(Writes through with shares, company comment)
By Alan Charlish
March 1 (Reuters) - Supermarket operator Ahold Delhaize reported fourth quarter earnings at the top end of estimates as its American business delivered a strong performance with volume growth offsetting price deflation.
The U.S. market, where the company runs supermarket chains Stop & Shop, Giant, Hannaford and Food Lion, accounted for over 60 percent of Ahold Delhaize's net sales in 2016.
However, supermarkets there have been faced with the worst food deflationary environment in over 20 years, Morgan Stanley analysts said.
Chief Executive Dick Boer told jounalists during a call he expects a return to inflation in the second half of the year.
The company reported fourth quarter pro forma underlying operating income of 608 million euros, down 3.9 percent from the same period a year ago due to the impact of a 53rd week in 2015. Analysts polled for Reuters had seen underlying operating income at 605 million euros.
"The results surprised positively overall...they are ahead in regions that matter, those being the U.S. and the Netherlands," said KBC analyst Alan Vandenberghe.
Formed by the merger last year of Dutch Ahold and Belgian Delhaize, the company proposed a dividend of 0.57 euro, up 9.6 percent compared to the Ahold dividend for the previous year.
Ahold Delhaize shares rose 3.3 percent by 0855 GMT.
The company confirmed its target for 2017 of 220 million net synergies from the Ahold-Delhaize merger, including 22 million euros realized in 2016. It sees free cash flow of 1.6 billion euros for 2017.
On the subject of synergies, Chief Financial Officer Jeff Carr told journalists that the company had made good progress on national brand negotions in Europe and the U.S.
"We've also made good progress in the U.S., specifically in the U.S., in terms of own brands and discussions with suppliers on own brands," he added.
Reporting by Alan Charlish; Editing by Thyagaraju Adinarayan/Keith Weir