SOK CORPORATION. Interim Report 1 January 30 June 2009

Transcription

1 SOK CORPORATION Interim Report 1 January 30 June

2 DEVELOPMENT OF THE ECONOMIC ENVIRONMENT The total production of the global economy will decrease this year, and the recession is the worst since the Second World War. The economic outlook weakened at an unparalleled pace after the international financial crisis peaked last autumn. The financial market crisis, global adjustment of production to the weakening demand, and the collapse of the real estate market happened nearly simultaneously in many countries. The weakening of the economy has been particularly serious in those developed industrial countries in which export makes up of a large portion of the national product. The gross national product of Finland decreased by 6.1 per cent in the first quarter of 2009, compared to last year. The decrease was larger than on average in the eurozone. The most significant factor in the weakening of the Finnish national economy was the sharp decline in exports: the export volume decreased by 25.5 per cent in the first quarter of the year. Decreasing industrial production has resulted in reduced investments and growing unemployment. Due to weakened employment, the volume of private consumption also decreased by 3.7 per cent from the previous year. Consumer confidence weakened significantly at the end of last year due to the negative news regarding the economy and employment. The confidence indicator fell towards the negative as it does during recession years. By the end of June, consumer confidence had, however, returned almost to last year s level. Consumers trust in their capability to consume has, in particular, been supported by the significantly declining interest rates. Consumer prices increased sharply last year, by 4.1 per cent. The change in the economic situation has halted the increase of prices. In June, the annual change of consumer prices fell to -0.1 per cent. The average inflation in the eurozone was also on minus by the same percentage in June. The weak economic situation and nonexistent inflation will maintain the low interest rates. The value of retail sales, excluding the automotive trade, decreased by 2.6 per cent by the end of May, according to the preliminary information from Statistics Finland. Viewed by business area, the variation in the development of sales was extensive. By the end of April, the value of grocery sales grew by 3.4 per cent. Department store business saw an increase of 2.2 per cent. The development of sales was clearly negative in many business areas: hardware store sales fell by 15.3 per cent, and furniture sales saw a decrease of 10.2 percent. Sales of household appliances and consumer electronics decreased by 19.3 per cent. The significant decrease in fuel retail, 16.2 percent, is attributable to the decreased prices. The sales volume only decreased by 0.4 per cent. A clear exception to the general trend in consumer goods sales were the sales of sporting goods which was up 4.8 per cent. Optical retail sales also grew during the first four months of the year. The value of motor vehicle sales decreased by 22.5 per cent by the end of April. The registrations of new passenger cars decreased by nearly 41 per cent by the end of June. In agricultural trade, farmers have bought and used only the necessary minimum amount of inputs due to the low price of grain. Machinery sales are also slow, and a large number of preowned and new machines remain in the inventory. The garden supply trade has managed well despite the economic situation, with sales better than the industry average. In the hotel and restaurant business, demand took a clear downturn at the beginning of the year. In addition to the economic uncertainty felt by consumers and the weakened employment situation, the decrease in demand was impacted by the slowdown of tourism to Finland. The value of hotel accommodation sales decreased by 7.5 per cent during the first quarter. The value of sales in off-licence restaurants decreased by about 5 per cent. Near-term outlook The economic situation continues to be very uncertain. Generally, it is believed that we are beginning to reach the lowest point of the recession. Many signs indicate that the overall economic situation is potentially starting to turn around. Stimulation of the economy is forecast to start in the markets of the USA and China. These markets will have a delayed impact in the eurozone. In Finland, the employment situation is expected to weaken further, and it is estimated that the peak of unemployment will not be reached until next year; thus, the near-term outlook of the real economy is rather gloomy. This is also reflected in retail and services in which the near-term outlook is weak. S Group business development 1 January 30 June 2009 The S Group comprises the cooperative enterprises and SOK with its subsidiaries. S Group s retail sales in January June totalled EUR 5,704 million, with a decrease of 1.3 per cent compared to the previous year. Retail sales by business area ± % prev. year S-Markets 1, Prisma hypermarkets* 1, Sale and Alepa stores Other supermarket trade Supermarket Trade total* 3, Service Station Stores and Fuel Trade Department Stores and Speciality Stores Tourism and Hospitality Business* Automotive Trade and Accessories Agricultural Trade Other S Group total* 5, * Including retail sales in the neighbouring countries 2

