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METRO Group maintains its growth course

22.03.2006

METRO Group maintains its growth course

• Sales in the fiscal year 2005 up 4.2 percent to € 55.7 billion
• International business growing strongly by 10.5 percent to € 29.8 bil-lion
• Business in Eastern Europe grew by more than 20 percent regarding sales and by over 30 percent in terms of EBIT
• Share of foreign business in group sales rose to 53 percent and in EBIT to 70 percent
• Earnings per share from continued operations before write-downs on deferred tax assets up 6.5 percent
• METRO Group expects a growth in sales of 4 to 6 percent and a rise in earnings per share between 5 and 8 percent for 2006

Overall, the METRO Group looks back to a successful fiscal year 2005. Group sales - excluding Praktiker - increased 4.2 percent to € 55.7 billion. Abroad, the company distinctly raised its sales, i.e. by 10.5 percent to € 29.8 billion. At home, in contrast, sales dropped 2.2 percent to € 25.9 billion as a consequence of a sustained consumer restraint. The share of foreign business in group sales rose to a new record high of 53.4 percent.

"Overall, the METRO Group looks back to a successful fiscal year 2005. The internationalization of our business activities pursued during the past few years is bearing fruit," said Dr. Hans-Joachim Körber, Chairman of the Management Board and CEO of the METRO Group, at the presentation of the financial statements. "More than half of group sales in 2005 and over two thirds of our profit origina te from our activities abroad. In Germany, too, we are well-positioned in a highly competitive market. Only the development of Real in Germany is disappointing. The METRO Group benefits from its strong presence in the promising markets of Eastern Europe and Asia with double-digit growth rates. However, we were also successful in the mature markets of Western Europe. We will continue to drive our internationalization with the market entries into Bosnia, Sweden and Pakistan."

Earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 3.3 percent to € 2.94 billion. At € 1.7 billion, earnings before interest and taxes rose around 0.8 percent over the previous year’s level. In this context, a significant rise in earnings abroad of 17.3 percent to € 1.2 billion contrasted with a distinct slump in earnings at home of 28.4 percent to € 535 million, which mainly resulted from the negative business trend in food retail. With the exception of Real all sales divisions were able to improve their EBIT.

Earnings per share from continued operations, i.e. excluding Praktiker, amounted to € 1.54. Adjusted by write-downs on deferred tax assets for loss-carry forwards of Real Germany, the EPS stood at € 2.47. This corresponds to a 6.5 percent rise over the previous year value of € 2.32. The target for the earnings per share, which was revised during the year 2005, was thus achieved.

The Management Board and Supervisory Board will recommend to the Annual General Meeting to pay a unchanged dividend of € 1.02 per share of common stock and of € 1.122 per share of preferred stock.

The METRO Group again attained a positive economic value added (EVA) in fiscal 2005. It came up to € 305 million following € 318 million in 2004. With the exception of Real, each sales division posted a higher EVA in 2005 than in the previous year. Despite the development at Real, the return on capital employed reached the prior-year level of 8 percent.

Investments of the METRO Group totaled € 2.1 billion in the 2005 fiscal year, which is nearly € 400 million higher than in 2004. These funds were primarily used to driving the international expansion of Metro Cash & Carry as well as Media Markt and Saturn.

Due to the expansion activities, total assets rose by € 415 million to € 28.8 billion in the fiscal year 2005. The equity ratio of the METRO Group improved significantly from 17.1 percent to 18.5 percent.

As a result of the METRO Group’s dynamic expansion also the number of employees climbed further. On an annual average, the METRO Group had a headcount of nearly 247,000 employees. Translated into full-time equivalents, the number of employees rose by more than 12,000, or 6.2 percent, to over 205,000. In parallel, the company further increased its already high training quota in Germany from 7.9 percent in the previous year to 8.3 during the year under review.

Performance of the sales divisions

Metro Cash & Carry records strong growth in international business

During the reporting year 2005 the sales division Metro Cash & Carry vehemently underscored its position as an important growth driver within the METRO Group. It raised sales by 6.2 percent to € 28.1 billion. Abroad, Metro Cash & Carry boosted sales by 8.5 percent to € 22.3 billion. The sales division achieved particularly strong sales increases in Eastern Europe with a plus of 21.9 percent. Despite higher start-up losses and increased investments, EBIT rose 5.1 percent to over one billion euro. These figures reflect the strong earnings potential and operating performance of Metro Cash & Carry.

Real with distinct losses at home

During the fiscal year under review the Real sales division suffered in Germany a decline in sales and a strong slump in earnings. The sales of Real including Extra receded 7.5 percent to a total of € 9.9 billion. The foreign sales of Real developed positively with sales up 16.4 percent. In Germany, sales dropped 9.5 percent - or 4 percent on a like-for-like basis - below the previous year’s level. This drop in sales resulted from the massive streamlining of the Extra retail outlet chain by 156 Extra supermarkets, on the one hand. On the other hand it is also a reflection of the fierce competition in the German food retail sector as well as the distinct reticence and price sensitivity of consumers. Moreover, the sales losses are directly related to the quality incidents at two Real hypermarkets, which occurred last year. Real posted an EBIT of € -11.7 million for 2005, following € 135.5 million in 2004.

Media Markt and Saturn continue on success course posting strong growth

Media Markt and Saturn continued the successful course of business recorded during recent years also in 2005 and again expanded its market leading position in Europe. The division raised total sales by 9 percent to € 13.3 billion. In a domestic market characterized by consumer restraint, sales climbed 2.6 percent to € 7.2 billion. Abroad, sales soared 17.8 percent to € 6.1 billion. EBIT rose by 12.8 percent to € 509.8 million, with earnings growing on both the domestic and the foreign consumer electronics markets. The momentum of EBIT development that was achieved despite of considerable expansion activities demonstrates the distinct performance and earnings strength of Media Markt and Saturn.

Kaufhof department stores stand their ground in a challenging market environment

The negative macroeconomic environment and the sustained reticence of consumers in Germany decisively shaped business of the Galeria Kaufhof department stores, which mainly operate on the German market. Sales reached a volume of € 3.6 billion, which is 5.1 percent lower than the year-earlier value, which had been positively influenced by the campaign organized on the occasion of the company’s 125th anniversary. The Galeria Inno department stores in Belgium raised their sales by 8 percent to € 277 million. In the course of further optimized cost structures, EBIT of Galeria Kaufhof stood at € 69.2 million at the close of 2005 following € 56.8 million one year earlier. This corresponds to an increase of 21.8 percent.

Outlook

For the current year we strive for an increase in sales between 4 and 6 percent. The METRO Group will continue to pursue its dynamic growth course abroad. In Germany the business forecast for 2006 is characterized by cautious optimism.

In terms of earnings per share, the METRO Group aims at an improvement in the range of 5 to 8 percent. This outlook does not consider any material income from investments and assumes a stabilization of Real’s business in Germany.