Koninklijke Ahold Delhaize N.V.

Frederic van Daele - Frans W. H.

Muller - Chief Executive Officer and President Pierre Bruno Charles Bouchut - Chief Financial Officer and Executive Vice President

Sreedhar Mahamkali - Macquarie Research Fernand de Boer - Petercam S.A., Research Division Andrew Gwynn - Exane BNP Paribas, Research Division Pascale Weber - KBC Securities NV, Research Division Robert Joyce - Goldman Sachs Group Inc., Research Division Fabienne Caron - Kepler Cheuvreux, Research Division Marco Gulpers - ING Groep N.V., Research Division

Good morning. This is Frederic van Daele, investor relations of Delhaize Group.

I would like to welcome everyone to the conference call regarding our second quarter 2014 results. Today, we have the following people with us: Frans Muller, CEO, Delhaize Group; and Pierre Bouchut, CFO of Delhaize Group.

During this call, we will first give some highlights and then discuss our financial performance in the second quarter and the first half. And that is followed by some comments on operations.

Afterwards, we will take questions. And for those unable to stay on the call or wish to listen to it again, a replay will be available on the company's website.

Frans, before I give you the word, I just want to remind to you, everyone, that today's presentation and discussion will include forward-looking statements, and we want to caution you that such statements are predictions and that actual events or results can differ materially. Factors that may have a material effect on our business are detailed in the cautionary notes in our earnings release and are contained in our SEC filings.

The statements are made as of the date of this presentation, and Delhaize Group assumes no obligation to update this information. Frans, I give you the word.

Thank you much. Thank you very much, Frederic.

And good morning, everyone. Slide 3 should be familiar to you, and it summarized our priorities as set out in March of this year.

I move to Slide #4. This provides you with more details on our action plan.

In 2012 and '13, Delhaize Group has mainly focused on strengthening the balance sheet through the divestiture of peripheral assets, through working capital improvements and imposing a higher CapEx discipline. At the same time, Food Lion has been made more price competitive, while SG&A as a percentage of sales stopped growing.

For this year and next, we plan to continue this path. At the same time, we have started to take even more initiatives that should result in accelerated growth.

At Food Lion, we are testing how to be more relevant to our customers. And in Belgium, we have announced the Transformation Plan, which should, once implemented and accepted, improve competitiveness and provide us with the means to remain a differentiated operator in the Belgium market.

Further, we are currently exploring ways to accelerate growth at Hannaford and Alfa Beta, and we have a plan in place to accelerate growth in Delhaize Serbia in -- and in other core markets. Page 5 summarizes the key elements of the second quarter.

In terms of market share, we believe that our -- to our best knowledge, the second quarter provides a similar picture as the first, and this means that market share has been stable or increasing compared to last year in all of our operating markets, with the exception of Belgium, where the trend has deteriorated. In the U.S., Food Lion posted another quarter of positive same-store sales growth and real growth, showing continued momentum, supported by the completion of the phased repositioning.

Hannaford also had a good performance this quarter. The positive revenue momentum is started -- is starting to translate into a better trend in our profitability, whereby our underlying operating profit level was flat this quarter.

This is helped by the fact that we have started to cycle a number of our 2013 price investments. In Belgium, as you know, the environment remains very competitive, and Delhaize Belgium's market share was under pressure, although this can partially be explained by the disruption following the announcement of the Transformation Plan in June.

Our affiliated network performed reasonably well and outperformed our company-operated stores. Like in the first quarter, our operating profitability was impacted by negative sales leverage.

In Southeastern Europe, Alfa Beta in Greece and Mega Image in Romania continued to perform well, with positive trends in both comparable store sales growth and market share, which was also boosted by further store expansion in both networks. In Serbia, we did see the first signs of stabilization, while at the same time, our market share continued to evolve positively.

However, our revenues and profitability continued to be impacted by the tough economic environment, with negative GDP growth and by significant food retail prices deflation, with no prospect for a rapid shift in this trend. This situation had led us to book an additional EUR 150 million impairment, in euros, of our Maxi operations to reflect their fair market value over time.

Pierre will now review our second quarter with you. Pierre, the floor is yours.

Thank you, Frans. And good morning to everyone.

Let me now review our Q2 2014 financial results. Slide 6 provides you with our summary Q3 (sic) [Q2] income statement.

At EUR 5.3 billion, our sales increased by 0.5% at actual FX rates and by 3.7% at identical exchange rates. Organic growth for the quarter also stood at 3.7%.

Our gross margin stood at 24% and decreased by 25 basis points, compared to last year at identical exchange rates. This is mainly explained by our 30 basis point price investment at Delhaize America and by a 119 basis point gross margin decrease in Belgium, driven by price investments, promotions and higher logistic costs resulting from the start-up expenses relating to our new fresh automated distribution center and extra costs in our dark stores.

