Axfood AB (publ)

Good morning, everyone. This is Alexander Bernd Rop, Head of Investor Relations at Axfood, and welcome to the Axfood Third Quarter 2025 Telephone Conference. So with me today, I have Simon Margulis, President and CEO, and Anders Lexman, CFO. In the investor section of our website, you will find the presentation materials for today's call, and we encourage you to have that presentation at hand as you listen to our prepared commentary. after the presentation we will be taking questions and recording of this call will be made available after the event on our website so with that i will now hand over the words to simone so please go to page number two thank you alex and good morning everyone oxford summarizes another strong quarter with high customer traffic volume growth and increased market share

With increased loyalty and growth in our store chains, as well as improved efficiency and solid cost control, earnings increased in all operating segments. In addition, we continue to invest in strategically important areas to become even more efficient and further improve our competitiveness. In recent years a logistics structure has been developed to enable continued profitable growth and during the quarter we announced plans to establish a new highly automated logistics center in Kungsbacka in southern Sweden. In sustainability we presented the food 2030 report, our proposal for a more sustainable food strategy for Sweden. We also continued to phase out fossil fuels in all our transports, had a new solar park in full operations and launched innovative new products focused on sustainability and health. Following that introduction, let us now turn to page three and the agenda for today's presentation. I will start with a brief market overview and then I will give you a review of our third quarter performance and some of our strategic priorities. Following that, Anders will take you through the financials and lastly, the outlook for the full year and a brief summary to conclude from me before we open up for questions. Turning to page four, but let's go straight to page five and take a look at the quarterly development. As in previous quarters, market conditions in Swedish food retail during the third quarter continued to be characterized by intense competition and high price awareness among consumers. Overall market growth amounted to 5.4%, and Statistics Sweden reported that the annualized rate for food price inflation was 4.4%. This was somewhat lower than in the second quarter this year, However, in absolute terms, compared to the second quarter, the price development was relatively stable. Axford is successful in navigating a changing market dynamic by leveraging the strength of our business model of strong and distinctive concepts working in collaboration. Thanks to affordable and attractive offerings, more and more consumers are choosing to shop with us. Having maintained our momentum, we delivered a strong performance in the quarter. Growth in our retail sales amounted to almost 20%. Excluding Citigrass, which was acquired in November last year, growth amounted to just over 6%. As such, our growth again was above the market rate, both including and excluding Citigrass. Volume growth from increased loyalty, customer traffic, and new store establishment was the main driver behind this development. In e-commerce, we grew 11%, which compares to the market growth of 8%. Excluding Citygross and the discontinued business Middagsfrid, sales were up 6%. Turning to page 6. Consolidated net sales for Axford grew almost 7% in the quarter, driven by continued strong momentum in Willys, Hemköp and Snabgross. We also saw a positive trend for Citygross. In all, Citigrass net sales amounted to just over 2 billion SEK. However, on a group net sales basis, the contribution from Citigrass was 345 million SEK, due to internal eliminations in Dagab. Please go to the next page, number 7. Group operating profit increased to just over 1 billion SEK, and the operating margin was stable at 4.8%. Operating profit included items affecting comparability of minus 39 million SEK related to CityGross. Adjusted operating profit, which exclude these items, also increased to 1.1 billion SEK and the adjusted operating margin was higher at 4.9%. In all, the absolute growth in group operating profit was driven by Willis & Dagab, However, Hemsköp and Snabgross also reported increased profits year on year with strong growth in percentage terms. So the earnings performance was once again very well balanced this quarter across our operating segments. Citigrass had a negative impact on the group's profit development, however to less extent than in the previous quarters. Let's now go deeper into the development in each operating segment. starting with Willys on page 8. Willys continued to outperform the market in the third quarter with a growth of 6%. Growth primarily came from higher volumes as a result of an increased number of customer visits and new store establishments. A higher average ticket value also had a positive impact on the sales development. Willys is Sweden's most recommended food retail chain and has a unique position on the market. The rate of increase of new members in the Willis Plus loyalty program continued to be on a high level. And in addition, loyalty among existing members remained strong. Earnings grew and amounted to 587 million SEK, which correspond to a stable operating margin of 4.9%. The increase in operating profits was primarily driven by the increased sales volumes, a stable gross margin development and good cost control. Leveraging its position as Sweden's leading discount grocery chain, as well as its liking among households, Willys is continuing to develop its offering. Among many initiatives, stores are continuously being upgraded to the new Willys 5.0 store concept. Willys 5.0 entails a significant improvement to the customer experience through a substantial upgrade of store layout and design. The assortment is key and here the focus is really on enhancing the offering of fresh products. Willys 5.0 is a scalable concept which gives flexibility and opportunities to establish more