Axfood — Earnings Release 2013

Feb 4, 2014

Year-End Report Axfood AB (publ)

FOURTH QUARTER SUMMARY

• Axfood's consolidated sales for the period October–December totalled SEK 9,550 m (9,252), an increase of 3.2%.
• Retail sales for Group-owned stores increased by 3.8% during the period.
• Like-for-like sales increased by 1.5% during the period.
• Operating profit for the period was SEK 340 m (258).
• Profit after financial items was SEK 337 m (250) for the period.
• Profit after tax totalled SEK 257 m (229) for the period, and earnings per share were SEK 4.79 (4.37).
• Axfood decided to combine all transport and warehouse operations into a single unit.
• The Board of Directors proposes a dividend of SEK 15 per share (12).
• Axfood's goal for 2014 is to exceed the level of profit in 2013.

NO SIGNIFICANT EVENTS HAVE TAKEN PLACE AFTER THE BALANCE SHEET DATE

Key ratios
SEK m	Q4 2013	Q4 2012	Change	Full year 2013	Full year 2012	Change
Net sales	9,550	9,252	3.2%	37,522	36,306	3.3%
Operating profit	340	258	31.8%	1,302	1,200	8.5%
Operating profit excl. impairment charges	340	313	8.6%	1,302	1,255	3,7%
Operating margin, %	3.6	2.8	0.8	3.5	3.3	0.2
Operating margin excl. impairment charges, %	3.6	3.4	0.2	3.5	3.5	0.0
Profit after financial items	337	250	34.8%	1,278	1,162	10.0%
Profit after tax	257	229	12.2%	993	902	10.1%
Earnings per share, SEK1	4.79	4.37	9.6%	18.80	17.20	9.3%
Cash flow per share, SEK	4.8	2.6	84.6%	-1.2	3.9	-
Cash flow from operating activities per share, SEK	9.2	10.1	-8.9%	30.4	36.5	-16.7%
Return on capital employed, %2	30.3	28.2	2.1	30.3	28.2	2.1
Return on shareholders' equity, %2	27.5	27.2	0.3	27.5	27.2	0.3
Shareholders' equity per share, SEK3	-	-	-	71.82	64.76	10.9%
Equity ratio, %	-	-	-	42.6	38.8	3.8

On account of new accounting policies that took effect on 1 January 2013 with respect to pension costs (IAS 19), the comparative figures for 2012 have been adjusted.

1) Before and after dilution.

2) Moving 12-month figures.

3) Net asset value per share corresponds to shareholders' equity per share.

For further information, please contact:	The information in this year-end report is such
Anders Strålman, President and CEO, mobile +46-70-293 16 93	that Axfood is required to disclose in accord
Karin Hygrell-Jonsson, CFO, mobile +46-70-662 69 70	ance with the Securities Market Act. Submitted
Anne Rhenman Eklund, Head of Corporate Communications, mobile +46-70-280 64 59	for publication at 7.30 a.m. (CET) on 4 Febru
	ary 2014.

CEO'S COMMENTS

Axfood posted a record profit in 2013 on good sales growth. The growth in sales and earnings once again confirms that we have chosen the right strategy with ever-more appealing customer offerings, high efficiency and good cost control. The positive trend is also tangible proof that Axfood is increasingly winning its customers' appreciation and loyalty.

Axfood has also maintained a high pace of implementation in its ambitious future investments. This has involved a strong effort with many new store establishments, upgrading of a large number of stores, and the resource-intensive implementation of the new business system. Parallel with this, a comprehensive new investment was made in digital customer programmes.

Stable development and good earnings

Willys can look back on a successful year with good sales, a higher market share and favourable earnings performance. The year was also characterized by the successful launch of the digital customer programme, where the number of enrolled customers, 1.3 million, exceeded all expectations. Parallel with this, 12 new stores were opened and ten were remodelled. Willys thereby upheld its position as Sweden's leading discount chain with increasingly better stores, a wide product selection and a rich offering of fresh products.

Hemköp showed stable profitability and sales, and continued to strengthen its brand with an improved customer offering. Elsewhere, focus was mainly on developing the product selection, with an expanded offering of fresh products and growing number of modernized stores. While the latter is a necessary investment in the future in order to meet customers' expectations, it affects the operating margin in the short term. During the year Hemköp renovated 15 stores, opened a new flagship store in Stockholm, and conducted a relaunch of its loyalty programme.

Axfood Närlivs also had a good year, with considerably improved earnings. Better weather conditions compared with a year ago, together with stronger customer offerings, contributed to the favourable performance. In addition, the important agreements with OKQ8, Statoil and Preem were renewed during the period.

For Dagab, 2013 was dominated by hard and resource-intensive work with implementation of the new business system. As anticipated, the project gave rise to higher costs and put a heavy burden on operations. Despite this, Dagab managed to maintain very good delivery performance to the stores.

To achieve further efficiency, Axfood has decided to combine all of the Group's warehouse and transport operations into a single unit. This project commenced in early 2014 and is expected to take two years to complete. The President of the new organization is Nicholas Pettersson, who has been President of Axfood Närlivs since 2009.

Market outlook

Indications are high that things are beginning to brighten for the Swedish economy in 2014, although it is a cautious optimism as many uncertainties remain in the external environment. Axfood believes, however, that the market conditions for the food retail trade will remain stable, with continued fierce competition and food price inflation in line with 2013.