Our SG&A stood at 21.1% of sales and we're almost stable compared to last year as a percentage of sales. At 108 -- EUR 178 million, our Q2 underlying operating profit decreased by 7.8% at identical exchange rates.

Our UOP margin was 3.4%, down 42 basis points at identical rates, mainly as a result of our gross margin decrease. When taking into account other operating income and expenses, impacted by the EUR 150 million impairment charge taken on our Serbia operations, but also EUR 45 million of net finance costs, EUR 28 million of income tax expenses and a loss of EUR 1 million in discontinued operation, we recorded a group share net loss of EUR 45 million compared to a profit of EUR 105 million last year.

We generated EUR 82 million of free cash flow in the second quarter, excluding the proceeds from the sales of Sweetbay, Harveys and Reid's, a 24% increase compared to EUR 66 million in the second quarter of last year. Slide 7 provides you with the same overview, but for the first half of the year.

Group revenues had increased by 0.4% at actual rates and by 3.2% at identical exchange rates to EUR 10.4 billion. Gross margin decreased by 42 basis point at identical rates compared to last year, due to our price investments, mainly in the U.S.

and in Belgium. Our SG&A as a percentage of sales stand at 21.2% and is flat at identical rates.

As a result, our underlying operating profit decreased by 11% at identical exchange rates to EUR 339 million. The underlying operating margin for the first half was 3.3%, a decrease of 52 basis point at identical rates compared to last year.

When taking into account other operating income and expenses of EUR 103 million, impacted by the EUR 150 million impairment charge taken on our Serbia operations but also EUR 90 million of net finance costs, EUR 50 million of income tax expenses and a loss of EUR 11 million in discontinued operations, we recorded a group share in net profit of EUR 35 million compared to a profit of EUR 156 million last year. We generated EUR 128 million of operating free cash flow in the first half of this year, on track to deliver a healthy operating free cash flow over 2014.

Slide 8 shows the evolution of our EBITDA and underlying EBITDA. As you can note, at identical exchange rates, the resilience of our EBITDA and underlying EBITDA is very encouraging.

Actually, our EBITDA for Q2 has increased to EUR 338 million, while our underlying EBITDA decreased by 2.3% to EUR 336 million. For H1, our EBITDA has increased by 1.2%, while our underlying EBITDA has decreased by 4.9% to EUR 648 million.

At actual exchange rates, EBITDA for Q2 has remained quite stable, while underlying EBITDA has decreased by 4 -- by 5.4%. For H1, EBITDA has decreased by 1.8%, while our underlying EBITDA has decreased by 7.6% to EUR 630 million.

The following Slide 9 gives you more insight on the revenue evolution at Delhaize America. In Q2, we reported a same-store sales growth of 3.3%.

Retail inflation turned positive in the second quarter and stood at 2.2% for the quarter. Retail inflation has stabilized in June after having steadily increased since the beginning of the year.

For Q2, our cost inflation was in line with our retail inflation. Real growth was, therefore, positive at 1.1% for our 3 U.S.

banners combined. As in previous quarters, Food Lion is the main driver for the good performance, thanks to the continued momentum from the phase repositioning.

When taking into account the positive 80 basis point calendar impact and the 60 basis point positive impact from store openings, our Q2 organic growth stands at 4.7%. Over H1, we reported a same-store sales increase of 4%.

And if we add up the 40 basis point positive impact from store openings, Delhaize America growth stands at a satisfactory 4.4%. Slide 10 provides you with background information on our underlying operating margin evolution at Delhaize America.

In Q2, we reported a UOP margin of 3.6% compared to 3.8% last year. This decrease in UOP margin is entirely attributable to a 30 basis point price investment in our U.S.

operations. Food Lion started to cycle Phase 4 during the second quarter and will cycle Phase 4 -- 5 at the end of the year, while Hannaford continues investing in prices in some of its markets.

The negative impact of price investments on our margin was partly offset by the positive impact from volume growth. As a consequence, our SG&A has improved by 15 basis point as compared to last year.

For H1, our margin stood at 3.6%, showing a 33 basis point decrease compared to last year, again as a result of our price investments. For the full year, we expect our U.S.

margin to stabilize compared to last year. The next slide presents Delhaize Belgian sales evolution over the second quarter and the first half.

In Q2, Delhaize Belgium same-store sales decreased by 1.2% and suffered from the impact of strike in some of our company-operated stores, after the announcement of our Transformation Plan mid-June. Real growth was negative and stood at 2 -- at minus 2.1%, similar to Q1.

In addition, we invested 80 basis points in prices and promotions, which impacted our top line. The competitive environment remains tough, and retail inflation has decreased to 0.9% compared to 1.3% in the first quarter.

