Koninklijke Ahold Delhaize N.V.

Henk Jan ten Brinke - SVP, Investor Relations Dick Boer - CEO Frans Muller - Deputy CEO and Chief Integration Officer Jeff Carr - CFO

François Halconruy - Morgan Stanley Sreedhar Mahamkali - Macquarie Andrew Gwynn - Exane Matthias Maenhaut - ING Arnaud Joly - Societe Generale Gerard Rijk - NIBC Rob Joyce - Goldman Sachs Nick Coulter - Citi Juergen Elfers - Commerzbank

Thank you, operator. Good morning, ladies and gentlemen.

Thank you for attending our Q2 results conference call and webcast. I'm here with Dick Boer, CEO; Frans Muller, Deputy Chief Executive Officer and Chief Integration Officer; and Jeff Carr, CFO.

We will take you through a short presentation, which is available on our website, and that will be followed by a Q&A session. So with that, over to you Dick.

Thank you very much Henk Jan, and ladies and gentlemen good morning and welcome to our second quarter 2016 results conference call. Today is a special moment as this is the first time we talk to you as Ahold Delhaize, something we have been looking forward for a long time.

But today, we are still publishing two separate sets of results for the two individual companies since the merger was completed after the reporting period for both companies. After a short introduction, I will hand over to Jeff to talk you through our second quarter results.

Frans will then briefly take you through the Delhaize group numbers which you have already seen their preliminary Q2 numbers on July 21 and will provide you with an update on the integration. And finally, we will share with you some of our expectations for the remainder of the year, especially on items related to the merger and the financial impact in the second half of the year.

We have started our new chapter as Ahold Delhaize with good momentum, with these two strong sets of premerger results, Ahold’s underlying operating income of EUR355 million was up 8% at constant exchange rates, Delhaize group reported an underlying operating profit of EUR247 million which was up 12.1% at constant exchange rates. With our solid financial foundation and a strong business results recommended to deliver even more for customers and communities, associates and shareholders and our teams are highly energized to make the merger a success to shape Ahold Delhaize as a leader in supermarkets and e-commerce.

Now let me start by taking you through the Ahold highlights of the quarter. We saw a solid sales performance in the quarter with 4.4% increase in group sales ex-gas at constant exchange rates.

The United States, sales trend improved with volume growth in a deflationary environment. Our online business in the Netherlands grew again with more than 30% in consumer sales.

Our total underlying operating margin increased to 4%, mainly driven by our Dutch business. Free cash flow was strong again this quarter, EUR253 million, well over a half a billion for the first half of the year, Jeff will spend a bit more time on this.

So now, let me handover to Jeff who will take you through the numbers in greater detail.

Good morning ladies and gentlemen and thank you Dick. As you can see on chart six, net sales at EUR9 billion are up 3.6% at constant exchange rates and 3% at actually exchange rates.

At constant rates, excluding gas, net sales grew 4.4% and the key drivers of the growth being our online businesses and specifically our New York Metro business. Underlying operating income grew by 8% at constant exchange rates to EUR355 million.

Our margins grew by 20 basis points to 4%, as Dick mentioned the margin improvement was primarily resulting from the Netherlands, where our simplicity savings exceeded our reinvestments in the customer proposition. One-off charges in the period amounted to EUR36 million and the majority of this was obviously related to the merger.

Income from continuing operations was up just under 7% to EUR208 million. Now on the next chart, we look across the three reporting segments and we see a good performance across all segments.

Net sales excluding gas in the US grew 4.6%, and as I mentioned that’s mostly due to the additional stores - 25 additional stores in the New York Metro market. However, in the US, we also saw good volume growth in a deflationary environment.

We continue to see deflation in specifically meat and dairy categories in the US and also somewhat in dry grocery. Overall deflation for the quarter was 0.8%.

Identical sales grew excluding gas by 1.2% obviously with about 2% volume growth. This is lower than last year but remember last year should be adjusted for the beneficial Easter impact which we saw across all of your segments.

In the Netherlands, sales grew by 4.6% and identical sales grew strongly 3.2% and while our supermarkets continue to perform well with good volume growth, a key driver remained our online businesses ah.nl and bol.com, which combined grew over 30% again in this quarter. In Czech, net sales growth was pretty much flat, 0.1% and this was obviously impacted by the sale of five stores in quarter three last year related to the SPAR acquisition.

Identical growth improved further compared to prior quarters of 1.3% with a good performance at our supermarkets and positive momentum in our compact hypers. In the US, underlying operating income was EUR215 million, up 2% compared to last year with margins at 3.9% in line with last year.

And in the Netherlands, underlying operating income was very strong in the quarter at EUR157 million that’s up 21% versus last year with margins at 5.2%, 70 basis points ahead. And as I mentioned, this was mainly due to the good momentum behind our simplicity program while reinvestments in our customer proposition was somewhat lower, although this will rebalance more in the next quarters.

In the Czech Republic, I’m pleased with the progress on underlying operating margin, which was up 70 basis points versus last year at 1.7%. So moving on, it’s good to see the strong performance also resulting in solid cash flows.

With free cash flow in the quarter as Dick mentioned EUR553 [ph] million, but somewhat slightly lower than last year as Q2 2015 included a significant refund and income taxes paid in previous years. And additionally as we said in February we continued to expect capital expenditures to be higher in 2016 than the prior year.

And in Q2, we see net investments at EUR180 million, up EUR57 million from last year. I'll come back to the outlook for free cash flow later in the presentation, but for now I'm going to hand back to Dick.

Thank you Jeff, I will share with you some of our business highlights starting in the United States. Our program to improve our customer proposition starts to bear fruit.

We see volume trends improving especially in price. Rollout of our new produce department and our new bakery is nearing completion but as we said before, the journey will continue.

