Axfood — Interim / Quarterly Report 2012

Oct 23, 2012

Interim Report Axfood AB (publ)

THIRD QUARTER SUMMARY

• Axfood's consolidated sales for the period July–September totalled SEK 9,044 m (8,735), an increase of 3.5%.
• Retail sales for Group-owned stores increased by 3.0% during the period.
• Like-for-like sales were unchanged during the period.
• Operating profit for the period was SEK 368 m (370).
• Profit after financial items was SEK 359 m (362) for the period.
• Profit after tax totalled SEK 265 m (267) for the period, and earnings per share were SEK 5.06 (5.09).
• Ola Andersson resigned as President of Hemköpskedjan. Anders Strålman was appointed as Acting President.
• Axfood's goal for 2012 is to achieve an operating profit at the same level as in 2011.

NO SIGNIFICANT EVENTS HAVE TAKEN PLACE AFTER THE BALANCE SHEET DATE

Key ratios
SEK m	Q3 2012	Q3 2011	Change	Nine months 2012	Nine months 2011	Change	Full year 2011
Net sales	9,044	8,735	3.5%	27,054	25,881	4.5%	34,795
Operating profit	368	370	-0.5%	936	928	0.9%	1,250
Operating margin, %	4.1	4.2	-0.1	3.5	3.6	-0.1	3.6
Profit after financial items	359	362	-0.8%	906	902	0.4%	1,214
Profit after tax	265	267	-0.7%	668	665	0.5%	891
Earnings per share, SEK1	5.06	5.09	-0.6%	12.73	12.67	0.5%	16.99
Cash flow per share, SEK	1.4	0.1	1,300%	1.3	-2.0	-	0.0
Cash flow from operating activities per share, SEK	7.9	6.9	14.5%	26.4	19.1	38.2%	26.4
Return on capital employed, %2	30.4	32.9	-2.5	30.4	32.9	-2.5	31.0
Return on shareholders' equity, %2	28.6	31.0	-2.4	28.6	31.0	-2.4	28.7
Shareholders' equity per share, SEK3	-	-	-	61.90	57.35	7.9%	61.70
Equity ratio, %	-	-	-	38.6	38.0	0.6	39.1

1) Before and after dilution.

2) Moving 12-month figures.

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

For further information, please contact: Anders Strålman, President and CEO, mobile +46-70-293 16 93.	The information in this interim report is such that Axfood is required to disclose in ac
Karin Hygrell-Jonsson, CFO, mobile +46-70-662 69 70.	cordance with the Securities Market Act.
Anne Rhenman-Eklund, Head of Corporate Communications, +46-8-553 998 13,	Submitted for publication at 7.30 a.m. (CET)
mobile +46-70-280 64 59.	on 23 October 2012.

CEO'S COMMENTS

Axfood reported yet another quarter of stable earnings and sales performance. All units once again continued to this through efficiency and cost control in all areas.

Positive result for all units

Hemköp has continued to show positive development with good sales. However, thus far during the year earnings have been affected by nonrecurring costs in connection with store closures. During the period, a number of different marketing activities contributed to sales growth and to strengthening the Hemköp brand. Focus is now on attractively priced customer offers aimed at boosting sales. The former Vi stores that were converted to Hemköp a year ago also performed well.

Willys' profitability remained good with stable sales, despite the ongoing renewal of the chain's stores. An additional three stores were remodelled, and a total of 93 stores have now been modernized. These investments in a better shopping experience will further strengthen Willys' market position. The remaining approximately 20 stores in the renewal programme will be upgraded in 2013.

PrisXtra once again delivered a positive result, however, as previously sales were unsatisfactory on account of disruptive road work.

Axfood Närlivs posted favourable sales performance and grew its market share. Growth can be credited mainly to deliveries to new customers. However, like-for-like sales were hurt by generally poor weather during the summer.

Dagab's performance is characterized by efficiency and high delivery reliability. At the same time, implementation of the new business system is continuing, which – like earlier quarters – has entailed higher costs. As planned, additional costs for this work will be charged against earnings also in the coming quarters.

Private label products

For many years, private label products have been a key part of Axfood's strategy for profitable growth. In September we reached our goal of attaining a 25% private label share. The increase can be credited in part to our ambitious rollout in recent years of the Group-wide Garant brand, which has been well-received by customers.

Market outlook 2012

The economic turbulence in Europe and the USA remains. This is creating uncertainty about how the Swedish economy will develop moving forward. Despite this, Swedish consumers are still cautiously optimistic. Axfood therefore sees no major changes in the market outlook for the remainder of the year. We continue to believe that food price inflation will stay at 1% for the year, despite higher prices for certain staples.

