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METRO Group Sales Up 3.9 Percent in the First Half Year

02.08.2005

METRO Group Sales Up 3.9 Percent in the First Half Year

Düsseldorf, 2 August 2005 – In the first half of fiscal 2005, the METRO Group lifted sales by 3.9 percent to € 27.24 billion. Strong impulses were again emanating from the international business which distinctly boosted sales by 9.5 percent, to € 13.76 billion. The strongest growth was reported from Eastern Europe where sales surged 22.3 percent. In Germany, by contrast, the discussion about parliamentary elections and the potential increasing of VAT once again fueled consumer confusion. This uncertainty depressed business activity in an already difficult market environment.

The CEO of METRO Group, Dr. Hans-Joachim Körber, said: "The results of METRO Group in the first half year demonstrate one thing above all: we hold the right course with our growth drivers. International business, mainly in Eastern Europe, has again taken an extremely gratifying course. Our two most important sales divisions Metro Cash & Carry as well as Media Markt and Saturn, accounting for more than 70 percent of the group‘s sales, are looking back on successful six months. This also holds true for Praktiker, having extended further their market shares in a sector environment characterized by extraordinarily intense competition. On the other hand, we are not satisfied with the course of business at Real."

Earnings before interest, taxes, depreciation and amortization (EBITDA) were lifted by 2.2 percent by the METRO Group in the first half of the fiscal year, to € 1.06 billion. EBITA of € 463.1 million remained at the prior-year level. EBT rose 10.1 percent to € 267.0 million, earnings per share (EPS) by 2 cents to € 0.47.

In the second quarter the sales of the METRO Group climbed 3.6 percent to € 13.83 billion. Outside Germany the increase amounted to 9.9 percent. "For the first time distinctly more than half of our total sales came in from abroad, at a share of 52 percent. Moreover, the international business made an above average contribution to the result. Today, the METRO Group is reaping the benefits from the consistent implementation of our internationalization strategy which we launched years ago", commented Dr. Körber.

The group raised EBITDA in the second quarter by 1.7 percent to € 617.1 million. EBITA fell slightly, by 1.4 percent to € 315.9 million. EBT rose 10.3 percent to € 227.3 million.

As at the end of June 2005, the METRO Group was represented at 2,445 locations worldwide. In the second quarter, 18 locations were newly opened, 14 of them by the sales divisions Metro Cash & Carry as well as Media Markt and Saturn.

Metro Cash & Carry continues its growth course in Germany and abroad

In the second quarter 2005, Metro Cash & Carry stepped up sales by 7.0 percent to € 6.89 billion compared with a year earlier. The sales division of METRO Group with the highest sales volume was thus able to consistently continue the growth course of past years on a sustained basis. The East European business again made an above-average contribution. In that region, sales sprang up 24.9 percent to € 2.11 billion. In particular in Russia , the Ukraine, Bulgaria and Romania the course of business was very positive.

In Germany, the plus in sales reached 2.4 percent. This means that Metro Cash & Carry clearly outperformed its business environment. In Western Europe the sales division achieved increases in sales especially in France, Italy and Spain. The business was affected by unfavorable market trends specifically in Great Britain and the Netherlands. In total, sales in Western Europe fell 0.7 percent to € 3.08 billion. In Asia and Africa, Metro Cash & Carry raised sales in the second quarter by 8.5 percent to € 248.1 million. In total, the international share in the sales of this division rose from 77.9 to 78.9 percent.

The sales network was extended by four locations – two stores in the Ukraine and one store each in Spain and Russia. Investments in international expansion and modernization of the sales network were increased in the second quarter 2005 to € 195.7 million. This means that they were 55.1 percent higher in year-on-year comparison.

EBITA climbed 6.3 percent to € 230.7 million which bears evidence to the high earnings potential of this sales division.

Weak second quarter at Real weighs on food retail result ¹

In the second quarter, sales of Real and Extra dropped 10.0 percent to € 2.37 billion. This trend is also reflected in the divestiture of 140 locations. On a like-for-like basis, sales fell by 5.6 percent. In Germany, sales decreased by 11.7 percent to € 2.15 billion, like-for-like by 6.9 percent.

