Axfood AB (publ) (AXFO) Earnings Call Transcript & Summary

Thank you, and good morning. This is the Axfood Year-End 2021 Presentation. And with me today are Klas Balkow, our President and CEO; and Anders Lexmon, our CFO. In the Investors section of the Axfood website, you will find the presentation for today's call, which is intended to be viewed in conjunction with our prepared commentary. After our prepared commentary, we will be taking questions. A recording of this call will be made available on our website also. So with that, I would like to hand over to word to Klas. Please go ahead.

Thank you, Alex. And of course, good morning, everyone, and thanks for joining today's call. Here is today's agenda. I will first provide you with a brief market overview, and I will then go through the fourth quarter performance for Axfood. And I will then hand over to Anders, who will take you through our financials. And following Anders' part, I will talk about our strategy, and more specifically, highlight our focus areas in the coming year among certain other things. The last part of the presentation is about the outlook for 2022, and then we will, as normal, move on to the Q&A. But let's get going. So first, the market update. The food retail market is solid and resilient. And during the fourth quarter, demand continued to be strong. However, as with the most part of this year, high comparison figures dampened the overall growth. The inflation level was still relatively low, but clearly higher than earlier on during the year. In the third quarter, we really started to see a change in the overall market dynamics with the eased pandemic restrictions, and this trend was also evident in the fourth quarter. The recovery for the cafe and restaurant market and service trade continued, as well as for the stores at central urban locations and also in the cross-border trade towards Norway. Late in the quarter, however, new restrictions were implemented, and this had a dampening effect on the growth for these segments. In e-commerce, growth deteriorated on a sequential basis, and there was negative looking at the fourth quarter as a whole. This was largely explained by high comparison figures and customers increasingly returning to shopping in physical stores. Let's now look at the market developments in more detail. The graph on the left side on this page shows market growth rates on a monthly basis year-on-year. And the graph on the right side shows quarterly food price inflation year-on-year. And market growth slowed down towards the latter part of the year, but the comps were, as you're seeing, more difficult. In addition, we estimate that the performance of the cafe restaurant market was better, and this likely had certain impact on volumes in the food retail market. The inflation rate continued its upward trend and amounted to 1.3% in the fourth quarter, driven by price increases across most of our categories. On this slide, you have the charts showing monthly growth rates year-on-year for physical stores and online, respectively. As evidenced by the data, there has been continued good growth for our physical stores, while the trend for growth in e-commerce has been relatively weak. So, clearly, a continued shift to the physical store trade. Many consumers have been returning to the stores and -- as restrictions around the pandemic have been lifted. And consequently, physical stores have been capturing a higher share of the total growth. But needless to say, physical stores still represent the overwhelming majority of the sales in food retail and over the year approximately around 95%. That sums up the market overview that I wanted to give you today. And we are now on Page 7 in the presentation. And with that, let's now go to the fourth quarter developments for Axfood. Our total store sales grew strongly at 3.1% during the fourth quarter, which was clearly higher than the market growth rate of 0.5%. Growth for Willys was solid and Hemkop grew more than the market. However, the main driver behind our clear market outperformance was the recovery for our cross-border chain, Eurocash. In the online segment, we continue to outperform, although this quarter growth was negative at just below 11%, while growth rate in the market was just below 17%. Our consolidated net sales for Axfood grew by 25.1% during the fourth quarter and amounted to SEK 17.1 billion. Obviously, Bergendahls Food, which was acquired on October 1, contributed with SEK 2.7 billion. And net sales, excluding Bergendahls Food increased by 5.6%, mainly due to new establishment and increased net sales for Eurocash, Snabbgross and Dagab. Now I will go through the sales per segment in more detail on the following page. Now in total, group operating profit amounted to SEK 739 million in the fourth quarter, and the operating margin was 4.3%. The operating profit includes item affecting comparability, comprising revenue of SEK 112 million from the Fora and Afa employer insurance based on the previous premium payments. Integration cost of SEK 21 million for Bergendahls Food and structural cost of SEK 6 million related to this restructuring of Dagab's logistical operations. So adjusted operating profit, excluding items affecting comparability, amounted to SEK 653 million, and the corresponding margin was 3.8%. The increase in the adjusted operating profit was mainly due to higher operating profit for Dagab, Hemkop and Snabbgross. And the consolidation of Bergendahls Food resulted in the dilution of the operating margin, excluding items affecting comparability of 0.4 percentage points in this quarter. In all, a strong quarter with high profits and also higher adjusted operating margin, excluding the dilution from Bergendahls Food. Let's now move on and look at the segment, and we will start with Willys. In all, total sales growth for the segment amounted to 3.7%. Like-for-like sales stores increased by 1.5%. Now despite the market's highest comparison figures, the Willys chain continued to grow during the fourth quarter. The Willys store in Boras that was damaged by a fire in May reopened in the end of October. So the negative effect on growth from this particular store was less pronounced than in the third quarter when the store was closed the entire period. Willys