INTERIM REPORT for the period January 1 September 30, 2006

Transcription

1 Interim Report ICA AB 1 January - 30 September 2006

2 INTERIM REPORT for the period January 1 September 30, 2006 Continued strong income for ICA Group during the period Stockholm, November 6, 2006 Net sales during the nine-month period amounted to SEK 49,552 million (48,161), an increase of 2.9 percent. Operating income for the nine-month period rose to SEK 1,938 million (1,342), an increase of 44.4 percent, of which capital gains from real estate sales and impairments of SEK 213 million (79) are included. The operating income excluding these one-off items increased by 36.6 percent. Income after tax rose to SEK 1,574 million (1,076). Net results for the nine-month period amounted to SEK 1,940 million (1,068), an increase of 81.6 percent. Included in the net results is a profit impact from ICA Meny, including profit gains, of SEK 366 million ( 8). In the third quarter, net sales amounted to SEK 17,022 million (16,524), an increase of 3.0 percent. Operating income for the third quarter amounted to SEK 693 million (681), an increase of 1.8 percent, of which capital gains from real estate sales and impairments of SEK 18 million (105) are included. The operating income excluding these one-off items increased by 17.2 percent. Income after tax rose to SEK 585 million (493). Net results for the third quarter amounted to SEK 943 million (492), an increase of 91.7 percent. Included in the net results is a profit impact, including profit gains, from ICA Meny of SEK 358 million. Key financial ratios SEK million July - September January - September Full-year Net sales 1) 17,022 16,524 49,552 48,161 65,885 Operating income 1) ,938 1,342 1,947 Operating income excluding capital gains from real estate sales and impairments 1) ,725 1,263 1,872 Income after tax 1) ,574 1,076 1,525 Total assets 31,243 32,257 32,731 Cash flow from operating activities Operating margin, % 1) Operating margin exclusive capital gains from real estate sales and impairments 1) Equity/assets ratio, % Return on equity, % 2) Return on capital employed, % 3) 15, ) The sale of ICA Meny was finalized on September 19, 2006 and ICA Meny s operation is accounted for according to IFRS 5 as a discontinued operation on a separate line in the income statement. These key financial ratios refer to continuing operations and the comparative figures are therefore restated. 2) Return on equity = Income after tax as a percentage of average equity. The operations of ICA Banken are excluded from both the income statement and balance sheet in the calculation of return on equity. 3) Return on capital employed = Income after financial income as a percentage of average capital employed. The operations of ICA Banken are excluded from both the income statement and balance sheet in the calculation of return on capital employed. 2

3 Comment by the CEO ICA shows a continued strong result. During the period January to September our operating income rose by 44 percent to SEK 1,938 million. The income improvement was the result of, among other things, further efficiency improvements in our organization, and a favorable sales trend. Growth in Swedish store sales during the third quarter was 7.8 percent compared with the same period last year, which means that we have further strengthened our market position. In addition to the positive food sales development, partly as the result of our continued price cuts, higher demand for non-food products contributed to the positive trend. Non-food is a strategically important area for ICA where we see great potential going forward. During the third quarter we therefore gathered our resources in non-food in a new unit that will have full responsibility for product selection, purchasing, operations and sales. Another area where we see opportunities to improve efficiency is in Rimi Baltic. In October we signed an agreement with Kesko Livs Ab to acquire their 50 percent interest in the company. By integrating Rimi Baltic as a wholly owned subsidiary, we can establish a stronger Nordic-Baltic organization with synergies in sourcing, administration and IT, among other areas. Increased ownership in Rimi Baltic is therefore an important step in our aim to become the leader in the fast-growing Baltic market. This acquisition requires the approval of the EU Commission, and this is expected by year-end. Efficient distribution is of critical importance to remain competitive in the Nordic retail market. In September we took an important step when we opened our new warehouse in Helsingborg, a key puzzle piece in the development of ICA s new distribution network and Sweden s largest food distribution center. The facility, that is largely automated; meaning for e.g. that efficiency can be raised up to four times that of conventional warehouse handling, is one of Northern Europe s most modern logistics units. The Helsingborg warehouse can handle larger volumes, at the same time that it provides a more environmentally friendly logistics chain and faster deliveries to the ICA. In Norway, our customers are asking for more fresh products, greater diversity and higher quality, which shows that our strategy to focus on larger with a wider product range, such as ICA Maxi and ICA Supermarked, is the right road forward. New store openings, renovations and changes in the store structure are continuing according to plan, and we will gradually be able to offer the right, the right products and the right prices for our customers. We are also continuing our work to position Rimi as a discount concept where it is easy and inexpensive for our customers to shop. During the nine first months we have carried through a number of important investments within the ICA Group, such as the warehouse in Helsingborg and store modernizations in Norway, thanks to which we are well prepared for a future in which competition continues to grow. We continue to focus on price, product range, new store openings, Nordic cooperation and competence, and we are doing so at the same time that we are raising efficiency in our organization. As a result, we can build on the initiatives we now are making in the Nordic food retail market. Important events during the third quarter ICA Banken now reports positive operating income that during the nine-month period amounted to SEK 4 million ( 58), which confirms the positive development we have seen thus far this year. In September the European Commission approved ICA AB s sale of ICA Meny to Nordic Capital. ICA Meny s profit impact during this year including the gain on the transaction amounts to SEK 366 million. Important events after the conclusion of the third quarter In October ICA Baltic AB signed an agreement with Kesko Livs Ab to acquire its 50 percent interest in Rimi Baltic AB. ICA AB is paying EUR 190 million in cash for the shares and EUR 50 million for four properties in Estonia. The transaction requires the European Commission s approval, which is expected by year-end. When the acquisition is finalized, Rimi Baltic will be reported as a wholly owned subsidiary of ICA AB. The sale of the property where ICA operates its distribution center in Helsingborg was finalized in October. The sales results in a capital gain of approximately SEK 300 million that affects ICA s results for the fourth quarter. 3

