STOCKHOLM, Sweden, Oct. 23, 2002 (PRIMEZONE) -- Axfood AB's (publ.) consolidated sales amounted to SEK 24,535 m (23,872), an increase of 2.8 per cent. Retail sales for Axfood's wholly owned businesses in Sweden rose by 10.3 per cent.
- Operating profit for the period January - September totaled SEK 752 m (498).
- Operating profit for the third quarter was SEK 302 m (160), an increase of 89 percent compared with the third quarter a year ago. The Willys chain, Dagab and Axfood Narlivs made the strongest earnings contributions.
- Profit after net financial items increased by SEK 267 m, to SEK 670 m (403).
- Axfood has acquired three stores in the Norrkoping area. The stores have combined annual sales of SEK 500 m and will be Willys stores.
Key figures July-September January-September Jan.-Dec. SEK m 2002 2001 2002 2001 2001 Net sales 8,338 8,134 24,535 23,872 32,428 Operating profit before depreciation 436 282 1,145 857 1,171 Operating profit(1) 302 160 752 498 653 Operating margin 3.6% 2.0% 3.1% 2.0% 2.0% Profit after financial items 275 130 670 403 527 Profit for the period 177 80 437 257 328 Earnings per share, SEK 3.34 1.50 8.22 4.83 6.16 Equity ratio - - 22.4% 17.2% 17.0% Return on capital employed - - 25.3% 13.5% 17.3% (2) Return on shareholders' - - 38.6% 22.1% 31.8% equity after tax (2) Net asset value per share - - 28.20 21.34 22.70 1. Operating profit for the year includes a net capital gain of SEK 25m on sales of real estate. 2. Moving 12 months.
CEO's comments: "Axfood is showing very strong earnings for the third quarter -- the first in which we have passed the 3 per cent operating margin, which is our long-term target through 2005. It also means that our accumulated earnings are strong, with an operating margin of 3.1 per cent. Willys has reached a new level of profitability that is based on good growth in volume and a higher gross profit. This improvement has been enabled by the introduction of the Willys private label and efficient category management. Dagab, Axfood Narlivs and Spar Finland, also show continued favourable earnings trend during the third quarter.
"Willys hemma has had an aggressive rate of establishment during the year and now has 41 stores. This makes Willy hemma the leading player in the small-store format of the discount segment. Earnings for Willys hemma will be weighted by establishment costs in 2002. Hemkop showed continued weak development during the third quarter, mainly due to price reductions that have not yet led to volume growth. The process of change at Hemkop continues.
"During the third quarter an additional two central projects were started that will affect Axfood's earnings and cash flow. The first one involves the continued streamlining of the Group's staffs and salaried employee structure, which will reduce payroll costs in the coming two years by approximately SEK 70 m per year, corresponding to 150 full-time positions. We have also started a Supply Chain project. Through an increasingly distinct integration of the various links within Axfood's supply chain - such as purchasing, logistics, and stores - we can both improve quality and cut costs. This project will be the largest single undertaking within the Axfood Group and will continue for three years. The cost savings will be substantial. We have another two projects that have been under way for some time. The first of these is concerns private labels. Increasing the portion of total sales made up of private label goods will boost the Group's operating profit by approximately SEK 90 m per year and improve store margins. At the same time, our private label initiative offers customers quality-assured products at prices that are 15-10 per cent lower. The second prioritised process is Axfood's central purchasing, which is making a substantial yearly earnings contribution to the Group.
"The forecast for the Group's earnings in 2002, entailing an improvement compared with 2001, remains," said Mats Jansson President and CEO.
Important events during the third quarter
- Three stores (Matex) were acquired in the Norrkoping area. The stores have combined annual sales of approximately SEK 500 m and will join the Willys chain as per 1 January 2003.
- Axfood's sales of private label products continue to rise and accounted for 8.5 per cent of total sales in Sweden in September.
- Two central projects are being started: a continued reduction of the Group's overhead costs and a Supply Chain project, which will continue for three years.