continued to develop its offering and concept at a rapid pace, with an expansion of new stores and online and modernization of existing stores. And Willys is a food retail concept in the Swedish market that reaches the highest share of households and recently passed the milestone of 3 million members in its customer loyalty program, Willys Plus. Eurocash performance was measured against a weak fourth quarter last year, and sales increased significantly as a result of higher customer traffic following then the easing of the travel restrictions between Sweden and Norway. In December, however, restrictions were reintroduced from both countries, leading to a significant negative impact on sales at the end of the quarter. Now if I compare the fourth quarter to the situation before the pandemic, the fourth quarter, i.e. 2019, net sales were 14% lower. Looking then at the profit for the Willys segment was essentially flat at SEK 343 million, and the margin came in at 4.1%. A decline in the operating profit for the Willys chain as a consequence of negative growth in like-for-like sales was offset by a considerable improvement in operating profit for your cash, which was attributable to the substantial increase in sales. Nevertheless, Eurocash operating profit remained negative during the quarter, which is important to clear out. Let's now move forward and look into Hemkop. Total store sales growth was higher than the market and amounted to 1.9% and like-for-like growth was 1.2%. The franchise stores saw strong growth and like-for-like growth for the group-owned stores was once again solid, owing to low comparison figures and higher customer traffic at stores in particularly the central urban locations. The Tempo chain delivered a positive performance, but growth was negative in this quarter as a result of very high comparison figures from last year. Operating profit for Hemkop increased significantly and amounted to SEK 73 million, and the operating margin was also significantly higher at 4.5%. The increase is mainly attributable to positive like-for-like sales growth and improved sales mix and very good cost control. Let me now move on to Snabbgross. Once again, Snabbgross had a great quarter and posted all-time high sales, operating profit and operating margin. The fourth quarter sales increased strongly by 24.6% in total and 21.6% in like-for-like. Now the strong growth is partly attributable to the low comparison figures, the [ easening ] of the pandemic restrictions and a favorable market development. In addition, Snabbgross' accessibility through its store network and attractive customer offerings continued to contribute to an increase in the customer base. And the new establishments and a higher average ticket value has also contributed in this quarter. With the positive development in our like-for-like sales, Snabbgross' operating profit increased significantly in the quarter and amounted to SEK 45 million. The operating margin was also substantially higher at 4.5%. Let's now move on, and we are now on the operating performance for Dagab. With the contribution from Bergendahls Food, sales for Dagab increased by 27.7%. Net sales growth, excluding Bergendahls Food, was, however, also strong at 6%, mainly attributable to higher sales to store chains and convenience retailers. Overall, as you've seen, a very solid performance for Dagab in the fourth quarter with high efficiency and a very high activity level in many areas. Operating profit came in at SEK 250 million, which corresponded to an operating profit of -- operating margin of 1.6%. The operating profit includes items affecting comparability with Bergendahls Food integration costs and the structural costs associated with the logistical platform restructuring. Looking then at the adjusted operating profit came in at SEK 277 million and the adjusted operating margin at 1.8%. And the consolidation of Bergendahls Food resulted in a dilution effect of the adjusted operating margin amounted to 0.1 percentage points in the Dagab segment. With continued strong demand in food retail and higher demand from the convenience trade, capacity utilization and productivity remain high. However, I must say, higher fuel price had a negative impact on the operating profit. And delivery reliability continued to be negatively affected by certain disruptions in the general supply chain that affected planning and then related, obviously, then to the global supply chains, which issues relating to production and shortages in many -- in for example, raw materials, packaging materials and transports. With the restrictions now being relaxed in the restaurant market, Urban Deli continue to report the positive sales trend Apohem maintained its strong performance and recorded a high growth with a focus on now strengthening its brand for the future. And then just one more slide before I hand over to our CFO, Mr. Anders Lexmon. Our ambition level in the area of sustainability remains high. With focus on the entire value chain and sustainability activities that permeate all parts of our group, we aim to be a positive force for change that contributes to the positive development of society. And as you can see on the slide, we have accomplished a lot in 2021. And on the slide you can see examples of what we have achieved. We strive to make it easier for consumers to make sustainable choices, and we added many exciting new products to our assortment during the year. Food waste has a large negative environment impact, and we have, therefore, continued to reduce food waste that would be generated in our own operations. And to lower our climate impact, we focus a lot on sustainable energy, and we're also working on our transport by a transition of our fleet of delivery trucks towards more fossil-free fuels. Furthermore, we strive to reduce the use of plastics and also working with our packaging of private label products to be recycled and manufactured from recycled or renewable material. And lastly, we are working to improve work on social conditions throughout the food supply chain and also have set goals for sickness related to absence, diversity, and equality. With that, I would like to hand over to Anders, who will present our financial position. So Anders, please go ahead.

