METRO INC. increased net earnings by 8.4% in the second quarter of 2007



    MONTREAL, April 18 /CNW Telbec/ -

    
    Second Quarter 2007 Highlights

    - The Company realized net earnings of $61.8 million compared to
      $57 million, an increase of 8.4%. Fully diluted net earnings per share
      reached $0.53, up 8.2% from $0.49.

    - Excluding non-recurring items recorded in the second quarters of 2007
      and 2006, adjusted net earnings for the second quarter of 2007 would
      have been $65.5 million, an increase of 11.6%, and adjusted fully
      diluted net earnings per share would have been $0.56, an increase of
      12%. Non-recurring items include integration and rationalization costs
      of $5.4 million before taxes for the second quarter of 2007 and
      $2.6 million before taxes for the corresponding quarter of 2006.

    - Sales decreased 2.3% to $2,356.2 million. Excluding decreased sales of
      tobacco products, lost sales due to the disposal, in the fourth quarter
      of 2006, of our interest in a grocery wholesaler, and the fact that
      Christmas week fell in the first quarter of 2007 rather than the second
      quarter as in 2006, sales would have increased by 3%. Excluding the
      Christmas week, same-store sales increased by 2.5%.

    - Synergies of $20.6 million were achieved in the second quarter compared
      to $9.2 million in the same quarter last year. We expect to achieve
      close to $90 million of synergies in fiscal 2007.

    Highlights for the 2007 24-Week Period Ended March 17, 2007

    - The Company realized net earnings of $129.7 million, up 45.7% from
      $89 million. Fully diluted net earnings per share were $1.11, up 44.2%
      from $0.77.

    - Excluding non-recurring items recorded in the 24-week periods of 2007
      and 2006, adjusted net earnings for the 2007 24-week period would have
      been $137.1 million, a 26.6% increase, and adjusted fully diluted net
      earnings per share would have been $1.18, a 26.9% increase. The non-
      recurring items are integration and rationalization costs of
      $11 million before taxes for the first 24 weeks of 2007 and of
      $20.9 million before taxes for the corresponding period of 2006, and
      the additional tax expense of $5.3 million in 2006.

    - Sales for the first 24 weeks of 2007 reached $4,871.2 million, down
      1.3%. Excluding decreased sales of tobacco products and lost sales due
      to the disposal, in the fourth quarter of 2006, of our interest in a
      grocery wholesaler, sales would have increased by 1.8%.

    - Synergies of $39.6 million were achieved in the first 24 weeks of 2007
      versus $17.1 million in the same period of the previous fiscal year.

    METRO INC. realized net earnings of $61.8 million in the second quarter of
2007, compared to $57 million in the corresponding quarter of the previous
fiscal year, and fully diluted net earnings per share of $0.53 versus $0.49
last year. Non-recurring items were recorded in the second quarters of 2007
and 2006, namely integration and rationalization costs of $5.4 million before
taxes in 2007 and $2.6 million before taxes in 2006. Excluding these
non-recurring items, adjusted net earnings(1) for the second quarter of 2007
would have been $65.5 million, an increase of 11.6%, and adjusted fully
diluted net earnings per share(1) would have been $0.56, an increase of 12%.

    SALES

    Second quarter sales reached $2,356.2 million, down 2.3% compared to
fiscal 2006 second quarter sales of $2,412.1 million. Excluding decreased
sales of tobacco products and lost sales due to the disposal, in the fourth
quarter of 2006, of our interest in a grocery wholesaler, and the fact that
Christmas week fell in the first quarter of 2007 rather than in the second
quarter as in 2006, sales would have increased by 3%. Excluding the Christmas
week, same-store sales increased by 2.5% in the second quarter.
    Sales for the first 24 weeks of 2007 reached $4,871.2 million, down 1.3%
compared to sales of $4,933.8 million for the corresponding period of fiscal
2006. Excluding decreased sales of tobacco products and lost sales due to the
disposal, in the fourth quarter of 2006, of our interest in a grocery
wholesaler, sales would have increased by 1.8%.

    INTEGRATION AND RATIONALIZATION COSTS

    Following the acquisition of A&P Canada, we developed a plan to integrate
and rationalize our operations. This three-part plan, dealing with our store
network, the integration of our overall operations, and the implementation of
our information systems at A&P, continued during the second quarter of 2007.
    During the second quarter, we completed the implementation of our SAP and
EXE purchasing and distribution systems in all of our Ontario warehouses. We
also implemented our retail information systems in 10 stores and began
implementing our payroll and human resource management systems.
    Over the next quarter, the implementation of our retail systems in our
other stores will continue, as will the implementation of our payroll and
human resources management systems. So far, we have complied with our initial
timetable and remained within the original budget. We expect to complete these
implementations in the fourth quarter of 2007 as planned and stop outsourcing
A&P US information systems.
    Over fiscal 2006, integration and rationalization plan costs totalled
$28 million, and we anticipate another $27 million in 2007. Costs incurred
during the 24-week period of 2007 totalled $11 million, $5.4 million of which
in the second quarter.

    Integration and Rationalization Costs
    (Millions of $)
                                Incurred             Anticipated       Total
                                    2007        2006
                   (12 weeks)  (24 weeks)  (53 weeks)
    -------------------------------------------------------------------------
    Stores             $   -       $ 2.2       $11.9       $ 2.4       $16.5
    Integration of
     operations          3.3         4.5        13.9           -        18.4
    Implementation of
     information
     systems             2.1         4.3         2.2        13.6        20.1
    -------------------------------------------------------------------------
                       $ 5.4       $11.0       $28.0       $16.0       $55.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
    (EBITDA)(2)

