Talk with Ahold CEO Cees van der Hoeven
His spending spree at the helm of the historic Dutch grocer since 1993 has catapulted the public limited company into the big league. Ahold now ranks as the world's number two retailer by sales after Wal-Mart.
Over the last decade, van der Hoeven has given our newspaper an interview virtually every year at head office in Zaandam, near Amsterdam. Each time Ahold has become an even more global, diversified and complex group. Few big retail bosses talk about doubling annual revenues and net earnings every five years, and still fewer actually achieve this.
However, a new note of caution has crept into van der Hoeven's fluent and cosmopolitan repartee recently, and Ahold's relentless pace of internationalisation has come to a sharp halt. We wanted to know why.
"We need some breathing space"
Mr van der Hoeven, in 2001 Ahold increased net sales by 29 per cent to €66.6bn, but why did net earnings stay flat at €1.1bn?
Results in 2001 were heavily impacted by exceptional charges, particularly as a consequence of the situation in Argentina. Obviously, the heavy load of exceptionals is not something to be proud of. However, a large part of this was caused by external circumstances and around 80 per cent is non-cash.
Despite this our underlying business continues to be very strong. If you exclude the exceptionals, we are proud that we have achieved record sales and earnings once again.
Net earnings before goodwill amortization and exceptional charges, including the impact of the Argentine Peso devaluation, were €1.5bn — an increase of 36.2 per cent on last year. This was probably the best result in the industry world-wide.
How worried are you about Casino's entry onto your home Dutch market via its participation in your largest rival, Laurus?
Casino is not exactly an unknown quantity for us as we have co-operated for many years in the past on a number of projects — in fact, I was even a board member. Casino will certainly have its hands full with its new Dutch partner, and we look forward to meeting them on our home market.
As regards Laurus, we are used to competing with their best fascias, Edah and Super De Boer, in the Netherlands. Our own Dutch banners Albert Heijn and C1000 are very well established on the Dutch market so we feel more than confident of meeting any challenge they may wish to make.
In the past, you have been conspicuously enthusiastic regarding international acquisitions. Why are you now sounding a note of caution?
There are three main reasons for this. Firstly, in the current economic situation, we consider that it is more important to focus on organic growth and profits than on acquisitions. Organic growth and the occasional smaller acquisition will be financed from operating cash-flow.
Secondly, we have a tremendous amount of work to do in order to integrate recent acquisitions and need some breathing space. These include U.S. Food Service, our biggest acquisition ever, Bruno’s in the United States as well as a number of smaller acquisitions in Spain and Latin America.
Thirdly, you cannot go to financial markets too frequently with a call on funds; both with debt and equity you have to be careful. Having said this, I am convinced that international retail consolidation will continue to increase although it is difficult to guess the time scale.
If there was a proposition out there that we simply couldn’t ignore, then obviously we’d take a look at it, but I am not prepared to speculate and give you any names. There are certainly a number of CEOs in the trade who are convinced their company is worth considerably more than the market thinks.