Thank you, Klas. If we first take a look at sales development for the full year, the net sales for the group increased with 7.8% to SEK 57.9 billion. The growth in the fourth quarter was boosted by the acquisition of Bergendahls Food at 1st of October. And the growth, excluding Bergendahls Food amounted to 2.8% for the full year. Store sales for the Axfood Group increased by 1.9% and was just above the overall market growth for 2021 of 1.3%. The like-for-like growth was 0.3% for the full year. The operating profit, excluding items affecting comparability of SEK 14 million increased with SEK 180 million or 7.2%. The operating margin decreased from 4.7% to 4.6%. The Bergendahls acquisition had a dilutive effect on the operating margin of 0.2% for the full year. We saw a strong profit development from both Hemkop, Snabbgross and Dagab under 2021. And items affecting comparability consists of a Fora contribution of SEK 112 million in the fourth quarter and costs relating to the acquisition and integration of Bergendahls Food of SEK 98 million for the full year 2021. Looking then at the cash flow for 2021. We continued to show higher operating profit compared to last year, mainly due to strong margin development in Hemkop and Snabbgross and also a high efficiency in the Dagab operation. We had a slightly negative working capital effect of SEK 49 million for the full year, including effects from the UTP regulation. We also saw a higher investment activity compared to last year. The deviation is related to the acquisition of Bergendahls Food and City Gross, but also to higher investments in the supply chain and IT. SEK 1.9 billion of the revolving credit facility was used mainly to finance the acquisition and SEK 0.3 billion was repaid during the period, leaving an RCF balance of SEK 1.6 billion at the end of the year. The second dividend payout was made in September, another SEK 3.75 per share and thereby a total dividend of SEK 7.50 per share was paid out for 2021, an increase of SEK 52 million compared to last year. And to summarize, the total cash flow for the period amounts to minus SEK 800 million, a negative deviation of SEK 1.54 billion compared to last year. Total investments for the full year amounted to SEK 3.547 billion, of which SEK 1.722 billion was attributable to the acquisition of Bergendahls Food, of the remaining investments of SERK 1.825 billion, SEK 525 million was attributable to our retail operation, included both refurbishments and new establishments and were in line with last year. The investments in our wholesale operation was SEK 893 million, of which SEK 702 million was attributable to investments in automation. The remaining investments of SEK 191 million was in line with last year. And the investments in our IT operation was up SEK 97 million due to infrastructure in stores and new merchandise solution in our ERP systems and also to the integration of Bergendahls Food. During 2021, we have further decreased our net working capital compared to sales from minus 3.4% to minus 3.9%. We'll continue our focus on working capital with improved payment terms on accounts payable and our FCF program also helps us increase accounts payable. Going forward, we continue our efforts to improve the KPI further. However, the next 12 month, we except this rolling 12-month KPI to be negatively affected by the UTP regulation and to the dilutive effect of the Bergendahls transaction. Looking then at net debt, excluding IFRS 16, we went from a net receivable position in Q3 to a net debt position at the end of Q4, and that's the dark staple in the chart. This is explained by the acquisition of Bergendahls Food and the minority interest in City Gross, which was completed in Q4. Adjusted for the consideration paid for the acquisition, the net debt was in line with previous quarters. The net debt-to-EBITDA ratio increased due to the net debt increase and the equity ratio was 21.8%, a decrease of 2.0 percentage points compared to Q4 last year. The decrease in the equity ratio was also explained by the Bergendahls, City Gross transaction. The capital employed increased with approximately SEK 2.9 billion at year-end compared to last year, also due to the acquisition of Bergendahls and the RCF drawdown of SEK 1.6 billion. Return on capital employed decreased somewhat as well due to the increased net debt and the closing of the Bergendahls transaction as of the 1st of October. In line with the previous communication, Axfood is planning for a share issue of SEK 1.5 billion with preferential rights for existing shareholders. A proposal will be made to the AGM on the 23rd of March to authorize the Board to complete the rights issue to be completed in the second quarter this year. The share issue will ensure and maintain a long-term strong financial position for Axfood. The majority owner Axel Johnson AB, representing 50.1% of the shares has undertaken to vote in favor of the Board proposal. And that was the end of my presentation and thereby, Klas, I hand over to you again.

