Financial Highlights Second Quarter 2008
· Revenue growth of +2.6% at identical exchange rates
· Comparable store sales growth of +1.9% in the U.S. and +0.7% in Belgium
· Strong double-digit revenue growth in Greece (+14.5%) and in Indonesia and Romania (+32.1% at identical exchange rates)
· Group share in net profit increase of +56.8% at identical exchange rates due primarily to prior year financial charges

Financial Highlights First Half 2008

· Revenue growth of +3.7% at identical exchange rates
· Organic revenue growth of +4.1%
· Comparable store sales growth of +2.2% in the U.S. and +1.3% in Belgium
· Group share in net profit increase of +24.3% at identical exchange rates

CEO Comments

Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group, commented: “In the second quarter of 2008 our revenues grew at a rate that is reflective of the current economic environment with consumers’ purchasing power under pressure. In this context, we have been increasingly focusing on our price position. We are fortunate to have our most powerful private label offering ever, giving our customers high quality alternatives at great prices. We are committed to fund price investments and offset underlying cost pressures through major savings initiatives that will have a lasting effect on our organization. We continue to focus on our long-term strategies, which will make us even stronger when we emerge from this challenging economy.”

Second Quarter 2008 Income Statement

In the second quarter of 2008, Delhaize Group posted revenue growth of 2.6% at identical exchange rates. At actual exchange rates, revenues declined by 7.5% to EUR 4.5 billion due to a 13.7% weaker U.S. dollar versus the euro. Organic revenue growth amounted to 2.9% for the quarter. The revenue growth in the second quarter of 2008 was driven by:
· a 2.3% increase of U.S. revenues in local currency, supported by comparable store sales growth of 1.9%;
· a 0.6% decrease of Belgian revenues, negatively impacted by the divestiture of Di last year and the conversion of Cash Fresh stores to affiliated stores, yet supported by 0.7% comparable store sales growth;
· the solid performance of Alfa-Beta, delivering a 14.5% increase in revenues (10.8% excluding Plus Hellas acquisition); and
· strong revenue growth of 32.1% in Romania and Indonesia (Rest of the World) at identical exchange rates.

Delhaize Group ended the second quarter of 2008 with a sales network of 2,602 stores, representing a net addition of 41 stores for the quarter (including 29 newly acquired Plus Hellas stores in Greece).

Gross margin declined to 24.9% of revenues (25.5% in 2007) mainly as a result of the smaller contribution of our U.S. business due to the weakening of the U.S. dollar versus the euro. At identical exchange rates, gross margin declined by 32 basis points, mainly as a result of the divestiture of Di, the conversion of Cash Fresh stores to affiliated stores, price investments at Sweetbay and higher fuel costs. In the U.S., gross margin increased by favorable mix changes especially as a result of an increase in private label revenues.

Other operating income decreased by 21.7% at identical exchange rates and by 27.0% at actual rates to EUR 20.8 million mainly because the second quarter of last year was favorably impacted by EUR 3.0 million related to the sale of Di and by EUR 4.2 million related to the sale of Cash Fresh stores to independent store owners in Belgium (compared to EUR 2.2 million this quarter).

Selling, general and administrative expenses increased by 24 basis points as a percentage of revenues to 21.0% due to soft sales, the timing of market renewals at Food Lion, higher utility costs, the start of the integration of Plus Hellas and expenses related to the data security breach at Hannaford. In Belgium, operating expenses as a percentage of revenues decreased compared to last year as a result of the divestiture of Di and the conversion of Cash Fresh stores to affiliates and cost saving initiatives. At Sweetbay, the leverage effect of increased revenues continued to be beneficial for operating expenses as a percentage of revenues.

Other operating expenses amounted to EUR 3.6 million in the second quarter of 2008, a decrease of 56.6% at actual rates compared to the second quarter of last year which included EUR 2.5 million related to the sale of Di.

Operating margin was 4.4% of revenues (5.2% in 2007) and operating profit decreased to EUR 193.9 million, a 12.3% decrease at identical exchange rates (-22.1% at actual exchange rates). The year-over-year comparison is negatively impacted by EUR 6.6 million related to the start of the integration of Plus Hellas since its acquisition on April 1, 2008, and by last year’s divestiture of Di and the gains on the sale of Cash Fresh stores to affiliated owners (net effect of EUR 4 million). Excluding these elements, operating profit would have decreased by 8.3% at identical rates for this quarter.

Net financial expenses amounted to EUR 46.8 million, a decrease of 71.2% at actual rates compared to the second quarter of 2007, which included a EUR 103.8 million charge related to the debt refinancing transaction. Lower coupon rates on the outstanding debt and the weakening of the U.S. dollar contributed to lower financial expenses this year.

The effective tax rate decreased to 22.6% (27.1% in the second quarter of 2007). The effective rate was favorably impacted in the second quarter of 2008 by the positive resolution of federal tax matters in the U.S., while the second quarter of 2007 benefited from the favorable tax impact of the debt refinancing.

Net profit from continuing operations increased by 80.9% at actual exchange rates (101.9% at identical exchange rates) compared to the second quarter of last year which included the refinancing charge, and amounted to EUR 113.8 million. Basic net profit from continuing operations amounted to EUR 1.14 per share (EUR 0.61 in 2007). The result from discontinued operations, net of tax, amounted to EUR 2.9 million compared to EUR 21.9 million last year as the second quarter of 2007 included a positive accumulated foreign currency translation adjustment of EUR 23.7 million recorded upon closing of the sale of Delvita in the Czech Republic on May 31, 2007.

