Axfood — Earnings Release 2020

Feb 4, 2021

A strong fourth quarter ends an exceptional year

Fourth quarter summary

• Consolidated net sales totalled SEK 13,633 m (13 040), an increase of 4.6%.
• Operating profit totalled SEK 566 m (487), an increase of 16.1%. The operating margin was 4.1% (3.7%).
• Net profit for the period totalled SEK 409 m (359), and earnings per share before dilution were SEK 2.02 (1.68).
• The quarter was characterized by changed shopping behaviour among consumers due to the spread of the coronavirus/Covid-19. An increase in consumption of food at home had a favourable impact on sales. However, certain businesses with exposure to cafés and restaurants as well as cross-border shopping and central locations where customer traffic has decreased significantly continued to be negatively impacted, and to a higher negative extent than during the third quarter.
• In November Snabbgross launched a new B2C store concept, Snabbgross Club.

Summary January–December

• Consolidated net sales totalled SEK 53,696 m (50,740), an increase of 5.8%.
• Operating profit totalled SEK 2,510 m (2,288), an increase of 9.7%. The operating margin was 4.7% (4.5%).
• Net profit for the period totalled SEK 1,862 m (1,679), and earnings per share before dilution were SEK 9.12 (7.87).

Significant events after the balance sheet date

• The Board of Directors proposes an increased dividend of SEK 7.50 per share (7.25). The dividend is split up into two payment occasions.
• Capital expenditures in 2021 are expected to amount to SEK 1,800–1,900 m excluding acquisitions and right-of-use assets.
• During 2021 Axfood plans to establish 5-10 new stores.

Growth in store sales for the Axfood Group during the fourth quarter of 2020

4.6%.

Net sales growth for the Axfood Group during the fourth quarter of 2020

16.1% Operating profit growth for the Axfood Group during the

fourth quarter of 2020

Key ratios

	Q4	Q4		12 mos	12 mos
SEK m	2020	2019	Change	2020	2019	Change
Net sales	13,633	13,040	4.6%	53,696	50,740	5.8%
Operating profit (EBIT)	566	487	16.1%	2,510	2,288	9.7%
Operating margin, %	4.1	3.7	0.4	4.7	4.5	0.2
Profit for the period	409	359	13.7%	1,862	1,679	11.0%
Earnings per share before dilution, SEK	2.02	1.68	20.2%	9.12	7.87	15.9%
Cash flow from operating activities per share, SEK	7.12	5.26	35.4%	23.18	16.98	36.5%
Return on capital employed, %1)	24.2	30.1	-5.9	24.2	30.1	-5.9
Return on shareholders' equity, %1)	45.7	39.6	6.1	45.7	39.6	6.1
Shareholders' equity per share, SEK	–	–	–	20.70	19.21	7.8%

1)Rolling 12-month figures.

For further information, please contact:

Alexander Bergendorf, Head of Investor Relations + 46 73 049 18 44

The information herein is such that Axfood AB (publ) is required to make public in accordance with the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person listed above, at 7 a.m. CET on 4 February 2021.

Invitation to the presentation of the 2020 year-end report

Axfood will present the 2020 year-end report in as conference call at 9.30 a.m. (CET) today. The report will be presented by Klas Balkow, President and CEO, and Anders Lexmon, CFO. To follow the

presentation, visit www.axfood.com or ring:

Sweden: +46 8 566 427 06, UK: +44 333 300 9030, USA: +1 833 823 0590.

A strong year under extraordinary circumstances

A strong fourth quarter sums up an exceptional 2020, a year in which Axfood continued to grow faster than the market and with improved profitability. Even though the pandemic has required immense focus, we succeeded in maintaining a high pace of development and progress in our ambitious investments for the future. We ended the fourth quarter and have moved in to the new year with a stronger market position and clear plans for continued development.

Axfood's favourable performance continued during the fourth quarter with 7.4% growth in store sales. High productivity in Dagab and improved delivery reliability laid the foundation for a good Christmas shopping season and a strong close to the year. At the same time, online B2C sales grew by a full 157% and continued to be driven by considerably higher growth for the store pickup delivery option, Click and Collect. It is gratifying that we managed to end the year with stronger earnings during the fourth quarter and improved profitability.

Willys consolidates its leading position in the discount segment

Willys' impressive performance continued during the closing months of the year, and during 2020 it further strengthened its position as Sweden's leading discount chain. More and more people have come to appreciate Willys' concept, which the ranking in the top-ten list of Sweden's most highly reputed companies is proof of. We continue to invest in the establishment of new stores, a greater online presence, modernization of existing stores and stable operations, all to attract even more customers and further improve customer satisfaction.

The situation for the cross-border grocery chain Eurocash worsened during the fourth quarter as Norway's restrictions on travel to Sweden were expanded in early October. However, we are convinced that cross-border shopping will recover once the restrictions are lifted, as the incentives for Norwegians to shop for groceries in Sweden will remain. We have a positive view of the future for Eurocash and recently acquired the hypermarket Långflons Stormarknad to strengthen Eurocash's presence along the Norwegian border.

Stable growth for Hemköp despite challenges at central urban locations

Owing to the pandemic the fourth quarter remained challenging, especially for Hemköp's large Group-owned stores at central locations in larger cities. The Hemköp concept continues to attract more and more store managers, and with the investments we are making to strengthen the customer meeting, accelerate the online rollout and launch an improved loyalty programme in Klubb Hemköp, we are strengthening the chain over time. Tempo delivered a strong fourth quarter and ended the year with very favourable performance.

Higher market shares for Snabbgross in a weak market

Continued weak performance in the restaurant market as a result of the pandemic had a negative impact on Snabbgross during the fourth quarter. Quarterly sales decreased compared with the same period a year ago, but to a considerably less extent than the market. In November the all new Snabbgross Club store concept was inaugurated, which offers consumers a unique and attractively priced assortment in bulk packaging. The concept has been well-received, and it is clear that there is a need and keen interest.

Higher productivity at Dagab

Dagab considerably increased its profitability during the fourth quarter and capped off a year in which operations maintained stable product supply in all sales channels despite a highly challenging situation affected by the pandemic. Dagab has supported the chains in an exceptional way and laid the foundation for the Group's profitability improvement with steadily improved productivity.

Continued high pace of development

On the tailwinds of a financially strong year we are continuing development in areas such as logistics, with automation and transport optimization, upgraded IT platforms, new checkout systems, more stores and new concepts, a higher degree of digitalization and a more data-driven way of working. We are also stepping up the pace and raising our level of ambition in the area of sustainability with focus on the entire value chain. We are striving to be a positive force for change that contributes to development in society.

Axfood's financial position continues to be strong, and we estimate a capex need in 2021 of SEK 1,800–1,900 m, which is higher than the 2020 level owing to the investment plan for our new logistics centre. We also expect to establish 5-10 new stores and further strengthen our online availability and presence. The Board proposes a dividend of SEK 7.50 per share, an increase of 3 percent.

The fourth quarter crowns an eventful year for the Axfood family. I am proud of all the great efforts that have been made in various parts of our organization to live up to the important and societally essential role that the grocery industry has, especially in this exceptional and extraordinary time.

Klas Balkow President and CEO, Axfood AB

"A strong fourth quarter sums up an exceptional 2020, a year in which Axfood continued to grow faster than the market and with improved profitability."

The Swedish food retail market

The food retail industry is generally less sensitive to economic swings than other trade sectors. The industry is mainly affected by population growth and inflation, but also by megatrends such as digitalization, demographic changes, sector convergence, health and sustainability, and price value.

During the first two decades of the 21st century the share of household expenses spent on groceries hovered around 12%. At the same time, the market for prepared food has grown, and the share of household expenses consumed at cafés and restaurants has neared 6%, an increase from around 4% at the start of the millennium.

In recent years, food retail sales online have grown rapidly, and this growth accelerated in 2020. E-commerce still accounts for a small share of the food retail market, however – nearly 5% in 2020 by certain estimates. In the online segment, growth is considerably stronger for the store pick-up alternative than home delivery.

According to the Swedish Food Retailers Federation's (SvDH) food retail index, total sales growth during the fourth quarter of 2020 was 7,5%, including 136% growth for online. Food price inflation during the period October–December was 1.2%, according to preliminary data from Statistics Sweden.