Thank you, Anders. Now as usual, let's turn to our strategy part and the focus areas that we see when we now are going forward in 2022. So on this slide, you can see the 6 growth promoting and efficiency enhancing priorities that we work with to become the market leader in affordable, good and sustainable food. I will now briefly go through each of these to highlight the main focus areas for the group in the coming year. And first up, our focus area, customer offering. We will offer our customers an attractive, efficient, wide and affordable assortment. And in 2022, we aim to develop and strengthen the assortment. We will also strive to develop the customer offering to address sector convergence, for example, with meal solutions and within some targeted categories, including personnel care. And as always, price value is of high importance for us and for today's consumers, and we will, therefore, focusing on strengthening the price position of all our concepts. And lastly, we'll also integrate the customer offering for the warehouse operations of Bergendahls Food in Hassleholm. Moving then on to the customer meeting. Through our brands and formats, we will meet our customers' varying needs no matter where, when and how the customer meets us. During the pandemic, digitalization has accelerated, and we will, therefore, continue to strengthen in the way in which we meet our customers through our various digital platforms. We will also develop and optimize our store network to drive growth and strengthening our omnichannel offering with new establishments in attractive areas and also store modernization. And lastly, another important priority for 2022 is to develop the customer meeting with respect to sustainability and health, which is about helping and guiding our customers when they come and shop with us. Now this slide shows priorities in terms of expanding our business. We will grow in new and existing markets by establishing stores and developing new segments, categories and services. And in addition to new stores, we will expand online and also develop our online platform, so they are intuitive and user friendly. We'll also continue to establish our store concepts Snabbgross Club and furthermore, we will strengthening the market position of our development companies, as we call them, which includes our online pharmacy, Apohem, the Urban Deli restaurant chain and Middagsfrid. These companies are, though relatively small in the Axfood portfolio of brands, but they have a large potential and are present in attractive market segments. And finally, obviously, we will also focus on converting the customer of Bergendahls Food, so they are integrated with our own systems and processes. Let's continue now on our fourth strategic focus area, supply chain. In this focus area, it is really about the Bergendahls Food integration as well as our new logistical platform that will have a large degree of automation. A lot is now, obviously, going on here, and we will see significant benefits in the years to come. And as a quick reminder, investments in our logistical operations are expected to result in efficiency improvements starting 2024. And with respect to Bergendahls Food, the integration process is proceeding according to plan. And the focus right now is on integrating the wholesale operations with the Dagab's business. Moving on to work approach, which I will only touch upon briefly. Here, the focus is continue to develop an innovative, customer-oriented and dynamic organization in which efficiency and cost control are in focus. In addition to continue to develop our ways of working, we will also work to strengthening the partnership with City Gross and manage the integration of Bergendahls Food's warehouse operations in Hassleholm. We are now on the final focus area, our people. We will attract, recruit and develop the industry's best employees. And to do that, we need to focus and continue to focus on our culture, how we lead, and how we collaborate across the organization and also how we achieve a sustainable work-life balance. And lastly, we need to manage the integration process also in this part related to Bergendahls Food, so that all our new colleagues feel really welcome into the Axfood family. Moving on then from our strategic focus areas. I would