Supported by more than thousand price reductions in April, additional media campaigns and strong weekly ads, we saw price perception scores improving driving solid unit growth. Nature’s Promise, our successful organic and natural brand grew sales by 18% versus last year.

In the Netherlands, Albert Heijn continued to roll out new product innovations. Year-to-date more than 600 new products have been introduced and more than 500 products had quality improvements.

During the quarter, the number of personalized promotional offers was increased to once every week with an attractive selection based on previous purchases and individual preferences. Albert Heijn growth dinosaurs active and alive in the virtual reality campaign for kids and also introduced Belgian products following the merger with Delhaize.

As I mentioned earlier, our online business of bol.com and ah.nl continues to do very well. bol.com grew with their own offering as well as through the plaza sales.

Plaza sales were up 83% and consumer sales in Belgium grew at almost 60% compared to last year. Our Czech business again showed an encouraging performance, sales trends improved through various commercial and operational initiatives launched and implemented.

Margins further improved as ongoing investment in price were more than offset by simplicity savings this quarter. Now let me handover to Frans who will take you the Delhaize quarter two results.

Thank you Dick, and good morning to everyone. I will know walk you through Delhaize Q2 results which have been published last month with the full details published this morning.

Slide 12 summarizes the Delhaize highlights for the second quarter. on slides 13 to 16, you will find for your reference the usual details per segment we typically showed in our quarterly results.

We are pleased with the Delhaize group second quarter results where we saw revenues and underlying operating growth grow in each of our three operating segments compared to last year's second quarter. on slide 13, looking at the US, our comparable store sales growth stood at 2.9% taking into account 1% impact from deflation, we recorded 3.9% real growth with no major difference in real growth between Food Lion and Hannaford.

Our Easy, Fresh & Affordable initiative at Food Lion continued to perform according to plan in our Raleigh market which was re-launched in the last quarter of 2015. Now we are preparing for the Charlotte market with 142 stores under remodeling with a grand reopening campaign in the fourth quarter of this year.

Our US underlying operating margin increased by 20 basis points to 4.1% mainly as a result of continued sales momentum at both banners and a 50% basis point increase in gross margin. The gross margin increase is driven by a favorable product mix, lower cost of products in some product categories and lower shrink at Food Lion which was partly offset by the Hannaford price investments which started in Q4 ‘15.

SG&A as a percentage of revenues increased by 30 basis points as a result of increased labor and health care expenses. In Belgium, on slide 14, our market share continued to recover following the disruptions related to the Transformation Plan.

Nonetheless, our same-store sales of 2.1% remained largely driven by the performance of our affiliated network and by inflation. Company operated stores are lagging expectations.

In addition, the Belgian market continued to be driven by price with intensified competition. Our underlying operating margin was slightly up compared to last year and reached 3.3% as a result of a 90 basis points decrease in SG&A as a percentage of revenues driven by the Transformation Plan Savings which was partly offset by a 90 basis point lower gross margin due to high shrink in supermarkets and price investments.

The new store organization which is a new organizational structure in our Belgian company operated supermarkets will be in place with the fourth and last wave in this October. In Southeastern Europe on page 15, our organic revenue growth stood at 14.2% and was driven by a strong comparable store sales growth of 8.7% and 5% positive impact from network expansion.

CSS and real growth were positive in the three countries of the segment and continued to be particularly strong in Romania and in Greece. On the other hand, inflation turned negative at the minus 1.1% for the segment overall, which was driven by price investments and a very promotional environment in Greece.

Market share increased in all three countries. Our underlying operating margin increased from 4.5% last year to 5.0%, driven by the strong revenue growth in Romania and Greece and the good cost control across the segment which resulted in a 90 basis point decrease in our SG&A as a percentage of revenues, while gross margin was down 30 basis points for the segment due to the intense promotional activity in Greece.

Finally, our group operating free cash flow as you can see on page 16 stood at EUR258 million with the decrease compared to last year relating to working capital movements and increased Capex partly offset by higher EBITDA. Now let me give you a brief update on the integration.

As you can see on page 18, you see an update on what we have been doing as a new entity since the merger closed on July 23, which as you know is just four weeks ago. Thanks to the great and good preparation work from both the Ahold and the Delhaize teams.

The transition to Ahold Delhaize on day one was both smooth and exciting. All corporate associates are now into their new roles with two former head offices already successfully integrated into a single-entity based in the Netherlands.

The integration process is managed by a global office leading both the US and European integration teams. As we are now one single company, we have had access to details on each other's buying conditions in our different markets.

While we're not going into details today, this analysis certainly confirmed the synergy potential coming from sourcing. We have started to hold meetings with the largest national brand suppliers in the Benelux a couple of weeks ago and similar meetings with vendors in the US who will start in September.

Finally going forward, Ahold Delhaize will be a member of the two buying alliances in Europe for Coopernic for national brand's purchasing and for AMS for private label brands. Thank you and now I will hand over back to Jeff.

Thank you Frans, just a few details now, on the 6, October we’ll publish pro-forma historical quarterly segmental information covering 2015 in the first half of 2016 of all five Ahold Delhaize reporting segments. These pro forma numbers will exclude the financial impact of the store divestments as well as the transaction costs and then include the effects of purchase price allocation and in the purchase price allocation the Delhaize assets and liabilities will be revalued at current market rates.

That will also include the alignment of corporate cost allocation and accounting policies and foreign exchange rate methodology. So they will be published for clarity and to help you on the 6 of October.

The following page shows the financial impact from the divestment which will be excluded from the pro-forma numbers in the US. For example, in the US, 86 stores are to be sold.

The proceeds of $174 million will be excluded as well as the net sales and underlying operating income which with for the full year 2015 represented $1.4 billion of sales and $88 million of underlying operating income. Additionally, the financial impact from a further ten Richmond stores which will be sold will also be excluded from these results.

