Koninklijke Ahold Delhaize N.V.

Henk Jan ten Brinke - VP of IR Dick Boer - CEO Jeff Carr - CFO

Robert Jan Vos - ABN AMRO James Grzinic - Jefferies Nick Coulter - Citigroup Fabienne Caron - Kepler John Kershaw - Exane BNP Paribas Sreedhar Mahamkali - Macquarie Fernand de Boer - Degroof Petercam Jerome Samuel - HSBC Andrew Gwynn - UBS Richard Clarke - Bernstein Gerard Rijk - SNS Securities Cedric Lecasble - Raymond James

Thank you, operator. Ladies and gentlemen, good morning.

Thank you for joining us in our third quarter analyst call and webcast. I am here with Dick Boer, our CEO; and Jeff Carr, CFO.

And after a brief presentation that you can find at ahold.com, we will take your questions and with that over to you Dick, please.

Thank you very much Henk Jan and ladies and gentlemen, thanks for joining us at our third quarter conference call. Let me start by giving you the highlights of the quarter.

We delivered a strong financial and operating performance during the quarter and are pleased to report group sales of EUR8.4 billion. This is up 1.7% at constant exchange rates, but adjusting for lower gas sales up 3.3% versus quarter three 2014.

We also maintained an underlying operating margin of 3.8%, while our underlying operating income increased to EUR319 million. Free cash flow remains strong at EUR230 million and Jeff will give a bit more color on this later.

In the Netherlands, the strength of the Albert Heijn brand and our focus on quality and assortment improvements continued to drive positive sales trends. We are particularly pleased with the increase in our identical sales growth and I will tell you more about it later in the presentation and also will give you more detail on our online business.

In the United States, we continue to roll our enhanced customer proposition and saw underlying sales trends adjusted for competitive distribution last year further improve across our divisions. Our customers are responding well to the improved quality and increased value at our stores and the adjusted identical sales growth of 1.8% ex-gas is reflective of this.

As you may recall, we entered into a conditional agreement with A&P to acquire 25 of their stores in the New York metro area. We have started the converting these stores under the Stop & Shop banner and the final group of stores will be converted in next November.

Looking forward, we are on track to deliver a full-year performance in line with expectations and are making good progress towards completing the proposed merger with Delhaize by mid- 2016. And let me now hand over to Jeff, will take you through our quarter numbers in more detail.

Thank you Dick and good morning ladies and gentlemen. As Dick mentioned in the quarter, we saw a strong sales performance in the Netherlands and our sales trends in the US continue to improve once adjusted for the New England market disruption in quarter three last year.

As a result, net sales at constant currency and excluding gas grew by 3.3%. Including gas and foreign exchange, sales grew by 13%.

Underlying operating profit of EUR319 million was slightly ahead of last year at constant exchange rates and EUR34 million ahead at actual exchange rates. Underlying operating margins at 3.8% were in line with last year, reflecting the savings from our Simplicity program, funding our investments in value, quality and our growth initiatives in areas such as e-commerce.

In the quarter, operating income was EUR284 million after the inclusion of EUR35 million of one-off charges, which included EUR12 million related to the merger related costs and EUR11 million related to withdrawal from a multi-employer pension plan in the US. So moving on, let's look at the operating performance by segments starting with the US.

Total sales at EUR5.2 billion continued to be impacted by lower gas prices. But excluding gas, sales grew by 0.8% and identical sales were up 0.4%.

Now, as I mentioned in the third quarter last year this was impacted by a significant market disruption in New England and adjusting for this, identical sales grew by 1.8%. I must say also, there was a small benefit of around 20 basis points in the quarter due to Hurricane Joaquin at the end of the quarter, which threatened disruption in then north-east of the US, but a low devastating flooding that did occur in the Carolinas, our trading area was largely unaffected.

At Peapod, we saw sales improving with double-digit growth as we continue to improve capacity through the New Jersey facility. And finally, in the US, underlying operating margins were strong at 4.0%, with pressure from pharmacy margins being offset by strong expense control, simplicity savings and higher gas margins.

In the Netherlands, sales grew by 7.4%, with strong growth at Albert Heijn supermarkets, at ah.nl e-commerce food business and bol.com. At Albert Heijn, we saw a strong volume growth driven by increased transaction and basket sizes, and growth was particularly strong in the fresh categories, where we're focused on new product introductions and quality improvements.

At ah.nl and bol, we had another quarter with consumer sales growth of over 30% and as Dick will discuss bol.com growth was especially strong in Belgium and with our Plaza partners. Excluding bol, underlying operating margin was 5.1% in the Netherlands or 4.6%, including bol.com.

Sales in the Czech Republic grew by 6.4%, excluding gas and at constant exchange rates and identical sales growth was minus 0.7%. This includes eight weeks of the SPAR stores, which became identical in August, probably the acquisition in August of last year.

When adjusted for the SPAR stores, identical sales excluding gas were up 1.6%. The underlying operating margin was up 160 basis points from last year to 1.3%, a steady improvement from the beginning of the year and the underlying operating income did include some non-recurring costs related to the SPAR acquisition of EUR1 million.

We continue to deliver a strong free cash flow of EUR230 million in the quarter. This was EUR160 million higher than last year.

The growth in free cash flow resulted from a positive impact on working capital slightly offset by higher income tax paid, which was mainly due to a refund received last year. For the first three quarters of the year, our free cash flow stood at EUR783 million, EUR340 million higher than last year.