Strategy for profitable growth

The ambitious pace of investment aimed at ensuring profitable growth continues. Investing in store modernizations is a prerequisite for meeting our customers' expectations for a better shopping experience. Inviting stores and attractively priced customer offers, along with a high share of private label products, will together lead to higher sales. At the same time, strict cost control will be maintained. Parallel with this, implementation of a new business system, SAP, will continue until 2014. The pace of investment in the coming year will therefore be level with 2012, in the range of SEK 900-1,000 m.

Axfood's goal for 2012 is to achieve an operating profit at the same level as in 2011.

Anders Strålman President and CEO, Axfood AB

SALES, AXFOOD GROUP

Third quarter

Consolidated wholesale and retail sales for the Axfood Group totalled SEK 9,044 m (8,735) during the third quarter, an increase of 3.5%. Store sales for the Axfood Group (wholly owned stores and Hemköp franchises) totalled SEK 7,605 m (6,976), an increase of 9.0%. Sales for Axfood-owned retail operations increased by 3.0% during the third quarter, while like-for-like sales were unchanged. Axfood's private label share was 25.0% (23.1%) as of September.

Nine months

Consolidated wholesale and retail sales for the Axfood Group totalled SEK 27,054 m (25,881) during the period, an increase of 4.5%. Store sales for the Axfood Group (wholly owned stores and Hemköp franchises) totalled SEK 23,062 m (20,911), an increase of 10.3%. Sales for Axfood-owned retail operations increased by 3.2% during the period, with a 0.2% rise in like-for-like sales.

Net sales per operating segment
SEK m	Q3 2012	Q3 2011	Nine months 2012	Nine months 2011	Full year 2011
Hemköp	1,225	1,143	3,735	3,532	4,787
Willys	4,818	4,706	14,480	14,056	18,904
PrisXtra	113	123	375	409	549
Axfood Närlivs1	1,652	1,483	4,766	4,134	5,516
Dagab1	6,000	6,016	18,286	18,022	24,295
Other1, 2	1,113	1,038	3,354	3,137	4,156
Internal sales
Dagab	-4,811	-4,785	-14,722	-14,409	-19,436
Axfood Närlivs	-2	-1	-6	-9	-11
Other	-1,064	-988	-3,214	-2,991	-3,965
Total	9,044	8,735	27,054	25,881	34,795

1) The operations of Dagab, Axfood Närlivs and Axfood Sverige were legally combined on 1 January 2012. Internal sales between these units have ceased as from 2012. Comparative figures have been adjusted and are shown in the tables on page 9. 2) Includes joint-Group support functions, such as purchasing coordination, IT and corporate offices.

Retail sales, Group-owned and franchise stores
SEK m	Q3 2012	1) %	Like-for-like sales, %1)	Nine months 2012	% 1)	Like-for-like sales, %1)
Hemköp	1,207	6.8	1.1	3,681	5.4	2.3
Hemköp franchises	1,467	44.2	0.1	4,526	53.3	1.2
Hemköp total	2,674	24.5	0.6	8,207	27.3	1.8
Willys total	4,818	2.4	-0.1	14,480	3.0	0.0
PrisXtra total	113	-8.1	-8.1	375	-8.3	-8.3
Total	7,605	9.0	0.0	23,062	10.3	0.3

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

Change in store structure, nine months 2012
		New		Conversions
	Dec. 2011	establishment	Acquisitions	Sales/ closures	to/from	Sept. 2012
Hemköp	62	1	8	-4		67
Willys1)	170	1	1			172
PrisXtra	5					5
Total, Group-owned	237	2	9	-4	-	244
Hemköp franchises	121	1	3	-11		114
1) Of which, Willys Hemma	44	1	1			46

EARNINGS, AXFOOD GROUP

Third quarter

Operating profit for the quarter totalled SEK 368 m (370). The operating margin was 4.1% (4.2%). Net financial items totalled SEK -9 m (-8), and profit after financial items was SEK 359 m (362). The margin after financial items was 4.0% (4.1%). Profit after tax was SEK 265 m (267). Joint-Group costs were affected by higher amortization for the new business system.

Nine months

Operating profit for the period totalled SEK 936 m (928). The operating margin was 3.5% (3.6%). Net financial items for the period totalled SEK -30 m (-26), and profit after financial items was SEK 906 m (902). Profit after tax was SEK 668 m (665).

Operating profit for the period, broken down by operating segment
SEK m	Q3 2012	Q3 2011		Nine months 2011	Full year 2011
Hemköp	32	34	78	70	94
Willys	215	212	604	574	775
PrisXtra	4	-1	13	10	15
Axfood Närlivs	50	44	86	86	110
Dagab	46	56	119	138	192
Other1	21	25	36	50	64
Operating profit for the period, total2	368	370	936	928	1,250

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

1) Includes joint-Group support functions, such as purchasing coordination, IT and corporate offices. Also includes charges for, among other things, amortization of surplus value pertaining to the acquisition of PrisXtra and amortization of SEK 39 m (24) pertaining to the new business system.

