Axfood — Earnings Release 2022

Jul 15, 2022

Strong growth characterised by acquisition and high food price inflation

Second quarter summary

• Net sales totalled SEK 18,468 m (13,903), an increase of 32.8%, including the acquired Bergendahls Food.
• Retail sales totalled SEK 13,803 (12,583), an increase of 9.7%.
• Operating profit amounted to SEK 789 m (607) and included items affecting comparability of SEK -39 m (-54). The operating margin was 4.3% (4.4).
• Adjusted operating profit amounted to SEK 828 m (661), an increase of 25.3%. The adjusted operating margin was 4.5% (4.8).
• Net profit for the period amounted to SEK 590 m (455) and earnings per share before dilution to SEK 2.75 (2.26).
• A rights issue was completed with the support of the AGM's authorisation and the Board of Directors' decision. The rights issue was fully subscribed, and Axfood received SEK 1,499 m before issue costs.

First half of 2022 summary

• Net sales totalled SEK 35,061 m (27,106), an increase of 29.3%, including the acquired Bergendahls Food.
• Retail sales totalled SEK 26,514 m (24,790), an increase of 7.0%.
• Operating profit amounted to SEK 1,623 m (1,172) and included SEK 143 m (-54), net, in items affecting comparability. The operating margin was 4.6% (4.3).
• Adjusted operating profit amounted to SEK 1,480 m (1,225), an increase of 20.8%. The adjusted operating margin was 4.2% (4.5).
• Net profit for the period amounted to SEK 1,272 m (885) and earnings per share before dilution to SEK 6.02 (4.40).

during the second quarter

9.7%

The Axfood Group's retail sales during the second quarter

Key ratios	Q2 2022	Q2 2021	Change	6 mos 2022	6 mos 2021	Change	R12	Full-year 2021
Net sales, SEK m	18,468	13,903	32.8%	35,061	27,106	29.3%	65,846	57,891
Operating profit, SEK m	789	607	29.9%	1,623	1,172	38.6%	3,156	2,704
Operating profit excl. items affecting comparability, SEK m1)	828	661	25.3%	1,480	1,225	20.8%	2,945	2,690
Operating margin, %	4.3	4.4	-0.1	4.6	4.3	0.3	4.8	4.7
Operating margin excl. items affecting comparability, %1)	4.5	4.8	-0.3	4.2	4.5	-0.3	4.5	4.6
Net profit for the period, SEK m	590	455	29.9%	1,272	885	43.8%	2,482	2,094
Earnings per share before dilution, SEK2)	2.75	2.26	22.0%	6.02	4.40	37.0%	–	10.20
Earnings per share before dilution excl. items affecting comparability, SEK1, 2)	2.90	2.46	18.0%	5.33	4.60	15.9%	–	10.14
Cash flow from operating activities, SEK m	1,167	1,121	4.1%	2,596	2,248	15.5%	4,938	4,590
Return on capital employed, %3)	26.4	25.6	0.9	26.4	25.6	0.9	26.4	22.4
Return on equity, %3)	51.3	56.1	-4.9	51.3	56.1	-4.9	51.3	46.3
Equity per share, SEK	–	–	–	28.15	17.56	60.3%	–	23.68

1) See Note 9 Items affecting comparability for more information. 2) Comparison figures have been restated for the bonus element in the preferential rights issue during the second quarter 2022.

3) Rolling 12-month figures.

For further information, please contact:

Elisabet Johansson, Acting Head of Investor Relations, Tel. +46 72 221 16 50

The information herein is such that Axfood AB (publ) is required to make public in accordance with the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication, through the agency of the contact person listed above, at 7:00 a.m. CEST on 15 July 2022.

This interim report is an English translation of the Swedish original. In the event of any discrepancies, the Swedish version shall govern.

CEO message

Axfood continues to grow significantly more than the market in an exceptional time with high food price inflation. The acquisition of Bergendahls Food, a strong quarter for Willys and a robust recovery for Eurocash and Snabbgross contributed to strong sales growth and higher earnings.

When I wrote my CEO message a year ago, we were experiencing roughly 1 percent deflation on food in Sweden. In recent months, we have approached nearly double-digit food price inflation. The trend we are seeing is a consequence of a number of external factors such as the Covid-19 pandemic, the war in Ukraine, sharp increases in electricity and fuel prices, shortages of raw materials and packaging, and disruptions in the transport sector.

The world situation is affecting the entire supply chain, from primary production to our own operations and Swedish consumers, who are on increasingly tighter household budgets.

A return to pre-pandemic customer behaviours

At the same time, in this business environment we are seeing consumer behaviour returning to the norm before the Covid-19 pandemic.

Our customers are returning to physical stores, which is especially typical for large stores in central urban locations, where Hemköp is well positioned. Norwegian consumers are once again crossing the border to Sweden to make large food purchases, which means a more normal level of customer traffic to Eurocash. Snabbgross's growth and earnings during the quarter are clear proof that we have gone back to socialising in restaurants and cafés. Meanwhile, online grocery shopping has declined, although the share of e-commerce remains significantly higher than before the Covid-19 pandemic.

Stable earnings performance

While it is important for us to compensate our suppliers for higher costs, it is also important to continue offering our customers affordable, good and sustainable food.

The extremely rapid pace of the price increases from our suppliers has not yet been reflected in consumer prices. Demand for campaign products has also increased and continued high costs for electricity and fuel have had a negative impact. But thanks to our strong growth in physical stores, with Willys benefiting from the prevailing low-price trend and the return to cross-border shopping, as well as higher volumes from the acquired Bergendahls Food, we once again delivered increased earnings this quarter. The divestment of Mat.se and effective cost control in our chains also contributed to the positive earnings trend.

At the same time, we reported lower delivery reliability than normal for Dagab as a consequence of widespread delayed incoming deliveries and unusually rapid shifts in demand, which resulted in higher logistics costs. We worked hard with our suppliers during the quarter to minimise disruptions in the supply chain.

Integration of Bergendahls Food and establishment in Bålsta proceeding according to plan

Several important milestones in the integration of Bergendahls Food were passed during the quarter,

"Thanks to our strong growth in physical stores, with Willys benefiting from the prevailing low-price trend and the return to cross-border shopping, as well as higher volumes from the acquired Bergendahls Food, we once again delivered increased earnings this quarter."

according to plan. The wholesale conversion to Dagab's systems and processes was completed at the end of April. This is an important basis for our ongoing efforts to ensure that economies of scale are realised in the form of expected synergies. Preparations for the conversion of City Gross's point-of-sale system began in May. The conversion is expected to be completed around the end of 2022. Preparations are under way for starting up production at the new automated logistics centre in Bålsta, where installation has begun on the largest rooftop solar panel facility in Sweden.