4 ICA Group financial results Financial results during the nine-month period Consolidated net sales for the ICA Group during the nine-month period amounted to SEK 49,552 million (48,161), an increase of 2.9 percent. ICA Sverige s sales rose by 3.6 percent. Sales for ICA Norge decreased by 1.2 percent; in local currency sales decreased by 3.1 percent. ICA Banken s sales rose by 98 percent, while business volume climbed 13 percent. Operating income for the period rose by SEK 596 million or 44 percent to SEK 1,938 million (1,342) due to further efficiency improvements in our organization and a favorable sales trend. The operating result for ICA Sverige amounted to SEK 1,841 million (1 054). The income improvement in ICA Sverige is due to improved market positions and the fact that operating income during the corresponding period last year was charged with expenses for marketing and preparations for the price-cutting campaign launched in March Capital gains on real estate sales in Sweden increased by SEK 78 million to SEK 107 million (29) compared with the same period last year. The operating result in ICA Norge amounted to SEK 328 million (353). The income decrease in ICA Norge is mainly due to lower store sales and due to costs for modernizations of but is partly compensated by capital gains on real estate sales. After deducting write-downs, capital gains amounted to SEK 104 million ( 33). The large part is attributable to the sale of a Norwegian shopping center in February. ICA Banken now shows a positive operating result of SEK 4 million ( 58). ICA Banken s improved operating result is due to higher business volumes. The ICA Group Functions segment (formerly ICA AB) is reporting lower results due to changes in the principles for distributing expenses within the Group, which is an element in the efforts to create a joint organization. Net sales for Rimi Baltic during the period amounted to SEK 6,478 million, an increase of 20.7 percent. ICA s share of Rimi Baltic s loss amounted to SEK 28 million. The comparable result for the same period last year was SEK 33 million. The increased result is largely due to higher store sales and more efficient real estate maintenance. The loss is affected by expenses for the high rate of new store openings. Net sales for Netto Marknad during the period amounted to SEK 1,788 million, an increase of 18.4 percent. ICA s share of Netto Marknad s loss for the period improved to SEK 45 million ( 60) compared with the same period last year. ICA Meny was sold as of 19 September and was included in the ICA Group this year until and including August. Net sales for ICA Meny for the period January August amounted to SEK million, for the period January September 2005 net sales amounted to SEK 4,221 million. Net sales together with a favorable cost control and a profit gain from the sales, have resulted in an improved result after tax for the period of SEK 366 million ( 8). Financial results during the third quarter Consolidated net sales during the third quarter of 2006 amounted to SEK 17,022 million (16,524), an increase of 3.0 percent. ICA Sverige s sales rose by 5.6 percent. Sales for ICA Norge decreased by 4.7 percent; in local currency sales decreased by 1.1 percent. ICA Banken s sales rose by 63 percent. Operating income for the third quarter of 2006 rose by SEK 12 million or 1.8 percent to SEK 693 million (681). ICA Sverige s operating result amounted to SEK 664 million (476). The improvement in ICA Sverige compared to the third quarter last year is due to stronger market positions and the fact that operating income during the corresponding period last year was charged with expenses for marketing and price cuts. During the third quarter capital gains on real estate sales in Sweden decreased by SEK 18 million to SEK 2 million (20) compared with the same period last year. ICA Norge s operating result amounted to SEK 111 million (187). Lower sales volume and expenses to modernize are the main reasons for the declining results for ICA Norge during the third quarter. ICA Banken s business volume continued to rise, which contributed to substantially higher operating income. ICA Banken reported operating income of SEK 11 million ( 8) during the quarter. The ICA Group Functions segment (formerly ICA AB) is reporting lower results due to changes in the principles for distributing expenses within the Group, which is an element in the efforts to create a joint organization. The third quarter was charged with increased IT costs and costs in connection with the sale of ICA Meny. Net sales for Rimi Baltic during the third quarter of 2006 amounted to SEK 2,262 million, an increase of 21.6 percent. ICA s share of Rimi Baltic s profit amounted to SEK 1 million. The comparable result for the third quarter of last year was SEK 13 million. The increased result is largely due to higher store sales. Net sales for Netto Marknad during the third quarter amounted to SEK 613 million, an increase of 16.5 percent. ICA s share of Netto Marknad s loss for the third quarter improved to SEK 9 million ( 22) compared with the third quarter last year. Net sales in ICA Meny during the third quarter amounted to SEK 1,092 million (1,462), in the quarter s net sales, only July and August are included. The increase in net sales together with a favorable cost control and the profit gain from the sales, have resulted in an improved net profit after tax of SEK 358 million ( 1) in the quarter. 4

