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Ahold Narrows Annual Losses despite U.S. Foodservice Operating Loss

AMSTERDAM, The Netherlands. - Dutch retailer Ahold reported today that it drastically narrowed its net loss for the year, despite an operating loss at its Columbia-based U.S. Foodservice unit, according to news reports.

For the fourth quarter, Ahold had lower operating margins at its retail operations in the fourth quarter while the blighted U.S. Foodservice subsidiary turned in an operating profit. At U.S. Foodservice, EBITA came in at 21 million euros against a loss of seven million in the same quarter in the previous year, and the margin was 0.6% versus a negative 0.1%.

Ahold reported a net loss under Dutch accounting rules of 1 million euros for 2003 ($1.2 million) compared with a net loss of 1.2 billion euros ($1.4 billion) for 2002. The company last year discovered more than $850 million in accounting irregularities at its Columbia, MD-based U.S. Foodservice unit. That led to a long delay in 2002 financial results and a restatement of results for 2001 and 2000.

Under more stringent U.S. accounting rules, Ahold reported a net loss of $747 million euros ($899 million) for 2003, compared with a net loss of 4.3 billion euros ($5.2 billion) for 2002. Ahold said the difference was mainly because of different U.S. accounting rules covering assets held for sale, which amounted to about $609 million, and a change in accounting principles relating to vendors, which totaled about $120 million.

Ahold reported net sales of 56 billion euros ($67 billion) a decrease of 10.6 % from 2002. The company attributed the decrease to lower currency exchange rates against the euro for the dollar. Excluding foreign currency translation effects, Ahold sales rose 2.7%.

Net sales at U.S. Foodservice for 2003 rose $402 million, or 2.3%. The 2002 acquisitions of Allen Foods and the assets of Lady Baltimore helped boost sales. But U.S. Foodservice reported an operating loss before impairment, amortization of goodwill and exceptional items of $74 million, down from income of $292 million in 2002.

Ahold said the loss was largely due to vendors raising prices and shortening payment terms in response to the accounting irregularities at U.S. Foodservice. Operating costs for U.S. Foodservice also rose.

Ahold sees a number of challenges in 2004. The company predicts "only modest" net sales growth in the U.S. because of competitive pressure, and the planned sale of Ahold's Spanish operations will reduce its net sales in Europe. Ahold said sales at U.S. Foodservice may decline slightly, but expects the unit to have positive operating results before impairment, amortization of goodwill and exceptional items.

Ahold announced last week that it has reorganized U.S. Foodservice's operations
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April 16 ID Report

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