    Earnings before interest, taxes, depreciation and amortization for the
second quarter of 2007 were $140.1 million, down 0.2% from $140.4 million for
the same quarter last year. Second quarter EBITDA represented 5.9% of sales
versus 5.8% last year. Second quarter integration and rationalization costs
were $5.4 million and $2.6 million in 2007 and 2006, respectively.
    Our second quarter equity earnings from our investment in Alimentation
Couche-Tard were $5.2 million in 2007 compared to $6.6 million in 2006.
    Excluding integration and rationalization costs as well as equity earnings
from our investment in Alimentation Couche-Tard, 2007 second quarter EBITDA,
as a percentage of sales, would have been 6% versus 5.7% in 2006. This
improvement in EBITDA is due mainly to effective merchandising and further
synergies in 2007.
    In the second quarter of 2007, we recorded $20.6 million in synergies
compared to $9.2 million in the second quarter of 2006. With these results, we
will exceed our $80 million objective in 2007 and expect to achieve close to
$90 million of synergies for fiscal year-end.
    EBITDA for the 24-week period rose 18.8% to $294.7 million or 6% of sales
compared to $248.1 million or 5% of sales for the same period last year. We
incurred integration and rationalization costs of $11 million in the first 24
weeks of 2007 versus $20.9 million over the same period in 2006. Equity
earnings from our investment in Alimentation Couche-Tard were $13.8 million
for the 24-week period compared to $13.4 million in 2006.
    Excluding integration and rationalization costs and earnings from our
investment in Alimentation Couche-Tard, our EBITDA for the first 24 weeks of
2007 would be 6% of sales compared to 5.2% for the same period of fiscal 2006.
    The increase in EBITDA is due mainly to effective merchandising and
further synergies achieved in 2007.
    We achieved $39.6 million in synergies in the first 24 weeks of 2007
versus $17.1 million in the same period of fiscal 2006.

    INTEREST, DEPRECIATION AND AMORTIZATION

    Total depreciation and amortization expenses for the second quarter and
first 24 weeks of fiscal 2007 amounted to $37.9 million and $74.9 million,
respectively, compared with $39.1 million and $77.9 million for the same
periods last year. These decreases result primarily from additional
amortization charges in fiscal 2006 following the reassessment of the useful
life of certain assets. Second quarter interest expenses totalled
$14.1 million versus $16.3 million last year, while interest expenses for the
24-week period totalled $28.4 million versus $31.8 million last year. These
decreases are due primarily to a debt reduction of $188 million since the end
of the second quarter of 2006. Interest rates for the first 24 weeks of 2007
averaged 5.4% compared with 4.9% for the corresponding period of the previous
fiscal year.

    INCOME TAXES

    The 2007 second quarter and 24-week period income tax expenses of
$27.6 million and $59.9 million represent an effective tax rate of 31.3%. The
2006 second quarter and 24-week period income tax expenses of $26.4 million
and $47.8 million represented effective tax rates of 31.1% and 34.5%,
respectively. In the first quarter of 2006, we recorded an additional tax
expense of $5.3 million, following an approval milestone with regard to the
Québec government's budget providing for a tax rate increase for large
businesses. Excluding this additional expense, the effective tax rate for the
first 24 weeks of 2006 would have been 30.7%.

    NET EARNINGS

    Second quarter net earnings were $61.8 million compared to $57 million for
the corresponding quarter of fiscal 2006, an increase of 8.4%. Fully diluted
net earnings per share increased 8.2% to $0.53 compared to $0.49 last year.
Excluding second quarter integration and rationalization costs of $5.4 million
before taxes in 2007 and of $2.6 million before taxes in 2006, adjusted net
earnings for the second quarter would have been $65.5 million, up 11.6% from
net earnings for the same quarter last year. Adjusted fully diluted net
earnings per share would have been $0.56, an increase of 12% over last year.
    Net earnings for the first 24 weeks of 2007 reached $129.7 million versus
$89 million last year, a 45.7% increase. Excluding integration and
rationalization costs of $11 million before taxes for the first 24 weeks of
2007 and of $20.9 million before taxes for the first 24 weeks of 2006, and the
additional tax expense of $5.3 million in 2006, adjusted net earnings for the
2007 24-week period would have been $137.1 million, up 26.6% over the
corresponding period last year. Fully diluted net earnings per share would
have been $1.18, up 26.9% over last year.

    Quarterly Highlights
    (Millions of dollars, except earnings per share)

                                 2007         2006         2005    Variation
                            (52 weeks)   (53 weeks)   (52 weeks) (Percentage)
    -------------------------------------------------------------------------
    Sales (Restated - EIC-156)
    Q2                        2,356.2      2,412.1            -         (2.3)
    Q1                        2,515.0      2,521.7            -         (0.3)
    Q4                              -      2,673.5      1,951.8         37.0
    Q3                              -      3,336.7      1,898.2         75.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings
    Q2                           61.8         57.0            -          8.4
    Q1                           67.9         32.0            -        112.2
    Q4                              -         78.9         50.2         57.2
    Q3                              -         85.1         56.9         49.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted net earnings
    Q2                           65.5(3)      58.7(3)         -         11.6
    Q1                           71.6(3)      49.6(3)         -         44.4
    Q4                              -         71.0(3)      50.2         41.4
    Q3                              -         78.3(3)      56.9         37.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Fully diluted net
     earnings per share
     (Dollars)
    Q2                           0.53         0.49            -          8.2
    Q1                           0.58         0.28            -        107.1
    Q4                              -         0.68         0.48         41.7
    Q3                              -         0.73         0.58         25.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted fully diluted
     net earnings per
     share (Dollars)
    Q2                           0.56(3)      0.50(3)         -         12.0
    Q1                           0.62(3)      0.43(3)         -         44.2
    Q4                              -         0.61(3)      0.48         27.1
    Q3                              -         0.68(3)      0.58         17.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The variations in our results over the last four quarters are due
primarily to the August 13, 2005 acquisition of A&P Canada, the effect of our
integration plan during those quarters, and the synergies achieved.
    The impact of this acquisition is well demonstrated by the increase in
third quarter sales in 2006 over those of 2005. A&P Canada results were
included for the entire fourth quarter in 2006, comprising 13 weeks versus 12
weeks for the corresponding quarter of 2005, while the fourth quarter of 2005
included only 6 weeks of such results. First and second quarter sales for 2007
are comparable to those for the corresponding quarters of 2006 with respect to
the acquisition of A&P Canada.
    Decreased sales in fiscal 2007 quarters compared to 2006 resulted from
decreased sales of tobacco products and lost sales due to the disposal, in the
fourth quarter of 2006, of our interest in a grocery wholesaler, and the fact
that Christmas week fell in the first quarter of 2007 rather than in the
second quarter as in 2006. Excluding these items, 2007 first and second
quarter sales would have been up 0.6% and 3%, respectively, over 2006.
    Over the last four quarters, net earnings and fully diluted net earnings
per share were impacted by, among other things, integration and
rationalization costs related to the acquisition of A&P Canada, a gain on
disposal of an investment and income tax expense variations resulting from
fluctuations in tax rates applicable to large corporations announced by the
government.
    Excluding these non-recurring items, increases in fiscal 2006 third and
fourth quarter adjusted net earnings and adjusted fully diluted net earnings
per share, compared with those for the corresponding quarters of fiscal 2005,
are due primarily to the acquisition of A&P Canada, synergies and the impact
of the 53rd week of 2006. Increases in adjusted net earnings and adjusted
fully diluted net earnings per share for the first and second quarters of
fiscal 2007, compared with those of 2006, are due primarily to more effective
merchandising programs and further synergies.