5 ICA and Rimi store sales development The following tables refer to store sales to consumers. In Sweden, this includes sales in Swedish retailer-owned ICA. In Norway, franchise store sales are included. Sales for retailer-owned and franchised are not consolidated in the Group. Information is based on accepted practices in each country. This means that the Swedish sales figures include VAT, while the Norwegian sales figures do not. ICA store sales in Sweden Store sales incl. VAT July September 2006 January - September 2006 SEK M Change, all Change, comparable SEK M Change, all Change, comparable Maxi ICA 4, % 8.4% 14, % 6.5% Hypermarket ICA Kvantum 5, % 6.7% 17, % 6.5% ICA Supermarket 7, % 5.9% 22, % 5.1% ICA Nära 3, % 6.2% 10, % 5.3% TOTAL 22, % 6.7% 64, % 5.8% During the nine-month period private label sales rose from 14 percent to 17 percent of total sales in Sweden compared with the same period last year. ICA and Rimi store sales in Norway Store sales excl. VAT July September 2006 January - September 2006 NOK M Change, all Change, comparable NOK M Change, all Change, comparable ICA Maxi % -3.7% 1, % -0.5% ICA Supermarked 1, % 1.6% 3, % 2.2% ICA Nær 1, % 1.9% 3, % 0.9% Rimi 2, % 2.2% 6, % -0.9% TOTAL 4, % 1.3% 14, % 0.2% The negative development during the third quarter for identical Maxi during the quarter is explained by operational disturbances due to a flood and a construction project. Efforts to modernize the store structure and clarify the format strategies for ICA and Rimi are continuing in During the nine-month period private label sales rose from 6 percent to 8 percent of total sales in Norway compared with the same period last year. 5

6 Number of ICA in Sweden, including retailer-owned Store profile Dec 2005 New Converted Closed September 2006 Maxi ICA Hypermarket ICA Kvantum ICA Supermarket ICA Nära TOTAL 1, ,399 During the nine-month period five Maxi ICA hypermarkets (of which three rebranded ), one ICA Supermarket (rebranded) and eight ICA Nära (four rebranded) were opened in Sweden. ICA and Rimi in Norway, including franchised Store profile Dec 2005 New Converted Closed September 2006 ICA Maxi ICA Supermarked ICA Nær Rimi TOTAL In Norway, six ICA Supermarked (four rebranded), five ICA Nær (all rebranded) and two Rimi were opened. Financial position Cash flow from operating activities amounted to SEK 2,950 million (878) during the period. Cash flow from investing activities amounted to SEK 27 million ( 1,259), of which the sales from ICA Meny is included by SEK 883 million. Cash flow from financing activities amounted to SEK 2,549 million (467), mainly used to reduce external debt. The Group s liquid assets as of September 30 totaled SEK 3,340 million (3,064). The equity/assets ratio was 30.4 percent (24.6). The Group's net debt excluding ICA Banken was SEK 3,496 million (7,032), a decrease of 50.3 percent compared to September 30, Investments Investments during the period amounted to SEK 1,689 million (1,887) and were distributed as follows: Investments July - September January - September Full-year Retail locations ,193 1,515 Under construction Investment properties Distribution Intangibles Other TOTAL ,689 1,887 2,547 Personnel The Group had an average of 11,611 employees (11,570) during the first nine months of the year. Parent Company The Parent Company's net sales amounted to SEK 714 million (279) with income after net financial items of SEK 715 million (795). Investments during the period amounted to SEK 128 million (118). Cash, cash equivalents and short-term investments amounted to SEK million 5 (5). 6

