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Feb 25, 2011
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Carrefour seen listing assets, Ahold returning cash

Feb 25, 2011

Feb 25 - Two of Europe's biggest retailers, France's Carrefour and Ahold of the Netherlands, are likely to spice up modest increases in annual profits next week with attempts to boost their unloved shares.

Carrefour in Bangkok, Thailand

Carrefour, undermined by two profit warnings last year, could decide at a board meeting on Wednesday whether to list assets such as its property and discount businesses, a source close to the matter told Reuters.

That might placate major shareholders who feel the value inherent in the group is not reflected in its share price.

Ahold, which makes most of its sales in the United States, is expected to return a least 500 million euros ($691 million) to investors, buying new chief executive Dick Boer more time to decide what to do with its 2-billion-euro-plus cash pile.

Retailers across Europe and the United States are facing an uncertain outlook as governments implement austerity measures to reduce their debts and as commodity prices soar.

World No.1 Wal-Mart posted its seventh straight fall in quarterly underlying U.S. sales on Tuesday.

Results from French group Casino should show that companies in faster-growing emerging markets are doing better.

For Carrefour, however, strong growth in Asia and Latin America last year was tainted by problems at its Brazilian hypermarket business, which triggered the two profit warnings.

That undermined confidence which had been building as the group drives through a three-year turnaround plan aimed at delivering 4.5 billion euros of savings and starts rolling out a new format for its struggling European hypermarkets.

After peaking at 41.28 euros in September, Carrefour shares dropped to as low as 30.85 euros earlier this year.

Europe's biggest retailer responded last month by saying it was considering listing some assets, though it pledged to retain control of Carrefour Property, its European real estate arm.


"They have to make it clear by March 3 what they are up to," said a banker close to the situation.

"I think they are in advanced stages of looking at an IPO (initial public offering) for property ... They might IPO, but they also might spin off. Spin off makes more sense in some ways, because shareholders get the money right away," he added.

Carrefour Property had a gross asset value of 11 billion euros in 2009, almost half of the group's market capitalisation.

Some analysts believe Carrefour is caught between two stools. To get the valuation it wants for the property arm, it would have to lose control of its rents to the separately listed entity.

Other options for Carrefour include listing discount chain Dia, valued at 3.5-4.0 billion euros, floating part of its Chinese or Latin American businesses, or selling out of countries where it is not market leader, such as Poland, Romania or Turkey.

"We believe that Carrefour will look to list 25 percent of its French real estate, realising 2.75 billion euros of proceeds and other non-core operational assets including Dia, Malaysia, Singapore and Poland, realising an additional 6.9 billion," said JP Morgan analysts. These proceeds would equate to 14 euros per share, or about 40 percent of the current total, they added.

Carrefour's operating profit for 2010 should not provide any surprises after the world's No.2 retailer said last month it expected to post an 11 percent increase to 3.025 billion euros.

The focus will be on the outlook for this year, rising food prices and the prospects for new Carrefour Planet hypermarkets.

Some analysts think the group might also raise its cost savings target and/or return more cash to shareholders.


Handing back cash to shareholders is likely to be a major theme for Ahold, which on Friday said it had finished its last 500-million-euro programme to buy back stock.

The results will be the first presented by new chief executive Dick Boer. As he was involved in the formation of the group's current strategy, which is to focus mainly on using cash to look for acquisitions in existing and neighbouring markets, analysts do not expect any major change in direction.

Ahold, which runs Dutch market leader Albert Heijn but makes 60 percent of its sale in the United States, has been outperforming rivals in a particularly tough U.S. market, helped by its strength in more affluent northeastern states.

Analysts think fourth-quarter operating profit dipped 4 percent to 328 million euros, according to a Reuters poll of six, hit by one fewer week of trading than the year before.

Full-year profits are tipped to rise, and analysts have also pencilled in a 17 percent dividend hike to 0.27 euros.

Casino's 2010 results should not spring many surprises, either, after it said last month it was on track for operating profit of 1.29 billion euros, excluding the purchase of Casas Bahia in Brazil and after a tax adjustment.

That performance included a decline in the operating margin in France as the group cut prices to revive its Geant hypermarkets and Leader Price discount stores. Analysts will be keen to hear whether margins can rise this year.

By Dominique Vidalon and Mark Potter
(Additional reporting by Nina Sovich in Paris; Editing by Will Waterman)

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