Q2, Half Year Looking Up for Ahold

In its interim report for the second quarter and half year 2010, Ahold revealed an overall net sales increase of 10.8 percent (4.4 percent at constant exchange rates)  to 7.1 billion euros (US $9.0 billion), helped by business acquisitions in the first quarter.

“We continued to grow sales, volumes and market share in the Netherlands and the United States while delivering solid financial results,” noted John Rishton, CEO of the Amsterdam-based retail conglomerate. “Market conditions remained challenging, with high levels of competitive promotional activity. We are confident in our ability to continue to balance sales and margins while providing improved value to our customers.”

Operating income for the quarter was 347 million euros (US $440.9 million), an increase of 17.6 percent, while retail operating income rose 70 million euros (US $89 million)  to 376 million euros (US $477.7 million). Income from continuing operations grew 3.6 percent to 203 million euros (US $257.9 million), which the company attributed to a higher operating income and lower net financial expense, partly offset by higher income taxes and lower share in income of joint ventures. Net income was 202 million euros (US $256.6 million), a 6 million euro (US $7.6 million) increase over the year-ago period.

For the half year, company net sales were 15.9 billion euros (US $20.2 billion), a 5.2 percent gain (3.9 percent at constant exchange rates). Operating income was 756 million euros (US $960.4 million), an increase of 9.4 percent, and retail operating income was 805 million euros (US $1 billion). Income from continuing operations rose 0.4 percent to 455 million euros (US $571.7 million), due to a higher operating income and lower net financial expense, partly offset by higher income taxes and lower share in income of joint ventures, according to Ahold. Net income was up 92 million euros (US $116.9 million) to 476 million euros (US $604.7 million), mainly because of year-over-year changes in the company’s estimate of its net provision for losses under lease guarantees connected with former subsidiaries Bi-Lo and Bruno’s.

At Ahold USA, second-quarter net sales rose 5.5 percent to $ 5.5 billion, partly because of business acquisitions, particularly the Ukrop’s transaction in February. Identical sales grew 1.4 percent (0.5 percent excluding gas). Operating income was $ 270 million, or 4.9 percent of net sales, an increase $ 22 million. Higher operating costs in connection with acquisitions, reorganization and restructuring activities adversely affected the operating margin, however. Specifically, second-quarter operating income included losses of $20 million relating to the newly purchased Ukrop’s locations, $9 million of reorganization and IT integration costs, and $6 million of restructuring and related charges, although these charges were largely offset by a $20 million release of insurance provisions, impairment reversals of $ 4 million, and gains on sale of assets of $ 6 million.

For the first half, net sales at Ahold USA were up 4.8 percent to $12.6 billion, partly owing to business acquisitions, foremost among them the aforementioned Ukrop’s deal. Identical sales grew 1.5 percent (0.1 percent excluding gas). Operating income was $ 565 million, or 4.5 percent of net sales, a $4 million rise. Operating income included losses of $32 million in relation to the Ukrop’s locations, a $12 million charge from the alignment of inventory valuation across the newly formed U.S. divisions, $14 million of reorganization and IT integration costs, and $4 million of restructuring and related charges. These charges were partially offset, however, by the release of insurance provisions of $20 million, impairment reversals of $3 million, and gains on sale of assets of $6 million were partial offsets.