EBITDA increase by 38.0%, Cash EPS by 36.9%
BRUSSELS, Belgium, October 26, 2001 - Delhaize Group (Euronext Brussels: DELB, NYSE: DEG), the Belgian international food retailer, reported today an increase of cash earnings per outstanding share by a strong 36.9% to EUR 1.00 in the third quarter of 2001. Delhaize Group's sales rose by 22.2% to EUR 5.5 billion, and its earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 38.0% to EUR 414.3 million. The EBITDA margin of Delhaize Group rose to 7.6% coming from 6.7% the prior year.
'I am very pleased with the operational results of Delhaize Group in the third quarter of 2001', said Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group. 'We continue to build sales and profit momentum. Comparable store sales grew 2.3% at Delhaize America and 3.6% in Belgium in a weakening economic environment.'
In the third quarter of 2001, Delhaize Group achieved sales of EUR 5.5 billion, an increase of 22.2% over the third quarter of the prior year. These results include since July 31, 2000 the sales of Hannaford Bros. Organic sales growth was 3.9% (excluding acquisitions, divestitures, currency fluctuations and adjusted for a comparable number of weeks at Delhaize America). During the third quarter of 2001, Delhaize Group extended its sales network with six stores to a total of 2,446 outlets.
In the third quarter of 2001, Delhaize Group's EBITDA increased by 38.0% to EUR 414.3 million. Compared to 2000 figures adjusted for Delhaize America's results on a thirteen-week basis, the increase amounted to 25.4%. In the third quarter of 2001, Delhaize Group posted an EBITDA margin of 7.6% of sales compared to 6.7% in the third quarter of 2000.
For the thirteen-week period ended September 30, 2001, Delhaize Group posted cash earnings (before goodwill amortization and exceptional items) of EUR 92.8 million compared to EUR 38.2 million in the prior year. Delhaize Group's cash earnings per outstanding share increased by 36.9% to EUR 1.00. Compared to 2000 figures adjusted for Delhaize America results on a thirteen-week basis, the increase in cash earnings per outstanding share amounted to 51.3%.
After a strategic review of Delhaize Group's operations, the Board of Directors has decided to close 19 stores of Super Discount Markets, its small Atlanta based supermarket company. In addition, Super Discount Markets sold nine Save-A-Lot discount stores to Supervalu Inc, Delhaize Group's minority partner in Super Discount Markets.
The Board of Delhaize also decided to close eight Delvita stores in the Czech Republic and Slovakia, and to record an asset impairment charge for seven other Delvita stores. Delvita currently operates 116 stores in the Czech Republic and Slovakia.
These decisions resulted in the third quarter in exceptional pre-tax charges of EUR 54.3 million and EUR 19.1 million, respectively, and will enable the management to allocate the resources of the Group to assets with the greatest potential for long term return on capital and increased shareholder value.
Therefore, reported earnings (after goodwill amortization and exceptional items) of Delhaize Group were in the third quarter of 2001 EUR -14.9 million compared to EUR 7.8 million the previous year on a twelve-week basis quarter for Delhaize America (EUR 0.9 million on a thirteen-week basis). Reported earnings per outstanding share amounted to EUR -0.16 in the third quarter of 2001, compared to EUR 0.15 in the previous year. Excluding exceptional charges, reported earnings would have been increased from EUR 22.3 million in the third quarter of 2000 to EUR 58.5 million this year, or EUR 0.63 per outstanding share.
Delhaize Group is confident in its existing guidance for 2001. Delhaize Group expects in 2001 an increase of its sales network by 135 stores (+5.8%) to a total of 2,445 stores. Sales are expected to exceed EUR 20 billion, while EBITDA is expected to rise by 20 to 25%. Cash earnings per outstanding share are expected to increase by 15% or above. Since the beginning of the year, Delhaize Group bases its guidance on the assumption of a full year 2001 average exchange rate of 1 EUR = 0.96 USD and excluding a significant share buyback.
Geographical Overview
United States
In the thirteen-week period ended September 30, 2001, sales of Delhaize America stood at USD 3.8 billion (EUR 4.3 billion), an increase of 12.2% over the comparable thirteen-week period of the prior year. Comparable store sales (which include relocations and expansions) for the thirteen-week period increased by 2.3%.
At the end of the third quarter of 2001, Delhaize America was operating 1,453 supermarkets. During the quarter, 11 new stores were added, while 32 stores were remodeled and expanded.
EBITDA increased by 31.7% over the comparable thirteen-week period of the prior year to USD 329.0 million (EUR 370.0 million). The EBITDA margin increased from 7.3% to 8.6% of sales.
In the third quarter of 2001, the contribution of Delhaize America to the cash earnings of Delhaize Group was USD 76.7 million (EUR 86.2 million), an increase by 263.1% compared to USD 21.1 million (EUR 23.3 million) in the comparable thirteen-week period in 2000. Third quarter reported earnings amounted to USD 55.8 million (EUR 62.6 million) compared to USD -7.2 million (EUR -8.0 million) in the comparable thirteen-week period in 2000.
Third quarter's strong results reflect continuing gross margin improvement over the last several quarters. During the third quarter of 2001, gross margin improved 154 basis points on a pro forma basis to 25.4%. The benefits of the merger with Hannaford Bros. continue to be realized as planned. Delhaize America achieved approximately USD 13 million in benefits from best practices and synergy development in the third quarter of 2001 for a total of USD 47 million achieved in the first full year post-acquisition, exceeding the original target of USD 40 million.
Delhaize Group reiterates its earlier announced guidance on the U.S. activities. In 2001, sales of Delhaize America are expected to grow approximately 17-18%, with comparable store sales growth to be 1.5-2.0%. In 2001, EBITDA of Delhaize America is expected to increase between 25 and 30%.