With a positive calendar effect of 50 basis points and a positive 70 basis points from network expansion, Delhaize Belgium revenues growth was flat. As you can see, over H1, our organic growth stand at minus 0.4% when adding the minus 1% same-store sales growth, a negative 10 basis point calendar impact and 7 basis points from network expansion -- and 70 basis points from network expansion.

As shown on Slide 12, Delhaize Belgium UOP margin decreased by 100 basis point over Q2, from 4.2% in Q2 2013 to 3.2% in Q2 this year. This drop is mainly explained by, first, our 80 basis point investment in prices and promotion; second, 50 basis -- 55 basis points higher logistic costs, split evenly between start-up costs relating to our new automated DC and the opening of our dark stores.

Those additional costs were partly offset by a lower shrink for 15 basis points. For H1, our UOP margin dropped by 130 basis point to 3.2% in H1, again mainly as a result of lower gross margin.

We expect our Belgium margin to remain under pressure for the rest of the year, as the competitive environment will remain intense and as we negotiate with the unions about the implementation of our proposed Transformation Plan. On Slide 13, we provide you with the sales evolution in our Southeastern Europe segment.

Our same-store sales for Q2 stand at plus 0.1% for the segment. If you take into account the 5.2% positive impact from expansion, our organic growth was 5.3%.

While Greece and Romania continued to post positive same-store sales and market share gains, Maxi same-store sales in Serbia was negative, driven by retail deflation and negative volume growth. While still slightly negative, real growth in Serbia showed, however, an improvement compared to previous quarters.

For H1, same-store sales of our southeastern operation -- Southeastern Europe operation was down 10 basis points. With a negative 30 basis point calendar effect and a 480 basis point positive impact from store openings, the organic growth of our Southeastern Europe segment stands at 4.4%.

On this following chart, Slide 14, we'll provide you with more details on the margin evolution for Southeastern Europe. In Q2, our UOP margin decreased by 50 basis points from 4.4% in Q2 2013 to 3.9% in Q2 2014.

The margin decrease is explained by the still difficult trading conditions in Serbia, resulting in negative sales leverage, as well as promotional spend in Greece and a change in defined benefit plan, which had a onetime retroactive positive impact in Greece last year. The prevailing sluggish economic situation in Serbia, with negative GDP growth, combined with significant food price deflation, with no prospect for a short-term turnaround, has led us to book an additional EUR 150 million impairment of our Maxi operation to reflect their sustainable fair market value.

For H1, our Southeastern Europe UOP margin decreased by 40 basis point to 2.9%, mostly attributable to the negative sales leverage in Serbia. The following waterfall analysis on Slide 15 provide the breakdown of our cash flow generation at actual FX rates in the first half of the year.

Over H1, our free cash flow generation has been mainly supported by regular [ph] EBITDA and continued CapEx discipline. Over H1, our free cash flow was, however, negatively impacted by additional working capital in Southeastern Europe for EUR 109 million, additional cash CapEx for EUR 51 million, increase in taxes for EUR 56 million and the additional bonus payment at Delhaize America for EUR 60 million.

Our operating free cash flow stand at EUR 128 million over H1. With the proceeds from Sweetbay, Harveys and Reid's divestiture for EUR 180 million, our total free cash flow for H1 stand at EUR 308 million.

I am now on Slide 16. Compared to the end of 2013, our net debt further decreased by EUR 129 million, down to EUR 1.3 billion at the end of H1 2014.

You will note, therefore, that our net debt has been divided by 2 over the last 30 months. On the right side of the slide, you see the evolution of our net debt capacity, according to the most demanding ratio under our current BBB-, Baa3 investment grade rating.

Our net debt capacity stands at EUR 730 million as of the end of June and therefore has more than doubled over the last 18 months, needless to say that we are pleased with the underlying reinforcement of our financial structure. I now hand over to Frans to give you an update on our operations.

Thank you, Pierre. Let me give you an update on our progress, with regard to our strategic initiatives.

Slide 17 summarizes the status at Food Lion. Food Lion is a dense network of supermarkets, that offers low prices with strong promotions and an element of convenience to its local communities.

In order to improve Food Lion further, we have decided to implement a large assortment change at Food Lion this year and next year. This process continues to be on track.

We've now implemented changes in the first wave of categories, which have resulted in minimal disruption in the distribution centers and stores. It has resulted in a continuation of the solid trends we have been seeing and in an overall increase of our market share in those categories.

Additionally, the checkout software and hardware are being renewed. This, in combination with the allocation of extra labor hours, should decrease waiting times at the checkouts.

This process is currently gaining speed, with now over 160 Food Lion stores on the new equipment. Starting in the fourth quarter of this year, we are planning to revamp our private label ranges.

This will also be a gradual rollout process, which could take up to 18 months. Finally, we will be testing our Easy, Fresh & Affordable strategy in 77 stores, with the first batch of 29 stores in Wilmington, North Carolina in a couple of weeks.

