Axfood — Earnings Release 2022

Oct 20, 2022

Substantial growth and increased market share

Third quarter summary

• Net sales totalled SEK 18,674 m (13,723), an increase of 36.1% including the acquired Bergendahls Food.
• Retail sales totalled SEK 14,026 m (12,149), an increase of 15.5%.
• Operating profit amounted to SEK 975 m (793) including items affecting comparability of SEK -40 m (-18). The operating margin was 5.2% (5.8).
• Adjusted operating profit amounted to SEK 1,015 m (811), an increase of 25.2%. The adjusted operating margin was 5.4% (5.9).
• Net profit for the period was SEK 745 m (601) and earnings per share before dilution amounted to SEK 3.40 (2.90).
• In September, a dividend of SEK 3.75 per share was paid out, the second part of the dividend to shareholders totalling SEK 7.75 (7.50) per share.
• Axfood's holding in Mathem was revalued at SEK 206 m, a decline of SEK 635 m, which is in line with the decline in valuation for comparable companies.

Summary January–September

• Net sales totalled SEK 53,735 m (40,829), an increase of 31.6% including the acquired Bergendahls Food.
• Retail sales totalled SEK 40,541 m (36,939), an increase of 9.7%.
• Operating profit amounted to SEK 2,599 m (1,965) including items affecting comparability of SEK 103 m (-72). The operating margin was 4.8% (4.8).
• Adjusted operating profit amounted to SEK 2,496 m (2,036), an increase of 22.6%. The adjusted operating margin was 4.6% (5.0).
• Net profit for the period was SEK 2,017 m (1,486) and earnings per share before dilution amounted to SEK 9.43 (7.30).

36.1%

Net sales growth for the Axfood Group during the third quarter

15.5%

The Axfood Group's growth in retail sales during the third quarter

Key ratios	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	R12	Full year 2021
Net sales, SEK m	18,674	13,723	36.1%	53,735	40,829	31.6%	70,797	57,891
Operating profit, SEK m	975	793	23.0%	2,599	1,965	32.3%	3,338	2,704
Operating profit excl. items affecting comparability, SEK m1)	1,015	811	25.2%	2,496	2,036	22.6%	3,149	2,690
Operating margin, %	5.2	5.8	-0.6	4.8	4.8	0.0	4.7	4.7
Operating margin excl. items affecting comparability, %1)	5.4	5.9	-0.5	4.6	5.0	-0.3	4.4	4.6
Net profit for the period, SEK m	745	601	23.8%	2,017	1,486	35.7%	2,625	2,094
Earnings per share before dilution, SEK2)	3.40	2.90	17.3%	9.43	7.30	29.2%	–	10.20
Earnings per share before dilution excl. items affecting comparability, SEK1, 2)	3.55	2.97	19.6%	8.89	7.57	17.5%	–	10.14
Cash flow from operating activities, SEK m	1,487	1,054	41.1%	4,083	3,302	23.7%	5,371	4,590
Return on capital employed, %3)	25.8	22.6	3.3	25.8	22.6	3.3	25.8	22.4
Return on equity, %3)	49.9	47.4	2.5	49.9	47.4	2.5	49.9	46.3
Equity per share, SEK	–	–	–	28.70	20.61	39.3%	–	23.68

1) See Note 9 Items affecting comparability for more information.

2) Comparison figures were revalued for the bonus issue element of the rights issue that was completed in the second quarter of 2022.

3) Rolling 12-month figures.

For further information, please contact:

Alexander Bergendorf, Head of Investor Relations, tel. +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 7:00 a.m. CET on 20 October 2022.

CEO message

We operate in a time with high inflation and changing market dynamics. We know that many of our customers find themselves in a challenging situation, and we are doing everything we can to make sure that our offering is affordable and competitive. With positive contributions from all businesses and an outstanding performance by Willys, Axfood continued to grow significantly more than the market. With distinctive concepts, investments in our business, and an ability to respond to rapid changes, we are well equipped to continue to strengthen our position.

Food price inflation continued to rise in the third quarter, reaching levels that we have not seen since the 1980s. Combined with increasing electricity prices and interestrate hikes, Swedish households are facing financial pressure. As a major food retail company, we have a responsibility to support consumers' opportunities to purchase affordable, good and sustainable food. At the same time, we also have a responsibility to our suppliers to compensate for their increased costs and ensure that every part of the food supply chain is reasonably paid. We take our mission with the utmost seriousness and are working determinedly and systematically to find a healthy balance.

In times such as these, consumer purchasing patterns also change, with increased price consciousness as customers find themselves with less money in their wallets. Value for money becomes more important, and it is clear that many people are searching for discounted products and campaigns. Unfortunately, we have also noted that consumers are increasingly choosing not to purchase sustainability-labelled products, which often have a higher price since they are generally more expensive to produce. New customer behaviours require us to be flexible and be able to quickly optimise our offering to meet changes in demand.

Strengthened position and outstanding performance, particularly by Willys

We recorded substantial sales growth in the third quarter, clearly strengthening our position and gaining market share, both in physical stores and in e-commerce. I'd like to highlight Willys in particular, whose business concept of offering Sweden's cheapest bag of groceries is attracting a growing number of customers, and which recorded fantastic growth in the quarter, including higher volumes, which is in contrast to the market as a whole where growth entirely has been driven by pricing. Willys has increased its market share for a long period of time, even when inflation was at a more normal level, as a result of many years of development with a focus on establishing clarity, optimising operations and maintaining a high pace in modernising the store base. The Willys segment was also bolstered by the fact that Eurocash, which operates on the Norwegian border, is delivering strong sales growth now that cross-border shopping has recovered.

We have also seen a continued recovery for stores in central urban locations, which is particularly beneficial for Hemköp, with is clear focus on creating affordable offerings that are relevant and attractive for its target group. Snabbgross once again recorded a very strong quarter, despite high comparison figures, and benefited from a continued strong market for cafés and restaurants at the same time as membership-based Snabbgross Club continued to attract a growing number of members.

"We reported substantial sales growth in the third quarter, clearly strengthening our position and gaining market share."

Strong growth boosts earnings

The substantial sales growth in the third quarter led to a positive earnings development calculated in SEK. The margin improvement for the Willys segment was primarily a result of the development in Eurocash, which has gone from major losses during the pandemic to once again posting positive earnings. The divestment of Mat.se and increased volumes from the acquired Bergendahls Food also contributed to higher earnings. The integration of Bergendahls Food is proceeding according to plan, and the wholesale conversion is complete. The conversion of the point-of-sale system to Axfood's IT platform in all of City Gross's stores is expected to continue until year end.

However, certain factors impacted margins negatively during the quarter. The rapid pace of price increases from suppliers has not yet been fully reflected in consumer prices. We are also noting changes to the product mix, including a higher share of campaign products. In logistics, the cost level for fuel remained high, albeit somewhat lower than during the second quarter this year. At the same time, significant supply chain disruptions led to increased costs and caused our delivery reliability to remain relatively low. Our operations are also impacted to a certain extent by higher electricity prices, despite our long-standing efforts to secure our electricity use.

Progress towards an optimised logistics platform

In Bålsta, the establishment of our new highly automated logistics centre is in full swing and proceeding according to plan. We have now moved in to the office part of the building and are preparing to implement automation in stages in 2023. In Landskrona, the establishment of our new fruit and vegetable warehouse is proceeding according to plan, and in the fourth quarter we will start to operate the manual section of the warehouse.

Robust governance and high ambitions in sustainability

To maintain a high pace in the area of sustainability, it is essential to have clear targets and guidelines. Our sustainability programme is an important governance tool and constitutes the foundation of our climate and sustainability efforts. The programme is updated and followed up on each year in order to further advance our positions, and in this year's update, we introduced new climate and biodiversity targets. Transitioning to a more sustainable future is more important than ever before, and Axfood is continuing to show courage and maintain a high level of ambition.

Energy efficiency improvements are a focus area and something that we have systematically been working with for a long time, with ambitious targets in place. Recently, Sweden's largest rooftop solar panel facility was installed on the new logistics centre in Bålsta, and in addition we are currently working on installing a large rooftop solar panel facility on our new fruit and vegetable warehouse in Landskrona. We are also in the permitting process to build Sweden's largest onshore solar park.

Presentation of the interim report for the third quarter of 2022

Axfood will present the interim report for the third quarter of 2022 in a conference call at 9:30 a.m. CET today, Thursday 20 October 2022. The report will be presented by Klas Balkow, President and CEO, and Anders Lexmon, CFO.

To follow the presentation, ring: Sweden: +46 8 505 583 56 UK: +44 333 300 9260 USA: +1 646 722 4957

Financial calendar

• The year-end report for 2022 will be published at 7:00 a.m. CET on 1 February 2023
• The 2022 Annual and Sustainability Report will be published at the end of February 2023
• The 2023 AGM will be held on 22 March 2023
• The interim report for the first quarter of 2023 will be published at 7:00 a.m. CET on 26 April 2023
• The interim report for the second quarter of 2023 will be published at 7:00 a.m. CET on 14 July 2023

Well positioned with strong concepts

Overall, we are operating in an exceptional time, but we are well positioned and have the ability to manage the challenges with which we are presented. With our distinctive concepts, we cater to consumers' various preferences, and a rapid pace of development across all areas of the Group is further strengthening our competitiveness and bringing us closer to our vision of being the leading company within affordable, good and sustainable food.

