Axfood AB (publ)

Welcome to the Axfood Q2 2023 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now, I will hand the conference over to speakers CEO Klaas Balco and CFO Anders Lexman. Please go ahead.

thank you and uh good morning everyone and uh thank you for joining today's call as you've heard uh today i have our cfo with me andres lexman and we're here to present to you the interim report for the second quarter of 2023 in the investor section on the website you will find the presentation material for today's call and the recording will also be made available after the presentation but with that let's get started and please page Turn page to page number two. And here you'll find today's agenda. First, I will provide you with a brief market overview and then go through our second quarter performance. After that, Anders will take you through the financials. And following on this part, I will talk about the progress we are making with our new and highly automated logistical center in Bolsta outside Stockholm. And also our recent initiatives in the area of sustainability with respect to renewable energy. Then we'll go through the outlook for the year before we open up for questions. So please go to the next page, page number three. So let's start by looking at the development during the quarter, first for the market and then for Axfood. And we are now on page four. Looking at the market, we had a market growth that amounted to 8.7% during the second quarter. The inflation remained high at 14.5%. However, the level was significantly lower on a sequential basis compared to the first quarter. And even more so in June. as you may have seen that inflation on food was 12.5%, which is around 8.5 percentage points lower than the peak level of inflation earlier on this year in February. The quarter was characterized by an ongoing strong focus on value for money and a high level of activity in the market. Swedish consumers have largely continued to search for low prices and campaign products, and it's clear that there is now a much greater awareness of price value. But while the market growth has continued to be weaker than the overall food price inflation, the gap has narrowed, which implies that the negative development for volumes and mix has improved. So the market seems to be recovering somewhat with respect to that. Looking ahead, we believe that the inflation rate will continue to decline, but I have to say there is still a great deal of uncertainty and many factors that can have an impact such as the uncertain geopolitical situation, the impact of climate change on harvests, and the continued very weak Swedish corona. Let's go to the next page, page number five. In this market climate, Axel is maintaining its momentum with a growth rate of 17% in the second quarter, significantly more than the market. Through increased customer traffic and higher volumes, we maintain a very high growth rate despite the significant decline in inflation. With our different concepts, we hold a strong position in the market where value for money has become increasingly important. In e-commerce, as you can see on the slide, our sales increased approximately 9%, which was more than the market growth, which was negative at approximately minus 3%. We are clearly continuing to outperform both on the total market as well as online. Please go to the next page, page number six. Our consolidated net sales for Axfood grew by almost 13% during the second quarter. This increase is attributable to high food price inflation, but also an increase in new customers. As you can see on the slide, all our segments reported double digit sales growth in the quarter. The share of retail sales and e-commerce was 5.0%, which was clearly higher than the overall market. Turn into page seven. In total, group operating profit amounted to 878 million SEK, and the operating margin was 4.2%. The reported operating profit includes item affecting comparability of minus 64 million SEK included in the dog segment. related to the restructuring of our logistical operations and more specifically the transition to the new logistic center in bolsta looking at the adjusted operating profit which excludes item affecting comparability increased approximately 14 percent the increase was mainly the result of strong growth and effective cost control overall this compensated for the lower gross margin in the segment and higher market investments Higher costs for rents and salaries also had a negative impact on our profit. In terms of rental costs, we saw these effects already in the first quarter as rents increased from January 1st. However, the impact from salaries as of April 1st as a result of salary increases of approximately 4% and the removal of lower employer payroll tax for young people. The adjusted operating margin was unchanged compared to the prior year at 4.5%. Let's look into our various segments, and we are now on page eight, and we'll go into the development within the Villius segment. Net sales growth for Villius amounted to a full 20%, while like-for-like retail sales increased by slightly more than 16%. The exceptionally strong development was attributable to pricing and volume growth from higher customer traffic. Sales for euro cash increased, but growth was not as significant as before, as we now have a fully annualized the adverse effects from the pandemic. Operating profit increased 8% and amounted to 503 million, corresponding to a lower operating margin of 4.6%. The very strong growth in like for like sales and effective cost control compensated at a lower gross