Axfood — Interim / Quarterly Report 2012

Jul 16, 2012

Interim Report Axfood AB (publ)

SECOND QUARTER SUMMARY

• Axfood's consolidated sales for the period April–June totalled SEK 9,292 m (8,889), an increase of 4.5%.
• Retail sales for Group-owned stores increased by 3.7% during the period.
• Like-for-like sales increased by 0.5%.
• Operating profit for the period was SEK 320 m (317).
• Profit after financial items was SEK 308 m (307) for the period.
• Profit after tax totalled SEK 226 m (226) for the period, and earnings per share were SEK 4.31 (4.30).
• Axfood signed an agreement with MatHem i Sverige AB on the sale of Netxtra.
• 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	Q2 2012	Q2 2011	Change	Six months 2012	Six months 2011	Change	Full year 2011
Net sales	9,292	8,889	4.5%	18,010	17,146	5.0%	34,795
Operating profit	320	317	0.9%	568	558	1.8%	1,250
Operating margin, %	3.4	3.6	-0.2	3.2	3.3	-0.1	3.6
Profit after financial items	308	307	0.3%	547	540	1.3%	1,214
Profit after tax	226	226	0.0%	403	398	1.3%	891
Earnings per share, SEK1	4.31	4.30	0.2%	7.68	7.58	1.3%	16.99
Cash flow per share, SEK	0.1	0.5	-80.0%	0.0	-2.1	-99.1%	0.0
Cash flow from operating activities per share, SEK	10.6	6.6	60.6%	18.5	12.2	51.6%	26.4
Return on capital employed, %2	31.1	33.3	-2.2	31.1	33.3	-2.2	31.0
Return on shareholders' equity, %2	31.3	34.0	-2.7	31.3	34.0	-2.7	28.7
Shareholders' equity per share, SEK3	-	-	-	56.82	52.24	8.8%	61.70
Equity ratio, %	-	-	-	34.8	34.4	0.4	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:	The information in this interim report is such
Anders Strålman, President and CEO, mobile +46-70-293 16 93.	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 1.00 p.m. (CET)
mobile +46-70-280 64 59.	on 16 July 2012.

CEO'S COMMENTS

Once again Axfood delivered a solid profit and favourable sales performance. Good store operations, a larger number of customers and continued high efficiency and cost control have contributed to the profitable growth.

Favourable earnings for all units

Willys posted good sales with continued strong earnings. The operating margin of 4.4% is well in line with the target of 4% over time. To defend Willys' position in the market and improve customers' shopping experience, another four stores have been modernized. The remaining approximately 25 stores in the renewal programme will be upgraded during the coming two years.

Hemköp showed good growth and stable earnings. The main focus has been on driving sales and implementing the new brand platform, entailing a number of different marketing activities. In addition, in April a new store was opened at an attractive location in central Stockholm. This will further strengthen Hemköp's position in the key Stockholm market. Hemköp's target of reaching an operating margin of 3% for 2012 remains.

PrisXtra reported yet another quarter of favourable profitability, despite disruptive roadwork nearby two stores.

Närlivs has had continued favourable growth, mainly due to additional volumes from new agreements. However, a slightly negative Easter effect and poorer weather conditions compared with the same period a year ago affected like-for-like sales and thus also earnings. During the period, an agreement was signed with MatHem i Sverige AB on the sale of the Netxtra online grocery shopping business. At the same time, a delivery agreement was signed with MatHem i Stockholm. The agreement strengthens Axfood Närlivs' role as the leading supplier of food to online retailers.

Dagab had stable development during the period, with high efficiency. As in the preceding quarter, earnings were affected by higher costs associated with implementation of the new business system. Additional, related costs will be charged against earnings in coming quarters.

Market outlook 2012

Swedish consumers have continued to show cautious optimism. However, a number of dark clouds continue to overshadow the business environment and could have an adverse effect on the Swedish economy and consumption going forward. Food price inflation continues to be low, and we continue to believe that it will not exceed 1% for the full year.

Strategy for profitable growth

An ambitious pace of investment and good cost control will ensure profitable growth. Investing in store modernizations is a prerequisite for meeting our customers' expectations for a better shopping experience. At the same time, our focus is on stimulating sales growth through attractive customer offers and a high share of private label products. Parallel with this, implementation of the new business system is also continuing. Total capital expenditures in 2012 are estimated to be SEK 900-1,000 m (993).