Time for more sustainable initiatives

For me it is urgent to emphasise the importance of sustainability issues here, because when food prices rise there is a risk that sustainable and healthy food will become a lower priority. But the climate and environmental challenges are larger and more urgent than ever. Our work related to sustainability issues is integrated in all aspects of our business, and we have a broad agenda with activities encompassing the entire food system. But courage and drive are needed from politicians, with measures that benefit both the environment and household budgets. We have therefore proposed that politicians introduce a reduction in VAT on sustainable food. We believe that this would be an effective way to guide developments in the right direction, for consumers, producers and society as a whole.

A greater ability to respond to rapid changes

We also completed a fully subscribed rights issue during

the quarter. With this rights issue, we have further strengthened our financial position and created greater financial flexibility for the time ahead, as we continue to invest in our logistics efficiency and our total offering.

In an exceptional time when the pace of change is unusually rapid, I would like to take the opportunity to express how grateful I am for the drive and commitment shown in all of our operations. I am also confident that the experiences we've gained from responding to challenges, such as those faced Eurocash and Snabbgross during the pandemic, will improve the entire Group's ability to quickly

Presentation of the interim report for the second quarter of 2022

Axfood will present the interim report for the second quarter of 2022 in a conference call at 9:30 a.m. CEST today, Friday 15 July 2022. The report will be presented by Klas Balkow, President and CEO, and Anders Lexmon, CFO.

To follow the presentation, ring: Sweden: +46 8 519 99 383 UK: +44 333 300 9267 USA: +1 646 722 4904

Financial calendar

• The interim report for the third quarter of 2022 will be published at 7:00 a.m. CEST on 20 October 2022
• The year-end report for 2022 will be published at 7:00 a.m. CET on 1 February 2023
• The interim report for the first quarter of 2023 will be published at 7:00 a.m. CEST on 26 April 2023
• The interim report for the second quarter of 2023 will be published at 7:00 a.m. CEST on 14 July 2023
• The interim report for the third quarter of 2023 will be published at 7:00 a.m. CEST on 19 October 2023

adjust when there are sudden changes in our operating environment.

Together, with a generous helping of both determination and humility, we continue to take on the challenges and opportunities facing us, our suppliers and our customers.

Klas Balkow President and CEO, Axfood AB

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

20 April 2022

Hemköp the first to have climate-smart signs in stores

21 April 2022 Axfood to build Sweden's largest rooftop solar power facility

21 April 2022 Axfood Q1: 2022 begins with strong growth and profitability

26 April 2022

Axfood's Board of Directors resolves on a rights issue of approximately SEK 1.5 bn and announces the terms of the issue

29 April 2022 Axfood publishes prospectus relating to the rights issue

4 May 2022 Dagab puts a new all-electric Scania truck into operation for food transports

23 May 2022 Proposal to reduce VAT on food

25 May 2022 Axfood's rights issue fully subscribed

27 May 2022 Tempo celebrates its 90th anniversary

14 June 2022 Axfood launches a new packaging database

30 June 2022 Change in number of shares and votes in Axfood AB (publ)

The Swedish food retail market

According to the Swedish Food Retail Index, total sales growth during the second quarter of 2022 amounted to 5.4%. The calendar effect during the quarter is assessed at 1.0 percentage point, largely attributable to a positive impact from Easter.

Sales in physical stores increased by 7.6%. E-commerce sales decreased by -27.6%, with the store pick-up delivery option decreasing by -36.1% and home delivery declining by -18.1%. E-commerce accounted for 4.3% of grocery sales during the quarter.

Food price inflation

During the second quarter of 2022, food prices increased by 8.9% according to Statistics Sweden, rising gradually during the period. The price increases during the quarter are attributable to such categories as meat, milk, cheese, eggs and bread. Higher fuel prices and electricity prices were underlying causes of inflation.

0% 2% 4% 6% 8% 10% 12% Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 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 25 for a definition. Mat.se is included in the results beginning in February 2022.

Group performance

Net sales

Second quarter

Net sales totalled SEK 18,468 m (13,903), an increase of 32.8%. This increase is attributable to the acquired 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 9.7% to SEK 13,803 m (12,583). Like-for-like sales growth was 8.5%, primarily driven by Willys' strong performance as well as the return to large stores in city locations, where Hemköp is well positioned.

E-commerce sales totalled SEK 737 m (1,017), down 27.5%. This decrease was primarily attributable to the sale of Mat.se and high comparison figures. The decrease was 18.3% excluding Mat.se. The share of retail sales attributable to e-commerce was 5.3%, which is higher than the market and significantly higher than before the Covid-19 pandemic.

Sales of private label products accounted for 30.8% (30.8) of retail sales.

January–June

Net sales totalled SEK 35,061 m (27,106), an increase of 29.3%. Retail sales grew 7.0% to SEK 26,514 m (24,790). Like-for-like growth was 5.8%. E-commerce sales totalled SEK 1,660 m (2,130), down 22.1%. The decrease was 15.0% excluding the divested company Mat.se. The share of retail sales attributable to e-commerce was 6.0%.

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

8.5%

Like-for-like retail sales growth during the second quarter

Net sales per segment

	Q2	Q2		6 mos	6 mos		Full-year
SEK m	2022	2021	Change	2022	2021	Change	2021
Willys	9,204	8,141	13.0%	17,621	16,127	9.3%	32,424
Hemköp	1,661	1,554	6.9%	3,250	3,108	4.6%	6,202
Snabbgross	1,299	971	33.7%	2,233	1,708	30.8%	3,825
Dagab	16,746	12,488	34.1%	31,808	24,368	30.5%	52,295
Joint-Group	311	267	16.5%	592	532	11.2%	1,059
Internal sales between segments
Dagab	-10,479	-9,271	13.0%	-19,910	-18,244	9.1%	-36,935
Joint-Group/other	-275	-247	11.0%	-534	-493	8.3%	-978
Total	18,468	13,903	32.8%	35,061	27,106	29.3%	57,891

Retail sales

				Change				Change
	Q2	Q2		like-for-like	6 mos	6 mos		like-for-like
SEK m	2022	2021	Change	stores	2022	2021	Change	stores
Willys	9,206	8,140	13.1%	11.2%	17,626	16,125	9.3%	7.6%
Hemköp1)	4,597	4,443	3.5%	3.5%	8,888	8,665	2.6%	2.5%
Total	13,803	12,583	9.7%	8.5%	26,514	24,790	7.0%	5.8%

1) Refers to Hemköp (Group-owned and retailer-owned stores) as well as Tempo (Q2 2021 restated)

Change in store structure

		New
		establishments/	Sales/		June	June
Number of stores	2021	acquisitions	closures	Conversions	2022	2021
Willys1)	226	2	−	−	228	223
Hemköp/Tempo, Group-owned stores	63	1	−	1	65	61
Snabbgross	27	2	−	−	29	26
Total, Group-owned stores	316	5	−	1	322	310
Hemköp, retailer-owned stores	134	1	−	-1	134	137
Tempo, retailer-owned stores	130	2	-1	−	131	130
Total, retailer-owned stores	264	3	-1	-1	265	267
Total, Group-owned and retailer-owned stores	580	8	-1	−	587	577

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

Operating profit

Second quarter

Operating profit amounted to SEK 789 m (607), an increase of 29.9%. Operating profit includes net items affecting comparability totalling SEK -39 m (-54). These items consisted of integration costs of SEK -25 m for the acquired Bergendahls Food, structural costs of SEK -31 m connected to Dagab's restructuring of its logistics operations and a SEK 17 m repayment from Fora/Afa. The operating margin was 4.3 percent (4.4).

