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Edited Transcript of AXFO.ST earnings conference call or presentation 20-Apr-17 7:00am GMT

Thomson Reuters StreetEvents

Q1 2017 Axfood AB Earnings Call

Stockholm Apr 20, 2017 (Thomson StreetEvents) -- Edited Transcript of Axfood AB earnings conference call or presentation Thursday, April 20, 2017 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Cecilia Ketels

Axfood AB - IR

* Klas Balkow

Axfood AB - President & CEO

* Anders Lexmon

Axfood AB - Acting CFO

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Conference Call Participants

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* Nicklas Ekman

Carnegie Investment Bank - Analyst

* Gustav Sandstrom

Danske Bank - Analyst

* Riccardo Romiati

One Investments Sagl - Analyst

* Stellan Hellstrom

Nordea Markets - Analyst

* Andreas Lundberg

ABG Sundal Collier - Analyst

* Alexandra Berganovsky

SEB Enskilda Inc. - Analyst

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Presentation

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Cecilia Ketels, Axfood AB - IR [1]

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Good morning, everyone, and warm welcome to the presentation of Axfood's first-quarter 2017. Today we have invited you to join us here in Hemkop City boutique, which is located in our head office here in Stockholm. The quarter will be presented by our new President and CEO Klas Balkow and our acting CFO Anders Lexmon.

After the presentation there will be time for questions. And those of you who are watching us live on the web you can ask the questions and then send it in and we will answer them during the Q&A session. And after these practicalities I welcome our new CEO Klas Balkow.

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Klas Balkow, Axfood AB - President & CEO [2]

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Thank you, Cecilia, and, of course, let me also take the opportunity or welcome you all to this great facility here that we have with the Hemkop [record] store which also, as Cecilia mentioned, is nearby our head office but it's also, of course, nearby our big store here in Hemkop Torsplan.

But also welcome you to Axfood's first-quarter financial report. And as you know it's my first report as well, but I must say, it's my first report for Axfood but I must say am pleased to see so many familiar faces here in the audience.

But let's now move into today's presentation. Our agenda for today, we will cover the key ratios and the financials for our first quarter, but I will also provide an update on our focus areas as well as we will inform you about our outlook for 2017. And as Cecilia mentioned we will end the session as always with a Q&A session.

However, before we jump into all the numbers, let me just provide you with a quick update on Axfood's position today. We have a strong presence in the Swedish food retailer market with a rolling 12 turnover of over SEK43 billion. We serve over 3 million customers every week within the Company.

We have 264 group-owned stores, 120 franchise-related stories connected to Hemkop and 23 cash-and-carry. In total we are collaborating with over 1,100 stores with some of the brands like Tempo and Handlar'n.

Finally, today we also are operating through three online platforms or three online brands. And in addition, worth to mention that we also have a strong business-to-business segment. We have a presence through Axfood Narlivs who support and serve several of the convenience retailers here in Sweden. And also they supply many of the leading online retailers, as well.

Now, the highlights of today's presentation I believe is fairly clear. We are gaining market shares and we are growing in what we conclude a somewhat soft market. But also taking further steps on our agenda to move forward.

And one of them is now we are starting to integrate the acquisitions of mat.se as well as Eurocash. That will give us further steps into the important online segment as well as now an opportunity to go into cross-border, the fast-growing cross-border segment. And I will come back somewhat later on in my presentation.

Now let's move now into some of the key ratios for the first quarter. First of all, our net sales is up at 3.2% to over SEK10.6 billion. And I think it should be seen in the perspective of that we have a clear negative calendar effect this quarter due to the Leap Year effect as well as an Easter that is in this year in April and last year was in March, and we look at the calendar effect to be approximately negative around 1.5 to 2 percentage points.

Our like-for-like sales in the group-owned stores is up at 1.3% and all concepts and segments is actually contributing to our growth with a positive like-for-like across the line. I will come back somewhat later on in terms of commenting specifically on each of these concepts.

But look at then at the market, we are noting as we can see that we are clearly gaining marketshares. Now it's fair to say that we only have the true market data for the first two months, January and February, but we definitely expect that it will also be the case that we are gaining marketshares when we conclude and we get the full market data also for March.

Axfood generates a solid profit and profitability in the quarter. And as you can see in the graph here behind me we are actually up against some tough comparables, some high comparables in this quarter. But our profit at SEK396 million came almost in line with last year, which was positively affected by our positive like-for-like.

