300
200 - -
100--
0--
Net gearing
1995 1996 1997 1998 1999
40 t Stockholders' equity
30
20
10
1995 1996 1997 1998 1999
as a of assets
I Group equity
I Capital accounts
as a
Including financial leases
Excluding financial leases
Investments and acquisitions
Investment in tangible fixed assets totaled
Euro 1.8 billion. Ahold invested USD 966
million in the United States, Euro 533
million in Europe, Euro 303 million in
Latin America and Euro 13 million in
Asia. In addition, the company entered
into new capital lease commitments of
Euro 181 million. A total of Euro 700
million was paid for new acquisitions.
Financing
The 1999 acquisitions were primarily
financed from existing credit lines and
short-term facilities. In April 1999,
Ahold Finance U.S.A. issued a bond in
two tranches. The first tranche, with a
principal of USD 500 million and a
maturity of 10 years, has a 6.25%
coupon. The second tranche, with a
principal of USD 500 million and a
maturity of 30 years, has a 6.875%
coupon. The proceeds of this bond were
used to repay the outstanding amount
under the USD 1 billion multi-currency
facility. The remainder was used for
further expansion in southern and central
Europe and Latin America. Interest rates
increased on both the Dutch and US
money markets and debt markets in the
course of 1999. Despite the fact that
most of the loans were agreed at fixed
interest rates, they had a marginally
negative impact on interest expenses.
Impact of currency fluctuations
Exchange rate fluctuations, particularly
between dollar and Euro, impacted Ahold's
consolidated statements. A quarterly
average rate of exchange is used to
determine earnings. For full-year 1999,
the average dollar rate was Euro 0.94
(1998: 0.90). The balance sheet reflects
the exchange rate as of the balance sheet
date. At the end of 1999, the dollar rate
was Euro 0.99 (1998: Euro 0.86). An
overview of exchange rates used in 1999
and 1998 is given on page 55.
Management of currency
and interest rate risks
A significant portion of the assets and
liabilities on Ahold's balance sheets is
denominated in foreign currency, partic
ularly in US dollars. Translation risks as
a result of converting foreign assets and
debt denominated in foreign currencies
on the balance sheet date are not
hedged. Fluctuations in balance sheet
ratios are generally limited. Ahold tends
to use long-term debt in local currency
to finance part of the assets of foreign
operating companies. Ahold uses financial
instruments to manage its foreign exchange
and interest rate exposure. Foreign
exchange contracts are only used to hedge
against currency risks resulting from
purchase commitments or other future
cash flows. Ahold uses derivatives to
hedge interest rate risks, only pertaining
to existing outstanding debt. No financial
instrument is used for speculative
purposes. The company agrees financial
contracts only with a limited number of
institutions of high credit standing and
has instituted a set of authorization
procedures.
Euro
Introduction of the Euro could impact
significantly on Ahold's European store
operations and financial systems. The
company has finalized a comprehensive
project, which maps the consequences
of the introduction of the Euro on infor
mation, technology, store operations,
and distribution. Ahold has also held
intensive discussions with suppliers to
facilitate the transfer to Euro billing
when necessary. At year-end, Ahold's
consolidated balance sheet included
adequate provisions for Euro introduction,
based on management's best assessments.
1999 dividend proposal
At the Annual General Meeting of
Stockholders on May 16, 2000, Ahold
will propose to declare a cash dividend of
Euro 0.49 (1998: Euro 0.38, adjusted
for optional stock dividends) per common
share of NLG 0.50 par value. Euro 0.14
of this amount has already been paid as
interim dividend. The level of the annual
cash dividend is based on a target pay-out
ratio of 40% of the result attributable to
holders of common shares. Stockholders
can choose to receive the 1999 final
dividend of Euro 0.35 in the form of a
pay-out of 2%, charged to the tax-free
additional paid-in capital. This dividend
will be made payable on May 24, 2000.
Holders of cumulative preferred financing
shares will receive a total 1999 dividend
of Euro 12.2 million minus the interim
dividend already paid.
Royal Ahold Annual Report 1999