Covid-19

During the fourth quarter, the Swedish food retail market continued to be impacted by changed shopping behaviours among consumers as a result of the coronavirus/Covid-19. The market has benefited from greater consumption at home, as many people have chosen to stay away from cafés and restaurants. Growth for e-commerce was once again exceptionally high and accelerated over the third quarter. Since many have chosen to eat at home instead of out, performance for the café and restaurant market has remained weak, and a decline in pace was noted compared with the third quarter with the imposition of greater restrictions in society. Sales for cross-border shopping remained at very low levels after Norway extended its quarantine requirement for travel from all regions in Sweden through essentially the entire quarter.

See Note 3 for further information on risks related to impacts from Covid-19.

Growth in store sales for the Axfood Group compared with SvDH's food retail index

1) Axfood began reporting e-commerce sales starting with the first quarter of 2019.

Net sales

Fourth quarter

Consolidated net sales grew 4.6% during the fourth quarter to SEK 13,633 m (13,040). Higher net sales for Willys were partly countered by lower net sales for Snabbgross and lower sales by Dagab to convenience retailers.

Store sales for the Axfood Group amounted to SEK 12,055 m (11,221), and increase of 7.4%. Like-for-like growth was 6.2%. High growth for Willys stores was countered in large part by a sharp drop in sales of nearly 80% for Eurocash in cross-border shopping, which had a negative effect of approximately 3.0 percentage points on growth in store sales for the Axfood Group. Hemköp's Group-owned stores grew at a slower rate than the market, owing to greater exposure to central locations in larger cities, but also to conversions. Retailer-owned Hemköp stores, which have less exposure to central locations in larger cities, once again grew more than the market. Sales for Snabbgross decreased as a result of lower demand in the café and restaurant market.

In online B2C sales, demand grew considerably during the fourth quarter, and Axfood once again grew more than the market. Net sales online totalled SEK 957 m (373), an increase of 157%. The increase is attributable to strong like-for-like sales growth and to Willys' and Hemköp's online rollout to new cities and more stores.

Sales of private label products accounted for 30.8% (29.6%) of the Axfood Group's total store sales during the fourth quarter.

January–December

Consolidated net sales for the period totalled SEK 53,696 m (50,740), an increase of 5.8%. Store sales for the Axfood Group grew 8.7%, and like-for-like sales grew 6.9%. Net sales online totalled SEK 2,827 m (1,333), an increase of 112%.

Net sales per segment

	Q4	Q4		12 mos	12 mos
SEK m	2020	2019	Change	2020	2019	Change
Willys	8,123	7,488	8.5%	31,793	29,029	9.5%
Hemköp	1,656	1,652	0.2%	6,354	6,378	-0.4%
Snabbgross	791	845	-6.3%	3,417	3,443	-0.7%
Dagab	12,310	11,657	5.6%	48,091	44,895	7.1%
Joint-Group	250	237	5.8%	991	928	6.9%
Internal sales between segments that are eliminated
Dagab	-9,264	-8,620	7.5%	-36,028	-33,068	9.0%
Joint-Group/other	-232	-219	6.1%	-923	-865	6.7%
Net sales, total	13,633	13,040	4.6%	53,696	50,740	5.8%

Store sales (including online)

				Change				Change
	Q4	Q4		like-for-	12 mos	12 mos		like-for
SEK m	2020	2019	Change	like stores	2020	2019	Change	like stores
Willys	8,123	7,488	8.5%	6.7%	31,792	29,029	9.5%	7.9%
Hemköp, Group-owned	1,617	1,616	0.1%	2.7%	6,202	6,236	-0.6%	2.8%
Hemköp franchises	2,315	2,118	9.3%	7.1%	8,976	7,940	13.0%	6.3%
Hemköp total	3,932	3,734	5.3%	5.2%	15,178	14,177	7.1%	4.8%
Axfood Group store sales	12,055	11,221	7.4%	6.2%	46,970	43,206	8.7%	6.9%
Snabbgross	791	845	-6.3%	-8.8%	3,417	3,443	-0.7%	-2.2%

Change in store structure

		New establish
	Dec.	ments/	Sales/		Dec.
Number of stores	2019	acquisitions	closures	Conversions	2020
Willys1)	213	5	-1	2	219
Hemköp	67	2 2)	−	-4	65
Snabbgross	24	2	−	−	26
Total, Group-owned	304	9	-1	-2	310
Hemköp franchises	129	2	−	2	133
Tempo franchises	127	−	-1	−	126
Axfood Group total	560	11	-2	−	569
1)Willys	156	4	−	2	162
1)Willys Hemma	50	1	-1	0	50
1)Eurocash	7	−	−	−	7

²Of which, acquisition of one Tempo store.

Growth in store sales for the Axfood Group during the fourth quarter of 2020

4.6%

Net sales growth for the Axfood Group during the fourth quarter of 2020

157% Increase in the Axfood Group's online B2C sales during the

fourth quarter of 2020

Operating profit

Fourth quarter

Consolidated operating profit for the fourth quarter increased to SEK 566 m (487), corresponding to an operating margin of 4.1% (3.7%).

The increase in operating profit is mainly attributable to strong like-for-like sales growth for Willys and a higher operating profit for Dagab. The improved operating profit for Dagab is mainly attributable to the favourable sales performance and improved logistics productivity both for stores and e-commerce. The continuing pandemic has had a positive impact on sales and thus earnings at the same time that performance has been negative for certain businesses with exposure to the café and restaurant market, cross-border shopping and central city locations. Earnings were also charged with costs for handling higher online volumes.

Profit after financial items amounted to SEK 535 m (460). Profit after tax was SEK 409 m (359).

January–December

Operating profit for the period was SEK 2,510 m (2,288), corresponding to an operating margin of 4.7% (4.5%).

Net financial items for the period amounted to SEK -116 m (-115), and profit after financial items totalled SEK 2,394 m (2,173). Profit after tax totalled SEK 1,862 m (1,679).

Operating profit per segment

SEK m	Q4 2020	Q4 2019	Change	12 mos 2020	12 mos 2019	Change
Willys	339	312	8.5%	1,551	1,429	8.5%
Hemköp	53	65	-18.4%	229	243	-6.0%
Snabbgross	28	34	-17.6%	150	167	-9.8%
Dagab	230	152	51.9%	829	678	22.3%
Joint-Group	-85	-76	11.7%	-250	-229	9.0%
Operating profit (EBIT)	566	487	16.1%	2,510	2,288	9.7%
Net financial items	-31	-27		-116	-115
Profit after financial items	535	460		2,394	2,173

Operating margin per segment

%	Q4 2020	Q4 2019	Change	12 mos 2020	12 mos 2019	Change
Axfood	4.1	3.7	0.4	4.7	4.5	0.2
Willys	4.2	4.2	0.0	4.9	4.9	0.0
Hemköp	3.2	3.9	-0.7	3.6	3.8	-0.2
Snabbgross	3.5	4.0	-0.5	4.4	4.8	-0.4
Dagab	1.9	1.3	0.6	1.7	1.5	0.2

Operating segment performance

Willys

Fourth quarter

Net sales for Willys grew 8.5% during the fourth quarter compared with a year ago, to SEK 8,123 m (7,488). Like-for-like sales increased by 6.7%. With its positioning and compelling discount concept, Willys continued to grow faster than the market. Willys continues to develop its offering and concept at a fast pace through expansion of new stores and online as well as through modernization of existing stores. In addition, higher consumption at home as a result of the pandemic had a positive impact on sales. A higher average ticket value and online expansion contributed to the favourable performance. Sharply lower sales for partly owned Eurocash significantly dampened growth for the segment as a whole, owing to an essential halt to crossborder shopping as all regions of Sweden continued to be covered by Norway's quarantine requirement for travel from Sweden. Sales for Eurocash stores fell by nearly 80% compared with the preceding year.

At the end of the fourth quarter Willys had 219 stores (213), including 212 Willys and seven Eurocash. Online shopping expanded during the fourth quarter, and at the end of the quarter Willys offered online shopping at 104 stores (78) in 65 cities (40).

Operating profit for the fourth quarter increased to SEK 339 m (312), corresponding to an operating margin of 4.2% (4.2%). Strong like-for-like sales performance at Willys stores was countered by a loss for Eurocash and higher personnel costs associated with online sales.

January–December

Net sales for Willys for the period totalled SEK 31,793 m (29,029), an increase of 9.5% compared with the same period a year ago. Like-for-like sales increased by 7.9%. Operating profit was SEK 1,551 m (1,429), and the operating margin was 4.9% (4.9%). The earnings improvement is explained by strong like-for-like sales for Willys stores, which were partly countered by the loss for Eurocash and higher personnel costs associated with online sales.