                                                2007                    2006
    -------------------------------------------------------------------------
    Net earnings
    (Millions of
     dollars)            Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4
    -------------------------------------------------------------------------
    Adjusted net
     earnings          71.6   65.5      -      -   49.6   58.7   78.3   71.0
    Integration and
     rationalization
     costs after taxes (3.7)  (3.7)     -      -  (12.3)  (1.7)  (2.6)  (2.1)
    Investment
     disposal gain,
     after taxes          -      -      -      -      -      -      -    8.6
    Decrease (increase)
     in tax expense       -      -      -      -   (5.3)     -    9.4    1.4
    -------------------------------------------------------------------------
    Net earnings       67.9   61.8      -      -   32.0   57.0   85.1   78.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                2007                    2006
    -------------------------------------------------------------------------
    Fully diluted net
     earnings per share
     (Dollars)           Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4
    -------------------------------------------------------------------------
    Adjusted fully
     diluted net
     earnings          0.62   0.56      -      -   0.43   0.50   0.68   0.61
    Integration and
     rationalization
     costs after
     taxes            (0.04) (0.03)     -      -  (0.10) (0.01) (0.03) (0.02)
    Investment
     disposal gain,
     after taxes          -      -      -      -      -      -      -   0.07
    Decrease (increase)
     in tax expense       -      -      -      -  (0.05)     -   0.08   0.02
    -------------------------------------------------------------------------
    Fully diluted net
     earnings per
     share             0.58   0.53      -      -   0.28   0.49   0.73   0.68
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Synergies, before taxes
    (Millions of dollars)
                                                                 Fiscal Year
                                                          2007          2006
                                                         --------------------
    Q1                                                    19.0           7.9
    Q2                                                    20.6           9.2
    Q3                                                       -          15.5
    Q4                                                       -          18.7
                                                         --------------------
                                                          39.6          51.3
                                                         --------------------
                                                         --------------------


    Cash Position

    OPERATING ACTIVITIES

    Operating activities generated cash flows of $116.6 million in the second
quarter and $166 million over the first 24 weeks of 2007, compared to
$177.6 million and $124.6 million respectively in the corresponding periods of
fiscal 2006. The decrease in 2007 second quarter cash flows compared to those
of the second quarter of fiscal 2006 are mainly the consequence of Christmas
week falling in the first quarter of 2007 rather than the second quarter as in
2006. The Christmas week reduction in inventories generated funds that
increased 2006 second quarter cash flows compared with the first quarter of
2007.

    INVESTMENT ACTIVITIES

    Investing activities consumed $52.7 million of cash in the second quarter
of 2007 and $121 million in the first 24 weeks versus $32.8 million in the
second quarter of 2006 and $80.5 million in the first 24 weeks of 2006. These
increases are due primarily to the acquisition of additional fixed assets
related to new store construction, expansion, and renovation projects.
    During the first 24 weeks of 2007, the Company and the retailers invested
$144.2 million in our retail network for an expansion of 506,400 square feet
or 2.7%, for a net expansion of 149,000 square feet. The opening of 10 new
stores, major renovations and expansions of 23 stores have been completed.

    FINANCING ACTIVITIES

    Financing activities consumed $6.1 million of cash in the second quarter
of 2007 and $28.8 million in the first 24 weeks of 2007 versus 2006 second
quarter outflows of $8.2 million and cash inflows of $80.2 million in the
first 24 weeks of 2006. The main reason for this variation in 24-week period
figures is the Company's issuance of $600 million of 10-year and 30-year
medium-term notes in the first quarter of 2006, with $500 million of the
proceeds used to pay down the credit facilities obtained for the acquisition
of A&P Canada. The remaining $100 million, kept as short-term cash assets, was
the primary source of cash flows generated in the first quarter of 2006.

