Quarterly Report, Axfood AB (publ.) For the period January 1 - June 30, 2001

Quarterly Report, Axfood AB (publ.) For the period January 1 - June 30, 2001 * Strong earnings improvement during the second quarter due to positive development for for Axfood Lågpris, Spar Finland and the wholesale operations. * The Hemköp chain's process of change continues in the aim of improving volume and earnings. During the period Hemköp showed unchanged net sales compared with the preceding year and a slight drop in earnings. * Consolidated sales totaled SEK 15,738 m (14,718), an increase of 6.9 percent. * Operating income amounted to SEK 338 m (18), entailing an operating margin of 2.1 percent. * Income after financial items amounted to SEK 273 m (-38). SEK m April-June Jan.-June 2001 2000 2001 2000 Sales 8,143 7,637 15,738 14,718 Operating income before 313 114 575 227 depreciation Operating income 193 7 338 18 Operating margin, percent 2.3% 0.1% 2.1% 0.1% Operating income before items affecting 200 101 345 146 comparability Income after financial 162 -24 273 -38 items Income after tax 106 10 177 -29 Earnings per share, SEK 1.99 0.18 3.33 -0.54 Equity ratio, percent - - 16.2% 13.9% Return on capital - - 11.8% 1.5% employed, percent Return on shareholders' equity after tax, percent - - 18.1% Neg. CEO's comments "The Axfood Group showed continued positive development during the second quarter, primarily due to strong earnings improvement for Axfood Lågpris and our wholesaling operation. We are also now beginning to see clear improvements at Spar Finland. "We will see an earnings improvement for the Hemköp chain once the extensive process of change has been fully carried out. "The agreement with private merchants outside Stockholm resulted in 17 conversions to the Spar concept during the second quarter. The new store openings have been successful from both the customer and earnings perspectives. "The Group's organization is experiencing steady improvement, and in pace with this we are also seeing the realization of synergies, such as through coordinated purchasing. Prior to the summer, work was begun throughout the Group on identifying further areas in which we can coordinate activities." Mats Jansson Market development The trend for the retail sector remained positive during the second quarter of 2001, according to data released by the Swedish Research Institute of Trade (HUI). Volume growth in current prices was 3.3 percent for the first six months of the year, with strong volume growth of 5 percent during the month of June. Sales and earnings of the Axfood Group Consolidated sales of the Axfood Group, including Spar Finland Abp, amounted to SEK 15,738 m (14,718) during the period. The Axfood Group's sales in Sweden (in own and collaborating stores) amounted to SEK 17, 107 m, including VAT, an increase of 1.5 percent in volume, or 3.4 percent in current prices, compared with the preceding year. Operating income for the period amounted to SEK 338 m (18). The operating margin was 2.1 percent (0.1). The operating margin before items affecting comparability and goodwill was 2.6 percent (1.4). Items affecting comparability amounted to SEK -7 m (-128) for the period. Net financial items amounted to SEK -65 m (-56). Income after financial items thus totaled SEK 273 m (-38). The margin after financial items was 1.7 percent (neg.). Store operations The store operations are conducted through wholly owned chain concepts (Hemköp, Axfood Lågpris and Axfood Direkt) and through collaboration with private merchants in established store concepts (Spar, Tempo och Vivo). Hemköp is the Group's most well-known brand, with 107 stores nationwide. The concept emphasizes the environment, health and quality, and is based on breadth and depth in the product assortment, especially of fresh products. An extensive process of change is being carried out at Hemköp and is being intensified during the autumn. Measures include category and product range control, a general cost overview, and continued store oversight, which can result in the reprofiling of unprofitable units. Sales during the period totaled SEK 3,210 m (3,216). Operating income before goodwill (EBITG) amounted to SEK 76 m (85), and the operating margin for the period was 2.4 percent (2.6). During the period, two stores were added to the Hemköp chain, one store was closed, and one store was converted to Axfood Lågpris. Axfood Lågpris is the market leader in Sweden's discount segment. Business is conducted under three consumer brands: Willy's, Matex/Exet and HP Billigt & Nära, totaling approximately 86 stores. Axfood Lågpris collaborates with a number of private merchants - 29 stores in all - through franchising agreements. During the autumn, Axfood Lågpris will be undergoing a name change to Willy's. For the large units, the name change and conversion to the Willy's concept - involving some 70 stores in all - will begin to be implemented during the first quarter of 2002. The small units within Axfood Lågpris will continue to be operated under the HP Billigt & Nära name. During the period, two stores were established, three were closed, and five were converted to Axfood Lågpris units. The trend during the second quarter was positive, with continued strong growth in volume and improved earnings. Sales by wholly owned stores during the period totaled SEK 3,678 m (2,562). Income for the period (EBITG), amounted to SEK 144 m (70), and the operating margin was 3.9 percent (2.7). Axfood Direkt