Ahold anticipates revival through US split
split its discredited US food venture in a bid to increase
efficiency.
The world's fourth largest food retail and food service group announced it will split its profitable US Foodservice operation, which lies at the centre of a 2003 financial scandal.
The move is fuelling speculation that the company is preparing for a major sell-off.
Ahold chief executive told the Financial Times: "The door has been left open.
"We have outlined a strategy and said where we think we can take [US Foodservice]. Once we are there we might take a further step. This opens up strategic options."
This week the company reported third-quarter operating profit of €258 million ($301.9m) compared to €99m during the same period last year. The 2005 amount excludes a €585m after-tax lawsuit payout relating to an accounting scandal.
More than 70 per cent of the company's sales are generated in the US, with the foodservice division bringing in better-than-expected third quarter results.
But the company claims rising fuel costs and food price deflation impacted on sales, and hopes a reorganisation of the American enterprise will bring costs down by $100m over the next three years.
The streamlining and restructuring will produce two separate divisions: Broadline, which makes up 85 per cent of US sales, and Multi Unit, which provides food to large chain restaurants.
The company claims the moves will drive annual net sales growth to at least five per cent over the next three years, and achieve an operating margin about three per cent by 2008.
Multi Unit will be given its own brand identity, and should be brought into profitability within the next two years, the company claims.
It is this separation that speculators presume will produce acquisition targets - but only in the long-term.
"After the disposal of non-core activities Ahold has evolved into a changed company, with comfortable balance sheet ratios," Rabo Securities said in a research note.
"However the bulk of Ahold's operations are in the midst of restructuring, making it likely that 2006 will be another transition year."
The €585m legal pay out settled a US lawsuit with shareholders, compensating them for an overstating of profits by almost €1 billion two years ago.
The remuneration will be paid to shareholders who purchased stock between July 1999 and February 2003 just before the scandal broke.
