UPDATE 2-Casino confident of growth as emerging markets expand

Thu Feb 21, 2013 10:22am EST

* 2012 operating profit 2.0 bln, tops guidance for 1.94 bln

* Says confident will grow sales, earnings in 2013

* No plans to enter new emerging markets in 2013 - CEO

* Sees conflict of interest if Diniz chairs Brasil Foods

* Shares up 1.1 percent, hit highest since June 2007

By Dominique Vidalon

PARIS, Feb 21 (Reuters) - French retailer Casino predicted further sales and profit growth this year after expansion in Latin America and Asia lifted 2012 operating profit by 30 percent.

The company - which controls Brazil's top retailer Grupo Pao de Acucar (GPA) - said Brazil, Vietnam, Thailand and Colombia would drive growth, while it would aim to stabilise falling sales at French hypermarkets with price cuts.

"Casino will pursue its strategy of back-to-basics in France and organic growth internationally, while working to maintain its financial structure," Chairman and Chief Executive Jean-Charles Naouri said in a statement.

Casino has been expanding in fast-growing emerging markets Thailand, Brazil, Vietnam and Colombia, which now make up 56 percent of sales and 66 percent of profit, while European consumer spending has hit by the euro zone debt crisis.

Casino, which competes with Carrefour and unlisted Leclerc, Intermarche and Auchan, said it is targeting strong sales growth and higher profit in 2013, aiming for a net debt to core profit (EBITDA) ratio below 2 against 1.91 in 2012.

Naouri told a news conference that while Casino did not plan to enter new emerging markets this year, it was not ruling out making "tactical moves" from Colombia, which he again described as Casino's expansion platform in Latin America.

In Brazil, Casino's second-largest market after France, growth prospects are strong, as Grupo Pao de Acucar (GPA) speeds up expansion in food retail, notably in the cash and carry and convenience formats, while aiming for top spot in e-commerce.

Commenting on Brazilian press speculation that Abilio Diniz, chairman of GPA, might seek to also chair Brazil's BRF-Brasil Foods SA, Naouri said such a move would "obviously be a clear conflict of interest", as Brasil Foods was a major GPA supplier.

While there was nothing in Diniz's shareholder pact with Casino preventing him from making such a move, Naouri said he hoped "ethical and governance principles would prevail".

A spokesman for Diniz in Paris declined comment.

POTENTIAL CONFLICT

Diniz and Naouri have been at odds in recent years after the Brazilian tycoon, whose family founded GPA, tried to orchestrate a merger between GPA and Casino's arch-rival Carrefour .

Last June, Casino took control of GPA but Diniz stayed on as chairman. There has been speculation that Casino might try to use this new potential conflict to push Diniz out for good.

Casino posted full-year operating income of 2 billion euros ($2.7 billion), beating the firm's guidance for 1.94 billion.

Casino shares were up 1.1 percent in early afternoon trade, outperforming the European retail sector. The stock rose as high as 77.98 euros, its highest since June 2007.

"Valuation remains attractive to us," Credit Suisse analysts said in a note, adding that Casino trades at 13.9 times their estimate for 2013 earnings, compared with a 12.7 sector average.

"We think a premium is deserved given the changing profile of the company towards emerging countries and Casino's potential to unlock sum-of-the-parts value," they said.

Wal-Mart Stores Inc, the world's largest retailer and a key rival of Casino in Brazil, trades at multipe of 12.9 times forecast earnings for 2014 against 12.2 for Casino, according to Reuters data .

Casino's profits from international operations rose 64.9 percent, while the contribution from France fell 8.6 percent.

Casino, whose brands include Geant hypermarkets, Franprix and Monoprix supermarkets, Petit Casino convenience stores and Cdiscount Internet shopping, warned last month that the operating margin of its French business would decline amid a worsening business climate.

Fourth-quarter hypermarket sales fell nearly 10 percent after Casino funded permanent price cuts on basic products by reducing promotions, a move that cost it some customers.

Casino also said it would extend price cuts to national brands at its Geant hypermarkets this year.

Naouri ruled out reducing Casino's stake in French real estate unit Mercialys below its current 40 percent.