00 Ahold ANNUAL REPORT 2002 71
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
debt. Net sales at Disco for the full fiscal 2002 increased 17% to EUR 783 million, compared to fiscal 2001. The
increase was primarily caused by high inflation in Argentina, which in fiscal 2002 amounted to approximately 48% with
respect to food and beverages. Gross profit margin at Disco in fiscal 2002 was negatively affected by decreased
purchasing power in Argentina. The gross profit margin decreased, mainly due to the economic crisis in Argentina, which
forced us to lower prices in order to remain competitive. In addition, Disco received reduced supplier bonuses, as a
percentage of net sales, in fiscal 2002 compared to fiscal 2001 due to fewer store openings and remodelings. In fiscal
2002, Disco started a restructuring initiative to position the company for the changed economic circumstances in
Argentina. Operating income in local currency at Disco in fiscal 2002 was below that in fiscal 2001 mainly due to
lowering prices, and the impact was magnified by the devaluation of the Argentine Peso. Disco's operating expenses
increased in fiscal 2002 compared to fiscal 2001, but decreased as a percentage of net sales in fiscal 2002 compared
to fiscal 2001. The operating expense increase resulted from higher rent expenses related to additional taxes and higher
packaging and transportation costs, which costs were denominated in US dollars. The decrease in operating expenses as
a percentage of net sales in fiscal 2002 was the result of a net sales increase due to inflation.
Net sales at Santa Isabel for the full year in fiscal 2002 increased by 5.9% to EUR 713 million, compared to fiscal 2001.
The increase was due to an effective pricing strategy that lowered prices in order for Santa Isabel to better compete with
the market and to store openings in Peru. The gross profit margin at Santa Isabel decreased in fiscal 2002 compared to
fiscal 2001, mainly due to the new pricing strategy and lower vendor allowances. Santa Isabel recorded an operating loss
for the period prior to its consolidation in July 2002, largely as a result of competition due to overcapacity in the markets
served by Santa Isabel. This operating loss was partly due to an impairment of goodwill of EUR 45 million.
- Fiscal 2001
Our share in the losses from unconsolidated joint ventures and equity investees was EUR 192 million in fiscal 2001
compared to income of EUR 78 million in fiscal 2000, primarily as a result of a loss incurred at DAIH in fiscal 2001,
partially offset by our share in income from our other joint ventures. Net sales at Disco in fiscal 2001 decreased 1.3% to
EUR 2.1 billion, compared to fiscal 2000. The decrease in net sales was due to the deflationary environment and a severe
recession in Argentina. Disco had operating income, stated as a percentage of net sales, of approximately 3.8% in fiscal
2001.
Net sales at Santa Isabel in fiscal 2001 increased 16.3% to EUR 772 million, compared to fiscal 2000. Santa Isabel
incurred a slight operating loss in fiscal 2001.
ICA, Scandinavia
In fiscal 2001, ICA experienced a rise in net sales and improved its operating income compared to fiscal 2000. In Sweden,
ICA improved its performance in fiscal 2001, particularly as a result of increased net sales and improved cost controls in
fiscal 2001 compared to fiscal 2000. In Norway, ICA had a difficult year, mainly as a result of format positioning, tough
competition and trade leakage to Sweden and Denmark due to customers crossing into those countries in search of lower
prices. In fiscal 2001, ICA's operating income improved by EUR 54 million to EUR 195 million. Our share in losses from
unconsolidated joint ventures and equity investees in fiscal 2001 reflected our share in income of EUR 64 million from
ICA, compared to EUR 19 million in fiscal 2000.
JMR, Portugal
In fiscal 2001, JMR net sales increased by 6.4% compared to fiscal 2000. The increase in net sales, which was partly
offset by lower margins, resulted in a higher gross profit in fiscal 2001 compared to fiscal 2000. Due to additional cost
savings, operating expenses were reduced in fiscal 2001 compared to fiscal 2000. The combined effect of higher net
sales and relatively lower operating expenses resulted in higher operating income in fiscal 2001 compared to fiscal 2000.
Our share in losses from unconsolidated joint ventures and equity investees in fiscal 2001 reflected our share in income of
EUR 30 million from JMR, compared to EUR 20 million in fiscal 2000.
CARHCO, Latin America
The Paiz Ahold joint venture increased its net sales in fiscal 2001 compared to fiscal 2000. Gross profit increased in
fiscal 2001 compared to fiscal 2000 largely as a result of changing the product offering by adding higher-profit non-food
items, but was partially offset by increased operating expenses, mainly due to store opening expenses. Operating income at
Paiz Ahold increased in fiscal 2001 compared to fiscal 2000. Our share in the losses from unconsolidated joint ventures
and equity investees in fiscal 2001 included our share in income of EUR 13 million from Paiz Ahold, compared to EUR
13 million in fiscal 2000.