3 At the end of June, S Group had 1,591 locations whereas the number for the corresponding period last year was 1,556. On 30 June 2009, the number of regional cooperative enterprises was 22 and the number of local cooperative enterprises was 10. Bonus sales by the S Group companies amounted to EUR 3,862 million in the first half of the year, showing an increase of 5 per cent compared to the previous year. Bonus sales accounted for 67.7 per cent (65.0%) of the entire S Group s sales. Customer-owners were paid a total of EUR million in bonuses, an increase of EUR 3.9 million (2.7%) on the previous year. In January June, 47,110 new members joined the cooperative enterprises belonging to the bonus system. The total membership was 1,806,045 at the end of June. OPERATIONS OF SOK CORPORATION 1 JANUARY 30 JUNE 2009 SOK s operations SOK is the parent company of SOK Corporation. In accordance with its statutes, SOK acts as the central organisation of the S Group, promoting and developing the operations of the cooperative enterprises and other organisations belonging to the S Group, and managing and supervising the Group s overall resources for maximum efficiency, while also monitoring the operations and seeing to the interests of the S Group and its different segments. SOK is in charge of the S Group s strategic management. Its tasks are to provide the S Group companies with services in chain management, customer-ownership and marketing as well as other group and corporate services and development activities relating to these services and other activities of the S Group. Services central to the S Group operations also include procurement, rental services, and assortment and invoicing services for goods delivered directly from manufacturers to the chain units. Through its nationwide and regional subsidiaries, SOK offers a wide spectrum of services to its customer-owners in accordance with the decisions made in the S Group. Furthermore, through its subsidiaries SOK engages in supermarket trade and hotel business in both the Baltic area and St. Petersburg. Changes in the Group structure Changes during the report period Business acquisitions, establishments and reorganisations In January, SOK bought the entire stock of Kiinteistöyhtiö Autokiinteistöt Oy from Länsiauto Oy. The company s business area is to own and manage a retail and repair shop facility in Hämeenlinna. In February, North European Oil Trade Oy bought St1 Varastot Oy (name changed to Neot Varastot Oy) in Pori and the business operations of the St1 Oy oil terminal in Vaasa. In the acquisitions, the St1 oil terminal Tahkoluoto in Pori and one in Vaasa and their personnel were transferred to North European Oil Trade Oy s ownership. OOO Real Estate 1 bought the remaining 50 per cent of the shares of OOO Karelia in February. SOK established a Kiinteistö Oy Liminka terminal to be used as Inex Partners Oy s Northern Finland refrigeration terminal in March. In April, SOK established a wind power company, Tuuliwatti Oy, in collaboration with St1 Oy. Both own 50 per cent of the newly-founded company. Business sales and discontinued operations The business operations of Tapiolan Sokos Oy were sold to the Helsinki Cooperative Society Elanto in January. Kiinteistö Oy Mikkelin Maaherrankatu 13 was sold to Cooperative Society Suur-Savo in June. Changes after the close of the report period S-Bank Ltd. organised a share issue aimed at the cooperative enterprises on 15 May 30 June As a result of the issue, SOK s ownership in S-Bank decreased to 50 per cent. S-Bank Ltd. is SOK s associated company as of 1 July SOK will merge its grocery and consumer goods procurement companies Inex Partners Oy and Intrade Partners Oy in the spring of The goal is to change the operational model of the S Group to streamline the division of work between the chain management and the procurement companies. The chain management will concentrate on developing and managing concepts, analysing demand and steering sales. The procurement companies will focus on transforming concept selections into products and procuring products. Revenue SOK Corporation s operations are divided into a Retail and Wholesale segment and a Banking segment in accordance with operational monitoring. The Retail and Wholesale Business is further divided into segments by business area. The information for the Retail and Wholesale Business comprises all operations except those of Banking. Banking operations are presented in the Interim Report as operations held for sale in accordance with IFRS 5. The revenue from the Retail and Wholesale Business for the period of 1 January 30 June 2009 was EUR 4,201 million, down by 4.0 per cent from the previous year. The decrease of EUR 175 million in revenue is mainly due to decrease in revenue in Automotive and Accessories Trade, Agricultural Trade and Fuel Trade resulting from reduced fuel prices. International operations accounted for 2.2 per cent of the Retail and Wholesale Business revenue, or EUR 94 million. The revenue from Banking was EUR 23 million (EUR 12 million). 3

