Axfood AB (publ)

Good morning, everyone, and welcome to Axfood's third quarter results presentation. It's good to have you with us. Let me briefly take you through what's coming up. Our CEO, Simon Margulis, will start with the key highlights of the quarter and developments in the market. Our CFO, Anders Lexman, will take us through the business and financial performance. Simon will return to discuss our strategic agenda. After the presentations, we'll take your questions. And if you have several, please ask them one at a time. So with that, Simon, over to you.

Thank you, Alex, and good morning, everyone, and a warm welcome from me as well. In the third quarter, Axfood continued to grow and increase earnings. We did so in a dynamic market despite deflation and cost pressure. We also delivered on our ambition to reach profitability in Citigrass. Value for money remains a key priority for consumers. At the same time, we're seeing some signs that quality and convenience are becoming more important. We have strong differentiated concepts and we're investing to become more efficient and more competitive. And that puts us in a strong position to continue growing profitability. Before we get into the details of the quarter, I'd like to zoom out and look at the broader environment. In recent years, we navigated global uncertainty due to political turbulence and climate changes. Digitalization and AI have also accelerated, bringing new opportunities and new demands for our business. Through all this, our market has continued to grow. It has changed, but conditions have been more stable than in most other industries. Discount has grown more than any other segment in recent years, largely at the expense of traditional grocery. Hypermarkets have also performed well, and we saw both trends last year too. Axfood accounts for 25% of the Swedish food retail, and our market share gains over time are a clear sign that our business model works. This year the market has continued to grow, and in the third quarter growth was 4%, but the drivers have changed. And like in recent years, growth is now coming from higher volume and changes in product mix. And growth is more spread out across different store formats. Food price inflation turned negative earlier this year, both including and excluding VAT. And as a reminder, VAT on food was halved from 12% to 6% on April 1st. Thank you very much. Thank you very much. Our broad range of concepts and offerings helps us meet different customer needs while keeping a strong focus on value for money and other added values. And that combination is a strength in this market. Now let's turn to the third quarter, starting with the business highlights. Retail sales continue to grow in the third quarter, driven by higher volumes. At almost 3%, growth was stronger than in the second quarter. However, we're still somewhat behind the market. It is a demanding year-on-year comparison, and we're comparing with strong third quarter last year, when Citigros had also begun to contribute to our sales. And looking at growth over a two-year period gives a fuller picture. And over that period, we have clearly outperformed the market. Net sales grew by 2% in the third quarter, although growth varied across our chains. Deflation held back sales, and we report net sales excluding VAT. And on that basis, consumer prices fell by almost 2% year on year in the third quarter. And that's according to Statistics Sweden. Our earnings increased in the third quarter driven by high sales volumes, a stable gross margin and also effective cost control. And we achieved this in the market with intense competition, deflation and cost headwings. Higher fuel prices were one of those headwings and the negative cost impact was in line with the second quarter. Group profitability remained stable and the margin was 4.9%, both on a reported and adjusted basis. And taken together, that is a resilient result under the market conditions we faced. ITEMS AFFECTING COMPARABILITY AMOUNTED TO 1 MILLION SEK IN THE QUARTER COMPARED WITH 39 MILLION A YEAR AGO AND WE ARE REVISING OUR FULL YEAR GUIDANCE HERE AND ANDERS WILL EXPLAIN THE CHANGE LATER IN THE PRESENTATION That concludes the first part. I will return later to discuss our strategic agenda and outlook. But for now, I hand over to our CFO Anders for a closer look at our operating segments and the financials. So by that, Anders, over to you.