The second half of the test will take place in Greenville, North Carolina in November of this year. These tests follow the opening of our pilot store in Concord in December last year, which continues to show strong results, with a sales uplift of well over 20%.

As we stated before, we want to fully test the Easy, Fresh & Affordable strategy and its different components in order to take decisions on how to best roll out this to the rest of the Food Lion network over the coming years. The strong sales response we have seen at Food Lion so far is, for us, an encouragement to continue investing in the banner.

On Slide 18, you can see that there is still a significant gap compared to our peers on sales productivity, but also on share of wallet, which we need to address. While we believe the trend is currently good, there is significant work ahead of us in order to narrow the gap to our peers.

On Slide 18 -- 19, we show a timeline of initiatives underway at Food Lion at the moment. In the fourth quarter of 2013, we completed the phase repositioning with the launch of Phase 5 in November.

We have been running a number of assortment tests in 3 lab stores since October of last year, and I already mentioned that we opened a pilot store in Concord last December. Since the beginning of this year, we are implementing a number of assortment changes in center store, and we are running some tests such as sealed fresh beef and new items for produce, dairy and for deli counter.

I already mentioned that we are updating our checkout technology at Food Lion. We already have completed this process at Hannaford.

Finally, we will test our new store concept, including a fair degree of maintenance CapEx, in 77 stores in the second half of this year. This process is on-track and it will stay within the CapEx guidance of $115 million, which we communicated in March.

We hope to have the learnings of these market tests by the end of this year and early next year, so that we are able to include these in our planning going forward. Let's now move to Delhaize Belgium on Slide 20.

Over the years, Delhaize Belgium has managed to maintain its market share in the Belgium market of around 25%. This has been supported by high-quality locations and a strong affiliated network.

We have a differentiated offer, large variety of fresh and well-developed private label range. This has also translated improving -- in improving customer satisfaction over the last years, despite the increased intensity in the competitive environment.

Over the same period, our costs have increased, which has put our profitability under pressure, mainly at our company-operated supermarkets. It's our intent to address this and to secure the long-term health of our Belgium operations through the Transformation Plan, which we announced in June.

On Slide 21, I would like to go in a little more detail on this Transformation Plan that Delhaize Belgium proposed and communicated on the 11th of June. We have stated that we are convinced that Delhaize Belgium has to implement significant organizational changes in order to secure its future.

The economic environment is not easy, and competition has become fiercer in recent years. We are, therefore, convinced that we need to accelerate the implementation of our commercial strategy and step-up our investments in order to retain our differentiated market position, which is focused on our Belgian identity, having the reputation of high-quality products and offering a strong customer service.

However, to realize our goals, we have to reduce our structural gap for productive labor cost per hour compared to our peers, which currently ranges from 15% to more than 30%, as you see on this slide. Delhaize Belgium is considering measures to improve efficiency and lower the costs of its company-operated activities.

These measures include implementing a new and lighter organization in the stores and back-office processes, relying more on efficiency and new technologies in the stores, but also adapting the wage and working conditions of all associates. Finally, Delhaize Belgium is also considering terminating its company-operated activities in 14 stores.

While we fully realize that these are very, very difficult decisions, which potentially have a lot of impact on our associates, we are doing everything in our capabilities to be as transparent as possible during this process. And we are convinced that these steps are necessary in order to secure the future of our Belgian operations.

On Slide 22, you can see a summary of the different steps we are following in this process, set out by the law Renault. In September, we will resume the dialogue with our social partners.

We are currently not able to provide you with a more precise timeline when this process is going to be concluded, but we hope that the uncertainty for our associates will be as short as possible. I now want to briefly describe what we are doing with our commercial strategy at Delhaize Belgium, this on Page 23.

In April, Delhaize Belgium opened 2 next-generation stores, in which we have fine-tuned our assortment, our service departments but also the checkout. The main changes in the stores are focused on fresh, a strong point of Delhaize in Belgium, which we want to further improve.

Secondly, we are fine-tuning our assortment to make this as innovative and efficient as possible. And here as well, like in the U.S., a review of our private brands is underway.

Thirdly, we have planned further investments in prices and promotions, as we want to provide customers with the best everyday value. Then we'll use these learnings of these 2 generation stores in 2 other pilot stores that we plan to open in the second half of this year.

I will now discuss some highlights in our Southeastern European operations, and in the meantime, I'm on Slide 24. The growth of over 5%, at identical rates that we realized in the second quarter, is largely delivered by store expansion and comparable store sales growth at Alfa Beta in Greece and at Mega Image in Romania.

In the first half of the year, we managed to add 16 new stores in Greece. And we managed again to growth -- to grow comparable sales store growth, driven by transaction, as inflation is largely flat at the moment in Greece.