In Belgium, the financial impact of 13 stores to be divested will be excluded and this represents EUR94 million in sales, net sales and EUR10 million in underlying operating income in 2015 numbers. We will exclude also the financial impact which is not significant from the divested Tom&Co sharing at that time.

Now on the next chart, I'm going to touch slightly outlook for Ahold Delhaize combined for the remainder of the year. Capital expenditure for the combined group is expected to be around EUR1.8 billion for the year following the prior guidance given both by Ahold and the Delhaize group.

On free cash flow, we expect EUR1.3 billion for the full year, now this number includes EUR0.2 billion of merger-related costs and the Delhaize Belgium Transformation Plan costs, and it also includes EUR0.1 billion from the estimated proceeds of divestments to be received in 2016, some of them do fall into ‘17. We are confident that we will meet as Frans' mentioned and as Dick mentioned the EUR500 million synergy target which we said to expect to be achieved on a run rate basis by mid-2019.

For 2016, we expect a positive P&L impact from these synergies of EUR30 million to be achieved in the second half of this year. And that's the actual impact that we expect to see in the second half not a run rate.

On one-off cost, we reiterate the expectations for both integration and transaction costs and you can see the detail on this char, slide 22 below split in both the transaction and the integration cost between the first half and second half. Integration cost, we continue to expect to see EUR350 million and for the transaction costs EUR140 million and as I mentioned you can see that in the table.

So thank you, and now I'm going to hand back to Dick.

Thank you Jeff and allow me to briefly wrap up. With the numbers presented today for both Ahold and Delhaize we feel a strong momentum in combining these two successful retailers and all our teams are driving ahead with great energy to create value for our customers, communities, associates and our shareholders.

At Ahold Delhaize, we are strongly committed to deliver great food, value and innovations for our customers. We started on day one, July 24, with plans in place and a lot of preparation being done to successfully integrate the two companies.

As Frans explained, a lot of it has already been done and we remain confident to meet our synergy target of EUR500 million on a run-rate base by mid-2019. We look forward to see you at our Capital Markets Day on December 7 in London, we will provide a further update on our strategy, our progress on the integration and including more details and timing on synergies and guidance on our capital structure going forward.

On slide 24, you will see the last and most important event for you; we would now like to take your questions.

Just a few questions from me, first of all of the price deflation in the US just wondering of that is from underlying commodities and how much of that is from price cuts below the market and also whether any more price investment in the US is needed? On Netherlands margin, could you give any more color on what's driving that big increase in margin there and whether or not we should see that as being the recurring margin going forward.

And also on the stores sold in Belgium, it looks like the margin there will be about 11%, so should we consider that to be the margin for the whole of the Belgian business?

A couple of good question, thank you, Tom. I think you cannot expect the margin of Belgium would be 11%, I’m sure you understand it, but increased margin of the Netherlands certainly not and we mentioned it also we got clearly say ahead of our simplicity savings in the first half, we continue to use part of that and our reinvestment in our customer proposition here in the Netherlands focusing on quality improvements and our products but also where possible of course we arrange our price positioning so that's what its continuation in the Dutch market.

So I wouldn't expect it will be a recurring margin for the rest of the year, although there might be a bit more let’s say ahead on what we were expecting for the first half and it will uplift a bit maybe for the second half continued. But in the total scheme of how Delhaize they will change our expectation on the consensus for the full year of the total group.

Maybe you want to say something about price deflation on Ahold Jeff and maybe Frans something about Delhaize.

Well, on price deflation I mentioned we saw 80 basis points deflation, the majority of which came from deflation in the commodities, meat and dairy. I’m not going to get into the specific breakout but we did make price investments in the quarter, which means we are continuing to close our price position relative to peers and improve our price position and the price reality relative to peers and encouragingly as Dick mentioned price perception is also starting to significantly improve.

In terms of whether or not any further investments, I think it’s a continuous process in the retail trade that you’re continuing to looking under our price position and look into improve your competitiveness. So as we see more funding, see more opportunities; we will continue to look to make further improvements to make sure that we are competitive and in a winning position in all of our markets.

I think we saw already quite some deflation in the Food Lion markets in the last two years, also this year combined for Hannaford and Food Lion, obviously this 100 basis points deflation, we see continued like Jeff mentioned deflation in dairy, and red meat. The deflation also came in the meantime to the northern markets, so therefore also Hannaford impacted and also for Hannaford it’s a combination of commodity deflation and price investments.

One quick question actually to follow up a little bit on the gross margin trend, so can you provide a bit more color by geography please. I’m really looking at Ahold if possible, so US and Netherlands and are you seeing any tailwind from the CPI, TPI spread basically on our gross margin.

Second question is on US margins, so far your margin I think in each one start at 3.9% typically H2 margins are little stronger than that. So should we be considering that your previous target of stable margins year-over-year at Ahold US is a bit too conservative or you’re expecting some margin compression in H2.

And last question is online, can you give you know broadly speaking the contribution of online like-for-like sales in the second quarter in the US and so should we still be assuming that your growing single-digit and related to that you know why is the performance a little below your expectations please?

I will start with the last question and Jeff go back to the margin and the segment. So on the last question clearly let's say for our online business in the US, we are in the high single digits and that’s disappointing so that's why we also mentioned that because in the previous quarter, we set through it back into double-digit growth that clearly of course is limited of this impact also on total sales unit as compared to the ah.

The Netherlands situation where online is 30% growth, of course it has more impact as well on sales but also certainly on some of the margin expectation for the second half because it continues, will have a bigger impact on our margin in the Netherlands, but I'll leave the margin discussion [indiscernible] to Jeff to explain. On the situation of the US and online, of course the disappointment means that we are doing everything we can at this moment to improve our operational standards.

We worked on the New York plans while we have been seeing with all the effects we have been taken that sales will be back there in double-digit growth but the total market of course bigger than New York and that's we dropped a just a bit in the single digits on the high single digits in Peapod. We are expecting to go back that of course when we do the things we have to do and we did also New York and the other markets.

