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

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Wall Street Breakfast

Delhaize Group (DEG)
Q2 2007 Earnings Call
August 9, 2007, 9:00 AM ET


Guy Elewaut - VP of IR and Corporate Communications
Pierre-Olivier Beckers - President and CEO
B. Craig Owens - EVP and CFO
Rick Anicetti - EVP
Ron Hodge - EVP
Michel Eeckhout - CEO of Delhaize Belgium


James Anstead - Citigroup
Dan McFetrich - Dresdner
John Kershaw - Merrill Lynch
Fernand de Boer - Petercam
Mark Husson - HSBC
Philippe Suchet - Exane BNP Paribas
Nick Coulter - Morgan Stanley



Welcome to Delhaize Group Second Quarter 2007 Earnings Conference Call.

I now hand over the conference call to Guy Elewaut, Vice President, Investor Relations and Corporate Communications of Delhaize Group.

Guy Elewaut - Delhaize Group - Vice President of Investor Relations and Corporate Communications

Thank you, operator. Good afternoon, everyone in Europe, good morning in the US. Welcome to the conference call concerning Delhaize Group's results in the second quarter of 2007. 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 from time to time 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 n contained in this presentation. An audio webcast of this conference 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 authorized, reproduced without prior expressed written consent of Delhaize Group.

Today, we have the following people with us; Pierre-Olivier Beckers, CEO of Delhaize Group; Craig Owens, CFO of Delhaize Group; Rick Anicetti, CEO of Food Lion; Ron Hodge, CEO of Hannaford; and Michel Eeckhout, CEO of Delhaize Belgium.

During this call, we will first look back on our performance in the second quarter of 2007, followed by comments on operations and strategy. Afterwards, we will take questions.

For those unable to stay on the call or who wish to listen to it again, a replay will be available on the Company's website.

I now turn to Pierre-Olivier Beckers, for introduction of our second quarter results.

Pierre-Olivier Beckers - Delhaize Group - President and Chief Executive Officer

Thank you, Guy, and hello everyone. Thank you for joining our conference call. We announced a great second quarter this morning with good sales and even better margin performance despite comparing with a very good quarter last year.

US operations again posted strong comparable store sales growth of 2.8%, particularly driven by Food Lion and Hannaford.

In Greece, Alfa-Beta posted a double digit sales increase for the fifth consecutive quarter, while our Belgian operations realized 2.7% comparable store sales growth, despite a strong point of comparison last year and an increasingly competitive environment.

In the second quarter, our margins continue to evolve very favorably, due to good cost controls, sales mix improvements, price optimizations and inventory management. This was combined with continued vigilance around our price position, including as required, investments and price reductions.

The second quarter was also important because of the successful restructuring of our debt and issuance of an investment grade rating by Moody's. The successful debt tender and refinancing have increased our financial flexibility and lowered our financial and tax charges. The investment grade rating is I believe, a recognition, of the strengths of our Company.

The good performance of the first six months and our many initiatives in the pipeline, make us feel comfortable that we will end up near the higher end of the revenues and operating profit guidance for 2007 that we had issued at the beginning of this year.

While we significantly increased our net profit from continuing operations guidance, and we expect a very solid net profit growth of more than 23% at constant currencies.

I will come back to our operations and the strategic initiatives later during this call. But first, Craig will run you through the financials. So, I will now turn to him, Craig.

B. Craig Owens - Delhaize Group - Executive Vice President and Chief Financial Officer

Thanks Pierre-Olivier. Welcome everyone. In the second quarter our Group revenues decreased by 0.4% due to the weakening of the US dollar by 6.7% against the Euro. Our organic sales growth amounted to 4.7% compared to a strong second quarter in 2006.

Our key companies, all showed solid sales growth during the quarter, particularly Food Lion, Hannaford, and Alfa-Beta in Greece. Our US sales increased by 4.2% and comparable store sales by 2.8%, based on the continued strong sales performance at Food Lion and Hannaford.

In the second quarter, competition remained consistent, but rational in most of our US markets. We did not notice significant changes in consumer behavior.

Food Lion continued to benefit from its focus on executional excellence across the entire network of stores, from successful market renewal programs and from commitment towards price and promotion strategy. At Hannaford and Sweetbay, there continued to be a strong focus on competitive pricing.

In Belgium, total sales increased by 3.8% with comparable store sales growth amounting to 2.7%. This sales growth was supported by the opening of seven new stores in an environment marked by numerous competitive openings and aggressive pricing activity, particularly by the discount chains.

Our market share decreased slightly, compared to the same period prior year in Belgium, due to a decline in share of the selling space and the sales losses during the planned temporary closing of Cash Fresh stores during their conversion to Delhaize banners.

Delhaize Belgium saw an increase in sales per square meter faster than the market in the second quarter.

Our Greek Company, Alfa-Beta, realized outstanding revenue growth of 13.2% due to a good sales momentum in existing stores and an aggressive store opening program.

For the fifth quarter in a row, our Greek operations posted double-digit revenue growth. This sales dynamics were also evident in Indonesia and Romania, which resulted in an increase of 21.1% in revenues for our emerging market segment.

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