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Ahold Reports Weak Third-Quarter Profits

November 26, 2003

AMSTERDAM, Netherlands (AP) _ Global food retailer Ahold reported worse-than-expected third quarter earnings Wednesday and said it hopes to sell euro3 billion ($3.5 billion) in new shares at a sharp discount to market price to cut debt.

Ahold, still reeling from an accounting scandal, reported a third-quarter net loss of euro122 million ($144 million) reversing a year-ago profit of euro159 million. Sales fell 7.1 percent to euro13.1 billion ($15.5 billion).

The third quarter loss was attributed to a weaker operating performance at all business units, the weaker dollar, and exceptional losses of euro110 million related to the sale of several units, principally in Chile. The earnings were also hurt by extra costs related to audit, legal and consultancy services in the wake of the scandal.

Analysts at Dutch brokerage Kempen & Co., who have a neutral rating on the company, said Wednesday’s results were disappointing, particularly in Ahold’s U.S. retail operations, which include Tops, Stop & Shop and Bruno’s.

``We are concerned about deteriorating results at U.S. retail,″ said Patrick Roquas, who said he would review his neutral rating.

Ahold, the world’s third largest supermarket operator after Wal-Mart Stores Inc. of the United States and Carrefour SA of France, said it will offer 621 million new common shares at euro4.83, a discount of 42 percent to the closing price of shares in Europe Tuesday, euro8.27 ($9.76).

Existing shareholders have the right to buy two new shares for every three they own. The new shares will be listed Dec. 17.

Earlier this month, Ahold had said it would issue euro2.5 billion ($2.86 billion) in shares and sell an equal amount in assets to cut debt of around euro11 billion ($13 billion) and return the company to financial health. Wednesday’s announcement increases the size of that share issue.

In trading on the Euronext Stock Exchange in Amsterdam, shares fell nearly 5 percent to euro7.86. The company’s U.S.-traded shares fell 4 percent to $9.38 on the New York Stock Exchange.

In February Ahold admitted overstating earnings by over euro1 billion in 2000-2002, mostly due to inflated sales at its U.S. Foodservice subsidiary.

U.S. and Dutch regulators launched investigations into the company’s accounting practices, and last month Ahold posted correct, audited books for 2002 seven months late. It booked a loss of euro4.33 billion ($5.1 billion) under U.S. accounting rules.

Stefaan Genoe, an analyst at Petercam, said that although Ahold’s latest results were disappointing, ``investors have to look beyond this year’s earnings and benefit from the euro4.83 share issue.″

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