    Financial Position

    Our financial position at the end of the second quarter of 2007 was very
solid. We had $181.9 million in cash and cash equivalents. We have not used
our approved $400 million line of credit. Our long-term debt corresponds to
37.8% of the combined total of long-term debt and shareholders' equity
(long-term debt/total capital).
    In the second quarter, the main elements of our long-term debt were as
follows:

                        Interest Rate             Balance           Maturity
                                             (Millions of
                                                  dollars)
    -------------------------------------------------------------------------
    Credit Facility A   Rates fluctuate with        469.3    August 15, 2010
                        changes in bankers'
                        acceptance rates
    Medium-term
     Series A notes     4.98% fixed rate            200.0   October 15, 2015
    Medium-term
     Series B notes     5.97% fixed rate            400.0   October 15, 2035
    -------------------------------------------------------------------------

    At the end of the second quarter, interest rate swap agreements in the
notional amount of $150 million were outstanding under Credit Facility A.
These agreements provide for the exchange of variable interest payments for
fixed interest payments according to the following terms:

    Fixed Rate           Notional Amount                            Maturity
                    (Millions of dollars)
    -------------------------------------------------------------------------
    4.6480%                         50.0                   November 23, 2008
    4.6820%                         50.0                   December 16, 2009
    4.7425%                         50.0                   December 16, 2010
    -------------------------------------------------------------------------

    Giving effect to these swap agreements, at the end of the quarter, long
term indebtedness comprised $750 million at fixed rates ranging from 4.6480%
to 5.97% and $319.3 million at variable rates which fluctuate with changes in
bankers' acceptance rates.


    FINANCIAL RATIOS

                                                         As at         As at
                                                      March 17, September 30,
                                                          2007          2006
    -------------------------------------------------------------------------
    Financial structure
      Long-term debt (Millions of $)                   1,116.7       1,116.6
      Shareholders' equity (Millions of $)             1,836.9       1,723.8
      Long-term debt/total capital (%)                    37.8          39.3


                                                   Fiscal 2007   Fiscal 2006
                                                     (24 weeks)    (24 weeks)
                                                  ---------------------------
    Results
      EBITDA/Interest (Times)                             10.4           7.8
    -------------------------------------------------------------------------


    CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS

                                                         As at         As at
                                                      March 17, September 30,
                                                          2007          2006
    -------------------------------------------------------------------------
    Number of Class A Subordinate Shares
     outstanding (Thousands)                          114,394        113,852
    Number of Class B Shares outstanding (Thousands)      848            880
    Stock options:
      Number outstanding (Thousands)                    3,651          4,233
      Exercise price                                   $11.80          $8.73
                                                    to $35.71      to $33.87
      Weighted average exercise price                  $21.50         $20.85
    Number of performance shares units:
      Number outstanding (Thousands)                      128             48
      Weighted average maturity                     29 months      30 months
    -------------------------------------------------------------------------


    DIVIDENDS

    On April 17, 2007, the Company's Board of Directors declared a quarterly
dividend of $0.115 per Class A Subordinate Share and Class B Share payable
June 4, 2007, an increase of 9.5% over the dividend for the corresponding
quarter last year. On an annualized basis, this dividend represents 21% of
2006 net earnings.

    SHARE TRADING

    The value of METRO shares remained in the range of $33.23 to $40.83 over
the first 24 weeks of fiscal 2007. During this period, a total of 25.4 million
shares were traded on the Toronto Stock Exchange. The closing price on Friday,
April 6, 2007 was $36.83, compared with $33.60 at the end of fiscal 2006.

    Outlook

    "Over the next quarters, we shall pursue our integration and
rationalization plan related to the acquisition of A&P Canada, which is on
schedule and proceeding as planned. We are satisfied with our progress to date
and are confident that METRO is well positioned to pursue its growth in the
Canadian grocery market," stated the President and Chief Executive Officer,
Mr. Pierre H. Lessard.

    Forward-looking Statements

    Any statement contained in the present press release which does not
constitute an historic fact, may be considered forward-looking. Verbs such as
"believe", "foresee", "estimate" and other similar expressions appearing in
this discussion and analysis generally indicate forward-looking statements.
These projections do not provide guarantees as to the future performance of
METRO INC. and are subject to risks, both known and unknown, as well as
uncertainties which may cause the outlook, profitability and actual results of
METRO INC. to differ significantly from the profitability or future results
stated or implied in these forward-looking statements.

    Conference Call

    Financial analysts and investors are invited to participate in a
conference call at 10:00 a.m. EDT on April 18, 2007. To access the conference
call, please dial 416-644-3417 or 514-807-8791. The media and public are
invited to listen to the call in real time or delayed time on the METRO INC.
Web site at www.metro.ca.

    -----------------------------
    (1) Earnings are presented for information purposes only. They do not
        have a standardized meaning prescribed by Canadian GAAP and
        therefore may not be comparable to similar measures presented by
        other public companies.

    (2) Earnings are presented for information purposes only. They do not
        have a standardized meaning prescribed by Canadian GAAP and
        therefore may not be comparable to similar measures presented by
        other public companies.

    (3) Earnings are presented for information purposes only. They do not
        have a standardized meaning prescribed by Canadian GAAP and therefore
        may not be comparable to similar measures presented by other public
        companies.


    Consolidated Statements of Earnings
    Periods ended March 17, 2007 and March 11, 2006
    (Unaudited) (Millions of dollars, except for earnings per share)

                                          12 Weeks                  24 Weeks
                                       Fiscal Year               Fiscal Year
                                 2007         2006         2007         2006
                                       (Restated -               (Restated -
                                            note 2)                   note 2)
    -------------------------------------------------------------------------
    Sales                   $ 2,356.2    $ 2,412.1    $ 4,871.2    $ 4,933.8
    Cost of sales and
     operating expenses       2,210.7      2,269.1      4,565.5      4,664.8
    Integration and
     rationalization costs
     (note 3)                     5.4          2.6         11.0         20.9
    -------------------------------------------------------------------------
    Earnings before
     interest, taxes,
     depreciation and
     amortization               140.1        140.4        294.7        248.1
    Depreciation and
     amortization                37.9         39.1         74.9         77.9
    -------------------------------------------------------------------------
    Operating income            102.2        101.3        219.8        170.2
    Interest, net
      Short term                 (0.6)        (0.1)        (1.3)         0.1
      Long term                  14.7         16.4         29.7         31.7
    -------------------------------------------------------------------------
                                 14.1         16.3         28.4         31.8
    -------------------------------------------------------------------------
    Earnings before
     income taxes                88.1         85.0        191.4        138.4
    Income taxes (note 5)        27.6         26.4         59.9         47.8
    -------------------------------------------------------------------------
    Earnings before minority
     interest                    60.5         58.6        131.5         90.6
    Minority interest            (1.3)         1.6          1.8          1.6
    -------------------------------------------------------------------------
    Net earnings            $    61.8    $    57.0    $   129.7    $    89.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
     (note 6)
      Basic                 $    0.54    $    0.50    $    1.13    $    0.78
      Fully diluted         $    0.53    $    0.49    $    1.11    $    0.77
    -------------------------------------------------------------------------
    See accompanying notes


