Axfood AB (publ)

Welcome to the Axfood Q1 2024 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 hash 5 on their telephone keypad. Now, I will hand the conference over to speakers CEO Klaas Balco and CFO Anders Lexman. Please go ahead.

for joining today's call. With me here today to present the Interim Report for the first quarter of 2024 is our CFO, as you heard, Anders Leksman. In the investor section of our website, you will find the presentation material for the call and the recording will also be made available after the presentation. And with that, let's get started and please turn to page number two. Today's agenda is as follows. First, we'll have a brief market overview, and then I will give you a review of our first quarter performance. After that, Anders will take you through the financials. And following Anders' part, I will talk about the progress we are making with some of our strategic initiatives and investments for the future. Then just a brief summary of the presentation before we open up for Q&As. So we are now on page number three, but let's go straight into page number four and take a look at the developments during the first quarter. Market growth amounted to just over 6% during the quarter, with help from a calendar effect of roughly 2% through the leap day and the timing of Easter. However, inflation was substantially lower than before. In total, inflation amounted to slightly more than 1% in the quarter, which is then according to Statistics Sweden. Summarizing it all and taking the price and calendar effect into account, the adjusted sales growth at almost 3% was actually the highest in three years. In other words, the market is now displaying a solid recovery after the pressure on volumes in previous years. But the market is still very much characterized by price conscious consumers and our competitors are focusing a lot of strategic price investments, campaigns and marketing. It is still a very intense competitive environment. And this is, of course, something we follow closely. With that, please go to next page, page number five. And if we look then at our performance, given that actually we are facing uniquely high comparison figures, our beginning of the year was strong with 7% growth in retail sales. As over the two year period, our growth amounted to 28%, almost double the rate of the market, which was 16. The fact that we posted solid growth in the quarter in a market with low inflation was a result of significant volume growth. This confirms to us that our customers appreciate our offerings in our various concepts. With that, turn to page, and we are then on page number six. And if we then look at our e-commerce, our sales increased almost 9%, which again was higher than the market. And market growth continued to improve. However, growth in e-commerce still lags physical stores and is clearly muted compared to the growth rates we have seen in this channel a couple of years ago. But our share of consumer sales from e-commerce was almost 6%, one percentage point higher than the penetration of the total market. Move on to page number seven and looking at some of our key ratios. Consolidated net sales for Axfood grew by just over 5% during the first quarter, driven by higher volumes from strong customer traffic. Our strong sales performance in Billis and Hemship drove our overall growth. Dog app sales to external customers was, however, somewhat softer, which held back the overall net sales growth. Please turn to the next page, page number eight. And in total, group operating profit amounted to 817 million SEK, and the operating margin was 4.0%. Last year, we had a significant cost affecting comparability relating to the transition to the new logistic structure. Although the ramp up of our Bolsta logistic center is still ongoing, related costs are no longer deemed as affecting comparability. as parallel warehouse operations are being phased out gradually during this year. On an adjusted basis compared to last year, the increase in operating profit was mainly the result of strong growth and effective cost control. Higher rental levels and increases, however, had a negative impact on our profit. The adjusted operating margin was 4.0%. Let me now go into our various segments and turn to page number nine and we'll start with Willys. Total and like for life sales growth in the Willys segment approached 8% and 6% respectively. Higher volumes was the primary contributor to the strong performance. Willys therefore continued to gain market share, although at somewhat slower rate than previously, which is natural given the exceptionally high comparison figures. If I compare to Same period two years ago, village has grown more than twice as much versus the market. And if we look at the cross-border shipping, shopping, both total and like-for-like sales increased significantly for Eurocash due to high levels of customer traffic and a positive Easter performance. Our operating profit in this segment increased to 484 million sex, corresponding to an unchanged operating margin of 4.3%. Strong growth in like-for-like sales and effective cost control compensated for the costs associated with higher rent levels and salary increases. And let me just continue a little bit on Willys. If you go to page number 10. Willys has a unique and competitive offering with the ambition to deliver Sweden's cheapest bag of groceries and has attracted many new customers for a long time. And regarding the number of customers that makes purchases on a regular basis, Villis saw a positive development for this key ratio with an increase of 6% year on year. Loyalty is, in other words, strong, and we see that the customer Villis has attracted in recent years and also continues to shop within the chain. In addition, the rate of increase of members in the Villis Plus loyalty program continues to be on a high level. Growth in new membership is significantly higher than in 2021, i.e. the year before inflation took off. And actually, the average amount of new members on a monthly basis in the first quarter exceeded the 2021 monthly average by more than 30%. The total number of members in our Willys Plus is now just over 3.6 million. And finally, Willys penetration is still the highest among concepts in the market. And we are pleased to see that we have been able to maintain this level, a level that we expect to increase with more and more store establishments. Now turn to page number 11, and we'll look into the Hemship segment. The first quarter saw another good performance from Hemship. Net sales in the segment increased almost 8%, and like for like, retail sales growth was 7%. While the development for the Hemship banner was strong, Tempo delivered somewhat weaker performance as a result of the challenging market climate for smaller store formats. Operating profit amounted to 101 million SEK and the operating margin was 5.2%. The significant increase in operating profit was primarily attributable to the strong like-for-like growth in the group-owned stores and lower costs related to campaigns. The quarter also saw improved operational efficiencies and good cost control with lower, particularly electricity costs. Turning now to page number 12. And if I dig a little bit deeper into Hemshep, I want to comment that we continue to see Hemshep's position, particularly by focusing on price value through popular everyday products, campaigns and communication. But also Hemshep has continued to invest in the modernization of existing stores. Over the last two years, the number of store modernizations have amounted to more than 60. This is almost a third of the total store base. And lastly, Hemship is also enhancing its sustainability profile. For example, Hemship is an industry leader in the sale of organic products. And during the quarter, the chain was recognized for its work with an award from Sweden's organic farmers. With that, we'll go to page number 13. And let's look into snub growth. In the cafe and restaurant market, the beginning of the year was weak, including a negative effect from the Easter. This was reflected in snub growth performance, even though snub growth once again gained market shares. Sales during the quarter increased 3% in total and 1.5% on a like-for-like basis. Operating profit amounted to 27 million SEK, corresponding to an operating margin of 2.3%. A weak growth in like-for-like sales could not fully offset increased costs primarily related to personnel and higher rent levels. While Snabgross navigated in a challenging B2B market, Snabgross Club expanded and two additional stores were converted in the quarter to the membership-based consumer concept. With that, we'll continue to the next page, which will be page number 14. And the look at DAGAP. Our net sales for DAGAP increased 4%. Strong growth in sales for Axfood's Groupon stores was offset by softer sales development to our external customers, including small formats and the service trade. A reported and adjusted operating profit amounted to 268 million SEC, and the operating margin both underreported and on an adjusted basis once was 1.4%. The higher operating profit was primarily attributable to volume growth and positive currency effects. However, higher logistical costs related to the transition to the new logistic platform had a negative impact on operating profit. In addition, the accelerated climate transition to renewable fuel in transports impacted operating profit negatively. I'll talk more about both these initiatives shortly. However, first and turning now to page number 15, it's time for Anders to talk you through the financial development, which was strong in the quarter. So please go to the next page, number 16. And Anders, please go ahead.