And for the full-year, we expect our free cash flow to be slightly ahead of last year. In quarter four 2014, we incurred some favorable timing impacts from working capital at the end of the period, which we don't expect to repeat to the similar extent in 2015.

In addition, we expect capital expenditures for Q4 in 2015 to be slightly higher than last year. Not least because this includes the conversion costs of the 25 A&P stores in New York metro, which will cost a total of around $60 million.

Thank you, now I'll hand back to Dick.

Thank you very much, Jeff. We are now at slide 6 in your deck, so I’d like to take you through some of the business highlights for each of our segments.

I’d like to start with the US. We continue to invest in quality, service and price as James McCann explained to your early this year.

We are applying this program in various phases through our store base. Our Super KVI program, which offers customers the 30 most important products at very competitive prices have been rolled out now in three of our four divisions and we expect to complete this rollout for next year.

We also have developed a new produce department, we’ve talked about it before, which has now been launched in more than 300 stores with an encouraging volume uplift and we expect to have this implemented in all of our stores next year. Another category we have taken now is piloting our new bakery department in 15 stores and we have continued to work hard on all new concepts in a way for the other fresh department.

Also, just in the start of the fourth quarter, we made another significant value investment by lowering prices again on thousands and thousands of products funded by Simplicity program. This is all supported by a complete new branding campaign, helping customers to save money, save time and eat well.

As I explained before, the whole program is all about delivering quality and price. It's ensuring that customers have better choices, healthier choices and more products available, all at a better value.

We also continue to innovate our store formats. We opened two stores in a new format, which we call bfresh.

These are typical only 10,000 square foot stores and have a focus on fresh foods, convenience and smart value. At ahold.com you can watch a short video of this concept.

bfresh offers a range of natural and organic, vegan and gluten free products and foods from all around the world. Either freshly prepared for direct consumption or for later at home, or for the customers to cook themselves.

In order to be a one-stop shop, it also offers a small range of daily non-perishables for urban shoppers. So if they want, they can do the full shopping at our stores at bfresh.

On the right-hand side on the slide, you can see the main elements of the transaction and conversion of the 25 former A&P stores in New York. It's a great addition to our network and will strengthen our number two position in that market.

I’d like to go to the next slide which is all about the Netherlands. Albert Heijn continues to successfully introduce new and innovative product and concepts.

Since the start of the year, we have introduced more than a thousand new products at Albert Heijn. We would also innovate in a way in which customer shop in our stores.

For example, through the introduction of the first fully self-scan supermarket in the Netherlands. Also, customers today can self-scan their shopping with their own mobile phones in more than 200 of our stores already.

Another example of how we are developing new concept is through the pilot online store we opened on Alibaba’s Tmall platform in China. It offers around a hundred Dutch products primarily own brand to Chinese customers.

What is even more important, we’ll learn from the fast-growing e-commercial world in China, a lot of the experience we can have there, so it's helping us even to develop ourselves further. In our Albert Heijn stores, the focus is clearly on fresh, the improvement at our deli department introduced a healthy range of read meals, ready-made meals and offering more healthy and tasty food to our customers.

Furthermore, we are piloting healthy checkouts in 100 of our stores, which offer food and other healthier snacks at the checkout at an alternative to our customers have previously seen. Also, our Etos and Gall & Gall brands were also refreshed.

The focus on quality, service and advice to our customers. Another developmental highlight is the launch of our Etos own-brand beauty care product in our supermarkets in the US, providing an affordable alternative product range in the category.

Let me share a few highlights from our check business which is next slide, slide eight. As you may have read in the interim report during the quarter, the former SPAR stores became part of our identical store base.

As these stores, especially the larger ones reported negative sales growth, this has an adverse impact on our identical sales performance for the segment. Excluding the former SPAR stores, our Albert stores posted positive identical sales growth, driven by the performance of our supermarkets.

The deployment of our Favorite store concept was successfully rolled out to all our 240 supermarkets, leading to positive customer reactions and sales uplift in these stores. The team now is working hard to improve the performance of our larger stores.

The Favorite concept is being rolled out to the large former SPAR stores and they are also launching various other initiatives such as implementing the store centric model using our US stores to improve the execution of key day-to-day processes by empowering store associates. On online, the next slide, slide nine.

Bol.com had another very successful quarter, growing traffic and now offering an assortment of 10 million and more products. Plaza sales mentioned already by Jeff those made through our third-party vendors were up 78% and are over 20% of the total consumer sales.

Also, consumer sales in Belgium were up 71%, further strengthening bol.com as the leading online non-food retailer in the Benelux. Our Dutch online food business ah.nl grew sales by almost 30%.

This was achieved through expanding its customer base in existing markets with a strong focus on quality of service and an improved online shopping experience, ah.nl continues to introduce new products and now offers an assortment of more than 28,000 products. We are also pleased to report at Peapod, our online grocery in the US reported double-digit sales growth again this quarter.

The capacity usage of Peapod New Jersey facility was increased during the quarter, and we also improved service levels and started marketing more actively in the New York City market. Peapod continues to develop new concepts, both for family as well as for business-to-business customers.

Now, before moving to Q&A session, let me say a few words of the proposed merger with Delhaize. As we announced in June, the merger will create stronger international food retailer with local brands that have market leading positions in complementary neighboring geographies.

Substantial synergies at a trend rate of EUR500 million a year will lead to significant value creation and we’ll also be able to use strong cash flow generation to invest in future growth and deliver attractive return to shareholders. While we remain highly focused on running our day-to-day operations, we are making good progress with the integration planning and as you know, we’re planning to complete the transaction by mid-2016 after holding EGM in the first half of the year.