margin. Due to intense quarter with a high activity level in the market, we have not fully passed through supplier price increases to consumers. Also, increased costs for rent and salaries have negatively impacted the profit. And lastly, I would just like to add that Eurocash has not yet fully recovered its profitability after the pandemic. Let's now go to the next page, page number nine. And Willys' ambition to offer Sweden's cheapest bag of groceries has attracted new customers for many years. And over the past year, the growth rate of new members in the Willys Plus loyalty program has accelerated even further. Willys is a very appreciated concept and customers are becoming more loyal. Actually, Willys is the Sweden's most recommended grocery chain based on Net Promoter Score. And as you can see, actually the gap between Vilius and the other players in the market has widened quite a bit recently. And for those of you who are not familiar with the MPS ratio, it is a widely common measure to rate willingness to recommend, which is a good proxy for customer satisfaction and loyalty. Furthermore, we also see that Vilius is strengthening its brand. And as an example, Willys this year reached an all-time high ranking in the Sustainability Brand Index, which is European's largest brand study, measuring the perception of stakeholders on a brand's sustainability. We clearly see that Willys is gaining ground among consumers, not at least with respect to brand image and loyalty. And this presents an excellent platform for Willys to build on to further strengthen its position in the long run. We're now on page 10, so let's turn the attention to Hemsherp. Net sales growth for Hemsherp amounted to 12%. In terms of retail sales growth, Hemsherp once again performed well, growing more than the market and clearly more than the traditional grocery segment. In total, retail sales, which includes tempo, increased by 10% and 9% on a like-for-like basis. And overall, growth for the stores in the Hemsherp chain was better than the growth for tempo. And the operating profit for Hemshep amounted to 73 million, and the operating margin was 3.9%. And key profit drivers were similar to the , meaning positive effects from growth and effective cost control, which offset negative effects from a lower gross margin as well as higher rents and salaries. Turning to page 11, Hemshep continuously develops this concept, and we see that initiatives in several different areas are yielding results. First, the pace of store refurbishments is high, which means that more and more stores are updated to a modern concept that customers really appreciate. Second, to boost its price value perception and attract the more price-conscious consumers, Hemshelp has improved its alltid bra pris offering, with especially competitive prices on a large selection of products in the stores. And thirdly, Hemship is strengthening its sustainability position, and they do really want to distinguish themselves from competition here by, for example, offering a wide assortment of sustainable and healthy products, as well as providing guidance and incentives to responsible consumption. As an example of progress in this area, Hemsjöp has had the highest share of organic food sales in the industry in the recent years. And lastly, Hemsjöp is working to expand the assortment of meal kits and ready-made food in store, which is an important category, not at least in times like this. Moving then to Snabgrås and page 12. SnubGhost continued to demonstrate strong sales growth in the second quarter with somewhat stable volume trends despite the somewhat weaker market. Sales increased 15% in total and 12% on a like-for-like basis. Developments in the newly established stores and sales to consumers member-based SnubGhost club store concept contributed to this growth. With the development in the quarter, annualized sales for Snabgross for the first time actually reached a milestone of 5 billion SEC. Operating profit amounted to 92 million SEC in the quarter, corresponding to an operating margin of 6.2%. The increase in operating profit was primarily attributable to the growth in like-for-like sales and effective cost control. And profit was adversely impacted by certain negative product mix effects, costs related to new stores, and higher costs related to rent and salaries. With that, let's go to page number 13, and we'll look into Dagab. Net sales for Dagab increased 14% in the quarter, mainly attributable to sales to food retail stores. Sales to the convenience trade also increased, however, at a slower rate due to weaker trends for that market than for the food retail market. Daga's profit was impacted by cost affecting comparability, which I mentioned before, and the operating profit amounted to 287 million SEK. The adjusted operating profit amounted to 351 million SEK, and the adjusted operating margin was slightly higher at 1.8%. The higher profit was primarily driven by the strong growth. And in addition, synergies coming from the Barindals acquisition contributed positively. And on the latter, we are well on track to achieving the estimated synergies of at least 200 million SEK annually by 2024, the latest. On the negative side, back to the profit, development was a clear weak Swedish Krona. The activity level for Dagab is high. The largest ongoing project is obviously the transition to the new logistical platform, which I will get back to you shortly on that subject. But first, it's time for Anders to talk you through the financials. So go to next page, page number 15. And Anders, please go ahead.