Thank you, Simon. So let me start with Willys. Total sales grow by just over 2%. Like-for-like growth was also positive, though still modest. Deflation held back Willys sales. We're also comparing against strong figures from recent years. With the customer meeting as our main priority, we work to further increase growth with a focus on price, campaign, assortment and loyalty. During the third quarter, this work contributed to a more positive development than in the second quarter. Operating profit declined slightly, as like-for-like growth remained modest. Gross margin was stable. Operating margin was also slightly lower, at 4.7%. Hemköp delivered another strong quarter. Once again, the chain gained market share. Retail sales grew by 7%, broadly in line with the second quarter. Higher volumes drove that growth, with customer traffic increasing. A higher average ticket also contributed. Deflation held back sales growth, but like-for-like growth remained very strong. Operating profit also increased strongly, and the operating margin rose to 5.8%. The main drivers were higher sales volumes, a stable gross margin, and solid cost control. When we acquired Citigos, the ambition was to reach profitability at some point during the second half of 2026. We are now delivering on that ambition. Like-for-like sales growth in the third quarter was positive and improved from the second quarter. The chain also demonstrated profitability with a positive trend in both earnings and margin. The improvement was mainly driven by structural measures and work to make operations more efficient. As part of that work, CityGross closed its store in Helsingborg in mid-August, its fifth store closure so far. But the location will be converted to Willys this autumn. Closing underperforming stores helps build a stronger core of CityGross, and lays the foundation for profitable growth. Snub growth sales were unchanged from the same quarter last year, but overall and on a like-for-like basis. Deflation held back sales growth. The restaurant market grow during the quarter with snub growth sales unchanged. its market share declined. Earnings were lower than last year, market investments reduced the gross margin, and volume growth did not fully offset that impact. The operating margin was also lower at 5.1%. During the quarter, WE APPOINTED A NEW MANAGING DIRECTOR FOR SNAVGROSS. ROBERT STEKOWICZ WILL ASSUME THE ROLE ON THE FIRST OF AUGUST NEXT YEAR AT THE LATEST. DAGAB DELIVERED RESILIENT EARNINGS IN THE THIRD QUARTER. NET SALES INCREASED BY APPROXIMATELY 2%. As in our retail chains, growth was driven by higher volumes, mainly to Dagab's food retail customers, and particularly to Exfood's own concepts. Operating profit and margin were both unchanged year on year. Improved productivity in logistics support earnings. At the same time, deflation and market investments weighed on earnings, as did the higher fuel costs mentioned earlier. So that concludes the review of our operating segments. Now let's turn to the financial development. Cash flow for the quarter was broadly in line with last year. For the year to date, however, cash flow was weaker, mainly due to weaker operating cash flow. And as a reminder, the VAT cut had a negative impact on cash flow through networking capital, mainly due to lower accounts payable. The cash outflow from investing activities was somewhat higher than last year, and I will come back to that in a moment. Loan replacements affected cash flow from financing activities in the third quarter. For the year to date, however, that effect was offset by new borrowing. At the end of the quarter, we utilized 3 billion SEK of our credit facilities. Utilization was somewhat higher than in the second quarter, partly because the second installment of the dividend was paid in September. Our strong financial position gives us flexibility to make the right long-term business decisions. Our gearing remains low, excluding the accounting effects of IFRS 16. Net debt divided by EBITDA was 0.6 at the end of the third quarter, including IFRS 16. It was 2.1. Our target is an equity ratio of at least 20% at year end. The level at the end of the third quarter was well in line with that target. And we continue to invest in the future. As I mentioned, investments year to date were higher than last year, driven by automation for our new logistics center in Kungsbacka and investments in our store base. So far this year, we have established eight new Groupon stores, slightly more than last year. Using capital efficiently and managing working capital are important parts of our business and financial strategy. As I mentioned, the VAT cut has had a negative impact this year. You can see that in the rolling 12-month figure. Even so, networking capital remains at a solid level, at minus 2.7% of sales. Capital employed has increased in recent years, mainly due to the acquisition of Bergendals Food and Citigos, as well as investments in logistics. It increased somewhat in the third quarter, mainly due to the dividend payment. Return on capital employed was almost 16%, slightly higher than at year end, supported by the positive development in earnings. And let's then turn to the full year outlook. We are revising a few elements this quarter. We expect capital expenditure of 2 to 2.1 billion SEK, somewhat below our previous outlook. There have been some delays in the detailed planning for our new logistics center in Kungsbacka. As a result, we are moving the remaining automation investment plan for this year into next year. We will still expect operation and ramp up at Kungsbacka to begin in 2030. At this stage, however, we cannot rule out some delay. We are also postponing some structural costs in Citygross that affect comparability. Our outlook for new store establishments is unchanged. Taken together, the revisions of our outlook mainly concern timing. Some plan investments and structural costs will come later. And then, Simon, I hand over to you again.