We have a number of key milestones ahead of us in the coming months which we will update you about in due time. And we have also planned a number of road shows later this quarter during which Frans and I will meet investors together.

And with that operator, we’d like to start the Q&A session.

Hi, good morning gentlemen, I have a few questions, first on the corporate costs. Could we have known about this jump that we saw in Q3 and related to this assuming that the self-insurance discount rates remain where they are today, what would be the best estimate for these costs in Q4?

And finally related to this one, can your remind us again, what was the reason of the other part of the jump in corporate costs or was that related to a low base last year? That’s my first question.

And my second one, it's on SPAR. You already said that without SPAR, growth would have been positive.

Would you be willing to share that with us, what was the number excluding SPAR? And is it fair to assume that dilution will be less in the fourth quarter?

Thank you.

Okay, Jeff will take the corporate costs, and I will come back on SPAR.

So thanks, Robert. The corporate costs included as we mentioned in the first quarter and I have mentioned in previous times, the charge, which results from the discounting of the insurance provision, which stands in the balance sheet at over EUR700 million.

Now certainly in this period, in quarter three, the discount rate went down again and that resulted in the higher than expected charge. But I don’t think that will have a true impact for the full year where we still expect the total corporate costs to be - maybe slightly over at most estimates, but certainly around EUR90 million, I think as a consensus estimate of just about EUR83 million, EUR84 million, so slightly higher than that, but not - I don’t think significantly higher than that.

So it did have a bit more of an impact in this quarter, but I think by the end of the full year, it won’t be a significant or a material effect. And you’re right, the rest of the corporate costs, excluding that factor were adverse relative to last year, mostly because of the lower charges last year.

So all in all, I think corporate costs will end up a little higher because of that by the end of the year, but not significantly.

And Robert, on SPAR, as I mentioned, we clearly have now the Interspar stores into our sales year-on-year, from identical. Also if you take, the Albert stores, they have an identical sales growth in this quarter of 1.6%, so that makes clearly that the impact of SPAR currently is still below our expectations on the growth side.

We’re undertaking a lot of work around that. Changing brand names has been always proven, always something you need to work hard to get the customers understand the difference between your store and your brand versus the previous one and certainly also for the larger stores, I am not talking about supermarket, because they, of Interspar stores were quickly on a high level of sales and expectations.

But certainly for the larger stores, we continue to have to work and we do - we have taken - undertaking a lot of interventions to make the stores better. And I am sure that the team in the Czech Republic will turn the corner off of that.

All right. Thank you.

Yes, good morning team. I had three quick ones.

The first one was if you can clarify what inflation was in the US in Q3? The second one, obviously there's been a big competitive change in dynamics in a big region for you, in the US, with A&P going officially bust.

Can you perhaps illustrate how that impacted your performance in the US? Did you see a disproportionate to market share gain in areas where you are overlapping them, over the period?

And then lastly, can you maybe clarify - clean, yes and a flat performance in Dutch margins, despite that ID growth of 4%, very good ID growth, where is the positive leverage going? Are you reinvesting this proportionately into gross margins?

Thank you.

On the inflation in the US, it was around 1% for the US market. On New York, clearly the third quarter was still as it was before so A&P and Pathmark was still operating their stores, so the transition of the stores is not happening in the fourth quarter, so it’s too early to say something more about it.

Clearly of course, we have seen over the last year already that A&P, so that’s not only for the quarter, but on the last year of course, that the markets - let’s say performance of it was clearly already under delivering, which is an advantage for the markets in general of course, when we as strong competitors can take advantage of a weaker player. On the other hand, you have to continue also now in a way that A&P stores will be converted to better stores again.

We shouldn’t forget that. So they will be sold, there will be new stores in and that will also change the environment going forward.

Can I just - sorry, just clarify on that has the market share gain in greater New York accelerated in Q3 versus previous quarters?

I think we have seen a certain increase of acceleration of our market share in the third quarter that’s quite that’s correct here, but are still slight, so most results are done by ourselves because we make our stores better. The relative plans has been of course greater growth for ourselves already over the last couple of quarters, but clearly third quarter I think was helped a bit by already the turbulence around A&P, Pathmark.

All right. Thanks.

That’s clear.

And James, just coming back to you on the margins in the Netherlands, I am pretty pleased with the margin performance in the Netherlands at 4.6%, it’s ahead of the previous quarters, in the first half of the year and obviously excluding the impact of bol 5.1% is again a margin I am pretty comfortable with. I think obviously what we said at the beginning of year, we continued to invest in bol and those investments are delivering significant returns with bol’s consumer sales growing over 30%.

And we also explained there would be an impact versus prior year on continued increases in pension costs. So excluding those factors, I am pretty pleased with the overall performance in terms of the margins in the Netherlands, and obviously driven off the back of a strong sales growth that gives us an improvement in total underlying operating income, so I am pretty satisfied with that.

All right, thank you.

Hi, good morning. Three, if I may.

Firstly on the minimum wage regulation in some of your states, could you comment on how your existing wage rates are positioned, and I guess how any hikes fit into your plans going forward, and I guess your plans to mitigate those costs? Then secondly, you called out a positive margin impact from Simplicity in Q3, how should we think about those benefits going forward?

Presumably some of those savings will have funded the second value investment, or should we look for those savings to continue to come through to the bottom line? And then lastly on bfresh, could you talk about your ambitions, albeit at a very early stage for that concept?

