Ahold Delhaize’s ‘Strong’ Q2 Driven by Synergies
Ahold Delhaize has posted second-quarter 2017 results showing an improvement in sales and merger synergies, which has led to higher margins.
The company’s net sales ballooned 67.3 percent (64.6 percent at constant exchange rates) to 16.1 billion euros, while net income surged 68.2 percent (66.5 percent at constant exchange rates) to 355 million euros. Pro forma net sales rose 3.4 percent (1.8 percent at constant exchange rates) to 16 billion euros and pro forma underlying operating income increased 64 million euros to 626 million euros, up 11.4 percent. Pro forma underlying operating margin increased to 3.9 percent, versus 3.6 percent in the year-ago period.
“We are pleased to report a strong set of results,” said Dick Boer, CEO of the Zandaam, Netherlands-based retail conglomerate, which operates in 11 countries. “Sales improved across the board, and the group underlying operating margin increased by 30 basis points to 3.9 percent as merger synergy savings continued to track ahead of projections.”
Continued Boer: “A year after the merger between Ahold and Delhaize, the integration of the two companies is fully on track and delivering results as we continue to focus on strengthening our local brands through our 'Better Together' strategy. We expect to achieve gross synergies of 750 million euros by 2019, of which 250 million euros will be reinvested in our brands.”
According to the chief executive, the company is ramping up investments in its omnichannel strategy, which “combines a thriving network of brick-and-mortar stores with leading online businesses,” so as “to further unlock their promising growth potential.” Ahold Delhaize anticipates nearly 3 billion euros of online consumer sales this year, putting it on track to garner nearly 5 billion euros by 2020.
The company’s U.S. sales performance improved with the return of inflation, while margins grew thanks to solid synergy savings. “Our U.S. brands are well placed in a fast-changing competitive landscape,” noted Boer. “We continue to improve the price positioning of our Ahold USA brands and have developed effective competitive plans for Food Lion, facing new competition.”
He added that the U.S. business’ recently formed Retail Business Services division, which groups “scale and building expertise in own brands, digital and IT,” is getting up to speed, and that the company is setting up “a brand-centric operating model” to bolster local competitiveness in its markets.
Further, Boer said that the company expected its “underlying operating margin for the full year 2017 to be broadly in line with the first half of the year, with 220 million euros net synergies for 2017.”