Axfood's strategy remains firm

Axfood enters 2014 with a favourable starting point and the same strategy that has brought about our profitable growth for several years. It is through this strategy that we will continue to develop our concepts, strengthen our brands and exceed our customers' expectations. Axfood is also maintaining its focus on higher efficiency, a high pace of establishment, good cost control and further development of our customer programmes.

Parallel with this, Axfood will now – step by step – see the results of the major investments that we have made in recent years in the new business system as well as in new customer programmes. Several of these projects are nearing completion, entailing that the pace of investment will gradually subside in the coming years. In the year ahead, additional stores will be modernized and ten new stores will be opened. Investments in 2014 are expected to amount to SEK 700–800 m.

Our ambition is to continue generating substantial value for our customers and shareholders alike, and we look forward to yet another eventful and successful year for Axfood.

Axfood's goal for 2014 is to exceed the level of profit in 2013.

Anders Strålman President and CEO, Axfood AB

SALES, AXFOOD GROUP

Fourth quarter

Consolidated wholesale and retail sales for the Axfood Group totalled SEK 9,550 m (9,252) during the fourth quarter, an increase of 3.2%. Store sales for the Axfood Group (wholly owned stores and Hemköp franchises) totalled 8,126 m (7,897), an increase of 2.9%. Sales for Group-owned retail operations increased by 3.8% during the fourth quarter, with a 1.5% rise in like-for-like sales. Axfood's private label share was 25.0% (24.4%) as of December.

Full year

Consolidated wholesale and retail sales for the Axfood Group totalled SEK 37,522 m (36,306) during the year, an increase of 3.3%. Store sales for the Axfood Group (wholly owned stores and Hemköp franchises) totalled SEK 31,868 m (30,959), an increase of 2.9%. Sales for Group-owned retail operations increased by 3.9% during the year, with a 1.9% rise in like-for-like sales.

Axfood has no significant transactions with related parties, other than transactions between subsidiaries.

Net sales per operating segment
SEK m	Q4 2013	Q4 2012	Full year 2013	Full year 2012
Hemköp	1,438	1,474	5,578	5,584
Willys	5,209	4,927	20,394	19,407
Axfood Närlivs	1,596	1,570	6,489	6,336
Dagab	6,569	6,348	25,509	24,634
Other1	1,286	1,167	5,120	4,521
Internal sales
Dagab	-5,308	-5,113	-20,622	-19,835
Axfood Närlivs	-1	-2	-7	-8
Other	-1,239	-1,119	-4,939	-4,333
Total	9,550	9,252	37,522	36,306

1) Includes joint-Group support functions, such as purchasing coordination, IT and corporate offices.

Retail sales, Group-owned and franchise stores

SEK m	Q4 2013	1) %	Like-for-like sales, %1)	Full year 2013	% 1)	Like-for-like sales, %1)
Hemköp	1,419	-2.6	0.7	5,500	-0.2	0.9
Hemköp franchises	1,498	-1.0	2.9	5,974	-1.1	2.8
Hemköp total	2,917	-1.8	1.9	11,474	-0.7	1.9
Willys total	5,209	5.7	1.7	20,394	5.1	2.2
Total	8,126	2.9	1.8	31,868	2.9	2.1

1) Percentage change compared with the corresponding period a year ago.

Change in store structure, full year 2013
	Dec. 2012	New establishment	Acquisitions	Sales/closures	Conversions to/from	Dec. 2013
Hemköp (incl. PrisXtra)	72	1	1	-2	-3	69
Willys1)	174	6	3	-3	3	183
Total, Group-owned	246	7	4	-5	-	252
Hemköp franchises	114		1	-4		111
1) Of which, Willys Hemma	46	1	2	-3	1	47

EARNINGS, AXFOOD GROUP

Fourth quarter

Operating profit for the fourth quarter totalled SEK 340 m (258). The operating margin was 3.6% (2.8%). Operating profit for the preceding year included an impairment charge of SEK 55 m for the PrisXtra brand. The operating margin for the preceding year excluding the impairment charge was 3.4%. Net financial items totalled SEK -3 m (-8), and profit after financial items was SEK 337 m (250). The margin after financial items was 3.5% (2.7%). Profit after tax was SEK 257 m (229). Joint-Group costs were affected by higher depreciation for the new business system.

Full year

Operating profit for the year was SEK 1,302 m (1,200). The operating margin was 3.5% (3.3%). Excluding the impairment charge, the operating margin for the preceding year was 3.5%. Net financial items for the year totalled SEK -24 m (-38), and profit after financial items was SEK 1,278 m (1,162). Profit after tax was SEK 993 m (902).

Operating profit for the period, broken down by operating segment
SEK m	Q4 2013	Q4 2012	Full year 2013	Full year 2012
Hemköp	35	58	151	149
Willys	208	192	808	796
Axfood Närlivs1	34	28	140	114
Dagab1	41	45	114	168
Other1, 2	22	-65	89	-27
Operating profit for the period, total1, 3	340	258	1,302	1,200

1) On account of new accounting policies that took effect on 1 January 2013 with respect to pension costs (IAS 19), the comparative figures for 2012 have been adjusted. Axfood Närlivs has been adjusted by SEK 1 m for the fourth quarter and the full year. Dagab has been adjusted by SEK 1 m for the fourth quarter and SEK 5 m for the full year. "Other" has been adjusted by SEK 2 m for the full year 2012. Operating profit has been adjusted by a total of SEK 2 m for the fourth quarter and SEK 8 m for the full year.

