Sligro Food Group’s profit for the year was just over €70 million, which was €4 million or 5.5% lower than in 2009. As reported on 5 January 2010, sales in 2010 were 1.3% higher at €2,286 million. Organic sales growth turned out at 3.6%.

Koen Slippens, CEO:

‘In tough trading conditions, Sligro Food Group was able to outperform the market by 4–5% in both segments. Several factors, most notably the non-recurring integration costs of our ‘Greater Amsterdam’ project, the pressure on prices in the group’s markets and the extra 53rd week in 2009, prevented us from equalling the record profit we achieved in 2009. Our market position in both foodservice and food retail improved in 2010 and the ‘Greater Amsterdam’ project has created a solid base on which to build our profitability in the coming years.’

Gross profit was 0.6% higher at €529 million. The gross profit margin was 0.2 points lower at 23.1%, mainly due to promotional campaigns and pressure on prices in the group’s markets.

Expenses as a percentage of sales were up 0.2 points at 19.3%, due to a combination of factors including non-recurring expenses relating to the ‘Greater Amsterdam’ project (merging of all delivery activities in the Amsterdam region) and relatively modest expenses in week 53 of 2009.

The total non-recurring effect of the ‘Greater Amsterdam’ integration project on the result is estimated at around €10 million, over half of which is non-cash expense. Accelerated depreciation accounts for about €5 million of this figure, on top of some €2 million in book losses and provisions for closure expenses and €3 million in extra operating expenses to guarantee the quality of service. We now have a stable organisation delivering high-quality services and we are well on the way to achieving our original objectives.

Net operating profit was €7 million lower at €91 million. As a percentage of sales, this represented a decrease of 0.3 points to 4.0%.

The foodservice operating profit was €15 million lower at €78 million. As explained above, the ‘Greater Amsterdam’ project was a major factor here, but the underlying trend shows a better picture. In a market that has been declining for the past two years, there has also been intense price competition.

The food retail operating profit was up almost €7 million at €13 million. As a percentage of sales, this equates to a 1.0 point improvement to 1.8%. The sales growth generated by the successful implementation of the Food Retail Masterplan accounted for most of this improvement. Price competition in food retail intensified in the second half of the year.

Earnings per share were 5.4% lower at €1.59, as against €1.68 in 2009.

In view of the significant improvement in free cash flow in recent years, we propose to increase the dividend gradually to 50% of net profit, payable entirely in cash. A dividend of €0.70 per share is proposed for 2010, which equates to a pay-out of 44%.

The financial position was further strengthened in 2010 with long-term finance in the form of a US private placement. All bank debt was repaid in 2010 and cash reserves increased to €67 million. Net interest-bearing debt increased by €25 million in 2010 to €156 million, partly as a consequence of the anniversary dividend of €44 million in respect of 2009, the repurchase of own shares for almost €4 million and the net cost of acquisitions and disposals of just over €40 million.

Outlook

Though not really warranted by the economic circumstances and outlook, consumers are still keeping a tight hold on their purse strings and are very price-conscious. It is all ‘in the mind’.

Food commodity prices have risen sharply in recent months, and this will gradually work through into higher producer prices. The intense price competition on both of the markets we serve makes it difficult to pass these increases on, which adds to the pressure on prices in these markets. The foodservice market has contracted by around 8% in the years since the economic crisis broke. We do not expect this decline to continue in 2011, but recovery will be slow at the start. The trend towards value for money will continue in the hospitality market.

We expect Sligro Food Group to outperform the market in both food retail and foodservice in 2011, as it has in recent years. In food retail, it will be the result of action taken under the Food Retail Masterplan, which has not yet reached full effectiveness. The cash-and-carry segment of the foodservice operation has the support of the strong Sligro format.

The foodservice delivery operation has the benefit of its good price/quality ratio, as recently confirmed by a customer survey. We have also signed a major contract that will generate over 2% growth in total foodservice sales.

As mentioned above, competition will be intense in 2011, and this will exert pressure on prices. We predict a relatively modest increase in expenses, reflecting the forecast growth in volume. We shall also gradually start to reap the benefit of savings yielded by the ‘Greater Amsterdam’ and ‘PLOP’ (PaperLess Order Processing) projects, whereas in 2010 there were substantial non-recurring expenses.

All things considered, we look forward to 2011 with confidence. Given the present market uncertainties, however, we prefer not to give a firm forecast of our future results at this stage.

The 2010 annual report will be published on 8 February 2011. Developments in the first quarter of 2011 will be discussed in our trading update on 21 April 2011 and our half-year figures will be published on 21 July 2011.

Background to the full-year figures will be given today in a press conference and analysts’ meeting. For the presentation given at these events, click here.

Veghel, 27 January 2011

On behalf of the Executive Board of Sligro Food Group N.V.,

K.M. Slippens

H.L. van Rozendaal

Tel. +31 413 34 35 00