AHOLD TO SHAREHOLDERS: 'NEVER AGAIN'

THE HAGUE, Netherlands -- Ahold's chief executive officer was unapologetic about some of the "hard decisions" made over the past year to "get the company back on track," assuring the congress of irate shareholders at the company's annual meeting last week that they will start earning dividends again when Ahold achieves investment-grade profile by the end of 2005."Never again do we want to find ourselves

THE HAGUE, Netherlands -- Ahold's chief executive officer was unapologetic about some of the "hard decisions" made over the past year to "get the company back on track," assuring the congress of irate shareholders at the company's annual meeting last week that they will start earning dividends again when Ahold achieves investment-grade profile by the end of 2005.

"Never again do we want to find ourselves in the same situation as last year," said Anders Moberg, who joined the company as CEO last year after the company's financial crisis was disclosed. "Mark my words: We will get through it!"

Hannu Ryopponen, chief financial officer, told shareholders Ahold was calling in 920 million euros (about $1.13 billion) in bonds early to cut debt, which stood at about $9.2 billion at the end of 2003. He said the 4% convertible subordinated notes due in 2005 would be paid at par, together with accrued interest and unpaid interest in line with a plan announced in April.

Ryopponen also said U.S. Foodservice, Ahold's food-service-distribution unit where income had been hugely inflated, will post positive earnings before interest, taxes and amortization in 2004, excluding any restructuring charges.

"No later than 2006, our target for U.S. Foodservice is to exceed its 2002 adjusted EBITA margin," Moberg added.

Ahold said it will focus on those supermarkets that are in or will be in the No. 1 or No. 2 market position in the next few years.

Moberg said he is confident Ahold will raise about $3 billion through divestments by the end of 2005. He said bids for its Spanish units are coming in, although he declined to reveal from where. So far, it has withdrawn from Latin America and Asia.

Central Europe and the Baltic states were profiled as profitable growth opportunities, which would reduce Ahold's reliance on the United States, where the weak dollar has dented earnings.

Working to put the accounting scandal in the past, Ahold executives fended off an inquisition of private investors and shareholder groups demanding meticulous explanations of the company's finances, litigation, investigations and contingent liabilities. Shareholders also were unimpressed with 12 pages of "Risk Factors" in the annual report.

"Not everything is in our hands," Moberg said. "Progress will be faster on some fronts than on other fronts."

As a result of the accounting irregularities from 2000 to 2002, which prompted scrambling together a rescue credit line for a $1 billion-plus profit overstatement scandal in early 2003, the company is under investigation by prosecutors and regulators in the United States and Netherlands.

Ahold faces shareholder class-action suits in the United States, as well as a case launched in the Netherlands by the Dutch shareholders association, VEB. Some shareholders are calling for inquiries into financial records dating as far back as 1998. One elderly shareholder told SN, "I lost two-thirds of my money, and why? I am very angry because for years I had confidence in Ahold. It was a company one could trust.

"Moberg seems OK," she added, "and I hope he's worth the money we're paying him, but the former CEO and those financial people who knew what was going on, they should be held responsible."

Restoring Ahold's financial health, re-engineering the food retail business, recovering the value of U.S. Foodservice, and reinforcing accountability, controls and corporate governance are the goals for this "transitional" year, Moberg said. Repeating statements made earlier last month, Moberg told shareholders that by 2006, Ahold will achieve 5% growth in annual net sales, 5% EBITA margin, and a 14% return on net operating assets.

Ahold, which grew to become the world's third-largest food service and retailer through rapid expansion in the 1990s, denied recent reports in the Dutch media that it was eyeing takeovers in Europe to offset an imbalance in its income structure, which depends heavily on U.S. sales.

"There are no plans in place today for any acquisitions," Ryopponen told the meeting.

As the executives plug away at the three-year recovery plan to cut debt, restore profitability, refocus operations, and rebuild Ahold's investment-grade credit, shareholders continue to test the CEO and his board.

When repeatedly asked about the likelihood of a hostile takeover bid, the CEO stressed he has no intention of selling the company.

"I came here to keep the company together. I am not here to sell off the pieces. We are doing everything that we can to strengthen the company, and in 2006, we will be in a stronger position than we are today," Moberg said.

In protest, and after hours of incensed queries, shareholders demanded to suspend the vote to approve the performance of the executive and supervisory boards in 2003.

Shareholders voted to keep Deloitte as auditors until the end of 2005. Because Deloitte was Ahold's auditor in the period prior to the accounting fraud, some shareholders were not pleased. Ahold said the auditor could could not be held responsible for the crisis at U.S. Foodservice.