Thank you, Claes. And for the first quarter, the cash flow was 129 million SEK and compared with last year, 377 million higher. mainly due to a strong cash flow from the operating profit and positive networking capital development. We had a positive calendar effect in Q1 as well as a positive impact from a lower degree of parallel warehouse operations compared to last year and also improvements in accounts payable. The negative cash flow from investments activities of 353 million SEK was significantly lower than last year as we know now have a lower pace in automation investments. Investments in our retail operation was also lower in Q1 compared to last year due to few stores but investments in joint group functions was in line with last year. At the end of the first quarter we utilized approximately 0.8 billion SEK of our credit facilities approximately 0.7 billion SEK less than in the first quarter And then let's turn to page number 17. We have further strengthened our financial position in the first quarter compared to a year ago. The net debt has increased slightly compared to year end due to higher utilization of the credit facilities. However, the net debt ratio remains unchanged at zero. The equity ratio has been very stable and even increased over the last couple of years. The ratio at the end of the first quarter amounted to 19.4%, 1.3% higher than the first quarter level last year. Total investments excluding leasehold for the first quarter amounted to 354 million. 197 million lower compared to last year. And again, we now see a lower pace in investments related to the new logistics center in Bålstam. This means that we now also see investments in relation to net sales are coming down and amounted to 1.7% in Q1. And then let's turn to page number 18. looking at the capital efficiency we have a positive development of networking capital in both absolute and relative terms at the end of the quarter the net the networking capital compared to sales was minus 3.4 percent a decrease with two percent we see a positive impact from more efficient warehouse operations with a lower degree of parallel warehouse operations from the transition to the new logistics center in Bolsa, and also improvements in trade payables. The positive development in current liabilities contributes to a lower level of capital employed, which, in combination with an increase in profit, improves the return on capital employed. So to summarize, we go into the second quarter with a strong financial position. And with that, Claes, I hand over to you.