7 Accounting principles This interim report is prepared according to IAS 34. The same accounting principles and calculation methods are applied as in the most recent annual report. The introduction of IAS 39 for reporting of financial guarantees at fair value in the balance sheet affects the Group s shareholders equity as of January 1, 2006 by SEK 13 million. Other new and revised IFRS standards that entered into force on January 1, 2006 have no effect on the ICA Group s income statement, balance sheet, statement of cash flows and shareholders equity. On June ICA AB signed an agreement to sell all the shares in ICA Meny AB and the deal was closed on September ICA Meny is reported as a discontinued operation in accordance with IFRS 5. ICA Meny s operations and net income from the beginning of the year is reported on a separate line in the income statement, Net income from discontinued operations. Comparative figures in the income statement are restated.. Next reporting date The year-end report for 2006 will be presented on February 21, Stockholm, November 6, 2006 Kenneth Bengtsson President and CEO, ICA AB Review Report We have reviewed the interim report for the period January 1 to September 30, 2006, for ICA AB. The Board of Directors and the President are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review. We conducted our review in accordance with Standard on Review Engagements SÖG 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by FAR. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden, RS, and other generally accepted auditing practices. The procedures performed in a review do 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 expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit. Based on our review, nothing has come to our attention that causes us to believe that the interim report is not, in all material respects, prepared in accordance with IAS 34 and the Annual Accounts Act. Stockholm, November 6, 2006 Deloitte AB Jan Berntsson Authorized Public Accountant The ICA Group (ICA AB) is one of the Nordic region s leading retail companies, with around 2,100 of its own and retailer-owned in Sweden and Norway. The Group includes the sales companies ICA Sverige, ICA Norge and Etos. ICA also offers financial services to Swedish customers through ICA Banken. ICA owns half of the companies Rimi Baltic, with 200 in the Baltic countries, and Netto Market, with nearly 80 in Sweden. ICA AB is a joint venture 40% owned by Hakon Invest AB and 60% by Royal Ahold N.V. of the Netherlands. Due to a shareholder agreement, neither party has control of the company and the two share equal voting power. Through Royal Ahold, ICA AB is part of an international retail network. For more information, please visit 7

8 Income statement July - September January - September Fullyear SEK million Net sales 17,022 16,524 49,552 48,161 65,885 Cost of sales -14,542-14,163-42,226-41,673-56,933 Gross profit 2,480 2,361 7,326 6,488 8,952 Selling and administrative expenses -1,912-1,896-5,884-5,405-7,439 Other operating revenue Share of associated companies net profit Operating income ,938 1,342 1,947 Financial income Financial expenses Income after net financial items ,755 1,169 1,674 Tax Net income for the period from continuing ,574 1,076 1,525 operations Net income for the period from discontinued operations 1) Net income for the period ,940 1,068 1,523 Of which attributable to Parent Company's ,940 1,082 1,536 shareholders Of which attributable to minority Net sales by segment SEK million July - September January - September Full-year ICA Sverige 12,396 11,738 35,572 34,333 46,753 ICA Norge 4,507 4,729 13,673 13,836 19,039 ICA Baltic ICA Banken ICA Group Functions 1) Intra-Group sales Net sales from continuing 17,022 16,524 49,552 48,161 65,885 operations Net sales from 1,092 1,462 4,383 4,221 5,778 discontinued operations 2) Net sales, total 18,114 17,986 53,935 52,382 71,663 Operating income by segment SEK million July - September January - September Full-year ICA Sverige ,841 1,054 1,607 ICA Norge ICA Baltic 3) ICA Banken ICA Group Functions 1) Operating income from ,938 1,342 1,947 continuing operations Operating income from discontinued operations 2) Operating income, total ,976 1,341 1,958 1) Previously named ICA AB. The segment includes the Parent Company and other joint Group functions. Netto Marknad is included in the segment s operating income. 2) Refers to sales and income from ICA Meny. 3) The operating income 2005 includes a profit gain from real estate sales. 8