Klas Balkow President and CEO, Axfood AB

Selection of press releases from Axfood during the third quarter of 2022

3 August 2022 Eurocash acquires Eda Supermarket

12 September 2022 Nominating Committee ahead of Axfood's 2023 AGM

29 September 2022 Axfood and Garant first in the world to offer ready meals made from cashew fruit from Cashewmeetly

30 September 2022

Third major solar power investment within a year as Axfood to build another of the country's largest solar power facilities in Landskrona

The Swedish food retail market

According to the Swedish Food Retail Index, total sales growth during the third quarter of 2022 amounted to 8.2%. The calendar effect during the quarter is estimated at 0.2 of a percentage point. Sales in physical stores increased by 8.9%. E-commerce sales decreased by -9.2%, with the store pick-up delivery option decreasing by -13.7% and home delivery declining by -5.1%. E-commerce's share of retail sales during the quarter amounted to 3.7%.

Food price inflation

During the third quarter of 2022, food prices increased by 14.5% according to Statistics Sweden. The inflation in the quarter was broad and covered the vast majority of product categories, but most notable was the price increases in the dairy, oils and fats, and coffee categories. Higher fuel and electricity prices are examples of underlying causes of inflation.

0% 2% 4% 6% 8% 10% 12% 14% 16% Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Axfood store sales Retail trade index SvDH/HUI

Growth in Axfood's retail sales1) compared with the Swedish Food Retail Index

1) Includes retail sales growth in the Tempo concept as of the first quarter of 2022. Comparison figures are not restated.

Growth in Axfood's e-commerce sales1) compared with the Swedish Food Retail Index

1) See page 24 for definition. Mat.se is included in the sales figures until February 2022.

Group performance

Net sales

Third quarter

Net sales totalled SEK 18,674 m (13,723), an increase of 36.1%. This increase is attributable to the acquired company Bergendahls Food, food price inflation, a continued strong recovery in both cross-border shopping and convenience retail, and higher customer traffic in physical stores.

Retail sales grew 15.5% to SEK 14,026 m (12,149). Like-for-like sales growth was 14.1%, primarily driven by Willys' strong performance, but also to a certain extent by the recovery of larger stores in city locations, where Hemköp is well positioned.

E-commerce sales totalled SEK 667 m (723), down 7.7%, mainly as a result of the divestment of Mat.se. Excluding Mat.se, sales increased by 4.4%. The share of retail sales attributable to e-commerce was 4.8% (6.0), which is higher than in the market.

Sales of private label products accounted for 31.0% (30.3) of retail sales.

January–September

Net sales totalled SEK 53,735 m (40,829), an increase of 31.6%. Retail sales increased 9.7% and amounted to SEK 40,541 m (36,939). Like-for-like growth was 8.6%. E-commerce sales totalled SEK 2,327 m (2,850), a decline of 18.4%. The decrease was 10.0% excluding the divested Mat.se. The share of retail sales attributable to e-commerce was 5.7%. Sales of private label products accounted for 31.1% (30.9) of retail sales.

Read about the performance of the Willys, Hemköp, Snabbgross and Dagab operating segments on pages 8–11.

36.1%

Net sales growth for the Axfood Group during the third quarter

14.1%

The Axfood Group's growth in comparable retail sales during the third quarter

Net sales and growth

Net sales per segment

SEK m	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	Full year 2021
Willys	9,450	7,873	20.0%	27,071	23,999	12.8%	32,424
Hemköp	1,608	1,459	10.2%	4,858	4,567	6.4%	6,202
Snabbgross	1,324	1,132	16.9%	3,557	2,840	25.3%	3,825
Dagab	16,971	12,211	39.0%	48,780	36,579	33.4%	52,295
Joint-Group	305	263	16.0%	897	795	12.8%	1,059
Internal sales between segments
Dagab	-10,709	-8,973	19.3%	-30,619	-27,217	12.5%	-36,935
Joint-Group/other	-275	-242	13.5%	-809	-735	10.0%	-978
Total	18,674	13,723	36.1%	53,735	40,829	31.6%	57,891

Retail sales

				Change				Change
	Q3	Q3		like-for-like	9 mos	9 mos		like-for-like
SEK m	2022	2021	Change	stores	2022	2021	Change	stores
Willys	9,453	7,874	20.0%	18.3%	27,079	24,000	12.8%	11.1%
Hemköp1)	4,573	4,275	7.0%	6.4%	13,462	12,940	4.0%	3.8%
Total	14,026	12,149	15.5%	14.1%	40,541	36,939	9.7%	8.6%

1) Refers to Hemköp (Group-owned and retailer-owned stores) as well as Tempo (third quarter 2021 restated)

Change in store structure

Number of stores	Dec 2021	New establishments /acquisitions	Sales/ closures	Conversions	Sep 2022	Sep 2021
Willys1)	226	4	–	–	230	223
Hemköp/Tempo, Group-owned stores	63	1	–	0	64	62
Snabbgross	27	2	–	–	29	27
Total, Group-owned stores	316	7	–	0	323	312
Hemköp, retailer-owned stores	134	3	–	0	137	136
Tempo, retailer-owned stores	130	2	-1	–	131	130
Total, retailer-owned stores	264	5	-1	0	268	266
Total, Group-owned and retailer-owned stores	580	12	-1	–	591	578

1) Willys, Willys Hemma and Eurocash. See page 8 for more information.

Operating profit

Third quarter

Operating profit amounted to SEK 975 m (793), an increase of 23.0%. Operating profit includes items affecting comparability of SEK -40 m (-18). These items consisted of integration costs of SEK -16 m for the acquisition of Bergendahls Food, structural costs of SEK -40 m connected to Dagab's restructuring of its logistics operations and a SEK 16 m repayment from Fora/Afa. The operating margin was 5.2% (5.8).

Adjusted operating profit amounted to SEK 1,015 m (811), an increase of 25.2%. The increase in adjusted operating profit is mainly the result of strong growth in physical stores and the recovery of cross-border shopping, volumes from Bergendahls Food, the divestment of Mat.se and healthy cost control in the retail store chains. Overall, this compensated for increased purchasing prices, higher logistics costs and negative currency effects. The adjusted operating margin declined to 5.4% (5.9), mainly due to a lower operating margin in Dagab, which was partly the result of the dilutive effect from the consolidation of Bergendahls Food. Net financial items for the period amounted to SEK -33 m (-31) and profit after financial items to SEK 942 m (762). Profit after tax amounted to SEK 745 m (601).

January–September

Operating profit for the period totalled SEK 2,599 m (1,965), an increase of 32.3%. Operating profit includes items affecting comparability totalling SEK 103 m (-72). These items consisted of a capital gain of SEK 221 m for the sale of Mat.se, integration costs of SEK -74 m for the acquired company Bergendahls Food, structural costs of SEK -77 m connected to Dagab's restructuring of its logistics operations, and a SEK 33 m repayment from Fora/Afa. The operating margin was 4.8% (4.8).

Adjusted operating profit amounted to SEK 2,496 m (2,036), an increase of 22.6%. The adjusted operating margin was 4.6% (5.0).

Net financial items for the period amounted to SEK -114 m (-87) and profit after financial items to SEK 2,485 m (1,878). Profit after tax amounted to SEK 2,017 m (1,486).

Read about the performance of the Willys, Hemköp, Snabbgross and Dagab operating segments on pages 8–11. Operating profit and operating margin excl. items affecting comparability¹)

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

Operating profit per segment excluding items affecting comparability

SEK m	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	Full year 2021
Willys	602	457	31.7%	1,434	1,168	22.7%	1,512
Hemköp	77	76	0.9%	207	198	4.9%	271
Snabbgross	90	77	15.7%	201	148	35.4%	193
Dagab	309	247	25.1%	845	699	20.8%	976
Joint-Group	-62	-47	32.9%	-191	-177	7.7%	-262
Operating profit excl. items affecting comparability	1,015	811	25.2%	2,496	2,036	22.6%	2,690
Items affecting comparability1)	-40	-18		103	-72		14
Operating profit	975	793	23.0%	2,599	1,965	32.3%	2,704
Net financial items	-33	-31		-114	-87		-122
Profit after financial items	942	762	23.6%	2,485	1,878	32.3%	2,582

1) See Note 9 Items affecting comparability for more information.

Operating margin per segment excluding items affecting comparability

%	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	R12	Full year 2021
Willys	6.4	5.8	0.6	5.3	4.9	0.4	5.0	4.7
Hemköp	4.8	5.2	-0.4	4.3	4.3	-0.1	4.3	4.4
Snabbgross	6.8	6.8	-0.1	5.6	5.2	0.4	5.4	5.0
Dagab	1.8	2.0	-0.2	1.7	1.9	-0.2	1.7	1.9
Operating margin excl. items affecting comparability	5.4	5.9	-0.5	4.6	5.0	-0.3	4.4	4.6
Operating margin	5.2	5.8	-0.6	4.8	4.8	0.0	4.7	4.7

Capital expenditures

Total capital expenditures in intangible assets and property, plant and equipment during the January–September period amounted to SEK 1,709 m (1,209). Investments in wholesale operations amounted to SEK 1,062 m (546), of which SEK 747 m (444) pertained to part of the investment in automation solutions and SEK 79 m (−) pertained to investments in land. Investments in retail operations amounted to SEK 346 m (382), and joint-Group and IT investments amounted to SEK 301 m (281). Investments in right-of-use assets, mainly premises, amounted to SEK 1,216 m (1,427)

during the January–September period, of which SEK 370 m (416) pertained to newly acquired assets and SEK 847 m (1,011) pertained mainly to renewals of existing leases of premises and upward indexing of rents. Of the total investments in leases, SEK 166 m (350) pertained to wholesale operations, SEK 1,039 m (869) pertained to retail operations and SEK 11 m (208) pertained to joint-Group operations and IT.

