Carrefour Carrefour: 2008: Resilient Performance in a Tough Trading Environment

 
TIDM0HAL 
 
 

  Carrefour (Paris:CA): 
 
 
    -- Sales ex-VAT: up 5.9% at EUR87bn (+6.4% at constant exchange rates) 
 
    -- 2008 Activity Contribution: up 0.3% at EUR3,300m 
 
    -- Non recurring charges: EUR524m including EUR396m of impairment charges 
 
    -- Net income from recurring operations, Group share: -32.8% at EUR1,256m 
 
    -- Free cash flow: EUR1.9bn vs. EUR691m in 2007 
 
    -- Proposed dividend unchanged at EUR1.08 per share 
 

  Carrefour's 2008 results reflect: 
 
 
    -- An environment marked by a sharp slowdown in food price 

       inflation in the second half and deteriorating discretionary spending 

       in the Fourth Quarter 
 
    -- In this context, good sales resilience (up 6.4% at constant 

       exchange rates, including 1.8% from acquisitions) thanks to sustained 

       promotional efforts 
 
    -- Slight growth in Activity Contribution due notably to firm 

       operating cost discipline with savings of EUR150m 
 
    -- Net income from recurring operations, Group share impacted by non 

       recurring charges, principally impairments and a EUR126m tax provision 
 
    -- A strengthened balance sheet: free cash flow of EUR1.9bn through tight 

       management of our merchandise treasury and capex 
 

  In its March 10, 2009 meeting, Carrefour's Board of Directors examined and approved the 2008 consolidated financial statements. The Board decided to propose to shareholders at the AGM a dividend of EUR1.08 per share for 2008, unchanged from the 2007 level. The dividend will be paid on 7 May 2009. 
 
EUR m                                 FY 2008  FY 2007  Var. 
Sales Excl. VAT                     86,967   82,148   5.9% 
ACDA                                5,161    5,014    2.9% 
Activity Contribution               3,300    3,291    0.3% 
Non-recurring income and expenses   -524     47       na 
EBIT (Activity contribution         2,776    3,338    -16.8% 
after non-recurring items) 
Net income from recurring           1,256    1,868    -32.8% 
operations, Group share 
 
 

  In 2009, priority to sales dynamics and free cash flow generation through: 
 
 
    -- A EUR600m investment to reinforce sales dynamics 
 
    -- Operating cost savings of EUR500m to invest in sales 
 
    -- Increased discipline and selectivity in investments, with capex capped 

       at EUR2.5bn 
 

  Lars Olofsson, CEO of Carrefour, declared:"Carrefour's resilient performance in 2008 underlines the Group's solid fundamentals. In a trading environment that remains challenging, we will focus on boosting our sales dynamics while improving our organisation and reducing our costs.Our objectives for the future are clear: generate profitable, sustainable, organic growth that outpaces that of the market, and improve our margins. To accelerate our growth, we will strengthen our positions in France and in Europe and focus our expansion on our growth markets with the highest potential. By increasing our knowledge of our customers and better serving them, by transforming ourselves to become more agile, improve execution and gain in operational efficiency and by regaining market leadership through innovation, we will achieve our ambition: make Carrefour the preferred retailer." A video interview with Lars Olofsson, CEO, together with a full transcript, is now available on http://www.carrefour.com and http://w3.cantos.com/carrefour 
 
Performance by zone 
Sales by zone                                                            Activity contribution 
                                                                         by zone 
EUR m             FY 2008  FY 2007  Change    Change at const.exch. rates  FY 2008  FY 2007  Var. 
France          37,968   37,621   0.9%      0.9%                         1,510    1,556    -3.0% 
Europe          32,418   30,837   5.1%      5.4%                         1,153    1,216    -5.1% 
Latin America   10,505   8,211    27.9%     31.0%                        395      301      31.1% 
Asie            6,076    5,480    10.9%     13.3%                        242      218      10.9% 
Total           86,967   82,148   5.9%      6.4%                         3,300    3,291    0.3% 
 
 
 
    -- France: 
 

  In France, we delivered a good performance in supermarkets and convenience stores. Hypermarkets saw a downturn in sales, mainly due to a fall in non-food sales, particularly discretionary products. 160 supermarkets were converted to the Carrefour Market banner at end-2008, generating solid sales growth. Commercial margin, as a percentage of sales, was down slightly, reflecting our commitment to maintaining price competitiveness through promotions. SG&A expenses remained under control thanks to cost savings in the second half. Overall, Activity Contribution in France fell by 3%, equal to 4% of sales, almost unchanged relative to 2007. 
 
