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METRO Group distinctly accelerates growth

01.08.2006

METRO Group distinctly accelerates growth

In the second quarter of 2006, METRO Group succeeded in clearly stepping up its sales and earnings growth. Group sales rose 7.9 percent to € 14.0 billion. International business continued on its dynamic growth course, at a 13.1 percent expansion of the sales volume. Accordingly, the foreign share in the company’s total sales increased to 56.2 percent in the second quarter, after 53.7 percent in the prior-year period. Overall, METRO Group experienced the most successful quarter in six years.

METRO Group achieved a plus in sales of 8.9 percent in the West European markets against fierce competition. In Eastern Europe, the sales mark was lifted by 19.5 percent and in the Asian/African region even by 20.9 percent. For Germany, METRO Group registers a year-on-year sales increase of 2.0 percent, which is above the industry average.

"In the second quarter of the current fiscal year, we were extremely successful. METRO Group has emphatically attested to its performance potential and dynamic growth by achieving distinct increases in terms of sales and earnings, not only abroad but also in the domestic market", said METRO Group’s CEO, Dr. Hans-Joachim Körber, when presenting the key financials. He added that the FIFA World Cup contributed to a pick-up in domestic business. "METRO Group is favorably positioned. Taking into account the business development so far we are convinced that we will succeed in continuing on our successful growth route."

The METRO Group also recorded distinct increase rates in terms of earnings. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 14.6 percent to € 629 million in the second quarter. EBIT climbed 23.8 percent to € 322 million whilst EBT rose 16.6 percent to € 201 million. The earnings per share (EPS) from continuing operations were improved by 9 cents to € 0.36.

In line with the strategic portfolio optimization, the remaining 40.52 percent stake in Praktiker Bau- und Heimwerker¬märkte Holding AG was divested, yielding an income of € 484 million for METRO AG. The resulting book profit of € 143 million was shown as result from discontinued operations. This led to EPS from discontinued operations of € 0.44.

As per the end of June 2006, METRO Group was represented in 30 countries at 2,203 locations. In the second quarter, 22 stores were newly opened, of which seven by Metro Cash & Carry, 15 by Media Markt and Saturn. The growth dynamics of these two sales divisions were thus clearly stepped up once again. In the reference period of the previous year, they opened a total of 14 new stores.

Double-digit percent growth of Metro Cash & Carry in Eastern Europe and Asia

In the second quarter of 2006, Metro Cash & Carry boosted sales by 7.4 percent in a year-on-year comparison to € 7.4 billion. The international share in this sales volume rose to 80.5 percent.

The sales division again recorded sales increases in the double-digit percent range in Eastern Europe and Asia. Sales were raised by 16.9 percent in Eastern Europe, with the highest growth rates being achieved in Russia, Romania and the Ukraine. In the Asian markets too, especially in China, Metro Cash & Carry convincingly continued on its sustainable growth course and accomplished a 22.5 percent boost in sales. In Western Europe, a 3.5 percent plus in sales was reached. Business proved to be especially gratifying in France and Spain. The sales trend in Germany was slightly recessionary, falling short of the high prior-year level by 0.9 percent.

Metro Cash & Carry succeeded in improving EBIT by 8.2 percent to € 250 million.

The store network was extended by seven locations. At quarter end, the sales division was represented in 28 countries with 554 locations.

Real achieves stabilization in the German market

The sales division Real improved its sales by 2.0 percent to € 2.4 billion. In Germany, the initiatives for securing sales and earnings were reflected in an incipient stabilization of business with sales rising 0.3 percent on a like-for-like basis.

The sales volume of this division increased distinctly in Eastern Europe, namely by 29.3 percent. Aside from newly opened stores, this increase was enhanced by a high like-for-like growth rate in Poland. The course of business at the newly opened stores in Russia and Romania was also pleasant. In line with Real’s intensified activities outside Germany, the share of the international business in the total sales volume of the sales division has risen from 9.2 to 11.6 percent.

EBIT climbed to € 5 million as against € 1 million in the prior-year reference period. The improvement in earnings achieved in Germany was partly compensated by starting costs for the selective expansion of Real in Eastern Europe.

With the recently announced acquisitions of the Polish Géant hypermarkets and the German operations of Wal-Mart the METRO Group emphasizes the strategic importance of its hypermarket business in Germany and abroad. The strengthening of Real’s market presence in Germany and Poland will give METRO Group’s food retailing business further momentum.

In Germany, one store was closed in the second quarter. As per the end of the quarter, the store network comprised 550 locations in Germany and 41 in Eastern Europe.

Media Markt and Saturn accelerate growth further

In the second quarter, Media Markt and Saturn continued their dynamic growth at full speed and achieved double-digit percent growth rates in terms of both sales and earnings. Sales went up 16 percent, to € 3.2 billion. In Eastern Europe, this company group accomplished a boost in sales of 40.6 percent, and in Western Europe of 24.4 percent. Compared to the prior-year reference quarter, the share of sales abroad rose by another 4.0 percent points to 48.8 percent. In Germany, the consumer electronics centers achieved a plus of 7.6 percent and gained further market shares. The FIFA World Cup prompted a pick-up in demand mainly for TV sets.

In line with the highly satisfactory sales trend on a like-for-like basis, EBIT rose 23.7 percent to € 51 million.

Media Markt and Saturn enhanced their expansion strategy in Germany and the other European markets. In total, 15 new stores were newly opened by the company group in the second quarter, thereof six in Germany and nine in other West European countries. The Spanish market was in the focus of expansion with four newly opened centers, followed by Italy with two. As of the middle of the year, the sales network of Media Markt and Saturn thus comprised a total of 583 locations.

Galeria Kaufhof benefits from liberalized store opening times

The Galeria Kaufhof department stores raised their sales volume by 4.8 percent to € 802 million. In Germany, Kaufhof achieved a sales plus of 4.1 percent. The division benefited from the longer store opening times during the FIFA World Cup. In Belgium, the Galeria Inno department stores boosted sales by 13.2 percent.

EBIT improved mainly as a result of the higher sales volume by 18.0 percent to € -39 million.

After a two-year conversion period, the new flagship store at Berlin Alexanderplatz was opened in the second quarter. This is the prototype of the new cosmopolitan format in which Galeria Kaufhof presents itself as a strong, unmistakable lifestyle brand.

Outlook

With the highly satisfactory and successful course of the past quarter, the METRO Group has laid solid foundations for the second half of the fiscal year. It will firmly continue on its road of sustained, profitable growth. The targets for fiscal 2006 remain unchanged. The company adheres to its prediction of an increase in sales by 4 to 6 percent and of 5 to 8 percent in earnings per share. The reference basis is the comparable prior-year gain per share of € 2.47 for the continuing operations before write-downs on deferred tax assets from loss carry-forwards for Real Germany. This outlook does not consider the book profit from the Praktiker transaction nor the acquisitions of the Polish Géant hypermarkets and the German operations of Wal-Mart, which are still subject to approval by the antitrust authorities.

At scheduled capital expenditure of about € 2.1 billion, the METRO Group is determined to consistently continue its international expansion, mainly with Metro Cash & Carry as well as Media Markt and Saturn. Real will advance its selective internationalization strategy in Eastern Europe. At the same time, the sales divisions are bound to improve further their competitive positions in Germany and abroad thanks to their strong concepts and efficient cost structures.

Quarterly Report Q2 2006 pdf (272 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 2,200 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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