Thank you, Claes. So let me first sum up the first half year. During the first half, net sales for the group increased with a little more than 14% to 14 billion SEK. Store sales increased by 18.1%, which was clearly higher than the food retail market in total, where growth amounted to 8.9%. The operating profit, excluding items affecting comparability, of minus 119 million SEK increased by 212 million SEK to 1.7 billion SEK. The increase is mainly explained by the strong growth and effective cost control, partly offset by lower gross margins in the segments and increased costs related to rent and salaries. The operating margin excluding items affecting comparability was unchanged at 4.2%. Items affecting comparability pertained entirely to parallel warehouse operation during the transition to the new logistics center in Bålsta. In the year earlier period, items affecting comparability included a capital gain of 221 million SEK for the divestment of Matot SE. And then let's turn page to page number 16. Compared with last year, the operating cash flow was 507 million higher this quarter, mainly due to a reversal of the higher inventory levels reported in Q1. caused by inventory buildup ahead of Easter. We also in the second quarter had a higher inventory due to the restructuring in the logistic operations with the new logistics center in Bålsta. The strong cash flow from operating activities was also supported by the strong top line growth and operating profit. The cash flow from investment activities was 306 million lower due to a high level of automation capex in Q2 last year. Last year, also, financing activities was supported by the 1.5 billion SEK rights issue. At the end of the second quarter, we utilized approximately 1 billion SEK of our credit facilities, approximately 0.5 billion SEK less than in Q1. And let's go to page number 17. Coming over to the financial position, the net debt increased compared to last year due to higher leasehold debts connected to the new logistics center in Båstad. However, compared to Q1 this year, interest bearing loans have decreased due to lower utilization of the credit facilities. The equity ratio has been fairly stable over the last couple of years. Equity ratio at 19.9% was in line with prior years to Q2 trend, except last year's level, which was elevated due to the rights issue. Total investments excluding leasehold for the first half year was 327 million SEK lower compared to last year. We see a lower pace in investments related to the logistics center in Båstad. However, the investments in the retail operation was higher. We have a high ambition of new store establishments this year, And we have already established eight new group on store at the end of Q1. And then let's turn page to page number 18. As I mentioned before, the cash flow for the first half year was negatively affected by the development of the change in working capital, which also had an impact on the net working capital as a percentage of group sales. The reversal of this effect is expected gradually in the coming quarters as the warehouse transition progresses. The capital employed has increased over the last years, mainly due to the recognition of leasehold debts, which have had a diluting effect on the return on capital employed. However, at the end of the second quarter, the capital employed was in line with year end 2022. and slightly higher than the 20.3% reported in Q1. And thereby, Claes, I hand over to you again.