So that’s the expectation on the online business and Jeff will take the margin.

I think what we've already said is we don't really see any significant change in our expectations and our guidance in terms of margins. We’re comfortable with the market, specifically in the US I think if you look at the last two or three years, our margins have been pretty stable around the high 3s to 4% and that‘s you know we are in that range and we’re comfortable in that range, so I don't particularly see, it is a little strong in the first half than last year but I don't particularly see that as a need to change any particular guidance.

Clearly we had a strong performance in the Netherlands and therefore I think it's hard to say that they would be some full impact in the Netherlands but we do need to be bit more cautious, I don't expect this quarter's performance to be repeated in quarter three and quarter fourth where we have more investments in the pipeline in terms of quality specifically, quality investments in the pipeline. And specifically in terms of gross margin trends, I think the gross margin trend in the Netherlands obviously was strong based on investments that we've made, good simplicity initiatives for the Dutch consumers who have seen real improvements in terms of the cost base for example in our fruit juice bottles where we’ve converted from glass to plastic with significant savings, we use those savings again to reinvest back into the quality of that products and where necessary to adjust prices.

So, I think that the overall gross margin trends in the US are pretty much in line with last year. In fact, as we mentioned deflation will put gross margin under a bit more pressure but we believe that we have the initiatives in the pipeline to be able to handle that and maintain the margins at the current level in terms of the bottom-line margins at the current level.

So all in all, I would say no significant change to our expectations, we’ve been quite clear on that, it is a strong second quarter specifically in the Netherlands, but I wouldn't read across from that pool of translation into the second half of the year.

So three questions please from me, firstly, I appreciate you marking out the 7 of December to talk a little bit more on latest things including capital structure, but are you able to share any preliminary thoughts on - about the specific points on the capital structure? Secondly, in terms of competitive pressures we talked about a little bit, I’d be interested in earring your thoughts on what seems to be a sharpening pressures there in Giant-Carlisle markets and particularly also in North Carolina.

And if you can talk about it a little bit, you need to step up here in these markets in the second half that will be helpful. And finally, the timing of divestments when do we deconsolidate them; any kind of help there is appreciated.

And actually just got a very small observation, I find the commentary in terms of the back-end of the pipe where Delhaize that is being talked about in terms of gross margin and ID sales kind of movement, those comments are actually are very helpful if you could preserve them into Ahold Delhaize presentations that would be very helpful. It's just an observation, but there we go, I think those are the three questions on that observation.

Okay, we’ll get back to you certainly on the 7 of December with our Capital Market Day. I appreciate that you appreciated so that’s good; we hope to see you there.

And of course that's why we repositioned also a couple of the elements to be more specific on that day as you can imagine. You asked about the competition and mainly on Giants, the Carlisle division and the North Carolinas, Frans will take the North Carolinas and the rest I will ask Jeff to get back to.

But on the Carlisle market, clearly, last year we had very good half year, first half year, honesty also been supported by conversion there of stores which were previously run by the Delhaize bottom dollars and they are now all converted mostly to [indiscernible] so has more impact again in the Philly market. They had a very good full year by the way Giant-Carlisle last year, so they also working towards strong comparables versus last year.

I think in general, that's the only reason I could see at this moment, there is not a lot of other change in the competition. Although, of course we shouldn't underestimate the impact of Walmart in our market there, this is a market where Walmart has the full fleet to all our stores and is opposing and also changing their pricing there of course, so Carlisle has to react also on the price positioning there in that market.

Are you seeing enough changes there in terms of Walmart pricing on the ground?

You all know what the pricing changes are of Walmart, so we have to let’s say adjust and react at the same time. So that’s one of the reasons of course that also Carlisle has to react and get some fresh air on pricing in the market and Frans will elaborate a bit more also what’s happening in North Carolina.

I don't think it’s a huge impact so it’s not like wow, but it is impacting all of - in this market specifically because we have more Walmart opposite to us.

On the Carolinas, which have been for a long time already in a very competitive part of the US, where we already see as I said before for longer time a price deflation. We see competition strong in the Carolinas especially also Walmart dropped roughly for 500 private label items their prices, especially in that area we think they are testing with the Carolinas there.

We also see a potential reaction that this program came in with summer long pricing campaign. So I think we have to prepare ourselves for competitive environment also in the Carolinas going forward.

We feel that Food Lion is priced right for that challenge but we have to stay very alert that we make sure that we stay priced right also in the coming months.

If I could just very quickly follow up, there seems to be a lot of competitive openings, the square footage in the market is going up a bit more than what historically has been the case is that…?

I think that’s correct and if you then make let’s say on the Delhaize Food Lion the comparison - competition is opening more stores than we do, and I’m not even talking about the incoming disposal of stores on the Food Lion side. So, I think that’s correct that competition is opening faster at the moment Food Lion does.

Let me come back now just on the timing of the divestments, we’ve said just around 100 million, 0.1 billion at the income or the proceeds will be received in 2016, so, clearly in the US that’s something like two thirds or so will be settled this year, there will be some then in the first quarter or the first half of 2017. But majority will be in 2016.

Then on the Belgium stores, I would expect those to be resolved in 2017 not 2016. But we will back them both out pro-forma wise in terms of the comparables.

I will just say on capital structure, yes, we will give much more detail in December at the Capital Markets Day, but we continue to focus on cash generation and our cash generation remains strong and that gives us plenty of options and we continue to then look at a balanced approach looking at our opportunities to invest and you see our capital investments this year at 1.8 billion is probably at the high point relative to what we've invested over the last three or four years as two combined companies. So we are not shirking from investing in capital where we see the needs but we will give more clarity on that obviously in December.

Thank you.

Hi. Good morning, all.

