Etablissements Delhaize Freres et Cie "Le Lion" S.A. (DEG)

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Etablissements Delhaize Frères et Cie "Le Lion" (Groupe Delhaize) SA (DEG)

Q4 2012 Earnings Call

March 07, 2013 9:00 am ET

Executives

Frederic van Daele

Pierre Olivier Beckers - Chief Executive Officer, President, Director and Member of Executive Committee

Pierre Bruno Charles Bouchut - Chief Financial Officer, Executive Vice President and Member of Executive Committee

Roland C. Smith - Executive Vice President and Member of Executive Committee

Analysts

Andrew Gwynn - Exane BNP Paribas, Research Division

Fernand de Boer - Petercam S.A., Research Division

Fabienne Caron - Kepler Capital Markets, Research Division

Edouard Jean Aubin - Morgan Stanley, Research Division

Robert Jan Vos - ABN AMRO Bank N.V., Research Division

James G. Collins - Deutsche Bank AG, Research Division

Pascale Weber - KBC Securities NV, Research Division

Sreedhar Mahamkali - Macquarie Research

Presentation

Operator

Good day, and welcome to Delhaize Group's Conference Call Concerning 2012 Fourth Quarter and Full Year Results. Today's conference is being recorded. I will now hand the conference over to Mr. Frederic van Daele of Delhaize Group. Please go ahead, sir.

Frederic van Daele

Thank you, operator, and good afternoon, everyone, or good morning. Welcome to the conference call regarding Delhaize Group's results for the fourth quarter. I will now read out the disclaimer, which you can find on Slide 2.

This presentation contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statements. Factors that could cause results to differ materially from those in the forward-looking statements are detailed in the cautionary note regarding forward-looking statements in our earnings release that we issued today, as well as in reports filed by the company with the SEC. These forward-looking statements are made as of the date of this presentation. Delhaize Group assumes no obligation to update the information contained in this presentation.

During this call, we will discuss GAAP and non-GAAP financial measures, a reconciliation between the 2 is available in today's earnings release. An audio webcast of this call will be available on the company's website. Delhaize Group reserves all rights to the content of this webcast, and this webcast cannot be recorded or otherwise reproduced.

Today, we have the following people with us Pierre-Olivier Beckers, CEO, Delhaize Group; Pierre Bouchut, CFO, Delhaize Group; and Roland Smith, CEO, Delhaize America. During this call, we will first look back on our last year performance, follow it by comments on our priorities. Afterwards, we will take questions. And for those unable to stay on the call or wish to listen to it again, a replay will be available on the website.

I'll now turn to Pierre-Olivier Beckers for an introduction.

Pierre Olivier Beckers

Thank you, Frederic. Hello, everyone, and thank you for joining our conference call to discuss our fourth quarter and full year results. I think you will be familiar by now that we are using a slide presentation for this call, and I think you can find it on the website in case you did not receive it by mail this morning.

So Slide 3, that's where I am. Slide 3 summarizes our priorities, which are clear and consistent, obviously, as compared to November. Just to reiterate our first focus is on accelerating the Food Lion repositioning through expanding the brand strategy. Further, we are continuing to plan targeted price investments, mainly at Hannaford and Delhaize Belgium, but also in our Southeastern European banners. In this segment, and also in Indonesia, we are targeting to accelerate organic growth.

We remain committed to our pledge on capital discipline. The decision to decrease the dividend this year is a clear example of Delhaize Group's commitment to maintaining its financial strength. We will continue to spend our capital expenditure where we do expect to see the highest return. Additionally, we see further scope for working capital improvements. These are just a few pillars behind our goal to generate an average of approximately EUR 500 million of free cash flow per annum for the coming 3 years.

On Slide 4, we presented our accomplishments for Q4 and for 2012. As we said in January, we are pleased with the progress of our U.S. sales plans. These were primarily driven by positive transaction and item numbers as we reduced prices significantly, which certainly was the main driver for the lower margin in Q4 and 2012 as a whole. However, we are encouraged that the positive trends in transactions, items and sales has further developed and continued in 2013. We see the improving trends not only at Food Lion but also at Hannaford.

In Belgium, our market share trends in Q4, during which we generated strong year-end sales, were better than for 2012 as a whole. But certainly and clearly, more work needs to be done in Belgium.

In Southeastern Europe, previous trends continued. The macroenvironment was a challenge in most countries. We have, nevertheless, managed to make good progress in the these markets.

In Greece, we continue to gain market share. In Serbia, we have positive comparable sales growth and we realized our target of achieving a 4% underlying operating margin for the year. The strongest growth in that segment, however, was realized in Romania, held by 40 stores openings in Q4 alone, taking the total number of stores opened in this country to 89 for the whole year 2012.

Finally, our free cash flow generation was quite strong. But Pierre is, in a moment, going to talk about it in more detail. And I will come back later in the call to mention a few priorities for the year by region. So Pierre, the floor is yours.

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