Thank you, Anders. And we are now on page 19, but let's right away go into page 20. our strategic agenda comprises six strategic focus areas and with these within these areas we have a full agenda for the rest of the year and beyond to continue to develop our group and i will not go through all of them but i will look into a few of them so please go to the next page page 21. we are currently undergoing a transformation of our operations and large volumes will be moved to the newly established highly automated logistics center in Bolsta outside Stockholm. Our new logistics platform will offer a number of long-term benefits such as increased capacity and efficiency for both our own operations as well as for external customers. In February, as you are aware, we started with the outbound deliveries from Bolsta of the dry assortment to stores in Stockholm and the Mälardalen region. We gradually scaled up from there and increased volumes going out from the facility. And I must say that the first 10 weeks went significantly better than expected. However, in May, we started to experience some disruptions in the operation due to various factors. Some related to the new facility, some IT updates, but mostly related to how we operate the facility and ways of working. And of course, you have to expect some disruptions and hiccups when you ramp up a complex facility like this one. These disruptions led to issues with deliveries to a limited number of stores, which of course is unfortunate. But that said, I'm not glad to be able to say that after making some adjustments to the operations, we now have a stable situation and we have several learnings from this experience, which will help us going forward. But to maintain a high level of stability and provide greater flexibility, we have chosen to extend the ramp up phase of Båstad by six months until the summer 2024. The revision of the timeline will, however, only have a limited impact of our costs for the transition of approximately 20 million SEK in 2024. The timing of the realization of efficiency improvements and savings will not be affected. As a reminder, the investments in our new logistical platform are expected to result in 200-300 million SEK in annual efficiency improvements beginning in the second half of 2024, which will then increase to 300-400 million SEK at full capacity. Going to the next page, and speaking of our new logistical center, we are now at page 22 in the presentation. And I encourage you to save the date for Axwood's Capital Market Day in 2023, which will be held on site in Båstad on November 24th this year. At this event, the focus is, of course, on our new logistical platform, but we'll also cover areas that are of importance for our group to continue to drive profitable growth. And more details around this event will follow in due time. Turning now to page 23. We have an ambitious and broad sustainability agenda and has continued to take important steps in a number of areas during the quarter. Here, I wish to highlight and focus on how we, in a short period of time, have realized several large solar energy projects. In addition to building Sweden's largest roof-mounted solar panel facility at our new logistical center in Båstad, and a larger solar panel facility at our new fruit and vegetable warehouse in Landskrona, we have now received permission to build Sweden's largest onshore solar park north of Stockholm, which will be operational within a year. For a long time, we have almost exclusively been purchasing green electricity to our stores and warehouse. However, our own self-generated renewable energy capacity has been rather limited, accounting for approximately 1% of our electricity consumption in 2022. Now, however, we are truly scaling up and the capacity that these three new solar panel facilities will give us is equivalent to 27% of our electricity consumption in 2022. With these initiatives, we are continuing to reduce our climate impact and also promoting an increase in the amount of renewable electricity in the market. We are now on the next page, page 24, and our outlook for the year is unchanged, and it covers investments, items affecting comparability, and new store establishments. For new store establishments, we maintain a high pace compared to previous years, So far this year, we have opened up, as Anders said, eight new stores and a historically high number. Five new Willys stores, two Willys Hemma and one new Snabgo store. This is obviously a very important growth initiative for us to strengthen our presence in the market. And please turn to page 25 and the last slide of the presentation. So let me try to summarize. In a market Characterized by a lower inflation rate and continued focus on price value, we deliver very high growth with a large inflow of new customers in the second quarter, and thereby continue to strengthen our position in all market segments. We continue to maintain a high pace of development in all areas of our group, and a number of large group-wide projects are currently underway to further strengthen our long-term competitiveness. In our logistical operations, we are developing a data-driven and efficient flow of goods and a highly automated logistical platform. In the customer meeting, we invest in strengthening loyalty, establishing a record number of new stores, modernizing existing stores, and introducing relevant and intuitive digital solutions. With a strong financial position, we are able to adopt a long-term approach and make the investments needed to strengthen our position in the market. We aim to continue to challenge and develop our group to create an even stronger offering at affordable, good and sustainable food for all our customers. With that, I would like to conclude today's presentation and hand over to the operator to open up the line for questions. Thank you.

If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Fredrik Evarsson from ABG. Please go ahead.

Thank you very much. Good morning, gents. I've got three questions. I'll take them one by one. First question on the margin in villas and the gap between consumer and producer prices, which turned positive a few months ago. If we assume that this gap stays positive, do you expect to see some support to the gross margin as we look into the second half of the year? First question.

Yeah, thank you. Hi, Fredrik. Obviously, I think that that is to be seen. What is impacting in the market, of course, has been the increase of our producers. Now we are pleased to see, as you have noted, that the inflation rate is coming down. We are more flattish on that. Now, in addition to that, obviously, it's been a very intense activity in the market last quarter, which I'm sure everyone has seen. So, obviously, there are parameters in your question. It obviously depends on what is going on in the market as well. So, as you know, one of our key measures here is to make sure that we keep the price position that we want to have. and driving that also so further. So there is it's difficult to answer the question because of course it depends on also what happens in the market.

A lot of factors obviously in the question. I understand. Second question then on the Bayer and also acquisition obviously that supported dog apps margins quite a bit in Q2 it seemed like So if you could give some indication on where you are exactly or approximately in terms of synergies, how much have you done?

Yeah, but I think that, and I think as I stated, we are well in line with the guidance that we've said before that we're going to have 200 million SEC in synergies 2024. So we are well in line with that. I think that's as much as I can state.

Okay, fair enough. And last question from my side. On FX, given that we've seen the Swedish krona strengthening over the last couple of days, is it fair to assume that this could be even more supportive to dog apps margins going forward?