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

Anders Strålman President and CEO

SALES, AXFOOD GROUP

Second quarter

Consolidated wholesale and retail sales for the Axfood Group totalled SEK 9,292 m (8,889) during the second quarter, an increase of 4.5%. Store sales for the Axfood Group (wholly owned stores and Hemköp franchises) totalled SEK 7,887 m (7,124), an increase of 10.7%. Sales for Axfood-owned retail operations increased by 3.7% during the second quarter, with a 0.5% rise in like-for-like sales. Axfood's private label share was 23.7% (23.5%) as of June.

Six months

Consolidated wholesale and retail sales for the Axfood Group totalled SEK 18,010 m (17,146) during the period, an increase of 5.0%. Store sales for the Axfood Group (wholly owned stores and Hemköp franchises) totalled SEK 15,457 m (13,935), an increase of 10.9%. Sales for Axfood-owned retail operations increased by 3.3% during the period, with a 0.3% rise in like-for-like sales.

Net sales per operating segment
SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Hemköp	1,271	1,184	2,510	2,389	4,787
Willys	4,961	4,805	9,662	9,350	18,904
PrisXtra	130	142	262	286	549
Axfood Närlivs1	1,673	1,467	3,114	2,651	5,516
Dagab1	6,264	6,199	12,286	12,006	24,295
Other1, 2	1,162	1,079	2,241	2,099	4,156
Internal sales
Dagab	-5,052	-4,956	-9,911	-9,624	-19,436
Axfood Närlivs	-2	-2	-4	-8	-11
Other	-1,115	-1,029	-2,150	-2,003	-3,965
Total	9,292	8,889	18,010	17,146	34,795

1) The operations of Dagab, Axfood Närlivs and Axfood Sverige were legally combined as per 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	Q2 2012	%1)	Like-for-like sales, %1)	Six months 2012	% 1)	Like-for-like sales, %1)
Hemköp	1,253	7.0	2.5	2,474	4.7	2.8
Hemköp franchises	1,543	53.4	0.4	3,059	58.0	1.8
Hemköp total	2,796	28.4	1.6	5,533	28.7	2.4
Willys total	4,961	3.2	0.2	9,662	3.3	0.0
PrisXtra total	130	-8.5	-8.5	262	-8.4	-8.4
Total	7,887	10.7	0.5	15,457	10.9	0.5

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

Change in store structure, six months 2012
		New			Conversions
	Dec. 2011	establishment	Acquisitions	Sales/ closures	to/from	June 2012
Hemköp	62	1	6	-3		66
Willys1)	170	1	1			172
PrisXtra	5					5
Total, Group-owned	237	2	7	-3	-	243
Hemköp franchises	121	1		-5		117
1) Of which, Willys Hemma	44	1	1			46

EARNINGS, AXFOOD GROUP

Second quarter

Operating profit for the quarter totalled SEK 320 m (317). The operating margin was 3.4% (3.6%). Net financial items totalled SEK -12 m (-10), and profit after financial items was SEK 308 m (307). The margin after financial items was 3.3% (3.5%). Profit after tax was SEK 226 m (226). Joint-Group costs were affected by higher depreciation for the new business system.

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

Six months

Operating profit for the period totalled SEK 568 m (558). The operating margin was 3.2% (3.3%). Net financial items for the period totalled SEK -21 m (-18), and profit after financial items was SEK 547 (540). Profit after tax was SEK 403 m (398).

Operating profit for the period, broken down by operating segment
SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Hemköp	22	23	46	36	94
Willys	218	205	389	362	775
PrisXtra	5	4	9	11	15
Axfood Närlivs	28	36	36	42	110
Dagab	40	41	73	82	192
Other1	7	8	15	25	64
Operating profit for the period, total2	320	317	568	558	1,250

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 depreciation of SEK 24 m (14) 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–June amounted to SEK 537 m (488), of which SEK 157 m (22) pertained to acquisitions of businesses. In addition, SEK 189 m (252) pertained to investments in non-current assets in retail operations, SEK 27 m (56) to investments in non-current assets in wholesale operations, and SEK 121 m (111) to IT development.

