Deutsche B ank Bank C onference Conference

Transcription

1 Deutsche Bank Conference June

2 Forward looking statements This presentation includes forward-looking statements within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. Forward-looking statements describe further expectations, plans, options, results or strategies. Actual outcomes and results may differ materially from those projected depending upon a variety of factors, including but not limited to changes in the general economy or the markets of Delhaize Group, in consumer spending, in inflation or currency exchange rates or in legislation or regulation; competitive factors; adverse determination with respect to claims; inability to timely develop, remodel, integrate or convert stores; and supply or quality control problems with vendors. Additional risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements are described in our most recent annual report or Form 20-F and other filings with the Securities and Exchange Commission. Delhaize Group disclaims any obligation toupdate or revise the information contained in this presentation. ti 2

3 Delhaize Group has clear priorities... Who we are Principles Priorities Preferred food retailer The customer is at the center Put the customer back at the center Differentiated concept Business is local and market share matters Focus on core markets Fresh specialist, Private Label expertise Strengthen our core capabilities and Realize more operating efficiencies improve those needed to succeed Multinational Execute with speed Exercise discipline in capital Strong local identity allocation Respectful of all Stakeholders Use scale to reduce costs Respond to industry dynamics and trends 3

4 ... and a precise action plan Reduce complexity through divestitures of peripheral non-core assets Deleverage Balance Sheet Improve Working Capital Increase capex discipline Stabilise SG&A as % of sales Re-establish Food Lion price competitiveness Finalise divestiture of non-core assets Differentiate t Food Lion Improve Delhaize Belgium s competitiveness Transformation Plan to be implemented Decrease SG&A as % of sales Turnaround Maxi Accelerate growth in core markets (Hannaford, a Alfa Beta) Pursue working capital improvements and capex discipline 4

5 Delhaize Group has leadership positions in the markets where it operates Food Lion Hannaford Market Position (1) Market share (1) # 1 or 2 in 8 DMAs (72% of sales) # 1 or 2 in 7 DMAs (59% of sales) 12.9% 16.5% Belgium #2 25.3% Greece #1 19.5% Serbia #1 13.9% Romania #1 in greater Bucharest 24.9% (1) Source: Nielsen end of Q

6 Delhaize Group benefits from a solid financial structure ( in Millions) Cash position 2011 (1) Free cash flow x ,145 Net debt ,660-45% ,473 S&P s adjusted net debt / EBITDA (2) % (1) Excluding Maxi acquisition (2) Adjusted for a.o. operating leases and post retirement obligations as updated by S&P s rating services in light of the new methodology issued in 2013; 2013 data based on Delhaize s own estimates according to S&P s new methodology 6

7 ... and despite progress made over the last 2 years, we still target further improvements in working capital Core Working Capital (1) Days working capital (2) ( in Millions) US Belgium day of Group core working capital in 2013 = approximately 60 million (1) Inventories + accounts receivables accounts payables (2) Core working capital * 365 / sales (including discontinued operations) 7

8 Successful completion of the Food Lion repositioning is an encouragement to invest further in the brand... 1,113 stores TODAY 6 consecutive quarters of positive comparable store sales growth at Food Lion 36,000 sq ft on average 20,000 SKUs on average Convenient locations Q % Q % Q % Low prices driven by strong Q % 2.2% promotions Local brand, close to communities Q Q (1) 3.9% 3.8% (1) Excluding positive impact from severe winter weather 8

9 since Food Lion commercial performance lags behind its key competitors Average weekly sales per square foot ($) (1) Estimated share of wallet potential (4) Food Lion Food Lion 18% 82% today +5.8% Food Lion Average selected peers (2) 10.2 Average of local peers (3) 26% 74% Spend at food retailer Other grocery spend Our Easy, Fresh & Affordable strategy is meant to increase the number of items per basket (1) Square footage data notes: peer data from Spectra for 17 states with DA operations, Adjusted by industry average to reflect estimated selling sq ft; Food Lion actual selling sq ft (2) Walmart supercenter, Walmart Neighborhood h Market, Bi-Lo, Harris Teeter, Publix (3) Local peers include Bi-Lo, Harris Teeter, Publix, Giant Carlisle and Martins (4) Source: Nielsen Homescan, 52 weeks ending 12/28/13, Cross Outlet Facts, Retail Banner Shopper, Total US 9

10 We have begun the Easy, Fresh & Affordable journey Easy to shop Easy to save Easy to get in and out quickly Easy to find dinner for tonight Consistent quality Fresh in the store and fresh at home Appealing ready to eat meals Large selection in fresh departments Dependable low prices Compelling promotions Simplified commu- nication on pricing Private brands providing excellent value 10

11 ... with a precise roadmap Q End Q Q Q Q /2019 Finalised Phase repositioning i Live tests in stores - 3 Lab stores opened in October Pilot store opened in December 2013 In depth assortment changes - Finetune center store assortment (1) - Larger fresh assortment and Deli selection, test pre-packed meat - Review private label range - Enlarged promotions area Updated d checkout technology - Updated point-of-sales technology - Track customer behavior and drive loyalty - Decreased waiting time at checkout - Training i of staff Roll out of new store concept 77 stores in 2014 Further roll out (1) ~50% change in SKUs generates ~18% net reduction while increasing market relevance 11

12 Easy, Fresh & Affordable will rely on remodeling our Food Lion network for a step change in the shopping experience Market test (77 stores): testing and fine-tuning Easy, Fresh & Affordable Capital expenditures in market tests of $115 million Testing different capital investments and evaluating commercial modules Markets: Wilmington (35 stores, late August) Greenville (42 stores, late November) Main lessons of the rollout will be in late 2014/early

