Ahold drops growth targets
Latin American partner runs into trouble
July 17 2002
Supermarket giant Ahold has revised its earning per share forecast for 2002 down to between 5 and 8 per cent.
The Netherlands based retailer has dropped the forecast from 15 per cent in the face of currency fluctuations and costs related to its Latin American joint venture partner Velox Retail Holdings. Velox has defaulted on bank charges secured by its shares in the joint venture, Disco Ahold International Holdings.
Ahold will have to take over loans and purchase the Velox shares at a cost of almost $500m. Like other retailers active in the area, Ahold has also been badly hit by the collapse of the Argentinian Peso.
In Spain, the integration of Ahold Spain and Superdiplo are taking longer than expected. Ahold has already announced it expects operating earnings in Spain of around 70m euros, some 30m euros short of the original target. Lower-than-anticipated income from property is also a factor in the downgraded forecast.
Ahold president and CEO Cees van der Hoeven said: “The Corporate Executive Board has made every effort to be as transparent as possible in outlining the specific circumstances that can potentially impact our results. Preliminary results for the second-quarter of 2002, which ended on Sunday, July 14, indicate that, compared to last year, no EPS growth should be expected, largely because of non-operating factors.
“However, we are encouraged by the underlying strength of our core business and are fortunate that most Ahold companies are performing according to or better than expectation. Performance continues to be particularly solid at US Foodservice, Stop & Shop, Albert Heijn, Giant-Landover and ICA-Sweden. Operating
earnings at these five companies are according to plan and all are expected to sustain their performance throughout the year. Significant organic growth and margin expansion are being driven by Ahold’s customer focus, operational strength and economies of scale.”
Organic operating earnings growth, excluding currency impact, is still expected to be around 15 per cent.