During the first half of the year, seven 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 through shareholder agreements and board dominance. Combined consideration for the acquisitions amounted to SEK 157 m, of which SEK 28 m consists of contingent payments. Intangible assets associated with the acquisitions amount to approximately SEK 151 m, including approximately SEK 130 m in goodwill. Goodwill is primarily attributable to the synergies that the acquired operations are expected to generate. Combined annual sales of the acquired operations amount to approximately SEK 700 m. Consideration for the acquisitions, excluding the contingent payments, has been paid in cash.

tion/amortization, SEK m

Capital expenditures* Depreciation/amortization * Excluding goodwill

FINANCIAL POSITION

Cash flow from operating activities before paid tax was SEK 1,020 m (822) during the first half of the year. Paid tax amounted to SEK -50 m (-184). Cash and cash equivalents (interest-bearing assets) held by the Group amounted to SEK 316 m, compared with SEK 317 m in December 2011. Interest-bearing liabilities and provisions totalled SEK 1,185 m at the end of the period, compared with SEK 1,042 m in December 2011. Interest-bearing net debt was SEK 869 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 -457 m (-472).

The equity ratio was 34.8%, compared with 39.1% in December 2011.

THE SWEDISH FOOD RETAIL MARKET

According to Statistics Sweden's retail trade index for May, accumulated sales for the food retail segment have risen 3.7% since the start of the year in current prices. In fixed prices, adjusted for price and calendar effects (incl. leap year), volume increased by 1.5%.

STORE OPERATIONS

Willys

Second quarter

Willys had good profitability and favourable sales growth during the second quarter. Sales amounted to SEK 4,961 m (4,805), an increase of 3.2% compared with a year ago. Like-for-like sales increased by 0.2%. As part of efforts to improved customers' shopping experience and boost sales, an additional four stores were modernized during the period. A total of 90 stores have now been remodelled, and the remaining approximately 25 stores will be modernized in the coming two years. Operating profit amounted to SEK 218 m (205), an increase of 6.3%. The operating margin was 4.4% (4.3%).

The private label share as of June was 26.3% (26.3%) for Willys and 29.1% (30.0%) for Willys Hemma. Two Willys Hemma stores were opened during the quarter.

Six months

Willys' sales during the period January–June amounted to SEK 9,662 m (9,350), an increase of 3.3% 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 half of the year was SEK 389 m (362), and the operating margin was 4.0% (3.9%).

During the first half of the year, 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, % Omsättning, Mkr och rörelsemarginal, % Key ratios

SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Net sales	4,961	4,805	9,662	9,350	18,904
Change in like-for-like sales, %	0.2	0.6	0.0	-1.0	-1.6
Operating profit	218	205	389	362	775
Operating margin, %	4.4	4.3	4.0	3.9	4.1
Number of Group-owned stores	-	-	172	164	170
Average number of employees Private label share (Willys/Willys	-	-	3,480	3,414	3,410
Hemma)	-		- 26.3/29.1 26.3/30.0		26.7/29.7

Hemköp

Second quarter

Hemköp had continued favourable sales and stable earnings.

Sales for Hemköp's stores – both Group-owned and franchises – rose 28.4% during the second quarter. Sales for Group-owned stores amounted to SEK 1,253 m (1,171), an increase of 7.0%. Like-for-like sales for Group-owned stores increased by 2.5% during the period. Sales for franchise stores totalled SEK 1,543 m (1,006), an increase of 53.4%. 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 0.4%.

Operating profit for the second quarter was SEK 22 m (23). Operating profit for the period was negatively affected by a nonrecurring expense of SEK 6 m (–). The operating margin for the period was 1.7% (1.9%).

Hemköp's private label share (including franchise stores) continued to rise and was 17.5% (16.8%) as of June.

A new store was opened in central Stockholm in April, which will further strengthen Hemköp's position in the key Stockholm market. In addition, one store was acquired during the period.

Six months

Like-for-like sales for Group-owned stores increased by 2.8% during the period.

Sales for Hemköp's stores – both Group-owned and franchises – rose 28.7% during the period January– June. Sales for Group-owned stores amounted to SEK 2,474 m (2,363), an increase of 4.7%.

Sales for franchise stores totalled SEK 3,059 m (1,936), an increase of 58.0%, with a 1.8% rise in likefor-like sales.

Operating profit for the period January–June amounted to SEK 46 m (36). The operating margin for the period was 1.8% (1.5%). Operating profit was affected by nonrecurring expenses totalling SEK 12 m (12).