But it was impacted by the acquisition of Mat.se, the acquisition costs that we have, both Eurocash and Mat.se as well a somewhat higher development cost compared to last year. And looking at each business segment they are all in line with last year in terms of overall EBIT margin.

Let's now move into our various brands and various companies and I will start with the largest segment that we have which is Willys. And in the quarter Willys reported very good sales growth with more customers and higher ticket value that we achieved from these customers.

At the end of March we opened up another Willys store in Oskarshamn which is now getting us closer to reach almost 200 Willys stores in Sweden. And we continue to roll out our online offer to another four cities in this quarter, and as mentioned Willys profit is stable. We are reporting an EBIT margin of 3.5% similar to last year for Willys.

If we move on to Hemkop we continue to show a positive like-for-like in Hemkop both for our group-owned Hemkop stores as well as for our franchise stores. For the total concept we are growing over 5%.

And compared to last year our net sales is impacted by eight more group-owned stores has been converted into franchise. That's why you see somewhat slower growth in terms of our net group growth for Hemkop.

But in the quarter we have also opened up two more group-owned stores, one in Fallan in February and also one in Nacka here outside Stockholm. And we have also increased our online reach for Hemkop in the cities we are currently existing in, which is in Stockholm and Gothenburg. Also for Hemkop our EBIT margin is stable at 3.8% EBIT margin, which is comparable to last year.

Now finally a comment on Hemkop, I would like to mention that one of our flagship stores, Hemkop City here in Stockholm, closed last week for a larger refurbishment. And I want to point out this is nothing to do with the April 7 attack. It's something that has been planned for a long time.

We are planning to make a large re-makeover of that store. It will be really fantastic when we come out of that period. But, obviously, it will be closed now up until August, so almost around four months. During this time we will serve our customers in the area with the temporary pop-up store which will be related to the same area, in the same building.

Moving on to Axfood Narlivs, we continue to strengthen our position also for Axfood Narlivs. We have a positive growth of 3.3%, which is supported by that we have opened up when new cash-and-carry store in Helsingborg. And also Axfood Narlivs showed stable EBIT margin at 3.4%, which is positively impacted by good growth from our wholesale but somewhat negatively impacted by the investments we have now done with Axfood Snabbgross

(technical difficulty) Okay, go for it again.

So the final comment that we have now regarding our various concept is Dagab. Dagab, our support company, delivered a solid growth and solid profit during this quarter. The top line is also supported by strong sales in all our concept as well as of February 1 we now include the sales from Mat.se in the Dagab numbers.

We continue to improve our productivity. And behind good cost control we managed to slightly improve our EBIT margin despite then the result effect that we are seeing from Mat.se.

As of January 1, we have acquired Saba Logistics, an external fruit and vegetable warehouse where we historically have had a sell and buyback solution. When we now fully own this it gives us a better control over the total supply chain. But as a consequence, comparison sales is now benched against a pro forma number.

Finally, we continue to develop our private label. And as you can see here on the slide, we continue to see that the customers are appreciating more and more what we are offering through our private labels. And in this quarter we are now having a share that is above 28%, and we are actually now also just launching a new category in the spices category with a new brand name called Spice Field.

With that I've covered some of the top lines for our concept. I will come back and talk a little bit more about focus areas, but before that I hand over to our acting CFO Anders Lexmon who will give you go through some of the numbers in more detail.

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Anders Lexmon, Axfood AB - Acting CFO [3]

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Thank you, Klas. Just like Klas I am new at my position, but I am not new at Axfood. I have been at Axfood for 15 years and the last 10 years as head of financial control.

So let me walk you through the most important changes in the cash flow for the first quarter. In first quarter we not only paid out a dividend with approximately SEK1.3 billion, we also paid for acquisitions. That means that we now have a net debt position and used credit facilities with approximately SEK500 million.

When it comes to the investing activities we not only paid around SEK500 million for Mat.se, we also paid Saba like Klas mentioned. And I will come back to the investment activities little bit later.

At the end of March we also paid for Eurocash. And since we have not yet consolidated Eurocash and the acquisition prices primarily, it had affected our working capital for the quarter.

And beside that we have you can say normal changes in our working capital. We have a little bit negative impact from inventories ahead of Easter.