2) "Other" includes joint-Group support functions, such as purchasing coordination, IT and corporate offices. Also includes accumulated charges for, among other things, amortization of surplus value pertaining to the acquisition of PrisXtra and depreciation of SEK 67 m (55) pertaining to the new business system. The figure for the preceding year included an impairment charge of SEK 55 m for the PrisXtra brand.

3) Net financial items are not distributed per operating segment.

CAPITAL EXPENDITURES

Total capital expenditures during the period January–December amounted to SEK 806 m (932), of which SEK 43 m (175) pertained to acquisitions of businesses, while SEK 432 m (386) pertained to investments in non-current assets in retail operations, SEK 86 m (86) to investments in non-current assets in wholesale operations, and SEK 121 m (211) to IT development

* Excluding goodwill

FINANCIAL POSITION

Cash flow from operating activities before paid tax was SEK 1,831 m (2,050) during the year. Paid tax amounted to SEK -235 m (-135). Cash and cash equivalents held by the Group amounted to SEK 457 m, compared with SEK 521 m in December 2012. Interest-bearing liabilities and provisions totalled SEK 535 m at year-end, compared with SEK 861 m in December 2012. Interest-bearing net debt was SEK 78 m at year-end, compared with SEK 340 m in December 2012. Payout of the shareholder dividend affected cash flow by SEK -630 m (-630), and net capital expenditures affected cash flow by SEK 718 m (-816).

The equity ratio was 42.6%, compared with 38.8% in December 2012.

THE SWEDISH FOOD RETAIL MARKET

According to Statistics Sweden's retail trade index for December, accumulated sales for the food retail segment rose 2.7% since the start of the year in current prices. In fixed prices, adjusted for price and calendar effects, volume increased by 1.1%. This means that Axfood's retail operations gained market shares during the year.

STORE OPERATIONS

Willys

Fourth quarter

Willys continued to deliver favourable sales growth and good earnings. The successful Willys+ customer programme, which was launched during the first quarter, had a positive impact on sales. The share of sales via Willys+ has grown at a steady pace. Sales amounted to SEK 5,209 m (4,927), an increase of 5.7% compared with the preceding year. Like-for-like sales increased by 1.7%. The operating profit totalled SEK 208 m (192). The operating margin was 4.0% (3.9%). Earnings were charged with start-up costs for new stores. During the quarter, one Willys Hemma store was closed and four Willys stores were modernized.

The private label share as of December was 27.1% (26.9%) for Willys and 30.0% (29.5%) for Willys Hemma.

Full year

Willys' sales during the period January–December amounted to SEK 20,394 m (19,407), an increase of 5.1% compared with the preceding year. Like-for-like sales rose 2.2%. Operating profit totalled SEK 808 m (796), and the operating margin was 4.0% (4.1%).

Eight Willys stores opened, of which two were converted from Hemköp. In addition, four Willys Hemma stores opened, of which one was converted from Hemköp. Three Willys Hemma stores were closed during the year.

Sales, SEK m, and operating margin, % Key ratios

	Q4	Q4	Full year	Full year
SEK m	2013	2012	2013	2012
Net sales	5,209	4,927	20,394	19,407
Change in like-for-like sales, %	1.7	0.2	2.2	0.0
Operating profit	208	192	808	796
Operating margin, %	4.0	3.9	4.0	4.1
Number of Group-owned stores	-	-	183	174
Average number of employees1 Private label share (Willys/Willys	-	-	4,107	3,867
Hemma)	-	-	27.1/30.0	26.9/29.5

1) Calculation of the number of employees has been adjusted in 2013, and thus the comparative figure has also been adjusted.

Hemköp

Fourth quarter

Hemköp (including PrisXtra) had stable like-for-like performance. However, total sales were affected by a fewer number of stores compared with the same period a year ago. Sales decreased by 2.4%, with sales for Group-owned stores totalling SEK 1,419 m (1,457), a decrease of 2.6%. Like-for-like sales for Groupowned stores rose 0.7% during the period. Sales for franchise stores amounted to SEK 1,498 m (1,513), a decrease of 1.0%, with a 2.9% like-for-like rise for franchise stores (see table on page 3). Hemköp's private label share was 19.3% (18.1%) as of December.

Operating profit for the fourth quarter was SEK 35 m (58). The operating margin for the period was 2.4% (3.9%). The largest PrisXtra store in Stockholm was closed. In connection with this, Hemköp opened a new flagship store in the same area. In addition, six stores were modernized during the period. While this represents a necessary investment in the future in order to meet customers' expectations, in the near term it has had a negative impact on the operating margin. During the quarter Hemköp upgraded its loyalty programme to the same, modern platform as Willys.

Full year

Like-for-like sales for Group-owned stores increased by 0.9% during the period.

Sales for Hemköp's stores – Group-owned and franchises – decreased by 0.7% during the period January–September. Sales for Group-owned stores amounted to SEK 5,500 m (5,513), a decrease of 0.2%.

Sales for franchise stores amounted to SEK 5,974 m (6,039), a decrease of 1.1%, with a 2.8% rise in like-for-like sales.

