Message from the Corporate Executive Board
Dear Shareholders,
We would like to start this report as we did last year: by
expressing our thanks to all of you who have supported
Ahold through this very difficult time. We are truly grateful
to our shareholders, customers and suppliers who stood
by us in 2003 and to our associates who have worked
tirelessly to continue the process of getting our Company
back on track.
Customer, customer, customer
Our "Road to Recovery"
Restoring our financial health
04
Ahold Annual Report 2003
Message from the Corporate Executive Board
While mindful of the past, it is essential that our
Company is firmly focused on the future. A number
of remarkable things - particularly operational and
organizational restructuring - have been accomplished
in a very short time, and this momentum is building
and being sustained. Our future, the return on our
shareholders' investment and the value we bring to
customers, depends upon our undivided focus on
rebuilding the strength of the business. We have
reviewed the opportunities, particularly in the U.S. and
Europe, and revisited our mission. We want to be the
leading food provider in those markets in which we
choose to operate. This mission will be delivered by a
focused Company with common goals and shared
values. At all levels of our Company, we want to "think
customer" and move closer to our customers' needs.
We want to focus on attracting customers and improving
competitiveness in all markets.
The focus is very much on enhancing our customer
offering and boosting our competitiveness by improving
sales growth, decreasing our cost base and building a
sustainable platform for the future.
In 2003, our consolidated net sales were EUR 56.1
billion compared to EUR 62.7 billion in 2002, a decrease
of EUR 6.6 billion, or 10.5%. Although economic
conditions in all of our major trading areas were tough
and competition remained intense, net sales nevertheless
were resilient on an annual basis excluding the impact of
currency exchange rates. Our main retail trade operations,
except Albert Heijn, as well as U.S. Foodservice, showed
net sales increases excluding the impact of currency
exchange rates. The influence of the weak US dollar
throughout 2003 can clearly be seen on our reported
net sales numbers in Euros. Our 2003 net sales would
have increased by 2.7% excluding the impact of currency
exchange rates. Divestments that took place in 2003 only
had a slight impact on net sales.
Our operating income was EUR 718 million in
2003 compared to EUR 239 million in 2002, an
increase of EUR 479 million, or 200.4%. The increase
was mainly due to a more than Euro 1.2 billion drop in
the level of goodwill impairment charges. Excluding the
impairment of goodwill and our 2002 loss on related
party default guarantee, our 2003 operating income
was mainly affected by (i) weaker operating performance
at U.S. Foodservice as a result of primarily the sharp
deterioration in pricing leverage with suppliers and
increased operating costs, (ii) the competitive pressure
on U.S. and European retail operations, and (iii) the loss
on divestments resulting from the sale of various
companies. Operating income was also impacted as
a result of additional audit, legal and consultancy fees,
and other costs primarily in connection with the forensic
accounting and legal investigations and the audit of the
2002 financial statements.
The full operating review can be found in the
section "Operating and Financial Review and Prospects".
The entire Company is engaged in bringing about a
vital transformation: in structure, culture and leadership
style. This change won't happen overnight, but we are
confident that our transformation plan will enable us to
meet our ambitious strategic objectives. We are focused
on four key areas: restoring our financial health;
re-engineering our food retail business; recovering the
value of U.S. Foodservice; and reinforcing accountability,
controls and corporate governance. These objectives fall
within the context of our three-year financing plan and
our "Road to Recovery" strategy, which will bring back
value to our Company.
We are focused on increasing our cash flow by improving
our working capital management and being selective
with our capital expenditures. We intend to raise by the
end of 2005 at least EUR 2.5 billion of proceeds from
the disposition of non-core businesses or underperforming
assets, including those that were completed in 2003
and those already announced. We intend to reduce
indebtedness by the same amount.
In line with our strategic repositioning to optimize
our portfolio and to strengthen our financial position
by reducing debt, we completed in 2003 the divestiture
of our operations in Chile, Peru, Paraguay, Malaysia and
Indonesia, as well as Golden Gallon in the U.S. and
Jamin, De Tuinen and De Walvis in The Netherlands.
We also divested two shopping centers in the Czech
Republic and entered into an agreement to sell two
hypermarkets in Poland.
In early 2004, we sold our Brazilian retail chain
Bomprepo and credit card operation Hipercard, as well
as our interest in CRC Ahold in Thailand and reached
agreement to sell our Argentine operation Disco.
We are in the process of finalizing that transaction.
In addition, we are in the process of divesting BI-LO,
Bruno's and the Tops convenience stores in the U.S.,
our retail businesses in Spain and G. Barbosa in Brazil.
And last but certainly not least our successful
three billion Euro rights issue, which - together with a
new credit facility - has provided us with the financial
stability that we believe we need going forward. On
behalf of our associates, we'd like to thank shareholders
for their vote of confidence in supporting this offering.