9 Condensed balance sheet SEK million Intangible fixed assets 1,826 1,974 1,914 Tangible fixed assets 12,026 12,240 12,441 Financial fixed assets 4,822 4,719 4,914 Deferred tax assets Total fixed assets 18,718 19,005 19,318 Inventory 2,853 2,944 3,228 Accounts receivable 5,414 6,359 6,591 Liquid assets 3,340 3,064 2,920 Non-current assets held for sale Total current assets 12,525 13,252 13,413 TOTAL ASSETS 31,243 32,257 32,731 Shareholders equity 9,499 7,937 8,386 Long-term liabilities 6,638 7,175 8,905 Current liabilities 15,106 17,145 15,440 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 31,243 32,257 32,731 Pledged assets Contingent liabilities Condensed statement of cash flows January - January - Full-year September September SEK million Cash flow from operating activities before change in working capital 2,393 1,873 2,696 Change in working capital Cash flow from operating activities 2, ,339 Cash flow from investing activities 27-1,259-1,076 Cash flow from financing activities -2, ,410 Cash flow for the period Liquid assets at beginning of period 2,920 3,198 3,198 Exchange rate differences in liquid assets Liquid assets at end of period 3,340 3,064 2,920 Of which cash flow from discontinued operations 1) - Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period from discontinued operations ) Refers to cash flows from ICA Meny. 9

10 Change in shareholders equity September 30, 2006 SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,386 Change in accounting principle IAS Opening shareholders equity after introduction of new accounting principles 8, ,373 Paid to minority owners -9-9 Currency translation difference Dividend Net income for the period 1, ,940 Closing balance September 30, , ,499 Change in shareholders equity September 30, 2005 SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,094 Paid to minority owners -1-1 Currency translation difference Dividend Net income for the period 1, ,068 Closing balance September 30, , ,937 Change in shareholders equity December 31, 2005 SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,094 Paid to minority owners -1-1 Dividend Currency translation difference Net income for the period 1, ,523 Closing balance Dec. 31, , ,386 Note 1 Joint venture Rimi Baltic AB ICA AB and Kesko Livs Ab each own 50 percent of Rimi Baltic AB, which is active in food retail operations in the Baltic countries. Both companies have contributed a share of its capital. Operations are otherwise financed in part through the owners and in part externally, with equal guarantees from both owners. ICA s investment in Rimi Baltic AB is reported as a share of its net profit and is included in the Group's operating income. As of September 30 ICA AB s guarantees for Rimi Baltic AB amount to SEK 549 million. Rimi Baltic s condensed balance sheet as of September 30, 2006 is shown below. ICA AB signed an agreement in October with Kesko Livs Ab regarding acquiring its 50-percent share in Rimi Baltic. The deal is subject to an approval from the European Commission and this is expected to be finalized by the end of the year. Rimi Baltic SEK million SEK million Fixed assets 2,154 Shareholders equity 1,224 Other current assets 699 Long-term liabilities 816 Liquid assets 239 Current liabilities 1,052 Assets 3,092 Shareholders equity and liabilities 3,092 Total Total Total Number of - Rimi Baltic Store profile December 2005 New Converted Closed September 2006 Supermarket Hypermarket Discount Cash and carry 1 1 TOTAL

11 Netto Marknad AB ICA AB and Dansk Supermarked each own 50 percent of Netto Marknad AB, which manages the Netto discount concept in Sweden. Both companies have contributed a share of its capital. Moreover, the owners finance operations through loans. ICA AB has not provided any guarantees for the company. Netto Marknad AB s condensed balance sheet as of August 31, 2006 is shown below. Netto Marknad SEK million SEK million Fixed assets 672 Shareholders equity 59 Other current assets 156 Long-term liabilities 580 Liquid assets 31 Current liabilities 220 Assets 859 Shareholders equity and liabilities 859 Number of Netto In 2006 four new Netto were opened in Sweden. In total, there are 78 Netto in Sweden. Note 2 Discontinued operations On June 16, 2006 ICA AB signed an agreement to sell all the shares in ICA Meny AB. The sale was approved by the EU Commission in September, and the transaction was finalized on September 19, ICA Meny is reported as a discontinued operation in accordance with IFRS 5. ICA Meny s operations and net income from the beginning of the year is reported on a separate line in the income statement, Net income from discontinued operations. Comparative figures in the income statement are restated. ICA Meny (MSEK) July - September January - September Full year Net Sales 1, ,383 4,221 5,778 Operating profit Net income before tax from discontinued operations Tax on year profit Net income from discontinued operations Capital gains from discontinued operations Result from discontinued operations, net after tax

12 ICA AB Corporate identity number Svetsarvägen 16 SE Solna, Sweden Telephone Fax