Ahold, the world’s fourth-largest food retailer, on Thursday said it had met 2006 earnings targets. It also increased by €1bn a share buy-back programme, dependent on the sale of its US Foodservice distribution unit.
The shares were up 1.1 per cent at €8.28 in morning trade.
Anders Moberg, Ahold chief executive, noted that the company had cut net debt by €884m to €4.6bn in the year and reduced central costs sharply, although the latter largely reflected the fact that the 2005 number included a €803m charge to settle a class action case.
The share repurchase plan, which brings to €3bn the total value of shares the retailer intends to buy back, reflects progress in a broad divestment programme, Ahold said.
While that programme includes activities in Portugal and Poland that are deemed non-core, the centrepiece is the sale of USF, the unit that was at the centre of a near-€1bn accounting scandal IN 2003, which almost bankrupted Ahold.
Mark Kaiser, a former USF executive, is expected to be sentenced by a US court on Thursday on fraud charges related to that scandal.
The USF division is understood to have attracted bids of about $6bn from a number of private equity teams. Operating margins at the unit achieved Ahold’s 1.7 per cent target level.
The group posted 2006 net sales of €44.9bn, 2 per cent above 2005, or 2.7 per cent higher at constant exchange rates. Operating income rose by €1bn to €1.3bn, with retail operating income slightly higher at €1.2bn, an operating margin of 3.9 per cent unchanged from 2005.
Ahold again posted strong results from Albert Heijn, its Dutch flagship supermarket chain, where sales rose 8.4 per cent to €7.1bn, and were 11 per cent higher in the fourth quarter.
Group fourth-quarter net income more than doubled to €240m compared with €108m a year earlier, reflecting lower net financial expense and favourable income taxes. Full-year net income was €915m, up €769m.
However fourth-quarter operating income was €199m, including a €84m charge related to the sale of Tops stores in North-East Ohi, compared with €293m in 2005 when it benefited from insurance proceeds related to the class action settlement.
Ahold set operating margin guidance for 2007 at between 4 and 4.5 per cent.