If we then look at the development on the working capital for a little bit longer time, we can see that we improved our accounts payable with approximately 0.5 percentage points compared to net sales during the last two years. And we see a similar effect when we look at accounts receivable. There we have an improvement of approximately 0.4 percentage points over the two years. Inventories grows in line with net sales during this period.

If we then take a closer look to the acquisition of Mat.se, we have done a preliminary purchase price allocation, which you can see here. And you can see that we have a total impact on our balance sheet of approximately SEK78 million and 80% of the price is allocated to goodwill.

We have also other intangible assets like trademark and customer relations. And we have an impact on our P&L with approximately SEK4 million yearly over a six years period.

Coming back to the investments, we have total investments in the first quarter of SEK788 million and that is acquisition SEK622 million. And if we look at the, so to speak, more normal acquisitions in our stores warehouses and in IT, we have the investments are in line with previous quarter, little bit higher pace though.

And with that Klas I hand over to you again.

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Klas Balkow, Axfood AB - President & CEO [4]

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Thank you and thanks, Anders. I think the microphone works better now.

Well, Anders has been long time in the Company and as you know I have only been here for a few weeks. So I am not planning yet to give you any strategic overview of Axfood. I plan to come back to that sometime after the summer.

However, let me already today give you or I would say point out three focus areas that is important for me, the Company and some of the areas that we are working on. And I will try to give you some updates on some of the progress we have done recently in these areas.

The areas are three. They are focusing on continuing growth, which is important part, obviously, for Axfood, but also develop our only channel strategy and our only channel platform and further develop our sustainable agenda.

Let me now cover each of these areas a little bit more in detail, and let me start with the growth. Obviously, as retailers it is very important to secure a steady like-for-like growth. But we also see other opportunities to grow in Axfood.

First of all, we have the store expansion program. We plan to open up 11 stores this year. We have opened up four, so we have seven more to go.

We continue also to refurbish our Hemkop stores and Hemkop concept. And the program is now looking into, we are looking into accelerate the refurbishment program.

As we also already communicated, part of growing is also part of that is supporting our backend and supporting our supply. And we have already taken steps now, we are working now to increase our capacity for the warehouse of fresh food in (inaudible).

We are also developing our product range which, obviously, is key to drive like-for-like sales. And in the first quarter we have introduced over 2,000 new products out of almost 300 were private labels.

And I also want to comment regarding growth, the important step now we have taken in terms of entering the cross-border segment by acquiring Eurocash. And by April 1 we will be consolidating Eurocash into Willys.

But let me give you a quick reminder regarding Eurocash. Eurocash is the second largest food retailer in the cross-border segment. And today we are via Dagab supplying the goods through the eight stores in Eurocash. And this is a joint acquisition with Norgesgruppen, though pending approval from the EU.

But with this move we are entering a new segment for us, a segment that is growing. And we see strong opportunities now to strengthening with this move our position in the discount segment.

The second focus area I would like to comment on is our omnichannel strategy. As you know, omnichannel is a buzzword in the industry in many ways, but for us it really means how we can meet the customers in a seamless way. We have a various sales channels, and for us we need to work to the see secure that we work as smooth as possible with all these channels to meet the new demands that we see coming up from our customers.

As you can see on this chart that is now coming up behind me we already today are meeting our customers in multiple ways in various channels in various areas. And I believe we have a very strong base to build from and in my view a very good platform.

We have, I think, an exciting structure and a favorable set up. And yes, we have just started this journey and we have some way to go, and I am sure that I will come back to this several times in terms of our steps. But I for sure think this is one of the more interesting journeys we have in front of us in Axfood.

But let me then start by commenting some of the steps we have already taken in the recent progress on this. And as you know, we have taken steps in the pure online sales channel where we are acquired Mat.se, which is a pure online food retailer with dark stores in Stockholm, Gothenburg and Stockholm.

And for 2016 Mat.se had a net sales of SEK287 million and an EBITDA of minus SEK55 million. We are clearly in an investment phase with Mat.se.

We are also pleased to see in the first quarter we continue to grow our business within Mat.se. And next week we are starting to integrate Dagab as a supplier and plan to fully roll this out up until summer. But also want to comment that we continue also to see positive sales from the existing online channels in Willys and Hemkop even if we are in that perspective coming from lower levels.