like to talk about a very strategic deal that we announced in December. We entered into a partnership with Mathem, a strong pure player online retailer with home delivery, whereby we are divesting Mat.se in exchange for shares in Mathem. We believe this combination creates synergies and scale, providing improved opportunities to develop a strong offering in this particular segment of the market. At the same time, Mathem is entering into a 7-year delivery partnership with Dagab. Transaction, as you know, is subject to approval by the Swedish Competition Authority and the formal application was filed to the agency in the early January, and we expect a ruling in the first quarter this year. Previously, I mentioned Apohem, and I just would like to spend some time on Apohem's progress over the recent year. Apohem is an e-commerce challenger. A full-scale retail pharmacy where customers can order both over-the-counter and prescription drugs. In addition to the prescription drugs, Apohem now offers some 14,000 items. And in 2021, Apohem's market position improved, and the sales growth was very strong at the full 69% comparing to last year. Marketing efforts were increased with a focus on brand building and brand awareness. And the move to the new warehouse in late 2020 was clearly given Apohem the right conditions now to further grow, and we see there is a clear further potential here. In addition to the strong sales growth, progress was made increasing efficiency in the operation, and with the improved and optimized website that results in high customer conversion rates and very high customer review ratings. Apohem is well positioned to continue to grow and take the next step in its journey by focusing on logistic, tech, brand building, growth and profitability. That concludes the update on our strategic agenda. So please now turn to the outlook for 2022. We presented this at our Capital Market Day in December, and the guidance we gave then is unchanged. Capital expenditures are expected to amount to between SEK 2.6 billion to SEK 2.7 billion, excluding acquisitions and right-of-use assets, of which SEK 1.3 billion pertains to the logistics center in Balsta outside Stockholm, SEK 100 million pertains to the nationwide warehouse of fruit and vegetables in Landskrona, and SEK 110 million pertains to IT costs related to the acquisition of Bergendahls. The investments in our logistic operations are mainly related to automation. In 2022, operating profit will be charged with certain structural costs associated with the transition to Balsta and the integration of Bergendahls, totaling approximately SEK 340 million. And the majority of these costs are expected to be incurred in the second half of this year. Finally, we have a broad presence across Sweden, but there are still attractive locations where we are not represented. And there's also clear demand for our concept that we want to meet. Therefore, in 2022, we plan to increase the rate of expansion and establish 8 to 13 new stores. Moving on then to dividend for 2021. The Board of Directors will propose to the AGM an increased dividend to SEK 7.75 per share. The dividend will be split into 2 payments, SEK 4 per share in March and SEK 3.75 per share in September. And the dividend proposal corresponds to 75% of our profit after tax, well in line with our dividend policy. Now let's turn to the final page of this presentation. It is gratifying to finish what we -- has perhaps been the most intense and exceptional year for Axfood to date with a strong year-end report. We grew faster than the markets and we also posted improved earnings. We see this as a clear confirmation that our concepts are continuing to develop and strengthening its market positions. We have operated during a pandemic that has challenged customer behavior and purchasing patterns, during which our main focus has been on the well-being of our employees and our customers. We're also carrying out major structural changes that will create prerequisites for long-term profitable and sustainable growth. We are emerging from a successful year, stronger than before, and with some clear energy for continued investments moving now forward. And with that summary, I would like to hand over to the operator to open up the line for questions. Thank you.