conducts the Group's e-commerce retail business. Axfood offers three online shopping sites. The hemkop.nu site, launched on April 25, serves the Stockholm area. Consumers in Gothenburg are served by the willys.nu and billhalls.se online shopping sites. A new, joint- Group IT platform was introduced in connection with the launch of hemkop.nu and is intended cover all the Group's online shopping sites. The platform has been designed to improve operating efficiency and is leading to a gradual reduction in development costs. The trend for e-commerce in Sweden is weak, and the launch of hemkop.nu has not yet resulted in higher sales volumes. The summer months are generally a weak period for online retail food sales, and a renewed marketing effort is being made prior to the autumn. Sales during the period totaled SEK 40 m (43). Income (EBITG) amounted to SEK -18 m (- 11). Axfood Franchise collaborates with private merchants in Sweden through three concepts: Spar, Tempo and Vivo. The approximately 500 stores in this segment are customers of Axfood's wholesale operation. The agreement with some 170 Vivo merchants outside Stockholm to be included in the Spar chain resulted in the conversion of 17 stores to the new concept. New store openings have been successful, with satisfied customers and an increase in sales. Altogether the 170 stores have sales of approximately SEK 6 bn. Axfood Franchise is reported under joint-Group items. Income (EBITG) for the period amounted to SEK 13 m (10). Axfood Partihandel (wholesaling) - Sweden Axfood's wholesaling operation consists of Dagab, which supplies goods to Axfood's wholly owned chains and to collaborating merchants, and Axfood Närlivs, which supplies goods to convenience stores and service stations, such as OK/Q8 and Shell Select. Axfood Närlivs also has a cash- and-carry operation for restaurant and store owners, who can make purchases themselves and pay in cash. The positive trend for Axfood's wholesaling operation during the first quarter continued during the second quarter. Dagab and Närlivs showed continued volume growth, and both companies showed a sharp earnings improvement compared with a year earlier. This can be attributed primarily to the restructuring carried out last autumn, which involved sharp cost reductions, and the margin improvement achieved by Dagab in the beginning of the year. Axfood's wholesale operation posted sales of SEK 8,877 m (8,358) during the period. Of this amount, Dagab accounted for SEK 7,057 m and Axfood Närlivs for SEK 2,210 m. Income (EBITG) amounted to SEK 166 m (100), and the operating margin was 1.9 percent (1.2). Of this total, Dagab accounted for SEK 132 m and Axfood Närlivs for SEK 34 m. Spar Finland Axfood's long-term strategy is to expand in the Nordic region and establish a strong market position in each country. The subsidiary Spar Finland Abp has approximately 9 percent of the Finnish market. Axfood owns 40 percent of the capital and 66 percent of the votes in the company. Spar Finland has a jointly owned wholesale operation and a store network comprising 325 stores, of which 88 are wholly owned. Spar Finland experienced a negative trend in 2000 and posted major losses. An action program has been initiated which focuses on cost cutting and a restructuring of the store structure from five to two concepts - Spar and Eurospar - which are large discount stores. The slightly positive trend during the first quarter strengthened during the second quarter. The restructuring to two concepts has been initiated, and the Eurospar segment has gained seven new stores thus far during the year, which has had a positive impact on sales. Sales during the period amounted to SEK 2,760 m (2,503), and income (EBITG) totaled SEK 6 m (-19). Capital expenditures During the second quarter, Axfood acquired the remaining 9 percent of the shares in the subsidiary Eurotaste AB, which was engaged in the development of private label brands, purchasing and distribution. Eurotaste's other operations have been integrated with Axfood's. Capital expenditures during the period amounted to SEK 200 m. Of these, investments in fixed assets in the wholesaling operation and in the store network in Sweden accounted for SEK 162 m, and investments in fixed assets by Spar Finland accounted for SEK 38 m. Financial position Cash flow from continuing operations amounted to SEK 500 m during the period (117). The Group's liquidity amounted to SEK 282 m. Interest- bearing assets amounted to SEK 694 m (772), and interest-bearing net debt was SEK 1,943 (2,145). The equity ratio was 16.2 percent (13.9), while the debt-equity ratio, net, was 1.6 (2.1). Employees The Axfood Group had an average of 8,625 full-year employees during the first six months of the year (8,252). The next reporting date will be Friday, October 26. Stockholm, Sweden, August 9, 2001 Axfood AB (publ.) The Board of Directors This half-year interim report has not been subject to examination by the Company's auditors. For further information, please contact: Mats Jansson, President and CEO, +48-8-553 998 10, mobile +46-70-569 48 11 Lars Nilsson, Executive Vice President and CFO, +46-8-553 998 11, mobile +46-70-569 66 33 Bodil Eriksson, Executive Vice President, Corporate Communications, +46- 8-553 998 17, mobile +46-70-629 66 34 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/09/20010809BIT00450/bit0002.doc Full Report http://www.waymaker.net/bitonline/2001/08/09/20010809BIT00450/bit0002.pdf Full Report