    Consolidated Balance Sheets
    (Unaudited) (Millions of dollars)
                                                         As at         As at
                                                      March 17, September 30,
                                                          2007          2006
    -------------------------------------------------------------------------
    Assets
    Current assets
      Cash and cash equivalents                       $  181.9      $  165.7
      Accounts receivable                                300.3         302.1
      Inventories                                        575.1         565.5
      Prepaid expenses                                    17.2          11.3
      Future income taxes                                 22.3          16.7
    -------------------------------------------------------------------------
                                                       1,096.8       1,061.3
    Investments and other assets                         141.4         117.9
    Fixed assets                                       1,172.0       1,129.9
    Intangible assets                                    335.5         331.7
    Goodwill                                           1,490.1       1,490.1
    Accrued benefit assets                                33.0          33.0
    -------------------------------------------------------------------------
                                                      $4,268.8      $4,163.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' equity
    Current liabilities
      Bank loans                                      $    0.4      $    0.3
      Accounts payable                                 1,046.8       1,049.5
      Income taxes payable                                18.4          36.8
      Current portion of long-term debt                    5.2           7.3
    -------------------------------------------------------------------------
                                                       1,070.8       1,093.9
    Long-term debt                                     1,116.7       1,116.6
    Accrued benefit obligations                           60.2          60.6
    Future income taxes                                  127.3         115.0
    Other long-term liabilities                           45.3          44.2
    Minority interest                                     11.6           9.8
    -------------------------------------------------------------------------
                                                       2,431.9       2,440.1
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 7)                               718.5         709.0
    Contributed surplus                                    0.5           1.6
    Retained earnings                                  1,117.6       1,013.2
    Accumulated other comprehensive income
     (notes 2 and 8)                                       0.3             -
    -------------------------------------------------------------------------
                                                       1,836.9       1,723.8
    -------------------------------------------------------------------------
                                                      $4,268.8      $4,163.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes


    Consolidated Statements of Cash Flows
    Periods ended March 17, 2007 and March 11, 2006
    (Unaudited) (Millions of dollars)

                                          12 Weeks                  24 Weeks
                                       Fiscal Year               Fiscal Year
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Operating activities
    Net earnings            $    61.8    $    57.0    $   129.7    $    89.0
    Non-cash items
      Integration and
       rationalization costs
       (note 3)                   2.4          1.5          4.2         19.5
      Share of earnings in
       a public company
       subject to significant
       influence                 (5.2)        (6.6)       (13.8)       (13.4)
      Depreciation and
       amortization              37.9         39.1         74.9         77.9
      Amortization of deferred
       financing costs            0.5          0.6          1.0          1.2
      Loss on disposal and
       write-off of fixed and
       intangible assets          0.2            -          0.3          0.4
      Future income taxes         2.9          2.8          6.5          6.1
      Stock-based
       compensation cost          0.6          0.3          1.2          0.5
      Difference between
       amounts paid for
       employee future benefits
       over current period cost  (0.6)         1.8         (0.4)        (9.6)
      Minority interest          (1.3)         1.6          1.8          1.6
    -------------------------------------------------------------------------
                                 99.2         98.1        205.4        173.2
    Net change in non-cash
     working capital related
     to operations               17.4         79.5        (39.4)       (48.6)
    -------------------------------------------------------------------------
                                116.6        177.6        166.0        124.6
    -------------------------------------------------------------------------
    Investing activities
    Net change in investments
     and other assets             0.7         (1.9)        (1.1)        (1.6)
    Dividend of a public
     company subject to
     significant influence        0.6          0.5          1.2          0.5
    Acquisition of fixed
     assets                     (44.9)       (29.4)      (105.1)       (71.7)
    Disposal of fixed assets        -          2.2          2.5          6.5
    Acquisition of
     intangible assets           (9.1)        (4.2)       (18.5)       (14.2)
    -------------------------------------------------------------------------
                                (52.7)       (32.8)      (121.0)       (80.5)
    -------------------------------------------------------------------------
    Financing activities
    Net change in bank loans     (0.2)         0.9          0.1          3.0
    Issuance of shares            8.3          0.9          9.7          0.9
    Acquisition of
     treasury shares             (2.5)           -         (2.5)           -
    Increase of long-term debt    1.0          0.4          1.8        601.2
    Repayment of long-term debt  (2.2)        (2.1)        (4.8)      (505.2)
    Net change in other
     long-term liabilities        2.7          3.7         (7.8)         3.7
    Dividends paid              (13.2)       (12.0)       (25.3)       (23.4)
    -------------------------------------------------------------------------
                                 (6.1)        (8.2)       (28.8)        80.2
    -------------------------------------------------------------------------
    Net change in cash and
     cash equivalents            57.8        136.6         16.2        124.3
    Cash and cash equivalents -
     beginning of period        124.1         81.5        165.7         93.8
    -------------------------------------------------------------------------
    Cash and cash equivalents -
     end of period          $   181.9    $   218.1    $   181.9    $   218.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other information
    Interest paid           $     6.6    $     4.8    $    30.5    $    14.5
    Income taxes paid       $    17.4    $    21.2    $    71.4    $    41.6
    -------------------------------------------------------------------------
    See accompanying notes


    Consolidated Statements of Retained Earnings
    24-week periods ended March 17, 2007 and March 11, 2006
    (Unaudited) (Millions of dollars)