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

CAPITAL EXPENDITURES

Total capital expenditures during the period January–September amounted to SEK 679 m (696), of which SEK 159 m (49) pertained to acquisitions of businesses. In addition, SEK 272 m (345) pertained to investments in non-current assets in retail operations, SEK 43 m (78) to investments in non-current assets in wholesale operations, and SEK 151 m (156) to IT development.

During the period, nine stores were acquired as well as 50% of the wholesale company Hall Miba, a supplier of car care products and automotive accessories. Axfood has control of the partly owned wholesale business that was acquired in January 2012, through shareholder agreements and board dominance. Combined consideration for the acquisitions amounted to SEK 159 m, of which SEK 28 m consisted of contingent payments. Intangible assets associated with the acquisitions amounted to approximately SEK 153 m, including approximately SEK 131 m in goodwill. Goodwill is primarily attributable to the synergies that the acquired operations are expected to generate. Combined annual sales of the acquired businesses amount to approximately SEK 800 m. Consideration for the acquisitions, excluding the contingent payments, has been paid in cash.

Full year 2011

FINANCIAL POSITION

Cash flow from operating activities before paid tax was SEK 1,498 m (1,279) during the first nine months of the year. Paid tax amounted to SEK -113 m (-275). Cash and cash equivalents (interest-bearing assets) held by the Group amounted to SEK 387 m, compared with SEK 317 m in December 2011. Interestbearing liabilities and provisions totalled SEK 956 m at the end of the period, compared with SEK 1,042 m in December 2011. Interest-bearing net debt was SEK 569 m at the end of the period, compared with SEK 725 m in December 2011. Payout of the shareholder dividend affected cash flow by SEK -630 m (-630), and net capital expenditures affected cash flow by SEK -593 m (-664).

The equity ratio was 38.6%, compared with 39.1% in December 2011.

THE SWEDISH FOOD RETAIL MARKET

According to Statistics Sweden's retail trade index for August, accumulated sales for the food retail segment have risen 3.6% since the start of the year in current prices. In fixed prices, adjusted for price and calendar effects, volume increased by 1.3%.

STORE OPERATIONS

Willys

Third quarter

Willys reported continued good profitability and stable sales performance. Sales amounted to SEK 4,818 m (4,706), an increase of 2.4% compared with a year ago. Like-for-like sales decreased by 0.1%. As part of efforts to improved customers' shopping experience and boost sales, an additional three stores were modernized during the period. A total of 93 stores have now been remodelled, and the remaining approximately 20 stores will be modernized in the coming two years. Operating profit amounted to SEK 215 m (212), an increase of 1.4%. The operating margin was 4.5% (4.5%).

The private label share as of September was 27.5% (25.3%) for Willys and 29.7% (29.0%) for Willys Hemma.

The number of stores was unchanged during the period.

Nine months

Willys' sales during the period January–September amounted to SEK 14,480 m (14,056), an increase of 3.0% compared with the same period a year ago. Like-for-like sales were unchanged compared with the same period a year ago. Operating profit for the first nine months of the year was SEK 604 m (574), and the operating margin was 4.2% (4.1%).

During the period, one Willys Hemma store was established and one was acquired. Willys thereby comprises 172 stores, of which 46 are Willys Hemma.

					Sales, SEK m, and operating margin, %	Key ratios
6,000 5,000	4,706	4,848	4,701	4,961	8 7 4,818	SEK m	Q3 2012	Q3 2011	Nine months 2012	Nine months 2011	Full year 2011
4,000					6 5	Net sales	4,818	4,706	14,480	14,056	18,904
3,000	4.5	4.1	3.6	4.4	4.5 4	Change in like-for-like sales, %	-0.1	-1.3	0.0	-1.1	-1.6
2,000					3	Operating profit	215	212	604	574	775
					2	Operating margin, %	4.5	4.5	4.2	4.1	4.1
1,000					1	Number of Group-owned stores	-	-	172	166	170
0	Q3 11	Q4 11	Q1 12	Q2 12	0 Q3 12	Average number of employees Private label share (Willys/Willys	-	-	3,480	3,359	3,410
						Hemma)	-	-	27.5/29.7	25.3/29.0	26.7/29.7

Hemköp

Third quarter

Hemköp's sales performance remained favourable, with stable earnings. A number of different marketing activities associated with the new brand platform contributed to the positive performance.

