Ahold Delhaize profits rise in second quarter

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ZAANDAM, the Netherlands — Ahold Delhaize reported Wednesday that its second-quarter net profit rose 68%, driven by improved sales and higher margins.

“Sales improved across the board,” CEO Dick Boer said in a statement. “And the group underlying operating margin increased by 30 basis points to 3.9% as merger synergy savings continued to track ahead of projections.

“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 by 2019, of which €250 million will be reinvested in our brands. We look toward the second half of the year with confidence and expect our underlying operating margin for the full year 2017 to be broadly in line with the first half of the year, with €220 million net synergies for 2017.”

Net sales increased by 67.3% (64.6% at constant exchange rates) to €16.1 billion , according to the company, which added that net income increased by 68.2% (or 66.5% at constant exchange rates) to €355 million.

Boer detailed the strides the merged company has made in the U.S. market, which accounts for more than half its sales.

“In the United States, our sales performance improved with returning inflation, while margins expanded on the back of strong synergy savings,” Boer said. “Our U.S. brands are well-placed in a fast-changing competitive landscape. We continue to improve the price positioning of our Ahold USA brands and have developed effective competitive plans for Food Lion, facing new competition.”

Boer also said the company is making progress in setting up the Retail Business Services operation to support its U.S. operations, creating scale in such areas as own brands, digital and IT.

“Additionally, we are implementing a brand-centric operating model to strengthen local competitiveness in our markets and we expect a one-off restructuring charge of €70 million related to this, mainly in 2017,” Boer said.

Ahold Delhaize also had strong sales in its business in the Netherlands, with robust gains in its  supermarkets and via e-commerce. Boer also pointed to the company’s ongoing €1 billion share buyback program, which the company expects to complete by the end of the year.

“Furthermore,” he said, “we reiterate our guidance of €1.6 billion free cash flow for the year after €1.8 billion in capital expenditure.”


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