Belgian-Dutch supermarket group Ahold Delhaize has had a very good second quarter, with the company thinking last year’s merger could result in lower costs than previously anticipated. On the other hand, Belgium’s performance is still weak.
Cut 750 million euro in costs
Ahold Delhaize’s pro forma second quarter turnover grew 3.4 % to 16.05 billion euro, with half of that growth on the back of positive exchange rate fluctuations. The gross company profit grew 8.4 % to 1.08 billion euro and its underlying operational profit grew 11.4 % to 626 million euro.
The company’s integration is also going better than expected, and as a result Ahold Delhaize now forecasts a 750 million euro synergy by 2019, compared to “only” 500 million euro in previous estimates. It will invest 250 million euro of those funds into its own labels.
Stable turnover in the US and Belgium
The company’s Dutch turnover grew 5.6 % to 3.4 billion euro, thanks to positive performances both online and in the supermarkets. However, Easter was part of the second quarter this year and therefore positively influenced the results. Bol.com continued to perform strongly and Ahold Delhaize now targets a 3 billion euro consumer turnover for the full year. By 2020, that number should have grown to nearly 5 billion euro.
Belgian results are not as positive: it had a minimal 0.2 % turnover increase and a dwindling profit, because of decreased profit margins (down from 2.9 % to 2.5 %). The local division is also investing heavily into a store network remodeling operation. The franchise stores are the main reason Belgium still achieved a turnover increase, because its own store network still has to deal with turnover drops.
Ahold Delhaize generates about 60 % of its turnover in the United States and despite difficult circumstances, it outperformed expectations. Turnover grew 2.5 % to 5.9 billion euro, although that was entirely because of exchange rate fluctuations. Excluding these, turnover would have remained stable. Underlying EBITDA did grow 8.8 % to 407 million euro. Ahold Delhaize was satisfied with its US performance, especially as prices are on the rise following a year of deflation.
