BRUSSELS, Belgium, Nov. 7, 2002 (PRIMEZONE) -- Delhaize Group (Euronext Brussels:DELB) (NYSE:DEG), the Belgian international food retailer, announced today that in the third quarter of 2002 reported earnings amounted to EUR 23.8 million compared to EUR -14.9 million in 2001, which included an exceptional charge for the closure of Super Discount Markets. On a per share basis net earnings were EUR 0.26 (EUR -0.16 in 2001).
Sales of Delhaize Group were supported by growth in Europe, in Asia and at Hannaford in the U.S. Hannaford continued to benefit from the ongoing roll-out of the Festival for the Senses market strategy, Delhaize Belgium from the success of its new commercial policy and Alfa-Beta (Greece) from the continued success of the integration of its Trofo acquisition. The two other U.S. banners, Food Lion and Kash n' Karry, experienced sales and margin declines as both were negatively impacted by economic softness and aggressive competition.
"We are very focused in our efforts to improve sales momentum especially at Food Lion," said Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group. "We are committed to strengthen Food Lion's competitive position through price leadership, better operational execution and enhancing its customers' shopping experience in fresh products, service and convenience. In light of the current softness in sales, we also continue to identify cost savings to increase competitive leverage and protect profitability."
Organic sales growth of Delhaize Group was positive 2.0% in the third quarter of 2002; however, total sales decreased by 7.5% to EUR 5.0 billion compared to 2001 due to the weakening of the U.S. dollar, weak sales at two of its U.S. banners and the closing of Super Discount Markets in the fourth quarter of 2001. At identical exchange rates total sales growth would have been 0.6%. Delhaize Group added 14 stores to its sales network in the quarter, reaching a total of 2,495 stores.
Delhaize continues to generate significant operating cash flow. In the third quarter, cash flow from operations (EBITDA) of Delhaize Group amounted to EUR 344.7 million, or 6.8% of sales. Cash flow from operations declined 16.8% primarily due to the depreciation of the U.S. dollar and weak sales at Food Lion and Kash n' Karry. At identical exchange rates, EBITDA would have decreased by 8.2%.
Reported earnings in the third quarter of 2002 were EUR 23.8 million. In 2001, reported earnings for the quarter were EUR -14.9 million due to an exceptional charge of EUR 73.4 million (Group share net of tax) related to the closing of Super Discount Markets and an asset impairment on Delvita. Year-to-date reported earnings were EUR 118.6 million, more than double prior year. Cash earnings in the third quarter decreased to EUR 57.9 million (EUR 92.8 million in 2001). The mark to market of treasury shares and costs related to management changes in the U.S. impacted current earnings negatively by EUR 21.2 million (EUR 16.7 million, net of tax) in the third quarter. Cash earnings are 2.0% behind prior year through nine months.
On a per share basis, reported earnings amounted to EUR 0.26 (EUR -0.16 in 2001). Cash earnings per share in the third quarter were EUR 0.63 compared to EUR 1.00 the prior year.
Delhaize Group built on its excellent first half generation of free cash flow, producing EUR 88.6 million in the third quarter. Free cash flow after capital expenditure and dividends was EUR 315.2 million year-to-date. Delhaize America generated USD 21.2 million free cash flow in the third quarter or USD 107.2 million before the intra-group dividend payment to Delhaize "Le Lion". Since the beginning of 2001, Delhaize America has generated USD 734.4 million free cash flow, consistent with the target to generate USD 1 billion free cash flow in 2001-2003 at Delhaize America.
Since the beginning of the year, Delhaize Group has applied EUR 306.8 million free cash flow to the reduction of debt balances and has increased lease obligations by EUR 40.3 million. Combined with the weaker U.S. dollar translation, net debt in euro has decreased by EUR 684.9 million year-to-date to EUR 4.1 billion. The Group's net debt to equity ratio at the end of September 2002 stood at 110.9% compared to 127.3% at the end of 2001.
Financial Outlook
On the basis of the first nine months results and the expected development in the last quarter of the year, Delhaize Group issues the following guidance:
-- In 2002, the sales network is expected to grow by approximately 80
stores to a total of 2,524 stores.
-- At identical exchange rates, it is expected that sales of Delhaize
Group will grow in 2002 by 1.0% to 2.0% (excl. Super Discount
Markets). Assuming an average exchange rate of EUR 1 = USD 0.94,
this implies sales of EUR 20.6 billion to EUR 20.8 billion.
-- Delhaize America's comparable store sales growth is projected to
be in 2002 in the range of -1.0% to -1.5%.
-- At identical exchange rates, Delhaize Group expects cash earnings
to decrease in 2002 between 7% and 13%, or 20% to 25% on a per
share basis. Assuming an average exchange rate of EUR 1 = USD 0.94
for the year, cash earnings would be between EUR 280 million and
EUR 300 million, or EUR 3.02 to EUR 3.24 per share.
-- Delhaize Belgium's operating cash flow margin is expected to be at
or above 5% in 2002.
-- Delhaize Group is on track to realize the targeted net debt to
equity ratio of approximately 100% at the end of 2003.
Note: This release may be viewed in its entirety, including the financial tables, at the following link: http://www.prline.com/rootMRI/0000/docsMRI/Delhaize_en.doc