UPDATE 2-Serbian writedown pushes Delhaize to surprise loss

Thu Nov 7, 2013 7:05am EST

* Posts Q3 net loss of 87 mln eur vs expected net profit of 99.1 mln

* U.S. same-store sales +2.2 pct vs 1.65 pct expected

* Belgian same-store sales +1.5 pct vs 1.25 pct expected

* Takes 191 mln euro impairment in Serbia, 4 mln in Bulgaria

* CFO, rumoured to leave, says will stay on with new CEO (Adds details on Belgium, CFO)

By Robert-Jan Bartunek

BRUSSELS, Nov 7 (Reuters) - Belgian grocer Delhaize took a second writedown on its operations in the Balkans, pushing it to an unexpected third-quarter loss.

Delhaize said it would write off 195 million euros ($263.79 million), mainly on its business in Serbia, where a weak economy and high unemployment have contributed to a decline in sales and undermined short and mid-term expectations for its business there.

The charge comes on top of the about 245 million euros Delhaize wrote off on these operations in January, meaning the group has already lost nearly half of the 932.5 million euros it paid for Serbian retailer Delta Maxi in 2011.

Serbia's economy is likely come under further pressure as the government pursues plans to cut state benefits and subsidies to loss-making companies. At 24 percent, the jobless rate is among the highest in the region.

The Maxi business has more than 370 stores in Serbia and smaller operations in Bosnia and Bulgaria. Delhaize makes about 15 percent of its revenues in the southeastern Europe region, which also includes supermarkets in Greece and Romania.

Delhaize has already sold its operations in Albania for 1 million euros and in Montenegro for 5 million euros.

"I think the risks for further impairment are extremely reduced, and though we are exposed to underlying country risk in Serbia we are optimistic about the long run," Chief Financial Officer Pierre Bouchut said.

The group, with about 3,400 stores worldwide, posted a net loss of 87 million euros in the third quarter, compared with the expectations of a net profit of 99.1 million euros in a Reuters poll of four analysts.

The troubles in southeastern Europe masked a better-than-expected sales performances in its main markets of the United States and Belgium in the third quarter.

CUTTING COSTS

In the United States, where it operates the Food Lion chain in the southeast and the Hannaford brand in the northeast, like-for-like sales rose 2.2 percent year-on-year, compared with a 1.65 percent growth expected in a Reuters poll.

Delhaize makes about two-thirds of its revenues in the United States and has been cutting costs, including renegotiating terms with suppliers, and revamping its main Food Lion chain to counter stiff competition and sluggish consumer spending.

In Belgium, which accounts for about a quarter of revenues, same store sales grew 1.5 percent, also above a Reuters poll expecting growth of 1.25 percent.

Margins contracted in Belgium, however, and outgoing Chief Executive Pierre Olivier Beckers said this trend should persist because of the competitive environment in the country.

Delhaize is facing lower margins and volumes in Belgium, due to competition from the likes of Carrefour, Colruyt hard discounters Aldi and Lidl.

Bouchut quashed recent rumours in the French press about his imminent departure by saying he looked forward to working with the Chief Executive Frans Muller "in the coming years".

The group's shares were up 2.4 percent at 1155 GMT, the strongest performers in STOXX 600 European retail index, which was down 0.1 percent.

On an underlying basis, Delhaize made an operating profit of 176 million euros, just below the Reuters poll average of 180 million euros, and it stuck to its outlook of 755 million euros for 2013 as a whole.

Group revenues were down 0.5 percent to 5.34 billion euros in the third quarter. ($1 = 0.7392 euros) (Reporting by Robert-Jan Bartunek; Editing by Philip Blenkinsop and Pravin Char)

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