Risk factors
The following discussion of risks relating to the
Company should be read carefully when evaluating
its business, its prospects and the forward-looking
statements contained in this Annual Report.
Any of the following risks could have a material adverse
effect on Ahold's financial position, results of operations,
liquidity or could cause actual results to differ materially from
the results contemplated in the forward-looking statements
contained in this Annual Report. The risks described below
are not the only ones the Company is facing. There may be
additional risks that the Company is currently unaware of,
that may be common to most companies or that Ahold's
management now believes are immaterial, but which may
in the future have a material adverse effect on the Company's
financial position, results of operations, liquidity and the
actual outcome of matters referred to in the forward-looking
statements contained in this Annual Report. For additional
information regarding forward-looking statements, see the
"Forward-looking statements notice" included in this
Annual Report.
Risks relating to Ahold's strategy
Ahold might not successfully carry out the strategies for its
food retail and foodservice businesses, or realize expected
cost savings.
As a result of a strategic review of its businesses, the
Company adopted a strategy that includes a realignment of
its portfolio to focus on core retail business in its restructured
continental organizations: the United States and Europe,
the continued roll-out of value repositioning programs and
the reduction of operating costs. Ahold's financial targets are
to achieve sustainable 5 percent retail net sales growth, a
sustainable 5 percent retail operating margin and investment
grade. The Company may encounter difficulties or delays in
implementing its strategic initiatives and may not be able to
achieve these targets. Ahold may also incur unanticipated
costs in implementing its strategy.
Ahold's strategy includes initiatives that are expected to
reduce operating costs by approximately EUR 500 million
by the end of 2009. In addition, the initiatives are expected to
reduce the core costs at the Corporate Center by 50 percent
by the end of 2008. However, the Company may not be able
to reach the targeted levels or receive the expected benefits
of these cost reductions. In connection with the strategy,
Ahold also announced its intention to divest U.S. Foodservice,
as well as the Tops business, and its retail operations in
Poland and Slovakia. The Company also intends to sell its
stake in Jerónimo Martins Retail. If Ahold fails to complete
these divestments within the planned timeframe and on
acceptable terms or otherwise does not successfully carry
out its strategy, this could have a material adverse effect
on the Company's financial position, results of operation
and liquidity.
Risks relating to liquidity
Ahold's substantial level of debt could adversely affect
its business.
Ahold has significantly reduced its debt since 2003.
However, the Company continues to have substantial
indebtedness and its total gross debt as of December 31,
2006 was approximately EUR 6.5 billion. In addition to
the obligations recorded on its balance sheet, Ahold also
has various commitments and contingent liabilities that
may result in significant future cash requirements.
The Company's significant level of debt could adversely
affect its business in a number of ways, including but not
limited to, the following:
because the Company must dedicate a substantial portion
of cash flow from operations to the payment of interest
and principal on its debt, it has less cash available for
other purposes;
Ahold's ability to obtain additional debt financing may
be limited; or
Ahold Annual Report 2006 31
