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METRO Group Continues on Growth Path

31.10.2006

METRO Group Continues on Growth Path

The METRO Group continued on its growth path in the third quarter 2006. Group sales rose 6.3 percent to € 14.1 billion in a year-on-year comparison. Net of foreign exchange effects, the increase was 6.6 percent, thus exceeding the growth rate achieved in the first half of 2006. International business reigned supreme, reporting a 11.9 percent plus in sales. The share of international business in total sales thus surged to an all-time high of 57.4 percent. Domestic sales of € 6.0 billion virtually attained the prior-year volume.

"In the third quarter, we continued our growth overall and expanded further in important areas", said the Chairman of the Management Board of METRO Group, Dr. Hans-Joachim Körber, when presenting the key financials. "The internationalization of the METRO Group is the guarantor for an unabated, dynamic high rate of growth. This is demonstrated by the course of business experienced in the past three months. The business trend so far allows us to corroborate the growth forecast we publicized at the beginning of the year, concretizing it from a range of 4 to 6 percent to around 6 percent".

The METRO Group succeeded in stepping up its growth dynamics even further in the challenging West European markets where the company achieved a plus in sales of 9.2 percent in the third quarter. In Eastern Europe, net sales rose as much as 15.5 percent, net of currency effects even 16.6 percent. In the Asia/Africa region, METRO Group succeeded in boosting further the growth in sales accomplished in the first half of the year. For the third quarter, the company reported a 17.9 percent plus in sales in this region (net of currency effects: 21.7 percent).

In the domestic market, sales almost reached the prior-year level at € 6.0 billion. Restrained business activity under the influence of the weather in July was compensated for by a pick-up in the further course of the quarter.

The generally positive business trend in the third quarter is reflected in the earnings level. In Q3 2006 EBITDA was €574 million after €553 million in Q3 2005. Divisional EBIT increased by 9.7% from €236 million to €259 million. EBIT of METRO Group rose from €269 million to €281 million. Earnings per share (EPS) from continuing operations of € 0.25 came in below the prior-year value of € 0.36. The higher level in the third quarter 2005 was attributable to the extraordinary effect exerted by the divestment of shares in the Payback operator Loyalty Partner.

As per the end of September 2006, the METRO Group’s sales divisions were represented in 30 countries at 2,219 locations. In the period under review, 16 new stores were opened, thereof seven each by Metro Cash & Carry as well as Media Markt and Saturn.

Sustainable growth of Metro Cash & Carry in international business

Metro Cash & Carry once again outperformed the already high prior-year level and lifted sales by 6.2 percent in the third quarter 2006, to € 7.3 billion. International business turned out to be the strongest growth driver, achieving a rise in its share in total sales to 81.5 percent.

Metro Cash & Carry continued to secure double-digit percent growth in Eastern Europe and Asia. In Eastern Europe, sales rose 13.1 percent. The steepest growth rates were reported by Russia, Romania and the Ukraine. In the Asian markets, too, and China in particular, the sales division emphasized its sustainable growth course, attaining a 19.6-percent increase in sales.

In the West European market, which is subject to the fiercest competition, Metro Cash & Carry achieved a 3.1-percent plus in the third quarter. Business in France and Spain experienced an especially dynamic development. In Germany, sales were marked by a slight recession of -1.1 percent.

Metro Cash & Carry’s EBIT rose 9.7 percent to € 186 million. At the end of the quarter, Metro Cash & Carry was represented in 28 countries with
561 wholesale stores.

Real pushes international business – Further stabilization in Germany

Sales of the Real sales division increased by 1.2 percent to € 2.4 billion. The company experienced a highly dynamic development in Eastern Europe, reporting a plus in sales of 24.4 percent. The newly opened stores in Russia and Romania contributed to this growth. In line with the expanding international activities of this sales division, the share of the foreign business in the total sales volume rose from 10.0 to 12.3 percent.

In Germany, Real achieved a sales volume of € 2.1 billion, which was like-for-like 0.5 percent below the prior-year level. All in all, the course of business experienced by this sales division bears evidence to the fact that its domestic business has stabilized further. The business trend was more positive in the past three months than in the first half of 2006.

With the takeover of the hypermarket chain Géant in Poland and of Wal-Mart Germany in July 2006, the METRO Group took an important step in strengthening the market position of Real. The two acquisitions are bound to entail substantial synergies. The consolidation of the transactions, which were approved by the regulatory authorities without reservation, is expected to take place after the closing of the transaction in the course of the fourth quarter 2006.

Real’s EBIT stood at € -41 million compared to € -32 million in the previous year. Whereas the result of Real Germany stabilized at the prior-year level, the starting losses in connection with the international expansion rose, as anticipated. As per quarter end, Real’s sales network comprised 591 locations, thereof 548 in Germany and 43 in Eastern Europe.

Media Markt and Saturn continue to step up their growth dynamics

Compared to the first half of 2006, Media Markt and Saturn once again accelerated their growth rate. In the third quarter, sales figures climbed
13.0 percent to € 3.4 billion. Although business in this sector was marked by recession in Germany, the group succeeded in increasing its overall sales volume by 1.9 percent, thus raising its market share further.

In international business, Media Markt and Saturn continued their dynamic development, reporting high double-digit percent growth rates. In Western Europe, a significant plus in sales of 24.8 percent was achieved while sales in Eastern Europe were lifted by 33.4 percent. Especially in Spain, Italy, Belgium, the Netherlands and Poland, distinct sales increases were accomplished.

The share of the international business in total sales of Media Markt and Saturn exceeded the 50-percent mark for the first time in the company’s history. The sales division secured 51.4 percent of its sales volume outside Germany. In September 2006, the first Media Markt was opened in Sweden, moreover the company will enter the Russian market still this year.

Particularly thanks to strong international business, EBIT were lifted appreciably, by 20.0 percent to € 120 million. As per quarter end, the company’s store network comprised a total of 590 consumer electronics centers.

On 25 October 2006, the Media-Saturn group of companies opened its 600th electronics center in Europe - the Media Markt in Gothenburg. This means that 2006 stands out as the year with the strongest growth so far in the history of the sales division.

Galeria Kaufhof experiencing difficult start of the third quarter

Sales of the Galeria Kaufhof department stores in the third quarter remained slightly (0.3 percent) below the prior-year level at € 830 million. This was mainly due to a restrained course of business in the textile sector in the wake of the hotter-than-normal month of July. In Belgium, sales rose 5.3 percent.

In parallel with the subdued sales trend, EBIT fell from € -2 million to € -7 million. The department store network comprised 142 locations as per the end of the quarter under review, 127 of them in Germany and 15 in Belgium.

Outlook

The METRO Group is set to continue on its profitable growth path. Against the backdrop of the course of business experienced so far, the company anticipates an increase in sales by around 6 percent for the full fiscal year. With respect to earnings per share (EPS), forecasts continue to target a 5 to 8 percent rise. This prediction is based on the comparable prior-year figure of € 2.47.

Based on expected investments of around € 2.1 billion, international expansion and optimization of the existent sales network will be advanced further. Particularly Metro Cash & Carry as well as Media Markt and Saturn are bound to continue their successful internationalization strategy. Real will pursue its targeted expansion in Eastern Europe while at the same time distinctly strengthening its market position through integration of the acquisitions Géant in Poland and Wal-Mart in Germany.

Quarterly Report Q3 2006 pdf (266 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 performance capacity of the METRO Group is based on the strength of its 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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