But also taking more steps in the omnichannel. We are adding more cities with Hemkop and Willys, so we are covering larger areas to these brands. We are also currently evaluating and developing our various pickup-in-store solutions which will be critical for the stores and for this structure going forward.

We are also investing in our store network, particularly investing in infrastructure where one part of that that we are now starting to roll out fiber to our stores and able to offer free WiFi to our customers. But I think, more importantly, this infrastructure gives us opportunity to speed up our digital development in the stores. And not to forget, we are just about to launch a new online platform for our cash-and-carry business which we plan to do this fiscal year.

Moving into the third and final focus area, sustainability. And Axfood, as you know, following Axfood you know that it is a long tradition of sustainable focus that is really partly integrated into the core business. And it's part of the everyday work here in Axfood.

But it contains it many aspects. And today I'm not going to go through them all, but it is clear as we have an overall target to be climate neutral 2020 we are making good progress but we still have some way to go. We are not there yet.

But we have six working areas. And let me just highlight some progress we have done in one of them, which is adding more sustainable products to our consumers. Because we have an overall aim to ensure that everyone has access to good and sustainable food.

So we are increasingly adding products with less climate impact. During the quarter we have, for example, launched some new veggie products within our private label Garant.

We also are noting a very strong sales growth of vegetarian products even if also in this level we are coming from somewhat lower levels. But we are starting now to measure this and it is starting to be a key ratio for us. And in the first quarter we had a veggie growth of over 30%.

We also continue with our food waste program which we work in different through different initiatives. One of them is for products that has a short best before date. We have many local help organizations that are picking up the food so we can donate the food.

And as an example, as you can see behind me, the last 12 months Willys has given more than 250 tons of food to charity. And as a co-founder of Matmissionen we are pleased to see also now we have opened up the second store here in Stockholm.

Finally in this area, as you know, it's important for all of us to become better in recycling plastic. And as of today, just launched today we will start as the first food retailer to put a deposit on plastic bags. This is a test, it's in one store, a pilot store here nearby in Torsplan. But we will follow this closely as we think that with this together with our customers we will reduce plastic waste and we will hopefully are a positive influence in the whole industry.

That covers the focus areas I would like to mention at this stage. Now let me end the presentation with an outlook, starting with the overall market.

First of all, I am pleased that we now have concluded a new wage agreement for retail and wholesale that is now settled. It's a three-year program within the industry mark of 6.5% over the period.

We are also acting in a very competitive market and the outlook is that we continue to see, we will continue to see that the market is still very competitive. And the clear price hike of fruit and vegetables that we noted in January and February due to lack of supply is now back at more normal levels. So our expectation of food inflation remains within the range of 1% to 2%.

And Axfood's forecast, we are focusing on growth and we are focusing on new investments. So I repeat the forecast is an operating profit in 2017 to be level with the outcome of 2016.

That leads us to the end of my part of the presentation. So let me just quickly sum up.

We continue to grow. We continue to gain marketshares. Our profit is stable.

We have a strong financial position despite dividend payout and despite payout for our acquisitions. And I think, most importantly, we are now having a high level of activities for future growth. We are now taking steps, further steps in the omnichannel strategy and we are as of now entering the cross-border segment.

With that, Cecilia, I think you are about to lead the overall Q&A session. And please Anders, come up. I'm sure you need to help me straighten out --

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Cecilia Ketels, Axfood AB - IR [5]

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Yes, we open up for questions and let's start here in the room. And I think Nicklas Ekman from Carnegie has the first questions.

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Questions and Answers

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Nicklas Ekman, Carnegie Investment Bank - Analyst [1]

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Thank you, yes, I would like to start by asking a little bit about your mandate having been recruited to Axfood. I think one thing we have noted is that in your predecessor he was a little bit reluctant to invest in online and, of course, we saw a lot of online investments in 2016.

You are not talking about an omnichannel strategy and investing further. We've seen the acquisition of Mat.se, etc. So can you elaborate a little bit about your mandate in general and your mandate on omnichannel expansion in particular, whether this is a big strategic change or how we should see this?

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Klas Balkow, Axfood AB - President & CEO [2]

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Well, I think the mandate is clear, that is to grow and to develop Axfood clearly. And I think in that you need to follow the market. And we are clear about where the market is now going.

We are not knowing what kind of speed. We are not knowing how fast it will go. But for sure we will see a more omnichannel structure in the future, and that is important for Axfood to take a step in this.