Willys is Sweden's leading discount grocery chain, featuring a wide and deep assortment in Group-owned stores and online. With Sweden's cheapest bag of groceries, Willys aspires to lead and develop the discount segment of food retail. Willys also includes the cross-border grocery chain Eurocash.

Net sales, SEK bn, and operating margin, %1)

SEK m	Q4 2020	Q4 2019	Change	12 mos 2020	12 mos 2019	Change
Net sales	8,123	7,488	8.5%	31,793	29,029	9.5%
Change in like-for-like sales, %	6.7	5.1	1.6	7.9	6.2	1.7
Operating profit (EBIT)	339	312	8.5%	1,551	1,429	8.5%
Operating margin, %	4.2	4.2	0.0	4.9	4.9	0.0
Number of Group-owned stores	–	–	–	219	213	6
Average number of employees during the period	–	–	–	6,109	5,603	506
Private label share, %	32.4	31.1	1.3	32.5	31.7	0.8
Sustainability-labelled products as % of total sales	28.6	28.6	0.0	29.7	29.4	0.3
Sales of organic products as % of total food sales	5.4	5.4	0.0	5.5	5.6	-0.1
Growth in plant-based protein substitutes, %	15.1	13.0	-4.8	21.4	16.5	4.9
KRAV-labelled meat as % of total meat sales	2.0	2.1	-0.1	2.1	2.3	-0.2

Hemköp

Fourth quarter

Net sales for Group-owned Hemköp stores (including franchise fees) during the fourth quarter totalled SEK 1,656 m (1,652). Growth in store sales including Hemköp franchises was 5.3%. A higher average ticket value and e-commerce expansion contributed to the favourable sales performance.

Sales for Group-owned Hemköp stores totalled SEK 1,617 m (1,616). Like-for-like sales for Group-owned stores increased by 2.7%. Sales for franchise stores grew 9.3% to SEK 2,315 m (2,118). Like-for-like sales increased by 7.1%. Higher consumption at home during the continuing pandemic had a positive effect on sales, especially for stores near residential areas. The Groupowned Hemköp stores have a higher share of stores at central locations in larger cities, which have been negatively affected by sharply reduced customer traffic compared with the retailerowned Hemköp stores, the majority of which are located near residential areas. Stores in the Tempo chain continued to show very strong growth.

The number of Group-owned stores decreased by two, net, compared with the end of the fourth quarter a year ago. Since the fourth quarter of 2019, four new Hemköp franchise stores have been added, net. Hemköp maintained a fast pace in its online roll-out and at the end of the fourth quarter offered online shopping at 48 stores (19) in 30 cities (9).

Operating profit for the fourth quarter totalled SEK 53 m (65), corresponding to an operating margin of 3.2% (3.9%). The decrease in operating profit was mainly driven by a sharp decline in sales for a number of stores at central locations in larger cities and higher personnel costs associated with online sales.

January–December

Net sales for Group-owned Hemköp stores (including franchise fees) during the period totalled SEK 6,354 m (6,378). Growth in store sales including Hemköp franchises and online was 7.1%.

Sales for Group-owned stores totalled SEK 6,202 m (6,236) during the period, a decrease of 0.6%. Like-for-like sales for Group-owned stores increased by 2.8%. Sales for franchise stores totalled SEK 8,976 m (7,940), an increase of 13.0%, with a 6.3% increase in like-for-like sales. Nine stores in the Östenssons chain are included as from 1 September 2019.

Operating profit for the period was SEK 229 m (243), corresponding to an operating margin of 3.6% (3.8%). The decrease in operating profit was mainly driven by a sharp decline in sales for a number of stores at central locations in larger cities and higher personnel costs associated with online sales.

Hemköp offers an attractively priced and wide assortment with a rich offering of fresh products. Hemköp's Group-owned stores, franchise stores and online business aim to inspire good meals in a simple and painstaking manner. Hemköp also includes Tempo, a mini-mart format comprising retailer-owned stores.

Net sales, SEK bn, and operating margin, %1)

	Q4	Q4		12 mos	12 mos
SEK m	2020	2019	Change	2020	2019	Change
Net sales	1,656	1,652	0.2%	6,354	6,378	-0.4%
Change in like-for-like sales, Group-owned stores, %	2.7	1.7	1.0	2.8	1.3	1.5
Operating profit (EBIT)	53	65	-18.4%	229	243	-6.0%
Operating margin, %	3.2	3.9	-0.7	3.6	3.8	-0.2
Number of Group-owned stores	–	–	–	65	67	-2
Average number of employees during the period	–	–	–	1,658	1,739	-81
Private label share, %	26.5	25.9	0.6	26.3	25.9	0.4
Sustainability-labelled products as % of total sales	26.6	26.4	0.2	28.2	27.6	0.6
Sales of organic products as % of total food sales	8.4	8.5	-0.1	8.7	8.9	-0.3
Growth in plant-based protein substitutes, %	6.1	5.0	1.1	8.9	7.6	1.2
KRAV-labelled meat as % of total meat sales	6.1	6.9	-0.8	6.9	7.8	-0.9

Snabbgross

Fourth quarter

Snabbgross's net sales totalled SEK 791 m (845) during the fourth quarter, a decrease of 6.3% compared with a year ago. Snabbgross was once again negatively affected by the weak performance in the café and restaurant market as people in pace with the imposition of stricter pandemic restrictions chose to a greater extent than in the third quarter to eat at home instead of visiting cafés and restaurants. However, performance for Snabbgross is believed to have been considerably better than for the market as a whole. Despite the drop in net sales, Snabbgross's accessibility through its store network and attractive customer offerings resulted in an increase in the number of unique customers, where many appreciated the flexibility of being able to shop in stores. To give customers more options for grocery shopping during the continuing pandemic, during the fourth quarter Snabbgross continued to keep more than half of its stores open on a temporary basis for sales directly to consumers. During the quarter a new store concept was opened for consumers outside of Stockholm, Snabbgross Club. At the end of the quarter Snabbgross had 26 stores (24).

Operating profit for the period decreased to SEK 28 m (34), largely owing to the negative like-for-like sales performance. The operating margin decreased to 3.5% (4.0%).

January–December

Net sales for Snabbgross totalled SEK 3,417 m (3,443) during the period, a decrease of 0.7%. Operating profit for the period was SEK 150 m (167), and the operating margin was 4.4% (4.8%). The lower operating profit is mainly attributable to negative like-for-like sales performance.

SEK m	Q4 2020	Q4 2019	Change	12 mos 2020	12 mos 2019	Change
Net sales	791	845	-6.3%	3,417	3,443	-0.7%
Change in sales, like-for-like stores, %	-8.8	6.2	-15.0	-2.2	6.4	-8.6
Operating profit (EBIT)	28	34	-17.6%	150	167	-9.8%
Operating margin, %	3.5	4.0	-0.5	4.4	4.8	-0.4
Number of stores	–	–	–	26	24	2
Average number of employees during the period	–	–	–	427	411	16
Share of sustainability-labelled products, %	18.3	18.5	-0.2	18.6	18.6	0.0

Dagab

Fourth quarter

Net sales for the fourth quarter totalled SEK 12,310 m (11,657), an increase of 5.6%. The favourable growth was mainly attributable to strong sales to Willys and Hemköp. Dagab's sales to convenience retailers decreased compared with the same period a year ago, as many people opted to stay home in pace with increased pandemic restrictions. Lower sales to Eurocash and a decrease in sales for Urban Deli also had a negative impact on Dagab's net sales.

Operating profit was SEK 230 m (152), corresponding to an operating margin of 1.9% (1.3%). The increase is mainly attributable to the favourable sales performance, but also to high capacity utilization and improved logistics productivity both for stores and e-commerce. A wellestablished level of service laid the foundation for high delivery reliability for Christmas holiday shopping. Work on improving efficiency in the joint-Group dark stores contributed to higher productivity and more positive performance for Mat.se.

January–December

Dagab's net sales for the period totalled SEK 48,091 m (44,895), an increase of 7.1%. Operating profit was SEK 829 m (678), corresponding to an operating margin of 1.7% (1.5%). The increase is mainly attributable to the favourable sales performance, but also to high capacity utilization and very high efficiency.

SEK m	Q4 2020	Q4 2019	Change	12 mos 2020	12 mos 2019	Change
Net sales	12,310	11,657	5.6%	48,091	44,895	7.1%
Operating profit (EBIT)	230	152	51.9%	829	678	22.3%
Operating margin, %	1.9	1.3	0.6	1.7	1.5	0.2
Average number of employees during the period	–	–	–	2 823	2 699	124
Delivery reliability, %	–	–	–	94.8	96.8	-2.0

Snabbgross is one of Sweden's leading restaurant wholesalers with a customer base of restaurants, fast food operators and cafés. From its stores and online the chain offers personal service, availability and quality.