4 SOK Corporation s operating revenue by segment ± previous 1 Jan 30 June 1 Jan 30 June year % Supermarket Trade Tourism and Hospitality Business Automotive Trade and Accessories Agricultural Trade Procurement Services Business Elimination of internal items for the Retail and Wholesale Business 1) Revenue from the Retail and Wholesale Business 2) Revenue from Banking Elimination of items between the Retail and Wholesale Business and Banking SOK Corporation total ) The eliminations include the eliminations of business transactions between segments in the Retail and Wholesale Business. The eliminations between the segments include EUR 1,798 million of the Corporation s internal EDI invoicing (EUR 1,751 million). 2) The operative revenue of the Retail and Wholesale Business differs from the revenue in the Profit and Loss Statement of the Group s Retail and Wholesale Business by EUR 3 million due to the eliminations between the Retail and Wholesale Business and Banking. Revenue of the Retail and Wholesale Business Supermarket Trade The Supermarket Trade includes the supermarket trade conducted in the Baltic area as well as in St. Petersburg. The revenue of the Supermarket Trade grew by 6.7 per cent from the previous year. Compared to the previous year, new supermarkets were established in St. Petersburg and Riga. Investments in foreign operations continue with the opening of the first Lithuanian Prisma hypermarket in Vilnius in August Tourism and Hospitality Business The revenue of Sokotel Oy, engaged in the Tourism and Hospitality Business in Finland, decreased by 6.1 per cent from the corresponding period last year. This development was attributable to the rapid deterioration of the overall economic situation and the temporary closing of Sokos Hotel Tammer due to renovations, as well as reduced returns from services as the chain management operations of sales and marketing were transferred to SOK as of 1 January The economic outlook of the entire line of business in Finland is gloomy, and according to MaRa ry, the tourism and restaurant services association, strong decline in demand will continue during the latter half of the year as well. Revenue of AS Sokotel, engaged in hotel business in Tallinn, decreased from last year due to the tightened market and competitive situation. Revenue of OOO Sokotel, engaged in hotel business in St. Petersburg, grew compared to last year as a result of the establishment of new hotels. Automotive Trade and Accessories SOK Corporation s revenue from the Automotive and Accessories Trade decreased by 33.4 per cent from the previous year, which reflects the overall market situation in the automotive trade. Compared to the previous year, decrease in revenue is also attributed to a taxation reform that took effect in the beginning of April, changing the revenue entry practice so that vehicle tax became a passage through item no longer part of revenue. The total market of new passenger cars in January June was 52,067 vehicles, showing a decrease of 40.9 per cent compared to the previous year. The sales of Peugeot passenger cars declined by 44.3 per cent, or slightly more than the decline in the total market, and the market share of Peugeot passenger cars decreased from 4.1 per cent to 3.9 per cent. The sales of Ford passenger cars declined less than the decline in the total market, and the market share grew from 6.7 per cent last year to 8.5 per cent. The total market of vans was 5,234, showing a decline of 42.1 per cent compared to the previous year. Demand for trade-in cars was better than that of new cars, with a decrease of approximately 20 per cent from the previous year. Agricultural Trade Revenue of the Agricultural Trade decreased by 18.7 per cent. The decline was due to the weakened demand in hardware and machinery trade. The development was also attributable to the decline in the market prices of grain. Procurement The Procurement Business comprises the procurement and logistics services for groceries and speciality items by Inex Partners Oy, the procurement and logistic services for consumer goods by Intrade Partners Oy and fuel procurement by the North European Oil Trade Oy procurement company. Inex Partners Oy s revenue in January June was EUR 1,049.7 million. The comparable revenue was 9 per cent higher than at the beginning of 2008 and better than the planned level. The increase in Inex Partners Oy s revenue was mainly due to the favourable development of the sales of refined foodstuffs and fresh products. 4