Sales for Hemköp's stores – both Group-owned and franchises – rose 24.5% during the third quarter. Sales for Group-owned stores amounted to SEK 1,207 m (1,130), an increase of 6.8%. Like-for-like sales for Group-owned stores increased by 1.1% during the period. Sales for franchise stores totalled SEK 1,467 m (1,017), an increase of 44.2%. Compared with the same period a year ago, sales were favourably affected by the 43 Vi stores that were converted to Hemköp franchises during the preceding year. Like-forlike sales for franchise stores increased by 0.1%.

Operating profit for the third quarter was SEK 32 m (34). Profit a year ago was favourably affected by a reversal of structural costs for store closures in the amount of SEK 4 m. The operating margin for the period was 2.6% (3.0%).

Hemköp's private label share (including franchise stores) continued to rise and was 18.7% (17.6%) as of September.

As part of efforts to improve customers' shopping experience and further boost sales, three stores were modernized during the quarter.

Two stores were acquired during the period and one was closed. At the start of September, the first Hemköp store began operating under to so-called 91/9 agreement. The model entails that the store is majority-owned by Axfood during the initial years. The goal is that the store's proprietor will then attain 99% ownership of the store, while Axfood's stake will decrease to 1%. During the quarter, Ola Andersson announced his departure as President of Hemköpskedjan. Anders Strålman, President and CEO of Axfood, has been appointed as Acting President of Hemköp.

Nine months

Like-for-like sales for Group-owned stores increased by 2.3% during the period.

Sales for Hemköp's stores – both Group-owned and franchises – increased by 27.3% during the period January–September. Sales for Group-owned stores amounted to SEK 3,681 m (3,493), an increase of 5.4%.

Sales for franchise stores totalled SEK 4,526 m (2,953), an increase of 53.3%, with a 1.2% rise in likefor-like sales.

Operating profit for the period January–September amounted to SEK 78 m (70). The operating margin for the period was 2.1% (2.0%). Operating profit was affected by nonrecurring expenses totalling SEK 13 m (8).

During the first nine months of the year, eight stores were acquired, one was established and four were sold. Also during the period, one franchise store was established, three were acquired, and 11 were sold or closed. Hemköp had 181 stores at the end of the period, of which 67 were wholly owned.

SEK m	Q3 2012	Q3 2011	Nine months 2012	Nine months 2011	Full year 2011
Net sales	1,225	1,143	3,735	3,532	4,787
Change in like-for-like sales, %	1.1	0.6	2.3	0.8	0.4
Operating profit	32	34	78	70	94
Operating margin, %	2.6	3.0	2.1	2.0	2.0
Number of Group-owned stores	-	-	67	61	62
Average number of employees	-	-	1,394	1,360	1,364
Private label share	-	-	18.7	17.6	18.8

PrisXtra

Third quarter

PrisXtra once again reported a positive result. As previously, sales were unsatisfactory due to traffic rerouting and road work in Stockholm. Sales during the third quarter totalled SEK 113 m (123), a decrease of 8.1%. Like-for-like sales decreased by 8.1%. Operating profit was SEK 4 m (-1), and the operating margin was 3.5% (-0.8%).

Nine months

PrisXtra's sales during the period January–September amounted to SEK 375 m (409), a decrease of 8.3%. Like-for-like sale decreased by 8.3% during the period. Operating profit for the period January–September was SEK 13 m (10), and the operating margin was 3.5% (2.4%).

SEK m	Q3 2012	Q3 2011	Nine months 2012	Nine months 2011	Full year 2011
Net sales	113	123	375	409	549
Change in like-for-like sales, %	-8.1	-8.9	-8.3	-9.9	-10.0
Operating profit	4	-1	13	10	15
Operating margin, %	3.5	-0.8	3.5	2.4	2.7
Number of Group-owned stores	-	-	5	5	5
Average number of employees	-	-	116	138	135

AXFOOD WHOLESALING

Dagab

Third quarter

Dagab had stable performance during the quarter, with a high level of delivery reliability and high productivity. Sales during the third quarter amounted to SEK 6,000 m (6,016). Operating profit totalled SEK 46 m (56), and the operating margin was 0.8% (0.9%). Implementation of the new business system continued during the period, which – like in earlier quarters – entailed higher costs. According to plan, additional costs for this work will be charged against earnings in coming quarters.

Nine months

Dagab's sales during the period January–September amounted to SEK 18,286 m (18,002). Operating profit for the period was SEK 119 m (138), and the operating margin was 0.7% (0.8%).