stores. Because establishing new stores, this is exactly what Willys wants to do. As the store chain is currently accelerating its expansion pace to reach even more consumers. In October, Willys reached a significant milestone when it opened store number 250 in Rosengård in Malmö. Over the past 10 years, Willys had expanded store base with more than 50 stores on a net basis. And now the aim is to open at least 10 new stores each year in the coming years. Moving on to Hemköp and page 10. Hemshop's retail sales growth of 6% in the quarter exceeded that of the market, and like-for-like growth was also strong at almost 5%. Hemshop demonstrated volume growth driven by customer traffic. A higher average ticket value also impacted the sales development positively. Total net sales for Hemshop increased 7%. Operating profit was higher at 103 million SEK, and operating margin was 5.1%. The increase in operating profit was mainly driven by the increased sales, a stable gross margin and good cost control. Turning to page 11. I just talked about Willys modernizing its store base and Hemshop is also modernizing stores at a rapid rate in order to enhance the customer meeting. In addition, its offering is continuously being developed with a focus on price value, fresh products and meal solutions. Hemshub's performance in the third quarter was strong, representing a continuation of its momentum for some time now. This development is despite them operating in traditional grocery, which is a segment that, while being the largest on the market, has seen its share of the market decline in recent years. It's important to take this into account when analyzing Hemshub. And it is quite clear when you look at the customer data, such as development in penetration, in loyalty and purchases, The PEM köp is clearly outperforming their main peers. We are now on page 12. We acquired Citigrass nearly a year ago to create new growth opportunities for our group. The organization is working according to a clear plan and has a comprehensive development agenda in place to reverse the chain's weak performance in recent years. This year is a transitional year and we are today reiterating that we expect to reach profitability at some point in the second half of 2026. While total growth of Citigrass in the third quarter was impacted by store closures, like-for-like growth amounted to slightly more than 3%. Citigrass reported on an operating loss on an adjusted basis of minus 4 million SEK. The loss was less negative than in previous quarters, with positive effects from like-for-like growth. In addition, structural measures and efforts to streamline operations also contributed to the development. On a reported basis, operating profit amounted to minus 43 million SEK, which corresponds to an operating margin of minus 2%. This included items affecting comparability of minus 39 million SEK pertaining to structural measures, including discontinuation costs for the store in Kungälvskurva in Stockholm, organizational changes and sales currents within the non-food assortment. In August, the new communication concept and the improved, more affordable customer offering was further developed. Also, the Citygross store in Borlänge was closed ahead of concept change to Willys. Turning to page 13. The 3% growth in like-for-like sales for Citygross represent a positive trend. The chart on this slide shows comparable sales on a rolling 12-month basis, each quarter from the third quarter 2022. As you can see in the chart, after a couple of years with declining sales, Citygross is now back to growth, which of course is encouraging. That said, we're still in early days, on our journey with Citigros and maintain a high activity level to enable the chain to become a competitive player on the market once again. Citigros has excellent potential as a pure play hypermarket operator, an attractive segment that is continuing to account for a growing share of the market. With a long-term perspective, we are leveraging our knowledge and experience to develop and strengthen the chain for the future. Moving to slide 14, our restaurant wholesaler, Snabjos, delivered growth of 6% in the quarter on both a total and like-for-like basis. Higher volumes through increased customer traffic had a positive impact on sales, in addition to a higher average ticket value. Operating profit was higher than in the prior year and amounted to 101 million SEK, corresponding to a higher operating margin of 6.3%. The increase was mainly driven by higher sales, a stable gross margin, and good cost control. Next page, number 15, and Dagab. Dagab's quarterly net sales increased by 5%, driven by sales to Villis, Hemsköp, and Snabyos. Operating profit increased to 341 million SEK, and the operating margin was higher at 1.7%. The performance was primarily due to the sales growth and a lower cost level with increased productivity in logistics. Operating profit was however negatively impacted by a lower gross margin. Dagab is continuing its effort to optimize the flow of goods and streamline the group's new logistics structure. The logistics center in Bålsta, the fruit and vegetable warehouse in Landskrona, and the recently expanded and automated high-bay warehouse in Backen, Gothenburg, are all contributing to the group's capacity and efficiency. In addition, and we are now on page 16, work on establishing a new highly automated logistics center for southern Sweden has been initiated to ensure increased capacity and efficiency. As previously communicated during the third quarter, letters of intent were signed with our automation partner, Vitron, and with Kungsbacka Municipality. The logistics center, which will stand approximately 90,000 square meters and be environmentally certified, will handle picking and deliveries of goods in all temperature zones to grocery stores. Total capacity is expected to increase at least 20% compared to current volumes in the southern Sweden. The facility is expected to be put into operation starting in 2030. Turning to page 17. Now it's time for Anders to take you through the financials. So please go to the next page, page number 18. And Anders, please go ahead.