                                                                 Fiscal Year
                                                          2007          2006
    -------------------------------------------------------------------------
    Balance - beginning of period                     $1,013.2       $ 807.7
    Net earnings                                         129.7          89.0
    Dividends                                            (25.3)        (23.4)
    -------------------------------------------------------------------------
    Balance - end of period                           $1,117.6       $ 873.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes


    Consolidated Statements of Comprehensive Income
    Periods ended March 17, 2007 and March 11, 2006
    (Unaudited) (Millions of dollars) (notes 2 and 8)

                                          12 Weeks                  24 Weeks
                                       Fiscal Year               Fiscal Year
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net earnings            $    61.8    $    57.0    $   129.7    $    89.0
    Other comprehensive
     income
    Change in fair value of
     derivatives designated
     as cash flow hedges
     (net of income taxes)          -            -         (0.1)           -
    -------------------------------------------------------------------------
    Comprehensive income    $    61.8    $    57.0    $   129.6    $    89.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes


    Notes to Interim Consolidated Financial Statements
    Periods ended March 17, 2007 and March 11, 2006
    (Unaudited) (Millions of dollars, except for earnings per share)

    1. Statement Presentation

    The unaudited interim consolidated financial statements were prepared by
management in accordance with Canadian generally accepted accounting
principles. The accounting policies and procedures used in assembling these
interim consolidated financial statements are the same as those used in
preparing the audited annual consolidated financial statements for the year
ended September 30, 2006, except for the new accounting policies described in
note 2. The unaudited interim consolidated financial statements should be read
along with the audited annual consolidated financial statements and notes to
the statements in the Company's 2006 Annual Report. The operating results for
the interim period covered do not necessarily reflect overall results for the
fiscal year. Certain comparative figures have been reclassified to conform to
the presentation being used in the current fiscal year.

    2. New Accounting Policies

    IN 2007

    In the first quarter of 2007, the Company adopted the following new
accounting standards issued by the Canadian Institute of Chartered Accountants
(CICA):
    Section 1530, Comprehensive Income, introduces a new financial statement
which shows the change in equity of an enterprise from transactions and other
events and circumstances from non-owner sources.
    Section 3855, Financial Instruments - Recognition and Measurement,
establishes standards for recognizing and measuring financial instruments,
namely financial assets, financial liabilities and derivatives.
    The new standard lays out how financial instruments are to be recognized
depending on their classification. Depending on financial instruments'
classification, changes in subsequent measurements are recognized in net
income or comprehensive income.

    The Company has implemented the following classification:

    - Cash and cash equivalents are classified as "Financial Assets Held for
      Trading". These financial assets are marked-to-market through net
      income at each period end.
    - Accounts receivable and loans to certain customers are classified as
      "Loans and Receivables". After their initial fair value measurement,
      they are measured at amortized cost using the effective interest rate
      method. For the Company, the measured amount generally corresponds to
      cost.
    - Investments in companies are classified as "Available-for-sale
      Securities". These financial assets are marked-to-market through
      comprehensive income at each period end.
    - Bank loans, accounts payable, credit facilities, notes, loans payable,
      and obligations under capital leases are classified as "Other Financial
      Liabilities". After their initial fair value measurement, they are
      measured at amortized cost using the effective interest rate method.
      For the Company, the measured amount generally corresponds to cost.

    Section 3865, Hedges, whose application is optional, establishes how hedge
accounting may be applied. The Company, in keeping with its risk management
strategy, has decided to apply hedge accounting to its interest rate swaps and
treat them as cash flow hedges. These derivatives are marked-to-market at each
period end and resulting gains/losses are recognized in comprehensive income
to the extent the hedging relationship is effective.
    These new standards have to be applied without restatement of prior period
amounts. Upon initial application all adjustments to the carrying amount of
financial assets and liabilities shall be recognized as an adjustment to the
opening balance of retained earnings or accumulated other comprehensive
income, depending on the classification of existing assets or liabilities. The
Company has recognized a $0.4 adjustment to the opening balance of accumulated
other comprehensive income with respect to the interest rate swaps designated
as cash flow hedges.

    IN 2006

    The Company adopted, in the third quarter of fiscal 2006, EIC-156
"Accounting by a Vendor for Consideration Given to a Customer (including a
Reseller of the Vendor's Products)". Under this new standard, certain rebates
granted by the Company to its retailers have to be reclassified as a reduction
in sales rather than as cost of sales. The new standard must be applied
retroactively with restatement of prior interim financial statements. The
reclassification between sales and cost of sales and operating expenses
following the new standard's application and certain adjustments to A&P
Canada's different accounting practices on previously stated results totalled
$3.4 for the second quarter of 2006 and $5.8 for the 24-week period of 2006.

    3. Integration and Rationalization Costs

    During the period ended March 17, 2007, the Company pursued its plan for
the integration and rationalization of its operations following the
acquisition of A&P Canada. This three-part plan deals with the store network,
the integration of overall operations, and the implementation of information
systems at A&P Canada.
    Over fiscal 2006, integration and rationalization plan costs amounted to
$28 and $27 is anticipated in 2007. Costs incurred over the 24-week period
amounted to $11, which includes $5.4 in the second quarter of 2007.

    By Nature of Project

                                Incurred             Anticipated       Total
                                    2007        2006
                   (12 weeks)  (24 weeks)  (53 weeks)
    -------------------------------------------------------------------------
    Stores             $   -       $ 2.2       $11.9       $ 2.4       $16.5
    Integration of
     operations          3.3         4.5        13.9           -        18.4
    Implementation of
     information
     systems             2.1         4.3         2.2        13.6        20.1
    -------------------------------------------------------------------------
                       $ 5.4       $11.0       $28.0       $16.0       $55.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    By Nature of Costs for the 12-Week Period