Profitability in Greece was impacted by a one-off favorable change in pensions in June 2013, which now drops out of the comparison base. In Serbia, revenues are gradually starting to stabilize, although comparable store sales and overall sales growth was still negative.

We have to bear in mind that there continues to be significant retail deflation in the market. We continue to gain market share in Serbia, with our various banners.

And as already highlighted by Pierre, we revisited our growth and profitability expectations, resulting in a broader impairment of our goodwill and trade names. We are nevertheless working very hard on improving the operational performance in the Serbian market.

For example, we have currently 15 Maxi stores where we are fine-tuning a new commercial policy with more visible promotions and then win in fresh strategy. This has resulted in good results so far, and we will expand this strategy to a larger number of stores soon.

We are also contemplating changes to the Tempo hypermarket concept. And finally, we will be opening our new distribution center in the fourth quarter of the year, this year, and this is exactly as we planned.

At Mega Image in Romania, we are delivering on our full expansion plan, with already 21 stores opened year-to-date and are also reporting positive comparable store sales growth. We also announced a small acquisition in Romania, which will add another 20 stores by the end of the year, if approved by the relevant authorities.

To conclude: We managed to gain market share in all 3 countries in the second quarter. On Slide 25, you can see a graphical overview of our priorities for 2014 and '15.

In 2014, our actions are twofold. The first set of actions is focused on initiating change, mainly at Delhaize Belgium and Delhaize Serbia, while the second action theme is focused on growth initiatives.

For example, at Food Lion, with the testing of the new strategy, or at Hannaford, where we're looking for ways to improve its growth profile. In 2015, we should start rolling out new store concepts at both Food Lion and Delhaize Belgium.

And we will also clarify, going forward, how we will try to increase growth in our other core markets. At the same time, we will continue to be disciplined when spending capital and focus our working capital where there is still scope for further improvements.

The actions in Greece and Romania are focused on maintaining or even accelerating the current positive trends. And now Slide 26, for the conclusion.

We have currently 2 critical strategic initiatives underway. At Food Lion, we will be testing our new commercial concept in 77 stores, and we believe this step will help us to further close the gap with our peers in terms of sales productivity.

At Delhaize Belgium, the focus is on the intended Transformation Plan. Looking at the second half of the year, let's highlight the following trends.

Firstly, we would expect to see continued comparable store sales growth at both Food Lion and Hannaford. Secondly, Greece and Romania should continue to grow their revenues, with a solid level of profitability.

Thirdly, it's clear that the Transformation Plan in Belgium will result in some uncertainties in the short term. And finally, we would expect a persistently difficult trading environment in Serbia.

As you can see on the bottom of the page, we have not changed the guidance that we have provided so far for the full year. I now would like to open for questions, so please, operator, could you give the instructions and lead the Q&A session?

Three questions, please. Firstly, Frans, you've talked about finalizing noncore asset disposals and portfolio optimization in 2014.

Can you talk a little bit about what else remains to be done, particularly from the point of working dollars? And still, if there is any update in terms of your thoughts, that will be helpful.

And secondly, the U.S., I mean, clearly, you're tackling SG&A in Belgium, but what are the opportunities for you in the U.S.? If you could just shed a bit of light on the U.S.

SG&A optimization, what scope that is. That's the second one.

And finally, Pierre, I see you're actually talking about net debt capacity. It's probably the first time I've heard you talk about capacity.

You've certainly talked about reduction in net debt over the last few quarters. Is there anything we should read into the year in terms of your ability to use the balance sheet, either to give shareholders a bit more return or you looking potentially to do some bolt-on acquisitions, et cetera?

Is there anything we should really be thinking about, the fact that you've highlighting net debt capacity?

Good. Thank you very much.

Coming to your first question, on Bottom Dollar Food. As we said before, we have roughly 60 stores in Philadelphia and Pittsburgh, and we're now focusing on in getting the business model of Bottom Dollar Food profitable and sustainable.

That is where the team is working on, a lot of progress made in 2013. And we see also that we're getting now -- with the various actions they made on both SG&A but also on a smarter investment of pricing, that we get now very close to a breakeven for Bottom Dollar Food.

On the U.S. SG&A, like all for in the group, we would like to reduce our SG&A for the total group by 50 basis points in the coming 3 years.

And also there, the American operations are no exception. And it's important not only to look at percentage of our sales but also as -- at the absolute opportunities we have.

And all the teams worldwide, and U.S. is no exception, are working to meet this target.

Pierre?

Sreedhar, actually, since June 2012, we have been consistently and systematically updating you on our net debt capacity, because it is the real metric. This matters, because it takes into account not only our financing net debt, but also the underlying net present value of all these commitments, and this is the key metrics that we are tracking.

And we are very glad, of course, that these metrics has increased from about EUR 250 million, EUR 270 million, if my memory is correct, in June 2012 to EUR 730 million as of June 2014. And of course, we are glad of such an evolution and we'll continue to keep you posted.

of such an evolution.