Thank you, Simone. During the first nine months, net sales for the group increased by 6.6% to approximately 66 billion SEK. Including Citigrass, retail sales increased by 19.3% and excluding Citigrass, the increase was 6%. which was more than the food retail market in total, where growth amounted to 4.5%. Operating profit excluding items affecting comparability increased 5.8% to just over 2.8 billion SEK. The operating margin excluding items affecting comparability slightly decreased from 4.3% to 4.2%, where the CityGross acquisition impacted the margin with minus 0.3 percentage points. Next, page number 19. During the third quarter, the cash flow was minus 40 million SEK, which was 380 million SEK higher compared to last year. We saw a strong underlying operating cash flow both for the third quarter and the nine-month period. mainly due to a less negative contribution from net working capital compared to last year. The negative calendar effect was higher last year. The negative cash flow from investment activities of 421 million SEK in Q3 was somewhat higher compared to last year, but in line with previous quarters. We have a higher pace in our investments in our retail operations and a lower pace in automation investments compared to last year, since we now are through with our investment in the fulfillment center in Bålsta. By the end of the third quarter Exford utilized approximately 3.1 billion SEK of the group's credit facilities compared to 2.5 billion SEK by the end of Q2 and 3.2 billion SEK at the end of Q1. The increased utilization compared to Q2 was due to the dividend paid out in September. And then please turn to page number 20. Net debt has increased since the acquisition of Citigrass in Q4 last year. In addition to the loans raised for the acquisition, net debt also has increased with the Citigrass leasehold debt of approximately 2 billion SEK. As we communicated in the Q2 report, Exwood has successfully refinanced the existing revolving credit facility in the beginning of Q3. The new RCF amounts to 4 billion SEK, where 1 billion SEK have a term of three years and 3 billion SEK have a term of five years. And the conditions in the new agreement are in all essentials unchanged compared with the old facility. The equity ratio amounted to 20.2%. 4%, which was lower than December 2024, but above the actual year and target of 20%. The lower equity ratio compared to Q3 last year was also a result of the Citegross acquisition. Total investments excluding leasehold and acquisitions for the first nine months amounted to 1.3 billion SEK. Year to date, we have established seven new Groupon stores, the same number as in the prior year. We have however increased our store modernization rate compared to last year. And then please turn to page number 21. When we look at the capital efficiency we have a negative development of our rolling 12-month networking capital as percentage of sales. As I have mentioned before the impact of Citigrass acquisition is expected to increase this KPI with approximately 0.3 percentage points on a rolling 12-month basis. Capital employed has increased over the last years, mainly due to both the acquisition of Bergendals Fod and Sittergross, as well as the investments in Bålsta. The level of capital employed increased slightly during the first nine months, mainly as a result of increased leasehold debt and utilization of credit facilities. Due to the increase in capital employed, return on capital employed decreased somewhat compared to last year to 16.4%. And thereby, I have come to the end of my presentation and I hand over to you again, Simon.