 
    -- Europe: 
 

  Sales in Europe rose by 5.4% at constant exchange rates, with sustained growth in Spain (+5.7%), Romania and Portugal. Sales growth slowed in Europe as a whole in the fourth quarter, particularly in discretionary products. Commercial margin, as a percentage of sales, was stable overall, with a decline in Spain offset by rises in all other countries. Cost savings did not fully offset the negative impact caused by the sharp downturn in sales at the end of the year. Overall, Activity Contribution fell by 5.1% to EUR1,153m. 
 
 
    -- Latin America: 
 

  Latin American activities posted excellent sales growth of 31% at constant exchange rates, including 22.7% excluding acquisitions. Atacadao (Brazil) continued to register solid sales growth in 2008. Commercial margin as a percentage of sales fell slightly, mainly due to the increasing proportion of sales coming from Atacadao. Firm cost discipline led to a 31.1% increase in Activity Contribution to EUR395m, equal to 3.8% of sales (up from 3.7% in 2007). 
 
 
    -- Asia: 
 

  With sales up 10.9% (+13.3% at constant exchange rates), 2008 was a satisfying year, despite a sharp slowdown in most Asian countries in late 2008. Commercial margin fell slightly as a percentage of sales, impacted by efforts to remain price-competitive. The cost ratio in Asia improved relative to 2007. Overall, Activity Contribution rose by 10.9% to EUR242m. Analysis of 2008 results:Sales, profitability and financial positionIncome statement 
 
 
    -- Sales rose by 5.9% relative to 2007, or by 6.4% excluding 

       currency effects. All zones achieved sales growth in 2008. 
 
    -- Commercial margin, as a percentage of sales, fell by 30 basis 

       points as a result of the Group's commitment to price competitiveness. 
 
    -- Cost savings, mainly in the second half, exceeded our targets 

       and reached EUR150m. These savings enabled the Group to keep SG&A 

       expenses under control and offset the slowdown in sales in late 

       2008. General and administrative expenses (excluding rents) equalled 

       15.3% of sales, down from 15.5% in 2007. Asset costs rose by 

       8.7% as a result of ongoing expansion. 
 
    -- Activity Contribution rose by 0.3% to EUR3,300m, with rises in 

       Latin America and Asia offsetting declines in France and Europe. 
 
    -- Non-recurring charges totalled EUR524m. The main items were as 

       follows: a EUR157m capital gain on the disposal of Merter in Turkey, a 

       EUR126m tax provision, EUR76m of rebranding and integration costs and 

       EUR396m of impairment charges, mainly in Italy. 
 
    -- As a result, Group EBIT fell by 16.8% to EUR2,776m. 
 
    -- Financial expenses rose by 6.9% to EUR562m. 
 
    -- The tax rate was 33.6%, higher than the 28.7% seen in 2007. The 

       effect of the low capital gains tax rate on the Merter disposal in 

       Turkey was more than offset by the tax provision, calculated net of 

       tax, and the impact of impairments, most of which were non-deductible. 

       Excluding these last two effects, the tax rate would have been around 

       28%. 
 
    -- The change in minority interests (-EUR267m versus -EUR180m in 2007) 

       was mainly due to the gain on the Merter disposal and the growth of 

       subsidiaries' results where the Group works with partners. 
 
    -- Net income from recurring operations, Group share was EUR1,256m, 

       down 32.8% relative to 2007. Earnings per share from recurring 

       operations totalled EUR1.83, versus EUR2.67 in 2007. 
 

