"These are really terrible numbers. Ahold's results show weak operating performance and cannot be put down to just one-offs," said a trader in London. Analyst Han van Lamoen at FBS called the U.S. retail results "a nasty surprise".
The company wrote down the value of fixed assets in its U.S. retail business and in its South America business. It also took charges for a settlement with insurer AIG Europe.
"I am disappointed because I cannot yet see how U.S. retail is doing on a pure operating basis because Ahold does not specify the charges," said analyst Fernand de Boer at ING.
Ahold's Chief Executive Anders Moberg said many of the main operating companies improved against the same quarter last year and noted a recovery at the troubled U.S. Foodservice unit, which supplies caterers and hotels.
Ahold reiterated 2004 would be a year of transition with net income significantly impacted by further charges for divested South American assets, and a charge for costs related to the ICA retailer in Scandinavia which could also be booked in 2005.
Ryopponen reiterated the 2004 charges could total 1 billion euros and noted the U.S. supermarket environment would not dramatically improve. The Foodservice activities -- at the heart of a profit overstatement scandal -- were on track for an operating profit in 2004.
Ryopponen said Ahold wanted to sell all Spanish activities in one go, amid reports that Spanish retailer Eroski is eyeing the Canary Islands shops amid bids by private equity firms.
Ahold had already reported its second-quarter sales figure fell 4.8 percent to 12.3 billion euros, losing to Metro (XETRA:MEOG.DE - News) the title of the world's third-biggest retailer in turnover terms after Wal-Mart and Carrefour (Paris:CARR.PA - News).
The group is selling assets to cut debt and return to an investment grade rating by the end of 2005 after profit overstatements of nearly 1 billion euros in 2002 pushed it close to the brink.
Rene Dahan, a former executive vice president at Exxon Mobil Corp. (NYSE:XOM - News) who was appointed to the non-executive board in June will become interim chairman. (Additional reporting by Alison Tudor in London)
AMSTERDAM, Aug 26 (Reuters) - Dutch retailer Ahold (Amsterdam:AHLN.AS - News) reported disappointing second-quarter profits on Thursday as its U.S. supermarkets struggled to compete with Wal-Mart and others, and announced the surprise resignation of its chairman. Shares in the owner of Albert Heijn in the Netherlands and Stop & Shop and Giant in the United States hit a 14-month low after it said operating profit fell to 169 million euros ($204.3 million) from 222 million euros last year.
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The net profit increased to 32 million euros from a restated 3 million last year, boosted by lower interest costs.
Ahold had been expected to report an operating profit of some 258.5 million euros, according to an average of 14 analysts polled by Reuters. Its shares fell more than 9 percent to 5.18 euros, the worst performing blue-chip stock in Europe.
Ahold said Chairman Karel Vuursteen, 63, was resigning for personal reasons. The former chief executive of brewer Heineken (Amsterdam:HEIN.AS - News) was appointed chairman in September and was seen as a respected choice to continue to clean up a management plagued by an accounting scandal. However, his resignation was overshadowed by Ahold's poor results.
Ahold blamed unspecified charges and stepped up promotional activities -- codewords for ad spending and price cuts -- as well as strong competition for the decline in U.S. shops where operating income fell 33.2 percent to 207 million euros.
Chief Financial Officer Hannu Ryopponen said integrating the Stop & Shop and Giant Landover chains into one group was taking management time away from day-to-day operations. At the same time competition in the Boston area was particularly fierce with Shaw's Supermarkets Inc.
The No. 2 U.S. grocery chain, Albertsons Inc. (NYSE:ABS - News) acquired Shaw's earlier this year from J Sainsbury Plc (London:SBRY.L - News) of the U.K. for $2.5 billion.
The world's number one retailer Wal-Mart Stores Inc. (NYSE:WMT - News) has also increased its presence in the northeastern U.S. states where Ahold is strong.
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