DEBT WAIVERS, COST CUTTING

Daiei profit surges more than five-fold

Troubled retailer Daiei Inc. said Friday its group net profit surged to 140.49 billion yen in the six-month period ending Aug. 31, up more than five-fold from the same period last year.

Thanks to massive debt waivers and cost cutting, Daiei saw its group net profit soar 435.2 percent. Pretax profit rose 132.4 percent to 5.72 billion yen.

Under a major restructuring plan announced earlier in the year, Daiei’s three main lenders — UFJ Bank, Sumitomo Mitsui Banking Corp. and Mizuho Corporate Bank — agreed to waive claims on 170 billion yen in outstanding loans.

The company said the removal of loss-making subsidiaries from its consolidated financial statements also contributed to the huge increase in group profit. Revenue, however, slipped 9.7 percent to 1.165 trillion yen.

The supermarket chain operator meanwhile posted a parent-only pretax profit of 9.13 billion yen, up 50.8 percent from the same period a year earlier but well short of its initial forecast of 11 billion yen.

Nevertheless, Daiei President Kunio Takagi told a news conference that recovery efforts are “on schedule.”

Daiei said it cut interest-bearing debt in the six-month period by 428.5 billion yen, bringing it to 1.236 trillion yen. It is aiming to reduce such debt, excluding debts owned by consumer credit service subsidiary OMC Card Inc., to 900 billion yen by the end of February 2005.

On an unconsolidated basis, the retailer logged 812.4 billion yen in operating revenue during the half-year period, down 7.1 percent from the same period last year.

Sales at stores operating one year or more stood at 98.3 percent of last year’s figure.

The company blamed its poor sales record on the dwindling performance of electric appliances, which saw sales at 74.3 percent of last year’s figure.

Electric appliance sales were hardest hit during July, when the relatively mild weather put a damper on demand for air conditioners.

Blaming the decline on the growing popularity of large specialty electric stores, Takagi said his company will revamp electric appliance sales operations during the second half of the year, including a shift in strategy that will narrow its product range to expendable items such as light bulbs, batteries and audio and video tapes.

The net profit on a parent-only basis came to 138 billion yen. The firm logged a 3.9 billion yen loss in the same period last year.