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METRO Group with solid start into fiscal year 2006

03.05.2006

METRO Group with solid start into fiscal year 2006

METRO Group started into the year 2006 with a good development of sales. In the first quarter, the company achieved total sales of € 13.3 billion. This corresponds to a 4.8 percent growth over the same period last year.

"METRO Group has laid a solid foundation for a successful course of the fiscal year 2006. With 13.2 percent growth, we even managed to further boost the dynamic trend of our international operations," said Dr. Hans-Joachim Körber, Chairman and CEO of the METRO Group. "In Germany, by contrast, we continue to feel the general purchasing restraint. The fact that this year’s Easter business fell into the second quarter had an additional effect. However, we assume that the World Cup and anticipatory effects of the planned increase in value added tax will have a stimulating effect on the retail business in the further course of the year."

In Western Europe, sales climbed by 8.0 percent in a highly competitive environment. In Eastern Europe, METRO Group continued its dynamic growth course. All sales divisions operating in this region contributed to the distinct rise in sales of 20.2 percent. In Asia and Africa, sales soared by 28.7 percent. “Asia has been the strongest growth region for the METRO Group in the first quarter. This confirms our extensive activities on these markets,“ said Dr. Körber. The international share of group sales rose appreciably during the first quarter, namely from 50.7 percent last year to 54.8 percent in Q1 2006. In Germany, sales stood at € 6.0 billion, which is 3.8 percent below the prior-year quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) of the METRO Group came in nearly unchanged at € 423 million following € 424 million in the first quarter 2005. Due to the poor results of Real, EBIT dropped from € 144 million to € 138 million. Group EBT amounted to € 34 million following € 36 million in Q1 2005.

As per 31 March 2006, the METRO Group operated a total of 2,183 locations in 30 countries. 14 new stores were opened in the first quarter, the large majority of them by the growth drivers Metro Cash & Carry as well as Media Markt and Saturn.

Metro Cash & Carry with excellent development of sales and earnings

Year-on-year, Metro Cash & Carry stepped up sales by 8.0 percent to € 6.6 billion in the first quarter 2006. For the first time, the share of international sales of this sales division exceeded the 80 percent mark.

Particularly strong growth in sales was achieved in Eastern Europe and Asia. These two growth regions now account for more than one third of this sales division’s total sales. In Eastern Europe, Metro Cash & Carry generated a plus of 19.0 percent. In Asia and Africa, sales soared 29.8 percent. Business in China was particularly positive. In Western Europe, sales were up 3.0 percent while in Germany the fact that the Easter business fell into the second quarter was the main factor contributing to the 1.8 percent drop in sales.

EBIT of Metro Cash & Carry improved distinctly, namely by 20.6 percent to € 90 million. The store network was extended by three locations, two of them in China. A total of around 40 new cash & carry stores are scheduled to open in 2006. At the end of the first quarter, Metro Cash & Carry operated 547 stores in 28 countries.

Above-average prior-year basis affected Real’s financials

Sales of the Real hypermarkets dropped 6.0 percent to € 2.3 billion compared with the above-average development during the same quarter one year earlier, which was marked by the start of the “New Price Age” campaign. Moreover, the shift of the Easter business into the second quarter and the spin-off of stores also affected Q1 results.

Against this backdrop, sales in Germany receded 8.7 percent, like-for-like 7.4 percent. Real’s business abroad, by contrast, continued to develop positively with sales growing 23.3 percent. Following the market entry into Russia in 2005 and the expansion into Romania in the first quarter 2006, Real is now represented in four Eastern European countries.

The development of earnings reflects the higher start-up costs for the expansion and the negative sales trend in Germany. EBIT came in at € -40 million following € -5 million year-on-year. The store network at the end of the first quarter comprised 551 hypermarkets in Germany and 41 abroad.

Media Markt and Saturn: International share nearing the 50 percent mark

The consumer electronics centers operated by Media Markt and Saturn continued the successful course of business of the past few years and again appreciably extended its market leadership in Europe in the first quarter 2006. The sales division raised year-on-year sales by 8.5 percent to € 3.4 billion. The internationalization was advanced distinctly: the sales division’s international share of business grew from 42.5 percent to 47.6 percent in the first quarter.

In Western Europe, sales soared 20.2 percent, with particularly high growth rates in Spain, The Netherlands and Belgium. In Eastern Europe, sales even increased by 30.2 percent. Sales in Germany dropped slightly by 1.1 percent. The prior-year quarter had been characterized by the highly successful advertising campaign "Germany does not pay VAT today".

This successful course of business reflects in the growth of earnings with appreciable contributions also from the international operations. EBIT rose  16.7 percent coming in at € 64 million. The store network was extended by ten locations to 568 consumer electronics centers. Media Markt and Saturn opened seven stores in Germany alone.

Stabilization in the department store business

Business of the Galeria Kaufhof department stores took a stable course in the first quarter 2006. Sales receded slightly by 0.9 percent to € 814 million; in Germany, by 1.5 percent. Following good results in January and February, business in March slowed down due to the shift of the Easter business into the next quarter and the persistent cold weather.

In Belgium, the Galeria Inno department stores boosted sales by 5.8 percent to € 71 million. This positive trend and the very high customer acceptance in Belgium are also the consequence of the consistent and fast conversion of all Inno department stores to the Galeria concept.

First quarter EBIT of this sales division came in at € -26 million, which is equivalent to a 10.7 percent improvement.

Outlook

The METRO Group will continue its profitable growth also during the remainder of the financial year 2006. International expansion will be pursued consistently with a continued focus on the growth markets in Eastern Europe and Asia. Against the backdrop of the solid development in the first quarter and a satisfactory Easter business, METRO Group continues to expect a rise in sales in the range of 4 to 6 percent for the current year. Moreover, it anticipates a growth in earnings per share of 5 to 8 percent. This is based on the comparable year-on-year profit of € 2.47 for the continuing operations prior to the write-down on deferred tax assets from loss carry-forwards at Real Germany.

In the context of the strategic portfolio optimization, the remaining 40.52 percent stake held in Praktiker Bau- und Heimwerkermärkte Holding AG was divested on 11 April 2006. The proceeds from this transaction amounted to around € 484 million. METRO Group plans to use them to reduce its net debt and for the international expansion of its growth drivers Metro Cash & Carry as well as Media Markt and Saturn. Book profit from the Praktiker transaction will be shown in the second quarter results as earnings from discontinued operations and is not included in the earnings forecast for the fiscal year 2006.

Quarterly Report Q1 2006 pdf (292 KB)

METRO Group is one of the most important international retailing companies. In 2005 the group reached sales of € 55.7 billion. The company has a headcount of about 250,000 employees and operates more than 2,100 outlets in 30 countries. The operating business is performed by the sales brands which operate independently in the market: Metro/Makro Cash & Carry – world market leader in cash & carry wholesale, Real hypermarkets and Extra supermarkets, Media Markt and Saturn – market leader in consumer electronics centers in Europe, and Galeria Kaufhof department stores.

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