5 The revenue of Intrade Partners Oy totalled EUR million, which shows an increase of 8.2 per cent compared to the previous year but is smaller than planned. The development of revenue was particularly good in the ABC chain (+25%). Volume was also significantly increased by the expansion of the Kodin Terra chain. Meira Nova Oy s revenue was EUR million, showing an increase of 9.2 per cent compared to the previous year and exceeding the planned level. Of the customer groups, the ABC chain showed favourable growth in the first half of the year. The share of the S Group in total sales was 42.6 per cent, an increase of 14.2 per cent compared to the previous year. Revenue from the fuel trade of the procurement company North European Oil Trade Oy decreased by 22.6 per cent from the previous year due to the reduced prices of oil products. Services Business The Services Business includes the EDI invoicing of the cooperative enterprises goods procurement as well as the revenue from services produced by SOK for the S Group s units. EDI invoicing amounted to EUR 2,865 million. It showed an increase of 3.5 per cent compared to the previous year. Revenue from Banking (operations held for sale) As a result of the share issue aimed at the cooperative enterprises by S-Bank Ltd, SOK s ownership in S-Bank decreased to 50 per cent. Due to this, the Banking operations are presented in the SOK Corporation s Interim Report as operations held for sale in accordance with the requirements of the IFRS standards (IFRS 5). During the period under review, the revenue from the Banking operations was EUR 23 million, an increase of 84.9 per cent compared to the previous year. EUR 20.5 million of revenue consisted of interest margin. Interest income was primarily generated by investments in financial and capital markets and interests expenses from interest paid to customers on deposits. The favourable development of the interest margin was most of all impacted by the strong growth in the balance sheet. The share of net commission and fee income primarily generated by the card business in the Banking revenue was EUR 2.0 million. In addition to the net interest income, net commission and fee income, the Banking operations revenue contains the administrative service income of the Banking operations. At the end of June, the Banking operations employed a total of 184 people. Financial performance SOK Corporation s result before taxes was EUR 5.0 million (EUR 12.6 million). The result of the continuing operations before taxes was EUR -0.5 million (EUR 14.1 million). Valuations in accordance with the Finnish accounting legislation have been applied in the calculation of SOK Corporation s operational result. SOK Corporation s operational result by segment 1 Jan 30 June 1 Jan 30 June Supermarket Trade Tourism and Hospitality Business Automotive Trade and Accessories Agricultural Trade Procurement Services Business Elimination of internal items for the Retail and Wholesale Business 1) Operational result from the Retail and Wholesale Business Operational result from Banking SOK Corporation total ) The eliminations include the eliminations of business transactions between segments. SOK Corporation s operational result before taxes, EUR +1.7 million, is reconciled with SOK Corporation s results before taxes, EUR +5.0 million. Items not included in the operational result consist, among other things, of capital gains and losses, other operating income and expenses, and impairment losses. In January June 2009, capital gains and losses amounted to EUR 4.7 million, other operating income amounted to EUR 0.4 million and other items EUR -1.7 million. Operational result from the Retail and Wholesale Business Supermarket Trade The Supermarket Trade includes the supermarket trade conducted in the Baltic area as well as in St. Petersburg. The operational result of the Supermarket Trade was lower than the previous year due to the severe economic recession and the startup expenses incurred by the new units in St. Petersburg, Riga and Vilnius. Tourism and Hospitality Business The operational result of Sokotel Oy, which engages in the Tourism and Hospitality Business in Finland, weakened compared to the corresponding period last year. The company has launched significant development and savings measures in order to improve and safeguard the result. The operational result of AS Sokotel, engaging in hotel business in Tallinn, decreased compared to the corresponding period last year due to the reduced revenue. The recession in the Estonian economy impacts the hotel business in particular. The operational result of OOO Sokotel, engaging in the hotel business in St. Petersburg, was weaker than last year due to both the startup 5