During the first half of the year, six stores were acquired, one was established and three were sold. Also during the period, one franchise store was established and five were sold or closed. Hemköp had 183 stores at the end of the period, of which 66 were wholly owned.

Six Six Q2 Q2 months months SEK m 2012 2011 2012 2011
	Full year 2011
Net sales 1,271 1,184 2,510 2,389 4,787
Change in like-for-like sales, % 2.5 1.1 2.8 0.8	0.4
Operating profit 22 23 46 36	94
Operating margin, % 1.7 1.9 1.8 1.5	2.0
Number of Group-owned stores - - 66 61	62
Average number of employees - - 1,405 1,392 1,364
Private label share - - 17.5 16.8	18.8

PrisXtra

Second quarter

PrisXtra's earnings continued to be positive during the second quarter. As previously, sales were hurt by traffic re-routing and roadwork in Stockholm. Sales for the second quarter totalled SEK 130 m (142), a decrease of 8.5%. Like-for-like sales decreased by 8.5%. Operating profit was SEK 5 m (4), and the operating margin was 3.8% (2.8%).

Six months

PrisXtra's sales during the period January–June amounted to SEK 262 m (286), a decrease of 8.4%. Likefor-like sale decreased by 8.4% during the period. Operating profit for the period January–June was SEK 9 m (11), and the operating margin was 3.4% (3.8%).

Key ratios
SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Net sales	130	142	262	286	549
Change in like-for-like sales, %	-8.5	-7.8	-8.4	-10.3	-10.0
Operating profit	5	4	9	11	15
Operating margin, %	3.8	2.8	3.4	3.8	2.7
Number of Group-owned stores	-	-	5	5	5
Average number of employees	-	-	122	147	135

AXFOOD WHOLESALING

Dagab

Second quarter

Dagab had stable performance during the quarter, with a high level of delivery reliability and productivity. Sales for the second quarter amounted to SEK 6,264 m (6,199). Operating profit totalled SEK 40 m (41), and the operating margin was 0.6% (0.7%). As in the preceding quarter, earnings were affected by higher costs associated with implementation of the new business system. Additional, planned costs related to this will be charged against earnings in the coming quarters.

Six months

Dagab's sales during the period January–June amounted to SEK 12,286 m (12,006). Operating profit for the period was SEK 73 m (82), and the operating margin was 0.6% (0.7%).

SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Net sales	6,264	6,199	12,286	12,006 24,295
Distributed sales	4,315	4,305	8,526		8,356 16,981
Operating profit	40	41	73	82	192
Operating margin, %	0.6	0.7	0.6	0.7	0.8
Average number of employees	-	-	992	987	961
Delivery reliability, %	97.1	96.8	97.3	96.9	97.1

Axfood Närlivs

Second quarter

Axfood Närlivs has had continued favourable growth, mainly as a result of higher volumes from new agreements. However, a slightly negative Easter effect and poorer weather conditions compared with the preceding year affected like-for-like sales and thus also earnings. Sales during the second quarter amounted to SEK 1,673 m (1,467), an increase of 14.0%.

Operating profit for the second quarter amounted to SEK 28 m (36), and the operating margin was 1.7% (2.5%).

During the period, an agreement was signed with MatHem i Sverige AB on the sale of the Netxtra online grocery business. At the same time, a supply agreement was signed with MatHem i Stockholm.

Six months

Axfood Närlivs' sales during the period January–June amounted to SEK 3,114 m (2,651), and increase of 17.5%. Operating profit for the period amounted to SEK 36 m (42), and the operating margin was 1.2% (1.6%).

SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Net sales	1,673	1,467	3,114	2,651	5,516
Distributed sales	1,531	1,322	2,857	2,394	4,992
Operating profit	28	36	36	42	110
Operating margin, %	1.7	2.5	1.2	1.6	2.0
Axfood Snabbgross, no. stores	-	-	20	20	20
Average number of employees	-	-	793	720	735
Delivery reliability, %	97.7	97.5	97.8	97.8	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 environmentally 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 a changeover 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 generates 5%–16% lower CO2 emissions than traditional diesel fuel, depending on the time of year.