SEK m	Q3 2012	Q3 2011	Nine months 2012	Nine months 2011	Full year 2011
Net sales	6,000	6,016	18,286	18,022	24,295
Distributed sales	4,189	4,193	12,715	12,549	16,981
Operating profit	46	56	119	138	192
Operating margin, %	0.8	0.9	0.7	0.8	0.8
Average number of employees	-	-	934	940	961
Delivery reliability, %	97.3	97.0	97.3	96.9	97.1

Axfood Närlivs

Third quarter

Axfood Närlivs has had continued favourable growth, largely driven by deliveries to new customers. However, like-for-like sales were negatively affected by poorer weather compared with a year ago. Sales during the third quarter amounted to SEK 1,652 m (1,483), an increase of 11.4%.

Operating profit for the third quarter amounted to SEK 50 m (44), and the operating margin was 3.0% (3.0%).

Nine months

Axfood Närlivs' sales during the period January–September amounted to SEK 4,766 m (4,134), and increase of 15.3%. Operating profit for the period amounted to SEK 86 m (86), and the operating margin was 1.8% (2.1%).

SEK m	Q3 2012	Q3 2011	Nine months 2012	Nine months 2011	Full year 2011
Net sales	1,652	1,483	4,766	4,134	5,516
Distributed sales	1,512	1,338	4,369	3,732	4,992
Operating profit	50	44	86	86	110
Operating margin, %	3.0	3.0	1.8	2.1	2.0
Axfood Snabbgross, no. stores	-	-	20	20	20
Average number of employees	-	-	783	717	735
Delivery reliability, %	97.8	97.4	97.8	97.6	97.7

Legal combination of companies 2012

On 1 January 2012 a legal combination of the operations of Dagab AB, Axfood Närlivs AB and Axfood Sverige AB was carried out. The combination entailed the transfer of the operations of Dagab and Axfood Närlivs to Axfood Sverige AB. Axfood Närlivs AB has been combined with Axfood Sverige AB through a merger, and Dagab AB has transferred its entire operations to Axfood Sverige AB through an asset and liability transfer.

No changes will be made in the monitoring and reporting of the respective units as a result of the combination. Dagab and Axfood Närlivs will continue to be monitored and reported as separate segments. Combining the operations will lead to simpler administrative flows between the companies in the Axfood Group.

Internal sales between the companies ceased as of 1 January 2012, and the comparative figures for the respective units have been adjusted, as shown in the tables below. Total sales for the Axfood Group are not affected. The combination entails no change in the comparative figures for earnings in 2011, neither per unit nor in total.

Sales 2011, pro forma

	Q1	Adjustment	Q1 pro forma
Axfood Närlivs	1,370	-186	1,184
Dagab	6,141	-334	5,807
Other	1,020	-	1,020
Internal sales
Dagab	-5,185	517	-4,668
Axfood Närlivs	-9	3	-6
Other	-974	-	-974

Sales 2011, pro forma
	Q2	Adjustment	Q2 pro forma	Six months	Adjustment	Six months pro forma
Axfood Närlivs	1,691	-224	1,467	3,061	-410	2,651
Dagab	6,623	-424	6,199	12,764	-758	12,006
Other	1,082	-3	1,079	2,102	-3	2,099
Internal sales
Dagab	-5,600	644	-4,956	-10,785	1,161	-9,624
Axfood Närlivs	-6	4	-2	-15	7	-8
Other	-1,032	3	-1,029	-2,006	3	-2,003

Sales 2011, pro forma

	Q3	Adjustment	Q3 pro forma	Nine months	Adjustment	Nine months pro forma
Axfood Närlivs	1,714	-231	1,483	4,775	-641	4,134
Dagab	6,427	-411	6,016	19,191	-1,169	18,022
Other	1,038	0	1,038	3,140	-3	3,137
Internal sales
Dagab	-5,425	640	-4,785	-16,210	1,801	-14,409
Axfood Närlivs	-3	2	-1	-18	9	-9
Other	-988	0	-988	-2,994	3	-2,991

Sales 2011, pro forma
	Q4	Adjustment	Q4 pro forma	Full year	Adjustment	Full year pro forma
Axfood Närlivs	1,590	-208	1,382	6,365	-849	5,516
Dagab	6,622	-349	6,273	25,813	-1,518	24,295
Other	1,021	-2	1,019	4,161	-5	4,156
Internal sales
Dagab	-5,582	555	-5,027	-21,792	2,356	-19,436
Axfood Närlivs	-4	2	-2	-22	11	-11
Other	-976	2	-974	-3,970	5	-3,965

SIGNIFICANT RISKS AND UNCERTAINTIES

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

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

For a thorough account of the risks that affect the Group, please refer to the 2011 Annual Report.

SEASONAL EFFECTS

Axfood has no significant seasonal variations.