Investments, amortisation and depreciation

Financial position and cash flow

Cash flow from operating activities amounted to SEK 4,083 m (3,302) during the January– September period. The increase was mainly the result of higher operating profit and improved working capital. Paid tax totalled SEK -477 m (-323).

Net capital expenditures had an impact of SEK -1,872 m (-1,255) on cash flow. The higher investments are related to ongoing initiatives at Dagab.

Cash flow from financing activities was SEK -2,650 m (-1,238). The completed rights issue raised SEK 1,485 m, dividends to shareholders had an impact of SEK -1,646 m (-1,569) on cash flow, repayment of lease liabilities had an impact of SEK -1,276 m (-1,168) and repayment of loans raised had an impact of SEK -1,561 m (–).

Cash and cash equivalents held by the Group amounted to SEK 295 m, compared with SEK 734 m at 31 December 2021.

Interest-bearing liabilities and provisions totalled SEK 7,164 m, compared with SEK 8,375 m at 31 December 2021. Interestbearing net debt amounted to SEK 6,868 m, compared with SEK 7,640 m at 31 December 2021, with the change mainly attributable to paid dividends, the completed rights issue and repayment of loans.

The equity ratio was 26.4%, compared with 21.8% at 31 December 2021. The holding in Mathem was revalued in the third quarter at SEK 206 m, down SEK 635 m, which negatively impacted the equity ratio.

Net debt/EBITDA was 1.2, compared with 1.5 at 31 December 2021. Net debt/EBITDA excluding IFRS 16 was 0.1, compared with 0.4 at 31 December 2021.

Net debt/EBITDA

Derivation of total investments and net capital expenditures in cash flow

SEK m	9 mos 2022	9 mos 2021
Total capital expenditures	-2,926	-2,636
Investments in leases	1,216	1,427
Divestment of property, plant and equipment/intangible assets	1	5
Acquisitions of financial assets	-135	-58
Acquisitions of operations	10	−
Divested operations	-38	7
Cash flow from investing activities	-1,872	-1,255

Parent Company

The Parent Company's net sales and other operating income during the January– September period was SEK 232 m (207). After operating expenses of SEK -344 m (-312) and net financial items of SEK 257 m (-2), the Parent Company reported profit after financial items of SEK 145 m (-107). Net financial items includes SEK 255 m (–) in dividends from subsidiaries.

Investments during the period totalled SEK 3 m (12). The Parent Company had an interest-bearing net receivable of SEK 1,616 m at the end of the period, compared with SEK 299 m at 31 December 2021. The Parent Company has no significant transactions with related parties, other than transactions with subsidiaries.

Operating segment performance

Willys

Third quarter

Willys' net sales totalled SEK 9,450 m (7,873), an increase of 20.0%.

Willys' growth in like-for-like retail sales amounted to 18.3%. As food price inflation increases, value for money is becoming increasingly relevant to consumers, which is benefiting Willys as Sweden's leading discount player. Pricing and volume growth from increased in-store customer traffic explains the Willys chain's strong development during the quarter. The postpandemic recovery of cross-border shopping continued, and Eurocash's sales increased considerably compared with the preceding year.

The number of stores in the segment increased by seven, net, compared with the end of the third quarter of the preceding year. Willys added five stores and Willys Hemma added two. During the quarter, Willys entered into an agreement to acquire the Nya Pulsen store from Flemingsberg Livs AB, which also was approved by the Swedish Competition Authority. The transaction will be finalized on 16 January 2023 at the earliest. Eurocash'

previously announced acquisition of the Eda Supermarket store was completed on 4 October.

The e-commerce rollout continued, and at the end of the quarter online shopping was offered in 21 additional stores compared with the end of the third quarter last year.

Operating profit increased significantly and amounted to SEK 602 m (457), which corresponds to an operating margin of 6.4% (5.8). The higher operating margin was attributable to the substantial recovery of Eurocash.

January–September

Willys' net sales for the period totalled SEK 27,071 m (23,999), an increase of 12.8% compared with the corresponding period last year. Growth in like-for-like retail sales amounted to 11.1%.

Operating profit amounted to SEK 1,434 m (1,168) and the operating margin was 5.3% (4.9).

With the business concept of offering Sweden's cheapest bag of groceries, Willys is the country's leading discount grocery chain, offering a broad assortment both in Groupowned stores and online. The Willys operating segment includes the concepts Willys, Willys Hemma, the partly owned cross-border grocery chain Eurocash and a minority stake in the City Gross hypermarket chain.

Net sales and operating margin1)

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

	Q3	Q3		9 mos	9 mos			Full year
Willys key ratios	2022	2021	Change	2022	2021	Change	R12	2021
Net sales, SEK m	9,450	7,873	20.0%	27,071	23,999	12.8%	35,495	32,424
Operating profit, SEK m	602	457	31.7%	1,434	1,168	22.7%	1,777	1,512
Operating margin, %	6.4	5.8	0.6	5.3	4.9	0.4	5.0	4.7
Retail sales, SEK m1)	9,453	7,874	20.0%	27,079	24,000	12.8%	35,505	32,426
Like-for-like sales growth, %	18.3	-1.1	19.4	11.1	-0.5	11.6	–	0.0
Total number of stores2)	–	–	–	230	223	7	–	226
of which, Willys	–	–	–	171	166	5	–	168
of which, Willys Hemma	–	–	–	52	50	2	–	51
of which, Eurocash	–	–	–	7	7	–	–	7
Stores offering online shopping2)	–	–	–	138	117	21	–	126
Private label share, %	32.9	31.9	1.0	32.9	32.5	0.4	–	32.5
Share of sustainability-labelled products, %	26.6	28.7	-2.1	28.0	29.8	-1.8	27.9	29.6
Average number of employees	–	–	–	6,732	6,649	83	–	6,531
Share of women in management positions, %	–	–	–	39.7	32.8	6.9	–	34.5
Sickness-related absence, %	5.7	5.1	0.6	7.0	6.3	0.7	6.9	6.4

1) See definition on page 24.

2) At the end of the period.

Hemköp

Third quarter

Net sales for Group-owned Hemköp stores (including franchise fees) totalled SEK 1,608 m (1,459), an increase of 10.2%.

Hemköp's growth in retail sales, which includes Tempo, amounted to 7.0%. Hemköp continuously develops its concept, strengthens its sustainability profile and invests in the business with an increased presence and modernisations of existing stores. As an effect of the recovery after the pandemic, the development in larger stores in central urban locations were more favourable in the third quarter than the development for stores in residential areas, and the Tempo chain.

The number of stores in the segment increased by four, net, compared with the end of the third quarter of the preceding year. Two Group-owned Hemköp stores were added, while retailer-owned Hemköp stores increased by one and Tempo added one store. The Hemköp chain offered online shopping in two additional stores compared with the end of the third quarter last year.

Operating profit amounted to SEK 77 m (76), corresponding to an operating margin of 4.8% (5.2). Growth in like-for-like sales was offset by negative mix effects and a higherthan-usual share of sales from campaign products.

January–September

Net sales for Group-owned Hemköp stores (including franchise fees) for the period totalled SEK 4,858 m (4,567), an increase of 6.4%. The Hemköp chain's growth in retail sales amounted to 4.0%.

Operating profit for the period totalled SEK 207 m (198), corresponding to an operating margin of 4.3% (4.3).

Hemköp offers a broad, attractively priced assortment with a rich offering of fresh products. Through Group-owned stores, retailer-owned stores and an online business, Hemköp inspires good meals. The Hemköp operating segment also includes Tempo, a minimart format comprising retailerowned stores.

Net sales and operating margin1)

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

Hemköp key ratios	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	R12	Full year 2021
Net sales, SEK m	1,608	1,459	10.2%	4,858	4,567	6.4%	6,493	6,202
Operating profit, SEK m	77	76	0.9%	207	198	4.9%	280	271
Operating margin, %	4.8	5.2	-0.4	4.3	4.3	-0.1	4.3	4.4
Retail sales, SEK m1)	4,573	4,275	7.0%	13,462	12,940	4.0%	17,866	17,344
Like-for-like sales growth, %	6.4	1.7	4.7	3.8	1.3	2.5	–	1.1
Like-for-like sales growth, Group-owned stores, %	9.7	1.8	7.9	5.9	0.8	5.1	–	1.3
Total number of stores2)	–	–	–	332	328	4	–	327
of which, Group-owned Hemköp/Tempo stores	–	–	–	64	62	2	–	63
of which, retailer-owned Hemköp stores	–	–	–	137	136	1	–	134
of which, retailer-owned Tempo stores	–	–	–	131	130	1	–	130
Hemköp stores offering online shopping2)	–	–	–	68	66	2	–	70
Private label share, %	25.6	25.9	-0.3	26.3	26.4	-0.1	–	26.4
Share of sustainability-labelled products, %	26.8	27.3	-0.5	27.5	28.2	-0.7	27.3	28.0
Average number of employees	–	–	–	1,646	1,591	55	–	1,594
Share of women in management positions, %	–	–	–	27.8	28.4	-0.6	–	30.8
Sickness-related absence, %	5.5	5.0	0.5	6.7	6.2	0.5	6.7	6.3

1) See definition on page 24.