6 expenses of the new unit and the slowing down of the travel and tourism market in St. Petersburg, particularly in terms of business travellers. Automotive Trade and Accessories The operational result of the Automotive Trade and Accessories was significantly weaker during the first half of the year compared to the previous year primarily due to the weakened result experienced in imports. The weak result was affected by the low gross margin due to the decrease in revenue. The development of retail that was launched last year continued with the consolidation of the outlets in Tampere and with the move of the Hämeenlinna outlet to new premises. Thanks to the savings measures implemented in Automotive Trade and Accessories fixed costs were reduced significantly from the year before. In spite of this, the operational result for the financial period is forecast to be weaker than the year before due to the unfavourable overall market situation. Agricultural Trade As a result of the decreased revenue, the operational result of Agricultural Trade was slightly weaker than the year before. Procurement The operational results of Inex Partners Oy and Intrade Partners Oy for the beginning of the year were both better than planned and exceeded the results of the previous year. This is due to effective cost management. Meira Nova Oy s operational result was clearly better than planned and exceeded the result of the previous year. The favourable result development is attributable to the good development of sales and the effective management of fixed costs and capital costs. The operational result of the fuel procurement company North European Oil Trade Oy increased slightly compared to the previous year as a result of favourable business development. The operational result of the company was at the planned level. Services Business The operational result of the Services Business was better than the year before and better than planned, which is partly attributable to the powerful programme to improve the operations and create cost savings, launched as a result of the weak economic situation. Operational result of Banking (operations held for sale) The operational result of Banking, EUR +4.0 million, was significantly better than planned and better than the previous year. The good result is attributable to the powerful growth in revenue and the effective management of fixed costs. Investments and divestments SOK Corporation s investments amounted to EUR 57.4 million in the first half of the year (EUR 39.6 million). The most significant investments were the acquisitions of oil terminals in Pori and Vaasa, as well as investments into the Supermarket trade and Tourism and Hospitality Business in the St. Petersburg region, in particular. The divestments performed during the period under review amounted to EUR 10.4 million (EUR 5.9 million) of which the majority were real estate divestments. Financing Retail and Wholesale Business SOK Corporation s liquidity remained good throughout the year. The Retail and Wholesale Business s liquid cash assets and money market investments amounted to EUR million at the end of June (31 December 2008: EUR million). In addition, the Retail and Wholesale Business had EUR 260 million of undrawn binding credit facilities, of which EUR 220 were long-term. The interest-bearing net liabilities of the Retail and Wholesale Business amounted to EUR million (EUR million). The value of gearing in the Retail and Wholesale Business weakened to 67.1 per cent from 35.4 per cent at the turn of the year. The equity ratio of Retail and Wholesale was 26.4 per cent (27.3 per cent). SOK Corporation s equity ratio was 12.9 per cent (13.4 per cent). Banking (operations held for sale) S-Bank s equity grew by EUR 80 million during the period under review as a result of the directed share issue that brought the regional cooperative enterprises and one local cooperative enterprise as owners of the bank. The increase in equity was entered in the register on 13 July Expanding the ownership base was a part of a longer-term plan that was made for the bank when it was established. The directed share issue increased the bank s capital adequacy ratio to 21.3 per cent at the end of the period under review (10.3 per cent). Because only equity paid at the end of the review period can be included in own funds when calculating capital adequacy in accordance with the credit institution operations, a share of EUR 37 million of the share issue has been included in the capital adequacy ratio. Deposits to the S-Bank continued to increase at the beginning of the year but growth slowed down from the previous year. Deposits by private customers increased by EUR 125 million during the period under review, amounting to a total of EUR 1,901 million at the end of the period (31 December 2008: EUR 1,776 million). EUR 1,508 million of this amount was on sight deposit accounts (EUR 1,150 million) and EUR 393 million (EUR 626 million) on fixed-term accounts. Corporate deposits amounted to EUR 77 million (EUR 168 million). At the end of the review period, the bank s total deposits totalled EUR 1,978 million (EUR 1,945 million). 6

7 S-Bank invested its capital mainly in the money and capital markets. At the end of the review period, debt securities amounted to a total of EUR 1,871 million (EUR 1,766 million) of which debt securities eligible for refinancing with central banks totalled EUR 1,523 million (EUR 1,145 million). Credit card receivables as well as account and working capital credit facilities grew steadily during the review period and totalled EUR 135 million at the end of the period (EUR 100 million). Central bank receivables formed an item totalling EUR 112 million (EUR 161 million). Personnel SOK Corporation s average number of personnel, converted to full-time equivalents, was 8,728 people during the review period. In the end of June, SOK Corporation s number of personnel was 9,978, of whom 1,211 (12.1 per cent) were employed by SOK and 8,767 (87.9 per cent) by the subsidiaries. At the end of the period under review, 1,837 people (18.4 per cent) of the Corporation s personnel worked abroad. Compared to the end of 2008, the number of personnel grew by 632 people (6.8 per cent). SOK Corporation s number of personnel increased during the period under review mainly by temporary summertime employees who were hired in the spring. Compared to the corresponding period the year before, the number of personnel decreased by 389 (3.8 per cent), attributable partly by the transfer of 105 people to Helsinki Cooperative Society Elanto in connection with the sale of the business operations of Tapiolan Sokos on 1 January Changes in the SOK management Harri Koponen, Managing Director of the Turku Cooperative Enterprise, started as a new member of the SOK Executive Board on 1 January Veli-Matti Puutio, Managing Director of the Arina Cooperative Enterprise, resigned from the SOK Executive Board as of the beginning of Near-term risks and uncertainties SOK Corporation applies a risk management policy approved by the Executive Board, which defines the arrangement and process of the Corporation s risk management. The goal of risk management is to support the strategic and operative business objectives. Risk management within the SOK Corporation is comprehensive and integrated in management and operations planning. Risk management perspective is also included in significant projects and investments. During the first half of the year, special attention was paid to risks and risk management in the Baltic area and Russia. Significant risks facing the objectives set for operations in the nearby areas were identified and assessed, and plans were drawn up to manage the risks. The risk level of the business operations in Russia is continually monitored and reported to the SOK Executive Board on a quarterly basis. During the first half of the year, no significant changes were observed in the country-specific risk of Russia, but risks relating to business operations increased compared to the turn of the year. A new risk-bearing calculation model is being defined as part of enhancing the reporting of risk management. In addition, implementation of a new insurance programme was in focus during the beginning of the year. The near-term risks and uncertainties are related to the continuation of the economic recession and to its impacts on SOK Corporation s business operations. Decreased demand caused by recession will affect the result of several business areas of the Corporation both in Finland and in nearby areas during the latter half of the year as well. This is forecast to happen in the business areas of Automotive Trade and Accessories, Tourism and Hospitality Business, Supermarket Trade and Agricultural Trade. The spreading of the A(H1N1) influenza virus in Finland as predicted by the authorities is also among the risks. SOK Corporation has plans in place to prepare for a pandemic. Outlook for the remainder of 2009 The overall economic situation is not expected to improve fundamentally during the latter half of the year. Therefore, it is estimated that the revenue development in the first half of the year was weaker than planned and weaker than the year before, and will not improve noticeably during the remainder of the year. In the operations abroad, the profit development of the St. Petersburg Tourism and Hospitality Business in particular was weaker than expected during the first half of the year, and is not expected to improve noticeably during the remainder of the year. The result of the Supermarket Trade is burdened by the extensive expansion of business operations in St. Petersburg and the weak economic situation in the Baltic countries. In Finland, the weak situation in the Automotive Trade and Tourism and Hospitality Business is likely to continue. Therefore, it is estimated that the operational result of the Corporation for the entire year will be weaker than the previous year. Helsinki, 20 August 2009 SUOMEN OSUUSKAUPPOJEN KESKUSKUNTA Executive Board 7