I think it's fair to say that it's needed. As I said, one of my worries I've had related to inflation has been that we've seen a very weak Swedish krona. As you point out, the last few days it's clearly strengthened, which we think is positive. We have a clear negative FX effect in Dagab in this quarter. So, obviously, with the strengthening of the corona, we'll reduce that moving forward.

Excellent. That's all my questions. Thanks.

Thank you.

The next question comes from Nicholas Eckman from Carnegie. Please go ahead.

Thank you. Just a couple of questions from my end as well. Firstly, if you could elaborate really on your thoughts on inflation. You talk about here a much lower rate of inflation, but I think if you look sequentially, we're still only like 1.5% or less than 1.5% below peak inflation in March. And it was actually even up sequentially in June. What is your best guess on the sequential trend going forward? Are we looking at stable prices or do you see

price is continuing lower in the coming months uh uh it's a very obviously valid question and uh as well as uh it is for me too difficult to to have a very strong point on but but i think if i look at it and and you know the the uh as you point out we've seen more of stable pricing right now even if the the this morning's number is 0.3 uh disappointment you can say that but i mean it's it's a It's a mix of many products. I think the fact that we see it's more of a stable situation at the moment. So if we keep that stable, then obviously inflation rate will go down clearly. But as I've also pointed out, there are several uncertainties out there right now, which obviously see how those turns out. The cost pressure due to the weak Swedish corona towards our suppliers, as you know, we have a large share of imported goods to Sweden in terms of food, but also for the primary production in Sweden, also affected by the weak Swedish corona. The climate change with the harvests uh with the dry uh an resort uh is is a it's a concern uh to see what uh how that will turn out so so there are factors here that is uh difficult to forecast but right now at least it's been stable okay very good

And obviously, I think Willys has benefited a lot from this increased focus on prices. Do you see any risk that this could reverse now if inflation rates trend lower and maybe consumers still look for bargains, but maybe not at the same extent, but maybe trend back to shopping at their usual supermarket? Do you see any such signs now or is this in any way a concern to you?

uh the easy question on the answer on that do i see any of these signs no uh first of all uh you know it's and i think it's worth reminding uh over the years village has strengthened its market position and again market share and we've seen continuously increase of new customers and when we track these new customers when they uh you know open up their eyes for village they uh they like what they see and they they continue to be customers now we've had a more of a massive inflow of new customers and of course We don't see any trends that they would leave. But that's up to us now to work on to make sure that the customer meeting is as good, the price value is as good, etc. So they maintain and continue to be loyal customers. So that's what we've seen historically. And of course, our task now is to make sure that they continue to be loyal. And we've seen that before. And I hope that that will continue.

very clear thank you and just the final question this extended transition to your automated warehouse can you tell us a little bit about the time plan here i think initially you had talked about moving chilled and fresh goods into this warehouse during the summer and then frozen goods towards the end of the year can you update us where where that time frame is right now well it's uh not when we are talking about weeks where we are changing here but we also uh

due to uh to guidance a bit we also give us giving ourselves a bit more flexibility uh we will continue the dry assortment we will add on on the chilled during the and then as we said in the winter we'll do the uh the frozen uh now that is then we are looking at then uh You know, Christmas time, you don't want to interrupt. And so we will start that after the year end. So it's more weeks in terms of changing from that perspective. But it gives us also more flexibility as we've had some learnings now that we want to have. So clearly, just to get it more of a stable situation as we don't want to experience what we did in the spring again.

Very clear. Thank you for taking my questions. Thank you.

The next question comes from Daniel Schmidt from Danske Bank. Please go ahead.

Good morning, Klaus and Anders. Just a couple of questions from me. Klaus, maybe, or Anders, for that matter, could you What is the main reason for the difference in margin progression you think between Hemsworth and Willis in the quarter? You see margins in Willis being down by 50 basis points and they're up by 10 basis points in Hemsworth on the EBIT margin and of course they're exposed to the same market forces in terms of price pressure and at the same time increased salaries and normalization of payroll tax and so on. Or maybe they are not exposed to the same price pressure. What is the reason, you think?