1) IFRS 16 is applied as from 2019. Comparison figures are not restated.

Dagab handles the assortment, purchasing and logistics for the entire Axfood house of brands as well as for other B2B customers. The Dagab segment includes the online grocery store Mat.se, the meal kit company Middagsfrid, the online pharmacy Apohem, and Urban Deli, a combined restaurant and market hall concept with own food production.

Net sales, SEK bn, and operating margin, %1)

1) IFRS 16 is applied as from 2019. Comparison figures are not restated.

Capital expenditures

Total capital expenditures during the period January–December amounted to SEK 1,031 m (1,481). Of this total, SEK 565 m (535) pertained to investments in non-current assets in the retail operations, SEK 155 m (683) pertained to non-current assets in wholesale operations, of which SEK – m (510) pertained to a partial payment for an automation solution, and SEK 284 m (248) pertained to IT.

Investments in right-of-use assets (mainly premises) amounted to SEK 1,725 m (971) during the period January–December, of which SEK 693 m (325) pertained to newly acquired assets and SEK 1,032 m (647) pertained mainly to renewals of existing rental agreements for premises and upward indexing of rents. Of total investments in leases, SEK 1,525 m (862) pertained to retail operations, SEK 184 m (95) pertained to wholesale operations, and SEK 16 m (14) pertained to joint-Group operations.

Investments in the future

Establishment of automated logistics centre

Work on the new, highly automated logistics centre in Bålsta, outside Stockholm, is continuing according to plan. The logistics centre, which is planned to be fully operational in 2023, will be one of the largest and most modern in Europe for distribution of groceries to stores as well as to online consumers.

New Transport Management System

As a step towards a more sustainable and efficient transport model, collaboration is under way with Descartes on delivery of a new Transport Management System. The new system will improve transport optimization, provide a greater overview of transport flows, and will manage flows to stores and to online customers. The system also offers consumers improved order tracking. The roll-out of the system has begun and it will gradually be implemented before it is integrated with the new logistics centre in Bålsta during 2023.

Expansion in stores and online in 2021

One of Axfood's goals is to grow more than the market. Apart from increasing sales at existing stores and continuing with the online roll-out to more cities and stores, the Group sees room for growth by establishing new stores. During 2021 Axfood plans to establish 5-10 new stores.

New checkout system and new payment terminals in stores

The rollout of a new checkout system and payment terminals is currently under way in Axfood's stores. The new, modern solution for checkout lanes will result in lower operating and maintenance costs with a long, anticipated useful life. The solution will simplify the shopping process and enable more payment methods. The rollout is expected to be completed during the latter part of 2021.

New solutions in purchasing and assortment

To be able to handle growing demands on processes and solutions in purchasing and the assortment and create a more efficient and attractive offering to consumers, by increasing the degree of automation and better decision-making documentation with data and analytics, a project is being conducted with the purpose of updating Axfood's IT platforms. The aim of the project is to improve the campaign and assortment process. The system is being gradually rolled out and is expected to be fully implemented in 2022.

Capital expenditures and depreciation/amortization, SEK m1)

• 1) Of capital expenditures during the fourth quarter of 2019, SEK 510 m pertain to partial payment for an automation solution.

Other

Government support related to Covid-19

Despite challenges in parts of operations, the Axfood Group has continued to refrain from applying for so-called state reorientation and furlough support. However, in accordance with the rules, Axfood has accepted government assistance as compensation for the increased sicknessrelated absences through sick pay compensation. In the financial statements this is reported in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.

Financial position and cash flow

Cash flow from operating activities amounted to SEK 4,851 m (3,555) during the period January– December. Paid tax totalled SEK -370 m (-477). Net capital expenditures affected cash flow by SEK -1,080 m (-1,386). Payment of shareholder dividends affected cash flow by SEK -1,517 m (1,488), and amortization lease liabilities affected cash flow by SEK -1,515 m (-1,419).

Cash and cash equivalents held by the Group amounted to SEK 1,534 m, compared with SEK 798 m in December 2019. Interest-bearing liabilities and provisions totalled SEK 6,111 m, compared with SEK 5,929 m in December 2019. Interest-bearing net debt amounted to SEK 4,577 m at the end of the period, compared with SEK 5,131 m in December 2019.

The equity ratio was 24.3%, compared with 24.6% in December 2019.

Net debt/EBITDA was 1.0, compared with 1.2 in December 2019. Net debt/EBITDA excluding IFRS 16 was -0.4, compared with -0.1 in December 2019.

Derivation of total investments and net capital expenditures in cash flow

SEK m	12 mos 2020	12 mos 2019
Total investments	-2,755	-2,452
Investments in leases	1,725	971
Divestment of tangible/intangible assets	4	4
Acquisition of financial assets	-50	-31
Acquisition of operations, other items	-6	−
Divested operations	3	23
Divestment/acquisition of assets held for sale	−	99
Cash flow from investing activities	-1,080	-1,386

Parent Company

The Parent Company's net sales and other operating revenue during the period January– December amounted to SEK 275 m (265). After operating expenses of SEK 429 m (402) and net financial items of SEK -2 m (25), profit after financial items was SEK -157 m (-111). Capital expenditures during the period totalled SEK 27 m (15).

The Parent Company had an interest-bearing net debt receivable of SEK 127 m at the end of the period, compared with SEK 141 m in December 2019. The Parent Company has no significant transactions with related parties, other than transactions with subsidiaries.

Net debt/EBITDA

Sustainable development

Axfood's vision is to be the leader in good and sustainable food. Sustainability work is extensive and permeates the entire operations. Long-term sustainable decisions will enable the Company to grow faster than the market and create new business opportunities and profitable growth.

Sustainability in everything – food, the environment and people

For Axfood, sustainable development entails seeing the entire picture and the constant pursuit of improvements. Sustainability is ensured in all parts of the value chain by safeguarding the environment, the food that is produced and sold in stores, and the people who produce, sell and consume it.

In a ranking of listed Swedish companies' sustainability work published in November by Swedish business daily Dagens Industri and sustainability magazine Aktuell Hållbarhet, Axfood was placed at the top in the food retail category. The study assessed the companies especially based on their ability to map and manage risks, something that has become more pertinent in connection with the continuing pandemic.

Axfood's sustainability programme is extensive and includes a sustainability policy as well as targets that are revised yearly. In December new targets were adopted for continued development of Axfood's operations in a sustainable direction. These include targets for Axfood to achieve net-zero emissions by 2030 and that sustainability-labelled products shall account for at least 30% of sales by 2025 at the latest. In addition, targets that have expired or been achieved have been replaced with new ones.

For successful sustainability work it is important that the employees have fundamental knowledge about sustainability issues and the commercial benefit of being an industry leader in sustainable development. Toward this end, a new internal training has been developed which is required for all employees to complete. The training includes information about the impacts of food on the environment and people, and Axfood's sustainability work as well as interactive exercises and concrete examples of how the sustainability work is conducted.

Food – Klubb Hemköp, Vegobarometer and new organic products

Axfood strives to make it easier for consumers to make sustainable choices by offering a broad assortment of products that are produced in a sustainable way. With Hemköp's new and favourable loyalty program, Klubb Hemköp, Axfood is first out in the industry to reward sustainable choices that are positive for the climate as well as people's own health.

In December the Vegobarometer survey was published. This is the fifth year in a row that Kantar Sifo, under commission by Axfood, has conducted the Vegobarometer survey to study consumers' behaviours and attitudes surrounding vegetarian food. The trend of eating more vegetarian food is becoming increasingly clear, and the survey shows that it is mainly women and young people who are driving the shift to more vegetarian food. The heightened interest in plant-based food can also be seen in Axfood's sales of vegetarian alternatives, which continued to increase during the past year.

During the fourth quarter, initiatives surrounding organic and vegetarian products continued, such as through in-store promotions. New organic products from the private label Garant were launched, including pasta, bean mixes and rolled oats. In addition, MSC-labelled tuna was launched under the Gastrino private label.

During the fourth quarter the number of sustainability-labelled products increased to 27.3% (25.9%), the share of organic products was virtually unchanged at 6.0% (5.9%), and growth for plant-based protein substitutes was 10.1% (9.8).

The environment – electrified transports and reduced use of plastics

The share of the world's total greenhouse gas emissions from food production needs to be decreased, and toward this end Axfood is working in a number of areas to contribute to production that has the smallest environmental impact as possible.