Market trend
According to statistics published by the Swedish Research Institute ofTrade (HUI), volume growth for Sweden's retail food sector during theperiod January - September was 2.2 per cent. Retail food prices roseduring the same period by 3.8 per cent in Sweden and by3.7 per cent in Finland.
Sales and earnings of the Axfood Group Consolidated wholesale and retail sales for the Axfood Group for the period 1 January - 30 September amounted to SEK 24,535 M (23,872), an increase of 2.8 per cent.
The Axfood Group's sales in Sweden for the period January - September, including VAT (in own and collaborating stores), totalled SEK 26,452 M (25,977), an increase of 1.9 per cent. Sales for retail operations owned by Axfood in Sweden increased by 10.3 per cent during the same period.
Operating profit for the period January - September was SEK 752 m (498). The operating margin was 3.1 per cent (2.0). Operating profit includes a net capital gain of SEK 25 m on sales of real estate.
Net financial items amounted to SEK -82 m (-95). Profit after financial items was SEK 670 m (403). The margin after financial items was 2.7 per cent (1.7).
As per 30 September 2002, a reserve of SEK 2 m remains (SEK 17 m as per 31 December 2001) of total restructuring costs.
The Axfood Group's receivable of client-company funds from Alecta amounts to a nominal value of SEK 39 m.
Store operations
The Axfood Group's store operations are conducted via the wholly owned retail chains Hemkop, Willys and Willys hemma. The Group cooperates with independent grocers via the Spar and Tempo franchise concepts. Vivo Stockholm is run via a separate economic association. The grocers in this chain are customers of Axfood's wholesaling operation. The Vivo brand is owned by Axfood.
Hemkop
The change programme that is being gradually implemented at Hemkop has not yet resulted in improved earnings or higher sales. Earnings were under pressure during the third quarter, mainly due to the fact that the price reduction for the most common food items has not yet led to higher sales. Hemkop will be opening its pilot large-format store in Eskilstuna on 24 October.
Sales during the period January - September amounted to SEK 4,639 m (4,741). Operating profit (EBIT) was SEK 69 m (93). The operating margin for the period was 1.5 per cent (2.0).
During the period January - September, one store was acquired, six were converted to other concepts within the Group, and five were closed. Hemkop now has 96 stores.
Willys
Willys is Axfood's chain of large discount stores. The chain comprises 69 stores, of which 27 are still operating under the Exet/Matex brand. Conversion of these stores to Willys and the establishment of a homogenous Willys chain is proceeding according to plan.
The Willys stores continued to show very strong volume growth during the third quarter. The company's profitability has improved further as measures implemented during the past six months are now being realised in the third quarter. This applies among other things to the positive launch of the Willys private label brand, which now accounts for 11.5 percent of total sales. The private label products are important for maintaining Willys' leading discount position. Willys has also successfully begun work on product range and category management in its stores.
Sales during the period January - September for wholly owned stores amounted to SEK 6,136 m (5,014). Profit (EBIT) totalled SEK 265 m (174). The operating margin was 4.3 per cent (3.5).
To date during the year two new stores have been established, four have been acquired, four have been converted from other concepts within the Group and three have been closed.
Willys hemma
Willys hemma is the leading discount chain in the small-format segment of the discount market. Willys hemma was launched in February and had 41 stores at the end of September. The chain's launch is proceeding according to plan.
Sales for Willys hemma amounted to SEK 796 m (732) during the period, an increase of 8.7 per cent. A loss (EBIT) of SEK -18 m (+15) was reported for the period. The operating margin was negative (+2.0 percent).
To date during the year 29 stores have been converted from the HP chain, ten have been acquired and two have been converted from other concepts within the Group.
Axfood Franchise
Axfood's collaboration with independent grocers is coordinated in Axfood Franchise and the two store concepts Spar and Tempo. The Spar chain consisted of 126 stores at the end of the third quarter. An increase in the franchise fee for the Spar concept was effected during the third quarter.
Axfood Franchise is reported under joint-Group items. Profit (EBIT) for the period was SEK 25 m (22).
For further information, please contact: Mats Jansson, President and CEO +46-8-553 998 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
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