Interim Report ICA AB

Transcription

1 Interim Report ICA AB January 1 September 30, 2008

2 ICA s Interim Report Stockholm, November 5, 2008 The third quarter produced a further increase in sales but lower operating income Third quarter Net sales for the third quarter amounted to SEK 22,768 million (20,697), an increase of 10.0 percent. Operating income excluding capital gains on property sales for the third quarter amounted to SEK 633 million (736), a decrease of 14.0 percent. Operating income including capital gains for the third quarter amounted to SEK 683 million (899), a decrease of 24.0 percent. Net income for the third quarter amounted to SEK 550 million (736), a decrease of 25.3 percent. Nine-month period Net sales for the nine-month period amounted to SEK 66,832 million (60,187), an increase of 11.0 percent. Operating income excluding capital gains on property sales for the nine-month period amounted to SEK 1,381 million (1,344), an increase of 2.8 percent. Operating income including capital gains for the ninemonth period amounted to SEK 1,602 million (1,840), a decrease of 13.0 percent. Net income for the nine-month period amounted to SEK 1,298 million (1,568), a decrease of 17.2 percent. Key financial ratios July September January - September Full-year % % Net sales 22,768 20, ,832 60, ,326 Operating income ,602 1, ,602 Operating income excluding capital gains 1) ,381 1, ,006 Net income for the period ,298 1, ,166 Total assets 38,476 36,508 37,319 Cash flow from operating activities 1, ,297 2,516 4,169 Operating margin, % Operating margin excluding capital gains 1) Equity/assets ratio, % Return on equity, % 2) Return on capital employed, % 3) ) Operating income excluding capital gains on property sales and impairment losses on fixed assets. 2) Return on equity = Income after tax as a percentage of average equity. The operations of ICA Banken are excluded from both the income statement and balance sheet in the calculation. The return is calculated on a moving 12-month period. 3) Return on capital employed = Income after financial income as a percentage of average capital employed. The operations of ICA Banken are excluded from both the income statement and balance sheet in the calculation. The return is calculated on a moving 12- month period. 2

3 Comment by the CEO In the turbulent economic environment, we remain vigilant about changes to customer and competitor behaviour. The base of ICA Sverige is solid and we are pleased with the development of Rimi Baltic and ICA Banken, but there is still a lot of hard work with the challenges we face in ICA Norge. ICA has decided to introduce a new, more decentralized organization. In order to respond to local conditions ICA must be able to better adapt its and product ranges to the various needs of customers in Sweden, Norway and the Baltic countries. The new organization will also lead to more efficient work processes and provide opportunities for cost reductions. Consolidated net sales rose by 10 percent during the third quarter. Operating income excluding capital gains amounted to SEK 633 million, a decrease of 14 percent compared with the third quarter last year. The decrease is primarily due to the higher operating losses in ICA Norge mainly reflecting the initial impact of the price repositioning and continued high shrinkage. The higher operating losses in ICA Norge are also due to the fact that opened in 2007 and 2008 are not yet operating at a profit. The new pricing strategy was launched during the spring, and we cut prices on 1,000 items. The turnaround work in ICA Norge continues. During the quarter, we have implemented organizational changes to bring focus and experience to the issues we face. In August, Antonio Soares, the former CEO of Rimi Baltic, was appointed the new CEO of ICA Norge. In addition, we have appointed a new CFO and a new head of store operations. An immediate action of the new team was to develop a new concept for Rimi that has already been tested in two pilot with a positive outcome. The new concept will be launched gradually in more Rimi. ICA Sverige s operating income improved slightly during the quarter reflecting increased sales and changes in cost allocation methodology, offset however by a lower non-food result. Rimi Baltic s operating income was also stronger thanks to increased sales and an improved gross margin. ICA Banken improved its operating income during the third quarter mainly due to higher net interest income and net commissions. We continue to focus on our quality work with the goal that ICA will be the best in food quality in Sweden. An important element is the introduction of a common quality standard for all ICA. ICA s proposed quality standard is being drafted in consultation with other food retailers and the Swedish National Food Administration. Last spring we tested personalized discount offerings with ICA s frequent customers in the county of Östergötland with a very positive response. In October, we introduced the offerings to our frequent customers on a nationwide basis in Sweden. This is the first time a company has customized offerings to such a large extent. Consolidated net sales rose by 11 percent during the nine-month period. Operating income excluding capital gains on real estate sales amounted to SEK 1,381 million, an increase of 2.8 percent. The increase is due to improved operating income for ICA Sverige, Rimi Baltic and ICA Banken, partially offset by ICA Norge s operating losses. Operating income including capital gains decreased by 13 percent. Important events during the third quarter In August, Antonio Soares was named the new CEO of ICA Norge. He was most recently CEO of Rimi Baltic. At the same time, Edgar Sesemann has been appointed Deputy CEO of Rimi Baltic and Acting CEO. Important events after the conclusion of the third quarter In connection with the organizational changes announced today, Anders Nyberg has decided to leave ICA and his position as Executive Vice President of ICA AB. Also, ICA Sverige s Chief Operating Officer, Peder Larsson, has decided to leave ICA. In addition to the role as CEO and President of ICA AB, Kenneth Bengtsson will take over as acting CEO of ICA Sverige. At the same time, Mats Holgerson has been appointed COO of ICA AB. ICA s non-food operations will become a separate subsidiary of the Group. Björn Abild has been named the CEO of this company. 3

