Stockholm / SE. (ica) What’s going on at Sweden’s ICA Gruppen AB? «Global unease and uncertainty continue to characterise the world around us, and of course there is strong focus on the high food price inflation, which continues to increase and reached a full 13.5 percent in July. Together with other cost increases, this is putting a heavy strain on the entire value chain, with major consequences for our customers, where we need to work even harder to counter the negative effects,» says Chief Executive Per Strömberg in the light of the company’s interim report for the period January-June 2022.
Strömberg: «We find ourselves in a challenging environment that is not showing signs of easing in the immediate future. On the contrary, we have not yet seen the full effects of continued strained value chains, interest rate hikes and rising inflation. Many are already feeling the effects of a tougher everyday life, and no one will remain unaffected going forward. For ICA Gruppen’s part, we were challenged during the quarter by rising costs and smaller volumes in our grocery retail business. Despite this, as a company group we have managed to grow both our sales and earnings, which shows the strength of being a cohesive company group.»
Second quarter highlights versus Q2-2021
- ICA Gruppen’s Q2 sales increased by 6.7 percent to SEK 34,578 million (32,401).
- Operating profit for the second quarter of 2022 (SEK 1,531 million) rose 5.9 percent compared with the second quarter of 2021 (SEK 1,446 million).
- Very high inflationary pressure and continued macroeconomic uncertainty affected the quarter as a whole.
- Strong operating profit driven mainly by continued improvement for Apotek Hjärtat as well as for ICA Bank.
- ICA Sweden showed stable performance, even though ICA’s store sales were weaker than market growth and the margin narrowed compared with the same quarter a year ago.
- Sales of groceries online continued to decrease, but are still double the level before the pandemic.
- High cost inflation and mounting competition affected earnings for Rimi Baltic.
- Stable quarter for the real estate business. New, jointly owned property company formed together with Bonnier Fastigheter – Trecore AB.
- ICA Gruppen and Murgröna signed new credit facility worth a combined total of SEK 22.5 billion.
CEO Per Strömberg: «The cost trend is affecting all of our operations, our suppliers and our customers. In this challenging environment we are embracing our double societal responsibility: We are rallying for Swedish food production at the same time that we are working hard to give customers the best price value despite growing inflation.»
Consolidated net sales increased by 6.7 percent compared with 2021. In local currencies the increase was 6.3 percent. Price effects – driven by high food price inflation – were comparatively strong especially for Rimi Baltic and ICA Sweden. Volume effects were mainly positive for Apotek Hjärtat, but also for ICA Bank. On the other hand, volume effects were negative for ICA Sweden and to an even higher degree for Rimi Baltic.
Operating profit excluding items affecting comparability was slightly higher than a year ago, which to some degree was driven by continued improvement in Apotek Hjärtat, but above all by higher earnings for ICA Bank, where earnings in the preceding year were charged with a one-off accounting item for loan losses of SEK -60 million associated with the acquisition of Forex’s customer portfolios. In addition to this, ICA Insurance had a positive earnings effect of slightly more than SEK 30 million during the second quarter in connection with the dissolution of a claims reserve. In Rimi Baltic, weak sales performance in Latvia combined with strong cost inflation led to a decrease in operating profit by SEK 66 million. Overall, price effects in operating profit were positive, while volume effects were negative. Gross profit increased, while the gross margin narrowed slightly, mainly owing to fewer consolidated subsidiary stores in ICA Sweden. The operating margin excluding items affecting comparability was 4.4 percent (4.5). Profit for the period increased by SEK 629 million to SEK 1,768 million (1,139), which is explained by capital gains and a lower tax cost. The net result of divestments and impairment losses totalled SEK +457 million (+20) during the period, where the outcome for the year is mainly coupled to capital gains from property divestments.
The complete report «ICA Gruppen Q2-2022 | Stable performance – challenging world» (36 pages) is available on the group’s homepage at icagruppen.se.