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METRO Group: Successful Business in Germany and Abroad

30.07.2004

METRO Group: Successful Business in Germany and Abroad

During the first six months of fiscal 2004, METRO Group continued its stable growth unabatedly. Compared with the same period last year, the company increased sales by 5.1 percent to € 26.2 billion. Net of currency effects, growth stood at 6.2 percent. Earnings before taxes on income (EBT) rose € 57.5 million to close at € 239.7 million.

During the second quarter, the company achieved sales of € 13.35 billion and therefore was able to outperform the high prior-year level by 4.2 percent or, net of currency effects, by 5.1 percent. EBT improved by € 23.7 million to € 204.3 million.

"Overall, METRO Group is looking back on a successful first half year. In a continued difficult economic environment we succeeded in winning further market shares, in particular in the non-food range", said the company’s CEO, Dr. Hans-Joachim Körber, at the presentation of the business figures. "Therefore, we confirm our forecast for fiscal 2004."

In Germany, sales during the first half year advanced 1.9 percent to come in at € 13.65 billion. Abroad, sales increased 8.9 percent to reach € 12.57 billion; net of currency effects, this corresponds to an 11.4 percent rise. "This positive trend above all reflects the success of our consistently implemented internationalization strategy", said Körber. "We are particularly successful with our business activities in Eastern Europe where we were able to step up sales by 18.2 percent net of currency effects during the first two quarters. Also our business in the important growth market China developed very positively."

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first six months stand at € 1.03 billion which is € 162.9 million up from the same period last year. EBITA rose by € 93.2 million to € 463.0 million. This attests once again to the high operating performance capability of the METRO Group. Earnings per share (EPS) climbed appreciably, namely from € 0.36 to € 0.44.

METRO Group extended its store network to 2,386 locations worldwide. During the second quarter, 24 new stores were opened of which 19 by the sales divisions Metro Cash & Carry as well as Media Markt and Saturn.

Metro Cash & Carry: Strong growth on the international markets

Year-on-year, Metro Cash & Carry stepped up sales by 5.1 percent to € 12.36 billion during the first two quarters 2004. Net of currency effects sales improved by 6.7 percent.

Following a strong growth in domestic sales during the first three months, weak business of customers from the catering industry attributable to the poor weather led to a 4.4 percent decline in sales in Germany during the second quarter.

Abroad, the sales division achieved a distinct plus. In Western Europe, first half-year sales rose by 3.4 percent. In Eastern Europe, sales advanced 12.1 percent or, net of currency effects, 18.2 percent. In Asia and Africa, sales increased 15.2 percent with an upward tendency. During the second quarter, the volume of sales in this region surged 22.9 percent or, like-for-like, 7.3 percent. The business trend was particularly favorable in China.

EBITA during the first two quarters rose 8.0 percent to come in at € 290.5 million. With these results, Metro Cash & Carry once again demonstrated its high earnings capacity.

Real: Stable business trend

The Real hypermarkets closed the first six months at the same level as last year. At € 3.94 billion, sales were only 0.1 percent below the high prior-year sales volume. The adverse weather conditions in Germany had a negative impact on the food business, also at Real. While sales in Germany were slightly weaker coming in at -0.2 percent, they rose 1.2 percent in Poland and Turkey. Net of currency effects, sales in these two countries grew by 12.4 percent.

EBITA for the first half of 2004 improved by 5.5 percent to € 64.3 million. With the takeover of five large selling space Extra stores, the store network was extended to a total of 294 locations.


Extra: Restructuring consistently continued

Business development at Extra in the first half year was characterized by the consistently continued restructuring. As a consequence of these activities, in particularly due to the discontinuation of 15 locations, sales declined by 6.6 percent to € 1.30 billion. Like-for-like, sales receded by 2.1 percent.

EBITA during the first six months were down 5.5 percent from the prior-year value and stood at € -29.7 million. During the second quarter, EBITA reached the prior-year level. Following the transfer and/or closure of seven supermarkets, the Extra store network comprised a total of 452 locations at the end of second quarter 2004.

Media Markt and Saturn: Excellent business trend

The Media Markt and Saturn consumer electronics centers managed to once again outperform the successful business trend of the prior years during the first half of 2004 and achieved an excellent result. They succeeded in appreciably consolidating their leadership position on the European market.

Compared with the prior-year period, sales climbed 17.7 percent to € 5.30 billion with an upward tendency during the second quarter. In Germany, sales during the first half of 2004 improved by 14.4 percent whereas the development of the overall consumer electronics industry continued to be characterized by a weak demand. Business was positively influenced by intensive advertising campaigns on the occasion of the 25th anniversary of Media Markt and the European Football Championship. In Western Europe, the sales volume rose by 23.1 percent and in Eastern Europe by 19.9 percent.

Against the background of continued high investments into the extension of the store network in Germany and abroad, the sales division’s EBITA improved by 47.9 percent to € 82.2 million during the first two quarters. Including the seven outlets taken over from Fröschl, the network grew by 22 stores to a total of 458 consumer electronics centers.

Praktiker: Continued positive development of business

The Praktiker home improvement and DIY centers continued their appreciable upward trend of the past two years also during the first six months of 2004. They stepped up sales by 3.4 percent to € 1.53 billion. In Germany, sales climbed 1.8 percent. Second-quarter business was particularly successful in the domestic market with like-for-like sales growing 6.4 percent. In a sustained difficult industry environment, Praktiker managed to win further market shares.

In Eastern Europe, sales during the first half of 2004 rose 11.2 percent. Business developed particularly well in Poland, Hungary and Greece.

During the first two quarters EBITA improved by 67.4 percent to € 35.5 million against the background of this repeated growth in sales.

Kaufhof: General restraint in consumer spending affects business trend

During the first six months of the year, sales of Kaufhof Warenhaus AG receded by 3.8 percent to € 1.66 billion. In Germany, sales declined by 4.2 percent. In addition to the continued general restraint in consumer spending, in particular lacking impulses from the summer business affected sales in the textiles range. In an atmosphere of continued aggressive price competition, however, Kaufhof managed to stand its ground in competition.

In Belgium, sales rose 0.9 percent and like-for-like 2.4 percent. The converted Galeria Inno department stores continued to develop positively.
The generally negative sales trend and the strong price orientation of consumers also affected the results of the department stores: EBITA for the first two quarters stood at € -79.4 million, following € -35.7 million during the prior-year period.

Outlook

METRO Group will continue on its path of sustained profitable growth during the further course of the fiscal year 2004. The overall positive course of business during the first six months confirms the company’s forecast: For the fiscal year 2004 METRO Group continues to anticipate a growth in sales of at least 6 percent before currency effects. With regard to the termination of scheduled goodwill amortization from 2004 on, an EPS growth of 6 to 10 percent is targeted.

With a capital expenditure volume of around € 1.8 billion, METRO Group will continue to advance its international expansion, mainly with Metro Cash & Carry as well as Media Markt and Saturn. At the same time, the sales divisions will further extend their market positions.



Note: In this half year and quarterly report the new IFRS 3 (Business Combinations) as well as the amendments of IAS 36 (Impairment of Assets) and IAS 38 (Intangible Assets) issued by the IASB in early 2004 were applied. In this course scheduled goodwill amortization is terminated since first quarter 2004. There was no indication for an impairment of goodwill in second quarter 2004.

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