placement of preferred shares added a further Dfl27 million to stockholders' equity.
Additionally, retained earnings of Dfl 133 million were added to the reserves. Converse
ly, an amount of Dfl 69 million was charged to stockholders' equity, representing net
goodwill paid (Dfl 21 million), and net exchange rate differences (Dfl 48 million).
Return on average stockholders' equity in 1989 rose to 15.8% from 15.4% in 1988.
Capital accounts - consisting of stocldiolders' equity, third parties and subordinated
loan amounted to Dfl 1,507 million at 1989 year end, equal to 35.5% of the balance
sheet total. At 1988 year end, this item amounted to Dfl 1,094 million, or 28.3% of the
balance sheet total.
The current ratio amounted to 0.92, the same level as at 1988 year end. The cash
balance of Dfl 324 million included in the balance sheet is almost entirely committed to
daily operations.
The multicurrency syndicated revolving credit facility for 150 million arranged in
1988 was increased to $300 million early in 1990, in order to expand our financial flexi
bility. A comparable facility for $65 million is also available. As of the balance sheet
date, a total of $25 million had been drawn on these facilities.
At the beginning of 1990, the General Meeting of Stockholders adopted a resolution
to amend the Articles of Incorporation. The most important amendment increased the
authorized capital from Dfl 300 million to Dfl 400 million, empowering the Corporate
Executive Board to authorize share issues, subject to the approval of the Supervisory
Board.
Impact of currency fluctuations
While Ahold operates chiefly in The Netherlands and the United States, i.e. in guilders
and dollars, the consolidated financial statements are drawn up in guilders. Consequent
ly, exchange rate fluctuations between the guilder and the dollar influence the consoli
dated figures. In determining earnings, an average quarterly rate is used. For the entire
year this resulted in an average dollar rate of Dfl 2.12 as against Dfl 1.97 in 1988. This
difference had a positive impact of about Dfl 4.1 million on consolidated net earnings.
In contrast with the income statement, the balance sheet is based on the exchange
rate as of the balance sheet date. At 1989 year end, this was Dfl 1.92 as against Dfl 2.00
in 1988. This resulted in a negative exchange rate difference of about Dfl 47 million
being charged to stockholders' equity.
A better insight into operating progress excluding exchange rate influences comes from
separate analyses of activities conducted in guilders and activities conducted in dollars.
Capital accounts denominated in guilders rose from Dfl 387 million to Dfl 641
million. This includes stockholders' equity, which rose from Dfl 336 million to Dfl 589
million. Net earnings from activities conducted in guilders amounted to Dfl 125 million,
as compared to Dfl 93 million in 1988.
Capital accounts denominated in dollars, consisting almost entirely of stockholders'
equity, amounted to $452 million at 1989 year end, as compared to $353 million at 1988
year end. Net earnings from dollar-denominated activities rose from $27 million to $33
million.
Financing and Investor Relations
Ahold wants to encourage solid, long-term relationships with its lenders and sharehold
ers. Especially in a volatile financial climate, it is important to maintain the proper
balance between equity and loan capital and at the same time maximize future
financing flexibility.
In these fields, too, important progress was made in 1989. Medium-term financing
facilities were arranged or renewed both with individual banks and with syndicates, in
different currencies and for various Ahold subsidiaries. Consequently, Ahold can at
short notice raise considerable amounts of cash at variable interest rates. This gives
Ahold the necessary flexibility while keeping interest costs under control.
14
Among the major
objectives of the
Finance department is
offering value added to
the operating compa
nies, and building a
network of carefully
selected financial rela
tions. Says Gregor
Witteveen, Vice Presi
dent Finance: 'We at
tach great value to com
petitive pricing, high-
quality service, involve
ment and support. We
realize that service,
ideas and expertise
have a price. Loyalty is
a two-way street.
Contacts with investors
were strengthened.
Presentations outside
The Netherlands, inclu
ding Japan, attracted a
great deal of attention.
Frans Hent, Vice Presi
dent Investor Relations:
'In order to ensure a
proper appreciation of
our shares we must
regularly and consis
tently provide investors
with information.