So the mandate is nothing else than to grow and to develop Axfood. And I think in my view and so does the Board is that this is a natural step for us to take further steps in the omnichannel.

And as you can see, we have started but I think we are also going to be fair, it's a journey. I know that and it takes time. But I also think it's a lot of energy in our plans to grow that. And as I pointed out I think we have a very interesting base for this structure.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [3]

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And how many stores, Willys and Hemkop stores today offer online sales? You talked about 10 or 17 cities.

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Klas Balkow, Axfood AB - President & CEO [4]

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Well, if we are talking about cities we are covering eight cities today with the across the brands that we have. And we will continue to roll that out as pointing out in a smart way.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [5]

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But you don't have a number for how many stores that offer online sales today?

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Klas Balkow, Axfood AB - President & CEO [6]

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Stores if you are looking at online if you look at how many what number of cities or the coverage you are doing. One store could, obviously, cover a larger part.

So I think what you should look at is areas that we are covering rather than specific stores. Stores is somewhat related also to in Willys and Hemkop it's a pickup a solution, but we also now as we pointed out we are adding dark stores to our segment and so forth. So it will give us a better capacity as we move on.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [7]

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Okay. One thing you haven't mentioned today is the old margin target of 4%. Is that something that you have removed?

I mean it's, obviously, a conservative target in light of your current operating margin. But is that something that has deliberately been omitted?

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Klas Balkow, Axfood AB - President & CEO [8]

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Did the only thing I am commenting on today is we are sticking to our forecast what we had said, which is in line, the profit in line with 2016.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [9]

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Thank you.

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Cecilia Ketels, Axfood AB - IR [10]

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Anymore questions? Yes.

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Gustav Sandstrom, Danske Bank - Analyst [11]

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Gustav Sandstrom, Danske Bank. Listening to you regarding investments, you talk about how you are accelerating the refurbishment of current store base. You are hoping to invest in fiber and WiFi and current network, also investing in omnichannel.

This to me seems like they are longer projects than just this year possibly. So I know you're not giving forecast for next year, but do you still think this is a reasonable assumption that current CapEx forecast for this year will not be materially different from what we should expect 2018, 2019, 2020, so forth?

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Klas Balkow, Axfood AB - President & CEO [12]

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Well, as you are pointing out, I am not at this stage commenting beyond 2017. But the investment levels that we have shown for this year is clear and that is we are keeping that forecast. But you are right in terms of I think, obviously, some of these investments is also more longer term, but I think it's a natural part of driving our agenda forward.

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Gustav Sandstrom, Danske Bank - Analyst [13]

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And with regards to online, do you reckon that you have a similar market share online today as you do off-line? Or do you feel like you are lagging behind in one of the channels?

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Klas Balkow, Axfood AB - President & CEO [14]

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I think it's difficult to say that because, obviously, we are not getting all the data from online retailers today. But I think that we are more or less in line with the overall share of online share. That's my overall assumption, but I must admit that we don't have clear data on this at this stage.

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Gustav Sandstrom, Danske Bank - Analyst [15]

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And if that was true, that you have a similar position online as off-line, are you happy with that position it or is this --

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Klas Balkow, Axfood AB - President & CEO [16]

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No, what I said is that we have a similar share of online as the rest of the market. So, obviously, which means that the percentage out of online of total sales.

So, obviously, we are more or less on par with that. That is my overall assumption.

And to your question are we happy with that? I think that we all want to grow market shares across all channels.

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Gustav Sandstrom, Danske Bank - Analyst [17]

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But are you prepared to take those investments, I assume growing in market share, online would --

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Klas Balkow, Axfood AB - President & CEO [18]

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Well, I think you've seen that already with the acquisition of Mat.se. Of course, we are taking steps.

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Gustav Sandstrom, Danske Bank - Analyst [19]

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Thanks.

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Cecilia Ketels, Axfood AB - IR [20]

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Let's check if we have any questions on the phone, operator?

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Operator [21]

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(Operator Instructions) Riccardo Romiati, One Investments.

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Riccardo Romiati, One Investments Sagl - Analyst [22]

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Hi, good morning. Just a couple of financial questions just to understand.

One is I wonder if you could get some understanding of volume versus price in Q1 given the fruit and veg point you made, in fact, in January and February? Secondly, if you look at the corporate center number, I was wondering, is that where we will see some of the segregated online businesses consolidated so that minus 62 includes a some of those and that would be something we should think about going forward?