Group share in net profit amounted to EUR 116.3 million, an increase of 56.8% at identical exchange rates (42.9% at actual exchange rates) compared to 2007. Per share, basic net profit was EUR 1.17 (an increase of 39.3% over the EUR 0.84 of 2007) and diluted net profit was EUR 1.14 (EUR 0.81 in 2007).


Second Quarter 2008 Cash Flow Statement and Balance Sheet

In the second quarter, net cash provided by operating activities decreased from EUR 245.9 million in 2007 to EUR 133.1 million in 2008 as a result of lower profit from operations and more cash used in working capital. Capital expenditures increased by 16.4% to EUR 171.8 million primarily as a result of higher spending at Food Lion due to earlier remodeling activity than last year, the conversion of Plus Hellas stores in Greece, and increased spend on IT projects and IT infrastructure at Delhaize Belgium.

Delhaize Group had a free cash flow of EUR -25.5 million, a decrease of EUR 221.6 million compared to last year as a result of lower operating cash flow combined with higher cash outflows due to increased capital expenditures in the second quarter of 2008 and the EUR 119.0 million proceeds received in the second quarter of last year for the disposals of Delvita and Di. Delhaize Group held EUR 258.1 million cash and cash equivalents at the end of June 2008.

Delhaize Group’s net debt amounted to EUR 2.2 billion at the end of June 2008 (62.8% of equity), a decrease of EUR 20.9 million compared to the end of December 2007 (EUR 2.2 billion or 61.0% of equity), mainly as a result of the weakening of the U.S. dollar by 6.6% between the two balance sheet dates.

In the second quarter of this year, Alfa-Beta issued a EUR 80 million 5-year bond for the financing of the acquisition of Plus Hellas. Delhaize Group repaid a EUR 100 million 8% bond in May of this year using cash on hand and existing credit facilities.


First Half 2008 Income Statement

In the first half of 2008, revenues of Delhaize Group increased by 3.7% at identical rates and decreased by 6.0% at actual rates to EUR 9.0 billion because the U.S. dollar weakened by 13.2% versus the euro. Organic revenue growth amounted to 4.1%. Revenue growth in the first half of the year was the result of:
· a 3.7% increase of U.S. revenues in local currency driven by comparable store sales growth of 2.2% and by new store openings;
· a 0.1% increase of revenues in Belgium, supported by 1.3% comparable store sales growth and negatively impacted by the sale of Di and conversions of Cash Fresh stores to affiliates;
· a strong 14.7% increase in Greek revenues due to store openings, the good performance of the stores remodeled last year and the acquisition of Plus Hellas; and
· a 32.0% increase of revenues in Romania and Indonesia (Rest of World) at identical exchange rates.

Gross margin was 25.1% of revenues (compared to 25.5% in the first half of 2007) mainly due to the lower contribution of our U.S. operations as a result of the weakening of the U.S. dollar versus the euro. At identical exchange rates, gross margin declined by 14 basis points mainly due to the divestiture of Di and the conversion of Cash Fresh stores to affiliated stores in Belgium, price investments at Sweetbay and higher fuel costs, partly offset by favorable mix changes especially at Food Lion supported by an increase in private label revenues.

Other operating income decreased by 9.2% at identical rates and by 15.2% at actual rates to EUR 41.4 million primarily due to the sale of Di in the second quarter of last year and less gains this year related to the sale of Cash Fresh stores to independent owners in Belgium.

Selling, general and administrative expenses slightly increased to 21.1% of revenues (20.9% last year) as a result of the negative operating leverage of soft sales, the Food Lion market renewals, the start of the integration of Plus Hellas and higher fuel costs.

The operating margin of Delhaize Group decreased to 4.5% of revenues compared to 5.0% in the first half of 2007. As a result, operating profit decreased by 6.6% at identical exchange rates and decreased by 16.5% at actual rates to EUR 399.6 million. Excluding the effect of the start of the integration of Plus Hellas, the Di divestiture and the gains on the sale of Cash Fresh stores to affiliated owners, operating profit declined by 4.2% at identical exchange rates.

Net financial expenses significantly decreased, amounting to EUR 95.3 million, a 58.1% decrease compared to last year as a result of the debt refinancing transaction in 2007 and the weakening of the U.S. dollar versus the euro.

The effective tax rate decreased to 28.1% in 2008 from 31.1% in 2007 because of the positive resolution of federal tax matters in the U.S. in the first half of the current year, while the tax rate in the first half of last year benefited from the favorable tax impact of the debt refinancing completed in the second quarter and from a tax refund received in the first quarter.

Net profit from continuing operations amounted to EUR 218.7 million, a 26.4% increase compared to last year, or EUR 2.17 per basic share (EUR 1.74 in 2007).

In the first half of 2008, the result from discontinued operations, net of tax, amounted to EUR 2.7 million compared to EUR 25.0 million last year which included a positive accumulated foreign currency translation adjustment of EUR 23.7 million recorded as part of the closing of the sale of Delvita.

As a result, Group share in net profit amounted to EUR 218.1 million, an increase of 13.1% at actual rates (24.3% at identical exchange rates) compared to last year. Per share, basic net profit was EUR 2.20 (EUR 2.00 in the first half of 2007) and diluted net profit EUR 2.14 (EUR 1.91 in the first half of 2007).


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Delhaize Groep (Euronext Brussel: DELB, NYSE: DEG), de Belgische internationale voedingsdistributeur, maakte vandaag bekend dat Jack L. Stahl, voormalig CEO van Revlon, haar Raad van Bestuur zal vervoegen als onafhankelijk bestuurder naar aanleiding van het openstaand mandaat volgend op het vertrek vanDr. William L. Roper. De heer Stahl levert de Raad van Bestuur van Delhaize Groep zijn uitgebreide kennis van de consumentensector alsook zijn grote ervaring op het gebied van financieel en algemeen management.