Transports between warehouses and stores are the part of Axfood's own operations that have the largest carbon footprint. The delivery fleet is therefore being gradually changed over to being fossil-free. Part of this effort involves more electrified transports, and through a deepened collaboration with truck maker Scania and charging station operator Engie, goods will be distributed using electric trucks in the Stockholm area in 2021. Deliveries will be made using Scania's new plug-in hybrid trucks and a fully electric truck. The collaboration is being conducted within the framework of the partnership with Scania that was initiated in 2020.

Axfood is working to ensure that the packaging of its private label products is environmentally adapted and made of recycled or renewable material. The use of plastic in the Group's own operations is to be reduced by 25% by 2025. During the fourth quarter, the use of plastic was reduced for several products in the Garant assortment. Among other things, the plastic covering frozen pies was eliminated, thinner plastic packages were introduced for aged

In December Axfood's Executive Committee adopted a revised sustainability programme. The Group's sustainability targets include, among others, that Axfood's own operations shall have net-zero emissions by 2030 and that sustainability-labelled products shall account for at least 30% of total sales by 2025 at the latest.

More and more Swedish consumers are eating vegetarian food. This is shown in the 2020 Vegobarometer survey conducted by Kantar Sifo under commission by Axfood. The number of so-called flexitarians, i.e., people who have a vegetarian diet as a base but have not stopped eating meat entirely, has increased for the fifth year in a row. It is mainly women and young people who are driving the changeover to vegetarian food.

cheeses, and cardboard boxes were introduced for rice instead of plastic bags. In addition, the use of plastic was reduced in the packaging for Minstingen baby diapers.

Axfood purchases only green electricity and has the ambition to install solar panel systems on the rooftops of stores and warehouses where feasible. During the fourth quarter an additional solar panel system was put in operation, on the roof of the Stenkyrka Tempo store in Gotland.

People – living wages and support for migrant workers

Axfood aspires to be a positive force in society and is therefore working in various ways to improve work environments and social conditions throughout the food supply chain. The Group's own employees as well as customers and workers in production and farming are covered by this work.

Axfood has set a target to, as far as possible, have ensured living wages by 2030 for products from priority countries where the gap between the minimum wage and living wage is great. Since 2016 Axfood has been conducting a project in Punjab, Pakistan, to improve the conditions for small farmers who grow basmati rice. The farmers, most of whom are women, have received training in sustainable growing methods and assistance in organizing themselves in cooperatives, among other measures. In addition, during the fourth quarter the decision was made to introduce a new payment model that will give the rice farmers higher revenue in the coming year.

Many migrant workers in Thailand have been laid off or received poorer working terms during the continuing coronavirus pandemic. In October an app and website were launched in four languages with information on labour law and Covid-19. The initiative is being conducted in collaboration with Axfoundation and a number of international organizations.

One prioritized area is to increase the work attendance rate among the Group's employees, where the target is to achieve a work attendance rate of at least 95%. During the fourth quarter the work attendance rate was 92.5% (94.1%), which is a decrease compared with the same period a year ago and the third quarter of 2020 and is attributable to the continuing pandemic and the recommendations that have been issued to prevent the spread of Covid-19.

Key ratios, Group

	Q4	Q4	12 mos	12 mos
	2020	2019	2020	2019
Sustainability-labelled products as % of total sales	27.3	25.9	28.3	26.9
Sales of organic products as % of total food sales	6.0	5.9	6.1	6.2
Growth in plant-based protein substitutes, %	10.1	9.8	15.1	13.4
KRAV-labelled meat as % of total meat sales	2.9	3.1	3.1	3.4
Number of social audits	37	25	123	96
Electricity consumption, kWh/m2 (stores and warehouses)	-	-	302.6	313.1
Electricity consumption (kWh) as share of net sales (SEK), %	-	-	0.49	0.53
CO2, kg/tonne goods	15.6	17.1	15.6	17.2
Gender equality, share of women in senior positions, %	-	-	33.2	30.1
Work attendance rate, %	92.5	94.1	93.2	94.4

For more information on these key ratios, see Axfood's 2019 Annual and Sustainability Report.

Other information

Long-term targets and capital expenditures 2021

• Axfood's long-term financial targets:
• o Grow more than the market
  • o Long-term operating margin of at least 4%
• o Equity ratio of at least 20% at year-end
• Axfood's dividend policy sets the goal that the shareholder dividend shall be at least 50% of profit after tax. The dividend is to be paid out on two occasions.
• Axfood's capital expenditures in 2021 are expected to amount to SEK 1,800–1,900 m excluding acquisitions and right-of-use assets, of which SEK 585 m pertains to partial payment for an automation solution and SEK 115 m pertains to land related to the new logistics centre in Bålsta. During 2021 Axfood plans to establish 5-10 new stores .

Long-term share-based incentive programme

The Board of Directors proposes that the Annual General Meeting resolve to introduce a longterm share-based incentive programme to run over a three-year period (LTIP 2021). The programme corresponds in all essential respects to LTIP 2020. The programme is proposed to include approximately 75 employees, consisting of the members of Axfood's Executive Committee, members of the management teams of Axfood's subsidiaries and certain other persons in management functions. The incentive programme entails the following in short:

• Participation in LTIP 2021 requires a personal shareholding in Axfood that is allocated to LTIP 2021. The participants will be given the opportunity to allocate a maximum of 4,700, 1,250 or 250 shares to the programme, depending on their participant category.
• After the set vesting period, the participants will be granted shares in Axfood free of charge provided that certain conditions are met. To receive such share grants requires, in short, continued employment in the Axfood Group during the vesting period, that the individual continues to own shares in Axfood during the same period of time, and that certain performance targets have been met related to Axfood's share price, sales, earnings and sustainability.
• The maximum, combined number of shares in Axfood that may be granted under LTIP 2021 is limited to 310,000.
• Based on an unchanged share price during the term of the programme, a three-year vesting period and certain other assumptions, the total cost for LTIP 2021 including social security charges will be a maximum of SEK 54 m.

The main motives for establishing LTIP 2021 are to align the shareholders' interests with those of the members of the Executive Committee and other key persons in ensuring maximum long-term value creation and to encourage personal shareholding in Axfood. Further, it is believed that LTIP 2021 will facilitate Axfood in recruiting and retaining persons for the company management teams and other key persons. The Board of Directors will issue a notice of the Annual General Meeting shortly, and in connection with this it will make public the Board's complete recommendations for decision. Three long-term share-based incentive programmes are currently in effect. The term of the first of these, LTIP 2018, expires in April 2021.

Dividend

The Board of Directors proposes that the Annual General Meeting resolve in favour of an increased dividend for the 2020 financial year of SEK 7.50 per share (7.25), corresponding to 82% of profit for the year. In addition, the Board proposes that the dividend be split into two payments, SEK 3.75 per share in March 2021 and SEK 3.75 per share in September 2021.

Annual General Meeting 2021

The Annual General Meeting (AGM) of Axfood AB will be held on 24 March 2021. Against the background of the continuing pandemic and to reduce the risk of spread of Covid-19, the AGM will be conducted through a vote-by-mail procedure, pursuant to §22 of the Act (Lagen (2020:198) om tillfälliga undantag för att underlätta genomförandet av bolags- och föreningsstämmor) on Temporary Exceptions to Facilitate the Conducting of Company and Association General Meetings, entailing that no shareholders or representatives will participate in the AGM in person. Instead, shareholders will participate in the AGM by voting and submitting any questions in advance. All AGM documentation including the 2020 Annual and Sustainability Report will be available on the Company's website not later than three weeks before the AGM. The documents will also be kept on hand at the Company's head offices and can be sent by post to shareholders who request and provide their postal address.