Thank you.

Yeah, thank you Nick. I’ll take the first and last question.

Jeff, could come back on margin. On bfresh, we are in a testing phase.

We opened a couple of stores now. Of course, we will test more stores and opening couple of more locations in the year to come.

Mainly of course, not only from going from a testing, but also hopefully to something which is robust enough to be used as an expansion strategy for the metropolitan markets in the US. But still the first signs are positive on bfresh, but we have still to learn a lot also on the business model around that, so that’s around to bfresh.

On the minimum wages, yeah, there is of course in the US quite some discussion about it. First of all, most of our associates, majority of our associates in the US are already paid more than $9.

But our - and it’s not only of course the wage, but also our benefits which are of course, something which is - which our associates are looking at it, our benefits from a social point of view or health point of view clearly also part of our total package to our associates. And that’s of course something they recognized and our associates are recognizing.

We have made some adjustments in the second quarter for our Giant-Carlisle division, there was a slight impact on our total cost level and going forward, we expect that we can mitigate it ourselves.

Hi Nick, it’s Jeff here. The Simplicity program is fundamentally there to allow us to continue to invest in our business, invest in our quality, invest in value and our associates.

And that program is therefore identified to help drive identical service growth. So that’s the real purpose of the Simplicity program.

And we did have a strong performance in terms of the savings in the third quarter and generally that balances out with the investments we make. But from time to time, for example, if you remember back in the first quarter, we talked about the spend being more than the savings that we achieved and in this quarter, slightly the opposite occurred and we are slightly ahead of our run rate in terms of margin.

But overall, the purpose of the program is to fund those investments in quality and value. We’re also helped in this quarter by stronger than normal gas margins in the US, which helped increase a little bit the US margin.

So generally, I think as you look to the future in the fourth quarter, I’d continue to see us balancing the Simplicity savings with the investments we make in managing margins in-line with - pretty much in-line with market expectations. So that’s how you should consider the Simplicity program going forward.

Great. Thank you.

That’s very clear.

Yes, good morning, I've got one question particularly on Holland. Clearly in your stores you are more commercial, we saw that you removed some packaging in fresh and then you're running more attractive promotions.

I was wondering if you could us some comment on shrink. Did the work you do in fresh have a negative impact on shrink, and how are you controlling your shrink?

And regarding the promotion, is percentage of promotion in terms of sales, has it changed dramatically, or will it continue to change going forward? And as a whole do we - should we still forecast your store margin to increase due to the good like-for-like, or is this mitigating by the work you do on fresh, with shrink, and the promotions please?

Your last question I didn’t understand Fabienne.

For the last question, I was wondering if the fact that you removed packaging in fresh that may have implied more shrink, and the fact that you run more promotions means that you don’t have such a strong operating leverage in stores, despite the like-for-like?

Okay. First of all, thank you for your questions on the Netherlands.

The unwrapping of packaging and just mainly focused on produce, and fruit and veg, but not really increased a lot of shrink at all because our turnover and our source are so huge, because that’s really an issue. So that’s not an issue.

Promotion, we haven’t seen big changes in promotion share. We do different promotions and more exciting promotions for our customers, so I think that’s helpful, but certainly not an increase in promotion share of significance, so that’s also good news.

We see more transactions in our stores. Obviously, the customers are buying again a little more in our stores, which makes them I think more loyal and spending in different trips, so I think that’s also the good news.

And that’s also not only by the fact that we have our promotions, but certainly more about the innovation of new products, which we bring into the stores, people are more excited about, the customers are excited about it. So that’s I would say is my answer.

On the leverage, I think - if you take out what Jeff said also in the margin and you look back on the margin impact of bol and pensions, then we are very pleased with the margin development of the Netherlands. So in fact, I think we could say, the team did a great job over this quarter again with let’s say, the expansion we do and online and at the same time, working with the pension impact.

So I think it’s a good quarter for Albert Heijn.

Okay. Thanks a lot.

Yeah, good morning guys. A couple from me.

First of all, really just doubling back, the minimum wage, the Wal-Mart impact, clearly Wal-Mart going to $10 in 2016, I think the minimum wage legislation also to $10 in Massachusetts. And also you've got the key Stop & Shop negotiation with the unions, and I think in about April time.

So I understand there's no real impact for 2015, but could you comment on the potential impact on profitability into 2016 from addressing sort of the minimum, or living wage? Secondly, just on bfresh, what's your sense on the potential scale of this?

How many markets do you think you can put this into in your existing geographies if it works? And finally, just give us a sense on where price perception is in your various US banners, and now, in Albert Heijn, just a sense of how those have progressed?

Okay. Thank you, John.

I will take the last - these questions going forward, but please Jeff, jump in where we can try to answer at least your questions. Certainly on the wage, I think in general, we are of course already in markets where high minimum wage is set by the markets as you just had to sell.

So that is of course already a starting point, which is different than maybe some of the other markets Wal-Mart is talking about. Thirdly, we are of course paying already a good benefits to our associates in a combined way, so it’s more than only the wage, which is important for our associates and it’s hard to say exactly what the impact will be to 2016 on the negotiations with our union.

And that’s a bit too early to flack on that of course because that will take place early 2016. But maybe Jeff you want to add something that?

No.

On bfresh, I think it’s also too early. We have seen nice appetite of our customers in the markets where we are now testing these stores.

