2008 FINANCIAL REPORT Carrefour SA with capital of 1,762,256,790 euros RCS Nanterre 652 014 051 www.groupecarrefour.com 2008 FINANCIAL REPORT OTHERS PUBLICATIONS: 2008 Sustainable Development Report 2008 Annual Report ADDITIONAL INFORMATION AND GROUP FINANCIAL REPORTS ARE AVAILABLE AT WWW.GROUPECARREFOUR.COM Design, creation, copywriting and production: Translation: Photocredits: Carrefour Photo Library, Lionel Barbe. Paper: The Carrefour Group is committed to the responsible management of its paper purchasing. The paper used in the 2008 Challenges Booklet is FSC (Forest Stewardship Council) certified. This certification attests to its compliance with a set of internationally recognised forest management principles and criteria. The aim of the FSC is to promote environmentally responsible, socially beneficial and economically viable management of the Earth’s forests. Printing: This document has been produced in association with RR Donnelley. 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CONTENTS CONSOLIDATED FINANCIAL STATEMENTS 02 Management Report 09 Consolidated Financial Statements 13 Notes on the Consolidated Financial Statements 45 Companies consolidated by full integration as of 31 December 2008 53 Companies consolidated by the equity method as of 31 December 2008 54 Statutory auditors’ report on the Consolidated Financial Statements REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS 56 Report by the Chairman of the Board of Directors 66 Statutory auditors’ report on the Chairman’s Report ADDITIONAL INFORMATION 68 Consolidated store network 72 Commercial statistics CONSOLIDATED FINANCIAL STATEMENTS MANAGEMENT REPORT Accounting principles The Carrefour Group’s consolidated financial statements for fiscal The income statement as of 31 December 2007 is presented for the year 2008 have been drawn up in accordance with IFRS previous period. international accounting standards. Activity - results In an environment marked by a sharp slowdown in food-price Ⅵ Net income from recurring operations was affected by inflation and a steep decline in discretionary spending during the non-current expenses, which mainly include impairment charges 4th quarter, and a tax provision of 126 million euros. Ⅵ Sales remained resilient (+6.4% at constant exchange rates, Ⅵ A strengthened balance sheet: free cash flow of 1.9 billion euros including 1.8% from acquisitions) thanks to sustained promotional was generated via tight management of our merchandise cash efforts. flow and capital expenditures. Ⅵ The Activity contribution rose mainly due to our firm grip on operating costs. Main aggregate values from the income statement 2008 2007 Change (in millions of euros) 2008/2007 Net sales 86,967 82,148 5.9% Activity contribution 3,300 3,291 0.3% Net income from recurring operations – Group share 1,256 1,868 (32.8%) Net income from discontinued operations – Group share 16 431 - Net income – Group share 1,272 2,299 (44.7%) Sales 2008 2007 Change Change 2008/2007 2008/2007 at constant (in millions of euros) exchange rates France 37,968 37,621 0.9% 0.9% Europe (excluding France) 32,418 30,837 5.1% 5.4% Latin America 10,505 8,211 27.9% 31.0% Asia 6,076 5,480 10.9% 13.3% Total 86,967 82,148 5.9% 6.4% Net sales amounted to 86,967 million euros, up 6.4% as compared with 2007 sales at constant exchange rates. After the impact of exchange rates, sales increased by 5.9%. 2 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Breakdown of net sales by business Breakdown of net sales by geographic region As a % 2008 2007 As a % 2008 2007 Hypermarkets 62.0% 61.9% France 43.7% 45.8% Supermarkets 21.6% 21.5% Europe (excluding France) 37.3% 37.5% Hard-discount stores 11.1% 10.5% Latin America 12.1% 10.0% Other stores 5.4% 6.0% Asia 7.0% 6.7% Total 100.0% 100.0% Total 100.0% 100.0% Activity contribution 2008 2007 Change Change 2008/2007 2008/2007 at constant (in millions of euros) exchange rates France 1,510 1,556 (3.0%) (3.0%) Europe (excluding France) 1,153 1,216 (5.1%) (4.7%) Latin America 395 301 31.1% 33.5% Asia 242 218 10.9% 14.1% Total 3,300 3,291 0.3% 0.9% The Activity contribution amounted to 3,300 million euros and represented 3.8% of our sales, against 4% in 2007. It increased by 0.3% compared with 2007. Increases in Latin America and Asia offset declines in France and in Europe. Breakdown of Activity contribution by geographic region Ⅵ Capital gains or losses from sales representing income of 276 million euros (mainly from the sale of land in Merter, Istanbul for 157 million euros). As a % 2008 2007 Ⅵ A tax provision of (126) million euros. France 45.8% 47.3% Europe (excluding France) 35.0% 36.9% Ⅵ Latin America 12.0% 9.1% Miscellaneous costs of (202) million euros. Asia 7.3% 6.6% EBIT Total 100.0% 100.0% EBIT amounted to 2,776 million euros and represented 3.2% of our sales, against 4.1% in 2007. It fell by 16.8% compared to 2007. Depreciation and provisions EBIT by geographic region Depreciation and provisions amounted to 1,861 million euros, representing 2.1% of sales. As a % 2008 2007 Non-current income and expenses France 41.9% 46.6% Europe (excluding France) 35.9% 37.6% Non-current expenses amounted to 524 million euros. Non-current Latin America 14.2% 9.5% income and expenses included: Asia 8.0% 6.3% Ⅵ Asset impairment charges of (396) million euros. Total 100.0% 100.0% Ⅵ Cost of brand change and consolidation of (76) million euros. 