Operating profit for the period January–December amounted to SEK 151 m (149). The operating margin for the year was 2.7% (2.7%). Operating profit was affected by nonrecurring expenses of SEK 1 m (14).

During the year, one store was established, one store was acquired, three were converted to Willys or Willys Hemma, and one store was sold. Also during the year, one franchise store was acquired and four were sold. Hemköp had 180 stores at year-end, of which 69 were Group-owned.

SEK m	Q4 2013	Q4 2012	Full year 2013	Full year 2012
Net sales	1,438	1,474	5,578	5,584
Change in like-for-like sales, %	0.7	0.2	0.9	0.9
Operating profit	35	58	151	149
Operating margin, %	2.4	3.9	2.7	2.7
Number of Group-owned stores	-	-	69	72
Average number of employees1	-	-	1,675	1,667
Private label share	-	-	19.3	18.1

1) Calculation of the number of employees has been adjusted in 2013, and thus the comparative figure has also been adjusted.

* Comparative quarterly and full-year figures for 2012 have been adjusted for the combination of Hemköp and PrisXtra.

AXFOOD WHOLESALING

Dagab

Fourth quarter

Dagab had stable performance, but continued to be affected by the implementation of the new business system. As expected, the project gave rise to higher costs and put a heavy burden on operations. Despite this, Dagab succeeded in maintaining very good delivery performance to the stores. Operating profit totalled SEK 41 m (45), and the operating margin was 0.6% (0.7%). Sales amounted to SEK 6,569 m (6,348).

Full year

Dagab's sales during the period January–December amounted to SEK 25,509 m (24,634). Operating profit for the year totalled SEK 114 m (168), and the operating margin was 0.4% (0.7%).

SEK m	Q4 2013	Q4 2012	Full year 2013	Full year 2012
Net sales	6,569	6,348	25,509	24,634
Distributed sales	4,639	4,490	17,817	17,205
Operating profit	41	45	114	168
Operating margin, %	0.6	0.7	0.4	0.7
Average number of employees1	-	-	1,089	1,078
Delivery reliability2	-	97.9	-	97.5

1) Calculation of the number of employees has been adjusted in 2013, and thus the comparative figure has also been adjusted. 2) Delivery reliability cannot be measured at present due to the implementation of the new business system.

Axfood Närlivs

Fourth quarter

Axfood Närlivs once again posted favourable growth and improved earnings. Axfood Snabbgross performed very well, mainly owing to strengthened campaign offerings and an increase in the number of customers. Sales during the fourth quarter amounted to SEK 1,596 m (1,570), an increase of 1.7%.

Operating profit for the fourth quarter totalled SEK 34 m (28), and the operating margin was 2.1% (1.8%). During the period Axfood Närlivs implemented the new business system at one of its smaller warehouses. During the first quarter of 2014, the largest warehouse, in Örebro, will also install the system.

Full year

Axfood Närlivs' sales during the period January–December amounted to SEK 6,489 m (6,336), an increase of 2.4%. Operating profit for the period improved considerably and amounted to SEK 140 m (114). The operating margin was 2.2% (1.8%).

SEK m	Q4 2013	Q4 2012	Full year 2013	Full year 2012
Net sales	1,596	1,570	6,489	6,336
Distributed sales	1,492	1,453	6,049	5,822
Operating profit	34	28	140	114
Operating margin, %	2.1	1.8	2.2	1.8
Axfood Snabbgross, no. stores	-	-	20	20
Average number of employees1	-	-	869	865
Delivery reliability, %	97.5	98.2	97.6	97.9

1) Calculation of the number of employees has been adjusted in 2013, and thus the comparative figure has also been adjusted.

Combination of operations 2013

In connection with the conversion of PrisXtra that was started in 2013, PrisXtra ceased to constitute its own segment in the reporting and is part of Hemköp as from the first of January 2013. Comparative figures for 2012 have been adjusted and are shown in the tables below

Hemköp 2012, pro forma per quarter
	Q1	Q2	Q3	Q4
Sales
PrisXtra	132	130	113	127
Hemköp	1,239	1,271	1,225	1,347
Hemköp total	1,371	1,401	1,338	1,474
Operating profit
PrisXtra	4	5	4	3
Hemköp	24	22	32	55
Hemköp total	28	27	36	58

Hemköp 2012, pro forma accumulated
	Q2	Q3	Full year
Sales
PrisXtra	262	375	502
Hemköp	2,510	3,735	5,082
Hemköp total	2,772	4,110	5,584
Operating profit
PrisXtra	9	13	16
Hemköp	46	78	133
Hemköp total	55	91	149

Disclosures about financial assets and liabilities

The tables below provide disclosures about how fair value has been determined for the financial instruments that are measured at fair value in the statement of financial position. The breakdown of how fair value is determined is done according to the following three levels:

Level 1: according to prices in an active market for the same instruments. Axfood has no financial instruments at this level.

Level 2: based on direct or indirect observable market data that is not included in level 1. Level 2 includes derivatives used in hedge accounting and available-for-sale financial assets.

Level 3: based on input data that is not observable in the market. Axfood has no financial instruments at this level.