4 Sales and financial results The third quarter GROUP Consolidated net sales during the third quarter amounted to SEK 22,768 million (20,697), an increase of 10.0 percent. Net sales at fixed exchange rates rose 9.6 percent. Operating income for the third quarter amounted to SEK 683 million (899) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 50 million (163). Operating income excluding these items amounted to SEK 633 million (736). During the third quarter operating income improved for ICA Sverige, Rimi Baltic and ICA Banken, but decreased for ICA Norge and ICA Group Functions. ICA SVERIGE ICA Sverige s net sales increased by 9.4 percent. Operating income amounted to SEK 754 million (727) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 54 million (36). Operating income excluding these items amounted to SEK 700 million (691). The improvement in operating income is due to increased sales and changes in cost allocation methodology, offset however by a lower non-food result. ICA NORGE ICA Norge s net sales increased by 6.2 percent. In local currency the increase was 5.7 percent. The sales increase is due to the consolidation of more in ICA Norge and due to an increase in sales in comparable. The operating deficit amounted to SEK 109 million (120) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 4 million (119). The operating deficit excluding these items was SEK 105 million (1). The operating deficit has increased in connection with the introduction of a price repositioning as well as continued high shrinkage. The increased deficit is also due to the fact that opened in 2007 and 2008 are not yet operating at a profit. RIMI BALTIC Rimi Baltic s net sales increased by 20.1 percent. In local currency the increase was 17.6 percent. Operating income amounted to SEK 89 million (36) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 0 million (8). Higher sales and a better gross margin have lifted operating income. ICA BANKEN ICA Banken s revenues rose by 14.5 percent. Business volume increased by 3.2 percent (2.0) during the third quarter. ICA Banken s operating income improved to SEK 33 million (25). The improvement is due to higher net interest income and net commissions. ICA GROUP FUNCTIONS The operating deficit for ICA Group Functions was SEK 84 million ( 9). The higher deficit is mainly due to a change in the way costs are distributed within the Group. The change positively affected the operating results for ICA Norge and ICA Sverige and negatively affected ICA Group Functions during the third quarter. 4