                            Liability                              Liability
                                as at     Incurred         Paid        as at
                             Dec. 23,         2007         2007    March 17,
                                 2006    (12 weeks)   (12 weeks)        2007
    -------------------------------------------------------------------------
    Retention
     bonuses,
     termination
     benefits and
     others                     $ 1.8        $ 3.0        $ 0.4        $ 4.4
    Training and
     IT imple-
     mentation                      -           2.1         2.1            -
    Vacant premises               3.6           0.1         0.3          3.4
    -------------------------------------------------------------------------
                                $ 5.4         $ 5.2       $ 2.8        $ 7.8
    Asset write-offs                            0.2
    -------------------------------------------------------------------------
                                              $ 5.4
    -------------------------------------------------------------------------

                                           Incurred       Anti-        Total
                                               2006     cipated
                                          (53 weeks)
    -------------------------------------------------------------------------
    Retention
     bonuses,
     termination
     benefits and
     others                                  $ 18.1       $ 0.6       $ 22.9
    Training and
     IT imple-
     mentation                                  2.2        13.6         20.1
    Vacant premises                             2.4           -          4.7
    -------------------------------------------------------------------------
                                             $ 22.7      $ 14.2       $ 47.7
    Asset write-offs                            5.3         1.8          7.3
    -------------------------------------------------------------------------
                                             $ 28.0      $ 16.0       $ 55.0
    -------------------------------------------------------------------------

    By Nature of Costs for the 24-Week Period

                            Liability                              Liability
                                as at      Incurred        Paid        as at
                            Sept. 30,          2007        2007    March 17,
                                 2006     (24 weeks)  (24 weeks)        2007
    -------------------------------------------------------------------------
    Retention bonuses,
     termination benefits
     and others                 $ 2.1         $ 4.2       $ 1.9        $ 4.4
    Training and
     IT implementation              -           4.3         4.3            -
    Vacant premises               1.5           2.3         0.4          3.4
    -------------------------------------------------------------------------
                                $ 3.6        $ 10.8       $ 6.6        $ 7.8
    Asset write-offs                            0.2
    -------------------------------------------------------------------------
                                             $ 11.0
    -------------------------------------------------------------------------

                                           Incurred
                                               2006     Antici-
                                          (53 weeks)      pated        Total
    -------------------------------------------------------------------------
    Retention bonuses,
     termination benefits
     and others                              $ 18.1       $ 0.6       $ 22.9
    Training and
     IT implementation                          2.2        13.6         20.1
    Vacant premises                             2.4           -          4.7
    -------------------------------------------------------------------------
                                             $ 22.7      $ 14.2       $ 47.7
    Asset write-offs                            5.3         1.8          7.3
    -------------------------------------------------------------------------
                                             $ 28.0      $ 16.0       $ 55.0
    -------------------------------------------------------------------------
    Although the integration plan, comprising the projects listed above, has
not changed since the acquisition of A&P Canada, the anticipated costs by
nature have been revised.

    4. Employee Future Benefits

    The Company offers several defined benefit and defined contribution plans
that provide most participants with pension, other retirement and other
post-employment benefits. The Company's defined benefit and defined
contribution plan expenses were as follows:

                                      12 Weeks                      24 Weeks
                                   Fiscal Year                   Fiscal Year

                           2007           2006           2007           2006
    -------------------------------------------------------------------------
                 Pension  Other Pension  Other Pension  Other Pension  Other
                   plans  plans   plans  plans   plans  plans   plans  plans
    -------------------------------------------------------------------------
    Defined
     contribution
     plans         $ 5.4    $ -   $ 5.0  $ 0.1  $ 11.6  $ 0.1  $ 10.1  $ 0.2
    -------------------------------------------------------------------------
    Defined
     benefit
     plans
    Current
     service
     cost          $ 5.7  $ 0.2   $ 4.8  $ 0.2  $ 11.4  $ 0.5   $ 9.6  $ 0.5
    Interest cost    6.3    0.3     5.6    0.5    12.6    0.6    11.2    1.0
    Projected
     return on
     plan assets    (8.8)     -    (7.7)     -   (17.6)     -   (15.4)     -
    Amortization
     of actuarial
     losses and
     past service
     cost            0.3      -     0.2      -     0.6      -     0.4      -
    -------------------------------------------------------------------------
                     3.5    0.5     2.9    0.7     7.0    1.1     5.8    1.5
    -------------------------------------------------------------------------
                   $ 8.9  $ 0.5   $ 7.9  $ 0.8  $ 18.6  $ 1.2  $ 15.9  $ 1.7
    -------------------------------------------------------------------------

    5. Income Taxes

    The effective income tax rates were as follows:

                                          12 Weeks                  24 Weeks
                                       Fiscal Year               Fiscal Year
                                 2007         2006         2007         2006
                                    %            %            %            %
    -------------------------------------------------------------------------
    Combined statutory income
     tax rate                    32.1         31.8         32.2         31.8
    Changes
      Impact of Québec tax
       rate increase of 3%
       on future taxes
       ($5.3 in 2006)               -            -            -          3.8
      Share of earnings of a
       public company subject to
       significant influence     (0.8)        (1.0)        (1.0)        (1.2)
      Other                         -          0.3          0.1          0.1
    -------------------------------------------------------------------------
                                 31.3         31.1         31.3         34.5
    -------------------------------------------------------------------------

    6. Earnings per Share

    Basic earnings per share and fully diluted net earnings per share were
calculated based on the following number of shares:

                                          12 Weeks                  24 Weeks
                                       Fiscal Year               Fiscal Year
    (Millions)                   2007         2006         2007         2006
    -------------------------------------------------------------------------
    Weighted average number
     of shares outstanding -
      Basic                     115.1        114.5        114.9        114.5
    Dilutive effect of stock
     option plan and performance
     share units                  1.6          1.2          1.6          1.4
    -------------------------------------------------------------------------
    Weighted average number of
     shares outstanding -
      Diluted                   116.7        115.7        116.5        115.9
    -------------------------------------------------------------------------

    7. Capital Stock

    Issued and Outstanding

                                 Class A                 Class B
                      Subordinate Shares                  Shares       Total
                  ----------------------------------------------
                      Number                  Number
                  (Thousands)             (Thousands)
    -------------------------------------------------------------------------
    Balance as at
     September 30,
     2006            113,852     $ 707.3         880       $ 1.7     $ 709.0
    Share issue          574         9.7           -           -         9.7
    Transfer from
     contributed
     surplus -
     options
     exercised             -         0.2           -           -         0.2
    Conversion of shares  32           -         (32)          -           -
    Acquisition of
     treasury shares     (64)       (0.4)          -           -        (0.4)
    -------------------------------------------------------------------------
    Balance as at
     March 17, 2007  114,394     $ 716.8         848       $ 1.7     $ 718.5
    -------------------------------------------------------------------------

    Stock Option Plan

    As at March 17, 2007, 3,650,540 stock options had been granted to certain
employees at exercise prices varying from $11.80 to $35.71, with expiry dates
up to 2013. Of these stock options, 2,324,940 could be exercised for an
average weighted exercise price of $20.46.