8 INTERIM FINANCIAL STATEMENTS Consolidated income statement, IFRS Continuing operations: Revenue Other operating income Materials and services Employee benefit expenses Depreciation and impairment losses Other operating expenses Share of results of associated companies (+/-) Operating profit Financial income and expenses (+/-) Share of results of associated companies (+/-) Profit before taxes Income taxes (+/-) Result for the period from continuing operations Result for the period from operations held for sale Result for the period Attributable to: Equity holders of the parent company Minority interest Total comprehensive income Profit for the period Other comprehensive income: Exchange differences on translating foreign operations Available-for-sale financial assets Fair value changes during the period Income tax relating to available-for-sale financial assets Cash flow hedges Fair value changes during the period Income tax relating to cash flow hedges Other comprehensive income for the period, net of tax Total comprehensive income for the period Total comprehensive income for the period attributable to: Equity holders of the parent company Minority interest

9 Consolidated balance sheet, IFRS ASSETS Non-current assets Property, plant and equipment Investment properties Intangible assets Investments in associated companies Non-current financial assets Deferred tax assets Non-current assets, total Current assets Inventories Trade receivables and other current non-interest-bearing receivables Current interest-bearing receivables Short-term investments Cash and cash equivalents Current assets, total Assets held for sale Assets, total EQUITY AND LIABILITIES Equity Cooperative capital Restricted reserves Retained earnings Equity attributable to the equity holders of the parent company, total Minority interest Equity, total Non-current liabilities Supplementary cooperative capital Non-current interest-bearing liabilities Non-current non-interest-bearing liabilities Provisions Deferred tax liabilities Non-current liabilities, total Current liabilities Current interest-bearing liabilities Current non-interest-bearing liabilities Trade payables Provisions Tax liabilities for the financial year Current liabilities, total Liabilities held for sale Equity and liabilities, total

10 Consolidated cash flow statement, IFRS BUSINESS OPERATIONS Operating profit from continuing operations Operating profit from operations held for sale Adjustments to operating profit Change in working capital Cash flow from business operations before financing and taxes Increase (-) / decrease (+) in current receivables Change in current investments Interest paid and other financial expenses Interest received and other financial income Dividends received from business operations Income taxes paid Cash flow from business operations INVESTMENTS Acquired shares in subsidiaries Acquired shares in associated companies Acquisition of other fixed assets Sale of shares in subsidiaries Sale of other fixed assets Change in other long-term investments Liquid assets of divested and acquired subsidiaries Dividends received from investments Cash flow from investments FINANCING Increase (+) / decrease (-) in long-term loans Increase (+) / decrease (-) in short-term liabilities Changes in bonds and notes and mutual fund shares Decrease in cooperative capital Interest paid on the cooperative capital Other decrease in equity Cash flow from financing Increase (+) / decrease (-) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Foreign exchange rate effect on cash and cash equivalents Increase / decrease in cash and cash equivalents Cash and cash equivalents at the end of the year Adjustments to operating profit Gains (-) and losses (+) from the sale of fixed assets Depreciation and impairment losses Regrouping of interests in banking Other non-cash income and expenses Change in working capital Change in trade and other receivables Change in inventories Change in non-interest-bearing liabilities Only short-term, under three month debt securities have been categorised as cash and cash equivalents in the consolidated cash flow statement. The cash flow statement of 2008 has been adjusted to be comparable. 10