But you can imagine, if bfresh works, we have an opportunity really in the larger cities to expand and you know we are with the - on the East coast, there is a lot of large cities, where we have opportunities to expand in these larger cities. But it’s too early to give a number on that I would say.

And I think you had a third question, but -

Price perception.

I think John, it’s - price perception is something, which changes pretty slowly. We are as we said, I think in February we continue to see positive momentum in terms of the direction.

So we see improvement certainly in Albert Heijn, we have seen improvements in price perception in the US. As you know, Carlisle has always been our strongest market in terms of perception, but that continues to improve, the Landover market, we continue to see some small improvements and also in New York.

I think New England is the market we need to focus most on to get more improvement in that market. But overall, we are pleased that the investments that we are making are being recognized by the customers, by our customers.

And in terms of price reality, we’re certainly much more happy with the position we are in today than we were a couple of years ago. So the investments do take time to come through, but we are seeing positive trends.

Okay, that's fine. And just following, are you saying therefore you don't expect much of an impact in 2016 from the minimum wage, or it's just too early to assess?

And just on bfresh from the initial trials, do you see much cannibalization?

No, not on bfresh, and what we believe that we can, let’s say, mitigate the impact of whatever the impact will be on a minimum wages by our simplicity program.

Very clear. Thank you.

Yes, hi, good morning. Three questions for me as well, please.

US margins firstly, Jeff, you're clearly signaling a bit of a step-up in run rate of Simplicity. But I'm just looking at some of the comments you made.

I think Q4, beginning of Q4 you said you’ve cut some thousands of prices. Should they be flying a draw or should we expect potentially other quarters where you could see these savings actually more than offsetting your price cuts.

And more broadly, are you kind of done with the majority of the pricing work and it's going to be tinkering around edges rather than any more meaningful price work from here on? So that's the US, margins in the US pricing.

Secondly, just picking up on John's point about labor costs. Can you outline what are the expected wage negotiations there are to come in 2016 for you, please, which banners and which times of the year next year so we can watch out for those?

And finally, in terms of merger process, the first step seems to be the filing of F4. Do you have a timeline in mind when you will be filing this?

And within that will there be any incremental information shared in this document that we should be watching out for? So those are the three.

Thank you.

First of all, with margins, I didn’t say there was necessarily step up in Simplicity, I said what we had experienced is a good quarter. The program continues to go on which has been used to fund our improved competitiveness both in terms of price and valuable in the US, but also in Czech and The Netherlands and what you see in this quarter I think is a consequence of those actions.

So I don't particularly see a step up in the Simplicity savings. What I was trying to explain is in this quarter it was - it certainly came through as a slightly improved margin, but also helped in the US by improved gas margins as well.

I am looking forward to Q4. Yes, there is a launch of new value program to our customers and new campaign which includes price reductions.

This is costed into that overall funding and the way I would look at margins over the US is, as we described them all year, really with some fluctuations plus or minus from quarter to quarter, but pretty much on track with where most of the market expectations are. So we are pleased with the performance in this quarter.

We continue to see a good stable performance in terms of margin delivery. But most importantly what we are seeing as a result of our actions in terms of Simplicity is an improving trend in terms of identical sales.

And I think I am more interested in seeing those identical sets improve, the necessarily relatively small fluctuations quarter to quarter or margins. So it is improving trend in identical sales which I think is the key measure of the expense of the business.

And this quarter, if you take out the effect we flag market baskets disruption last year pretty clearly. This gave us about 140 basis points benefit last year and offsetting that obviously this year about 140 basis points and taken that out, we are at 1.8% identical sales improvement which is the strongest ID sales number we’ve seen in the US for quite some time.

There is a little bit of bit of price in there. As Dick mentioned some price inflation is running around 1%, but obviously that indicates is also volume growth in there.

So we are very pleased with that performance and our key focus remains driving identical sales.

To come back on your question on the rates negotiations, there is clearly - New England is first quarter next year, but I would try to make also the points before. Wages of course, there is a lot of discussion about minimum wages in the US.

On the other hand, we are paying our people well balanced and have a good pay and remuneration system for all our people. And of course the store has a lot of different levels in a store, but pay levels are also different.

So there we have supermarkets, there is a lot of people working in the apartments where of course different pay levels are taking place. And last but not least, our engagement survey is showing us that people are really and certainly also this year again has been positive step into more engagements with our staff.

So, clearly our relationship with our associates is in a good state. There are more negotiations coming up, but I know the one of New England is in the first quarter, I think later that year we have Landover but the exact timing I don't have.

Yes, good morning. Fernand de Boer, Degroof Petercam.

Please get used to the name. Couple of questions from my side.

Firstly could you say something about the performance of Albert Heijn in Belgium? I have a feeling that the like-for-like growth is a little bit slow there.

Then the second one in the Netherlands in general do you feel that the competitive environment is a little bit more relaxed as the Dutch consumer is in better shape at this moment? And then the last question you took 11 million charge for multi-employer facility.

Could you say something in general about pension deficits also going forward given the low interest rates and are there more opportunities for you to address other multi-employer facilities in US?

Okay, last one Jeff will take on the pensions. On Belgium of course the identical sales results of Belgium has gone to more modest levels as we've seen first quarter last year.

As you remember maybe the first half year, last year in 2014 as well as really more high season in the Belgium market. I think they are now more to steady base and our identical sales growth is more in line with what should be stores in the new market.

So that clearly has been a little more in line with normal market growth, but still ahead of that. So we still are ahead of the market growth in Belgium with our identicals.