On October 26, 2001, Delhaize Group will file with the Securities and Exchange Commission a Form 6K disclosing the separate financial statements for Delhaize America for the quarter ended September 29, 2001. It will be available on the Delhaize Group website at
www.delhaizegroup.com.
In the third quarter of 2001, Super Discount Markets achieved sales of USD 66.3 million (EUR 74.5 million) and an EBITDA of USD -0.5 million (EUR -0.6 million). At the end of the third quarter of 2001, Super Discount Markets was operating 19 Cub Foods supermarkets.
Europe
In the third quarter of 2001, the Belgian operations of Delhaize Group achieved sales of EUR 790.2 million, an increase of 7.1%. Delhaize Belgium continued to increase its market share through successful sales initiatives, a favorable product mix and the growth of its sales network. Comparable store sales, with one day less than in the same period last year, increased by 3.6%. The Belgian sales network was extended with six stores. EBITDA was up by 12.9% to EUR 39.1 million, resulting in an EBITDA margin of 5.0% compared to 4.7% the prior year.
During the third quarter of 2001, sales in the other European operations of Delhaize Group (Greece, Czech Republic, Slovakia and Romania) increased by 5.0% to EUR 257.2 million. EBITDA decreased by 41.9 % to EUR 8.0 million mainly due to the divestiture of P.G. in September 2000 and integration costs related to the Trofo acquisition. At the end of September 2001, Delhaize Group operated 230 stores in its other European operations, including 104 stores in Greece, 99 in the Czech Republic, 17 in Slovakia and 10 in Romania.
Asia
Sales of the operating companies of Delhaize Group in Asia rose during the third quarter of 2001 by 16.7% to EUR 45.4 million. EBITDA amounted to EUR 0.8 million, compared to EUR 0.2 million for the third quarter of 2000. In the third quarter of 2001, the sales network increased by one store to a total of 79 stores, including 22 in Thailand, 26 in Indonesia and 31 in Singapore.
Strategic Review of Super Discount Markets and Delvita
After a strategic review of its operations, Delhaize Group decided to close the 19 Cub Foods stores of Super Discount Markets before the year end, concluding that the significant investment required to be successful in the highly competitive Atlanta market would not be justified. In the United States, Delhaize America will now be the exclusive growth vehicle of Delhaize Group.
During the first nine months, Super Discount Markets posted sales of USD 208.0 million, or 1.5% of Delhaize Group sales. In the first nine months of 2001, Super Discount Markets contributed 0.01% to the operating cash flow of Delhaize Group and had a negative contribution of -1.4% to the cash earnings of Delhaize Group.
The Company is in the process of marketing the 19 Cub Foods store sites of Super Discount Markets. As a result of the restructuring, Delhaize Group will record in the third quarter of 2001 a charge, pre-tax, of USD 48.6 million (EUR 54.3 million), associated primarily with lease obligations. Severance payments and write-downs of fixed assets related to the stores are also included.
Delhaize Group has also reviewed its 116 Delvita stores in the Czech Republic and Slovakia to identify stores that do not meet long-term performance expectations. Eight under-performing stores will close before the end of 2001, and an asset impairment for seven other stores will be recorded, resulting in the third quarter of 2001 in a charge, before tax, of EUR 19.1 million. Out of the eight store closures, representing together 1.7% of Delvita's sales, seven are part of the 50 store group acquired from Interkontakt in 1999.
These measures will allow Delvita to focus its resources on its most promising assets. During the first nine months of 2001 Delvita renovated with success nine supermarkets located in Prague, reinforcing its supermarket leadership position in the Czech capital. The asset review will help Delvita to continue developing successfully based on the strategic location of its remaining 108 stores, the strong brand recognition among consumers and its dynamic management team.
Definitions
- Cash earnings: reported earnings plus goodwill amortization, store closing charges in the normal course of business and exceptional items
- Cash EPS: cash earnings divided by the weighted average number of shares outstanding during the period
- Comparable store sales: sales from the same stores, including relocations and expansions
- EBITDA: earnings before interest, taxes, depreciation and amortization
- Organic sales growth: sales growth excluding sales from acquisitions, divestitures and currency fluctuations
Delhaize Group
Delhaize Group is a food retailer headquartered in Belgium, and listed on Euronext Brussels and the New York Stock Exchange. At the end of the third quarter of 2001, Delhaize Group's sales network consisted of 2,446 stores in ten countries on three continents. In 2001, Delhaize Group will post more than EUR 20 billion in sales. Delhaize Group employs more than 150,000 people.
This press release is available in English, French and Dutch. For more information, visit the Delhaize Group website at
www.delhaizegroup.com. Questions can be sent to investor@delhaizegroup.com.
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 with the U.S. Securities and Exchange Commission, which risk factors are incorporated herein by reference. Delhaize Group disclaims 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.
Delhaize Group will conduct an investor's conference call at 3:00 p.m. CET (9:00 a.m. EST) on Friday October 26, 2001. The conference call will be broadcast live over the internet from 3:00 p.m. CET (9:00 a.m. EST) at www.delhaizegroup.com. An audio replay of this webcast will be available at the same website starting at 8:00 p.m. CET (2:00 p.m. EST) on October 26, 2001.
Click here for the Third Quarter 2001 Figures (Unaudited)
Contacts
| Guy Elewaut |
+ 32 (0)2 412 29 48
+ 32 (0)477 50 07 96 |
| Geoffroy d'Oultremont |
+ 32 (0)2 412 83 21 |
| Amy Shue (US investors) |
+ 1 (704) 633-8250, ext. 2529 |
| Ruth Kinzey (US media) |
+ 1 (704) 633-8250, ext. 2118 |