No, I think they are more or less exposed by the same situation on the gross margin. But obviously, Hemship is significantly smaller. And then if you look at the... The growth rate and in Hemsherp that added on as well, there are other, you know, income that franchise fees, et cetera, that comes into Hemsherp. So it's not, you know, it's more marginal on that part. One thing that we have highlighted, obviously, that we are not fully up to speed on Eurocash in terms of margin support into villas, which has also had an impact. And then Vilnius is a bit larger in terms of the impact from the payroll, the reduction of taxes for young employees. You relate to more of a price pressure, I think it's equal more or less. But there are some other impacts. And obviously, the amounts in Hemship is lower when you get that ease effect, how it improves the net margin.

So the franchise fee was maybe a little bit bigger this quarter versus last quarter. That had an impact. And then you're saying also your cash and payroll tax differences when it comes to the number of young people you have. in each concept and basically compared to the total number of employees in each concept. Okay, and another question maybe on the gross margin pressure in the market. I don't think that we've ever seen such a political debate and that we've had now in Sweden, at least not in modern times when it comes to food prices. And the finance minister is sort of being seen in play in a way that we haven't seen before. Do you think that that has propelled the price pressure or is this just for show in terms of the statements that have come out from your competitors?

Before I get into that, I also want to remind myself that to your previous question, we also, as you noted, had significantly more new store openings in Vilis. You can keep that on your list. No, but when it comes to, I mean, when it goes to the, I think it's been clear, it's been a lot of price activities out in the market. I think everyone has seen it as a consumer. There are a lot of price focuses for every, in every, in every retailer you go into, which is fairly obvious in terms of the situation, the households it's sitting in. So, and I think for us, we, you know, we have not made any specific, you know campaigns of a few products we focus on what we've done historically that we continue to drive the the overall offer particularly if you look at villas where you want to have the full grocery bag to be the most pro price competitive and we'll continue to do that but clearly it is and has been a very price active quarter okay

And do you feel that that anyway sort of impacted your market share gains during the quarter? Did it abate in any way towards the end of the quarter, given that you also had delivery problems or no change? Or what do you see there? What did you see?

The delivery problems, it's been a lot of, obviously, focus on that. And again, I'm the first one to think that was unfortunate, particularly as it has affected a few stores and for these stores, it had an impact. But if you look at Axfoods total, it was less than 1%. So that gives you a perspective on the impact, even if sometimes, you know, individual stores was more affected, which we are sorry that it happened. So and then, yeah, I mean, we are in the market that is very competitive. uh and and uh one of our most important uh you know kpis is to make sure that we keep our price competitiveness and of course that has some impact in this quarter we'll see how how that will continue how that will roll out the rest of the year okay And I must say, I think if you look at that and if you look at how intense it has been and how we are still continuing to gain shares and also maintaining a stable financial situation.

Yeah. And maybe a nitty gritty question. You showed a quite interesting chart on WillisPlus membership development. I think it was maybe in the last quarter or the quarter before. Has that sort of continued progress in the same fashion?

More or less, yeah.

Yeah. That's all for me, Niklas. Thank you.

Thank you.

The next question comes from Gustav Hagius from SEB. Please go ahead.

Thank you. Thanks for taking my questions. If I start with Willie's, it's been discussed partly here already, but when I look at the outperformance for Willie, it's obviously a very strong quarter, but for likewise versus the market, I note that you outgrew the market by 12 percentage points in Q1, if I recall correctly, and now it's more of an 8 percentage points outperformance. Can you elaborate a bit if this translates to or mainly relates to tougher comps or or Eurocash, or if we're starting to see sort of the major influx of new client customers and so forth starting to be a little bit, coming down a little bit. And also how to think about H2, where you think like for like and where this might be versus the market, that'd be interesting to hear.

Agustav, no, obviously Eurocash is partly in effect, but I think it's also fair to say, if you look at the starting point of the inflation was last year at this point, and if you look at the numbers that we reported there, Willis already started to take some jumps. So I think compared to To the rest of the market, we have significantly tougher comps that we are handling now, which is also kind of obvious that as we go in the year round, we are going to meet tougher comps versus the others. With that said, I think it's also, you know, we saw and we have a volume lift in our, but if you look at the market as a whole, the number you saw now in but was released as well for the Q2, it's somewhat better for the market versus Q1. So it seems that volume is also starting to come back a bit in the overall market, even if it's still negative.