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

Stockholm, 4 February 2021

Klas Balkow President and CEO

Future reports and 2021 Annual General Meeting

• The Annual and Sustainability Report for 2020 will be published in 26 February 2021
• The 2021 Annual General Meeting will be held on 24 March 2021
• The interim report for the first quarter of 2021 will be presented on 22 April 2021, at 7 a.m. CET
• The interim report for the second quarter of 2021 will be presented on 15 July 2021, at 7 a.m. CET
• The interim report for the third quarter of 2021 will be presented on 21 October 2021, at 7 a.m. CET

Selection of press releases from Axfood during the fourth quarter

5 Oct. 2020	Hemköp first in industry to reward shoppers for sustainable actions
20 Oct. 2020	Willys pilot tests self-scanning with smartphones: Scan & Go
28 Oct. 2020	Hemköp Rosendal store opens in Uppsala
5 Nov. 2020	Mat.se starts unique pilot project with selected restaurants
9 Nov. 2020	150 tonnes of food from Willys donated to charities this year
11 Nov. 2020	Changes in Nominating Committee ahead of Axfood's 2021 AGM
11 Nov. 2020	Willys opens new store in Skellefteå
25 Nov. 2020	Snabbgross Club opens – entirely new grocery store for members
14 Dec. 2020	Middagsfrid launches new, super-fast dinner solutions
14 Dec. 2020	Vegobarometer: Vegetarian trend driven by climate concerns of women and young people
21 Dec. 2020	Nominating Committee's recommendations for changes in the Board of Directors

Financial statements, Group

Condensed statement of profit or loss and other comprehensive income, Group

SEK m	Q4 2020	Q4 2019	12 mos 2020	12 mos 2019
Net sales	13,633	13,040	53,696	50,740
Cost of goods sold	-11,482	-11,077	-45,148	-42,797
Gross profit	2,152	1,963	8,548	7,942
Selling and administrative expenses, etc.	-1,586	-1,476	-6,038	-5,654
Operating profit (EBIT)	566	487	2,510	2,288
Interest income and similar profit/loss items	3	1	16	5
Interest expense and similar profit/loss items	-34	-29	-132	-120
Profit after financial items	535	460	2,394	2,173
Tax	-126	-100	-531	-494
Profit for the period	409	359	1 862	1 679
Other comprehensive income
Items that cannot be reclassified to profit or loss for the period
Revaluation of defined benefit pension plans	-17	-2	-6	-37
Tax	4	0	1	8
Items that can be reclassified to profit or loss for the period
Change in hedging reserve	-75	-40	-65	-41
Tax	15	8	13	9
Other comprehensive income for the period	-72	-33	-56	-61
Total comprehensive income for the period	337	327	1,806	1,617
Profit for the period attributable to
Owners of the parent	423	352	1,908	1,648
Non-controlling interests	-14	7	-46	30
Total comprehensive income for the period attributable to
Owners of the parent	350	320	1,852	1,587
Non-controlling interests	-14	7	-46	30
Earnings per share before dilution, SEK	2.02	1.68	9.12	7.87
Earnings per share after dilution, SEK	2.01	1.68	9.09	7.85

EBITDA

SEK m	Q4 2020	Q4 2019	12 mos 2020	12 mos 2019
Operating profit (EBIT)	566	487	2,510	2.288
Depreciation/amortization and impairment
losses	571	543	2,252	2,146
EBITDA	1,137	1,030	4,762	4,434
IFRS 16 Leasing costs	-409	-388	-1,617	-1,551
EBITDA excl. IFRS 16	728	639	3,145	2,880

Condensed statement of financial position, Group

SEK m	31/12/2020	31/12/2019
Assets
Goodwill	2,769	2,767
Other intangible assets	750	705
Property, plant and equipment	2,912	2,744
Right-of-use assets	5,656	5,407
Financial assets1)	33	22
Deferred tax assets	253	237
Total non-current assets	12,373	11,882
Inventories	2,670	2,387
Accounts receivable – trade	1,033	1,062
Other current assets	1,203	1,165
Cash and bank balances	1,534	798
Total current assets	6,441	5,411
Total assets	18,814	17,293
Shareholders' equity and liabilities
Equity attributable to owners of the parent	4,331	4,020
Equity attributable to non-controlling interests	232	229
Total shareholders' equity	4,563	4,249
Non-current lease liabilities	4,524	4,131
Other interest-bearing liabilities	403	421
Deferred tax liabilities	979	902
Other non-current liabilities	108	100
Total non-current liabilities	6,014	5,554
Current lease liabilities	1,184	1,377
Accounts payable – trade	4,424	3,832
Other current liabilities	2,629	2,280
Total current liabilities	8,237	7,490
Total shareholders' equity and liabilities	18,814	17,293
1) Of which, interest-bearing assets	−	−

Condensed statement of cash flows, Group

	Q4	Q4	12 mos	12 mos
SEK m	2020	2019	2020	2019
Operating activities
Operating profit (EBIT)	566	487	2,510	2,288
Adjustments for non-cash items	583	549	2,304	2,160
Interest paid	-24	-31	-118	-123
Interest received	1	1	10	5
Paid tax	-52	-112	-370	-477
Changes in working capital	416	207	515	-298
Cash flow from operating activities	1,490	1,101	4,851	3,555
Investing activities
Acquisitions of operations	−	−	-9	-2
Acquisitions of intangible assets	-58	-37	-211	-175
Acquisitions of property, plant and equipment	-260	-757	-817	-1,304
Other changes in investing activities	-2	5	-43	95
Cash flow from investing activities	-320	-789	-1,080	-1,386
Financing activities
Amortization of debt	-382	-344	-1,515	-1,419
Shareholder contribution from minority owner	−	−	49	−
Share repurchases	−	−	-53	-36
Dividend paid out	−	−	-1,517	-1,488
Cash flow from financing activities	-382	-344	-3,036	-2,943
Cash flow for the period	788	-32	735	-774

Condensed statement of changes in equity, Group

SEK m	31/12/2020	31/12/2019
Amount at start of year	4,249	4,528
Effect of changed accounting policy	−	-394
Adjusted shareholders' equity at start of year	4,249	4,134
Total comprehensive income for the period	1,806	1,617
Share repurchases	-53	-36
Share-based payments	28	21
Shareholder contribution from minority owner	49	−
Dividend to shareholders	-1,517	-1,488
Amount at end of period	4,563	4,249

Key ratios and other data, Group

	12 mos 2020	12 mos 2019
Operating margin, %	4.7	4.5
Margin after financial items, %	4.5	4.3
Equity ratio, %	24.3	24.6
Net debt (+)/net receivable (-), SEK m	4,577	5,131
Net debt (+)/net receivable (-) excl. IFRS 16	-1,131	-377
Net debt/EBITDA, multiple	1.0	1.2
Net debt/EBITDA excl. IFRS 16, multiple	-0.4	-0.1
Net debt-equity ratio (+)/Net receivable equity ratio (-), multiple	1.0	1.2
Net debt-equity ratio (+)/Net receivable equity ratio (-) excl. IFRS 16, multiple	-0.2	-0.1
Capital employed, SEK m	10,674	10,178
Return on capital employed, %	24.2	30.1
Return on shareholders' equity, %	45.7	39.6
Average number of employees during the period	11,451	10,854
Capital expenditures, SEK m	2,755	2,452
Investments in intangible non-current assets and in property, plant and equipment, SEK m	1,031	1,481
Number of shares outstanding at the end of the period	209,198,604	209,298,712
Average number of shares outstanding before dilution	209,253,740	209,380,332
Average number of shares outstanding after dilution	209,877,099	209,878,569
Key data per share
Earnings per share before dilution, SEK	9.12	7.87
Earnings per share after dilution, SEK	9.09	7.85
Ordinary dividend per share, SEK	7.501)	7.25
Shareholders' equity per share, SEK	20.70	19.21
Cash flow per share, SEK	3.51	-3.70

1) Proposed by the Board of Directors, to be paid out on two occasions.

Quarterly overview

SEK m	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020
Net sales	11,931	13,038	12,731	13,040	13,067	13,570	13,426	13,633
Operating profit (EBIT)	485	601	715	487	544	605	796	566
Operating margin, %	4.1	4.6	5.6	3.7	4.2	4.5	5.9	4.1
Earnings per share before dilution, SEK	1.68	2.01	2.50	1.68	1.93	2.22	2.95	2.02
Shareholders' equity per share, SEK	13.37	15.15	17.64	19.21	14.17	15.95	18.99	20.70
Return on shareholders' equity, %	52.8	46.8	42.1	39.6	58.9	53.6	47.9	45.7
Cash flow from operating activities per share, SEK	3.44	5.18	3.10	5.26	6.38	4.10	5.58	7.12
Investments in intangible non-current assets and in property, plant and equipment	245	252	192	792	276	218	219	318
Net debt (+)/net receivable (-)	6,047	5,449	5,082	5,131	5,454	5,218	5,185	4,577
Share price, SEK	173.00	183.75	209.10	208.40	202.20	203.40	205.40	191.80