5 Sales and financial results Nine-month period GROUP Consolidated net sales during the nine-month period amounted to SEK 66,832 million (60,187), an increase of 11.0 percent. Net sales at fixed exchange rates rose 10.1 percent. Operating income for the nine-month period decreased to SEK 1,602 million (1,840) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 221 million (496). Operating income excluding these items increased to SEK 1,381 million (1,344). During the nine-month period, operating income improved for ICA Sverige, Rimi Baltic and ICA Banken, but decreased for ICA Norge and ICA Group Functions. ICA SVERIGE ICA Sverige s net sales increased by 11.1 percent. Operating income amounted to SEK 1,898 million (1,570) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 191 million (191). Operating income excluding these items rose to SEK 1,707 million (1,379). Operating income has improved as the result of higher sales at both the retail and wholesale level as well as an improved gross margin partly due to an August 2007 increase in the logistics fee paid by ICA retailers. Operating income has, however, been offset by a lower non-food result. ICA NORGE ICA Norge s net sales increased by 7.1 percent. In local currency the increase was 4.2 percent. The sales increase is due to the consolidation of more in ICA Norge and due to an increase in sales in comparable. The operating deficit amounted to SEK 311 million (242) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 30 million (304). The operating deficit excluding these items increased to SEK 341 million ( 62). The operating deficit has increased in connection with the introduction of a price repositioning as well as continued high shrinkage. The increased deficit is also due to the fact that opened in 2007 and 2008 are not yet operating at a profit. RIMI BALTIC Rimi Baltic s net sales increased by 18.1 percent. In local currency the increase was 16.0 percent. Operating income amounted to SEK 161 million (29) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 0 million (1). Higher sales and a better gross margin have lifted operating income. ICA BANKEN ICA Banken s revenues rose by 10.9 percent. Business volume increased by 11.1 percent compared with September 30, 2007 and by 7.3 percent since the beginning of the year. ICA Banken s operating income improved to SEK 79 million (59). The improvement is due to higher commission income and better net interest income. The second quarter also included a one-time gain of SEK 17 million on the sale of shares in Master Card as well as IT expenses of SEK 15 million. Operating income also included the cost to produce and replace new debit cards. ICA GROUP FUNCTIONS The operating deficit for ICA Group Functions was SEK 225 million ( 60). The higher deficit is mainly due to a change in the way costs are distributed within the Group, a one-time bonus paid to employees in Sweden and higher pension costs. FINANCIAL POSITION The Group s total assets have increased by SEK 1,157 million to SEK 38,476 million since December 31, Cash flow from operating activities amounted to SEK 3,297 million (2,516) during the nine-month period. The improvement is due to improved working capital, primarily lower accounts receivable, and increased deposits in ICA Banken. Cash flow from investing activities amounted to SEK 1,858 million (102). The year-over-year change is due to fewer property sales. As a consequence, cash flow from financing activities amounted to SEK 904 million ( 2,059). The Group s liquid assets totaled SEK 4,898 million on September 30, 2008 (SEK 4,360 million on January 1, 2008). The equity/assets ratio was 32.1 percent (32.4 percent on January 1, 2008). The Group's net debt excluding ICA Banken was SEK 2,592 million (SEK 2,344 million on January 1, 2008). 5

6 INVESTMENTS Investments during the nine-month period amounted to SEK 1,971 million (2,145) and were distributed according to the table below. Three investments exceeded SEK 50 million: Maxi Kristiansand in Norway, Rimi Hypermarket Kurzemes and Rimi Supermarket Milgravis in Latvia. Investments July September January - September Full-year Retail locations ,637 1,644 2,152 Distribution Investment properties Intangibles Other TOTAL ,971 2,145 2,805 PERSONNEL The Group had an average of 21,781 employees (19,945) during the nine-month period. PARENT COMPANY The Parent Company's net sales during the nine-month period amounted to SEK 670 million (649) with income after net financial items of SEK 740 million (839). Investments during the period amounted to SEK 36 million (63). Cash, bank balances and short-term investments amounted to SEK 5 million (5). TRANSACTIONS WITH RELATED PARTIES No transactions have taken place between ICA and related parties that significantly affect the company's financial position and results of operations. ACCOUNTING PRINCIPLES This interim report is prepared according to IAS 34. The same accounting principles and calculation methods are applied as in the most recent annual report. Readers of the interim report are presumed to have access to the most recent annual report. The interim report primarily contains information on events and changes that have taken place since the most recent annual report was issued and that are of considerable importance to understanding the changes in the Group s financial position and results of operations. No new standards or statements from IASB and IFRIC have entered into force during the period which impact ICA s financial reports. The preparation of the financial reports in accordance with IFRS requires management to make estimates and assumptions that affect the application of the accounting principles and the carrying amounts in the income statement and balance sheet. Estimates and assumptions are based on historical experience and a number of factors that under current circumstances seem reasonable. The result of these estimates and assumptions is then used to determine the carrying amounts of assets and liabilities that otherwise are not clearly indicated by other sources. Actual outcomes may deviate from these estimates and assumptions. 6