2) At the end of the period.

Snabbgross

Third quarter

Net sales totalled SEK 1,324 m (1,132), an increase of 16.9%. Snabbgross's growth in like-for-like retail sales amounted to 12.9% (11.6).

Snabbgross's strong sales growth was mainly due to the recovery of the café and restaurant market after the pandemic as well as food price inflation. Developments in newly established stores and sales to consumers through the membership-based Snabbgross Club store concept also contributed to the performance.

The number of stores in the segment increased by two, compared with the end of the third quarter of the preceding year.

Operating profit amounted to SEK 90 m (77), corresponding to an operating margin that was in line with the preceding year at 6.8% (6.8). This higher operating profit was primarily attributable to strong growth and effective cost control.

January–September

Net sales for Snabbgross totalled SEK 3,557 m (2,840) for the period, an increase of 25.3%.

Operating profit for the period amounted to SEK 201 m (148), and the operating margin was 5.6% (5.2).

Snabbgross is one of Sweden's leading restaurant wholesalers with a customer base of restaurants, fast food operators and cafés. Snabbgross offers personal service, accessibility and quality at its stores and online. The Snabbgross operating segment also includes the concept Snabbgross Club, which is directed at consumers.

Net sales and operating margin1)

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

Snabbgross key ratios	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	R12	Full year 2021
Net sales, SEK m	1,324	1,132	16.9%	3,557	2,840	25.3%	4,543	3,825
Operating profit, SEK m	90	77	15.7%	201	148	35.4%	245	193
Operating margin, %	6.8	6.8	-0.1	5.6	5.2	0.4	5.4	5.0
Wholesale sales, SEK m1) Like-for-like sales growth, % Total number of stores2) of which, Snabbgross	1,329 12.9 – –	1,136 11.6 – –	17.0% 1.3 – –	3,571 21.6 29 26	2,851 5.6 27 25	25.3% 16.0 2 1	4,560 – – –	3,840 9.3 27 25
of which, Snabbgross Club Share of sustainability-labelled products, %	– 18.3	– 18.6	– -0.3	3 18.8	2 18.6	1 0.2	– 18.7	2 18.6
Average number of employees Share of women in management positions, %	– –	– –	– –	530 37.3	465 34.0	65 3.3	– –	464 34.6
Sickness-related absence, %	6.5	5.6	0.9	7.4	6.4	1.0	7.4	6.6

1) See definition on page 24.

2) At the end of the period.

Dagab

Third quarter

Net sales totalled SEK 16,971 m (12,211), an increase of 39.0%. Sales growth excluding the acquired Bergendahls Food amounted to 17.4% and was attributable to strong sales to the store chains and convenience retailers.

Operating profit amounted to SEK 253 m (229), corresponding to an operating margin of 1.5% (1.9). Operating profit included items affecting comparability of SEK -56 m (-18). These items included integration costs of SEK -16 m (-18) for Bergendahls Food and structural costs of SEK -40 m (–) connected to the restructuring of the logistics operations.

Adjusted operating profit amounted to SEK 309 m (247) and the adjusted operating margin was 1.8% (2.0). This higher operating profit was due to strong growth, higher volumes from the acquired company Bergendahls Food and the divestment of Mat.se. Operating profit was negatively impacted by higher fuel costs, a weaker SEK and higher logistics costs as a result lower delivery reliability caused by shortages of goods on the part of suppliers and transportrelated disruptions.

Urban Deli, one of Axfood's development companies, continued its recovery after the pandemic and recorded favourable growth. Marketing initiatives continued to yield results for Apohem, and the company continued to deliver a very strong sales performance during the third quarter.

Work on the Group's future warehouse and logistics structure in Bålsta, Backa and Landskrona is proceeding according to plan. Recognition of right-of-use assets and lease liabilities related to the logistics centre in Bålsta has been moved forward to the fourth quarter of 2022 in conjunction with the facility becoming available to Axfood and taken into operations.

The integration and effects of the acquired Bergendahls Food are proceeding according to plan. In the third quarter, work continued on the conversion of City Gross's point-of-sale system, which is expected to continue until year-end.

January–September

Dagab's net sales for the period totalled SEK 48,780 m (36,579), an increase of 33.4%.

Operating profit amounted to SEK 915 m (681), corresponding to an operating margin of 1.9% (1.9). Operating profit included items affecting comparability of SEK 70 m (-18). These items included a capital gain of SEK 221 m for the sale of Mat.se, integration costs of SEK -74 m (-18) for Bergendahls Food and structural costs of SEK -77 m (–) connected to the restructuring of the logistics operations.

Adjusted operating profit amounted to SEK 845 m (699) and the adjusted operating margin was 1.7% (1.9).

Dagab operates and develops the Group's assortment, purchasing and logistics, but also conducts sales to external customers. The Dagab operating segment also includes retailerowned Handlar'n, the meal kit company Middagsfrid, the online pharmacy Apohem and the restaurant chain Urban Deli.

Net sales and operating margin1)

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

Dagab key ratios	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	R12	Full year 2021
Net sales, SEK m	16,971	12,211	39.0%	48,780	36,579	33.4%	64,496	52,295
Operating profit, SEK m	253	229	10.5%	915	681	34.2%	1,165	932
Operating profit excl. items affecting comparability, SEK m1)	309	247	25.1%	845	699	20.8%	1,121	976
Operating margin, %	1.5	1.9	-0.4	1.9	1.9	0.0	1.8	1.8
Operating margin excl. items affecting comparability, %1)	1.8	2.0	-0.2	1.7	1.9	-0.2	1.7	1.9
Delivery reliability, %	–	–	–	90.2	95.5	-5.3	–	95.4
Average number of employees	–	–	–	3,432	2,947	485	–	3,126
Share of women in management positions, %	–	–	–	29.9	25.4	4.5	–	25.4
Sickness-related absence, %	6.7	7.6	-0.9	8.1	8.5	-0.4	8.2	8.5

1) See Note 9 Items affecting comparability for more information.

Sustainable development

For Axfood, sustainable development is about seeing the whole picture and the relentless pursuit of improvements. Sustainability permeates all operations and encompasses the entire food system, taking into account the environment, animal welfare, and the people who produce, sell and consume food. Axfood will take the lead in promoting a sustainable food system by influencing decision-makers, leading the way through its own initiatives and driving industry issues. The foundation of Axfood's efforts is a sustainability programme designed to strengthen its business while contributing to the UN SDGs and Sweden's Environmental Objectives. The sustainability programme is an important tool that includes a sustainability policy and some 40 targets, and the Executive Committee resolved to carry out a new revision in the third quarter. For example, one of the three new targets introduced was to adapt the sales mix in the long term to reduce the climate impact per kilo of food sold each year.

Food

Axfood strives to make it easier for consumers to make sustainable choices by offering a broad assortment of sustainability-labelled products.

During the third quarter, the proportion of sustainability-labelled products declined and was 25.9% (27.1) of total sales. The decline was partly the result of the current inflation, which is unfavourable for goods with a somewhat higher price level, including sustainabilitylabelled products. This is most apparent in the fruit and vegetables as well as fish and dairy categories. The sales trend for organic products has been in decline for the industry as a whole for some time. During the quarter, Axfood's share of organic products declined to 5.2% (5.5), partly as a result of changes in the sales mix. The share of KRAV-certified meat was unchanged at 2.7% (2.7). Growth for vegetarian protein substitutes amounted to 7.9%, mainly driven by pricing, but also by an expanded assortment. Products with tofu, vegetarian fish fingers and ready meals made from cashew fruit – an extract from the harvest of cashew nuts – were some of the new vegetarian products introduced. Axfood is on track to reach its objective of cutting food waste in half by 2025 compared with the base year 2015, which is mainly driven by new technology and in-store clearances. These efforts include collaboration with local charity organisations and social food stores. During the third quarter, the fifth "Matmissionen" (Food Mission) in the Stockholm area opened, a store concept that Axfood initiated and to which the company continues to contribute to.

Environment

Axfood is striving to reduce the climate impact of food production as far as possible. The climate goal is to achieve net zero emissions from the company's own operations by 2030.

Energy efficiency is a prioritised area, and energy intensity in the Group continues to decline, primarily as a result of investments in premises, cooling systems and lighting. Axfood is also continuing to further invest in renewable energy with rooftop solar parks atop the new logistics centre in Bålsta and the new fruit and vegetable warehouse in Landskrona, and is in the permitting process to build Sweden's largest onshore solar park.

The total CO² effect per tonne of delivered goods for the Group's own transports was 11.9 CO2e (16.8) during the third quarter, a reduction of approximately 30%. This change was primarily attributed to higher use of renewable fuels.

Axfood is also working broadly to reduce the negative impact of plastic and chemicals. During the third quarter, product packaging for private label products was updated, which is expected to save about 20 tonnes of plastic per year.

People

Axfood aspires to be a positive force in society and is working to improve work and social conditions throughout the food supply chain, including customers and agricultural and production workers as well as its own employees.

Social audits are continually conducted in all risk countries in order to ensure compliance with Axfood's Code of Conduct among suppliers of private label products. The results of the audits were generally positive, with the exception of one audit for which an action plan is to be prepared.

Another prioritised area involves reducing sicknessrelated absence among the Group's employees. During the third quarter, sickness-related absence increased slightly to 5.9% (5.6). However, sickness-related absence declined compared with the first half of the year.

