaize America to the Delhaize Group results grew by 4.0% to USD 3.74 billion (EUR 4.27 billion). The disciplined retail strategies of the different banners of Delhaize America resulted in a comparable store sales growth of 1.5%. The timing of the Easter holiday positively impacted sales during the first quarter of 2002. Excluding the Easter effect, comparable store sales of Delhaize America would have increased 0.6%.
In the first quarter of 2002, Delhaize America opened eight new stores and relocated or closed three stores, resulting in a net increase of five stores to a total of 1,464 stores. In addition, Delhaize America remodeled or expanded 29 supermarkets.
The gross margin of Delhaize America increased to 27.8% compared to 26.3% in the first quarter of 2001 through an improved sales mix, more selective promotions and the continued roll-out of zone pricing at Food Lion. Cash flow from operations of Delhaize America increased by 9.0% to USD 319.2 million (EUR 364.1 million), or 8.5% of sales (8.1% in 2001).
Europe
In the first quarter of 2002, Delhaize Belgium sales grew by 4.3% to EUR 804.1 million despite comparison to very strong sales growth of 10.2% in the first quarter of 2001. The sales growth was due to the growth of the store network by five stores and the rise in comparable store sales by 2.1%, adjusted for one selling day less. Delhaize Belgium maintained its market share in a competitive environment. The operating cash flow of Delhaize Belgium amounted to EUR 37.3 million (EUR 39.8 million in 2001) in the first quarter of 2002.
At the beginning of 2002, Delhaize Belgium introduced a new commercial policy leading to a more limited number of promotions and consistently lower everyday prices. Under this policy the prices of more than 2,800 products were reduced. Average price levels are approximately 2.5% more competitive after the reinvestment of more than EUR 10 million in lower everyday prices. Customers reacted positively to the new commercial policy, resulting in an increase of the value of the average basket. The number of customers decreased due to the expected loss of shopper traffic exclusively seeking price promotions.
In the first quarter of 2002, sales in the other European operations of Delhaize Group (Greece, Czech Republic, Slovakia and Romania) amounted to EUR 276.6 million, an increase of 34.4%. The successful integration of Trofo in Alfa-Beta continued at a fast pace, resulting in comparable store sales growth in the Trofo stores of more than 20%. Delvita focused on the successful remodeling of its stores and improvements in its service and presentation of fresh products. In the first quarter of 2002, Delvita completed the remodeling of 24 stores. Cash flow from operations of the other European operations decreased by 6.4% to EUR 9.8 million. The decrease was due to expenses related to remodeling in the Delvita chain and to the Trofo store conversions.
Asia
In the first quarter of 2002, the operations of Delhaize Group in Asia reported sales growth of 22.7% to EUR 52.7 million. At the end of the first quarter of 2002, Delhaize Group operated 87 supermarkets in Asia, including 27 in Thailand, 29 in Indonesia and 31 in Singapore. Cash flow from operations of the Asian activities of Delhaize Group amounted to EUR 0.2 million compared to EUR 0.1 million in 2001.
APPLICATION SFAS No. 142
In addition to its quarterly, half year and yearly publication of consolidated results in accordance with Belgian GAAP, Delhaize Group also publishes a reconciliation of its annual results to U.S. GAAP in accordance with its obligations as a foreign company listed on the New York Stock Exchange.
Due to the adoption during the first quarter of 2002 of the new Statement of Financial Accounting Standards (SFAS) No.142, Delhaize Group stopped as of January 1, 2002, amortizing goodwill and other intangible assets with indefinite lives for its U.S. GAAP presentation and will start an annual assessment of potential impairment of goodwill and other intangible assets by comparing the book value of these assets to their current fair value. This change will not impact the Delhaize Group results in Belgian GAAP under which Delhaize Group will continue to record the amortization of goodwill and other intangibles.
The initial analysis required upon adoption of the standard by Delhaize Group under U.S. GAAP indicates no impairment charge to goodwill and an impairment charge related to other intangibles totalling, net of taxes, EUR 8.4 million (USD 7.4 million), which will be recorded as a change in accounting principle (separate from operating results) and reported in the U.S. GAAP reconciliation at year end.
For its filing as a separate registrant, Delhaize America has independently applied SFAS No. 142. Delhaize America performed its analysis at each of its three operating banners since each chain represents a separate operating segment for Delhaize America. Delhaize America's initial impairment analysis at the individual operating banner level resulted in a non-cash impairment charge totalling USD 288 million before taxes (USD 284 million net of taxes), which is recorded as a change in accounting principle (separate from operating results) in the first quarter 2002 income statement of Delhaize America. This impairment charge relates primarily to goodwill associated with the Delhaize Group share exchange and with Delhaize America's acquisition of Kash n' Karry. As indicated above, the SFAS No. 142 analysis indicates no impairment of goodwill for Delhaize Group since the analysis was performed at the consolidated Delhaize America level.
