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Ahold: U.S. Foodservice Losses Drop; No Word on Sale

AMSTERDAM, The Netherlands. - Dutch food retailer Ahold reported at a conference call here today that its American foodservice distribution unit recorded a smaller operating loss in the fourth quarter of 2004 compared with the previous year, according to news reports.

U.S. Foodservice, Columbia, MD, the second largest foodservice distributorship in the U.S., according to the 2005 ID Top 50, and the site of a major accounting scandal, had an operating loss of 3 million euros ($3.9 billion), said Hannu Ryopponen, finance director, compared with a loss of 8 million ($10.3 billion) euros last year.

Ryopponen insisted in a meeting with journalists that U.S. Foodservice would exceed its pre-scandal profitability by 2006.

As for the distributorship's corporate fate, Ryopponen said Ahold had not made a decision about whether to sell it, a move many analysts expect, in order to give it time to improve profits. A decision on its future is due before the end of the year, he added.

Dutch food retailer Ahold posted fourth quarter operating earnings below expectations, but said retail operating profit margin had improved to nearly 3% from 2.24% a year earlier. Ahold shares were 1.4% down at 6.59 euros ($8.5) in early trading. Analysts were quoted as saying that the multinational's core activities were disappointing, particularly its U.S. retail operations.

The company reaffirmed it goal to get the retail operating margins to 5% for full year 2006, for which it also targets 5% annual sales growth and a return on assets of 14% as part of a recovery program following a 1 billion euro ($1.3 billion) accounting scandal that broke in February 2003. However, financial analysts have recently expressed skepticism over the sales growth target amid fierce competition among retailers such as bigger Wal-Mart.

"2004 was our year of transition, 2005 is turning into a year of execution, a year in which we are delivering on our promise and concentrating on implementing our new way of working based on the sold structure created in 2004" ceo Anders Moberg said in a statement.

Ahold reported an operating profit, before goodwill charges and exceptional items, of 207 million euros ($268.9 million) in the fourth quarter of 2004, missing analysts' expectations.

It had a fourth-quarter net income of 96 million euros ($123.8 million) and a full-year loss of 443 million euros ($571.5 million) due to charges for disposals in Latin America.

Net debt was down to 6.3 billion euros ($81 billion) at Jan 2, from 7.46 billion ($9.6 billion) at Oct. 3. Ahold said it expected to complete its 2.5 billion ($3.2 billion) euro asset sale program by end-2005, as planned.

In January, Ahold had already reported a 3.1% decline in 2004 fourth-quarter sales to 12.3 billion euros ($15.9 billion), while the full-year figures dropped by 7.3% to 52 billion euros ($67.1 billion).

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