The share of women in management positions amounted to an accumulated 35.7% (31.8) as a result of systematic inclusion and gender equality efforts within the Group.

Sustainability key ratios1)	Q3 2022	Q3 2021	Change	9 mos 2022	9 mos 2021	Change	R12	Full year 2021
Share of sustainability-labelled products, %	25.9	27.1	-1.2	27.1	28.4	-1.3	27.0	28.1
Share of organic sales, %	5.2	5.5	-0.3	5.2	5.9	-0.7	5.3	5.8
Growth in plant-based protein substitutes, %	7.9	-4.7	12.6	1.4	-1.3	2.7	1.0	-1.6
Share of KRAV-certified meat, %	2.7	2.7	0.0	2.9	2.8	0.1	2.9	2.9
Number of social audits	22	29	-7	66	75	-9	93	93
Electricity consumption, kWh/m2 (stores and warehouses)	–	–	–	–	–	–	283.4	289.7
CO2, kg/tonne of goods	11.9	16.8	-4.9	13.1	17.5	-4.4	13.5	16.8
Share of women in management positions, %	–	–	–	35.7	31.8	3.9	–	32.3
Sickness-related absence, %	5.9	5.6	0.3	7.1	6.6	0.5	7.1	6.7

1) For definitions, see page 24.

For more information on Axfood's sustainability key performance indicators, see the 2021 Annual and Sustainability Report.

Other information

Long-term targets and capital expenditures 2022

Axfood's long-term financial targets:

• Grow faster than the market
• Long-term operating margin of at least 4.5%
• Equity ratio of at least 20% at year-end

Axfood's dividend policy is that the shareholder dividend is to be at least 50% of profit after tax. The dividend is to be paid out on two occasions.

Axfood's capital expenditures in 2022 are expected to amount to between SEK 2,600 and 2,700 m excluding acquisitions and right-of-use assets, of which SEK 1,300 m pertains to the logistics centre in Bålsta outside Stockholm (the majority of which concerns partial payment for an automation solution), SEK 100 m pertains to the nationwide warehouse for fruits and vegetables in Landskrona (the majority of which concerns partial payment for an automation solution), and SEK 110 m pertains to IT related to the acquisition of Bergendahls Food.

During 2022, Axfood plans to establish 8–13 new stores.

In 2022, Axfood's operating profit is expected to be charged with structural costs totalling approximately SEK 340 m, of which SEK 220 m is connected to the new logistics centre in Bålsta outside Stockholm and SEK 120 m to integration costs for Bergendahls Food. The majority of the structural costs are expected to be incurred in the second half of the year.

Nominating Committee

Ahead of the 2023 AGM and in accordance with the applicable instructions for Axfood's Nominating Committee, the following Nominating Committee has been appointed. The Nominating Committee consists of Marie Ehrling (Axel Johnson AB), Sussi Kvart (Handelsbanken Funds), Joachim Spetz (Swedbank Robur Funds) and Peter Nygren (ODIN Funds). Marie Ehrling is the chairman of the Nominating Committee. Axfood's Chairman, Mia Brunell Livfors, is a co-opted member of the Nominating Committee. Shareholders who wish to submit proposals to the Nominating Committee ahead of the AGM can do so by emailing valberedning@axfood.se. In order for the Nominating Committee to be able to address submitted proposals in a constructive manner, proposals must be received in due time before the AGM.

2023 Annual General Meeting

Axfood's Annual General Meeting (AGM) will be held on 22 March 2023 in Stockholm. All AGM documentation including the 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 so request and provide their postal address.

This report has been reviewed by Axfood's auditors.

Stockholm, 20 October 2022

Klas Balkow, President and CEO

Auditor's review report

To the Board of Directors of Axfood AB (publ) Corporate registration number 556542-0824

Introduction

We have reviewed the interim report for Axfood AB (publ) for the period 1 January–30 September 2022. The Board of Directors and the President are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of the review

We conducted our review in accordance with the International Standard on Review Engagements (ISRE) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review has a different focus and is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (ISA) and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that we would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion based on an audit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not, in all material aspects, prepared for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.

Stockholm, 20 October 2022 Deloitte AB

Hans Warén Authorised Public Accountant

Financial statements, Group

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

SEK m	Q3 2022	Q3 2021	9 mos 2022	9 mos 2021	R12	Full year 2021
Net sales	18,674	13,723	53,735	40,829	70,797	57,891
Cost of goods sold1)	-16,006	-11,482	-46,131	-34,212	-60,864	-48,945
Gross profit	2,668	2,241	7,603	6,617	9,933	8,946
Selling expenses	-866	-795	-2,671	-2,452	-3,647	-3,428
Administrative expenses1)	-1,006	-766	-3,042	-2,505	-3,985	-3,448
Share of profit in associated companies and joint ventures	-11	-12	-39	-32	-53	-46
Other operating income1)	195	148	809	420	1,178	788
Other operating expenses1)	-6	-23	-62	-83	-88	-108
Operating profit	975	793	2,599	1,965	3,338	2,704
Interest income and similar profit/loss items	7	1	11	9	15	12
Interest expense and similar profit/loss items	-41	-32	-125	-96	-163	-134
Profit before tax	942	762	2,485	1,878	3,189	2,582
Tax	-197	-161	-468	-392	-565	-488
Net profit for the period	745	601	2,017	1,486	2,625	2,094
Other comprehensive income
Items that cannot be reclassified to profit or loss for the period, net after tax
Revaluation defined benefit pensions	9	2	26	6	29	9
Change in holdings measured at fair value2)	-635	–	-635	–	-635	–
Items that can be reclassified to profit or loss for the period, net after tax
Change in hedging reserve	22	12	82	25	99	42
Other comprehensive income for the period	-604	14	-528	31	-506	52
Total comprehensive income for the period	140	615	1,489	1,517	2,118	2,146
Net profit for the period attributable to
Owners of the parent	735	612	2,011	1,540	2,621	2,150
Non-controlling interests	10	-11	6	-54	3	-56
Total comprehensive income for the period attributable to
Owners of the parent	130	626	1,483	1,570	2,115	2,202
Non-controlling interests	10	-11	6	-54	3	-56
Earnings per share before dilution, SEK3)	3.40	2.90	9.43	7.30	–	10.20
Earnings per share after dilution, SEK3)	3.39	2.89	9.39	7.28	–	10.16

1) Includes items affecting comparability, see Note 9 Items affecting comparability for more information.

2) See Note 5 Financial assets and liabilities for more information.

3) Comparison figures were revalued for the bonus issue element of the rights issue that was completed in the second quarter of 2022.

Condensed statement of financial position, Group

SEK m	30 Sep 2022	30 Sep 2021	31 Dec 2021
Assets
Goodwill	3,406	2,832	3,846
Other intangible assets	1,451	773	1,449
Property, plant and equipment	4,731	3,396	3,815
Right-of-use assets	6,332	5,905	6,384
Financial assets1)	617	59	385
Deferred tax assets	301	237	346
Total non-current assets	16,837	13,202	16,225
Inventories	3,520	2,586	3,136
Trade receivables	2,092	1,075	2,292
Other current assets	1,577	1,237	1,344
Cash and bank balances	295	2,343	734
Assets held for sale	46	−	−
Total current assets	7,529	7,242	7,506
Total assets	24,367	20,444	23,731
Equity and liabilities
Equity attributable to owners of the parent	6,194	4,310	4,952
Equity attributable to non-controlling interests	230	226	224
Total equity	6,424	4,536	5,176
Non-current lease liabilities	4,785	4,445	4,856
Provisions for pensions	329	381	371
Deferred tax liabilities	1,191	976	1,212
Other non-current liabilities	30	76	57
Total non-current liabilities	6,335	5,879	6,496
Current lease liabilities	1,548	1,498	1,548
Current interest-bearing liabilities	502	1,500	1,600
Trade payables	6,389	4,558	5,845
Other current liabilities	3,169	2,473	3,067
Total current liabilities	11,608	10,029	12,059
Total equity and liabilities	24,367	20,444	23,731
1) Of which, interest-bearing assets	−	−	−

Condensed statement of cash flows, Group

SEK m	Q3 2022	Q3 2021	9 mos 2022	9 mos 2021	R12	Full year 2021
Operating activities
Operating profit	975	793	2,599	1,965	3,338	2,704
Adjustments for non-cash items	35	11	-146	39	-123	62
Depreciation/amortisation	642	596	1,930	1,765	2,564	2,399
Interest paid	-38	-31	-116	-94	-146	-124
Interest received	3	0	5	2	7	4
Paid tax	-151	-103	-477	-323	-560	-406
Changes in working capital	21	-213	289	-52	292	-49
Cash flow from operating activities	1,487	1,054	4,083	3,302	5,371	4,590
Investing activities
Acquisitions of operations	−	−	10	−	-1,623	-1,633
Acquisitions of intangible assets	-52	-46	-207	-206	-310	-309
Acquisitions of property, plant and equipment	-222	-567	-1,503	-1,003	-2,016	-1,516
Acquisitions of financial assets	-14	-26	-135	-58	-474	-397
Other changes in investing activities	2	9	-37	12	-36	13
Cash flow from investing activities	-286	-630	-1,872	-1,255	-4,459	-3,842
Financing activities
Issue of shares	−	−	1,485	−	1,485	−
Loans raised	302	1,500	463	1,500	863	1,900
Amortisation of debt	-726	-389	-2,837	-1,168	-3,547	-1,878
Shareholder contribution from minority owners	−	49	−	49	−	49
Share repurchases	−	−	-115	-50	-115	-50
Dividend paid out	-810	-785	-1,646	-1,569	-1,646	-1,569
Cash flow from financing activities	-1,235	375	-2,650	- 1,238	-2,960	-1,548
Cash flow for the period	-34	799	-439	809	-2,048	-800

Condensed statement of changes in equity, Group

SEK m	30 Sep 2022	30 Sep 2021	31 Dec 2021
Amount at start of year	5,176	4,563	4,563
Total comprehensive income for the period	1,489	1,517	2,146
Change in non-controlling interests	−	-1	-1
Rights issue1)	1,485	−	−
Share repurchases	-115	-50	-50
Share-based payments	34	27	37
Shareholder contribution from minority owners	−	49	49
Dividend to shareholders	-1,646	-1,569	-1,569
Amount at end of period	6,424	4,536	5,176

1) See Note 8 Equity for more information.