In the Dutch market of course you could say that - I don't want to use the word relaxed. I think on the competitive environment clearly not.

I think there is a lot of activity going on [indiscernible] Lidl. As you can see in the media, they are spending a lot of money on television and media in general.

There is a lot of activity on price and promo going on. I think what we have done better over this year is to find our own position back again and advertise and position that much better in our stores.

And I think that’s where the turn for Albert Heijn is coming back, people believe our prices are good and we invest continuously in price, so slowly, slowly we continue to have our prices and value proposition better in the market and customers recognize our quality and assortments improvements and I think that’s where Albert Heijn is just known for, not only just that’s where we should be known for and we should use it even in a better way going forward in the Dutch market. So I think no relaxation on competition, more our own position to strengthen it and I think we are getting better every day which is one of our slogans as you know.

Fernand, on pensions, I’d just say a couple of things. There is no overall numbers to report in terms of deficits, but I don’t think that you will see any significant changes when we come around to the full year numbers.

I think in terms of generally what I would say is there is two main exposures, areas that we have in the business. One is in the Netherlands where we have a well-funded planning Dutch plan.

That remains well funded. Then we have the issue of multi-employer plans in the US and we have many of these plans that we operate within.

What we have done in the last three or four years is where we have seen opportunities to de-risk our exposure by either withdrawing or negotiating new positions, we’ve taken that and this was an opportunity to withdraw from one specific plan and that helps us manage our risk profile for relatively modest investment, so we will continue to do that where we see the opportunities on the multi-employer plans in the US to basically de-risk our exposure to those plans. And as I mentioned the Dutch plan remains well funded.

So I think that’s the key issues in terms of pensions.

Okay, thank you very much.

Yes, good morning. I have a question regarding future CapEx.

Looking at 2016, how should we think of your investment? I know it will depend on the timing of the merger with Delhaize, but if you can share your view on that and if we should expect stability on CapEx on 2015 level.

And follow-up is on the expansion in Belgium, is it still on plan to open further stores in 2016? Thank you.

Jerome, on CapEx, I think yeah I would see - we said in the past that we’ve given guidance to around EUR900 million number for the last three or four years and I would certainly say if anything in the last two or three years we’ve under-spent that a little bit. That hasn’t been through any capital constraints, it’s just been through the demand that’s been there.

I think as you look forward to 2016, it’s a bit early to give guidance, but we have talked about the fact that we are investing in some new facilities. For example, in bol, with the new warehouse and also Albert Heijn, so that - and also when you take into account initiatives bfresh you might see a pick up slightly in 2016, but I don’t think it will have a significant impact and I expect free cash flows will remain very strong.

So it may be slightly higher than the EUR900 million, close to EUR1 billion, but it’s that type of order of magnitude that we are talking about.

Yeah, on the Belgium question, we are currently having 33 stores in Belgium opened, so we also have signed a contract as you know with franchiser in the Belgium continue to open also more store and we of course have been out with a target for the Belgium market and we haven’t seen any reason at this moment to change it of course, we are still in the phase of being competitors in the Belgium market and we go our way and the others going their way and that’s what it is.

Thank you.

Hi, there. The majority of my questions have been asked, but I might try and ask one of them in a slightly different way.

Just on the margin, obviously we've guided on the Netherlands. I think you said initially down about 45 basis points including the pension and also the investment, and you're coming in slightly better than that.

As we go into next year, for the Netherlands, should we expect much more movement on that? Obviously we still have the bol investments, but you're suggesting that maybe we're heading towards a nadir for the Dutch margin?

Well, it is a slightly different way of putting it and I am not going to at this stage get pulled into giving guidance for 2016 on margins for the Netherlands. What I would say is the following.

Yes, we will continue with our investments in bol. We are very pleased with the performance of bol.

The consumer sales continue to grow at plus 30% which is probably higher than we expect for next year, but it’s a great performance, ah.nl continues to grow very strongly also and we are very pleased with that performance. And the stores in the Netherlands are now performing very well.

And we have ideas of investment programs in terms of quality that we will continue to make in terms of new initiatives which we continue to make and so I think we are in a good shape in terms of the top line. I think we are in good shape in terms of the bottom line, but I wouldn’t get dragged into projections.

There is always bumps in the road. As Dick said, it’s a competitive market and as we stand, I don’t see any reason to be negative about the outlook, but at the same time, I am not going to get pulled into giving projections for 2016.

Okay. And just a second question really, which is on the cash flow.

You said slightly better than last year for free cash flow. Fancy quantifying slightly?

No. I think clearly we are tracking ahead through the three quarters year-to-date.

I think we had a very strong fourth quarter last year which I don’t think will be repeated at that level partly due to the cut-off in the working capital benefits that we had last year, partly due to the fact that our capital expenditure plans are bit stronger in the fourth quarter this year. So I think we will give back a little of the benefits versus last year that we already have booked, but we will still end up being slightly ahead of last year.

So I think I will just leave it at that.

Okay. That's all pretty clear.

And just finally on the cash, I mean obviously you do have substantial balances, any progress on using some of that cash? I mean, obviously, we've got this acquisition, but EUR1.5 billion of cash at the year-end - sorry at the period end, is there any prospect at all that you can pay down some of these long-dated debt?

Certainly in terms of the debt, no, I think we - it is long-dated and it’s high yielding, so we look at that from time to time to see if there is any option or positive MPV in terms of redeeming that early. At the moment I don’t see any option for that.