Two, well, three questions. Just on the pro forma EBIT for 2015, I'm wondering if it's possible to give us a number today.

And maybe if that's not possible, you've probably got a better idea than most of us about where consensus is coming out for the 2016 full year. Are people generally in the right kind of ballpark?

Obviously, there is a lot of things going on, it's a bit noisy. That’s sort of questions 1 and 2.

The third one, I mean, obviously lots of questions about gross margin, and all the rest, are you still sticking firmly to the 500 million is gross and net, we should see that flowing through to the bottom line or might we expect a little bit more reinvestment?

Let me take, on the 500, we said that it will be the net. We’ve always said, if there is an upside and we haven't given a number, but any upsides will be used to reinvest back in the business and we haven't, as I said, disclosed any gross number, but the 500 is a net and we will continue to look to develop the upside.

And again, I think it's more right that we give more detail on that in December, but we stick with the guidance that we've given that the 500 being a net number. On the pro forma, no, I'm not going to give you an EBIT number at this stage.

There is incredible amount of work that has to be done within the group. Obviously, all of the Delhaize assets, all of the liabilities get revalued to current market rates.

That will increase the depreciation on those assets and also amortization costs. Looking at EBITDA will be more important for the combined group and obviously we can explain the adjustments and that will all be in the pack.

You mentioned the full year, yes, we are comfortable on a non-pro forma basis, just combining the two companies’ consensus and two companies’ EBIT, we are comfortable with the full-year consensus and that's what we’ve said. To that, obviously, the pro forma adjustments will be overlaid, but currently, I believe that the consensus is on a non-pro forma basis, and we are comfortable with that number.

Okay. I suppose as you size that, the pro forma EBIT for 2015?

I didn't size that, but I'm just not giving you a number at this stage. I think it's too complicated to throw a number out, which is why we intend to have a full pack, which will walk through a full reconciliation, not just showing the purchase price adjustments, but also showing the remedy store changes in terms of the disposals, but also transaction costs will be excluded.

We will also then walk through accounting changes between the two companies, which I don't think net to a difference in totally, it will show some deltas between gross margin and operating costs. And it’s too complicated to throw a number out, but clearly what we will do in October, we will publish a pack and I think we will have a session where we offer analysts some time to walk through the adjustments and basically make it as transparent and as clear to people as possible on that day, and I think that's the best way to introduce those numbers rather than throwing out the number over the conference call today.

Okay. I'll take a sort of, is it deferred adds it to a complicated question.

I'll sneak in one extra question, which is, just you've given some guidance on the phasing of the one-offs through for the year, but you haven't given any guidance on the sort of ongoing one-offs that you see in the business, because obviously you both have your independent, not sure how you call it, but productivity improvement plans, any color in the sort of run rate we should expect beyond those synergy related one-offs?

No. I think again, I'll pick that up.

We will continue, nothing that we talked, the synergies are incremental and as a result of the two businesses combining. The simplicity program that we've been running at Ahold will continue to generate savings on an ongoing basis and I'm not giving a number for next year, but we gave a number for this year as EUR350 million and we’ll continue to use those savings and we see them being evident in the margin in the Netherlands.

We will continue to use those savings to reinvest in our customer proposition and similarly in the Delhaize businesses, the synergy number does not affect the savings programs that they have in place, such as the Belgium transformation program, which will continue to deliver in line with the guidance that we've given. So you should think of the synergies as on top of those existing programs.

Now, clearly, over time, that outside of the window of the synergies in two or three years, those will start merging into just cost initiatives, but just think of the 500 as incremental to the existing programs.

I'm sorry, maybe I didn't phrase it right, but the question is more about the one-offs related to those non-synergy programs because obviously I mean the run rate in Ahold one-offs is about 100 million per year and where should we expect that to continue?

Well, no, I think one-offs are in their nature one-offs. So I wouldn't expect them to continue.

I think we've announced the 350 and there is a table in the chart, which shows it by year very clearly for 2015, ‘16, and then kind of ‘17 and beyond. That 350 and the transactions costs are what you should factor in and what other known one-offs are the Belgium transformation, which is already being discussed and disclosed.

Beyond that, it's difficult to predict a run rate. Clearly, as opportunities to develop to reorganize the change to improve business performance, we’ll take decisions as we see them, but it’s difficult to classify that as an ongoing run rate.

Okay. Thank you very much.

See you in December.

Yes. Thank you for taking my questions.

Maybe first question is on the 30 million benefit that you actually see in 2016 from the synergy tailwinds, there were some local press coverage that you would be -- that you had initiated the talks with the Benelux suppliers and that you would be looking for retroactive price cuts to the beginning of 2016. So I'm actually kind of looking at what kind of assumptions are actually baked in, in that 30 million figure, and also if there would be any regulatory impediments of realizing those retroactive price cuts?

That's my first question. And secondly, there was also some local press coverage regarding the Dutch franchisees and their discontent on the ah.nl franchise as they could not participate in the profitability of that and there would be some talks ongoing to resolve that dispute, which would be able to give a little bit of color on those stocks?

And then maybe thirdly, on Belgium, there is still a gap between the affiliates and the owned stores. Would you actually be able to state if that gap has been narrowing throughout the year and if we still can expect the margin uptick in the second half in the owned stores, driven by the new store organization?

Thank you.

Thank you for the questions. Certainly, for the first question and let’s be clear on what we do at this moment to the suppliers, so we are talking to, let's say, the top hundred suppliers and first of all, we talk about how we can grow, develop together possibilities to even greatly larger scale to all our suppliers.

This of course has all kind of elements in it, and that's what is of course on the table with our suppliers. I cannot go into all the details and certainly on the speculation, I think we just mentioned, this is just, I think, more or less speculation in the media at this moment.