Adjusted operating profit amounted to SEK 828 m (661), an increase of 25.3%. The adjusted operating margin was 4.5% (4.8).

The improvement in adjusted operating profit was attributable to strong growth in physical stores and a return to cross-border shopping, higher volumes from the acquired Bergendahls Food, the sale of Mat.se, and effective cost control in the chains, which together compensated for higher purchase prices, higher electricity and fuel costs, and negative currency effects.

Profit after financial items amounted to SEK 749 m (574). Profit after tax amounted to SEK 590 m (455).

January–June

Operating profit for the period totalled SEK 1,623 (1,172), an increase of 38.6%. Operating profit includes net items affecting comparability totalling SEK 143 m (-54). These items consisted of a capital gain of SEK 221 m for the sale of Mat.se, integration costs of SEK -59 m for the acquired Bergendahls Food, structural costs of SEK -37 m connected to Dagab's restructuring of its logistics operations, and a SEK 17 m repayment from Fora/Afa. The operating margin was 4.6% (4.3).

Adjusted operating profit amounted to SEK 1,480 m (1,225), an increase of 20.8%. The adjusted operating margin was 4.2% (4.5).

Net financial items for the period amounted to SEK -81 m (-56) and profit after financial items to SEK 1,543 m (1,116). Profit after tax amounted to SEK 1,272 m (885).

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	Q2 2022	Q2 2021	Change	6 mos 2022	6 mos 2021	Change	Full-year 2021
Willys	465	372	25.1%	832	711	17.0%	1,512
Hemköp	64	62	2.2%	130	121	7.5%	271
Snabbgross	81	57	43.1%	111	71	56.8%	193
Dagab	289	235	22.9%	536	452	18.4%	976
Joint-Group	-71	-65	8.3%	-128	-130	-1.3%	-262
Operating profit excl. items affecting comparability	828	661	25.3%	1,480	1,225	20.8%	2,690
Items affecting comparability¹)	-39	-54		143	-54		14
Operating profit	789	607	29.9%	1,623	1,172	38.6%	2,704
Net financial items	-40	-32		-81	-56		-122
Profit after financial items	749	574	30.3%	1,543	1,116	38.3%	2,582

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

Operating margin per segment excluding items affecting comparability

%	Q2 2022	Q2 2021	Change	6 mos 2022	6 mos 2021	Change	R12	Full-year 2021
Willys	5.1	4.6	0.5	4.7	4.4	0.3	4.8	4.7
Hemköp	3.8	4.0	-0.2	4.0	3.9	0.1	4.4	4.4
Snabbgross	6.2	5.8	0.4	5.0	4.1	0.8	5.4	5.0
Dagab	1.7	1.9	-0.2	1.7	1.9	-0.2	1.8	1.9
Operating margin excl. items affecting comparability	4.5	4.8	-0.3	4.2	4.5	-0.3	4.5	4.6
Operating margin	4.3	4.4	-0.1	4.6	4.3	0.3	4.8	4.7

Capital expenditures

Total capital expenditures in intangible assets and property, plant and equipment during the January–June period amounted to SEK 1,435 m (596). Investments in wholesale operations amounted to SEK 981 m (78), of which SEK 741 m (7) 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 235 m (306), and joint-Group and IT investments amounted to SEK 219 m (212).

Investments in right-of-use assets, mainly premises, amounted to SEK 946 m (1,170) during the January–June period, of which SEK 268 m (362) pertained to newly acquired assets and SEK 678 m (808) pertained mainly to renewals of existing leases for premises and upward indexing of rents. Of the total investments in leases, SEK 188 m (284) pertained to wholesale operations, SEK 748 m (678) pertained to retail operations and SEK 11 m (207) pertained to joint-Group operations and IT.

Investments, amortisation and depreciation

Financial position and cash flow

Cash flow from operating activities amounted to SEK 2,596 m (2,248) during the January– June period. The increase was mainly the result of a higher operating profit. Paid tax totalled SEK -326 m (-220).

Net capital expenditures had an impact of SEK -1,586 m (-625) on cash flow. The higher investments are related to ongoing initiatives at Dagab.

Cash flow from financing activities amounted to SEK -1,415 m (-1,613) during the January–June period. The completed rights issue raised SEK 1,499 m before issue costs, and SEK -1,260 m was repaid on the loan raised in connection with the acquisition of Bergendahls Food. Dividends to shareholders had an impact of SEK -836 m (-784) on cash flow, and repayment of lease liabilities had an impact of SEK -851 m (-779).

Cash and cash equivalents held by the Group amounted to SEK 329 m, compared with SEK 734 m at 31 December 2021.

Interest-bearing liabilities and provisions totalled SEK 7,334 m, compared with SEK 8,375 m at 31 December 2021. Interestbearing net debt amounted to SEK 7,005 m at the end of the period, compared with SEK 7,640 m at 31 December 2021, which was primarily attributable to the payment of dividends, the completed rights issue and repayments of loans.

The equity ratio was 24.8%, compared with 21.8% at 31 December 2021.

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.

Derivation of total investments and net capital expenditures in cash flow

SEK m	6 mos. 2022	6 mos. 2021
Total capital expenditures	-2,382	-1,766
Investments in leases	946	1,170
Divestment of property, plant and equipment/intangible assets	1	1
Acquisitions of financial assets	-121	-32
Acquisitions of operations	10	−
Divested operations	-40	2
Cash flow from investing activities	-1,586	-625

Parent Company

The Parent Company's net sales and other operating income during the January–June period amounted to SEK 157 m (140). After operating expenses of SEK -227 m (-218) and net financial items of SEK 255 m (-1), profit after financial items amounted to SEK 185 m (-79). Net financial items include SEK 255 m (–) in dividends from subsidiaries. Investments during the period totalled SEK 2 m (12). The Parent Company had an interest-bearing net receivable of SEK 2,615 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

Second quarter

Willys' net sales totalled SEK 9,204 m (8,141), an increase of 13.0%.