2008 FINANCIAL REPORT 3 Financial income (expense) Sale of Portuguese hypermarkets Financial expense amounted to 562 million euros, up by 6.9% as On 27 July 2007, the Group announced the sale of its Portuguese compared with 2007. It represented 0.6% of sales, a level subsidiary to Sonae Distribuição for an enterprise value of equivalent to 2007. 662 million euros. This transaction was approved by Portuguese competition authorities on 31 December 2007. In 2008, the selling Income tax price was adjusted based on certain financial indicators on the transaction’s final closing date. Effective income-tax expenses were 743 million euros in 2008. This represented 33.6% of income before taxes, against 28.7% in 2007. Sale of operations in Switzerland The effect of low taxation on capital gains from the sale of land in Merter (Istanbul) was more than offset by accounting for the tax On 21 August 2007, Carrefour Group and Maus Frères announced provision, which was calculated net of tax, and by the impact of the sale of their respective interests in Distributis AG to Coop for an non-deductible impairments. enterprise value of approximately 330 million euros. This transaction was approved by Swiss competition authorities on 28 March 2008. Consolidation by the equity method Sale of our operations in Slovakia Income from equity affiliates amounted to 52 million euros, 9 million euros higher than in 2007. This trend is mainly explained by income Following the Slovakian competition authorities’ 29 December 2006 growth among subsidiaries in which the Group holds a minority refusal to approve the sale of four Carrefour stores to Tesco, the interest. Group looked for a new buyer. On 1 June 2007, the Group concluded an agreement with ICS and ECM Group NV to sell these Minority interests stores, which will continue to be operated under the Carrefour banner. This transaction was approved by the Slovakian competition authorities in February 2008. Minority interests’ share in income amounted to 267 million euros, representing an increase of 87 million euros over the previous year. This increase is mainly related to gains realized on the sale of land in Cash flow and investments Merter (Istanbul) and to income growth among subsidiaries where the Group works with partners. Cash flow stood at 4,011 million euros and was stable overall compared to 2007. Net income from recurring operations - Group share Net investment for the year amounted to 2,412 million euros, against 3,337 million euros in 2007. Tangible and intangible investment amounted to 2,918 million This line amounted to 1,256 million euros, down 32.8% compared euros. Investment rose in Asia, Latin America and Eastern Europe. with net income from recurring operations – Group share 2007, Financial investment for 2008 represented 439 million euros. which stood at 1,869 million euros. Disposals that impacted our cash flow in 2008 amounted to 945 million euros. Net income from discontinued operations - Group share Shareholders’ equity This line, which represented income of 16 million euros in the 2008 income statement, breaks down as follows: This amounted to 10,952 million euros as of 31 December 2008, against 11,770 million euros for the previous year. Ⅵ adjustment to the sale price of operations in Portugal for (30) million euros; Net debt Ⅵ income up to the date of final sale and income from the sale of The Group’s debt fell from 7,358 million euros at the end of 2007 to operations in Switzerland for 12 million euros; 6,652 million euros at the end of 2008. Ⅵ income up to the date of final sale and income from the sale of operations in Slovakia for 23 million euros; Ⅵ the final impact of transactions for discontinued operations during prior fiscal years for 11 million euros. 4 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS FRANCE The consolidated store network in France as of 31 December 2008 stood as follows: Hypermarkets Supermarkets Hard-discount stores Other stores Total 203 590 842 9 1,644 In 2008, the network expanded by 9 hypermarkets and 2 hard- ■ Net Sales ■ Activity Contribution (in millions of euros) (in millions of euros) discount stores.