7 NEXT REPORTING DAYS The full-year report for January December 2008 will be presented on February 18, The interim report for January March 2009 will be presented on May 6, The interim report for January June 2009 will be presented on August 19, The interim report for January September 2009 will be presented on November 4, Stockholm, November 5, 2008 Kenneth Bengtsson President and CEO, ICA AB REVIEW REPORT Introduction We have reviewed the interim report for ICA AB for the period January 1, 2008 to September 30, The Board of Directors and the CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim financial information based on our review. Focus and scope of the review We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by FAR. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden, RS, and other generally accepted auditing practices in Sweden. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed on the basis of an audit. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim report is not, in all material respects, prepared in accordance with IAS 34 and the Annual Accounts Act for the Group and in accordance with the Annual Accounts Act for the Parent Company. Stockholm, November 5, 2008 Deloitte AB Jan Berntsson Authorized Public Accountant About ICA The ICA Group (ICA AB) is one of the Nordic region s leading retail companies, with around 2,230 of its own and retailer-owned in Sweden, Norway and the Baltic states. The Group includes the retail companies ICA Sverige, ICA Norge and Rimi Baltic. ICA also offers financial services to Swedish customers through ICA Banken. ICA AB is a joint venture 40% owned by Hakon Invest AB and 60% by Royal Ahold N.V. of the Netherlands. According to a shareholder agreement, Royal Ahold and Hakon Invest jointly share a controlling influence over ICA AB. Through Royal Ahold, ICA AB is part of an international retail network. For more information, please visit 7

8 Financial reports for the Group Income statement - Group July September January - September Full-year SEK million Net sales 22,768 20,697 66,832 60,187 82,326 Cost of sales -19,710-17,731-58,001-51,746-70,685 Gross profit 3,058 2,966 8,831 8,441 11,641 Selling and administrative expenses -2,448-2,258-7,533-7,205-9,812 Other operating revenue Share of associated companies net profit Operating income ,602 1,840 2,602 Financial income Financial expenses Income after net financial items ,379 1,611 2,282 Tax Net income for the period ,298 1,568 2,166 Of which attributable to Parent Company's ,304 1,574 2,167 shareholders Of which attributable to minority Net sales by segment - Group July September January - September Full-year SEK million ICA Sverige 14,314 13,081 41,895 37,700 51,438 ICA Norge 5,029 4,739 14,955 13,961 19,095 Rimi Baltic 3,147 2,620 9,138 7,740 10,736 ICA Banken ICA Group Functions ,186 Intra-Group sales Net sales 22,768 20,697 66,832 60,187 82,326 Operating income by segment - Group July September January - September Full-year SEK million ICA Sverige ,898 1,570 2,372 ICA Norge Rimi Baltic ICA Banken ICA Group Functions Total operating income ,602 1,840 2,602 8

9 Financial reports for the Group (cont.) Condensed balance sheet - Group SEK million Sept. 30, 2008 Sept. 30, 2007 Dec. 31, 2007 Intangible fixed assets 3,647 3,573 3,599 Tangible fixed assets 15,349 14,769 14,959 Financial fixed assets 3,822 3,439 3,368 Deferred tax assets Total fixed assets 23,087 21,976 22,202 Inventory 4,076 3,963 3,934 Accounts receivable 6,199 6,193 6,720 Liquid assets 4,898 4,305 4,360 Assets held for sale Total current assets 15,389 14,532 15,117 TOTAL ASSETS 38,476 36,508 37,319 Shareholders equity 12,346 11,451 12,073 Long-term liabilities 5,203 6,703 5,537 Current liabilities 20,927 18,354 19,709 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 38,476 36,508 37,319 Pledged assets Contingent liabilities Condensed statement of cash flows - Group January September January September Full-year SEK million Cash flow from operating activities before change in working capital, excluding taxes paid 2,371 2,297 3,186 Taxes paid Change in working capital 1, ,097 Cash flow from operating activities 3,297 2,516 4,169 Cash flow from investing activities -1, Cash flow from financing activities ,059-3,372 Cash flow for the period Liquid assets at beginning of period 4,360 3,749 3,749 Exchange rate differences in liquid assets Liquid assets at end of period 4,898 4,305 4,360 9