We’re talking with business suppliers and have good discussions going forward, how to leverage their scale, first of all, our new scale, because we are a new company. We've seen different terms, we've seen different terms between Holland and Belgium and clearly that is something which comes on the table, which need to be discussed on the table and not in public at this moment.

So that's why I hope you understand, we do that, at this moment, in the table and our negotiation. And we're talking to, at this moment, 100 main suppliers.

We are talking to all suppliers, as clearly focused on 100 suppliers. On the 30 million maybe Frans, you would elaborate a bit more on that franchise?

Yeah. As you said correctly, Dick, the meetings with those vendors in Benelux just started, so it is extremely difficult to comment on any outcome, which we don't have.

The 30 million for this year is in P&L effective euro amount and this is, at the moment, our best estimate on what we know at the moment and that we know more than we talk during the next quarter. On Belgium, the sales performance gap between the affiliates and the company operated was your question, that gap did not get smaller in itself and that's mainly to do with the fact that we are having a transformation plan and a part of the transformation plan is also a new store organization in the company operated stores.

And it means that we have some disruptions in reorganizing all departments, organizations, indoor stores and I just mentioned that this way for -- the last way, the last group of stores to be transferred in this new company, new store organization will take place in this October. So that's why we have to get used to a number of new procedures, new instructions plus the effects of the transformation plan and that's why our company operated stores are not yet in the best optimal shape at the moment.

You had a question on franchise and the progress we’re making in the discussion here in the Netherlands, that's first and foremost, our relationship with franchise on the business as such, and the way we work together on Albert Heijn and rolling out our improvements in the stores is in a very good shape. There is clearly a good momentum continues also with our franchises because this is, actually, we've seen also the first half, we are doing well.

We have some debate and discussions and that's ongoing about what is in the public domain. There might be certainly more in the public domain going forward, because we have discussions which will certainly get the media attention maybe in the coming quarters again, but on the other hand, we tried to have this discussion on the table and there it should be done and there, we should also solve and resolve it.

All right. Thank you.

Yes, good morning, everyone. I have two questions.

The first one, a follow-up on the Netherlands. So you mentioned more quality investment in the coming quarters, is it a reasonable assumption to expect the margin improvements comparable to what we had in Q1, which means around 30, 40 basis points?

And my second question on store disposals in the US, the 86 units to be disposed seem to be good stores. So you know with an EBIT margin above 6%.

And I was surprised by the low transaction multiple at around 0.12 times sales, if you can give us some flavor and explain this lower multiple? Thank you.

Yes. As you know, we mentioned it before in different quarters also updates on the last question.

We of course, in the FTC process work under pressure to finish the negotiations and that has certainly lowered the amount we got out of our sales proceeds. On the other hand, and that's a positive news I would say.

The number of stores we have to dispose were more limited than we and the markets were expecting clearly in the beginning. So I think it's a balance of the two, which of course, while negative is the outcome of the sales proceeds.

On the other hand, the number of stores we have been selling off now is still limited in the range close toward the expectations is often the market has, maybe also for myself. On the Dutch margin, we were clear on the first half year, the second quarter is certainly better than by a more, let's say, achievement or any on the simplest savings in the second quarter.

We will continue to reinvest, we also said we will have a slight uptick on our margin expectations for the full year, but in the total scheme of the company, that will, let's say, bring us still back on the expectations of the markets, which is on the market that we believe it will be included in that. So I am not speculating first or second quarter, I'm looking at the first and the second half and I think we gave our opinion today.

And maybe one follow-up on the Netherlands for the time being, you have strong top line and good margin development, but if you had to choose the priorities for the coming two years, will it be top line, or will it be margin?

It's topline is all where it starts. We all know we want to grow business and we need to grow our business as always, so that’s important.

Topline is important for also for Albert Heijn in Netherlands, by the way, you should and also take into account 30% growth of online is driving part of the topline growth in Netherlands. So that's clear also at a certain moment, the major driver of the first half year is clearly coming from online and good performance of our supermarkets in Netherlands.

And that's why we grew market share also in Netherlands. Now, top line is important for all of us, that’s the retail top line.

I think I would say that if we don’t drive top line, it’s not good.

Thank you very much.

Yes, good morning. Few short follow-up questions.

Concerning the 30 million synergies in 2016, where is the base, is that in the US, is that in Europe and is that already in purchasing or can you be bit more detailed on that 30 million? Second question is about the Belgium situation of the Delhaize stores, the merger, does that give any new insight how to tackle this problem in Belgium and can we expect a different program here or is the old program often has still to be executed?

And finally, I didn't quite catch what the problem was at people in the US outside the New York area?

On the 30 million, it’s very early in the process. We are four weeks after close and we are glad to give you some color on what we expect for the remainder of 2016 year being P&L effective, not run rate and the P&L effective, is even more prominent at the moment.

This is a combination of a number of expectations. We have some sourcing synergies, but also some SG&A synergies.

Let's not forget that we've brought those two head offices together and after close, we were already completely integrated with our offices in Brussels and Zaandam, but the office of the group here in Zaandam. So it's a part of cost, SG&A, it's a part of sourcing, it’s still a small portion of the total amount as you know.

So it's a little bit of a mixed basket and we just intended to give you some color. On Belgium, we always said that Delhaize Belgium will be the leading brand in Belgium.

The transformation plan is giving us -- is according to plan by the way. The cost savings there and will give us the funding to do the things, which are necessary in Belgium, making the brand stronger, making sure that we are priced better and also are modernizing the network and also things are going on and I think with the brand reputation and the positioning in Belgium, I think we have a very good opportunity to make Delhaize Belgium a stronger brand and come back to old strength from before.

On Peapod, the issues around Peapod is not so much demand of our customers, that clearly the rest of the amount also in the US and online food sales. Clearly, we had operational problems last year in the New York market because of our warehouse there.