                                          12 Weeks                  24 Weeks
                                       Fiscal Year               Fiscal Year
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Granted stock options during
     the period                     -       15,000        4,500       45,000
    Weighted average exercise
     price                        $ -      $ 30.02      $ 35.71      $ 31.81
    Weighted average fair value   $ -       $ 9.40      $ 11.07       $ 9.90
    -------------------------------------------------------------------------

    During the 24-week period of 2007, the weighted average fair value of
stock options was established at the time of grant using the Black & Scholes
model and based on the following weighted average assumptions: risk-free
interest rate of 3.92% (2006 - 4%), expected six-year term (2006 - six-year
term), anticipated volatility of 30% (2006 - 30%) and an anticipated 1.5%
dividend yield (2006 - 1.5%).
    The compensation expense for these stock options amounted to $0.3 for the
second quarter of 2007 (2006 - $0.3) and to $0.7 for the 24-week period of
2007 (2006 - $0.5).

    Performance Share Unit Plan

    As of March 17, 2007, a total of 128,282 performance share units (PSUs)
had been granted to certain employees including 29,270 in the first quarter,
as the Company met certain performance indicators, and 50,564 during the
second quarter.
    At the end of the second quarter, 135,500 shares were held in trust for
participants until the PSUs shall have vested or been cancelled. None of these
shares have been acquired during this quarter.
    A compensation expense of $0.5 pertaining to PSUs was recorded in the
24-week period of 2007, $0.3 of which was recorded in the second quarter.

    8. Accumulated Other Comprehensive Income

    Derivatives designated as cash flow hedges constitute the sole item in
Accumulated Other Comprehensive Income. The changes that occurred during the
24-week period were as follows:

                                                                 Fiscal Year
                                                          2007          2006
    -------------------------------------------------------------------------
    Adjusted opening balance due to the new
     accounting policies adopted regarding
     financial instruments
    (net of income taxes of $0.2) (note 2)               $ 0.4           $ -
    Change in fair value, net of income taxes,
     during the period                                    (0.1)            -
    -------------------------------------------------------------------------
    Balance - end of period                              $ 0.3           $ -
    -------------------------------------------------------------------------

    9. Contingency

    In January 2007, the Company was named in a suit brought by beneficiaries
of a multiemployer pension plan. They claim that plan assets were mismanaged
and are seeking, among others, damages of $1 billion from the trustees and the
employers. The Company is one of the 443 employers affected by the suit and
did not participate in managing the plan. The Company forcefully contests the
suit's merits and considers that it will have no future financial obligation
relating to this recourse.

    10. Financial Instruments

    The financial instruments' book values and fair values were as follows:

                              As at March 17, 2007  As at September 30, 2006
    -------------------------------------------------------------------------
                                 Book         Fair         Book         Fair
                                value        value        value        value
    -------------------------------------------------------------------------
    Investments and other assets
      Available-for-sale financial
       assets
        Investments in
         companies              $ 0.1        $ 0.1        $ 0.1        $ 0.1
      Loans and receivables
        Loans to certain
         customers              $ 9.9        $ 9.9        $ 8.6        $ 8.6
      Derivatives designated as
       cash flow hedges
        Interest rate swaps     $ 0.5        $ 0.5          $ -        $ 0.6
    -------------------------------------------------------------------------
    Long-term debt
      Other financial liabilities
        Credit facility A     $ 469.3      $ 469.3      $ 469.3      $ 469.3
        Series A notes          200.0        199.7        200.0        199.8
        Series B notes          400.0        406.8        400.0        410.3
        Loans                    11.1         11.1         10.4         10.4
        Obligations under
         capital leases          41.5         49.9         44.2         53.7
    -------------------------------------------------------------------------
                             $1,121.9     $1,136.8     $1,123.9     $1,143.5
    -------------------------------------------------------------------------

    The fair value of cash and cash equivalents, accounts receivable, bank
loans and accounts payable approximates their carrying value because of the
short-term maturity of these instruments.
    The fair value of investments in companies, public companies for the most
part, is evaluated based on stock market prices at the balance sheet date.
    The fair value of loans to certain customers, credit facilities and loans
payable is equivalent to their carrying value since their interest rates are
comparable to market rates.
    The fair value of the derivative financial instruments generally reflects
the estimates of the amounts the Company would receive by way of settlement of
favourable contracts or that it would pay to terminate unfavourable contracts
at the balance sheet date. The fair values of the interest rate swaps are
calculated using the prices obtained from major financial institutions.
    The fair value of notes represents the obligations that the Company would
have to face in the event of the negotiation of similar notes under current
market conditions.
    The fair value of the obligations under capital leases represents the
obligations that the Company would have to face in the event of the
negotiation of similar leases under current market conditions.
    
    %SEDAR: 00001783EF




For further information:

For further information: Richard Dufresne, Senior Vice-President and
Chief Financial Officer, (514) 643-1003; Investor Relation Department: (514)
643-1055, finance@metro.ca; METRO INC.'s corporate information and press
releases are available on the Internet at the following address: www.metro.ca;
SOURCE: METRO INC.


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