  Cash flow, debt and liquidity statement 
 
 
    -- Cash flow totalled EUR4bn in 2008, roughly unchanged relative to 

       2007. 
 
    -- The improvement in working capital requirement was mainly the 

       result of a EUR649m increase in merchandise treasury, and reflects good 

       management of inventories and supplier payment. 
 
    -- Capex remained under control, and was stable overall at EUR2.9bn. 

       Investments increased in Asia, Latin America and Eastern Europe. 
 
    -- As a result, free cash flow rose from EUR691m in 2007 to EUR1.9bn 

       in 2008. 
 
    -- At year-end, net debt totalled EUR6,652m, down from the end-2007 

       figure of EUR7,357m. 
 
    -- The Group's liquidity situation is solid, with EUR3bn of 

       unconditional undrawn syndicated loans, and with no refinancing needed 

       until May 2010. 
 

  AGM: 
 

  The AGM will be held at 9.30am on 28 April 2009 at the Carrousel du Louvre, 99 rue de Rivoli, 75001 Paris. 
 

  Publication of Q1 2009 sales: 16 April 2009 
 
Investor Relations: Rémy Dumoulin,            Tel: [phone] 
Alessandra Girolami 
Relations Actionnaires: Céline Blandineau     Tel: [phone] 
                                              (toll-free in France) 
Press Relations: Publicis Consultants         Tel: [phone] 
 
 
APPENDIX 
CONSOLIDATED STATEMENT OF INCOME 
In millions of euros                     dec 2008      % Prog    dec 2007 
Sales, net of taxes                      86 966,8      5,9%      82 148,5 
Other revenues                           1 258,3       9,7%      1 147,2 
Total revenues                           88 225,2      5,9%      83 295,7 
Cost of sales                            (68 709,4)    6,3%      (64 609,4) 
Margin of current activities             19 515,8      4,4%      18 686,3 
SG&A                                     (14 354,7)    5,0%      (13 672,7) 
Activity contribution 
Before depreciation &                    5 161,1       2,9%      5 013,6 
provisions (ACDA) 
Depreciation & provisions                (1 860,8)     8,0%      (1 722,5) 
Activity contribution (AC)               3 300,3       0,3%      3 291,2 
Non current income and expenses          (524,3)                 47,0 
EBIT                                     2 775,9       -16,8%    3 338,2 
Financial result                         (562,3)       6,9%      (526,1) 
Result before tax                        2 213,6       -21,3%    2 812,1 
Income tax                               (743,1)       -7,9%     (806,9) 
Net income from recurring 
operation of 
Consolidated companies                   1 470,5       -26,7%    2 005,2 
Equity accounted companies               52,1          20,9%     43,1 
Net income from recurring operation      1 522,6       -25,7%    2 048,3 
Minority interests                       (266,9)       48,5%     (179,8) 
Net income from recurring operation-     1 255,6       -32,8%    1 868,5 
Group Share 
Discontinuing operations Group Share     16,2                    430,9 
Discontinuing operations                 0                       (0,0) 
Minority Interest 
Total net income                         1 538,8       -37,9%    2 479,2 
Net income- Group Share                  1 271,8       -44,7%    2 299,4 
 
 
MAIN RATIOS 
                                             dec 2008    dec 2007 
Gross margin / Sales                         22,4%       22,7% 
SG&A / Sales                                 -16,5%      -16,6% 
Activity contribution / Sales                3,8%        4,0% 
EBIT / Sales                                 3,2%        4,1% 
Tax rate                                     33,6%       28,7% 
ACDA / Financial result                      (9,2)       (9,5) 
Activity contribution / Financial result     (5,9)       (6,3) 
 