10 Financial reports for the Group (cont.) Change in shareholders equity September 30, Group Attributable to Parent Company s Attributable to minority SEK million shareholders Opening balance January 1, , ,073 Currency translation difference Net income for the period 1, ,298 Total change in net assets excluding transactions with the company s owners 13, ,430 Dividend -1,084-1,084 Closing balance, September 30, , ,346 Total Change in shareholders equity Attributable to Parent Attributable to Total September 30, Group SEK million Company s shareholders minority Opening balance January 1, , ,216 Acquisition of minority 2 2 Currency translation difference Net income for the period 1, ,568 Total change in net assets excluding transactions with the company s owners 12, ,409 Dividend Closing balance, September 30, , ,451 10

11 Financial reports for the Parent Company Income statement Parent Company July September January - September Full-year SEK million Net sales Cost of sales Gross profit Selling and administrative expenses Operating income Result from shares in Group 0 0 1,145 1,156 1,156 companies Other financial income Other financial expenses Income after net financial items Appropriations Income before tax Tax Net income for the period Condensed balance sheet - Parent Company SEK million Sept. 30, 2008 Sept. 30, 2007 Dec. 31, 2007 Intangible fixed assets Tangible fixed assets Financial fixed assets 33,841 33,891 33,886 Deferred tax assets Total fixed assets 34,017 34,099 34,100 Accounts receivable 2,342 2,162 3,436 Liquid assets Total current assets 2,347 2,167 3,446 TOTAL ASSETS 36,364 36,266 37,546 Shareholders equity 26,084 25,622 26,322 Untaxed reserves 1,292 1,466 1,292 Provisions Long-term liabilities 8,000 8,000 8,000 Current liabilities ,598 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 36,364 36,266 37,546 Pledged assets Contingent liabilities 8,813 10,449 9,239 11

12 APPENDIX - Sales trends for ICA and Rimi The following tables refer to store sales. In Sweden, this includes Swedish retailer-owned ICA store sales. In Norway, franchise store sales are included. Sales for retailer-owned and franchised are not consolidated in the Group. The percentages below are year-over-year comparisons. ICA store sales in Sweden Store sales excl. VAT July - September 2008 January - September 2008 SEK million Change, all Change, comp SEK million Change, all Change, comp Maxi ICA Stormarknad 5, , ICA Kvantum 5, , ICA Supermarket 7, , ICA Nära 3, ,218 TOTAL 22, , During the nine-month period, the share of private label sales rose to 18.3 percent (17.4) in Sweden. ICA store sales in Norway Store sales excl. VAT July - September 2008 January - September 2008 NOK million Change, all Change, comp NOK million Change, all Change, comp ICA Maxi , ICA Supermarked 1, , ICA Nær 1, , Rimi 1, ,725 TOTAL 4, , During the nine-month period, the share of private label sales decreased to 9.5 percent (10.1) in Norway. ICA store sales in the Baltic countries Store sales excl. VAT July - September 2008 January - September 2008 EUR million Change, all Change, comp EUR million Change, all Change, comp Estonia Latvia Lithuania TOTAL During the nine-month period, the share of private label sales increased to 6.8 percent (5.0) in the Baltic countries. Number of ICA in Sweden, including retailer-owned Store profile December 2007 New Converted Closed September 2008 Maxi ICA Stormarknad ICA Kvantum ICA Supermarket ICA Nära Number of ICA and Rimi in Norway, including franchised TOTAL 1, ,374 Store profile December 2007 New Converted Closed September 2008 ICA Maxi ICA Supermarked ICA Nær Rimi Number of in Baltic countries TOTAL Country December 2007 New Converted Closed September 2008 Estonia Latvia Lithuania TOTAL

13 ICA AB Corporate identity number Svetsarvägen 16 SE Solna, Sweden Telephone Fax