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METRO Group with strong growth in international business

03.05.2005

METRO Group with strong growth in international business

METRO Group laid a solid foundation for a successful course of business in fiscal 2005. In the first quarter the company achieved total sales of € 13.4 billion. This corresponds to a year-on-year increase of 4.2 percent.

Dr. Hans-Joachim Körber, CEO of the METRO Group: "All in all, we are satisfied with the first quarter 2005. The result supports our forecast for the full fiscal year. In particular our nonfood sales divisions were successful in Germany and abroad. At Extra, we see the first positive restructuring effects." In Germany and Western Europe, the first quarter was affected by a negative calendar effect with three business days less than in the prior year and a high comparable basis from the same quarter last year.

International sales developed very positively gaining 9.1 percent to reach € 6.58 billion. "In particular in Eastern Europe we continued on our dynamic growth path as the largest trading and retailing company operating in the region. All sales divisions represented in the region contributed to the distinctive rise in sales of 21.8 percent," said Körber.

Sales rose 3.0 percent in Western Europe and 5.5 percent in Asia and Africa. In Asia business development was notably satisfactory. Especially in China METRO Group will press ahead expansion. The international share in sales continued to climb during the first quarter, namely from 46.9 percent during the same period last year to 49.0 percent. In Germany, sales remained unchanged compared to the prior-year quarter standing at € 6.84 billion.

Overall, METRO Group raised its earnings before interest, taxes, depreciation and amortization (EBITDA) by 2.9 percent to € 439.8 million. EBITA grew by 1.3 percent to € 147.2 million. The EBITA of the sales divisions, which reflects the operating performance, rose by 4.6 percent to € 91.4 million. Group EBT improved by 8.7 percent to € 39.7 million.

As at 31 March 2005, the METRO Group operated a total of 2,451 locations in 30 countries. Nine new stores were opened during the first quarter.

Metro Cash & Carry particularly strong in Eastern Europe
Compared with the prior-year period, the sales division Metro Cash & Carry raised sales by 3.8 percent to € 6.14 billion during the first quarter. In Germany and Western Europe, business was affected by the lower number of business days as well as the growing trend towards private labels. Moreover, there were no positive special effects like those in the prior year from the anniversary campaign "40 Years Metro Cash & Carry". Consequently, sales receded 5.5 percent in Germany and 2.3 percent in Western Europe.

Strong sales growth was again achieved in Eastern Europe and Asia. In Eastern Europe, Metro Cash & Carry reached a plus of 22.3 percent. In Asia and Africa, sales were up by 12.5 percent. These two important growth regions in the meantime account for over one third of the division’s sales volume.

At € 74.7 million, EBITA of Metro Cash & Carry reached the high prior-year level. The store network was extended by three new locations: one new location was opened in each Germany and China. Another wholesale cash & carry store opened its gates in early 2005 marking the division’s market entry into Serbia and Montenegro. In total, Metro Cash & Carry operated 507 locations in 28 countries at the end of the first quarter.

Real stands its ground in a highly competitive market
The Real hypermarkets defended their good market position in a continued tense sector environment. Sales rose 2.9 percent to € 2.02 billion. In Germany, the sales division achieved a plus in sales of 1.7 percent. Like-for-like sales remained below the prior-year level. The transfer of eight large selling space Extra supermarkets had a positive effect while the lacking three business days had a negative effect on sales. A rise in customer frequency and sales could nevertheless be achieved towards the end of the quarter with the price aggressive marketing campaign focused on branded products launched in late February.

Real continued to develop very positively abroad. In Poland and Turkey sales climbed 13.6 percent to reach € 211.8 million. Midyear 2005 Real will increase its presence in Eastern Europe and open its first hypermarket in Moscow.

The earnings trend reflects the investments into the division’s market positioning as well as the burden from the takeover of Extra locations. EBITA receded from € 13.3 million to € 3.1 million while, simultaneously, capital expenditure rose by € 13.6 million to € 35.6 million. After the integration of eight large selling space Extra supermarkets, the network of locations at the end of the first quarter comprised 314 hypermarkets of which 280 in Germany.

Expedited restructuring shows first signs of success at Extra
Under the comprehensive restructuring of its location portfolio the Extra sales division continued to substantially downsize its store network. 119 stores in Southern and Eastern Germany were hived off effective 1 January 2005. Compared with the prior-year quarter the selling space was reduced by one third. Accordingly, sales dropped 29.9 percent to € 450.5 million during the first three months of the year under review. Like for like, the decline only amounted to 2.0 percent. All this was achieved despite the increasingly competitive situation on the German market and demonstrates that the fundamental restructuring measures are starting to take effect. The first signs of success showed in particular in EBITA which improved from € -17.9 million to € -8.7 million.

As at 31 March 2005, the store network of Extra comprised 306 locations following 458 on the same date last year.

Media Markt and Saturn with continued strong growth
The consumer electronics centers of Media Markt and Saturn continued the successful business trend of the past few years also in the first quarter 2005 and once again substantially extended their market leadership in Europe. The sales divisions raised year-on-year sales by 14.0 percent to € 3.09 billion. In Germany, Media Markt and Saturn achieved a plus in sales of 10.6 percent to € 1.78 billion. Customer frequency was improved once again through price-aggressive marketing campaigns and additional market shares were won in a challenging sector environment. In Western Europe sales climbed 16.0 percent. The sales division recorded a particularly positive business trend, especially in Italy and Spain. In Poland and Hungary, sales were boosted by as much as 43.3 percent or currency-adjusted by 24.6 percent.

This successful business trend also reflects in higher earnings. The sales division’s EBITA climbed by 13.3 percent to a total of € 54.7 million. The store network was extended by four locations – three in Germany and one in Poland – to 507 consumer electronics centers.

Praktiker confirms success course
The Praktiker home improvement and DIY centers continued on their success course in a fiercely competitive business environment and won additional market shares. Year-on-year, the sales division raised its sales by 2.1 percent to € 722.5 million. In Germany sales grew by 1.3 percent and by 2.0 percent on a like-for-like basis. Praktiker continued to focus on its price-aggressive and attention-drawing market positioning strategy. In Eastern Europe, sales rose by 6.1 percent. At the end of the first quarter the share of international business in total sales stood at almost 20 percent.

EBITA improved by 37.9 percent to € -3.2 million. This demonstrates that Praktiker continues to be on the right course, also with regard to the earnings trend.

Department store business in a persisting difficult industry environment
During the first quarter 2005, sales of Kaufhof Warenhaus AG receded 4.3 percent to € 821.8 million. In Germany, sales dropped 5.0 percent. In addition to the negative calendar effect, in particular the poor weather conditions prevailing in February weighed on customer frequency. In Belgium, sales at the Inno department stores improved 5.0 percent to reach € 66.9 million. The positive trend in Belgium is also a consequence of the consistent and fast conversion of all Inno department stores to the Galeria concept.

For the quarter, the sales division reported total EBITA of € -29.2 million following € -25.6 million during the same period last year.

Outlook
METRO Group will continue on its path of profitable growth also during the remainder of the fiscal year 2005 - irrespective of the further trend in consumer spending and the general business activity on the home market. Thanks to its international activities the company is largely independent from the development of individual national markets. International expansion is consistently advanced with the focus remaining on the growth markets in Eastern Europe and Asia.

For the current year, the METRO Group anticipates a rise in sales of 5 to 6 percent and an increase in earnings per share of 8 to 12 percent.

Quarterly Report Q1 2005 pdf (399 KB)

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