Obviously, the merger is coming up and that’s a key item. We have a billion return planned in that program and that will obviously impact the cash position of Ahold pre-merger and I can’t really talk about the plans post-merger other than what we’ve already said in terms of depending on the efficient balance sheet and applying a balanced approach to our capital allocation.

Okay, great. Thank you.

Good morning. It's actually Richard Clarke here.

Bruno has stepped up. Just three quick questions from me.

On the antitrust in the US, my understanding is that you have to find a buyer for the stores that you would have to exit if that's decided by the FTC. Is there an active market in the US people looking for stores at the moment to buy?

Have you already started that process looking for potential buyers based on your own analysis? Secondly, just coming back on Belgium, I mean, obviously, you've opened another store.

Can we say that your target, which I think was 60 stores by the end of next year still stand irrespective of what the competition commission says? So if you have to close some stores, you'll just open more somewhere else?

And then the third question is on - coming back on bfresh and New York. Are there any opportunities to convert any of the A&P stores into bfresh?

Is this an opportunity to get you to number one in New York, which I think will be the last big city you're not number one in? Thank you.

Thank you very much, Richard. On bfresh New York, no, we’re looking clearly to different locations.

So smaller size stores, so that's clearly not what - we look at it, of course, if that would give opportunities to fast forward that, but we didn't see in the current portfolio of A&P, Pathmark opportunities for bfresh to take over quickly. So, we didn’t - on Belgium, yes, we have to target 50 stores, so that's clear, that's what it is and as I said before, before merger close, we still operate this to competitors in the markets where we are.

So that's the fact we have. Then the anti-trust on the FTC is of course - a lot of speculation already going on.

We are in the process, which we are currently managing on the whole FTC and the potential disposal of course and we see clearly appetite in the market to have an opportunity also when needed and where needed to sell our stores.

Thank you.

Yeah. Thank you.

Good morning. Few questions, concerning the free cash flow definition from your earlier expectation, where did it exactly differed from what you expected three months ago?

Or is it only the US dollar development? Second question is on the pressure from bol.com in 2015, the 25 basis points, will the same happen in 2016 or is there not yet a plan on that?

And my last question is about minimum wage impact in the Netherlands this time, where the political arena is talking about higher minimum wage for 18 to 23 year age. Did you already calculate a number for that for your Dutch operations?

Well, why don't I start, this is Jeff, with the comment on free cash flow and I’ll cover Bol. On Bol, yes, the answer to that question is we see similar investments in 2016.

We've said 2015 and ‘16, we make the similar type of investments in terms of building awareness, in terms of some of the stores, in terms of developing the website, investments in people and the brand to drive the sort of sales that we are seeing and we’re very pleased with the returns that that’s given in terms of top line growth. So we will continue with that plan through 2016.

Does it mean that in 2016, we will see this again on top of this 25 basis points or just did basis points we saw in 2015?

No. Maintained at this sort of level.

So, at the 25 - there isn’t an incremental investment, but we’re maintaining this level of investment for 24 months is basically what we said. And we haven't commented beyond that, but we’ll maintain this level of investment.

I think in terms of free cash flow, what's changed, we've had a slightly better performance in terms of working capital, which is very pleasing. We continue to have a lot of projects running to improve our inventory management.

We are investing in inventory systems and we’re very pleased with the overall performance in terms of working capital. There's a little bit of help from foreign exchange, but we’d - basically that's been constant through most of this year, so that hasn't really been a change, but we've also seen improvements, we've seen an improvement in operating cash flows from the business.

When you look at the EBIT, some of the biggest impacts on our EBIT number, a non-cash item such as depreciation and some of the pension costs, which is non-cash, some of the areas such as we discussed earlier, the insurance discounting, which is a non-cash item, so when you look at our EBITDA, we also see some improvements there, which have resulted in improving operating cash flows, as is mentioned working capital and the consequence of that is we think that, yeah, our cash flow for the full year will be slightly higher than we expected at the end of last quarter.

Yeah. The minimum wages in the Netherlands, here are a couple of things.

First of all, it is out of course in the Dutch political arena about how to handle this, of course, first of all unions, employers, et cetera are of course engaged in the dialog and I think one of the clear arguments we have in the Dutch market on the current positioning on use minimum wages, minimum wage going forward is that we have seen that and compared also in Europe that with our used wages starting point in the Dutch market, there is much less unemployment in the Dutch market on used. There is a great opportunity for used to start working for the first time, and collecting some first money to spend it for their private purpose.

So there is also a great benefit of having this system in the Netherlands, and it has improved and I think when you compare ourselves with used unemployment further in the rest of Europe. So that's I think first and foremost, which is important and also shared in the current dialog with all parties, which are of course part of that.

And we believe strongly still that is something what has been seen by also political parties hopefully to the same extent. Thirdly, and I think that’s - we’ve of course looked at the impact, we didn't do our calculations, because we should first see what the impact could be.

And as we don't know, the outcome of the political discussion, it's too early to come up with any numbers on that. I'm strong believer that there is enough common sense in the Dutch society and also from our political, the political party and the unions to see how you can, let's say, get a good work relationship continue going forward, also with the same system and then see what the consequences will be.

However, there seems to be majority in the parliament?

Yeah. But I think we will first have to see what the impact will be.

There are other signals should be going down from 23 to 21, and other things. Then I think you can really make the impacts on, because that's one of the other areas where you see there is discussion going on to the minimum wage and that certain moment the used wages at certain times on 21.