[Operator Instructions] Our first question comes from the line of Fredrik Ivarsson from ABG.

3 questions from my -- I take them one by one. First, there seems to be quite big spread between purchasing prices and consumer inflation at the moment. Did you feel any pressure from that during the last 3 months to 6 months?

Well, as you know how this industry works, you also have some windows where you go with your price increases. And it is, obviously, clear that we see some increased announcements from the suppliers at this stage. But if I look back, we have not seen that much of an impact in the fourth quarter as we have reported. But we expect now to see some, obviously, inflation pressure going forward, and we'll see how that follows out going forward. Though, as you may point out that we've also seen some inflation costs directly in our own operations that we see that directly. And obviously, as I pointed out, fuel cost is one example that we see negative effect of currently.

Right. And then if we could move on to Eurocash. You said sales were down 14% versus Q4 '19. But were there positive growth prior to the new restrictions in December?

Yes. I would say that we -- as you know, we have looked at this fairly in detail in terms of the attractiveness and the interest of the Norwegians to come and shop in the cross-border we looked at it when we had the restrictions. And we were pleased to see when the restrictions open up that it was very positive to see the large customers coming back and visiting us. So we had a very positive momentum on that. Then, obviously, when the restrictions then came back, it put in some halt into that. So I think, overall, we are positive about Eurocash, and we are positive about the cross-border trade. And we are, for sure, looking forward now that the restrictions will ease, that it seems to happening at this stage, as you sure are well aware of.

Yes. And a follow-up also on Eurocash, you say that earnings were negative. But can you say anything about the delta versus Q4 '19 as well? Are we talking about double-digit negative millions?

We are talking about significant negative, that's correct. And obviously, even if we are -- now we are lower, even sales is significantly lower versus last year. So it is burning our profit even if the hit is not as bad as it was Q4 last year.

And the next question comes from the line of Daniel Schmidt from Danske Bank.

A couple of questions from me then. Given that you've now had Bergendahls under your wings for couple of months. And of course, I appreciate that you already said that you want to realize cost synergies of SEK 200 million in the coming years. But would you care in any way to sort of give any guidance for this year or any approximation of how much synergies you could generate in '22?

I think it's far too early to talk about that, Daniel. Right now, as we have outlined, the focus is now to integrate the wholesale business into our own systems. And obviously, before we are there, we are -- that's the first step to even start to look into synergies. And then we want to integrate their stores that will take the full year basically or at least the majority of the year to do that with the City Gross. So that will support their operations, and it will also become more efficiencies for us. So we are not really there yet, but there's a high focus, obviously, as a first step now to integrate the wholesale operations. So early to say.

But you are making changes to manning, which was talked about in media before Christmas or maybe right after, I forgot.

Sorry, I missed the first part there. We have some --

You are making changes to manning, which was communicated or it was sort of publicly in some sense a couple of weeks ago.