[indiscernible] also, out of [indiscernible], from Petercam. Also 3 questions from my side.

First question is on your pilot store in Concord. You started with a very good uptick in sales there.

Did that maintain that sales uptick? Or did you saw -- see some fall out, fall down there?

Second question is on your pilot store in Belgium, the new ones, Ifistada [ph] stores. It looks, to me, a very upscale assortment, which might not be the right concept for the entire Belgium market.

Could you ferry that in within Belgium? Or how do you see that?

And also, you're talking about more promotional concept, but I -- in the stores I visited, I didn't really get that feeling that is was very promotional, so maybe a comment there. And maybe the last question, on your pricing in Belgium, if you track the differences with Colruyt's on a monthly basis, it looks to me a very strength move [ph] in June, where there was a significant price increase in the gap with Colruyt, at least from their side.

Could you also comment on that?

Okay, let me go through your questions. First of all, the Concord store, that's -- the pilots will open on the 4th of December.

I think we can be very happy to report that, also at the moment, we have well over 20% sales growth for the Concord store. So that seems to be, as far as you can say, at least sustainable in the last 6, 7 months.

And we see there are both an uplift in basket size and an uplift in visits. On the pilot stores, Braine and Wezembeek in Belgium, both had a very good start.

Both stores -- but also both stores have been impacted, let's say, by the announcement in June of our intended Transformation Plan, which we see that impact across the network. We are very confident that these stores bring, especially for those affluent areas in Braine and Brabant and Wezembeek, a very good value.

And as we launch them as pilot and test stores, there are, of course, a few things you can still improve. We are very happy with our produce department.

But I would agree with you that, on the promotional part on, let's say, communicating your price element, where we invested quite a bit, and where we are on the way of closing the gap with our competitors, that we could do more in communicating this to our customers. Third question, on Colruyt in June, we do not exactly what you're referring to, but the only thing what I can say in June, that in June, of course, we had ourselves our announcement on the 11th of June, where we had the sales impact.

And the second thing what I can say is that, in June, because of the announcement of our intended plan, we did not go full out with our promotions, nor with our World Cup promotions.

Three questions. It seems to be the standard, so I'll go for 3.

Just on the first, I think, Pierre, you mentioned during the prepared remarks, on the margin for the U.S., I mean, you expect it to be flat in the full year. Could you just clarify?

I think that would obviously imply loosely up 30 basis points in the second half. Second question was I'm just wondering if it's too soon to quantify the size of the one-off from the Belgium Transformation Plan.

And I don't want to a prejudice anything there. And then finally, just on the cash position, right about EUR 1 billion, and frankly, it was exactly EUR 1 billion of gross cash, but obviously still quite a lot of gross debts.

Any further thoughts on paying down some of that gross debts and using that cash maybe in other ways as well?

Well, let's start with that. We said that we have a total cash position on hand of EUR 950 million.

And the net financing debt, of course, when deducting these cash positions, stand at EUR 1.3 billion, more or less. I said earlier and during our Q1 conf call, the use of our cash position, as you know, will depend largely on the outcome of our 2 strategic initiatives: Easy, Fresh & Affordable at Food Lion and our Transformation Plan in Belgium.

And we therefore, cannot comment at this stage. We need to have more visibility, and we hope to have such a visibility, of course, in Q1 next year.

The margin in the U.S., yes, we kept telling you over the last 6 month or so that the -- we expect our operating margin in the U.S. to stabilize, as we are sighting in the Phase 5 and Phase 6 Food Lion repositioning in Q2, Q3 and Q4 of this year.

On the third question, the Transformation Plan in Belgium, the sizing of a potential one-off, as I understood the question. We resume our talks with our social partners in September.

And those sessions are planned, which is still the consultation phase. And from there on, hopefully, we move into the phase of talking about solutions for associates and for the company.

And it's, therefore, very premature to have any assessment on a potential one-off and a potential sizing of the measures.

Just sorry, could you just comment to the margin points? You mentioned obviously stabilization, but stabilization for the full year implies up in the second half, I think, about loosely 30 basis points.

Could you just clarify what you mean stabilization?

Well, I think, at Q2, UOP margin seems to be a good indicator, maybe with a slight potential upside over Q3 and Q4.

The comment was for the U.S., I think, when you...

No, I'm not talking of the U.S. This was you question.

Yes, yes.

First of all, could you give us some more details on about how much intangibles you have left on the balance sheet for Serbia? Secondly, there was some news that Albert Heijn has acquired an affiliate store of Delhaize in Maaseik.

So do you see Albert Heijn as a threat, that they might acquire more or manage to convince affiliates to step over to their chain? Could you also quantify the impact of the disruption at the stores in the second quarter, what the impact was on sales?