Financial statements, Parent Company

Condensed income statement, Parent Company

SEK m	Q3 2022	Q3 2021	9 mos 2022	9 mos 2021	Full year 2021
Net sales	2	2	6	5	7
Selling and administrative expenses	-117	-94	-344	-312	-430
Other operating income	73	65	226	201	271
Operating loss	-42	-27	-112	-105	-152
Net financial items	2	-1	257	-2	-4
Profit/loss after financial items	-40	-28	145	-107	-156
Appropriations, net	−	−	−	−	2,326
Profit/loss before tax	-40	-28	145	-107	2,170
Tax	7	5	19	19	-456
Net profit/loss for the period	-33	-23	164	-88	1,714
Operating profit includes depreciation/amortisation totalling	2	2	6	5	7

Net profit for the period corresponds to total comprehensive income for the period.

Condensed balance sheet, Parent Company

SEK m	30 Sep 2022	30 Sep 2021	31 Dec 2021
Assets
Property, plant and equipment	34	38	37
Participations in Group companies	4,319	3,524	3,529
Other financial assets	1	12	12
Deferred tax assets	8	6	6
Total non-current assets	4,362	3,580	3,584
Receivables from Group companies1)	3,975	1,268	6,481
Other current assets	351	356	37
Cash and cash equivalents	11	2,126	321
Total current assets	4,338	3,750	6,838
Total assets	8,700	7,330	10,423
Equity and liabilities
Restricted equity	296	287	287
Non-restricted equity	2,411	685	2,497
Total equity	2,708	973	2,784
Untaxed reserves	3,487	3,192	3,487
Provisions	6	11	10
Non-current liabilities	9	3	4
Current interest-bearing liabilities	502	1,500	1,600
Trade payables	12	35	20
Liabilities to Group companies2)	1,824	1,483	2,277
Other current liabilities	153	132	241
Total current liabilities	2,490	3,151	4,138
Total equity and liabilities	8,700	7,330	10,423
1) Of which, interest-bearing receivables	3,936	1,264	3,844
2) Of which, interest-bearing liabilities	1,823	1,483	2,256

Notes

Note 1 Accounting policies

Axfood applies the International Financial Reporting Standards (IFRS) as endorsed by the EU. 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 Chapter 9 Interim Financial Reporting of the Swedish Annual Accounts Act. The same accounting policies and measurement principles and methods have been used in this interim report as in the 2021 Annual and Sustainability 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 texts and tables, figures between 0 and 0.5 are reported as 0.

New accounting policies effective in 2022 and later

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

Axfood's holding in Mathem is classified as a financial asset measured at fair value through other comprehensive income.

A non-current asset is classified as held for sale when its carrying amount will be recovered mainly through a sale and not through use and when it is available for immediate sale in existing condition and according to normal terms, and it is highly probable that the sale will be carried out. Such assets are reported on a separate line as a current asset in the statement of financial position. Noncurrent assets are reported at the lower of their carrying amount and fair value less costs to sell.

Significant assumptions and assessments

Preparing the financial statements in accordance with IFRS requires the Board and Executive Committee to make judgements and estimates as well as assumptions that affect the application of the accounting policies and the Company's result and position as well as other disclosures in general. Estimates and assumptions are based on historical experience and are reviewed on a regular basis. The actual outcome may deviate from these estimates and assessments.

Note 2 Other material information

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.

Transactions with related parties

The Axfood Group's transactions with related parties, aside from those covered by the consolidated financial statements, consist of transactions with associated companies and with subsidiaries within the Axel Johnson Group.

Significant risks and uncertainties

Like all business activities, Axfood's business is exposed to risks. The risks are broken down into operational, strategic and financial risks. The risks that could have the greatest impact on the Group are the risk of disruptions in the

Note 3 Operating segments

Segments have been defined based on how Axfood's Executive Committee monitors and governs the operations to evaluate performance and allocate resources. The Executive Committee reviews the segments' operating profit or loss, both including and excluding items affecting comparability.

The operating segments that have been identified are Willys, Hemköp, Snabbgross and Dagab. Joint-Group logistics chain, IT and information security risks, and liability and trust risks. Axfood works continuously with risk identification and assessment. Major emphasis is placed on preventive work and on planning to maintain operating continuity in the event of unforeseen events.

The carrying amounts of the Group's assets are tested on a regular basis to determine any need to recognise impairment. The carrying amounts are also tested when there are triggers of impairment identified.

For a thorough account of the risks that affect the Group, see the 2021 Annual and Sustainability Report.

The war in Ukraine

The share of direct purchases from Ukraine is very low in Axfood's supply chain. However, Ukraine is a major supplier of grain, and the situation is therefore impacting the company's suppliers. In addition to a raw material shortage, the war has also resulted in greater logistics problems throughout the supply chain. The war has not had any substantial financial impact on Axfood aside from its effect on the world situation as a whole.

pertains to head office support functions, such as the Executive Committee, Finance/Accounting, Legal Affairs, Communications, Business Development, HR and IT. For information about Axfood's operating segments, see pages 8–11 of this interim report. For a more detailed description of the segments, please refer to the 2021 Annual and Sustainability Report.

Note 4 Acquired and divested operations

Bergendahl Food AB

The purchase price allocation for Bergendahl Food AB, which was acquired on 1 October 2021, was finalised during the second quarter of 2022 in accordance with the purchase price allocation that was adjusted in the first quarter of 2022. During the second quarter, Bergendahl Food AB transferred its operations internally to Dagab Inköp & Logistik AB and to Axfood IT AB.

Mat.se and Mathem

In December 2021, Axfood and Mathem announced that they had entered into a strategic partnership, with Axfood divesting Mat.se in exchange for shares in Mathem. Completion of the acquisition was subject to approval by

Note 5 Financial assets and liabilities

Financial assets measured at fair value amounted to SEK 271 m (2). SEK 66 m (2) is attributable to Level 2 of the fair value hierarchy and SEK 206 m (–) is attributable to Level 3. Financial liabilities measured at fair value amounted to SEK 0 m (75). The entire amount is attributable to Level 2 of the fair value hierarchy.

The carrying amount of the call option agreement entered into with City Gross in conjunction with the acquisition amounted to SEK 0 m (–). The call option agreement is recognised at fair value based on an assessment of the change in City Gross's future sales and earnings performance.

The carrying amount of the holding in Mathem amounted to SEK 206 m (–). The holding in Mathem was negatively revalued in the third quarter by SEK 635 m. The revaluation is an adjustment to the the substantial decline in value in the market, which has accelerated in the second half of 2022. The valuation corresponds to an EV/sales multiple of 0.5 based on Mathem's sales LTM at 30 June 2022. A 10% increase in the multiple would have resulted in a valuation of SEK 225 m, while a corresponding reduction of the multiple would have

the Swedish Competition Authority, which was obtained on 9 February 2022, and on 1 March 2022, Mat.se was sold to Mathem. The purchase consideration amounted to SEK 688 m on a cash and debt-free basis. The acquired shares in Mathem corresponded to a shareholding of 16.5% of Mathem. The shareholding in Mathem is recognised as a financial instrument measured at fair value with changes in value through other comprehensive income.

The capital gain from the divestment of Mat.se amounted to SEK 221 m and was recognised in other operating income during the first quarter. The capital gain is recognised in the operational earnings follow-up as an item affecting comparability in the Dagab segment.

resulted in a valuation of SEK 184 m. Given the uncertainty in the financial markets and its impact on the valuation, revaluation of the holding in Mathem is conducted continuously.

Forward exchange contracts are measured at fair value based on the Central Bank of Sweden's spot rates on the accounting date, which is assessed to be a reasonable approximation of fair value. For other financial assets and liabilities, the carrying amount represents a reasonable approximation of fair value.

Changes in the fair value of financial assets attributable to

Level 3, SEK m
Amount at start of year	–
Acquisitions	758
New issue	83
Revaluation via other comprehensive income	-635
Amount at end of period	206

Note 6 Pledged assets and contingent liabilities

Group, SEK m	30 Sep 2022	30 Sep 2021	31 Dec 2021	Parent Company, SEK m	30 Sep 2022	30 Sep 2021	31 Dec 2021
Pledged assets	–	–	–	Pledged assets	–	–	–
Contingent liabilities	20	19	20	Contingent liabilities	244	256	244

Note 7 Long-term share-based incentive programmes

The 2022 AGM resolved to adopt a new long-term sharebased incentive programme that runs over a three-year period, LTIP 2022, which in all essential respects corresponds to LTIP 2021, with the main adjustments being an increase of the number of participants and savings shares and the fact that a reference group of companies has been identified to measure the share price performance.

