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METRO Group achieves distinct rise in sales and earnings in the first nine months of 2003

31.10.2003

METRO Group achieves distinct rise in sales and earnings in the first nine months of 2003

METRO Group bolstered the outlook for the current fiscal year with a successful course of business in the first nine months of 2003. Sales revenues were up 5.8 percent net of currency adjustments and at 4.2 percent after taking account of currency effects to stand at € 37.75 billion. Earnings before interest and taxes on income (EBIT) soared 22.3 percent to reach € 445.0 million.

In the third quarter 2003, METRO Group’s positive development of the first six months continued, even when compared with the strong third quarter of the prior year. Currency-adjusted, sales revenues during the period under review climbed 5.0 percent. When taking account of currency effects they rose 3.6 percent to € 12.8 billion. With a rise in the foreign share to 48.4 percent of total sales revenues in the third quarter, the internationalization process was advanced further. EBIT improved by 12.4 percent to € 211.3 million.

"The course of business during the first nine months and in the third quarter clearly demonstrates that our strategy of a sustained profitable growth is bearing fruit", said Dr. Hans-Joachim Körber, Chairman and CEO of METRO AG. "Against this background we are confirming our forecast for 2003: we will improve the sales revenues net of currency adjustments by at least 5.5 percent. The increase in earnings per share is expected to be in the upper range of the forecast corridor of 6 to 10 percent."

In Germany, sales revenues in the first nine months rose 2.6 percent to € 20.01 billion. On an international level, they climbed 6.0 percent to € 17.74 billion. After currency adjustment, this corresponds to a growth of 9.2 percent. Earnings before interest, taxes, depreciation and amortization (EBITDA) of € 1.4 billion exceeded the prior year reference value by 7.9 percent. Hence, METRO Group once again proved its high operating performance capability. Earnings per share (EPS) during the first nine months of the current year rose appreciably by 7 cents to € 0.24. EPS excluding the lower net investment income was up 13 cents to € 0.30.

METRO Group extended its sales network to 2,339 outlets worldwide at the end of the third quarter 2003. 23 new locations were opened during the past quarter, 20 of them relating to the sales divisions Metro Cash & Carry and Media Markt/Saturn. In total, METRO Group was represented in 27 countries at the end of the quarter under review.

Quarterly Report Q3/9M 2003 here...

Metro Cash & Carry: After market entry in the Ukraine now in 25 countries
In the first nine months of 2003, Metro Cash & Carry increased its sales revenues by 5.1 percent to € 17.89 billion. In Germany, sales revenues went up 7.8 percent to € 4.22 billion, reflecting mainly the take-over of three outlets. Abroad, sales revenues rose 8.1 percent after currency adjustment or 4.3 percent to € 13.67 billion when taking account of currency effects. The most distinct growth was registered by Metro Cash & Carry in Eastern Europe where they reached 8.7 percent before currency adjustments. The sales division further expanded its activities in these growth markets with its market entry in the Ukraine.

EBIT improved by 16.9 percent in the first nine months to € 339.0 million. Capital expenditure was raised by one quarter to € 558.1 million compared with the prior year reference period. At the end of the third quarter, Metro Cash & Carry was represented in 25 countries with 456 outlets.

Real: Results again significantly improved
The Real hypermarket stores succeeded in continuing their positive course of business in the first nine months of the year. Overall, Real’s sales revenues climbed 0.3 percent to € 5.89 billion. In Germany, Real increased its sales volume by 1.3 percent thus strengthening its leading market position in this country. The development of sales in the third quarter, in particular in the nonfood sector, was affected by the extreme temperatures prevailing in July and August. In Poland and Turkey, negative currency effects weighed on the development of sales.

The hypermarket stores clearly improved their results. In the first nine months, Real rose its EBIT by almost 40 percent to € 40.7 million. Under the restructuring program of the Extra sales division, three large Extra stores were integrated into the Real network in the third quarter.

Extra: Accelerated restructuring shows positive effects
As a consequence of the streamlining of their sales network, the Extra supermarkets registered a sales volume of € 2.05 billion during the first nine months of the year which is 1.4 percent less on a period-to-period basis. Like-for-like, revenues remained almost at the same level as the year before. The accelerated restructuring of this sales division has in the meantime resulted in an appreciable stabilization of the business situation at Extra. In the third quarter, 12 Extra supermarkets have been spun off the sales network: five were closed, four were converted into franchise outlets and three were integrated into the Real sales network. At the end of the third quarter, Extra thus operated a total of 476 outlets.