Group, 31/12/2013	Financial assets and liabilities
SEK m	Carrying amount	Fair value	Non-financial assets and liabilities	Total, statement of financial position
Financial assets	50	50	10	60
Accounts receivable – trade	909	909	-	909
Cash and bank balances	457	457	-	457
Total assets	1,416	1,416	10	1,426
Non-current interest-bearing liabilities	61	61	410	471
Current interest-bearing liabilities	64	64	-	64
Other current noninterest-bearing liabilities	1	1	1,963	1,964
Accounts payable – trade	2,225	2,225	-	2,225
Total liabilities	2,351	2,351	2,373	4,724

Parent Company, 31/12/2013	Financial assets and liabilities
SEK m	Carrying amount	Fair value	Non-financial assets and liabilities	Carrying amount
Financial assets	6	9	-	6
Receivable from Group companies	889	889	1,314	2,203
Cash and bank balances	114	114	-	114
Total assets	1,009	1,012	1,314	2,323
Accounts payable – trade	26	26	-	26
Liabilities to Group companies	1,272	1,272	13	1,285
Total liabilities	1,298	1,298	13	1,311

Disclosures about fair value of financial instruments

The carrying amount of interest-bearing assets and liabilities in the statement of financial position can deviate from their fair value due to changes in market interest rates, among other things. To establish the fair value of financial assets and liabilities, market value has been used for assets and liabilities as far as possible. Axfood's holdings of tenant-owner rights are stated at market value (level 2). Interest-bearing financial assets and liabilities that are not derivative instruments are calculated based on future cash flows of principal amounts and interest, discounted to the current market interest rate while taking into account the risk-free interest rate and risk premium for Axfood on the balance sheet date (the effective interest method – level 2). For current financial assets and liabilities with variable interest rates, fair value is considered to be the same as the carrying amount.

The carrying amount of trade accounts receivable, other receivables, cash and cash equivalents, trade accounts payable and other liabilities is a reasonable approximation of fair value.

Axfood uses the market interest rate in effect on the accounting date plus a relevant interest rate spread to discount financial instruments. The interest rate used for interest-bearing liabilities as per 31 December 2013 was 1.35% (2.52%).

SIGNIFICANT RISKS AND UNCERTAINTIES

In the course of its business the Axfood Group is exposed to operational, strategic and financial risks. Operational and strategic risks include business and liability risks, among others, while financial risks include liquidity risk, interest rate risk and currency risk.

Axfood works continuously with risk identification and assessment. One of the most significant business risks that Axfood has identified in its safety analysis work is of a total loss, such as from a fire at one of the central warehouses in Jordbro, Backa or Örebro. Major emphasis is put on preventive work, and the organization for this is well developed, as is the Company's planning to maintain operating continuity in the event of unforeseen events.

For a thorough account of the risks that affect the Group, please refer to the 2012 Annual Report, and as from 17 February 2014, to the 2013 Annual Report.

SEASONAL EFFECTS

Axfood has no significant seasonal variations.

SUSTAINABLE DEVELOPMENT

One of Axfood's strategic objectives is to be an active driver of work with sustainable development and thereby be best in the industry. Sustainability work strengthens Axfood's business and contributes to longterm development of the operations. In the day-to-day activities, sustainability aspects are integrated in product purchasing and selection as well as in logistics, product flows and store operations. Priority areas for Axfood's environmental sustainability work are energy consumption, transports and the eco-cycle. All of these areas have major bearing on Axfood's business and have large potential for improvement.

One overall goal is to reduce the climate impact of the Group's operations by 75% during the period 2009–2020. One area of importance going forward involves work on improving energy efficiency and changing over to refrigerants that do not have any adverse climate impact. A system for detailed measurement and control of electricity consumption is currently being installed in Axfood's Group-owned stores and warehouses. The system will enable central regulation and monitoring aimed at reducing electricity consumption. In addition, Dagab has installed one of Sweden's largest solar panel systems that helps power the refrigeration system at the company's cold storage warehouse in Gothenburg.

Dagab and Axfood Närlivs are working continuously to minimize their climate impact. These measures include maximizing load capacity in delivery vehicles and the use of so-called eco-driving techniques to reduce fuel consumption. To further lower emissions from Dagab's and Axfood Närlivs' transports, "Evolution" diesel fuel is used, which is partly based on pine oil and produces lower CO2 emissions than conventional diesel fuel.

Another important goal is to increase recycling, where most waste is either recycled for use as raw material by the recycling industry or is converted to energy.

During the autumn an ambitious diversity goal was also set, with the vision that the Group's employees will reflect the diversity of the Group's customers. Axfood is a firm believer that diversity increases business benefit.

A more detailed description of Axfood's work with environmental matters can be found at axfood.se and in Axfood's Sustainability Report for 2013, which will be published on 17 February. See the table on page 16 for data on electricity consumption and emissions from transports.

PARENT COMPANY

Other operating revenue for the Parent Company during the period January–December amounted to SEK 164 m (184). After selling and administrative expenses, totalling SEK 270 m (284), and net financial items totalling SEK 3 m (-3), profit after financial items was SEK -103 m (-103). Capital expenditures during the period totalled SEK 29 m (4).

The Parent Company's interest-bearing net debt was SEK 306 m at year-end, compared with SEK 349 m in December 2012. The Parent Company has no significant transactions with related parties, other than transactions with subsidiaries.