Sure. We are -- but we are taking -- we are announcing, and I'm not sure the English word, but you know we are [Foreign Language] we say, in Sweden. And the effects of that will -- that's the first step. And now we are in discussions, obviously, with the unions and how to take that steps going forward. So that is still -- we have announced it, but then the effects of that will come later on. But first of all, we need to take the discussions now in the right timing with the unions.

Okay. And when you would you -- sort of when will you have the result of that? Do you think is that during the spring? Or is that sort of lingering on?

I hope so -- no, but I hope that we will clear this out. Obviously, it's a sad message to give. And we want to work on that as quick as we can for everyone involved, because, of course, it's in some uncertainties at this stage. So we hope we'll have a fairly speedy process, so we will have this more cleared out in the spring.

All right. And then just moving on to sort of the previous topic when it comes to input cost inflation. And you said that you haven't seen that much during Q4, but probably more will come, if I got you right. How do you view that? I think you have a fairly strong history in passing on input cost inflation to the end consumer. Is there any reason to believe that this time it's different?

Well, I think maybe the short answer is no. But we are -- it depends, of course, now how this will turn out. But it's a fairly low margin business. And historically, we are working for efficiency improvements to handle that, and the same as the supplier is trying to do that. But obviously, with the large increases in the end of the day, I think we have to get used to that. We will see some price increases also for the consumers in the market.

And speaking about the consumer and given what's been happening with energy prices and fuel prices and so on for disposable income. Have you seen any changes to consumer behavior in the past 2 months in terms of basket size or basket mix or sort of preference in terms of concepts or anything like that?

I understand. Well, as you saw, we -- the inflation rate was in the fourth quarter just below 1.5%, slightly higher in December, and that is still on a -- compared to normal, that's still on a fairly low levels in terms of normal inflation. So we have not seen any major changes behind that, which obviously is related to that the inflation rates has been not that high. And maybe remind ourselves, we're also coming from a period with even lower inflation rate during the summer, even deflation. So -- but the answer there is, no, I'm not seeing any major shifts due to that because of the inflation has not been that high.

And then, of course, the consumer is experiencing much higher inflation in other parts of disposable income rather than food, but I'm just thinking that the overall disposable income is probably on its way down as we speak. Do you think that, that even though food inflation is not that bad, do you think that will -- well, how do you view that historically when it comes to sort of trading down? And do you think that's going to be beneficial even more for Willys going into '22?

I may misunderstand your last question if you were relating to the inflations where we see in the electric cost and fuels, because obviously, that has been impacted the consumers already now. That was relating more to the food, so --

Yes, I understand.

But then, obviously, it is a high inflation pressure to the consumers going forward. We'll see how this turns out. Then you can argue and look into what will the consumers then do. And, obviously, one is that you are turning into more price value, both in terms of products, but also in terms of retailers. And obviously, I think, we are well positioned going forward if that happens in terms of the strong value proposition we have with Willys, but also the strong position we have with our private labels.

Yes. But it's too early to see any indications of that trend accelerating in any way when it comes to discount yet. Is that your judgment right now or we might see it --

That's my judgment right now. And if you look at like private label is more or less flat year-on-year in terms of shares, so we haven't seen any major shifts there. We are, though -- and I think it's not related to that. But as you were seeing, we are strengthening, and I think it's very -- ending this report, looking at Hemkop is doing a really good performance. Willys is also doing a fantastic performance. If you look at it, they had almost a 14% growth last year and even been able to even overcome that part. So -- and if you look at the data that comes out in terms of customer penetration, Willys continue to attract more and more customers.

Yes, absolutely. Just a final question to Anders, maybe. You talked about UTP impact on net working capital and cash flow. I think it was SEK 49 million in the quarter, and you said it will have a negative impact in '22. Any quantification -- any -- sort of how much could that be?

