Royal Ahold, the world’s fourth largest food retailer, said its fourth quarter profits more than doubled on a tax rebate and lower interest costs.

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Net income rose to EUR239m (US$319m), up from EUR108m for the fourth quarter of 2005.


The company paid EUR136m of interest in the fourth quarter, down 32% from a year earlier. Ahold received a tax rebate of EUR13m, compared with the EUR37m in taxes it paid in the comparable period.


At Ahold’s US Stop & Shop/Giant-Landover chain, operating profit as a percentage of sales narrowed by 0.7% from last year, to 4.2% in the fourth quarter. The operating margin at US Foodservice was 1.7% in the full year, meeting a goal Ahold set in 2003 to restore the unit to profitability.


Ahold, which operates Dutch supermarket chain Albert Heijn, said it expects an operating margin of between 4% and 4.5% in 2007.

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However, despite increased profits, operating income dropped 32% to EUR199m, partially due to an EUR84m charge associated with the sale of its Topps stores in the US. 


Fourth-quarter sales declined 4.6% to EUR10.4bn, Ahold said in February. Revenue was affected by a weaker dollar, the company said.


Ahold said it has increased its share buyback scheme to EUR3bn, EUR1bn more than it had originally planned to spend.


The retailer said that it expects to raise EUR4bn by selling off its US Foodservice unit and US Topps stores. Ahold will use the proceeds from the sale to fund the buyback and reduce debt, CFO John Rishton said today (22 March).


CEO Anders Moberg said in a press conference that the group has received “considerable” interest in the sale of its US units, but would not elaborate on when the businesses would be sold.


“Ahold met the targets we set last year,” Moberg said. “Our retail operations performed inline with our margins guidance and exceeded sales growth guidance.”