In the course of the restructuring the EBIT of the Extra supermarkets dropped from € -50.5 million to € -57.8 million during the first nine months.

Media Markt/Saturn: Europe’s No. 1 further expands its lead
The Media Markt/Saturn consumer electronics centers once again boosted their sales revenues and result during the first nine months of 2003. Sales revenues rose by 9.8 percent to € 6.92 billion with a clear plus achieved in particular by the foreign outlets. In Western Europe, this sales division succeeded in raising sales revenues by 25 percent. Among others, this is attributable to a consistently pursued expansion of the sales network. The foreign share in sales revenues in the third quarter 2003 for the first time climbed to over 40 percent. The consumer electronics centers further expanded their leadership position not only in Germany but also Europe-wide.

EBIT of this sales division improved substantially by 20.8 percent to € 118.9 million during the first three quarters despite a continued high level of capital expenditure on the expansion of the location network in and outside Germany. At an EBIT increase of almost 30 percent in the third quarter, Media Markt/Saturn managed to improve the positive trend of the first six months even further. With the opening of 14 new stores in the third quarter – of which five in Germany – the number of consumer electronics centers as at 30 September 2003 rose to 415 following 374 at the same date one year earlier.

Praktiker: Continued positive trend in sales and result
The Praktiker home improvement centers continued their positive results trend during the first nine months of 2003 with sales rising yet again. Compared with the prior-year period, sales revenues were boosted by 10.3 percent to € 2.16 billion. The stores in Germany and Easter Europe showed a particularly positive course of business. In the meantime, more than one quarter of the sales revenue is generated outside of Germany. One of the main reasons for gaining a lead over its competitors and winning further market shares was Praktiker’s aggressive price positioning on the German market.
 
EBIT of the DIY centers improved substantially despite the aggressive price campaign and amounted to € 4.6 million in the first nine months following a loss of over € 15 million during the same period one year earlier.

Kaufhof: Sales influenced by record heat
During the summer months, business of Kaufhof Warenhaus AG was affected by the extremely high temperatures which weighed particularly on inner city retailers. The effect mainly concerned textiles sales. The good customer frequency attributable to the longer opening hours was not able to compensate this negative impact. In the first nine months of this year total sales revenues reached a volume of € 2.6 billion which is 2.4 percent below the prior-year reference period. In Belgium, sales in the first three quarters rose by 0.9 percent to € 175 million. The revamped Galeria Inno department stores continued to develop better than those stores that have not yet been adapted to this concept.

EBIT of the Kaufhof department stores in the first nine months stood at € -34.5 million following € -22.0 million during the same period one year earlier. After closing a small store in the third quarter, Kaufhof operated a total of 148 department stores.

Outlook
METRO Group will continue on its path of sustained profitable growth also in the fourth quarter 2003 and expects a successful closure of the ongoing fiscal year. The positive development of business during the first nine months and in the third quarter 2003 confirms the forecast for the overall year: at least 5.5 percent rise in sales before currency effects and an improvement in earnings per share in the upper range of the forecast corridor of 6 to 10 percent.

METRO Group’s decision to discontinue negotiations on the planned divestiture of the retailing real estate bundled under the Asset Immobilienbeteiligungen GmbH & Co. KG (AIB) will not affect the earnings forecast. An acceptable sales price from METRO Group’s point of view which would have brought an adequate profit after consideration of the tax risks and would have had a positive impact on the company’s debt ratios was not offered. Consequently, the Management Board decided to start negotiations with WestLB on the acquisition of a majority stake in AIB – with the objective of consolidating this company with effect from 31 December 2003.

"Consolidation of the real estate represents the best solution for our shareholders, for the rating agencies and thus also for METRO Group", explained Dr. Körber. "With the consolidation we will improve the rating relevant debt ratios."

METRO Group will consistently advance the international expansion and optimization of its business concepts. On 20 October 2003, it was the first major international trading and retailing company to make its market entry in India with the inauguration of a Metro Cash & Carry market in Bangalore. With this move, METRO Group is now represented in 28 countries.

Quarterly Report Q3/9M 2003 here...

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