11 Consolidated statement of changes in equity, IFRS Cooperative capital Equity attributable to shareholders of the parent company Fair value reserve Reserve find Supervisory Board s Disposal fund Translation differences Retained earnings Total Minority interest Equity, total Equity 1 Jan 2008 Total comprehensive income Interest on cooperative capital and supplementary cooperative capital Other changes Correction of prior period error 1) Change of minority interest 30 June Jan 2009 Total comprehensive income Interest on cooperative capital Other changes Change of minority interest 30 June ) The amount recognised directly in equity as a correction of an error from the previous financial year, a total of EUR 4.4 million, is due to a tax complaint resolved in SOK s favour. 11

12 Accounting policies applied to the income statement and balance sheet This Interim Report has been prepared in compliance with the financial accounting recognition and measurement principles of IFRS standards but not all the requirements of IAS 34 (Interim Financial Reporting) have been observed in preparing it. The Interim Report complies with the same accounting policies and calculation methods as the latest Financial Statements, however the Corporation has, as of 1 January 2009, implemented the amendments to standards and interpretations published by IASB mentioned below. All figures in the tables of the Interim Report have been rounded off, which is why the added amount of individual figures may differ from the sum presented. The key ratios have been calculated with exact values. S-Bank Ltd. organised a share issue aimed at the cooperative enterprises on 15 May 30 June As a result of the issue, SOK s ownership in S-Bank decreased from 100 per cent to 50 per cent. S-Bank Ltd. and its limited subsidiary S-Asiakaspalvelu Oy have been presented in the Interim Report as operations held for sale in accordance with IFRS 5. As of 1 July 2009, S-Bank Ltd. and S-Asiakaspalvelu Oy were included in the Corporation as an associated company (in the Interim Report, as a subsidiary). This Interim Report is unaudited. Amendments to standards and interpretations published by IASB taking effect as of 1 January 2009: The revised IAS 1 Presentation of Financial Statements standard changed the way the income statement and the consolidated statement of changes in equity are presented. In accordance with the amendment to the IAS 23 Borrowing Costs standard, the acquisition cost of a qualifying asset requiring a substantial period of time to get ready also includes costs of borrowing as of 1 January Implementation of the standard did not have a significant effect on the Corporation s Interim Report. Implementation of the interpretation of IFRIC 13 Customer Loyalty Programmes did not have an effect on the Corporation s figures. 12

13 Segment information SOK Corporation applies the IFRS 8 standard in its segment reporting. For reporting to top management, SOK Corporation s operations are divided into seven business segments. The segments are based on business areas. In calculating the operational result, valuations in accordance with Finnish accounting legislation are used. In SOK Corporation s management reporting, assets are not allocated or reported on, except for working capital. The Banking segment has been classified as operations held for sale. Supermarket Trade Tourism and Hospitality Business Automotive Trade and Accessories Agricultural Trade Procurement Services Business Elimination of internal items in the Retail and Wholesale Business Retail and Wholesale Business, total Banking Elimination of items between the Retail and Wholesale Business and Banking Management Reporting, total Revenue Operational result Investments Divestments Working capital Reconciliation of revenue from the Retail and Wholesale Business Management accounting revenue to be reported Eliminations between the Retail and Wholesale Business and Banking IFRS revenue from the Retail and Wholesale Business Reconciliation of the result Operational result of the segments to be reported Items excluded from the operational result within SOK Corporation: Gains and losses on the sale of property, plant and equipment Other operating income and expenses Increase in compulsory provisions Valuation gains and losses on derivatives, and other items Result for the period from operations held for sale Other adjustments Profit before taxes for the period from continuing operations IFRS Additional data at SOK Corporation level, external income Finland Foreign Revenue, total Supermarket Trade Tourism and Hospitality Business Automotive Trade and Accessories Agricultural Trade Procurement Services Business Retail and Wholesale Business, total Banking Revenue, total