13 In a tough competitive market, Delhaize Belgium maintained market share and customer satisfaction over the last few years Market share (%) #2 position, 25.3% market share Strong Affiliated network Excellent locations Differentiated assortment Large fresh offering Broad private label range Q Customer satisfaction 13

14 Delhaize Belgium plans to re-inforce its differentiated position Great customer satisfaction Launch of 2 pilot stores in April centered around Bien acheter, bien manger ( Buy well, eat well ) New look & feel and customer experience Enhanced Fresh departments (Fruits & Vegetable, Bakery, Butchery, Fish) Efficient checkout, increased self checkout Innovative and more efficient assortment t More visible promotions Sales according to expectations SG&A burden making business case not yet compelling April 2014 H pilot stores 2 additional pilot stores Use learnings from pilots 14

15 ... and to tackle its cost handicap to ensure future profitable expansion Cost per productive hour (Delhaize = 100) Average:77 Proposed Transformation Plan Delhaize Colruyt Carrefour Introduce a lighter and more efficient structure for companyoperated supermarkets Provide more efficient procedures and working methods and place full focus on new technologies Lidl 78 Adapt the wage and labor conditions of all associates Aldi Albert Heijn Stop company operated activities in 14 supermarkets that t have an unsustainable financial performance Source: AT Kearney 15

16 The legal procedure (Law Renault) consists of 3 phases Statement of intention to Workers Council Phase I Information & Consultation Phase I Information & Consultation Phase II Negotiation of social plan, new wage & labour conditions Phase III Implementa- tion of social plan June 11, 2014 Answer questions and assess suggestions Constructive dialogue focused on interest of associates Application of social plan, new wage & labor conditions Phase III Implementation of the social plan 16

17 Delhaize Group has a decisive and practical approach for the years to come and beyond Finalise portfolio optimization Roll out Easy, Fresh & Affordable at Tackle Delhaize Belgium cost Food Lion handicap Roll out New Generation Stores in Test Food Lion Easy, Fresh & Belgium; Transformation Plan to be Affordable implemented Prepare for growth in selected markets Stabilise Maxi Accelerate disciplined expansion in selected markets (Hannaford, Greece) Pressure on Capital Discipline & Working Capital improvements will not be released 17

18 Appendix 18

19 Q highlights by region Market share stable or increasing in all our operations except Belgium U.S. 6th consecutive quarter of positive real growth at both Food Lion and Hannaford (adjusted for Easter timing) Food Lion s momentum supported by Phase repositioning and weather Profit evolution impacted by price investments and costs related to winter storms Belgium Weaker than expected Q1 sales Profitability significantly impacted by investments in prices and promotions in combination with higher SG&A SEE Alfa Beta and Mega Image continued to perform well Serbia performing below our expectations 19

20 Financial results Q ( in Millions) Q1 % Growth Actual Rates Identical Rates Revenues 5,104 5, % 2.8% Gross Margin 24.6% 24.0% (62 bps) (58 bps) SG&A as % of revenues 21.3% 21.3% (1 bps) (3 bps) Underlying Operating Profit / Margin % % (16.5%) (63 bps) (14.2%) (63 bps) Net finance costs Income tax expenses Discontinued operations Group Share in Net Profit Free Cash Flow (48) (45) (4.4%) (1.4%) (20) (22) 12.2% 15.3% (48) (10) 79.8% 80.5% % 63.0% (1) (81.8%) (80.7%) (1) Excluding proceeds of the first tranche of the disposal of Sweetbay, Harveys and Reid s ( 41 million) 20

21 EBITDA ( in Millions) EBITDA Underlying EBITDA At Identical Rates Q Q % Q Q % At Actual Rates Q Q % Q Q % 21

22 Delhaize America - organic revenue growth and comparable store sales growth Delhaize America -0.8% +0.3% Q % +4.1% CSS Calendar Impact Expansion Organic growth 22

23 Delhaize America underlying operating margin Delhaize America Underlying Operating Margin Q % - Q1 margin impacted by: Price investments of around ~70bps (Food Lion Phase 4 & 5, Hannaford) Commodity price increases in meat, Q % 3.6% produce and dairy Costs linked to severe weather conditions Volume growth 23

24 Delhaize Belgium - organic revenue growth and comparable store sales growth Delhaize Belgium -0.8% -0.8% Q % +0.7% CSS Calendar Expansion Organic growth Impact 24

25 Delhaize Belgium underlying operating margin Delhaize Belgium Underlying Operating Margin Q % - Q1 margin impacted by: Sales performance Price investments and promotions (70 bps) Q % 3.1% Supply chain costs Higher SG&A costs (staff costs, remodeling related costs) 25

26 SEE - organic revenue growth and comparable store sales growth Southeastern Europe Q % +3.5% 35% -0.4% -0.5% CSS Calendar Impact Expansion Organic growth 26

27 SEE underlying operating margin Southeastern Europe Underlying Operating Margin Q % - Q1 margin impacted by: Negative sales leverage in Serbia Q % 1.9% Improved procurement conditions 27

28 Free Cash Flow generation ( in Millions) Free Cash Flow evolution EBITDA Changes in core working (1) capital Net payment of interest and taxes Cash capex (2) Other Operating FCF (3) 1st tranche of proceeds from Sweetbay, Harveys and Reid s FCF (1) Including 11 million from discontinued operations (2) Mainly higher bonus paid in the US in 2014 (3) Remaining proceeds amount to 138 million and will be received in Q