Willys' growth in like-for-like retail sales was 11.2% (-1.1). As food price inflation increases, the discount category is becoming increasingly relevant to Swedish consumers, which is benefiting Willys as a leading discount player. The growth of the Willys chain during the quarter was attributable to the price trend and higher customer traffic in stores. Eurocash's sales rose significantly since the lifting of travel restrictions enabled a more normal inflow of customers from Norway.

The number of stores in the segment increased by five, net, compared with the end of the second quarter of the preceding year. Willys added three stores and Willys Hemma added two. The e-commerce rollout continued, and at the end of the quarter online shopping was offered in 19 additional stores compared with the end of the second quarter last year.

Operating profit amounted to SEK 465 m (372), corresponding to an operating margin of 5.1% (4.6). This higher operating margin was attributable to a significant increase in earnings for Eurocash and effective cost control.

January–June

Willys' net sales for the period totalled SEK 17,621 m (16,127), an increase of 9.3% compared with the corresponding period last year. Willys' growth in like-for-like retail sales was 7.6%.

Operating profit was SEK 832 m (711), and the operating margin was 4.7% (4.4).

With Sweden's cheapest bag of groceries, Willys is the country's leading discount grocery chain, offering a broad assortment in both 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.

	Q2	Q2		6 mos	6 mos			Full-year
Willys key ratios	2022	2021	Change	2022	2021	Change	R12	2021
Net sales, SEK m	9,204	8,141	13.0%	17,621	16,127	9.3%	33,919	32,424
Operating profit, SEK m	465	372	25.1%	832	711	17.0%	1,632	1,512
Operating margin, %	5.1	4.6	0.5	4.7	4.4	0.3	4.8	4.7
Retail sales, SEK m1)	9,206	8,140	13.1%	17,626	16,125	9.3%	33,927	32,426
Like-for-like sales growth, %	11.2	-1.1	12.3	7.6	-0.3	7.9	–	0.0
Total number of stores2)	–	–	–	228	223	5	–	226
of which, Willys	–	–	–	169	166	3	–	168
of which, Willys Hemma	–	–	–	52	50	2	–	51
of which, Eurocash	–	–	–	7	7	0	–	7
Stores offering online shopping2)	–	–	–	136	117	19	–	126
Private label share, %	32.6	32.4	0.2	32.9	32.8	0.1	–	32.5
Share of sustainability-labelled products, %	29.1	29.8	-0.6	29.7	30.2	-0.5	29.2	29.6
Average number of employees	–	–	–	6,339	6,286	53	–	6,531
Share of women in management positions, %	–	–	–	38.5	33.7	4.8	–	34.5
Sickness-related absence, %	6.1	7.0	-0.9	7.7	7.0	0.8	6.8	6.4

1) See definition on page 24

2) At the end of the period

Hemköp

Second quarter

Net sales for Group-owned Hemköp stores (including franchise fees) totalled SEK 1,661 m (1,554), an increase of 6.9%.

Retail sales growth for Hemköp, including Tempo, was 3.5%. Customer traffic in large stores in central urban locations increased as a result of the recovery after the Covid-19 pandemic, while at the same time stores near residential areas and the Tempo chain were affected by a decrease in customer traffic.

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

Operating profit was SEK 64 m (62), corresponding to an operating margin of 3.8% (4.0).

January–June

Net sales for Group-owned Hemköp stores (including franchise fees) for the period totalled SEK 3,250 m (3,108), an increase of 4.6%. Retail sales growth for the Hemköp chain was 2.6%.

Operating profit for the period was SEK 130 m (121), corresponding to an operating margin of 4.0% (3.9).

Hemköp offers a broad, attractively priced assortment with a rich offering of fresh products. Through Group-owned stores, retailer-owned stores and 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	Q2 2022	Q2 2021	Change	6 mos 2022	6 mos 2021	Change	R12	Full-year 2021
Net sales, SEK m	1,661	1,554	6.9%	3,250	3,108	4.6%	6,344	6,202
Operating profit, SEK m	64	62	2.2%	130	121	7.5%	280	271
Operating margin, %	3.8	4.0	-0.2	4.0	3.9	0.1	4.4	4.4
Retail sales, SEK m1)	4,597	4,443	3.5%	8,888	8,665	2.6%	17,567	17,344
Like-for-like sales growth, %	3.5	1.0	2.5	2.5	1.0	1.5	–	1.1
Like-for-like sales growth, Group-owned stores, %	5.8	1.9	3.9	4.2	0.4	3.8	–	1.3
Total number of stores2)	–	–	–	330	328	2	–	327
of which, Group-owned Hemköp/Tempo stores	–	–	–	65	61	4	–	63
of which, retailer-owned Hemköp stores	–	–	–	134	137	-3	–	134
of which, retailer-owned Tempo stores	–	–	–	131	130	1	–	130
Hemköp stores offering online shopping2)	–	–	–	70	63	7	–	70
Private label share, %	26.1	26.5	-0.4	26.6	26.7	-0.1	–	26.4
Share of sustainability-labelled products, %	27.5	28.4	-0.9	27.9	28.7	-0.8	27.5	28.0
Average number of employees	–	–	–	1,582	1,519	63	–	1,594
Share of women in management positions, %	–	–	–	30.7	32.4	-1.7	–	30.8
Sickness-related absence, %	5.8	6.9	-1.0	7.4	6.9	0.5	6.5	6.3

1) See definition on page 24

2) At the end of the period

Snabbgross

Second quarter

Snabbgross's net sales amounted to SEK 1,299 m (971), an increase of 33.7%. Like-for-like sales increased 29.3%.

Snabbgross's strong sales growth was primarily due to the recovery in the café and restaurant market since restrictions were entirely lifted at the beginning of the summer last year as well as to food price inflation. In addition, the performance in newly opened stores and steadily increasing interest in the Snabbgross Club store concept, with over 40% growth in membership, made positive contributions.

The number of stores in the segment increased by three compared with the end of the second quarter of the preceding year.

Operating profit was SEK 81 m (57), corresponding to an operating margin of 6.2% (5.8). This higher operating profit was primarily attributable to strong growth and effective cost control.

January–June

Net sales for Snabbgross totalled SEK 2,233 m (1,708) for the period, an increase of 30.8%.

Operating profit for the period was SEK 111 m (71), and the operating margin was 5.0% (4.1).