We continued to see in other areas where we have warehouses as we also have a bit more struggle with our operational execution, mainly in our home Chicago, where we had some difficulties with getting the production out and that's, let's say, reduced the sales number clearly of the second quarter and get us back on the double-digit. And of course all actions are taken.

This is a bit easier to resolve them. Then in case of the mechanization of New York, because there we clearly had also to work with the complete new technology and all focus is now on the teams to resolve that and that we can get the production out to our customers where demand is instead of selling [indiscernible].

So, teams are underway and the repairing where necessary and then hopefully we are told issues around people going and focus on growing sales again in a similar way as we are continuing to successfully roll out online here in the Netherlands and in the Benelux.

Okay, thank you very much.

Hi, good morning. Thanks for taking questions.

Just a couple of areas. Just back to US food inclusion, are you actually seeing any things of producer prices picking up, and if they do, do you think they will get past through to the consumer or is there any reason we think it might not.

And the second one is just quickly, just to confirm the last answer on Peapod, you’re still seeing strong, are you still seeing strong demand growth for the online food business in the US or has anything changed there recently? Thanks a lot.

I think on the last one, it’s clear there is a strong demand in the US on online sales is clear. We're trying to do everything what we did in the market for people at least to get the operation centered on a better level, which, let's say, was a bit disappointing.

We are investing also heavily on the customer proposition on people. The prices are right, so we are much cheaper for instance in Fresh Direct and all other retailers in the market.

So we do the right things. The website is completely renewed and was really much faster.

You can make your orders. So it's a little disappointing also for ourselves, the operation execution in the warehouse were lagging the opportunities we had.

So, not a single issue around the demand, it’s much more in the positioning, it’s much more about the operational execution.

Just quick follow-up, is Fresh Direct what you consider the sort of main competition or things are getting much bigger?

I think it depends a bit where you are in New York, of course, and Fresh Direct also moves to fairly, it's clearly a main competitor in that area, don't underestimate all other retailers. They also have their online propositions, often not with home deliveries.

So we are unique with our home delivery system wherein most cases the other supermarkets are a picker point. So Fresh Direct clearly for the Belgium market, very expanded.

In Chicago and Instacart is of course a nice solution, but you should see Instacart much more as, let's say, the forgotten product you want to get quickly and at your house. So it's more an instant delivery system into ours, which is clearly, we are testing it, we are using it Giant Landover, we should get the best ourselves to see how it works, but the basket size clearly of an Instacart customer is smaller than that the big shopper we have in people.

So that's clearly a difference and I wouldn't mix both as the same solution. It's clearly two different solutions.

What basket size are you running on people?

It's clearly over $100. So that's what normally is in our basket size in foods home delivery.

And on inflation?

And inflation, even by the way, it will be more specific around $120.

I think just to say that I think on both the Ahold Delhaize side, we both see continued deflation for the balance of the year in the US. I don't see that turning around into an inflationary environment in the short-term.

No. I think, Jeff, I think, we, for the last, it is not different and in the North, and former Ahold operators, we see also deflation I think for the remainder of the year that might, it will not change a lot I think the outlook we have.

And do you feel like it's just because of the producer side or are you seeing a lot more structural in the ability to pass through any price rises?

Well, I think if you look at two big deflationary categories, then we talk about meat and especially red meats and we talk about dairy, which of course are very impactful and big categories and there is more, let's say, demand supply imbalance at the moment, which is already keeping us quite so busy in the last quarters with a lot of volatility. But I’d just reiterate, we are not -- our operating model currently doesn't depend on deflation or inflation either.

We have been operating in the last two years in the customer proposition program that we discussed by ourselves continuing to improve pricing. So therefore, we have not experienced significant inflation as two or three years and we’ve been able to maintain margins and that’s certainly, we're not banking on inflation coming back in order to be able to deliver the performance we expect to deliver.

And I think in food line, I’m looking at France, we haven't seen inflation, significant inflation in the market for some time.

Last two years, we had deflation and I think that's typically on retail. I mean, we have to make sure that we are priced right.

So we always have to be very alert, not only on the commodities, but also what the competition is doing. So what our internal deflation is a mix of making sure that we are priced right in the commodity process.

Good morning and congrats for getting over the line. Just one for me, for Jeff if I may, it looks like you’ve backed out store contribution for the US disposals.

Is it possible to give an indication of what the fully loaded profitability would be to help model or kind of talk around that issue?

No. Clearly, we cannot react quickly to reduce the overhead fixed cost element related to disposing 80 some stores out of a portfolio of 2000.

So clearly, you are right to say that the number that you see here is the store contribution. Obviously, as we go through the whole synergy program over the next two or three years, we will see SG&A costs come down.

But I'm not going to give a number as to say, well, what's the impact of that in terms of fully loaded. What I would say is they were good stores, at least, probably at our business average of around just under 4%.

So that's kind of like the average and these stores were at average or slightly above average.

Okay. That's helpful.

And similarly for the disposals in Belgium as well?

Yes. The 11% is not representative of a fully loaded country margin obviously.

I think, we will be setting some sort of record if that was the case. But again, I couldn't say beyond saying that these stores are probably operating at around average in terms of the Belgium margin.

No, that's very helpful. It's just to get a good sense of the net impact on profitability and obviously the store contribution wouldn't be that guide, although obviously historically from a price point set of accounts, that is clear.

Yes. Going forward, obviously, we would look to adjust fixed costs, but that stuff to do in the short term, especially when you are going through a synergy and an integration program, which in itself will result in lower SG&A costs, which will offset any loss of the incremental EBIT.

Great. And one follow-up if I may on the simplicity savings within Holland.

Obviously you called out packaging within, I think it was fruit juice that you mentioned, are there any other large projects that have come to fact that is quite a material move in terms of margin for this quarter?

