Ahold makes a profit - and huge rights issue

ZAANDAM, The Netherlands - Dutch retail giant Ahold, hit by huge accounting fraud earlier this year, announced that it has returned to profit but also said it would make a huge rights issue to bolster its finances.

The company reported a net profit of 60 million euros (68 million dollars) for the first half of 2003 compared to a net loss of 142 million euros a year ago.

The rights issue is intened to raise 2.5-3.0 billion euros.

Ahold has been rocked by accounting failures this year and needs the finance from the issue to shore up its balance sheet.

The company hopes to raise a total of 5.0 billion euros with the issue and the sale of subsidiaries outside its key markets. In line with this Ahold announced that it would sell off its Spanish subsidiaries.

The three-year financing plan has been dubbed "Road to Recovery" and focuses on getting the company's financial health back in order.

"With the financing plan that we are proposing we finally draw a line under this difficult year. We can now focus wholeheartedly on strengthening the competitiveness of out business," company chairman Anders Moberg said in a statement.

Despite Ahold's return to profit, the results for the first six months of are still disappointing with underlying earnings that fell 48.4 percent from a year earlier. Sales dropped 11.8 percent due to lower exchange rates of the dollar in particular. Excluding the impact of currency movements sales would have risen some 3.6 percent, according to Ahold.

The company reported operating income before goodwill and exceptional items of 677 million euros compared to 1.3 billion euros in the first half year of 2002.

"The results of the first half year of 2003 were disappointing and impacted by the diversion of out management as a result of the events surrounding the announcement on February" of the accounting scandal, said chief financial officer Hannu Ryopponen.

Ahold, the third-biggest retailer in the world, after US group Wal-Mart and French group Carrefour, said last month it had made a massive net loss of 4.328 billion euros in 2002, according to US accounting standards, and warned that the legacy of an accounting fraud uncovered in its US unit would severely impact its results this year.

The group, which had expanded aggressively abroad in the 1990s, revealed in February that it had discovered widespread accounting irregularities at its unit US Foodservice.