Thirdly, on Dagab I was wondering if you could give some understanding of the consolidation impact of Saba and Mat.se on the Dagab sales at this point? Lastly, also on the Saba effect on Dagab, where I think SEK 800 million is taken out of the pro forma. Does that reappear anywhere else in the P&L? Thank you.

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Klas Balkow, Axfood AB - President & CEO [23]

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Let me start and I think, Anders, you will help me out on some of them. Regarding the effects of volume and values, it's nothing we are commenting on specifically.

Regarding, if I understood you right, regarding the online, yes, it's Mat.se is now included in the Dagab numbers. And as we are stating out, Mat.se has a negative EBITDA, and that is now included into Dagab. Where this will go and how that trend will follow, of course, we have a target now to work on this and to integrate it into our business, but, again, we are in an investment pace with this project.

Regarding the impact of Saba, I think I leave that to you, Anders, to comment on.

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Anders Lexmon, Axfood AB - Acting CFO [24]

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Yes, and like Klas said, the only impact from the Saba pro forma accounting is on net sales, not anywhere else in the profit and loss. I think that was one of the questions.

And the second question about Saba, like Klas mentioned before, previously we had the sell and buyback solution with Saba, fruit and vegetables. And that demand that Dagab had a higher sales previous year.

Now we don't have that and, therefore, the pro forma figures are reported. If I understand the question right.

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Riccardo Romiati, One Investments Sagl - Analyst [25]

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That's fine. Maybe just to clarify on two.

Is it possible to give it the total impact of acquisitions on the profit during Q1 just so we understand what the acquisition impact on profit was? And maybe on my volume versus price question, would it be fair to say that the price impact was higher than the 1% to 2% guidance for the full year in Q1?

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Klas Balkow, Axfood AB - President & CEO [26]

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Well, if I comment on as I pointed out we had in one part of the range fruit and vegetables we had a price hike for two months. And, of course, that had some impact. I will not say its material versus the rest as it has slowed down.

Regarding your question in terms of the impact of profit for Mat.se in this quarter, I understand and I'm clear about that, that it's going to be everyone here wants to follow and wants to have details about how we are developing, how we are growing, what's the profit impact and so forth. But as you understand as well from my point of view, this is a strategic investment that is not material today and we have competitors that is not disclosing their number. So we are not going to share quarter by quarter in terms of our profit development in Mat.se at this stage.

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Riccardo Romiati, One Investments Sagl - Analyst [27]

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Apologies, I am just trying to understand organic profit versus acquisitions. You have Saba as well, so maybe that's not material on the profit. Okay.

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Klas Balkow, Axfood AB - President & CEO [28]

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That's right. And as you pointed out, we have disclosed the total number for Mat.se for the full 2016 and, obviously, there is a fair share of impact in that in the first quarter. I think that's fairly given.

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Riccardo Romiati, One Investments Sagl - Analyst [29]

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Yes, okay thank you for the answers.

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Cecilia Ketels, Axfood AB - IR [30]

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So Riccardo, if you are happy with the answer to that we will go back to the floor here and give the question to Stellan at Nordea.

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Stellan Hellstrom, Nordea Markets - Analyst [31]

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Thank you. I just have one question on the results in Dagab which improved despite the inclusion of Mat.se. And I mean, you have improved also results in Dagab earlier.

I would think that the results of the efficiency improvement would at some point mature and you will go back into more of a stable state in terms of margins there. Could you give us some flavor on what you see in terms of further potential to --

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Klas Balkow, Axfood AB - President & CEO [32]

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I think it's a fair comment and I think I must say I am also somewhat new in terms of the sensibility in terms of that. But, obviously, we have a positive growth, we have a positive like-for-like and we have a positive growth overall which supports the operation in Dagab. And then we should see that you are getting this productivity.

How that will develop over time, I think probably you and I will come back to that later on. But at this stage I can just conclude that when we are gaining volume in the warehouse at the current stage, of course, we are getting out some of the benefits out of that, as well.

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Stellan Hellstrom, Nordea Markets - Analyst [33]

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All right. Thanks.

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Cecilia Ketels, Axfood AB - IR [34]

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Andreas with ABG.