ACCOUNTING POLICIES

Axfood applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, the Swedish Annual Accounts Act, and recommendation RFR 2 – Reporting for Legal Entities, issued by the Swedish Financial Reporting Board (RFR). In order to prepare the financial statements in accordance with IFRS, the Board and Executive Committee make estimations and assumptions that affect the Company's result and position as well as other disclosures in general. These estimations and assumptions are based on historical experience and are reviewed on a regular basis.

New accounting policies 2013

Starting on 1 January 2013 the Group applies IFRS 13 Fair Value Measurement, entailing a new, uniform manner of measuring fair value and improved disclosure requirements.

Effective 1 January 2013, the Group applies the amended IAS 19, Employee Benefits: changes in reporting of actuarial gains and losses. Starting on 1 January 2013, the Group has changed over from reporting actuarial gains and losses in accordance with the corridor method to reporting them in their entirety in other comprehensive income in the period in which they arise. This results primarily in more relevant information in the statement of financial position, since the reported pension obligation after the change specifies a value that better represents the actual net obligation of the Group. The Group also applies the amendments to IAS 1 Presentation of Financial Statements: reporting of items in other comprehensive income. The changed accounting policy has resulted in a reduction of opening equity in 2012 by SEK 95 m (including the effect of the changed tax rate) and a decrease in closing equity in 2012 of SEK 76 m. The opening provision for pensions in 2012 increases by SEK 98 m, and the closing provision for pensions in 2012 increases by SEK 79 m. Operating profit for 2012 is positively affected by SEK 8 m, and comprehensive income for the year is affected positively by SEK 19 m.

In other respects, the accounting policies used by the Parent Company and Group in this report are unchanged compared with the most recently published annual report.

New accounting policies in 2014 and later

A number of new or amended IFRSs and interpretations take effect in 2014 and later, and have not been prospectively applied in the preparation of this year-end report. New IFRSs and interpretations or amendments that will be applicable starting in financial years after 2014 and later are not planned to be applied prospectively. To the extent that anticipated effects on the financial statements of the application of the following new or amended IFRSs and interpretations are not described below, Axfood has determined that they will not have any material effect on the consolidated accounting.

Effective 1 January 2014 the Group applies IFRSs 10, 11 and 12. IFRS 10 Consolidated Financial Statements supersedes IAS 27 with respect to the rules for consolidated accounting and SIC-12 with respect to when a company is to be covered by consolidated accounting rules. IFRS 10 includes a model that is to be used for determining if control exists or not. IFRS 11 Joint Arrangements mainly entails two changes: determining if an arrangement is a joint operation or a joint venture, and the elimination of proportionate consolidation for joint ventures. IFRS 12 Disclosure of Interests in Other Entities requires a range of disclosures about an entity's interests in other companies in the consolidated financial statements, and more extensive disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated "structured entities". The current opinion is that the investments in joint arrangements and associated companies in the Group will not need to be consolidated in accordance with IFRS 10.

FORECAST

Axfood's goal for 2014 is to exceed the level of profit in 2013.

NEXT REPORT

The interim report for the period January–March 2014 will be presented on 24 April 2014.

ANNUAL GENERAL MEETING

The Annual General Meeting will be held at 5 p.m. on 12 March 2014 at Cirkus, in Stockholm. The 2013 Annual Report will be published on 17 February 2014 on Axfood's website, at which time it will be available at Axfood's head offices in Stockholm. In addition, printed versions will be distributed by post to shareholders, upon request, approximately one week before the Annual General Meeting.

This year-end report has not been reviewed by the Company's auditors.

Anders Strålman President and CEO

PRESS RELEASES DURING THE FOURTH QUARTER

30/10/2013 Axfood to reorganize 12/11/2013 Axfood named "Competence Company of the Year" 13/11/2013 Hemköp takes unique initiative with MSC certification of fish counters 27/11/2013 Axfood's CFO named "CFO of the Year"

FINANCIAL STATEMENTS, GROUP

Condensed statement of profit or loss and other comprehensive income, Group
Q4 2013 Q4 2012 Full year 2013 Full year 2012 SEK m
Net sales	9,550	9,252	37,522	36,306
Cost of goods sold	-8,239	-8,028	-32,392	-31,416
Gross profit	1,311	1,224	5,130	4,890
Selling/administrative expenses, etc.	-971	-966	-3,828	-3,690
Operating profit	340	258	1,302	1,200
Net financial items Profit before tax	-3	-8	-24	-38
	337	250	1,278	1,162
Tax	-80	-21	-285	-260
Profit for the period	257	229	993	902
Other comprehensive income
Items that cannot be reclassified to profit or loss
for the period
Revaluation of defined benefit pension plans	27	4	18	16
Tax attributable to items that cannot be reclassi fied to profit or loss for the period	-6	-1	-4	-4
Items that have been reclassified or can be re classified to profit or loss for the period
Change in fair value of forward exchange con	-1	0	-1	0
tracts Change in fair value of available-for-sale financial
assets	-	0	-	0
Tax attributable to items that have been reclassi fied or can be reclassified to profit or loss for the	0	0	0	0
period
Other comprehensive income for the period	20	3	13	12
Total comprehensive income for the period	277	232	1,006	914
Operating profit includes depreciation/amortization	171	162	667	637
of Earnings per share, SEK	4.79	4.37	18.80	17.20
Profit for the period attributable to
Owners of the parent	254	230	987	902
Non-controlling interests	3	-1	6	0
Total comprehensive income for the period at tributable to
Owners of the parent	274	233	1,000	914
Non-controlling interests	3	-1	6	0

On account of new accounting policies that took effect on 1 January 2013 with respect to pension costs (IAS 19), the comparative figures for 2012 have been adjusted.