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	Q2 2022	Q2 2021	Change	6 mos 2022	6 mos 2021	Change	R12	Full-year 2021
Net sales, SEK m	1,299	971	33.7%	2,233	1,708	30.8%	4,351	3,825
Operating profit, SEK m	81	57	43.1%	111	71	56.8%	233	193
Operating margin, %	6.2	5.8	0.4	5.0	4.1	0.8	5.4	5.0
Wholesale sales, SEK m1) Like-for-like sales growth, % Total number of stores2)	1,304 29.3 –	975 10.9 –	33.6% 18.4 –	2,242 27.3 29	1,714 1.9 26	30.8% 25.4 3	4,368 – –	3,840 9.3 27
of which, Snabbgross of which, Snabbgross Club	– –	– –	– –	26 3	25 1	1 2	– –	25 2
Share of sustainability-labelled products, %	18.9	18.6	0.3	19.1	18.8	0.3	18.8	18.6
Average number of employees Share of women in management positions, %	– –	– –	– –	474 39.6	420 34.0	54 5.6	– –	464 34.6
Sickness-related absence, %	6.7	6.9	-0.2	8.0	6.9	1.1	7.2	6.6

1) See definition on page 24

2) At the end of the period

Dagab

Second quarter

Net sales totalled SEK 16,746 m (12,488), an increase of 34.1%.

Like-for-like sales growth was 12.7% and was attributable to strong sales to store chains and convenience retailers.

Operating profit amounted to SEK 233 m (235), corresponding to an operating margin of 1.4% (1.9). Operating profit included SEK -57 m in items affecting comparability. These items included integration costs of SEK -25 m for Bergendahls Food and structural costs of SEK -31 m connected to the restructuring of the logistics operations.

Adjusted operating profit amounted to SEK 289 m (235), and the adjusted operating margin was 1.7% (1.9). This higher operating profit was due to strong growth and higher volumes from the acquired Bergendahls Food. At the same time, operating profit was affected by higher fuel costs, negative currency effects and higher logistics costs as a result of lower delivery reliability caused by shortages of goods on the part of suppliers and transport-related disruptions.

Axfood's development companies Apohem and Urban Deli performed well during the quarter. With restrictions lifted in the restaurant market, Urban Deli continued to report strong growth and a positive earnings trend. Market investments that were made contributed to a continued positive growth trend for Apohem.

Work on the Group's future warehouse and logistics structure in Bålsta, Backa and Landskrona is proceeding according to plan. Right-of-use assets and a lease liability for the logistics centre in Bålsta will be recognised in the third quarter of 2022.

System support that will improve the campaign and assortment process for all of Axfood is currently being implemented.

The effects of the acquisition and the integration of Bergendahls Food are proceeding according to plan. Wholesale operations were converted to Dagab's systems and processes during the second quarter, and a new purchasing organisation was established. In addition, the conversion of City Gross's point-of-sale system began and is expected to continue until year-end 2022.

January–June

Dagab's net sales for the period totalled SEK 31,808 m (24,368), an increase of 30.5%. Operating profit was SEK 661 m (452), corresponding to an operating margin of 2.1% (1.9).

Operating profit included SEK 126 m, net, in items affecting comparability. These items included a capital gain of SEK 221 m for the sale of Mat.se, integration costs of SEK -59 m for Bergendahls Food and structural costs of SEK -37 m connected to the restructuring of the logistics operations.

Dagab runs 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 pharmacist Apohem, the restaurant chain Urban Deli and a holding in Mathem.

Net sales and operating margin1)

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

Dagab key ratios	Q2 2022	Q2 2021	Change	6 mos 2022	6 mos 2021	Change	R12	Full-year 2021
Net sales, SEK m	16,746	12,488	34.1%	31,808	24,368	30.5%	59,736	52,295
Operating profit, SEK m	233	235	-1.2%	661	452	46.3%	1,141	932
Operating profit excl. items affecting comparability, SEK m1)	289	235	22.9%	536	452	18.4%	1,059	976
Operating margin, %	1.4	1.9	-0.5	2.1	1.9	0.2	1.9	1.8
Operating margin excl. items affecting comparability, %1)	1.7	1.9	-0.2	1.7	1.9	-0.2	1.8	1.9
Delivery reliability, %	−	−	−	91.3	96.2	-4.9	−	95.4
Average number of employees	−	−	−	3,343	2,844	499	−	3,126
Share of women in management positions, %	−	−	−	29.3	26.9	2.4	−	25.4
Sickness-related absence, %	7.3	9.3	-2.0	8.8	9.0	-0.2	8.5	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 the entire business 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.

Axfood strives to make it easier for consumers to make sustainable choices by offering a broad assortment of sustainability-labelled products. The prevailing price inflation has resulted in higher price sensitivity, and there is a risk that this could jeopardise the consumption of sustainable food. Axfood has therefore proposed that politicians reduce the VAT on sustainable food as a way of accelerating the green transition of the food system. A differentiation in VAT would enable consumers to buy sustainable food at lower prices, while simultaneously motivating food companies to make changes so that their products will meet the requirements for various sustainability labels.

Food

During the second quarter, sustainability-labelled products decreased to 27.2% (28.5) of total sales, which was largely attributable to fruits and vegetables making up a lower share of sales.

Organic products decreased to 5.2% (5.9) of total sales, partly as a result of lower sales of organic milk and bananas. On the other hand, sales of KRAV-certified meat increased slightly to 3.0% (2.8) of total sales.

Sales growth for vegetarian protein substitutes was -1.1% (2.7), an effect of lower sales of frozen and chilled vegetarian products. Green-listed fish increased to 73.5% (69.1) of total sales as a result of specific targeted initiatives.

The 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. Axfood is also working to reduce the climate impact of the supply chain, where the greatest share of emissions is generated. A new climate training tool has been developed by Axfoundation and Axfood, among others, to increase people's knowledge and help suppliers in various countries to reduce their emissions.

The total CO² effect per tonne of delivered goods for the Group's own transports was 11.9 CO2e (16.9) during the quarter, a reduction of approximately 30%. This change was primarily attributed to higher use of renewable fuels. Dagab is continuing to convert its delivery fleet by increasing the share of electric vehicles in order to further reduce the climate impact of transportation. This autumn, a 64-tonne electric truck and trailer, the first of its type in Sweden, will be put into operation in the Gothenburg region.

Energy intensity measured in relation to the number of square metres continues to decrease in comparison with the previous period, amounting to 284.3 kWh/sq. m. (289.7). The decrease was primarily attributable to investments in up-to-date premises, the installation of new freezer lids and doors, and a transition to LED lighting.

Axfood is also working to reduce the negative impact of plastic and chemicals. It became the first company in the food retail industry to build a database containing approximately 18,000 different packaging materials. The database will speed up the transition to recoverable packaging made from renewable or recycled materials.

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. 30 audits (26) were conducted during the second quarter. The results of the audits were generally positive, with the exception of one supplier for which an action plan is to be prepared.

One prioritised area involves reducing sickness-related absence among the Group's employees. During the second quarter, sickness-related absence amounted to 6.3% (7.3). Sickness-related absence, primarily short-term sicknessrelated absence, shifted to a more normal level after the spread of Covid-19 diminished.