Allotment of LTIP 2019 was carried out in April 2022 using treasury shares. For more information about

incentive programmes, see Axfood's 2021 Annual and Sustainability Report.

To secure the Company's obligations under LTIP 2022, Axfood repurchased 343,000 shares for a total of SEK 100 m during the second quarter of 2022, at an average price of SEK 292.04 per share. The holding of treasury shares amounts to 1,037,856 shares, which is sufficient to secure the delivery of shares for all of the Company's incentive programmes.

Note 8 Equity

On 26 April 2022, it was announced that the Board of Directors, with the support of the AGM's authorisation, had decided to carry out a rights issue. The rights issue comprised a maximum of 6,972,528 shares with preferential rights for existing shareholders, with the Company's shareholders receiving one subscription right for each share held and 30 subscription rights entitling the holder to subscribe for one new share. The subscription price was SEK 215 per share and the subscription period concluded on 23 May 2022. 6,831,824 shares were subscribed for with the support of subscription rights, and the remaining 140,704 shares were allocated to investors

who had subscribed for shares without the support of subscription rights. Axfood received SEK 1,499 m from the rights issue before SEK 14 m in issue costs. The number of registered shares is 216,843,240 after the rights issue.

Change in number of shares and share capital

	Number of shares	Share capital, SEK
1 January 2022	209,870,712	262,338,390
Rights issue	6,972,528	8,715,660
Total	216,843,240	271,054,050

Note 9 Items affecting comparability

Integration costs totalled SEK -16 m (-18) during the quarter, and cumulative integration costs totalled SEK -74 m (-18). The costs pertain in their entirety to the Bergendahl Food AB transaction. Integration costs consist primarily of costs for external consultants and parallel IT operations connected to the ongoing integration project. The costs are recognised in other operating expenses as well as administrative expenses. Structural costs in the quarter amounted to SEK -40 m (–) and cumulative structural costs amounted to SEK -77 m (–). These pertain to costs connected with the restructuring of Dagab's

logistics operations. Structural costs primarily pertain to personnel costs and are included in the cost of goods sold. The cumulative capital gain of SEK 221 m (–) pertains to earnings from the divestment of Mat.se, which is recognised in other operating income. Fora/AFA amounted to SEK 16 m (–) in the quarter and cumulatively to SEK 33 m (–) and pertained to additional payments received from Fora/AFA employer's liability insurance based on earlier premium payments. Revenue is recognised in other operating income.

		Q3	Q3	9 mos	9 mos		Full year
	Segment	2022	2021	2022	2021	R12	2021
Acquisition costs	Joint-Group	–	–	–	-54	–	-54
Integration costs	Dagab	-16	-18	-74	-18	-95	-39
Structural costs	Dagab	-40	–	-77	–	-83	-6
Capital gain	Dagab	–	–	221	–	221	–
Fora/AFA	Joint-Group	16	–	33	–	145	112
Total		-40	-18	103	-72	189	14

Note 10 Significant events after the balance sheet date

No significant events have occurred after the balance sheet date.

Key ratios

Quarterly overview, Group

SEK m	Q4 2020	Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022	Q2 2022	Q3 2022
Net sales	13,633	13,203	13,903	13,723	17,062	16,593	18,468	18,674
Operating profit	566	565	607	793	739	835	789	975
Operating profit excl. items affecting comparability	566	565	661	811	653	653	828	1,015
Operating margin, %	4.1	4.3	4.4	5.8	4.3	5.0	4.3	5.2
Operating margin excl. items affecting comparability, %	4.1	4.3	4.8	5.9	3.8	3.9	4.5	5.4
Net profit for the period	409	430	455	601	608	682	590	745
Earnings per share before dilution, SEK2)	2.00	2.14	2.26	2.90	2.90	3.27	2.75	3.40
Earnings per share before dilution excl. items affecting comparability, SEK2)	2.00	2.14	2.46	2.97	2.57	2.43	2.90	3.55
Cash flow from operating activities	1,490	1,127	1,121	1,054	1,288	1,429	1,167	1,487
Cash flow from operating activities per share, SEK	7.12	5.39	5.36	5.04	6.16	6.83	5.51	6.89
Return on capital employed, %1)	24.2	26.6	25.6	22.6	22.4	26.5	26.4	25.8
Return on equity, %1)	45.7	63.0	56.1	47.4	46.3	65.5	51.3	49.9
Equity per share, SEK	20.70	15.51	17.56	20.61	23.68	19.35	28.15	28.70
Investments in intangible assets and property, plant and equipment	318	292	304	613	616	531	904	274
Items affecting comparability	–	–	-54	-18	86	182	-39	-40
Net debt (+)/net receivable (-)	4,577	5,016	4,920	5,481	7,640	8,225	7,005	6,868
Share price, SEK	191.80	208.80	236.70	209.70	260.40	306.20	294.30	254.90

1) Rolling 12-month figures.

2) Comparison figures were revalued for the bonus issue element of the rights issue that was completed in the second quarter of 2022.

Key ratios and other data, Group

	9 mos 2022	9 mos 2021	Full year 2021
Operating margin, %	4.8	4.8	4.7
Operating margin excl. items affecting comparability, %	4.6	5.0	4.6
Equity ratio, %	26.4	22.2	21.8
Net debt (+)/net receivable (-), SEK m	6,868	5,481	7,640
Net debt (+)/net receivable (-) excl. IFRS 16	536	-462	1,236
Net debt/EBITDA, multiple	1.2	1.1	1.5
Net debt/EBITDA excl. IFRS 16, multiple	0.1	-0.1	0.4
Net debt-equity ratio (+)/net receivable-equity ratio (-), multiple	1.1	1.2	1.5
Net debt-equity ratio (+)/net receivable-equity ratio (-), excl. IFRS 16, multiple	0.1	-0.1	0.2
Capital employed, SEK m	13,588	12,360	13,550
Return on capital employed, %1)	25.8	22.6	22.4
Return on equity, %1)	49.9	47.4	46.3
Average number of employees during the year	12,834	12,128	12,202
Total capital expenditures, SEK m	2,926	2,636	3,565
Investments in intangible assets and property, plant and equipment, SEK m	1,709	1,209	1,825
Number of shares outstanding at end of period	215,805,384	209,104,732	209,104,732
Average number of shares outstanding before dilution	212,221,661	209,176,383	209,158,470
Average number of shares outstanding after dilution	213,100,288	209,877,451	209,875,766
Key data per share
Earnings per share before dilution, SEK2)	9.43	7.30	10.20
Earnings per share before dilution excl. items affecting comparability, SEK2)	8.89	7.57	10.14
Earnings per share after dilution, SEK2)	9.39	7.28	10.16
Ordinary dividend per share, SEK3)	–	–	7.75
Equity per share, SEK	28.70	20.61	23.68
Cash flow per share, SEK	-2.07	3.87	-3.82
1) Rolling 12-month figures.

2) Comparison figures were revalued for the bonus issue element of the rights issue that was completed in the second quarter of 2022.

3) Paid out on two occasions.

Financial key ratios

In addition to the financial key ratios prepared in accordance with IFRS, Axfood presents financial key ratios that are not defined by IFRS or by the Swedish Annual Accounts Act, so-called alternative performance measures (APMs). These APMs aim to provide supplementary information that contributes to analysing Axfood's operations and development. The APMs used are considered generally accepted in the industry. APMs should not be seen as a substitute for financial information presented in accordance with IFRS, but as a complement. The APMs are defined below under the financial key ratio definitions.

Some APMs are also reported excluding IFRS 16 to enable a follow-up of operational development excluding the technical accounting effects as a result of IFRS 16. Some APMs are also reported excluding items affecting comparability since the adjusted performance measure provides a better understanding of the operations' underlying development when comparing between periods.

Reconciliation of EBITDA

	Q3	Q3	9 mos	9 mos		Full year
SEK m	2022	2021	2022	2021	R12	2021
Operating profit	975	793	2,599	1,965	3,338	2,704
Depreciation, amortisation/impairment	642	596	1,930	1,765	2,564	2,399
EBITDA	1,617	1,389	4,528	3,730	5,901	5,103
IFRS 16 Lease fees	-461	-425	-1,373	-1,259	-1,817	-1,702
EBITDA excl. IFRS 16	1,157	965	3,155	2,471	4,085	3,401

For reconciliation of additional key ratios, see Axfood's website, axfood.com.

Financial key ratio definitions

EBITDA: Operating profit before depreciation, amortisation and impairment. Also reported excluding the effects of reporting in accordance with IFRS 16 as EBITDA excl. IFRS 16. Indicates the underlying development of the operations.

Equity per share: Share of equity attributable to owners of the parent divided by the number of shares outstanding at the end of the period. Indicates shareholders' share of the Company's total equity per share.

Items affecting comparability: Financial effects in connection with major acquisitions and divestments or other major structural changes as well as material non-recurring items that are relevant in order to understand the results when comparing between periods.

Cash flow from operating activities per share: Cash flow from operating activities for the period divided by the average number of shares outstanding before dilution. Indicates cash flow generated from operating activities.

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

Net debt/net receivable: Interest-bearing non-current and current receivables and liabilities less cash and cash equivalents and interestbearing financial assets. Net indebtedness is also referred to as net debt. Net indebtedness is also referred to as net receivables. Used to show the Company's net interest-bearing assets and liabilities.

