Ahold's Top Two Executives Quit Amid Accounting Probe
quicken.com
The Grocer's stock down 65% on opening of the US markets ... Times Are a Changin'. Will the "others" (Loblaws for instance) be able to maintain their lofty price earnings ratios.
Monday, Febuary 24, 2003 08:15 AM ET
Dow Jones Newswires
AMSTERDAM -- Royal Ahold NV's (AHO, news) top two executives quit Monday as the Dutch retail giant revealed it overstated earnings by more than $500 million during the past two years.
The world's third-largest retailer after Wal-Mart Stores Inc. (WMT, news) of the U.S. and France's Carrefour said it is investigating bookkeeping at several units, including U.S. Foodservice and Argentine-based retailer Disco.
Ahold said Cees van der Hoeven, Ahold's chairman and chief executive, and Michael Meurs, chief financial officer, resigned over the matter. Now running day-to-day operations is Henny de Ruiter, chairman of the supervisory board.
The disclosure is expected to rock investor confidence in Ahold, which owns such major supermarket chains as Stop & Shop and Giant-Landover in the U.S. It also calls into question the company's basic strategy, which has involved a series of international acquisitions.
Ahold's shares fell 54% at the market's open to 4.44 euros ( $4.78). Its bonds also fell heavily.
Ahold bought U.S. Foodservice in 2000 in an initial foray into the corporate catering industry. The company said it is now investigating problematic commercial relationships between the unit and its suppliers.
Ahold also said it will restate the way in which it has consolidated results from its retail joint-venture ICA Ahold in Scandinavia, its joint-venture Jeronimo Martins Retail in Portugal and its Argentine supermarket retailer Disco International Holdings. Also under scrutiny are its stakes in supermarket retailers Bompreco in Brazil and Paiz Ahold in Central America, and various accounting and transaction issues at Disco.
Mr. De Ruiter said the problems were discovered as Ahold was finalizing its 2002 results, which were to be released March 5 but are now indefinitely postponed. Last year's results will reflect the lion's share of the $500 million-plus overstatement.
In 2001, Ahold posted net income of 1.1 billion euros on revenue of 52.5 billion euros.
Investor confidence in Ahold was already at a low after a series of erratic disclosures and two profit warnings last year. Ahold began to rankle investors last March when its method of calculating organic growth was called into question, as was the way it accounts for gains from real-estate transactions.
Confusion was renewed when Ahold in April released full-year earnings under U.S. generally accepted accounting principles, showing that profit fell nearly 90% compared with Dutch accounting standards.
Trust in Mr. Van der Hoeven was severely tested and some investors demanded his resignation, but in November the supervisory board backed him for another five to seven years.
"The chairman and chief financial officer are resigning in light of today's events, which weren't known in November," Mr. De Ruiter said Monday.
Ahold said it secured 3.1 billion euros in new funding from a syndicate of banks. The company said it is fully funded and that it will continue with its three-year program focused on reducing debt and increasing cash flow.
Mr. De Ruiter said that the company has suspended some senior executives at U.S. Foodservice, but he declined to give names. Messrs. van der Hoeven and Meurs will stay on to ensure an orderly transition, the company said.
In 2001, Ahold was chosen retailer of the year in the U.S. by trade publication Mass Market Retailer. In recent years, Mr. Van der Hoeven has won the award for best manager in the Netherlands, while Mr. Meurs was named financial officer of the year in 2001.
-By Maaike Veen, Dow Jones Newswires; 31 20 626 0770; maaike.veen@dowjones.com
Dow Jones Newswires
02-24-03 0815ET |