The share of women in management positions increased to 35.4% (33.3) as a result of systematic inclusion and gender equality efforts within the Group.

Sustainability key ratios1)	Q2 2022	Q2 2021	Change	6 mos 2022	6 mos 2021	Change	R12	Full-year 2021
Share of sustainability-labelled products, %	27.2	28.5	-1.3	27.8	28.9	-1.1	27.4	28.1
Share of organic sales, %	5.2	5.9	-0.7	5.5	6.1	-0.6	5.5	5.8
Growth in plant-based protein substitutes, %	-1.1	2.7	-3.8	-1.6	0.3	-1.8	-1.3	-1.6
Share of KRAV-certified meat, %	3.0	2.8	0.1	3.1	2.9	0.2	3.0	2.9
Number of social audits	30	26	4	44	46	-2	100	93
Electricity consumption, kWh/m2 (stores and warehouses)	–	–	–	–	–	–	284.3	289.7
CO2, kg/tonne of goods	11.9	16.9	-5.0	13.0	17.8	-4.8	14.4	16.8
Share of women in management positions, %	–	–	–	35.4	33.3	2.1	–	32.3
Sickness-related absence, %	6.3	7.3	-1.0	7.8	7.2	0.6	7.0	6.7

1) See page 25 for definitions.

For more information on Axfood's sustainability performance measures, 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.

Rights issue

In conjunction with the announcement of the acquisition of Bergendahls Food, it was also announced that the Group intends to carry out a new share issue of about SEK 1.5 bn, with preferential rights for existing shareholders.

On 26 April this year, the Board of Directors, with the support of the AGM's authorisation, decided on a rights issue in order to maintain a strong financial position over time.

The rights issue was fully subscribed, and Axfood received SEK 1,499 m before issue costs.

The total number of shares and votes increased by 6,972,528, and at 30 June the number of shares and votes amounted to 216,843,240 shares.

The interim report for the January–June 2022 period provides a true and fair view of the Parent Company's and the Group's operations, position and earnings, and describes the significant risks and uncertainties facing the Parent Company and the companies included in the Group.

Stockholm, 15 July 2022

Mia Brunell Livfors Chairman of the Board

Fabian Bengtsson Director

Caroline Berg Director

Christian Luiga Director

Peter Ruzicka Director

Christer Åberg Director

Anders Helsing Director, employee representative Michael Sjörén

Sara Öhrvall Director

Director, employee representative

Lars Östberg Director, employee representative

Klas Balkow President and CEO

This interim report has not been reviewed by the Company's auditors.

Financial statements, Group

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

SEK m	Q2 2022	Q2 2021	6 mos 2022	6 mos 2021	R12	Full-year 2021
Net sales	18,468	13,903	35,061	27,106	65,846	57,891
Cost of goods sold1)	-15,825	-11,668	-30,126	-22,730	-56,341	-48,945
Gross profit	2,644	2,236	4,935	4,376	9,505	8,946
Selling expenses	-922	-856	-1,805	-1,709	-3,524	-3,428
Administrative expenses1)	-1,099	-869	-2,036	-1,739	-3,745	-3,448
Share of profit in associated companies and joint ventures	-12	-11	-28	-20	-54	-46
Other operating income1)	198	167	614	324	1,078	788
Other operating expenses1)	-21	-60	-56	-61	-104	-108
Operating profit	789	607	1,623	1,172	3,156	2,704
Interest income and similar profit/loss items	2	0	4	8	9	12
Interest expense and similar profit/loss items	-42	-33	-85	-64	-155	-134
Profit before tax	749	574	1,543	1,116	3,009	2,582
Tax	-158	-120	-270	-231	-528	-488
Net profit for the period	590	455	1,272	885	2,482	2,094
Other comprehensive income
Items that cannot be reclassified to profit or loss for the period
Revaluation defined benefit pensions	23	5	22	5	28	12
Tax	-5	-1	-4	-1	-6	-2
Items that can be reclassified to profit or loss for the period
Change in hedging reserve	55	-17	75	16	113	54
Tax	-11	3	-15	-3	-23	-11
Other comprehensive income for the period	62	-10	77	17	112	52
Total comprehensive income for the period	653	445	1,349	901	2,594	2,146
Net profit for the period attributable to
Owners of the parent	586	476	1,276	928	2,499	2,150
Non-controlling interests	4	-21	-4	-43	-17	-56
Total comprehensive income for the period attributable to
Owners of the parent	649	466	1,353	944	2,611	2,202
Non-controlling interests	4	-21	-4	-43	-17	-56
Earnings per share before dilution, SEK2)	2.75	2.26	6.02	4.40	−	10.20
Earnings per share after dilution, SEK2)	2.74	2.25	6.01	4.38	−	10.16

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

2) Comparison figures have been restated for the bonus element in the preferential rights issue during the second quarter 2022.

Condensed statement of financial position, Group

SEK m	30 Jun 2022	30 Jun 2021	31 Dec 2021
Assets
Goodwill	3,406	2,832	3,846
Other intangible assets	1,438	765	1,449
Property, plant and equipment	4,696	2,998	3,815
Right-of-use assets	6,486	6,042	6,384
Financial assets1)	1,244	46	385
Deferred tax assets	303	241	346
Total non-current assets	17,573	12,924	16,225
Inventories	3,478	2,585	3,136
Trade receivables	2,354	1,222	2,292
Other current assets	1,589	1,170	1,344
Cash and bank balances	329	1,544	734
Assets held for sale	46	−	−
Total current assets	7,796	6,521	7,506
Total assets	25,369	19,445	23,731
Equity and liabilities
Equity attributable to owners of the parent	6,074	3,673	4,952
Equity attributable to non-controlling interests	220	188	224
Total equity	6,294	3,861	5,176
Non-current lease liabilities	4,933	4,577	4,856
Provisions for pensions	343	389	371
Deferred tax liabilities	1,185	975	1,212
Other non-current liabilities	29	91	57
Total non-current liabilities	6,490	6,032	6,496
Current lease liabilities	1,556	1,499	1,548
Current interest-bearing liabilities	501	−	1,600
Trade payables	6,316	4,544	5,845
Other current liabilities	4,212	3,509	3,067
Total current liabilities	12,584	9,552	12,059
Total equity and liabilities	25,369	19,445	23,731
1) Of which, interest-bearing assets	−	−	−