14 Segment information Supermarket Trade Tourism and Hospitality Business Automotive Trade and Accessories Agricultural Trade Procurement Services Business Elimination of internal items in the Retail and Wholesale Business Retail and Wholesale Business, total Banking Elimination of items between the Retail and Wholesale Business and Banking Management Reporting, total Revenue Operational result Investments Divestments Working capital Reconciliation of revenue from the Retail and Wholesale Business Management accounting revenue to be reported Eliminations between the Retail and Wholesale Business and Banking IFRS revenue from the Retail and Wholesale Business Reconciliation of the result Operational result of the segments to be reported Items excluded from the operational result within SOK Corporation: Share of the results of associated companies Gains and losses on the sale of property, plant and equipment Other operating income and expenses Decrease in compulsory provisions Valuation gains and losses on derivatives, and other items Result for the period from operations held for sale Other adjustments Profit before taxes for the period from continuing operations IFRS Additional data at SOK Corporation level, external income Finland Foreign Revenue, total Supermarket Trade Department Store and Speciality Store Trade Tourism and Hospitality Business Automotive Trade and Accessories Agricultural Trade Procurement Services Business Suomen Spar Oy Retail and Wholesale Business, total Banking Revenue, total

15 Operations held for sale In this interim report S-Bank Ltd. and its subsidiary S-Asiakaspalvelu Oy were classified as operations held for sale. The result of operations held for sale included in the consolidated income statement was following: Revenue Other operating income Materials and services Employee benefits expenses Depreciation and impairment losses Other operating expenses Share of results of associated companies (+/-) Operating profit Financial income and expenses (+/-) Share of results of associated companies (+/-) Result before taxes Income taxes (+/-) Result for the period from operations held for sale Balance sheet of operations held for sale: Assets Tangible and intangible assets Shares in associates Deferred tax assets Trade receivables and other current non-interest-bearing receivables Current interest-bearing receivables Short-term investments Cash and cash equivalents Assets, total Liabilities Non-current interest-bearing liabilities Deferred tax liabilities Current interest-bearing liabilities Current non-interest-bearing liabilities Liabilities, total Cash flow Cash flow from business operations Cash flow from investments Cash flow from financing Total Intra-group transactions have been eliminated from the above figures. 15

16 Tangible and Intangible assets Acquisition cost Acquisition cost, 1 Jan 2009 Translation differences From business combination Operations held for sale Increases Decreases Transfers between items Acquisition cost, 30 June 2009 Accumulated depreciation Accumulated depreciation, 1 Jan 2009 Translation differences From business combination Operations held for sale Accumulated depreciation on deducted and transferred items Depreciation for the period Impairment losses Accumulated depreciation, 30 June 2009 Carrying amount, 1 Jan 2009 Carrying amount, 30 June 2009 Acquisition cost Acquisition cost, 1 Jan 2008 From business combination Increases Decreases Transfers between items Acquisition cost, 30 June 2008 Accumulated depreciation Accumulated depreciation, 1 Jan 2008 From business combination Accumulated depreciation on deducted and transferred items Depreciation for the period Impairment losses Accumulated depreciation, 30 June 2008 Carrying amount, 1 Jan 2008 Carrying amount, 30 June 2008 Tangible Investment Intangbile Assets properties Assets

17 Pledges and contingent liabilities Contingent liabilities Change Pledges given and contingent liabilities Liabilities secured by pledges Loans from financial institutions Carrying amount of pledged shares Other liabilities Carrying amount of pledged shares Total Liabilities secured by guarantees Loans from financial institutions Guarantees given Guarantees total Liabilities secured by mortgages Loans from financial institutions Mortgages Mortgages given to securities total General security for liabilities Mortgages Other liabilities Pledges Mortgages Guarantees Total Security given on behalf of others Guarantees for liabilities of associated companies Guarantees for liabilities of cooperative enterprises Guarantees for others liabilities Total Other contingent liabilities Guarantees for liabilities of cooperative enterprises Guarantees for others liabilities Total Other liabilities Letter of credit liabilities Total Operating leases Group as lessee Minimum lease payments on non-cancellable operating leases: In one year In one to five years Over five years Total Change In addition, SOK has given letters of comfort for the guarantees granted by SOK-Takaus Oy. The amount of the letters of comfort is EUR 94.4 million on 30 June 2009 (EUR million on 30 June 2008). 17

18 Key ratios SOK Corporation, continuing operations: Revenue, Operating profit, % of revenue Profit before taxes, % of revenue SOK Corporation: Equity ratio, % Gearing, % Key ratios of retail and wholesale business segment: Equity ratio, % Gearing, % Key ratios of S-Bank: Capital adequacy ratio, % Calculation of key ratios Equity ratio, % = Total equity x 100 % Total assets - advances received Gearing, % = Interest-bearing liabilities - Cash and cash equivalents x 100 % Total equity Capital adequacy ratio, % = Own funds, total x 8 % Minimum own funds requirement, total 18