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Andreas Lundberg, ABG Sundal Collier - Analyst [35]

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Yes, thank you. On the Eurocash acquisition, what kind of growth potential do you see there given or you have now eight stores, right, at the border. Is it fair to assume that you can open up more stores at the border or in other places in Sweden?

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Klas Balkow, Axfood AB - President & CEO [36]

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I think we just stepped into this segment. We are, obviously, we have followed this segment, we have been the supplier to the stores for some time. But, obviously, this gives us an opportunity to also continue to drive and to lead and to develop the segment, as well.

But I have to come back to how we view that at this stage. I think we are very positive about getting into the segment in general. We can see that the overall segment is growing, so it's a growing area that we are now taking a step into.

How that will develop we will have to see and follow. I think the good part is also we are now working with the segment within Willys which gives us the opportunity to drive this together with the Willys concept.

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Andreas Lundberg, ABG Sundal Collier - Analyst [37]

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If the market prices is 100 in Sweden on average, what is the price level of Eurocash?

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Klas Balkow, Axfood AB - President & CEO [38]

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I'm not sure I follow that. What do you mean?

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Andreas Lundberg, ABG Sundal Collier - Analyst [39]

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I mean how is the price level at Eurocash if you compare them to the market in Sweden or compared to Willys perhaps?

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Klas Balkow, Axfood AB - President & CEO [40]

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All in terms of price to the consumers, is that what you are asking? We are -- let me help you on that, I think we are slightly higher than Willys --

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Anders Lexmon, Axfood AB - Acting CFO [41]

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Then Willys, yes.

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Klas Balkow, Axfood AB - President & CEO [42]

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But it is a clear discount. Then you have -- so we are overall slightly higher, but also I must say it's a different mix in the range because it's also somewhat targeted to cross-border range, if I may say so.

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Andreas Lundberg, ABG Sundal Collier - Analyst [43]

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Then maybe a question on how much of your customers in Eurocash are coming from Norway?

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Klas Balkow, Axfood AB - President & CEO [44]

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Sorry, once again?

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Andreas Lundberg, ABG Sundal Collier - Analyst [45]

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How much of your customers at Eurocash are coming from Norway?

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Klas Balkow, Axfood AB - President & CEO [46]

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Well, there is part of being a cross-border segment, it's, obviously, that it attracts a lot of Norwegian customers.

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Andreas Lundberg, ABG Sundal Collier - Analyst [47]

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And then back on online, how is your feedback so far from the store business online when it comes to efficiency stores, from picking for instance and also how much of your deliveries online from stores are going home, on home deliveries? Thank you.

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Klas Balkow, Axfood AB - President & CEO [48]

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Currently we are it's, again, in a small base and it varies regarding if it's a pickup in-store or if it's direct. And you also start to see that if I take an example that we are starting to see a faster growth in some of the pickup-in-stores in some areas. But, obviously, the delivery to home is also growing a different concept.

And I'm a big vague here because, obviously, here is a kind of part where we want to develop and we want to set our own agenda before we share it with everyone on that. So I will come back more clear on that.

But I think today the mix of being able to deliver to your home or to get the opportunity for the customer to pick up in store is there. And we have a mix of that. And I think I'll stop there.

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Andreas Lundberg, ABG Sundal Collier - Analyst [49]

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Okay, and lastly, in the fourth quarter I think you had some margin pressure from sourcing. Internationally the FX was negative for you guys and you didn't transfer that to consumers, not for the private label segment at least. How was that in the first quarter? Thank you.

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Klas Balkow, Axfood AB - President & CEO [50]

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Well, it has been transferred more into the first quarter which has been received very positively as well as you can see that. So, obviously, we are still very price competitive on our own labels.

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Cecilia Ketels, Axfood AB - IR [51]

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Nicklas Ekman at Carnegie again.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [52]

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Thanks, yes. A few follow-ups.

First of all, if you look at the profitability level by your different segments, it was more or less unchanged or up in all the core businesses and the other segment was down. And this was, as I understand, not at all related to Mat.se because that was included in Dagab. So what was the reason for, I think, the SEK26 million drop or increase in losses in other?

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Klas Balkow, Axfood AB - President & CEO [53]

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As, I think, we pointed out as well we have clearly cost for the acquisitions that we have done, not only Mat.se but also Eurocash. So you have a fair share of cost for that.