Condensed statement of financial position, Group
SEK m	31/12/2013	31/12/2012
Assets
Goodwill	1,800	1,759
Financial assets	60	45
Other non-current assets	2,797	2,741
Total non-current assets	4,657	4,545
Inventories	1,906	1,932
Accounts receivable – trade	909	867
Other current assets	1,000	955
Cash and bank balances	457	521
Total current assets	4,272	4,275
Total assets	8,929	8,820
Shareholders' equity and liabilities
Equity attributable to owners of the parent	3,768	3,398
Equity attributable to non-controlling interests	34	28
Total shareholders' equity	3,802	3,426
Non-current interest-bearing liabilities	471	495
Noninterest-bearing non-current liabilities	403	331
Total non-current liabilities	874	826
Current interest-bearing liabilities	64	366
Accounts payable – trade	2,225	2,359
Other current noninterest-bearing liabilities	1,964	1,843
Total current liabilities	4,253	4,568
Total shareholders' equity and liabilities	8,929	8,820
Pledged assets	32	29
Contingent liabilities	27	32

On account of new accounting policies that took effect on 1 January 2013 with respect to pension costs (IAS 19), the comparative figures for 2012 have been adjusted.

Condensed statement of cash flows, Group
SEK m	Full year 2013	Full year 2012
Operating activities Cash flow from operating activities before changes in working capital, before paid tax	1,907	1,809
Paid tax	-235	-135
Changes in working capital	-76	241
Cash flow from operating activities	1,596	1,915
Investing activities
Acquisitions of operations, net	-19	-113
Acquisitions of non-current assets, net	-690	-703
Change in financial non-current assets, net	-9	0
Cash flow from investing activities	-718	-816
Financing activities
Change in interest-bearing liabilities	-312	-265
Dividend payout	-630	-630
Cash flow from financing activities	-942	-895
Cash flow for the period	-64	204

Condensed statement of changes in equity, Group
SEK m	31/12/2013	31/12/2012
Amount at start of year	3,426	3,237
Change in accounting policy	-	-95
Total comprehensive income for the period	1,006	914
Dividend to shareholders	-630	-630
Amount at end of period	3,802	3,426

Key ratios and other data, Group

	Full year 2013	Full year 2012
Operating margin, %	3.5	3.3
Margin after financial items, %	3.4	3.2
Equity ratio, %	42.6	38.8
Debt-equity ratio, net, multiple	0.0	0.1
Debt-equity ratio, multiple	0.1	0.3
Interest coverage, multiple	43.6	26.8
Capital employed, SEK m	4,337	4,288
Return on capital employed, %	30.3	28.2
Return on shareholders' equity, %	27.5	27.2
Capital expenditures, SEK m	806	932
Earnings per share, SEK1	18.80	17.20
Dividend per share, SEK	15.00	12.00
Shareholders' equity per share, SEK1, 2	71.82	64.76
Cash flow per share, SEK1	-1.2	3.9
Number of shares outstanding1	52,467,678	52,467,678
Average number of employees3	8,285	8,021
Work attendance rate, %	94.8	95.0
CO2, kg/tonne goods4	21.9	20.1
Electricity consumption, kWh/m2 (stores and warehouses) 5	361.7	363.6

Quarterly overview

	Q1 12	Q2 12	Q3 12	Q4 12	Q1 13	Q2 13	Q3 13	Q4 13
Sales	8,718	9,292	9,044	9,252	8,950	9,557	9,465	9,550
Operating profit	250	322	370	258	254	326	382	340
Operating margin, %	2.9	3.5	4.1	2.8	2.8	3.4	4.0	3.6
Earnings per share, SEK1	3.40	4.35	5.08	4.37	3.69	4.74	5.58	4.79
Shareholders' equity per share, SEK1	52.2	56.1	60.8	64.8	56.5	61.1	66.6	71.8
Return on shareholders' equity, %	34.2	31.7	29.0	27.2	31.8	30.2	28.4	27.5
Cash flow from operating activities per share, SEK	7.9	10.6	7.9	10.1	9.7	6.1	5.4	9.2
Capital expenditures	323	214	142	253	210	188	153	255

1) The number of shares is the same before and after dilution. The average number of shares is the same as the number of shares

outstanding. Axfood has no holdings of treasury shares.

2) Net asset value per share corresponds to shareholders' equity per share.

3) Calculation of the number of employees was changed during the year. The comparative figures have been adjusted.

4) Moving 12-month figures. Pertains to the total volume for Dagab's and Axfood Närlivs' transports from warehouses to stores with own delivery vehicles.

5) Moving 12-month figures. Pertains to wholly owned stores and warehouses.

On account of new accounting policies that took effect on 1 January 2013 with respect to pension costs (IAS 19), the comparative figures for 2012 have been adjusted.