ENVIRONMENTAL IMPACT

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

One overall goal is to reduce the climate impact of the Group's operations by 75% during the period 2009–2020. The remainder of the Group's environmental impact will be climate-compensated. One area of importance going forward involves work on improving energy efficiency and changing over to refrigerants that do not have any adverse climate impact. Following a procurement process, a system for detailed measurement and control of electricity consumption is being installed in all Group-owned stores. The system will enable central regulation and monitoring aimed at reducing electricity consumption. In 2010 Axfood changed over to renewable electricity for most Group-owned stores and warehouses.

Dagab and Axfood Närlivs are working continuously to minimize their climate impact. These measures include maximizing load capacity in delivery vehicles and the use of so-called eco-driving techniques to reduce fuel consumption. In addition, Dagab and Axfood Närlivs use "Evolution" diesel, which is partly based on pine oil. Evolution diesel has been improved through a increased proportion of pine oil and now generates 16%–25% lower CO2 emissions than conventional diesel fuel, depending on the time of year. The previous reduction in CO2 emissions was 5%–16%.

Axfood also focuses on recycling, where most waste is either recycled for use as raw material by the recycling industry or converted to energy. Energy efficiency improvement will continue to have high priority. A more detailed description of Axfood's work with environmental matters can be found at axfood.se.

PARENT COMPANY

Other operating revenue for the Parent Company during the period January–September amounted to SEK 135 m (132). After selling and administrative expenses, totalling SEK 207 m (187), and net financial items totalling SEK -3 m (-3), profit after financial items was SEK -75 m (-58). Capital expenditures during the period totalled SEK 3 m (2).

The Parent Company's interest-bearing net debt was SEK 446 m at the end of the period, compared with SEK 749 m in December 2011. The Parent Company has no significant transactions with related parties, other than transactions with subsidiaries.

ACCOUNTING POLICIES

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

FORECAST

Axfood's goal for 2012 is to achieve an operating profit at the same level as in 2011.

NEXT REPORT

The year-end report for the period January–December 2012 will be released on 7 February 2013.

NOMINATING COMMITTEE

Shareholders who wish to submit nominations to the Nominating Committee ahead of Axfood's Annual General Meeting on 13 March 2013 may do so by e-mail at: valberedning@axfood.se.

ANNUAL GENERAL MEETING

The Annual General Meeting will be held at 5 p.m. on 13 March 2013 at Cirkus, in Stockholm. The 2012 Annual Report will be published on 18 February 2013 on Axfood's website, at which time it will be available at Axfood's head offices in Solna. In addition, printed versions will be distributed by post to shareholders, upon request, approximately one week before the Annual General Meeting.

This interim report has been reviewed by the Company's auditors. The review report can be found on page 12.

Anders Strålman President and CEO

PRESS RELEASES ISSUED DURING THE THIRD QUARTER

28 August 2012 Ola Andersson leaves Hemköpskedjan – Anders Strålman appointed Acting President 7 September 2012 Axfood wins award as Listed Company of the Year 2011

AUDITORS' REVIEW REPORT

To the Board of Directors of Axfood AB (publ) Reg. no. 556542-0824

Introduction

We have reviewed the accompanying interim report for Axfood AB (publ) for the period 1 January–30 September 2012. The Board of Directors and the President are responsible for the preparation and presentation of the interim report in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We have conducted our review in accordance with the Swedish Standard on Review Engagements, SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has another focus and is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (ISA) and other generally accepted auditing standards. The procedures performed in a review to not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion based on a review does not provide 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, in all material respects, is not prepared for the Group in accordance with IAS 34 and the Swedish Annual Accounts Act and for the Parent Company in accordance with the Swedish Annual Accounts Act.

Stockholm, 23 October 2012 KPMG AB

Thomas Thiel Authorized Public Accountant

FINANCIAL STATEMENTS, GROUP

Condensed statement of comprehensive income, Group

			Nine months	Nine months	Full year
SEK m	Q3 2012	Q3 2011	2012	2011	2011
Net sales	9,044	8,735	27,054	25,881	34,795
Cost of goods sold	-7,821	-7,503	-23,388	-22,255	-29,877
	1,223	1,232	3,666	3,626	4,918
Gross profit
Selling/administrative expenses, etc.	-855	-862	-2,730	-2,698	-3,668
Operating profit	368	370	936	928	1,250
Net financial items	-9	-8	-30	-26	-36
Profit before tax	359	362	906	902	1,214
Tax	-94	-95	-238	-237	-323
Profit for the period	265	267	668	665	891
Other comprehensive income
Change in fair value of forward exchange con	2	2	0	3	0
tracts Change in fair value of available-for-sale financial
assets	-	-	-	-	5
Tax attributable to components in other compre hensive income	-1	-1	0	-1	-1
Other comprehensive income for the period	1	1	0	2	4
Total comprehensive income for the period	266	268	668	667	895
Operating profit includes depreciation/amortization of	163	150	475	436	588
Earnings per share, SEK	5.06	5.09	12.73	12.67	16.99
Profit for the period attributable to
Owners of the parent	264	267	667	665	891
Non-controlling interests	1	0	1	0	0
Total comprehensive income for the period at tributable to
Owners of the parent	265	268	667	667	895
Non-controlling interests	1	0	1	0	0