Condensed statement of cash flows, Group

SEK m	Q2 2022	Q2 2021	6 mos 2022	6 mos 2021	R12	Full-year 2021
Operating activities
Operating profit	789	607	1,623	1,172	3,156	2,704
Adjustments for non-cash items	19	25	-181	28	-147	62
Depreciation/amortisation	644	588	1,288	1,169	2,518	2,399
Interest paid	-40	-32	-78	-63	-139	-124
Interest received	1	1	2	2	4	4
Paid tax	-113	-104	-326	-220	-512	-406
Changes in working capital	-132	36	268	161	58	-49
Cash flow from operating activities	1,167	1,121	2,596	2,248	4,938	4,590
Investing activities
Acquisitions of operations	-2	−	10	−	-1,623	-1,633
Acquisitions of intangible assets	-84	-61	-155	-160	-304	-309
Acquisitions of property, plant and equipment	-821	-243	-1,281	-436	-2,361	-1,516
Acquisitions of financial assets	-109	-17	-121	-32	-486	-397
Other changes in investing activities	11	4	-39	3	-29	13
Cash flow from investing activities	-1,005	-317	-1,586	-625	-4,803	-3,842
Financing activities
Issue of shares	1,485	−	1,485	−	1,485	−
Loans raised	101	−	161	−	2,061	1,900
Amortisation of debt	-1,683	-391	-2,111	-779	-3,210	-1,878
Shareholder contribution from minority owners	−	−	−	−	49	49
Share repurchases	-115	-50	-115	-50	-115	-50
Dividend paid out	−	−	-836	-784	-1,621	-1,569
Cash flow from financing activities	-211	-441	-1,415	-1,613	-1,350	-1,548
Cash flow for the period	-49	363	-405	10	-1,215	-800

Condensed statement of changes in equity, Group

SEK m	30 Jun 2022	30 Jun 2021	31 Dec 2021
Amount at start of year	5,176	4,563	4,563
Total comprehensive income for the period	1,349	901	2,146
Change in non-controlling interests	−	-1	-1
Rights issue1)	1,485	−	−
Share repurchases	-115	-50	-50
Share-based payments	19	16	37
Shareholder contribution from minority owners	–	–	49
Dividend to shareholders	-1,621	-1,569	-1,569
Amount at end of period	6,294	3,861	5,176

1) See Note 8 Equity for more information.

Financial statements, Parent Company

Condensed income statement, Parent Company

SEK m	Q2 2022	Q2 2021	6 mos 2022	6 mos 2021	Full-year 2021
Net sales	2	2	4	3	7
Selling and administrative expenses	-119	-113	-227	-218	-430
Other operating income	81	71	153	136	271
Operating loss	-36	-40	-70	-78	-152
Net financial items	254	-1	255	-1	-4
Profit/loss after financial items	217	-41	185	-79	-156
Appropriations, net	–	–	–	–	2,326
Profit/loss before tax	217	-41	185	-79	2,170
Tax	6	7	12	14	-456
Net profit/loss for the period	224	-33	197	-65	1,714
Operating profit includes depreciation/amortisation totalling	2	2	4	3	7

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

Condensed balance sheet, Parent Company

SEK m	30 Jun 2022	30 Jun 2021	31 Dec 2021
Assets
Property, plant and equipment	35	40	37
Participations in Group companies	4,297	3,467	3,529
Other financial assets	1	12	12
Deferred tax assets	6	6	6
Total non-current assets	4,339	3,526	3,584
Receivables from Group companies1)	4,122	1,166	6,481
Other current assets	236	195	37
Cash and cash equivalents	87	1,344	321
Total current assets	4,444	2,705	6,838
Total assets	8,783	6,231	10,423
Equity and liabilities
Restricted equity	296	287	287
Non-restricted equity	2,455	697	2,497
Total equity	2,751	985	2,784
Untaxed reserves	3,487	3,192	3,487
Provisions	8	12	10
Non-current liabilities	4	3	4
Current interest-bearing liabilities	501	–	1,600
Trade payables	21	19	20
Liabilities to Group companies2)	1,077	1,072	2,277
Other current liabilities	936	947	241
Total current liabilities	2,534	2,038	4,138
Total equity and liabilities	8,783	6,231	10,423
1) Of which, interest-bearing receivables	4,113	1,109	3,844
2) Of which, interest-bearing liabilities	1,077	1,072	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.

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

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.

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 our 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 in accordance with the purchase price allocation that was adjusted in the first quarter.

During the second quarter, Bergendahl Food AB transferred its operations internally to Dagab Inköp & Logistik AB and to Axfood IT AB.

Fair value according to purchase price allocation,

SEK m
Customer relationships	599
Intangible assets	30
Property, plant and equipment	82
Right-of-use assets	580
Inventories	359
Trade receivables	904
Cash and bank balances	260
Other current assets	45
Deferred tax, net	-127
Lease liability	-580
Trade payables	-1,072
Other current liabilities	-197
Total acquired identifiable net assets	882
Goodwill	1,000
Total acquired identifiable net assets including goodwill	1,881
Purchase consideration paid	1,881
Cash and cash equivalents in Bergendahl Food AB	-260
Change in consolidated cash and cash equivalents	1,621

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 the Swedish Competition Authority, which was obtained on 9 February 2022, and Mat.se was sold to Mathem on 1 March 2022. 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, and the shareholding in Mathem is recognised as a financial instrument.

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.

Note 5 Financial assets and liabilities

Financial assets measured at fair value amounted to SEK 875 (0). SEK 34 m (0) is attributable to Level 2 of the fair value hierarchy and SEK 841 m (–) is attributable to Level 3. Financial liabilities measured at fair value amounted to SEK 0 m (89). 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 participation in Mathem amounted to SEK 841 m (–). The carrying amount

Changes in forward exchange contracts measured at

fair value, SEK m
Amount at start of year	-49
Change recognised in other comprehensive income	75
Realised changes	9
Amount at end of period	34

corresponds to the cost on the transaction date on 1 March 2022, plus SEK 83 m that Mathem received from Axfood from the new share issue completed during the second quarter. The participation in Mathem is recognised at fair value based on an assessment of Mathem's future sales and earnings performance.

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.

Note 6 Pledged assets and contingent liabilities

Group, SEK m	30 Jun 2022	30 Jun 2021	31 Dec 2021
Pledged assets	–	–	–
Contingent liabilities	20	19	20

Parent Company, SEK m	30 Jun 2022	30 Jun 2021	31 Dec 2021
Pledged assets	–	–	–
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

Note 8 Equity

On 26 April, it was announced that the Board of Directors, with the support of the AGM's authorisation, had decided on 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. 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

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.

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 -25 m (–) during the quarter, and cumulative integration costs totalled SEK -59 m (–). 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 -31 m (–) and cumulative structural costs amounted to SEK -37 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 capital gain of SEK – m (–) and cumulative capital gain of SEK 221 m (–) pertain to earnings from the divestment of Mat.se, which are recognised in other operating income. Fora/AFA amounted to SEK 17 m (–) in the quarter and cumulatively and pertained to additional payments received from Fora/AFA employer's liability insurance based on earlier premium payments. The revenue is recognised in other operating income.