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 in 2012. 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–June amounted to SEK 89 m (88). After selling and administrative expenses, totalling SEK 141 m (130), and net financial items totalling SEK -3 m (-3), profit after financial items was SEK -55 m (-45). Capital expenditures during the period totalled SEK 3 m (0).

The Parent Company's interest-bearing net debt was SEK 376 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 interim report for the period January–September 2012 will be released on 23 October 2012.

PRESS RELEASES ISSUED DURING THE SECOND QUARTER

26 April 2012 Hemköp establishes new store in central Stockholm 16 May 2012 Axfood sells Netxtra to MatHem

This half-year report gives a fair overview of the Parent Company's and Group's operations, financial position and results of operations, and describes significant risks and uncertainties that the Parent Company and companies included in the Group face.

Stockholm, 16 July 2012

Fredrik Persson Chairman		Marcus Storch Vice Chairman
Antonia Ax:son Johnson	Peggy Bruzelius	Maria Curman
Odd Reitan		Annika Åhnberg
Ulla-May Iwahr Rydén*	Michael Sjörén*	Inger Sjöstrand*

Anders Strålman President and CEO

* Employee representatives.

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

FINANCIAL STATEMENTS, GROUP

Condensed statement of comprehensive income, Group

SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Net sales	9,292	8,889	18,010	17,146	34,795
Cost of goods sold	-8,049	-7,641	-15,567	-14,752	-29,877
Gross profit	1,243	1,248	2,443	2,394	4,918
Selling/administrative expenses, etc.	-923	-931	-1,875	-1,836	-3,668
Operating profit	320	317	568	558	1,250
Net financial items	-12	-10	-21	-18	-36
Profit before tax	308	307	547	540	1,214
Tax	-82	-81	-144	-142	-323
Profit for the period	226	226	403	398	891
Other comprehensive income
Change in fair value of forward exchange con tracts	-2	0	-2	1	0
Change in fair value of available-for-sale financial
assets	-	-	-	-	5
Tax attributable to components in other compre hensive income	1	0	1	0	-1
Other comprehensive income for the period	-1	0	-1	1	4
Total comprehensive income for the period	225	226	402	399	895
Operating profit includes depreciation/amortization of	160	145	312	286	588
Earnings per share, SEK	4.31	4.30	7.68	7.58	16.99

Condensed statement of financial position, Group
SEK m	30/6/2012	30/6/2011	31/12/2011
Assets
Goodwill	1,743	1,578	1,613
Other financial assets	46	31	44
Other non-current assets	2,745	2,541	2,684
Total non-current assets	4,534	4,150	4,341
Inventories	1,911	1,876	1,916
Accounts receivable – trade	916	759	639
Other current assets	962	983	1,065
Cash and bank balances	316	207	317
Total current assets	4,105	3,825	3,937
Total assets	8,639	7,975	8,278
Shareholders' equity and liabilities
Equity attributable to owners of the parent	2,981	2,741	3,237
Equity attributable to non-controlling interests	28	-	-
Total shareholders' equity	3,009	2,741	3,237
Non-current interest-bearing liabilities	741	401	409
Noninterest-bearing non-current liabilities	297	216	308
Total non-current liabilities	1,038	617	717
Current interest-bearing liabilities	444	797	633
Accounts payable – trade	2,506	2,247	2,273
Other current noninterest-bearing liabilities	1,642	1,573	1,418
Total current liabilities	4,592	4,617	4,324
Total shareholders' equity and liabilities	8,639	7,975	8,278
Contingent liabilities	32	17	20
Pledged assets	3	15	3

Condensed statement of cash flows, Group
	Six months	Six months
SEK m	2012	2011	Full year 2011
Operating activities
Cash flow from operating activities before changes in working capital, before paid tax	856	822	1,777
Paid tax	-50	-184	-323
Changes in working capital	164	0	-70
Cash flow from operating activities	970	638	1,384
Investing activities
Acquisitions of operations, net	-109	-25	-68
Acquisitions of non-current assets, net	-348	-447	-873
Change in financial non-current assets, net	-	-	0
Cash flow from investing activities	-457	-472	-941
Financing activities
Change in interest-bearing liabilities	116	356	190
Change in non-controlling interest	-	-	-1
Dividend paid out	-630	-630	-630
Cash flow from financing activities	-514	-274	-441
Cash flow for the period	-1	-108	2
Condensed statement of changes in equity, Group
SEK m	30/6/2012	30/6/2011	31/12/2011
Amount at start of period	3,237	2,972	2,972

