By Ellen Emmerentze Jervell
DÜSSELDORF-- Metro AG said net profit fell 10% in its fiscal
first quarter as the ruble's plunge against the euro knocked the
shine off the earnings of the German supermarket operator, one of
the industry's big investors in Russia.
Despite the "persistently challenging economic environment," the
group stuck to its forecast for a slight rise in revenue and
operating profit for the fiscal year to end-September.
The group, among Europe's largest supermarket groups alongside
Tesco PLC of the U.K. and Carrefour SA of France, said on Tuesday
that net profit fell to EUR404 million ($458 million) in the three
months to end-December from EUR451 million in the same period last
year.
The German company said exchange-rate fluctuations, with the
weak ruble largely to blame, knocked EUR60 million off earnings in
the quarter. The period is typically the company's most profitable
in the year, as it includes the Christmas shopping season. It
accounts for about 30% of the company's full-year sales.
The slump in the ruble, with currency having recovered only
slightly from a steep fall in December, and Russia's worsening
economy have hit foreign companies doing business in the country
hard. Metro derives nearly a quarter of its EUR63 billion in yearly
revenue from Eastern Europe, including Russia.
Though the ruble has firmed up a bit, the reality of the
economic slowdown and surging inflation has hit hard since the
holidays, according to industry officials and economists, with
consumer confidence falling to record lows.
"The weak ruble obscures our overall good operating
performance," Chief Executive Olaf Koch said in a statement.
"Adjusted for negative currency effects, our earnings were actually
higher than in the same quarter of the previous year."
Metro management remained cautiously optimistic for the rest of
the fiscal year, forecasting, on a comparable currency basis, a
slight rise in overall sales and in earnings before taxes and
interest, adjusted for special items. First-quarter EBIT fell 8% to
EUR1.01 billion on a 2.1% drop in revenue to EUR18.3 billion.
Metro's Media-Saturn business, Europe's biggest consumer
electronics chain, reported a strong quarter, with a 20 % jump in
EBIT, before special items. Despite tough competition from rivals
such as Amazon.com, the business continued to expand its online
activities, with online sales up than 25% to around EUR500 million
in the quarter, accounting for more than 7% of Media-Saturn's total
sales.
Amid the dramatic deterioration in the economic conditions in
Russia, Metto has been narrowing its geographic focus on more
profitable markets.
Metro has sold its Greek wholesale subsidiary Makro Cash &
Carry to a local retailer. The sale was completed on January 30.
Last year, it pulled out of the Danish market, where its Cash &
Carry wholesale operations recorded losses for several years. It
also sold its Cash & Carry business in Vietnam.
To focus on turning around its German hypermarket business,
Metro also disposed of a number of Real hypermarket stores in
Eastern Europe last year.
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