Net debt/Net receivable excluding IFRS 16: Interest-bearing noncurrent and current receivables and liabilities, excluding lease liabilities, less cash and cash equivalents and interest-bearing financial assets.

Net debt/EBITDA Net debt divided by EBITDA on a rolling 12-month basis. Also reported excluding the effects of reporting in accordance with IFRS 16. Indicates the Group's ability to pay its debt.

Net debt-equity ratio/net receivable-equity ratio: Net debt/ net receivable divided by equity including non-controlling interests. Also reported excluding the effects of reporting in accordance with IFRS 16. Indicates the Company's debt-equity ratio.

Sales growth: Percentage change in sales between two periods. Axfood monitors growth in both retail sales and net sales. One of Axfood's Group-wide strategic targets is to grow faster than the market and growth in retail sales is the target Axfood uses to measure this.

Earnings per share (defined according to IFRS): Net profit for the period attributable to owners of the parent divided by the average number of shares outstanding. Reported both before and after dilution. Earnings per share are also reported based on earnings excluding items affecting comparability.

Return on equity: The share of net profit for the period on a rolling 12 month basis attributable to owners of the parent as a percentage of the share of average equity attributable to owners of the parent. Indicates the return that owners receive on capital invested.

Return on capital employed: Profit after financial items, plus financial expenses on a rolling 12-month basis as a percentage of average capital employed. Indicates profitability in both equity and borrowed capital in the Company.

Operating margin: Operating profit as a percentage of net sales for the period. An operating margin of at least 4.5% is one of Axfood's strategic Group-wide targets.

Operating margin excluding items affecting comparability: Operating profit excluding items affecting comparability as a percentage of net sales for the period. Also referred to as adjusted operating margin.

Operating profit: Profit before net financial items and tax. Indicates profitability for operating activities.

Operating profit excluding items affecting comparability: Profit before net financial items and tax adjusted for items affecting comparability. Also referred to as adjusted operating profit.

Equity ratio: Equity including non-controlling interests as a percentage of total assets. An equity ratio of at least 20% at yearend is one of Axfood's Group-wide strategic targets.

Capital employed: Total assets less non-interest-bearing liabilities and non-interest-bearing provisions. Measures the Group's capital use and efficiency.

Operating key ratio definitions and glossary

Share price: Closing share price.

Private label share: Sales of private label products, excluding meat, fruits and vegetables, as a percentage of retail sales.

Retail sales: Reported store sales including

online sales for the concepts Willys, Willys Hemma, Eurocash, Hemköp Group-owned stores, Hemköp retailer-owned stores and Tempo, excluding adjustments mainly related to customer bonuses.

Online sales: Reported online sales of the concepts Willys, Hemköp Group-owned stores and Hemköp retailer-owned stores.

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

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

Like-for-like sales: Sales for stores that existed and generated sales in the current period and the comparison period.

Wholesale sales: Company and private customer sales including online for the concepts Dagab and Snabbgross (including Snabbgross Club).

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

R12: The sum of the past 12 months determined on a rolling basis.

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

Key ratio definitions for sustainability

Electricity consumption in stores and warehouses: Reported as the number of kilowatt hours (kWh) of purchased electricity used per square metre (sq. m.). The selection includes electricity consumption under joint contracts for a total of 290 Group-owned stores and eight warehouses. Bergendahl Food AB is included as of the first quarter of 2022. Comparison figures have not been restated. The number of square metres corresponds to the total area of 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. Bergendahl Food AB is included as of the first quarter of 2022. Comparison figures have not been restated. Reported data for the quarter and accumulated data are presented with a one-month lag.

Gender equality: The share of women in management positions at the end of the current period. Management position refers to employees, including members of the Executive Committee, who are defined as managers with employee responsibility. As of the first quarter of 2022, employees from the acquired Bergendahl Food AB are included in the reported data. Comparison figures have not been restated. Reported data is presented only on an accumulated rolling 12-month basis.

Growth in plant-based protein substitutes: Sales of plant-based protein substitutes in the period in relation to sales during the corresponding period a year ago. Plant-based protein substitutes include refrigerated and frozen items. The selection includes Groupowned stores in the Willys, Eurocash, Hemköp and Snabbgross store chains.

Number of social audits: Refers to on-site visits and inspections to ensure suppliers fulfil the requirements of Axfood's Code of Conduct. The selection includes on-site visits carried out by Axfood and visits carried out by the organisation Amfori BSCI.

Sickness-related absence: Refers to the number of reported hours of sickness-related absence in relation to scheduled work time. The selection includes active employees in Axfood. Active employees pertains to all employees in the Group except for employees of Urban Deli AB and Hall Miba AB. As of the first quarter of 2022, employees from the acquired Bergendahl Food AB are included in the reported data. Comparison figures have not been restated. Internal consultants and employees on parental leave/leave of absence are not included. Sickness-related absence for the third quarter pertains to time worked during the June–August period.

Share of KRAV-certified meat: Sales from KRAV-certified meat items (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 store chains.

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

Share of sustainability-labelled products: Sales from sustainabilitylabelled products with a valid country of origin marking as a percentage of Axfood's total food sales. The selection includes Groupowned stores in the Willys, Eurocash, Hemköp and Snabbgross store chains.

About Axfood

The Axfood Group is a leader in food retail in Sweden and a family of different concepts in collaboration. Each week, 4.5 million customers are reached. In total, Axfood has more than 12,000 employees (FTEs) and net sales of more than SEK 70 billion. Axfood aspires to be, and to be recognised as, a strong force in society and to work together with stakeholders and decision-makers to drive development toward more sustainable food consumption. Axfood's shares are listed on Nasdaq Stockholm and the principal owner is Axel Johnson.

Purpose Better quality of life for everyone.

Vision A leader in affordable, good and sustainable food.

Business concept A family of different concepts in collaboration.

Business model

Axfood's business model covers purchasing and assortment, logistics and sales channels and concepts. The customer is always in focus and value is created for Axfood and the Group's stakeholders in every step.

Long-term financial targets and investments

• Axfood's long-term financial targets:
  • Grow faster than the market
  • Long-term operating margin of at least 4.5%
  • Equity ratio of at least 20% at year-end
• Axfood's dividend policy is that the shareholder dividend is to be at least 50% of profit after tax. The dividend is to be paid out on two occasions.

2030 targets

Axfood's purpose is to create a better quality of life for everyone. We work to improve and simplify life around food for everyone we impact through our different concepts, operations and brands. Our ambition is to, by 2030:

• be Sweden's most inclusive food company
• be the strongest driving force for sustainable food in Sweden
• have created a healthier Sweden
• be a leader in the development of the simplest and best food experiences

Strategy

Axfood pursues a strategy of growth-promoting and efficiency enhancing priorities. The strategy is built on six strategic focus areas: customer offering, customer meeting, expansion, supply chain, work approach and our people. To promote growth, the focus is on developing and offering an attractively priced assortment. Apart from growing sales at existing stores, key initiatives include continued expansion through the e-commerce rollout and establishment of new formats and more stores. Efficiency in the organisation will be achieved through a more data-driven work approach and continued development of logistics solutions of the future. To stay at the forefront, we need to continue building a culture that enables the industry's best employees to be attracted and develop. Axfood aspires to take the lead in promoting a sustainable food system and to be and to be recognised as a strong force for change in society.

Operating segments

• With the ambition to offer Sweden's cheapest bag of groceries, Willys is the country's leading discount grocery chain. Willys aims to develop the discount segment in food retail with a wide assortment in Group-owned stores and online. The Willys operating segment includes the concepts Willys, Willys Hemma, the partly owned cross-border grocery chain Eurocash and a minority stake in the City Gross hypermarket chain.
• Hemköp offers a broad, attractively priced assortment with a rich offering of fresh products. Through Group-owned stores, retailer-owned stores and an online business, Hemköp inspires good meals. The Hemköp operating segment 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. Snabbgross offers personal service, accessibility and quality at its stores and online. The Snabbgross operating segment also includes the concept Snabbgross Club, which is directed at consumers.
• Dagab operates and develops the Group's assortment, purchasing and logistics, but also conducts sales to external customers. The Dagab operating segment also includes retailer-owned Handlar'n, the meal kit company Middagsfrid, the online pharmacy Apohem and the restaurant chain Urban Deli.

Investment case

• The food retail market is relatively unaffected by economic swings and is driven largely by population growth and inflation. Axfood has a clear strategy for addressing the trends in the market through concrete priorities in six focus areas. The goal is to grow faster than the market with a long-term operating margin of at least 4.5%.
• To meet customers' varying needs, Axfood is a family of different concepts with strong market positions. With a clear expansion plan, a focus on the customer meeting in physical stores or in e-commerce and the development of meal solutions, customers' evolving behaviours in the market are being met.
• Economies of scale and cost efficiency are achieved through close collaboration between the central functions and Group companies. Dagab is the joint purchasing and logistics company, setting high demands for price, quality and sustainability. Axfood's common IT company has a crucial role in the Group's digital development, automation and data-driven work approach to meet future needs.
• Axfood has a solid balance sheet, and the business model generates stable cash flow with efficient management of working capital. During the last five years, the dividend yield has been close to 4%.
• Axfood has long been working to be a positive force in society. Axfood is taking the lead in promoting a sustainable food system, and innovative and sustainable products are being launched through the private label assortment.

Axfood AB, SE-107 69 Stockholm Solnavägen 4 Tel. (switchboard): +46 8 553 990 00 info@axfood.se, axfood.se Corporate reg. number: 556542-0824