UPDATE 2-Colruyt H1 profit up, but margins shrink

Fri Nov 28, 2008 12:33pm EST

* H1 operating profit 212.5 mln euros vs 220 mln expected

* Margins hit by labour and energy costs

* Maintains full-year net profit target of 304 mln euros

(Adds more details, analyst comment)

By Philip Blenkinsop

BRUSSELS, Nov 28 (Reuters) - Belgian discount supermarket chain Colruyt's (COLR.BR) profit rose by less than expected in the first half as cheaper prices drew in customers, but energy and labour costs ate into margins.

The company said in a statement on Friday it maintained its net profit guidance of 304 million euros for its 2008-2009 financial year. A number of analysts had expected Colruyt to increase the target.

"We know that Colruyt tend to be conservative. It is a bit disappointing. It must be that they expect a little less growth in their second half," Ivan Lathouders, analyst at Bank Degroof said.

Colruyt described the market as a difficult one and noted Belgium's system of automatic wage indexation, extra costs for temporary workers and training of new staff to support expansion had pushed the wage bill up.

Earnings before interest and tax (EBIT) rose by 7.7 percent to 212.5 million euros ($275 million), against the average forecast of 220 million euros in a Reuters poll of six analysts.

The operating margin shrank to 6.9 percent from 7.3 percent a year earlier.

Revenue increased by 14.0 percent to 3.09 billion euros, broadly in line with expectations as low prices meant the company gained market share, while the net profit was 5.2 percent higher at 150.4 million euros, against the average forecast of 158 million euros.

Colruyt competes with German hard discounters Aldi and Lidl, France's Carrefour and high-end Belgian retailer Delhaize and has been increasing its market share in Belgium as consumers turn to cheaper goods with a deepening economic downturn.

Colruyt's shares are up by 5 percent in the year to date against the 43 percent drop of the DJ Stoxx European retail index .SXRP. (Reporting by Philip Blenkinsop; Editing by Andrew Macdonald)

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