What we see now, approximately, we will have a negative effect on the KPI. Net working capital versus sales of approximately 0.5% connected to the new UTP regulation. But that's an approximation, and we'll have to see how it fall out in the next year.

And we have one more question from the line of Niklas Ekman from Carnegie.

Just a couple of questions. Firstly, if we go back to the issue of inflation here, I'm curious what magnitude of inflation are you seeing based on the kind of negotiations you are having now? We had 1.7% in December and comps are getting easier or easier or depending on how you look at it. But what's the rate of inflation that we can expect for food in kind of Q1, Q2?

I understand you asked that Niklas. And obviously, it's difficult right now to give you any number. But clearly, so it is higher what we have seen in the fourth quarter, clearly higher. And obviously, we're working now with the various -- with our suppliers to see what is raw materials and what is other costs related that is fair to take out in the market. So it is really work in progress.

Fair enough. The second question is on the competitive landscape. If I look at your trend here, it looks like you outgrew the market quite strongly between 2015 and '20 and then you were in line with the market now in the past 12 months, and now in Q4, you're gaining considerably again. So I'm curious if you can elaborate a little bit about the competitive landscape. It looks like ICA lost a lot of momentum in Q4. How is Coop doing, how is Lidl doing? Is there any change in Coop's momentum that you're seeing in the market?

Well, as you know, I'm not too happy about talking competitors in that sense. But obviously, if I look at it -- and I think it's fair to say when we are related to some of our trends and market changes, it's also comparing that to some of the uplift we've had, that was massive. I think we've had the highest comp figures to meet in certain quarters that we have seen in 2021. Now it is continue to be a highly competitive landscape. You see the activities that is going on. And I have no other top of my mind in terms of that, that will continue. But that also means that we will need to work even harder to continue to be more relevant to the customers, continue to create the efficiencies to create that fantastic price value that we want to give out to the consumers. So we're focusing a lot on our own, Niklas. And obviously, we have a lot of good, strong competitors out there, and I'm sure they are trying to do their best as well. So as much as I can say.

Fair enough. Last question is on the one-off costs here, SEK 340 million that you're guiding for in '22. Will that cover all the costs related to integration and automation as you see. Sometimes there are additional costs that kind of impact the adjusted EBIT. I kind of have the same question for 2023, because you haven't provided any guidance there, but that's also a year where costs will be elevated. Will that be reported then as one-off costs in '23 or will that impact the adjusted EBIT?

Costs relating to the integration will fall out in this year 2022 as we expected.

And maybe if I jump in then, if I understood your question right. We have been transparent in terms of what are the one-off costs that will happen in this year. And obviously, we try to cover what we see as the real true one-offs. And then as in [ Norway ] we have business going on as normal, and some of these investments will still be made there and also cost will be made there. But the one-offs has been clearly pointed out. We'll come back to 2023, but I think we have the majority of -- well, particularly for Bergendahls, but also from the logistical part, it is -- the majority shift is now happening now. But we'll come back to any guidance if that is for the 2023.

I was just curious, since you are -- and this refers to the guidance you gave at the Capital Markets Day where you indicated that costs will be elevated throughout '22 and partly into '24, and you've only guided for one-off costs in 2022. So I was kind of wondering what we should view in terms of the underlying profitability, excluding all these one-offs, if that profitability is likely to go down or likely to remain flat in 2022, all else equal?

Well, there are many parameters that is contributing to the guidance in terms of going forward. Related to -- then to costs, as I said, majority has now been taken. Then, of course, it's our ability, how fast we are getting the efficiency up and running in our new logistical platforms will also affect. If we are really good at it, it will not have an effect. It will even go even better. If we are -- it takes longer time, it will have some impact. So again, I have to come back to that when we are getting a bit further on into our plans.

And as there are no further questions, I'll hand it back to the speakers.

Well, with that then from our side we would like to thank you for joining the call, and thanks for the questions. And have a nice day. Thank you.

Thank you.