		0
-630	-630	-630
402	399	895
		- -

Key ratios and other data, Group

	Six months 2012	Six months 2011	Full year 2011
Operating margin, %	3.2	3.3	3.6
Margin after financial items, %	3.0	3.1	3.5
Equity ratio, %	34.8	34.4	39.1
Debt-equity ratio, net, multiple	0.3	0.4	0.2
Debt-equity ratio, multiple	0.4	0.4	0.3
Interest coverage, multiple	27.1	28.0	29.9
Capital employed, SEK m	4,194	3,939	4,279
Return on capital employed, %	31.1	33.3	31.0
Return on shareholders' equity, %	31.3	34.0	28.7
Capital expenditures, SEK m	537	488	993
Earnings per share, SEK1	7.68	7.58	16.99
Dividend per share, SEK	-	-	12.00
Shareholders' equity per share, SEK1, 2	56.82	52.24	61.70
Cash flow per share, SEK1	0.0	-2.1	0.0
Number of shares outstanding1	52,467,678	52,467,678	52,467,678
Average number of employees	7,295	7,140	7,062

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.

Quarterly overview
	Q3 10	Q4 10	Q1 11	Q2 11	Q3 11	Q4 11	Q1 12	Q2 12
Sales	8,582	8,885	8,257	8,889	8,735	8,914	8,718	9,292
Operating profit	364	321	241	317	370	322	248	320
Operating margin, %	4.2	3.6	2.9	3.6	4.2	3.6	2.8	3.4
Earnings per share, SEK1	5.00	4.32	3.28	4.30	5.09	4.32	3.37	4.31
Shareholders' equity per share, SEK1	52.3	56.6	47.9	52.2	57.4	61.7	52.5	56.8
Return on shareholders' equity, %	32.3	30.7	35.8	34.0	31.0	28.7	34.0	31.3
Cash flow from operating activities per share, SEK	6.3	6.2	5.6	6.6	6.9	7.3	7.9	10.6
Capital expenditures	138	270	220	268	208	297	323	214

FINANCIAL STATEMENTS, PARENT COMPANY

Condensed income statement, Parent Company
--------------------------------------------	--	--	--	--

SEK m	Q2 2012	Q2 2011	Six months 2012	Six months 2011	Full year 2011
Net sales	-	-	-	-	-
Selling/administrative expenses, etc.	-26	-22	-52	-42	-74
Operating profit	-26	-22	-52	-42	-74
Group contributions received, net	-	-	-	-	1,182
Other net financial items	0	-1	-3	-3	-5
Profit after financial items	-26	-23	-55	-45	1,103
Appropriations	-	-	-	-	-274
Profit before tax	-26	-23	-55	-45	829
Tax	7	8	15	13	-217
Net profit for the period Operating profit includes deprecia	-19	-15	-40	-32	612
tion/amortization of	1	1	1	1	2

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

Condensed balance sheet, Parent Company
SEK m	30/6/2012	30/6/2011	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	5	4	6
Deferred tax assets	9	9	9
Total non-current assets	3,576	3,484	3,469
Receivables from Group companies1	1,195	1,198	2,103
Other current assets	124	148	67
Cash and bank balances	0	-	0
Total current assets	1,319	1,346	2,170
Total assets	4,895	4,830	5,639
Shareholders' equity and liabilities
Restricted shareholders' equity	287	262	262
Unrestricted shareholders' equity	2,714	2,740	3,384
Total shareholders' equity	3,001	3,002	3,646
Untaxed reserves	275	1	275
Non-current interest-bearing liabilities	330	31	31
Noninterest-bearing non-current liabilities	3	4	4
Total non-current liabilities	333	35	35
Current interest-bearing liabilities	409	767	603
Liabilities to Group companies2	838	995	1,047
Accounts payable – trade	13	6	14
Other current noninterest-bearing liabilities	26	24	19
Total current liabilities	1,286	1,792	1,683
Total shareholders' equity and liabilities	4,895	4,830	5,639
Contingent liabilities	371	357	382
Pledged assets	-	-	-
1) Of which, interest-bearing receivables	1,194	1,197	888
2) Of which, interest-bearing liabilities	831	991	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.

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 243. 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