Let me start with the second question, on Maaseik and the affiliates, in general, in Belgium. It's, for us, at the moment, business as usual.

We have, in total, affiliate network of 556 affiliated stores on AD, Proxy and Shop and Go. And of course, in such a network with such an amount of stores, there is always some movement.

So far, if you talk about this 2014 year, we closed down 1 affiliate store. And we have lost, if you'd like to say lost, 2 stores to Carrefour: 1 AD and 1 Proxy.

This is just normal course of business, because a lot of complex are running out. And also, we gained many more extensions than we lost extensions of our contracts.

On Maaseik, which has been reported in the press, AD Maaseik, we took the decision consciously in April of this year not to extend that type of arrangement under the cost and projections we had in our hands, as we also would like to have a sustainable business going forward. Overall, the number of affiliates very loyal to Delhaize is staying very sturdy and very stable.

We are convinced that, for the affiliates themselves, which is our interest, we have the best possible sales productivity and profit profitability per square meter of operation in Belgium. We're working very hard with the affiliates, of course, to make sure that our proposition remains strong.

And it's not only our time, but also Carrefour and Colruyt are doing also for affiliate solutions. So it's also there a competitive market, but we feel very confident that we have the right -- that we are doing the right things here.

Yes, to answer your question on the -- in Serbia, we are left in our books for Maxi with EUR 50 million of goodwill and EUR 70 million of trade names. So all together, it's EUR 120 million.

It is our sentiment that, today, after 3 consecutive impairment in our Maxi operation in Serbia since 2011, we have now with EUR 120 million a more sustainable value of Maxi in our books. As explained, our operation in Serbia have been seriously impacted over the last 12 months by GDP recession in Serbia, on one hand, but also by a significant food prices deflation, as we highlighted it.

We also decided to close down in Serbia our transit and compensation business, with total sales of about EUR 70 million to EUR 80 million, in last year. So all that explain a further impairment in Serbia.

And I gave you the key metrics for the coming years.

And the impact of the disruption at the stores on Belgium sales in the second quarter?

Yes, Pascale, it's not so easy to calculate these kind of things, but to give you a number, if you look at the week of the announcement there, the week of 11th of June, and we look at the number of stores which were on strike and we try to connect -- and we're only talking about company-operated stores, and we try to connect these to the sales number, we roughly estimate, let's say, the damage there at EUR 10 million of sales, with a roughly EUR 3 million of UOP, for that specific week, for those specific stores on strike. And this is the number I can give you.

A couple of questions from me, about online, actually. So I just wanted to ask firstly, in terms of the dark store gross margin impact, is that a recurring impact, the cost of doing business online?

Or is that just a one-off kind of start-up cost? The second one is also on that dark store.

Can you give us some metrics on the kind of the capital cost of the dark store, the units per week you're achieving from that dark store? That would be great.

And finally, just in terms of online, in the future, are you looking at the U.S. in any terms of online rollout at the moment?

Good. Let me give you an answer on the U.S.

And we talk here about Hannaford, Hannaford To Go. We'll roll out this year roughly 10 more stores for Hannaford To Go, where we see -- and a -- and positive sales uplift, where we see a lot of new business and additional business and where we also see that customers at Hannaford To Go shop like every customer across all the assortments, all the categories but haven't significantly higher baskets.

So at Hannaford, we see a very positive development. It depends a little bit where you are in which market and what kind of service you have to offer.

At the moment, we have in the Hannaford To Go, which is in -- more or less, in click-and-collects type of solution for our Hannaford stores. Maybe Pierre, a few things on dark stores from your side?

Yes. Well, you will probably be disappointed, because we are not going to provide you with details on the situation and on the overall, the expected situation going forward.

Of course, part of it is start-up costs, and it is non-recurring, but of course, this is a business where we have to reach, as you understand it perfectly well, a minimum threshold and to reach the productivity going forward. And at this stage, we are not going to provide you with any metrics in these respects.

We do believe in the development of online sales, and we are dedicated to it. There is a start-up cost, of course, with our dark store in Belgium.

Most of it is nonrecurring, but it will take time for us, of course, you will understand that, to build up the needed volume to reach a minimum [indiscernible] in this business, as you have to look at it on -- from an analystic standpoint.

Okay. And anything on just even the cost of the dark store, just in terms of the capital outlay?

Rob, it's Frederic. It's a third-party dark store, so there is not so much capital involved.

I've got 2 question. The first one, on the U.S.

Could you give us more qualitative comments on the pricing environment in the Southeast, particularly if your price difference versus Harris Teeter or Walmart has changed? And any comment on the Northeast would be as well appreciated.

And my second question is regarding Belgium. On Slide 21, you put again the cost per productive hour difference for your competitors.

Could you give us a feeling of what is the price difference with your competitors at this point in time? And how do you believe it may evolve when you start to sort your cost issue?