No, we’ve been working on multiple projects, a lot of them in the cost of goods area, a lot of them have been projects which, for example, in the US, we have been more successful at earlier in our simplicity program. The Netherlands I think is not lag, I wouldn't like to use the word lag, but it has come to the program a little later, but now it’s picking up a really full head of steam and that will obviously be supplemented by the synergies combining the two businesses going forward.

But the kind of areas that we've been looking at, areas we've talked about in the US in the past, looking at promotional effectiveness for example, in more detail. Looking at packaging, we've talked in the past about [indiscernible] example in terms of if I go back, I think, this was a few months ago and I still see some of these, which actually I was discussing just earlier in the week [indiscernible] on the bottom of the tray and clearly replacing that with a standard tray, I don't think a customer notices the difference in terms of the quality if you can reinvest that price back into the quality of meat, those savings back into the quality of meat, I think that's something which the customer appreciate more.

We’re working on G&A savings as well as we've talked in the past. If you remember back to our fit for growth program, this was a program which went over several years, not as perhaps dramatic as the Belgium transformation, but the fit for growth program didn't start and finish over a 12-month period, but it's been ongoing in the Netherlands as we’ve looked to optimize and improve efficiency across our overhead areas.

So we've been looking across a broad range of activities and literally hundreds of activities, the bigger ones come out in the millions, but a lot of them effectively tens of thousands and 50,000 type of levels in a year. And what I’m pleased about most is the attitude of continuous improvement within our teams because they see these opportunities as opportunities to innovate, to invest more in quality, to invest more in new products and certainly what Dick mentioned about Albert Heijn, if you go into the stores now and look at the new products on the shelf and look at the improved quality across our meats for example, you can see where we’ve been investing the savings in.

So it gives you a little bit of a flavor and again there is many, many projects across many areas of our business, involving every line of the P&L.

That's helpful. Thanks so much.

Operator, we will take the last question now please.

Yes, thank you very much for taking my question. It's concerning the two US proceeds of the 86 disposed stores, can you please share with us whether the proceeds of 174 million actually triggered a loss from asset disposals or put differently, have the book values of those assets been higher than the proceeds, that's the first question.

The second one is concerning Peapod, the operational execution, Dick, which you mentioned and referred to, does that in one way or the other delay potential synergies related to Peapod by introducing the expertise to the Food Lion or Hannaford stores. For example, by means of promoting, as you do in your Ahold Delhaize network, Peapod by Stop and Shop, you could think of doing this by Peapod by Hannaford or Peapod by Food Lion, knowing that Hannaford tries, it’s safe to organize something in online.

That nevertheless, the overall game plan probably was that you would sort of take all benefits out of your online activities and now it seems as if there might be a delay for this rollout, can you share your thoughts on that one with us please? And then finally this is one for Frans on Delhaize in Belgium, can you share with us the magnitude of market share gains in the first half of 2016?

Thank you very much.

Thank you, Juergen. Clearly, Jeff, maybe you can take the proceeds and Frans clearly will come back on Belgium.

On Peapod, I don't think it will really, I would say, limit our opportunities, it's more the standardization and the current operational challenges we have and mainly focusing on the Chicago area, by the way, which clearly is a disappointing thing. I said it already, because we were expecting out of the New York warehouse to move on.

At the end of the day, we know what we want. We now also what we can offer in the online proposition for Peapod.

As I said, things like the new launch of the website, everything is modernized. It's more of the operation execution than something else at this moment, which hinders us.

I don't think that will really hinder us to roll out or if we want to roll out to other areas at this moment, the opportunities, I don’t think that will.

And I think on the digital e-commerce learnings, I think, a big important part of the rational of this merger is we can learn a lot from each other and I think e-commerce for sure, Ahold has a better track record than Delhaize on digital. I think we both have big opportunity.

So all the learnings we will share teams are now openly very receptive to sharing and take the best out of this and that can also be for the US an opportunity to grow in digital and e-commerce. An effort to go is a good program, but we don't have a whole delivery surface.

So, we also look into those opportunities how Peapod could grow in other adjacencies and networks and the same for the digital space and it's not only limited to the US, but also for Europe.

Okay. And I mean I will just finish on Peapod by saying it is a great business, its sales will be over $700 million this year.

It’s I would think probably the biggest grocery home delivery business in the US. If we are expressing some disappointment, it's because we see the potential for example at ah.nl, where we’re growing around 30%.

So it’s a frustration that we can't fully meet the demand, but I'm sure the team is working on it and we’ll turn that around and we’ll be reporting better numbers shortly. On the proceeds, what we say in the statement is that the 174 million will result in no significant divestment gain or loss.

So there is no significant P&L impact, so it’s about neutral. And that's for the 86 stores that doesn't include any potential loss should we then dispose of the other 10 stores in the Richmond area.

Excuse me, Jeff. May I just quickly interrupt on the Richmond area store disposals, what triggered the decision to dispose of an additional 10 stores?

Well, the brand is now isolated in that market. So we had, when we made the original acquisition in that market from Ukrop's, I think we had something like 25 stores.

We will be disposing of the majority of those in this process, which will leave a limited presence in the market for the brands. So I think it's -- the right sensible thing to do is just exit that market in terms of the brand.

Obviously at least a very strong Food Lion business in that market, but the Ahold site will exit that market.

Juergen, the market share development in Belgium. I only have here at the moment at hand the Q2 numbers.

The last 30 basis points of market share in the second quarter and this is almost like, you have the data already in your hand partly, Colruyt plus 20 basis points, Carrefour, minus 20 basis points, Lidl was flat and Aldi lost 15 basis points in the second quarter of market share.

And the 30 basis points uplift, does that bring you to what sort of level, are you not talking about 24.3% percent or so?

The or-so will be correct. I just look at my, my business, what is the number?

24.3, Juergen, is 100% correct.

Okay, great. Thanks very much indeed.

Thank you.

Thank you. Well, ladies and gentlemen, this concludes this conference call.

Thanks again for attending and have a nice day.