DELHAIZE GROUP
Delhaize Group is a Belgian food retailer present in ten countries on three continents. At the end the first quarter of 2002, Delhaize Group's sales network consisted of 2,456 stores. In 2001, Delhaize Group posted EUR 21.4 billion in sales and cash earnings of EUR 339.0 million. Delhaize Group employs approximately 147,000 people. Delhaize Group is listed on Euronext Brussels and the New York Stock Exchange.
REPORT OF THE STATUTORY AUDITORS
We have conducted a limited review of the first quarter accounts of Delhaize Group as at March 31, 2002. Our limited review did not reveal any significant adjustments which would be required to be made to the quarterly accounts as presented. - Deloitte & Touche Reviseurs d'Entreprises, represented by Mr James Fulton.
FINANCIAL CALENDAR
- Final date for depositing shares for the
shareholders meetings May 16, 2002
- Extraordinary shareholders meeting and annual
shareholders meeting May 23, 2002
- Dividend payment May 27, 2002
- Press release - 2002 second quarter results August 1, 2002
- Press release - 2002 third quarter results November 7, 2002
DEFINITIONS
-- Cash flow from operations: EBITDA or earnings before interest,
taxes, depreciation, amortization, store closing charges in the
normal course of business, exceptional items and minority
interests
-- Cash earnings: reported earnings plus goodwill amortization, store
closing charges in the normal course of business and exceptional
items, net of taxes and minority interests
-- Cash EPS: cash earnings divided by the weighted average number of
shares during the period
-- Comparable store sales: sales from the same stores, including
relocations and expansions
-- Free cash flow: cash flow before financing activities less
dividends and directors' share of profit, less dividends paid by
subsidiaries to minority interests
-- Net debt: long-term financial liabilities, including current
portion and capital leases, plus short-term financial liabilities,
minus short-term investments (excl. treasury shares) and cash and
banks
-- Organic sales growth: sales growth excl. sales from acquisitions,
divestitures and currency fluctuations
-- Outstanding shares: the number of shares issued by the Company,
including treasury shares
-- Weighed average number of shares: number of shares outstanding at
the beginning of the period (less treasury shares), adjusted by
the number of shares cancelled, repurchased or issued during the
period multiplied by a time-weighting factor.
This press release is available in English, French and Dutch. You can also find it on the recently renewed web site http://www.delhaizegroup.com. Questions can be sent to investor@delhaizegroup.com.
Delhaize Group's management will be discussing the financial results for the first quarter 2002 during an investors' conference call that will start at 03.00 p.m. CET (09.00 a.m. EST) on May 7, 2002. To participate in the conference call, please call +44.20.8781.0579 (U.K.) or +1.800.553.2379 (U.S.) and ask for "Delhaize". The conference call will also be broadcast live over the internet on May 7, 2002 from 03.00 p.m. until approximately 04.00 p.m. CET (between 09.00 a.m. and 10.00 a.m. EST) at www.delhaizegroup.com. A replay of this web cast will be available at the same website starting at 06.00 p.m. CET (12.00 p.m. EST) on May 7, 2002.
Safe Harbor
Some of the statements in this press release and other written and oral statements made from time to time by Delhaize Group and its representatives are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of Securities Exchange Act of 1934, as amended, and involve a number of risks and uncertainties. These statements include, but are not limited to, statements about strategic options, future strategies and the anticipated benefits of these strategies. These statements are based on Delhaize Group's current expectations. Delhaize Group's actual results could differ materially from those stated or implied in such forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements are described in Delhaize Group's Annual Report on Form 20-F for the year ended December 31, 2000 and other periodic filings made by Delhaize Group and Delhaize America with the U.S. Securities and Exchange Commission, which risk factors are incorporated herein by reference. Delhaize Group and Delhaize America disclaim any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.
Number of Stores
End of 2001 Change 1st End of 1st End of 2002
Q 2002 Q 2002 Planned
United States 1,459 +5 1,464 1,493
Belgium 675 +5 680 736
Greece (1) 104 - 104 105
Czech Republic 94 - 94 98
Slovakia 16 - 16 17
Romania 10 +1 11 15
Thailand 26 +1 27 36
Indonesia 29 - 29 39
Singapore 31 - 31 36
TOTAL 2,444 +12 2,456 2,575
(1) Excluding ENA-franchised stores.
To view this release in its entirety, including tables, please click the link: http://www.prline.be/affiche.asp?Doc_id=132766