And when you talk about volumes coming back, do you see any sort of reversal towards normalized levels, 2019 levels? Or is this mainly because comps are also obviously getting easier on the volume side, but do you see an absolute uplift in volumes? This is sort of pre-placement numbers.

For us, and I can also relate to us, we have a strong volume growth. But if you look at the overall market, if I think that's your question, that is still my assumption, at least, even though I don't have... If I look at the growth rate in Krona, that indicates at least a volume drop in the overall market. And how do I look at it forward? I think some of this volume will come in food. We need food. We'll continue to have food. And I think that will overall come back as we move forward.

And coming back to this, You mentioned, sort of alerted to that you've seen historically that you're taking new customers or new customers to Willys and they generally stick. But is there any signs of different sort of customer behavior from these new cohorts that are quite big into Willys? Are they adopting this similar pattern as previous cohorts that they are, I assume, shopping more and more at Willys as time progresses?

Yeah, yeah, I think they are. I mean, you start this classic, you start and you test and then you're coming back more and more so. So they also see, you know, it's not only if I would say price hunter that comes in and shop one or two articles, it's really the full bag that they start to shop. So we are getting good base into to the stores.

And then I thank you. And then just a housekeeping question on the financials. It's been a little bit higher obviously in the first half here than we've seen historically. Is that a good number to extrapolate going forward, what we saw in Q2 and similar to Q1 in terms of net financials?

What type of financial do you mean, Gustav? Do you mean working capital?

Net interest costs.

Yeah, interest costs. Okay. Yeah. I would say it's quite fair to assume that this level is... It's good to assume that we have a good run right there.

That's helpful. Thank you, guys.

Thank you.

Thank you.

The next question comes from Anna Schumacher from BNP Paribas Exane. Please go ahead.

Hi, both. Thank you for taking the question. I have a quick one on Eurocash, if that's okay. You commented that it has not yet returned to profitability since the pandemic. When do you expect that it will?

Well, obviously, first of all, it's important that we see that we are getting, you know, the customers coming back. But as you know, if you look at the last quarter, it's been a fairly price intensive quarter as well. On the other side of the border, we had the currency effects that, you know, so it's been a more of a price activity also there. And as soon as we are getting, you know, or a stable situation, I think that will also come back. But that's difficult to forecast when that will come.

That's clear. Great, great. Thank you.

Thank you.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. The next question comes from Daniel Schmidt from Danske Bank. Please go ahead.

Yes, hi again. I hope you can hear me. I, of course, heard your answer when it came to Realize Energy's class, when it comes to Bergendahl food. But it's quite a jump. in Q2 versus Q2 last year when it comes to profitability in the OGAB. Could you maybe shed some light to what that relates to? Is that sort of a lot more synergies coming through or is it sort of economies of scale or sort of all of the above, of course? But could you give us some more information on that?

Obviously, it also goes for the economy of scales. We have a strong growth, as you've seen, and that is good if you're working on... When you get scaled in that operation, that's supporting, that is helping. Last year, we also had some fuel impacts. If you remember, we had a fuel cost that came included. And we also have some integration costs last year as well. So as we've integrated, as you may remember, we had the barium dose integration at the time. But I think scale is one, an important one, and also some related costs last year that has an impact.

We're just coming back to synergies then. These 200 million... Should we see, sort of put it this way, should we see a linear development of us being realized or have we done a lot in the first part and then it's going to be sort of harder to get the last 50, 60 million or sort of how should we view it?

Well, of course, when we get in the operation up and running, you're getting more of the effects. We got the organization set up. We're getting that structure that is now more or less in place. Uh, and then, uh, obviously the effect is also, uh, how, uh, you know, in terms of how they are developing and how Citigroup is developing and our customer base is developing, but then we have continuously steps that we can do. We still are operating from, from the, uh, from the warehouse in Hässleholm. And we think that we still can, you know, with our support and with our technology, we can continue to drive more efficiencies out of that.

Yeah. All right. Thank you. Thanks.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Well, I would like to thank you for your questions, and I also would like to thank you for listening in, and I also would like to wish you a great day. Thanks a lot. Bye.