		Q2	Q2	6 mos	6 mos		Full-year
	Segment	2022	2021	2022	2021	R12	2021
Acquisition costs	Joint-Group	–	-54	–	-54	–	-54
Integration costs	Dagab	-25	–	-59	–	-97	-39
Structural costs	Dagab	-31	–	-37	–	-43	-6
Capital gain	Dagab	–	–	221	–	221	–
Fora/Afa	Joint-Group	17	–	17	–	130	112
Total		-39	-54	143	-54	211	14

Note 10 Significant events after the balance sheet date

No significant events to report after the balance sheet date.

Key ratios

Quarterly overview, Group

SEK m	Q3 2020	Q4 2020	Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022	Q2 2022
Net sales	13,426	13,633	13,203	13,903	13,723	17,062	16,593	18,468
Operating profit	796	566	565	607	793	739	835	789
Operating profit excl. items affecting comparability	796	566	565	661	811	653	653	828
Operating margin, %	5.9	4.1	4.3	4.4	5.8	4.3	5.0	4.3
Operating margin excl. items affecting comparability, %	5.9	4.1	4.3	4.8	5.9	3.8	3.9	4.5
Net profit for the period	605	409	430	455	601	608	682	590
Earnings per share before dilution, SEK	2.93	2.00	2.14	2.26	2.90	2.90	3.27	2.75
Earnings per share before dilution excl. items affecting comparability, SEK	2.93	2.00	2.14	2.46	2.97	2.57	2.43	2.90
Cash flow from operating activities	1,167	1,490	1,127	1,121	1,054	1,288	1,429	1,167
Cash flow from operating activities per share, SEK	5.58	7.12	5.39	5.36	5.04	6.16	6.83	5.51
Return on capital employed, %1)	24.5	24.2	26.6	25.6	22.6	22.4	26.5	26.4
Return on equity, %1)	47.9	45.7	63.0	56.1	47.4	46.3	65.5	51.3
Equity per share, SEK	18.99	20.70	15.51	17.56	20.61	23.68	19.35	28.15
Investments in intangible assets and property, plant and equipment	219	318	292	304	613	616	531	904
Items affecting comparability	–	–	–	-54	-18	86	182	-39
Net debt (+)/net receivable (-)	5,185	4,577	5,016	4,920	5,481	7,640	8,225	7,005
Share price, SEK	205.40	191.80	208.80	236.70	209.70	260.40	306.20	294.30

1) Rolling 12-month figures.

2) Comparison figures have been restated for the bonus element in the preferential rights issue during the second quarter 2022.

Key ratios and other data, Group

	6 mos 2022	6 mos 2021	Full-year 2021
Operating margin, %	4.6	4.3	4.7
Operating margin excl. items affecting comparability, %	4.2	4.5	4.6
Equity ratio, %	24.8	19.9	21.8
Net debt (+)/net receivable (-), SEK m	7,005	4,920	7,640
Net debt (+)/net receivable (-) excl. IFRS 16	515	-1,156	1,236
Net debt/EBITDA, multiple	1.2	1.0	1.5
Net debt/EBITDA excl. IFRS 16, multiple	0.1	-0.4	0.4
Net debt-equity ratio (+)/net receivable-equity ratio (-), multiple	1.1	1.3	1.5
Net debt-equity ratio (+)/net receivable-equity ratio (-), excl. IFRS 16, multiple	0.1	-0.3	0.2
Capital employed, SEK m	13,628	10,326	13,550
Return on capital employed, %1)	26.4	25.6	22.4
Return on equity, %1)	51.3	56.1	46.3
Average number of employees during the year	12,232	11,544	12,202
Total capital expenditures, SEK m	2,382	1,766	3,565
Investments in intangible assets and property, plant and equipment, SEK m	1,435	596	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	210,429,800	209,212,208	209,158,470
Average number of shares outstanding after dilution	211,228,811	209,880,820	209,875,766
Key data per share
Earnings per share before dilution, SEK2)	6.02	4.40	10.20
Earnings per share before dilution excl. items affecting comparability, SEK2)	5.33	4.60	10.14
Earnings per share after dilution, SEK2)	6.01	4.38	10.16
Ordinary dividend per share, SEK3)	–	–	7.75
Equity per share, SEK	28.15	17.56	23.68
Cash flow per share, SEK	-1.92	0.05	-3.82
1) Rolling 12-month figures.

2) Comparison figures have been restated for the bonus element in the preferential rights issue during the second quarter 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

	Q2	Q2	6 mos	6 mos		Full-year
SEK m	2022	2021	2022	2021	R12	2021
Operating profit	789	607	1,623	1,172	3,156	2,704
Depreciation, amortisation/impairment	644	588	1,288	1,169	2,518	2,399
EBITDA	1,433	1,195	2,911	2,341	5,674	5,103
IFRS 16 Lease fees	-459	-418	-913	-834	-1,781	-1,702
EBITDA excl. IFRS 16	974	777	1,999	1,506	3,893	3,401

For reconciliation of additional key ratios, see 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. Used to show the Company's net interestbearing 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

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.

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, Willys Hemma, Hemköp and Snabbgross store chains.

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

Electricity consumption in stores and warehouses: Reported as the number of kilowatt hours (kWh) of purchased electricity used per square metre (m² ). The selection includes electricity consumption under joint contracts for a total of 289 of Axfood's Group-owned stores and eight of Dagab's warehouses. As of the first quarter of 2022, Bergendahl Food AB is included in the reported data. 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.

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 acquisition of Bergendahl Food AB are also included in the reported data. Comparison figures have not been restated. Reported data is presented only on an accumulated rolling 12-month basis.

Sickness-related absence: The number of reported hours of sicknessrelated absence in relation to scheduled work time. The selection includes all active employees in the Axfood Group. 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 acquisition of Bergendahl Food AB are also 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 in the second quarter pertained to time worked during the March to May period.

Growth in plant-based protein substitutes: Growth is calculated by measuring sales of plant-based protein substitutes in relation to previous sales. Plant-based protein substitutes refers to all items included in the refrigerated vegetarian main category and the deep frozen vegetarian presentation category. The selection includes Group-owned stores for the Eurocash, Willys, Hemköp and Snabbgross store chains.

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. As of the first quarter of 2022, Bergendahl Food AB is included in the reported data. Comparison figures have not been restated. Reported data for the quarter and accumulated data are presented with a one-month lag.

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), net sales of about SEK 66 bn. Axfood aspires to be, and to be recognised as, a strong force in society and to work together with stakeholders and decision-makers in society 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 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 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 runs 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 pharmacist Apohem, the restaurant chain Urban Deli and a holding in Mathem.

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 averaged 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