Financial statements, Parent Company

Condensed income statement, Parent Company

	Q4	Q4	12 mos	12 mos
SEK m	2020	2019	2020	2019
Net sales	1	1	5	4
Operating expenses	-120	-114	-429	-402
Other operating revenue	64	65	269	261
Operating profit (EBIT)	-54	-47	-155	-136
Net financial items	-1	0	-2	25
Profit after financial items	-54	-47	-157	-111
Appropriations, net	2,082	1,825	2,082	1,825
Profit before tax	2,028	1,778	1,925	1,714
Tax	-437	-383	-418	-364
Net profit for the period	1,591	1,396	1,508	1,350
Operating profit includes depreciation/amortization totalling	1	1	4	3

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

Condensed balance sheet, Parent Company

SEK m	31/12/2020	312/12/2019
Assets
Property, plant and equipment	35	17
Participations in Group companies	3,459	3,397
Other financial non-current assets	7	0
Deferred tax assets	7	8
Total non-current assets	3,508	3,421
Receivables from Group companies1)	4,527	3,360
Other current assets	25	33
Cash and bank balances	1,141	373
Total current assets	5,694	3,765
Total assets	9,202	7,187
Shareholders' equity and liabilities
Restricted shareholders' equity	287	287
Unrestricted shareholders' equity	2,364	2,399
Total shareholders' equity	2,652	2,686
Untaxed reserves	3,192	2,907
Provisions	15	20
Non-current liabilities	3	3
Accounts payable – trade	15	18
Liabilities to Group companies 2)	3,165	1,482
Other current liabilities	160	71
Total current liabilities	3,340	1,571
Total shareholders' equity and liabilities	9,202	7,187
1) Of which, interest-bearing receivables	2,165	1,180
2) Of which, interest-bearing liabilities	3,165	1,392

Notes

Note 1 Accounting policies

Axfood applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. This interim report has been prepared for the Group in accordance with IAS 34 Interim Financial Reporting and applicable provisions of the Swedish Annual Accounts Act. Disclosures in accordance with IAS 34 Interim Financial Reporting are presented in notes as well as in other parts of the interim report. For the Parent Company, the interim report has been prepared in accordance with recommendation RFR 2 – Accounting for Legal Entities, issued by the Swedish Financial Reporting Board (RFR), and Ch. 9 – Interim Financial Reporting, of the Swedish Annual Accounts Act.

Preparation of the financial statements in accordance with IFRS requires the Board and company management to 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.

The same accounting policies and calculation methods have been used in this interim report as in the most recent annual report, except for what is stated below.

All amounts in the interim report are rounded off to the nearest million Swedish kronor (SEK m), unless indicated otherwise, entailing that tables and calculations do not always add up. In text and tables, figures between 0 and 0.5 are reported as 0.

New accounting policies effective in 2020 and later

Axfood has determined that new or amended standards and interpretations will not have any material effect on the consolidated financial statements.

Note 2 Operating segments

Axfood's operating segments have been determined based on the information considered by the Group's Executive Committee and which is used to evaluate the result of operations and allocate resources to the segments. The Executive Committee monitors sales and operating profit for each of the business areas, which make up the Group's operating segments. The operating segments that have been identified are Willys, Hemköp, Dagab and Snabbgross (previously called Axfood Snabbgross). For information about Axfood's operating segments, see pages 6–8 of this year-end report. For a more detailed description of the segments, please refer to the 2019 Annual and Sustainability Report.

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

Note 3 Significant risks and uncertainties

In the course of their business the Axfood Group and Parent Company are 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 Stockholm, Gothenburg 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.

The spread of Covid-19 in society has exposed Axfood's business to a new dimension of risk management. The risks that Covid-19 has given rise to, including the risk for disruptions in the logistics chain, supplier risks and employee risks, have been successfully managed within existing crisis response organizations without any significant disruptions for our operations. The work on minimizing disruptions over the longer term is ongoing, and the respective operations are monitoring and continuously working to handle the effects of the corona pandemic. Covid-19 may have long-term impacts, with the risk for a rise in unemployment and recession, which represents an uncertainty regarding the general level of consumption that may affect the Axfood Group on top of the clear impact that we are already seeing on cross-border shopping and the restaurant market. The reported values of the Group's assets are tested continuously to determine if there is a need to recognize any impairment. Reported values are also tested when there is an indication that a decline in value has been identified. Against the background of the corona pandemic, a review has been performed of the Group's reported values, and there are no indications of impaired values.

For a thorough account of the risks that affect the Group, please refer to the 2019 Annual and Sustainability Report.

Note 4 Seasonal effects

Axfood's sales are affected to some degree by seasonal variations. Sales increase in the quarter in which Easter falls, which is either the first or second quarter. Sales also increase ahead of Midsummer during the second quarter, as well as ahead of the major holiday season during the fourth quarter.

Note 5 Acquired operations

No significant acquisitions have been made during the year.

Note 6 Disclosures of financial assets and liabilities

Changes in currency forward contracts measured at fair value (SEK m)

Amount at start of year	-46
Change recognized in other comprehensive income	-65
Realized changes	-3
Amount at end of period	-114

In addition to the change in currency forward contracts measured at fair value, the contingent consideration that was measured at fair value according to Level 3 as per 31 December 2019 was dissolved in its entirety during the period, based on an assessment of the future sales and earnings performance of the Urban Deli group. The change in value was recognized in operating profit during the first quarter.

Note 7 Pledged assets and contingent liabilities

Group, SEK m	31/12/2020	31/12/2019
Pledged assets	–	–
Contingent liabilities	19	21
Parent Company, SEK m	31/12/2020	31/12/2019
Pledged assets	–	–
Contingent liabilities	256	302

Note 8 Long-term share-based incentive

programmes

The 2020 Annual General Meeting resolved to adopt a new long-term share-based incentive programme to run over a three-year period, LTIP 2020, the principles and scope of which in all essential respects correspond to the previously adopted programmes. Full grants were made under LTIP 2017 in April 2020 using treasury shares. For more information about incentive programmes, see Axfood's 2019 Annual and Sustainability Report.

To secure the Company's obligation to provide conditional performance shares under LTIP 2020, during the second quarter of 2020 Axfood repurchased 258,000 shares at an average price of SEK 206.46 per share, for a total of SEK 53 m. Axfood's holding of treasury shares thereafter amounts to 672,108 shares, which secure delivery of shares for all of the Company's incentive programmes.

Note 9 Events after the balance sheet date

• The Board of Directors proposes an increased dividend of SEK 7.50 per share (7.25). The dividend is split into two payment occasions.
• Capital expenditures in 2021 are expected to amount to SEK 1,800–1,900 m excluding acquisitions and right-of-use assets.
• Axfood plans to establish five to ten new stores in 2021.

Key ratios

The Axfood Group uses various financial measures in its interim reports that are not defined in IFRS. Axfood believes that these key ratios are relevant for readers of Axfood's financial reports as a complement in assessing Axfood's performance. Since not all companies calculate financial measures in the same way, these are not always comparable with measures used by other companies. These financial measures are therefore not to be regarded as a substitute for measures defined in IFRS. Definitions of the key ratios are provided below.

Operating key ratio definitions and glossary

Average number of employees during the year: Total number of hours worked divided by the number of annual full-time equivalents (1,920 hours).

Axfood Group: Group-owned stores and Hemköp franchise stores.

Delivery reliability: The share of delivered goods in relation to the share of ordered goods.

LTIP: Long-Term Incentive Programme (share-based).

Financial key ratio definitions

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

Cash flow from operating activities per share: Cash flow from operating activities for the period divided by the weighted average number of shares outstanding.

Cash flow per share: Cash flow for the period divided by the weighted average number of shares outstanding before dilution.

Debt-equity ratio: Interest-bearing liabilities divided by shareholders' equity including non-controlling interests.

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

EBITDA: Operating profit before depreciation, amortization an impairment losses.

EBITDA excluding IFRS 16: EBITDA excluding effects of reporting in accordance with IFRS 16.

Equity ratio: Shareholders' equity including non-controlling interests as a percentage of total assets.

Growth in store sales: Percentage change in the Axfood Group's store sales between two periods.

Joint-Group: Includes head office support functions, such as the Executive Committee, Finance/Accounting, Communications, Business Development, HR and IT.

Like-for-like sales: Sales for stores that existed and generated sales in the comparison period, broken down into Group-owned and franchise stores.

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

Net capital expenditures in cash flow: Total capital expenditures excluding investments pertaining to leasing, less divestments.

Net debt/EBITDA: Net debt divided by EBITDA on a rolling 12-month basis.

Net debt/EBITDA excluding IFRS 16: Net debt excluding lease liabilities divided by EBITDA excluding effects of reporting in accordance with IFRS 16 on a rolling 12-month basis.

Net debt-equity ratio/net receivable-equity ratio: Net debt/net recevable divided by shareholders' equity

including non-controlling interests.