FINANCIAL STATEMENTS, PARENT COMPANY

Condensed income statement, Parent Company
SEK m	Q4 2013	Q4 2012	Full year 2013	Full year 2012
Net sales	-	-	-	-
Selling/administrative expenses, etc.	-26	-28	-106	-100
Operating profit	-26	-28	-106	-100
Other net financial items	3	0	3	-3
Profit after financial items	-23	-28	-103	-103
Appropriations, net	1,010	973	1,010	973
Profit before tax	987	945	907	870
Tax	-219	-252	-201	-232
Net profit for the period	768	693	706	638
Operating profit includes
depreciation/amortization totalling	1	0	1	1

Profit for the period corresponds to total comprehensive income for the period.

Condensed balance sheet, Parent Company
SEK m	31/12/2013	31/12/2012
Assets
Property, plant and equipment	32	5
Participations in Group companies	3,606	3,573
Other financial non-current assets	6	5
Deferred tax assets	6	7
Total non-current assets	3,650	3,590
Receivables from Group companies1	2,203	2,213
Other current assets	21	13
Cash and bank balances	114	0
Total current assets	2,338	2,226
Total assets	5,988	5,816
Shareholders' equity and liabilities
Restricted shareholders' equity	287	287
Unrestricted shareholders' equity	3,468	3,392
Total shareholders' equity	3,755	3,679
Untaxed reserves	867	563
Non-current interest-bearing liabilities	25	28
Noninterest-bearing non-current liabilities	2	3
Total non-current liabilities	27	31
Current interest-bearing liabilities	-	314
Liabilities to Group companies2	1,285	1,155
Accounts payable – trade	26	19
Other current noninterest-bearing liabilities	28	55
Total current liabilities	1,339	1,543
Total shareholders' equity and liabilities	5,988	5,816
Pledged assets	-	-
Contingent liabilities	329	360
1) Of which, interest-bearing receivables	877	920
2) Of which, interest-bearing liabilities	1,272	927

FINANCIAL DEFINITIONS

Average number of employees: Total number of hours worked divided by the number of hours worked per year (1,920 hours).

Capital employed: Total assets less noninterest-bearing liabilities and noninterest-bearing provisions. Average capital employed is calculated as capital employed at the start of the year plus capital employed at the end of the year, divided by two.

Cash flow per share: Cash flow for the year divided by a weighted average number of shares outstanding.

Debt-equity ratio: Interest-bearing liabilities divided by shareholders' equity including non-controlling interests. Dividend yield: Dividend per share divided by the year-

end share price.

Earnings per share: Net profit for the year attributable to owners of the parent divided by a weighted average number of shares outstanding.

Equity ratio: Shareholders' equity including noncontrolling interests as a percentage of total assets. Interest cover ratio: Profit after financial items plus financial expenses, divided by financial expenses.

Margin after financial items: Profit after financial items as a percentage of net sales for the period.

GLOSSARY

Autoorder: An automated store restocking system. Delivery reliability: The share of delivered goods in relation to the share of ordered goods.

E-learning: An interactive training program.

Evolution diesel: Environmental diesel fuel that is based partly on pine oil.

Net asset value per share: Equity attributable to owners of the parent divided by the number of shares outstanding. Net debt: Cash and cash equivalents plus interest-bearing receivables less interest-bearing liabilities and provisions.

Net debt-equity ratio: Interest-bearing liabilities and provisions less cash and cash equivalents and interestbearing receivables, divided by shareholders' equity including non-controlling interests.

Operating margin: Operating profit as a percentage of net sales for the period.

P/E multiple before and after dilution: Share price in relation to earnings per share.

Return on capital employed: Profit after financial items, plus financial expenses, as a percentage of average capital employed.

Return on shareholders' equity: Net profit for the year attributable to owners of the parent as a percentage of average equity attributable to owners of the parent. Average equity is calculated as shareholders' equity at the start of the year plus shareholders' equity at the end of the year, divided by two.

GRI: Global Reporting Initiative.

Like-for-like sales: Like-for-like sales refer to store sales reported on the basis of an entire comparison period, i.e., two comparable years.

Axfood AB, SE-107 69 Stockholm Visitors' address: Norra Stationsgatan 80 C Tel. +46-8-553 990 00 Fax +46-8-730 26 89 info@axfood.se, axfood.se

ABOUT AXFOOD

Axfood conducts food retail and wholesale business in Sweden. Retail business is conducted through the wholly owned grocery chains Willys and Hemköp. The number of Group-owned stores is 252. In addition, Axfood collaborates with a number of proprietor-run stores that are tied to Axfood through agreements, including stores in the Hemköp chain, but also stores operating under the Handlar'n and Tempo profiles. Wholesale business is conducted through Dagab and Axfood Närlivs. Axfood has an approximate 20% share of the food retail market in Sweden. Axfood is listed on Nasdaq OMX Stockholm AB's Large Cap list. Axfood's principal owner is Axel Johnson AB, with 50.1% of the shares

Mission

Axfood's business mission is to develop and run successful food retail concepts based on clear and attractive customer offerings.

Business model

Axfood's business model is built upon a strong purchasing function, focus on private label products, efficient logistics and attractive grocery stores.

Strategy

Axfood will be the most profitable company in the Swedish food retail market and grow its market shares by strengthening and developing its position. Axfood's longterm goal is to attain an operating margin of 4%. Axfood's strategy is built upon five cornerstones: customers, profitability, growth, the environment and social responsibility, and employees and organization. Read more at axfood.se.

Value drivers

Factors that affect Axfood's performance include:

• Access to strategic store locations
• Development of an attractive product offering
• Innovativeness for enhancing customer benefit