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France's Casino says cost cuts to bring rewards in 2015
* Sees 2015 underlying sales growth in France
* Discounting and partnership to help home market
* Eyes growth opportunities in Brazil - CEO (Adds CEO comments at news conference)
By Dominique Vidalon
PARIS, Feb 17 (Reuters) - French retailer Casino expects to be rewarded for its price-cutting strategy with a higher operating profit in its home market this year after feeling the impact of lower margins in 2014.
Savings from a purchasing deal with local rival Intermarche would also feed through, adding to the beneficial effects of increased sales, Casino said on Tuesday.
Casino, which controls Brazil's top retailer Grupo Pao de Acucar and makes 60 percent of its sales abroad, predicted sustained organic growth at its international business and higher underlying group operating profit.
Casino has cut prices in its Geant hypermarkets and its discount arm LeaderPrice. The move has so far boosted sales volumes but weighed on profit margins and the company expects more of a return this year.
"We are confident that accelerating volumes at Geant and LeaderPrice, lower costs and improved purchasing terms from the Intermarche deal will improve operating profit in France in 2015," Chairman and Chief Executive Jean-Charles Naouri told a news conference.
The improvement would be tilted towards the second half of the year, with the French business stabilising its margin and seeing revenue improve from the summer.
Casino reported 2014 operating income of 2.231 billion euros ($2.55 billion), a decline of 2.5 percent. However, excluding exchange rates and changes in the group's retail portfolio, operating profit rose 5.6 percent.
The result edged ahead of the company's guidance given in January for operating profit of 2.22 billion euros. Shares (Frankfurt: DI6.F - news) in Casino rose 1.1 percent to 84.28 euros.
AUSTERITY CASTS A SHADOW
Retailers across Europe, including French rival Carrefour (Swiss: CA.SW - news) and Britain's Tesco (Xetra: 852647 - news) , have struggled as subdued wage growth and austerity measures squeeze shoppers' incomes.
In France most retailers have responded with price cuts to keep at bay the discount specialists making advances elsewhere in Europe.
Operating profit from Casino's food retailing business in France slumped 28.6 percent to 396 million euros in 2014.
The company has also been expanding for a number of years in the emerging markets of Thailand, Brazil, Vietnam and Colombia.
However, in Brazil, which is Casino's largest market and accounts for 43 percent of group sales, rising interest rates, inflation and a weak job market have hurt household demand.
Casino said cost cuts and robust sales at its Assai cash & carry stores helped Brazil deliver higher operating margins despite the tough economic climate.
Naouri said he expected the economic slowdown in Brazil to extend for a few more quarters, which could provide a buying opportunity for Casino's food retail unit GPA as well as for its Viavarejo consumer electronics unit, he said.
He would not go into details but noted that Viavarejo had 1 billion euros in cash and GPA almost no debt. ($1 = 0.8759 euros) (Editing by Andrew Callus and Keith Weir)