Condensed statement of financial position, Group
SEK m	30/9/2012	30/9/2011	31/12/2011
Assets
Goodwill	1,744	1,597	1,613
Financial assets	47	32	44
Other non-current assets	2,708	2,568	2,684
Total non-current assets	4,499	4,197	4,341
Inventories	1,785	1,832	1,916
Accounts receivable – trade	858	674	639
Other current assets	953	997	1,065
Cash and bank balances	387	211	317
Total current assets	3,983	3,714	3,937
Total assets	8,482	7,911	8,278
Shareholders' equity and liabilities
Equity attributable to owners of the parent	3,248	3,009	3,237
Equity attributable to non-controlling interests	27	-	-
Total shareholders' equity	3,275	3,009	3,237
Non-current interest-bearing liabilities	418	413	409
Noninterest-bearing non-current liabilities	296	215	308
Total non-current liabilities	714	628	717
Current interest-bearing liabilities	538	630	633
Accounts payable – trade	2,446	2,212	2,273
Other current noninterest-bearing liabilities	1,509	1,432	1,418
Total current liabilities	4,493	4,274	4,324
Total shareholders' equity and liabilities	8,482	7,911	8,278
Contingent liabilities	27	16	20
Pledged assets	8	15	3

Condensed statement of cash flows, Group

	Nine months	Nine months
SEK m	2012	2011	Full year 2011
Operating activities Cash flow from operating activities before changes in working capital, before paid tax	1,359	1,337	1,777
Paid tax	-113	-275	-323
Changes in working capital	139	-58	-70
Cash flow from operating activities	1,385	1,004	1,384
Investing activities
Acquisitions of operations, net	-115	-51	-68
Acquisitions of non-current assets, net	-478	-613	-873
Change in financial non-current assets, net	-	-	0
Cash flow from investing activities	-593	-664	-941
Financing activities
Change in interest-bearing liabilities	-92	186	190
Change in non-controlling interest	-	-	-1
Dividend paid out	-630	-630	-630
Cash flow from financing activities	-722	-444	-441
Cash flow for the period	70	-104	2

Condensed statement of changes in equity, Group
SEK m	30/9/2012	30/9/2011	31/12/2011
Amount at start of year	3,237	2,972	2,972
Total comprehensive income for the period	668	667	895
Dividend to shareholders	-630	-630	-630
Acquisition of previous non-controlling interest	-	-	0
Amount at end of period	3,275	3,009	3,237

Key ratios and other data, Group

	Nine months 2012	Nine months 2011	Full year 2011
Operating margin, %	3.5	3.6	3.6
Margin after financial items, %	3.3	3.5	3.5
Equity ratio, %	38.6	38.0	39.1
Debt-equity ratio, net, multiple	0.2	0.3	0.2
Debt-equity ratio, multiple	0.3	0.4	0.3
Interest coverage, multiple	30.2	31.1	29.9
Capital employed, SEK m	4,231	4,052	4,279
Return on capital employed, %	30.4	32.9	31.0
Return on shareholders' equity, %	28.6	31.0	28.7
Capital expenditures, SEK m	679	696	993
Earnings per share, SEK1	12.73	12.67	16.99
Dividend per share, SEK	-	-	12.00
Shareholders' equity per share, SEK1, 2	61.90	57.35	61.70
Cash flow per share, SEK1	1.3	-2.0	0.0
Number of shares outstanding1	52,467,678	52,467,678	52,467,678
Average number of employees	7,165	6,948	7,062
Work attendance rate, %	95.1	95.4	95.3
CO2, kg/tonne goods3	19.2	23.5	19.8
Electricity consumption, kWh/m2 (stores and warehouses)	353.34	361.94	360.4

1) The number of shares is the same before and after dilution. The average number of shares is the same as the number of shares outstanding. Axfood has no holdings of treasury shares.

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

3) Pertains to the total volume for Dagab's and Axfood Närlivs' transports from warehouses to stores with own delivery vehicles.

4) Pertains to rolling 12 months.