The first question, Fabienne, on price positioning in the U.S. I understand you are specifically interested in Harris Teeter, which is one of our competitors in the North Carolina markets, and also interested in Walmart.

A few comments there because that question had came also up in the Q1, based on the Harris Teeter acquisition by Kroger. We see more pricing and promotion activity at Harris Teeter.

And if you'll -- if you walk to stores, which we do and which I did last week, then you see they have become much more vocal on that element. And it's very difficult now for us to assess the exact effect.

So we have a look. We are convinced that we are, compared to Harris Teeter, definitely much more cheaper still, and it will remains like this.

But there is some more action in the stores. On Walmart, we always said the same in our price positioning, and this has not changed.

We see that we -- our -- on an 8-week rolling basis and roughly at 5% price difference, where we are more expensive, Food Lion versus Walmart. And we do this index, based on a representation of 40% to 54 -- 40% to 45% of our sales.

This, on those comparisons?

Yes. On Belgium, I mean, as we made it explicit, Fabienne, the idea is to reinvest all the savings we may achieve in our Transformation Plan, both in our sales price but also in remodeling, in an in-depth remodeling of our network in Belgium.

It is, therefore, too early at this stage to give you any precise comment, as long as we do not know the outcome of the planned negotiation with the unions.

Okay. But to come back on the U.S, are you in a position to give me a percentage price difference to Harris Teeter?

I remember it used to be about 10%. And for Belgium, if you -- I can understand you can tell -- not tell me where you will go, but can you tell me where you are Q-on-Q in price difference?

Well, in Belgium, we are at the same price level in other supermarket. That's Carrefour in the supermarkets.

We are therefore, probably 200 basis points cheaper than Carrefour supermarkets. And versus Colruyt and Ahold, it's a bit difficult because Colruyt, at 2 price -- 2 sets -- or 5 sets of prices, but mainly 1 of them to tackle Ahold prices in the Finnish [ph] part of the country, in the northeast part -- northwest part of the country.

So in this specific segment, we probably -- the price gap is probably 300 to 400 basis points; and in the other part of the country, probably 200 basis points in favor of Colruyt, if I can summarize, because it's -- I gave you the 2 extreme and of the 4 or 5 pricings round of Colruyt. And in the north side, as you know, we have only 1 single price for the country, and this is why there are such differences.

And Fabienne, we saw already in the last 6 weeks that our price investments towards the aggressive [indiscernible] and over time, that our gap became smaller. So we have a measurable, it's not 100% representative, but that we narrowed our gap.

So a number of things are working there on the price investments. And on Harris Teeter, your assumption of roughly at 10% as well.

Yes. Excluding promotion.

Excluding promotion.

Comparable assortments.

Absolutely.

I have two questions. The first is on the inflation uptick in the U.S....

Could you put a little more -- could you talk a little more in the microphone? We hardly can hear you.

The question just relates on the inflationary environments, both in the U.S. and in Belgium.

We see a little bit of a pickup in the U.S. on the inflationary side.

Could you elaborate a little bit more on where that is actually coming from, in fresh, meat, dairy and the likes, and what your expectations are for the second half of the year? And similar basically to what is happening in Belgium, in the markets, do you still see an acceleration in the price promotional environment?

Or is it actually decelerating? And what have you seen so far since you've announced the Transformation Plan, basically on any step up in activities from your competitors in the Belgian market since?

Good, thank you. Starting with the inflation question on both geographies.

On the U.S., to give you an indicative figure, for the second quarter, we saw an internal inflation of 2.2% across the banners. Mainly, as you already mentioned, it's coming from meat, dairy and produce.

What we see in July, an slowing down of that inflation. And that same internal inflation for the U.S, as a total, is now plus 1.6% inflation.

So I think we had the peak of inflation. There is still inflation in the model, but it went a little bit down in July, compared to the second quarter.

And this on Belgium, at the moment, we have an internal inflation of roughly 0.9% positive in Belgium. And to your question on do we see additional promotional activities during our announcement of our Transformation Plan, and then I think, in relation, yes, sir, and relatively yes because we did 2 things.

We found it not a good idea to have a full-blown promotional period, also especially during the World Cup, during that announcement period because we have, of course, a lot of sensitive reactions also, to take that into account. So we lowered, compared to our peers, a little bit our promotional strength.

And therefore, we see some effects, which is completely logical from an investment point of view. And we decided to step up again our promotional strength in the month of August, with a few extra radio campaigns and these kinds of things to make sure that we win our customers back as soon as we can.

Okay, thanks, everyone. This completes the conference call of Delhaize's second quarter results.

A replay will be available on the company's website. And if you have any additional questions, do not hesitate to contact our Investor Relations department.

Delhaize Group will announce its third quarter results on Thursday, November 6, 2014. And I would like to thank you and wish you a nice day.

Bye.