And we also have somewhat higher pace on the development projects that we are now moving forward out of this. So your follow-up question, how much is that, I would say a little bit more than half is non-recurring out of that.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [54]

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Excellent. Also you mentioned that you were rolling out 2,000 new products this spring. I was wondering, is that very different from your normal turnover in stores?

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Klas Balkow, Axfood AB - President & CEO [55]

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I think we have a good pace of that, I would say. But, obviously, it's important and it's important for me to be relevant and to drive that agenda. I just want to point out that we have a fairly high change of range.

It's not a dramatic change versus historically, if I understood it right. I was not here, but that's what I have understood.

But, of course, it's important that we drive this agenda. And I think some of the points out that we see also is that there are various trends in the market. We talked about that in the sustainability part with the vegetarian and veggie alternatives and so forth, and that gives more opportunities to add more into our range.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [56]

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And also you mentioned the refurbishment of Hemkop City. I believe this is one of your biggest Hemkop stores. Is that something that will have, could have a tangible impact to sales and earnings or is this --

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Klas Balkow, Axfood AB - President & CEO [57]

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Clearly, obviously, it is a flagship store, it's a large store and I want to be -- you will see it when you come down. It's going to be closed for a fairly long period of time, I would say, of four months. But it's going to be a really nice store when we are done.

But we have to, for various reasons, close it down during the refurbishment. So, of course, that will be an impact.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [58]

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Finally, can you say something about the changes in the -- or who is getting marketshare, who are you gaining market share at the expense of? If you can comment on a little bit about your competitors, we have seen ICA's figures, obviously, and how you have clearly outpaced them in terms of like-for-like growth. What is going on in Coop and Bergendahls?

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Klas Balkow, Axfood AB - President & CEO [59]

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Well, you know me in that aspect, I focus on our development and how we can grow and how we can meet the customers. And I would just concluding that apparently we are doing it somewhat better than the rest of the market.

So I am not going to stand up here and comment on each of the competitors. You have to look into that yourself.

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Nicklas Ekman, Carnegie Investment Bank - Analyst [60]

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Okay, thank you.

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Cecilia Ketels, Axfood AB - IR [61]

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Let's go back to the operator to see if we have any questions over the phone.

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Operator [62]

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(Operator Instructions) [Alexandra Berganovsky, SEB].

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Alexandra Berganovsky, SEB Enskilda Inc. - Analyst [63]

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Yes, hello, I just had a question regarding your acquisitions. I realize that you just finished two of them, but I just wanted to hear your opinion about future outlook for any other potential acquisitions that you might see or anything that you feel like you might be missing in your current portfolio. Thank you.

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Klas Balkow, Axfood AB - President & CEO [64]

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Well, thank you. As you have seen we have done, and I think compared to historically we have done more than acquisitions. We have done, we have increased the speed on that and we have now some work to do to integrate the one we have.

So I think we have to full focus on that. Does that mean that we will close doors for future acquisitions? No, I think that door will always be open, but at this stage we are focusing on the one we just acquired.

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Operator [65]

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(Operator Instructions) There appear to be no further questions. I will return the conference to the speakers.

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Cecilia Ketels, Axfood AB - IR [66]

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Thank you. Well, do we have any last questions here from the audience? Yes, Gustav.

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Gustav Sandstrom, Danske Bank - Analyst [67]

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Thanks, just a follow-up. I understand that pushing Easter into Q2 was negative from a volume perspective, obviously, but isn't it also true that Easter volumes come hand-in-hand with lots of campaigning and marketing, suggesting that pushing Easter into Q2 might also be supportive from a margin perspective? Could you elaborate a bit on that and if possible quantify it?

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Klas Balkow, Axfood AB - President & CEO [68]

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Well, I cannot quantify it and I will not elaborate on it more than saying for me that's why I also is a bit of not crystal if it's 2% or 1.5%, it's between 1.5% to 2% effect. And I think that we need to conclude both April and March until you see the full effect out of that.

Obviously, you have some more campaigns in Easter, so you have the effect of that but also have volume boost as well then. How big this will be we need to see that when we have, when the full month is coming. We will come back to that in July.

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Cecilia Ketels, Axfood AB - IR [69]

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Thank you. With that I think we close this up for today. Thank you all for coming, and I wish you a good day.

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Klas Balkow, Axfood AB - President & CEO [70]

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Thank you. Thanks for coming.