Quarterly overview
	Q4 10	Q1 11	Q2 11	Q3 11	Q4 11	Q1 12	Q2 12	Q3 12
Sales	8,885	8,257	8,889	8,735	8,914	8,718	9,292	9,044
Operating profit	321	241	317	370	322	248	320	368
Operating margin, %	3.6	2.9	3.6	4.2	3.6	2.8	3.4	4.1
Earnings per share, SEK1	4.32	3.28	4.30	5.09	4.32	3.37	4.31	5.06
Shareholders' equity per share, SEK1	56.6	47.9	52.2	57.4	61.7	52.5	56.8	61.9
Return on shareholders' equity, %	30.7	35.8	34.0	31.0	28.7	34.0	31.3	28.6
Cash flow from operating activities per share, SEK	6.2	5.6	6.6	6.9	7.3	7.9	10.6	7.9
Capital expenditures	270	220	268	208	297	323	214	142

FINANCIAL STATEMENTS, PARENT COMPANY

Condensed income statement, Parent Company

SEK m	Q3 2012	Q3 2011	Nine months 2012	Nine months 2011	Full year 2011
Net sales	-	-	-	-	-
Selling/administrative expenses, etc.	-20	-13	-72	-55	-74
Operating profit	-20	-13	-72	-55	-74
Group contributions received, net	-	-	-	-	1,182
Other net financial items	0	0	-3	-3	-5
Profit after financial items	-20	-13	-75	-58	1,103
Appropriations	-	-	-	-	-274
Profit before tax	-20	-13	-75	-58	829
Tax	5	3	20	16	-217
Net profit for the period	-15	-10	-55	-42	612
Operating profit includes deprecia
tion/amortization of	0	0	1	1	2

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

Condensed balance sheet, Parent Company
SEK m	30/9/2012	30/9/2011	31/12/2011
Assets
Property, plant and equipment	4	3	2
Participations in Group companies	3,558	3,468	3,452
Other financial non-current assets	7	4	6
Deferred tax assets	8	9	9
Total non-current assets	3,577	3,484	3,469
Receivables from Group companies1	927	993	2,103
Other current assets	180	227	67
Cash and bank balances	0	-	0
Total current assets	1,107	1,220	2,170
Total assets	4,684	4,704	5,639
Shareholders' equity and liabilities
Restricted shareholders' equity	287	262	262
Unrestricted shareholders' equity	2,699	2,730	3,384
Total shareholders' equity	2,986	2,992	3,646
Untaxed reserves	275	1	275
Non-current interest-bearing liabilities	29	31	31
Noninterest-bearing non-current liabilities	3	4	4
Total non-current liabilities	32	35	35
Current interest-bearing liabilities	482	600	603
Liabilities to Group companies2	870	1,042	1,047
Accounts payable – trade	15	13	14
Other current noninterest-bearing liabilities	24	21	19
Total current liabilities	1,391	1,676	1,683
Total shareholders' equity and liabilities	4,684	4,704	5,639
Contingent liabilities	365	357	382
Pledged assets	-	-	-
1) Of which, interest-bearing receivables	927	992	888
2) Of which, interest-bearing liabilities	862	1,036	1,003

FINANCIAL DEFINITIONS

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

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

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

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

Dividend yield: Dividend per share divided by the yearend share price.

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

Equity ratio: Shareholders' equity including noncontrolling interests as a percentage of total assets.

Interest cover ratio: Profit after financial items plus financial expenses, divided by financial expenses. Margin after financial items: Profit after financial items as a percentage of net sales for the period.

GLOSSARY

Autoorder: An automated store restocking system.

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

E-learning: An interactive training program. EMAB: EMAB is a collaborative organization for independent service station stores, with approximately 400 Net asset value per share: Equity attributable to owners of the parent divided by the number of shares outstanding.

Net debt: Cash and cash equivalents plus interest-bearing receivables less interest-bearing liabilities and provisions.

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

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

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

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

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

members within the Shell, Statoil 123, Hydro, Bilisten and Preem service station chains.

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

GRI: Global Reporting Initiative.

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

Axfood AB, 171 78 Solna Visitors' address: Hemvärnsgatan 9 Tel. +46-8-553 990 00, Fax +46-8-730 03 59 info@axfood.se, axfood.se

ABOUT AXFOOD

Axfood conducts food retail and wholesale business in Sweden. Retail business is conducted through the wholly owned grocery chains Willys, Hemköp and PrisXtra. The number of Group-owned stores is 244. In addition, Axfood collaborates with a number of proprietor-run stores that are tied to Axfood through agreements, including stores in the Hemköp chain, but also stores operating under the Handlar'n and Tempo profiles. Wholesale business is conducted through Dagab and Axfood Närlivs. Axfood has an approximate 20% share of the food retail market in Sweden. Axfood is listed on Nasdaq OMX Stockholm AB's Large Cap list. Axfood's principal owner is Axel Johnson AB, with 50.1% of the shares.

Mission

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

Business model

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

Strategy

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

Value drivers

Factors that affect Axfood's performance include:

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