Net debt-equity ratio/net receivable-equity ratio excluding IFRS 16: Net debt/net debt receivable excluding IFRS 16 divided by shareholders' equity including noncontrolling interests.

Net debt/net receivable: Interest-bearing non-current and current receivables and liabilities including cash and bank balances, plus interest-bearing financial assets.

Net debt/net receivable excluding IFRS 16: Interestbearing non-current and current receivables and liabilities excluding lease liabilities, including cash and bank balances, plus interest-bearing financial assets.

Net sales growth: Percentage increase in net sales between two periods.

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

Operating profit (EBIT): Profit before net financial items and tax.

Pro forma: Pro forma is a method of reporting changed historical figures that describe financial effects after a change in order to be able to compare with current figures.

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 period 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 end of the period plus shareholders' equity at the same point in time in the preceding year, divided by two.

Sales, Group-owned retail operations: Sales for Hemköp and Willys stores owned by Axfood.

Sales of private label products: Sales of private label products, excluding meats and fruits & vegetables, as a percentage of store sales including Hemköp franchise stores.

Share price: Closing share price.

Shareholders' equity per share: Equity attributable to owners of the parent divided by the number of shares before dilution.

Store sales, Axfood Group: Sales for Hemköp and Willys stores, including Hemköp franchises.

Total capital expenditures: Investments in intangible and tangible non-current assets, and in right-of-use assets.

Key ratio definitions for sustainability

Electricity consumption in stores and warehouses: Reported as the number of used kilowatt hours (KWh) of purchased electricity per square metre (sq. m.). The selection includes electricity consumption under joint contracts for a total of 276 of Axfood's Group-owned stores and six of Dagab's warehouses. The number of square metres pertains to the total sales area for all stores/ warehouses. Reported data is presented on a rolling 12 month basis.

Emissions from own transports: Total emissions (CO² kg) from purchased fuel (litres) in relation to total transported goods (tonnes) between warehouses and stores. Reported data pertains only to goods delivered by own transports. Reported data for the quarter and full year are presented with a one-month lag.

Energy intensity: Electricity consumption (KWh) under joint contracts as a percentage of the Axfood Group's total net sales (SEK). Reported data is presented on a rolling 12 month basis.

Gender equality: The share of women in senior positions. Senior positions refer to employees, including members of the Executive Committee, who are defined as managers with employee responsibility. Reported data is presented on an accumulated basis for the current year.

Growth for plant-based protein substitutes: Growth is calculated by comparing sales of plant-based protein substitutes with sales during the corresponding period a year earlier. Plant-based protein substitutes pertain to all items included in the main categories refrigerated vegetarian and the presentation category frozen vegetarian. The selection includes Group-owned stores in the Willys, Eurocash, Hemköp and Snabbgross chains.

Number of social audits: Pertains to performed site visits and inspections to gain an assurance that our suppliers are in compliance with Axfood's Code of Conduct. The selection includes site visits conducted under own management as well as site visits performed by the organization Amfori BSCI.

Share of KRAV-labelled meat: Sales of KRAV-labelled meat (both fresh and frozen) as a percentage of the Axfood Group's total sales of meat products. The selection includes Group-owned stores in the Willys, Hemköp and Snabbgross chains.

Share of organic sales: Sales of organically labelled products with an accredited country of origin label as a percentage of the Axfood Group's total food sales. The selection includes Group-owned stores in the Willys, Eurocash, Hemköp and Snabbgross chains.

Share of sustainability-labelled products: Sales of sustainability-labelled products with an accredited country of origin label as a percentage of the Axfood Group's total store sales. The selection includes Group-owned stores in the Willys, Eurocash, Hemköp and Snabbgross chains. In December 2019 the definition of the key ratio was changed, and thus comparison figures have been recalculated.

Work attendance rate: The number reported hours of sick leave in relation to scheduled work time. The selection includes active employees in the Axfood Group. Active employees refers to all employees in the Group except for employees of Urban Deli AB and Hall Miba AB. Internal consultants and persons on parental leave/leaves of absence are not included. Sickness-related absences for the fourth quarter pertains to time worked during the period September–November.

About Axfood

Axfood aspires to be the leader in good and sustainable food. Axfood includes the Willys and Hemköp chains as well as Tempo and Handlar'n. B2B sales are conducted through Snabbgross, and Dagab is responsible for the Group's product development, purchasing and logistics. The Axfood house of brands also includes Mat.se, Middagsfrid and Urban Deli, and partly owned Apohem and Eurocash. Together they reach more than 4.5 million customers every week. Axfood's shares are listed on Nasdaq Stockholm, and the principal owner is Axel Johnson AB.

Vision

Axfood will be the leader in good and sustainable food.

Mission

Axfood enables a better day where everyone can enjoy affordable, good and sustainable food.

Business concept

A family of successful and distinctive food concepts in close collaboration.

Business model

Axfood's business model is built upon three processes, where every detail in the process is important for the Company's success. It begins with the choice of suppliers by Axfood's joint-Group assortment and purchasing function for all of the Group's concepts. Efficient logistics then create conditions for favourable and profitable growth together with sustainable transports and efficient use of energy. A distinct sustainability profile, attentive customer service and smart store layout are key aspects in creating an inspiring in-store experience.

Long-term financial targets and investments 2021

• Axfood's long-term financial targets:
• Grow more than the market
• Long-term operating margin of at least 4%
• Equity ratio of at least 20% at year-end • Axfood's dividend policy sets the goal that the shareholder dividend shall be at least 50% of profit after tax. The dividend amount is to be paid on two occasions.
• Axfood's capital expenditures in 2021 are expected to amount to SEK 1,800–1,900 m excluding acquisitions and right-of-use assets, of which SEK 585 m pertains to partial payment for an automation solution and SEK 115 m pertains to land related to the new logistics centre in Bålsta. During 2021 Axfood plans to establish 5-10 new stores.

Strategy

Axfood's strategy is built upon six strategic areas: the customer offering, the customer meeting, expansion, supply chain, work approach, and our people. Axfood will offer an affordable and wide product range of good and sustainable food that is a mix of own and popular brands. With sustainable and efficient product supply, customers will be served wherever they may be at any time of the day or night – both in physical stores and online. Through new sales channels featuring new and innovative services and segments we will meet our customers' needs. Aside from these areas it is essential that we attract and develop the industry's top talent as part of our efforts to also have a customer-centric and dynamic organization in which efficiency and cost control are in focus. For Axfood it goes without saying that sustainability and community engagement run like a common thread through all our operations.

Investment case – value drivers

• The food retail industry is relatively insensitive to economic swings and is driven largely by population growth and inflation.
• Axfood has a clear strategy in which it addresses trends in the market through concrete priorities in six focus areas. With a focused expansion plan, focus on developing the customer meeting regardless of channel and development of sustainable and convenient meal solutions, Axfood is addressing changes in customer behaviours resulting from trends in the food retail market.
• With a refined focus on food and distinctive concepts, Axfood is a house of brands that are all strongly positioned in their respective segments. The Group's joint purchasing & logistics operation contributes to economies of scale and cost efficiency.
• Axfood's balance sheet is solid, and its business model generates stable cash flows. During the last five years the dividend has amounted to 91% of profit after tax.
• Axfood aspires to be a positive force in society and has clear goals for its sustainability work. Axfood's private label products eagerly lead the change with respect to sustainability and health.

Our segments

• Willys is Sweden's leading discount grocery chain, featuring a wide and deep assortment in Group-owned stores and online. With Sweden's cheapest bag of groceries, Willys aspires to lead and develop the discount segment of food retail. Willys also includes the cross-border grocery chain Eurocash.
• Hemköp offers an attractively priced and wide assortment with a rich offering of fresh products. Hemköp's Group-owned stores, franchise stores and online business aim to inspire good meals in a simple and painstaking manner. Hemköp also includes Tempo, a mini-mart format comprising retailer-owned stores.
• Snabbgross is one of Sweden's leading restaurant wholesalers with a customer base of restaurants, fast food operators and cafés. In stores and online the chain offers personal service, availability and quality.
• Dagab handles the assortment, purchasing and logistics for the entire Axfood house of brands as well as for other B2B customers. Dagab includes the online grocery store Mat.se, the meal kit company Middagsfrid, the online pharmacy Apohem, and Urban Deli, a combined restaurant and market hall concept with own food production.

Axfood AB, SE-107 69 Stockholm Norra Stationsgatan 80 C Tel. +46-8-553 990 00 info@axfood.se, axfood.se Reg. no. 556542-0824