U.S. Foodservice Sales Reach $5.5 Billion

NEW YORK - U.S. Foodservice, the beleaguered Columbus, MD-based foodservice distribution division of Dutch megaretailer Ahold, reported increased net sales as well as lowered net losses for the first quarter of this year, while it announced the acquisition of a new account, reported both companies, according to news media.

While U.S. Foodservice showed an increase in net sales, excluding currency impact of 4.6%, to $5.5 billion, primarily driven by food price inflation, the operating loss at distributorship was 58 million euros ($70 million). In the comparable period of last year, losses amounted to 73 million euros.

Ahold explained that the decrease in losses was largely due to currency impact and an increased leverage of fixed costs over a higher amount of sales in U.S. dollars. During the reporting period, Ahold noted in its quarterly reports statement, U.S. Foodservice continued the process of improving the effectiveness of its procurement contracts and organization, as well as evaluating the profitability of its largest customer accounts.

U.S. Foodservice also reported adding a key account and realigning its customer mix as part of its previously announced "Road to Recovery" program. The distributorship awarded a new contract, with an expected annual incremental sales volume exceeding $150 million, from Novation, one of the America's largest group purchasing organizations for the growing healthcare industry.

U.S. Foodservice also said that it had mutually agreed with catering firm Compass Group USA to terminate the national distribution agreement between the companies. The agreement would have expired on June 30, 2007, if this early termination had not occurred.

"This realignment of our customer mix is part of our previously announced strategy of focusing resources on growing customer segments where we can establish long-term, value-added partnerships," said Robert Aiken, executive vice president of strategy and governance distributorship.

In reporting overall results for the first quarter of 2004, Ahold stated that net sales amounted to 15.4 billion euros ($18.6 billion), a decrease of 11.3% compared with the same period in 2003. Net sales grew approximately 1.3%, excluding currency impact and the impact of divestments. Ahold's retail operations in the United States experienced ongoing challenging market conditions, the company explained. In the European retail operations, net sales excluding currency impact and the impact of divestments remained unchanged compared to the same quarter of 2003.

The operating loss amounted to 145 million euros ($175 million), while the company reported income of 402 million euros in the comparable period of 2003. Ahold said the result was primarily caused by exceptional losses of 450 million euros ($543 million) related to the divestments of Bompreco, Hipercard and operations in Thailand. These exceptional losses were mainly caused by accumulated foreign currency translation adjustments and goodwill reversals, the company explained.

Under Chief Executive Anders Moberg, Ahold has been working to regain investors' confidence after news of the three- year profit overstatement caused the shares to plunge 63% in a day and triggered a class-action lawsuit and investigations of the company's businesses in the United States and the Netherlands.

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