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AHOLD USA NOT AMONG DIVESTITURES

ZAANDAM, Netherlands -- In the wake of Ahold's recent progress in its efforts to raise money to reduce debt, the company's U.S. supermarket operations still appear safe from the auction block, at least for now.Analysts said Ahold's pledge to reduce its $13 billion debt load through the sale of assets might eventually include the disposal of some U.S. chains, but in the near term they expect the company

ZAANDAM, Netherlands -- In the wake of Ahold's recent progress in its efforts to raise money to reduce debt, the company's U.S. supermarket operations still appear safe from the auction block, at least for now.

Analysts said Ahold's pledge to reduce its $13 billion debt load through the sale of assets might eventually include the disposal of some U.S. chains, but in the near term they expect the company to continue to focus on improving the performance of those banners, which include Stop & Shop, Tops, Giant-Landover, Giant-Carlisle, Bruno's and Bi-Lo.

"I think they want to see what kind of structural problems they have, and then try to reorganize themselves out of it," said Jens Jantzen, analyst, Bear Stearns, London. "Bruno's must have a question mark hanging over it, and Tops has not been performing very well, but I would be surprised if something happens before the second half of next year. I think they would like to try to get it in order before they decide that it's not going to work."

He also said he expected that Ahold would speed up the process of combining the resources of its various U.S. holdings into what it calls "arenas." Thus far, Ahold has combined several functions of its Tops and Giant-Carlisle chains and its Bi-Lo and Bruno's banners. Recently, the company said it had begun planning the integration of its Stop & Shop and Giant-Landover divisions.

A spokesman for Ahold declined to discuss details of the latter integration, other than to say it would be similar to those under way at its other four U.S. chains.

In the meantime, Ahold has continued its other efforts to raise funds to pay down its debt, which include the sales of retail assets outside the United States and a proposed 3 billion-euro ($3.6 billion U.S.) stock offering. The two-for-three rights offering of 621 million common shares at 4.83 euros per share would be underwritten by a syndicate of banks.

Although some analysts reportedly said the rights offering would be dilutive, Jantzen, a fixed-income analyst, said he applauded the move as a means to reduce debt.

"It's very good news for the bonds," he said.

After Ahold revealed last month that it would sell its 628-unit Spanish retail operations, Jantzen said he also expected the company to divest its Portugal business, and he said he's waiting for more definitive news from the company on the fate of its holdings in the Czech Republic and Poland. The company also is expected to divest its Latin American businesses, he said.

In unveiling a broad restructuring plan, Ahold said last month it plans to generate nearly $3 billion from the sale of assets by the end of 2005.

Jantzen said he expects Ahold to get 600 million to 700 million euros from the sale of its Latin American business, and another 700 million or more from the sale of its Spanish holdings. That could still leave about 1 billion euros or more to come from the sales of other assets.

"It is my belief that we will get some news [on additional asset sales] this year," he said, although he noted that he doesn't expect any sales to close until 2004.

Ahold has said it plans to attempt to return its U.S. Foodservice division to profitability rather than sell it immediately. Overstated profits at the U.S. Foodservice division were at the heart of Ahold's $1.1 billion accounting scandal, which erupted in February.

In the recently ended third quarter, the company said its performance was impacted by the weak exchange rate for the U.S. dollar, a weaker performance at its U.S. Retail division, and several non-recurring charges.

Third-quarter operating income declined 32.9% from year-ago levels, to $233 million, which the company attributed to added promotional activity, particularly at the Giant-Landover and Tops chains. Operating income also was impacted by asset-impairment charges and other non-recurring items.

Quincy, Mass.-based Stop & Shop and Carlisle, Pa.-based Giant are two Ahold divisions that are performing strongly, the company said. Stop & Shop's net sales increased 6.6% through the first nine months; Giant's net sales increased 7.8% year-to-date.

Both Landover, Md.-based Giant Food and Tops Friendly Markets, Williamsville, N.Y., had marginal sales gains, which the company attributed to the weak economy and heightened competition. Net sales at Bruno's, Birmingham, Ala., and Bi-Lo, Mauldin, S.C., were lower in the period.

U.S. Retail sales were up 3.3% for the third period, to $6.17 billion. Through three quarters, sales grew 3.2%, to $20.7 billion. Same-store sales year-to-date increased 0.1%, and comparable-store sales at existing and replacement stores increased by 0.9%.

Operating income through three quarters totaled about $1 billion, a 10.7% decline from year-ago levels.

The company as a whole reported a third-quarter loss of $144 million on sales of $15.4 billion, compared with net income of $177 million on sales of $16.6 billion in the year-ago third quarter at current exchange rates. Through three quarters the loss was about $74 million on sales of $51.6 billion, compared with a loss of $14.3 million on sales of $57.6 billion in the year-to-date results of a year ago.