So there is a lot of debate going on and I think what is important and again I think that's what we stress to our, in this discussion, is how you compare ourselves into European markets with the used wages still helping the lower unemployment numbers on used in the Netherlands. So we will also clearly see where and what the impact will be if there is a decision taken by the unions together with the employers or even by the government.

Okay. Last question about the gas margin in the US, what was the impact of this benefit and is that relatively one-off, is that tens of millions or is that few million-dollar margin impact?

It's roughly 10 basis points benefit that we saw and gas margins obviously fluctuate based on the market pricing and inventory levels and so we saw good margins, although the prices are low, we saw good margins in the US. So we benefit really from the fact that we have lower sales, which means our overall mix of the margin in the US is a bit stronger, but we also actually got better margins on the gas that we sold this quarter, which added about, roughly about 10 basis points in the quarter.

And that is how many millions of dollars, is that benefit?

I'll leave you to do the math yourself, you see the numbers.

Okay. Thanks very much.

Yeah. Hi.

Good morning guys. Sorry going back to the situation with your unions.

The UFCW just replaced their deadlines for expiry on your contracts and they said that all of your contracts for Stop & Shop expire in February 16. So my question is why do you think it's too early to determine what your wage costs will be, given the expiry and presumably on top of that, do you really think it's feasible to assume a 1% increase in your wage costs, given the wages have gone up by 37% in Massachusetts going forward and that the benefits can offset that increase.

That's my first question. My second question is your gross margin was up 91 basis points in the third quarter.

Now in the previous quarter, you mentioned this was due to fuel related things. This time, it is related to sourcing.

Local press has said that there are some price increases. Do you think that that is sustainable and do you think that is correct from the commentary from local press?

My third question is in relation to the timing of the deal, can you give us an update on the timing in terms of some of the FTC delays that have happened recently regarding mergers? Thanks.

Okay. And it is the last one to start, we believe we clearly are on track with the FTC mid-2016, we expect to close.

So we don’t see it at the moment that there might be different view on. So we are on track with the preparation so that what we feel comfortable still with a mid-2016, on the unions, yes, I mentioned at New England - as the new associations in quarter once, so, that's correct, there is nothing which I didn't say.

The only thing what I can't do here is to negotiate about the impact on our negotiations at the phone with an analyst conference. That's something we do in the table with the unions.

And on prices…

Well, the gross margin for the group increased 90 basis points and a lot of that is driven by gas and foreign exchange. We don't publish gross margins for the US business specifically, but certainly we have a lot of initiatives, which include improved promotional effectiveness, improved buying in terms of design value propositions from our private label, by taking out surplus packaging, which is impacting favorable performance in the business and we’re using that to reinvest back in price and value.

I don't recognize the commentary on price increases, quite the contrary, I track very carefully the price reality and the price perception on a monthly basis in all of our banners and our price reality continues to improve. We are in a good position in our Stop & Shop banners and we’re continuing to make price investments, which I think you've seen in the beginning of the fourth quarter, some significant real price investments, these aren’t just PR and noise, the real investments.

So I don't recognize the commentary on price increases. And as I mentioned, in terms of the group gross margin, it's largely impacted by - it’s pretty stable if you take out the impact of gas and if you take out the impact of exchange rates, but thanks for your questions.

Sorry. Just going back to the question on the union, I appreciate, when would you have to let us know the outcome of those negotiations if it isn’t February.

Would this be in February or January, when was the timing would lead to let us know how those have turned out?

First of all, that will be clearly somewhere in the media because normally when negotiations finish, there is always something which is a release on that. So we will know that, you will know that.

And secondly also what we said, we, of course, are continuous as always negotiating with our unions and on contract and we believe also there is a big simplicity program that we are able to mitigate the impact of that. So it’s also - and that’s why simplicity is helping us to continue to have a good oversight on improving our cost performance where needed or mitigate inflationary impact or whatever and at the same time, lower our prices and improving quality.

So that's what it is and what I can say.

Operator, we will now take the last question please.

Yes. Good morning, gentlemen.

Cedric Lecasble from Raymond James. I have two questions if I may.

So first one on this volume market share in New England, should we understand that the tougher volume market share is exclusively linked to the situation of Market Basket versus last year or are there any other elements that are worth mentioning. That's the first question.

And the second one is on your food online business, which seems to be growing very nicely in the Netherlands and the US. Could you help us understand the weight - the current weight of this business related to the whole business of selling food?

And on profitability, where does it stand today, what are your targets, what can we model from now? Thank you very much.

Well, first of all, yes, I would say on New England, the impact is really - it's an impact from the disruption in the market last year with Market Basket, where obviously their stores didn't actually close, but they were empty for several weeks. So that is the impact in New England.

In terms of our food online businesses, if you had look at Peapod and ah.nl combined, I would say the sales of those businesses are just under EUR1 billion. So you can calculate that as a percent of our total sales, but with people being slightly, obviously slightly larger, but let's say just under something just under EUR1 billion in terms of the sales.

In terms of margins, what we've said is that we see a long-term margin of 2% to 3% in terms of the online food business, but while we continue to invest in growth, we’re making significant investments in new locations and new pickup points and we are currently running slightly loss-making, but we have said that we see where we would see stable environments, for example, a distribution center with fixed routes. We know that the model can generate a fully allocated small single digit margin, which does provide a good return on capital on the business, but at the moment, it’s slightly loss making for the two businesses.

Very helpful, thank you.

Okay. Ladies and gentlemen, this concludes this conference call and webcast.

Thanks again for joining us and have a nice day.