 
CONSOLIDATED BALANCE SHEET 
In million of euros                                    dec 08    dec 07 
ASSETS 
Intangible assets                                      12 417    12 847 
Tangible assets                                        14 809    14 751 
Financial Investments                                  1 741     1 555 
Deferred tax assets                                    672       944 
Investment properties                                  346       500 
Non current assets                                     29 985    30 597 
Inventories                                            6 891     6 867 
Trade receivables                                      2 919     3 424 
Bank loans                                             4 805     4 672 
Other receivables                                      1 769     1 538 
Current financial assets                               245       0 
Cash and cash equivalents                              5 317     4 164 
Current assets                                         21 946    20 665 
Non current assets of discontinued activities          150       669 
TOTAL                                                  52 082    51 931 
LIABILITIES 
Shareholders equity, Group share                       10 161    10 663 
Minority interests in consolidated companies           791       1 107 
Shareholders equity                                    10 952    11 770 
Deferred tax liabilities                               424       462 
Provisions for contingencies                           2 320     2 147 
Non current liabilities                                13 696    14 379 
Borrowings                                             12 215    11 523 
Trade payables                                         17 276    17 077 
Bank loans refinancing                                 4 495     4 419 
Other debts                                            4 376     4 307 
Current liabilities                                    38 361    37 325 
Non current liabilities of discontinued activities     25        227 
TOTAL                                                  52 082    51 931 
 
 
MAIN RATIOS 
Main ratios                                     dec 08    dec 07 
Net debt                                        6 652     7 357 
Net debt / Shareholders equity                  61%       63% 
Operating working capital (in days of COGS)     40        39 
 
 
CONSOLIDATED STATEMENT OF CASH FLOW 
In million of euros                                    dec 2008    dec 2007 
NET DEBT OPENING                                       (7 357)     (6 309) 
Cash Flow                                              4 011       3 918 
Change in working capital                              964         (88) 
Others                                                 22          40 
Cash flow from operations (ex. financial services)     4 997       3 869 
Capital expenditures                                   (2 918)     (3 069) 
Change in payables to fixed assets suppliers           (161)       (6) 
Others                                                 (2)         (103) 
Free Cash Flow                                         1 916       691 
Financial investments                                  (439)       (1 489) 
Disposals                                              945         1 221 
Others                                                 (21)        (44) 
Cash flow after investments                            2 401       378 
Dividends / capital increase                           (939)       (814) 
Others (dividends, change and perimeter)               (757)       (614) 
NET DEBT CLOSING                                       (6 652)     (7 357) 
 
 
CHANGES IN SHAREHOLDERS EQUITY 
                                      Retained    SH equity      Minority 
In million Euros                      Earnings    Group share    Interests 
At December 31, 2007                  11 770      10 663         1 107 
Fy 2008 result                        1 539       1 272          267 
2007 dividends                        -927        -740           -187 
Capital increase and premiums         3           0              3 
Foreign currency translation          -828        -781           -47 
adjustments 
Change in consolidation perimeter     -346        -8             -338 
And other movements                   -259        -245           -14 
At December 31, 2008                  10 952      10 161         791 
 
 

  DEFINITIONS 
 
 
    -- Gross margin from current operations 
 

  Gross margin from current operations corresponds to the sum of net sales and other income less the cost of sales (other than inventory purchases and variations, the cost of goods sold includes other costs that mainly consist of the costs of products sold by financial companies, income from discounts and exchange rate differences generated by goods purchases). 
 
 
    -- Activity contribution before depreciation and amortization (ACDA) 
 

  Activity contribution before depreciation and amortization (ACDA) corresponds to the gross margin from current operations less sales, general and administrative expenses. 
 
 
    -- Activity contribution (AC) 
 

  Activity contribution corresponds to the gross margin from current operations less sales, general and administrative expenses, depreciation and amortization. 
 
 
    -- EBIT 
 

  EBIT corresponds to the gross margin from current operations less sales, general and administrative expenses, depreciation, and amortization and non-recurring items (items of an unusual type due to their nature and frequency are accounted for under non-current income and non-current expenses, such as depreciation of assets and restructuring costs). 
 
 
    -- ROCE (Return On Capital Employed) 
 

  ROCE is the ratio of Activity Contribution to capital employed. 
 
 
    -- Free cash flow 
 

  The Free cash flow corresponds to the cash flow generated by operating activities plus the change in working capital less capital expenditures.