At Real the course of business was not satisfactory. Following a positive start of the branded article campaign "The new price time" in February and March 2005, the need for optimizing the implementation of this campaign became apparent in the second quarter. With the restructuring of the Real Management which took place in June together with additional investments, METRO Group is driving the strengthening of this sales brand. In particular, the strategy of a more distinct market positioning is now being implemented much more consistently.

In Poland and Turkey, Real's sales volume grew 11.1 percent to € 217.2 million. On 28 July 2005, the sales brand opened its first hypermarket in Moscow. Another two stores are due to be opened this year in Russia. Moreover, Real is planning the market entry to Romania.

The EBITA of food retail shrank, from € 39.4 million to € 0.5 million, due to expenditures on behalf of stabilization of customer frequency and retail branding at Real.

Investments in the domestic store network and expansion abroad were stepped up by 23.7 percent to € 46.3 million in the second quarter.

¹ After virtually completing the refocusing of the Extra outlet chain and comprehensive interlinking of Real and Extra, the METRO Group will in future regularly report on the two retail brands as one reporting unit.

Media Markt and Saturn outdistance their competitors

In the second quarter, Media Markt and Saturn were strengthening further their position as European market leaders in consumer electronics centers and again proved to be significant growth drivers of the METRO Group. They pushed sales by 6.7 percent to € 2.76 billion compared to an already very high prior-year level.

Sales in Western Europe rose by 14.3 percent to € 1.08 billion. Particularly Spain, Italy, Belgium and the Netherlands took a very positive course. In Eastern Europe, sales rose by 20.1 percent to € 153.3 million. In total, the international share in sales grew further from 41.5 to 44.8 percent. In Germany, Media Markt and Saturn again succeeded in outdistancing their competitors in the sector and achieved an increase in sales by 0.7 percent, to € 1.52 billion. In Germany, in particular, the reference benchmark was already very high as a result of the anniversary and European football championship campaigns in the respective prior-year quarter.

Thanks to increases in earnings contribution by the international organization, EBITA went 20 percent up to € 41.6 million. At capital expenditure of € 54.6 million for Europe-wide expansion, Media Markt and Saturn retained the high level of the prior-year quarter. In Belgium and Germany three consumer electronics centers each, in the Netherlands two and in Austria and France one location each were newly opened.

Praktiker reports appreciable boost in earnings

The Praktiker home improvement and DIY stores extended their market position in Germany in the face of persistently fierce competition. At the same time, the international business recorded an extremely positive trend. In the second quarter, total sales rose by 1.6 percent to € 831.8 million.

In Germany, sales receded 2.4 percent to € 618.8 million. This is principally attributable to the partial postponement of the 20-percent rebate summer campaign into the third quarter. Net of this effect, the sales trend was positive. In Eastern Europe, sales climbed by 16.3 percent to € 197.0 million. One Praktiker store each was opened in Bulgaria and Romania, and this once again strengthened the leadership position in the fast growing East European markets. At a share of 25.6 percent, countries outside Germany contributed for the first time more than one fourth to total sales.

The successful repositioning of Praktiker is also expressed in the sustainable improvement in earnings contributions. EBITA sprang up 22.6 percent, to € 49.9 million.

Department store business under the impact of imminent parliamentary elections in Germany

In the second quarter, sales at the Kaufhof department stores decreased by 4.6 percent to € 764.9 million. In Germany, sales receded by 5.7 percent to € 706.0 million, on a like-for-like basis by 5.0 percent. The announced elections to the German parliament have heightened the concerns of consumers and intensified the general reluctance to spend money. This trend proved to exert a sensible effect on the department store business in Germany.

In Belgium, sales rose by 11.1 percent to € 58.9 million.

Total EBITA improved by 11.1 percent, to € -47.7 percent.

Outlook

The METRO Group is continuing on its path of sustained profitable growth. The targets for fiscal 2005 remain attainable. The company is anticipating a growth of 5 to 6 percent in terms of sales and of 8 to 12 percent in the earnings per share.

Having earmarked capital for expenditure of around € 1.9 billion, the METRO Group is determined to continue its international expansion, above all with Metro Cash & Carry as well as Media Markt and Saturn. Real and Praktiker will advance their selective internationalization in Eastern Europe. Simultaneously, the sales divisions will further strengthen their competitive positions in Germany and abroad thanks to their powerful concepts and efficient cost structures.

Quarterly Report Q2 2005 pdf (100KB)

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