Earnings Call: Q2 2018

Jul 16, 2018

Afternoon, and welcome to the Axude AB Q2 2018 Report. Throughout the call, all participants will be in a listen only mode, and afterwards, there will be a question and answer session. Today, I am pleased to present CEO, Klas Balcao. Please begin your meeting. Thank you very much. And obviously, let me also welcome you to the presentation of Axwood's Q2 2018. And as the headline states on the first slide, I am pleased to sum up the Q2 and state that we had yet another strong quarter. Let's now go to the next page that will cover the agenda for this presentation. We will go through the key ratios for the 2nd quarter. We'll also go through our financial position that will be presented by our CFO, Mr. Anders Lexmann. And I will then do an update on some of our strategic steps in the quarter as well as some activities going forward. And we will end this session, as said, with a Q and A, where you will be able to ask questions to both myself and Mr. Lexmann. Let's now turn to Page number 3. And before we go into the numbers for the quarter, let me just remind you of what we are today. We have a clear house of brand strategy. And in the quarter, we also added 1 new brand to our family, this since Apo Hem launched its online pharmacy in June, which means that we now have 5 online brands, 3 in the food supplier, 1 dinner bag company and then Apo Hem. And together with all other brands, we have over 300 group owned stores. And in total, we collaborate and supply goods to over 1100 stores throughout Sweden. Let's now turn page and go into the 2nd quarter's highlights. And first, I must make a comment on the warm and sunny weather during the quarter. This is something that has been positive for Axwood, especially if we look at Axwood Snabdios that supports the cafe and restaurant business that had a really, really strong quarter. The warm and sunny weather also had a negative impact on particularly Swedish food production, something that I will address later on in my presentation. But we also had a favorable performance in all segments with strong profits and actually a record profit for the Q2. And we continue to see high growth rates on our online business. And as volume increases, we are pleased to see that we're also achieving better productivity, which decreases the burden on our margin. Let's now go into next page, Page 5, and start covering some of the key ratios for the quarter. So next page, Page 6. And if I start with sales, looking at the Q2, I must comment on the growth rate that is influenced by high comps from last year, and this year also includes a clear negative Eastern effect. For the Eastern, we calculate that we had a negative effect for the group in the range of 1.5% to 2%. Despite this, we increased net sales in the quarter by 2.5%. The warm weather had an impact, as I mentioned, but not only for Axwood Snabgroze. The weather has affected harvest and the supply of, example, given fruit and vegetables, which in certain product categories led to some clear price increases. In early summer, I also kick started the barbecue season and increased sales for certain categories such as meat, soft drinks and frozen food. This in total impacted the consumer behavior and our overall sales mix. We had also good growth in all our segments and as mentioned, particularly in Akzooslaukos, but also Villas and Hampshire reported healthy growth. Naga has been impacted by not only Eastern, but also a negative calendar effect, and I'll come back to this when we go through segment by segment a little later on in this presentation. And now turning to next page, Page 7. And overall, if we look at the first half of 2018 and our store sales, we had a growth rate of over 6%. Now we do not yet have the market data for June, but until May, the market has grown by 3%. And in the graph, you can see the outperformance of the market partly due to acquisitions, but in this quarter, all sales are, for us, organic growth. And if I isolate the quarter's store sales, our April to June figure was up 3 0.2%. And if I compare that to the figures we have so far for the market, though April, May, the market grew by 1.2% in current prices. So we are fairly confident that we also, in this quarter, continue to gain market shares. I'm now going to the next page, Page 8. And if we look at our profitability, we delivered actually the best operating profit for the Q2 ever in the company and also showed top profitability with an EBIT margin of 4.5%. The higher like for like sales contributed to our increased earnings, but the warm weather also resulted in a positive sales mix that benefited our overall margins. And all segments contributed to the strong earnings. The fact that we in this quarter only opened 1 new store and had fewer larger refurbishment was also favorable to our profitability, particularly then in Hampshire. I also want to comment on that the online continues to weigh down earnings, but the burden on our margin decreases as we manage to achieve better productivity with the volume growth we are currently seeing. Now let's now go into each segment, and I'll start with the largest one, Villis. I'll turn to Page 9. And I'm pleased to see that Villis continued its positive momentum and reports another great quarter, both in sales and profitability. The negative eastern effect has a high impact, particularly on the Village segment, but not only in the Village stores, but also on our cross border business Eurocash that had a softer sales in this period just due to the Easter effect. Now despite this calendar impact, Village is showing a like for like sales over 2%. And if I compare the quarter with the same quarter last year, we have 3 more Villas stores in operation. And in this quarter, we opened up 1 more Villas Hema in Malne, but we also closed one village in Stockholm Greater Area due to an overall area reconstruction that and the store and the area will open up again in 2020. We continue to roll out online through its store network. In the quarter, Villis offers online shopping in 5 additional cities and more stores in larger cities has been added to our service. Number of stores are important for Villis due to the high share of click and collect that is actually now still above 50% click and collect rate for a store on average. All in all, we now offer online in 48 Village stores in 27 cities. And at the year end, we plan to have approximately 60 stores in 30 cities with our omnichannel offer in Villas. And finally, let me also comment the strong profitability Villas is reporting in this quarter, which clearly is impacted not only by the positive like for like sales, but also a positive sales mix effect due to Easter, since Easter is a low margin period as well as the warm weather has been supportive, as I mentioned earlier, in terms of our margin mix. Let's now move to the next page, Page 10. Going then to Hampshire. Hampshire is also showing a good growth rate overall, which is positively affected by the last year's closure of Hemshoop City. Hemshoop reported more customers and also higher ticket value. And our like for like in total, Hemshoep came in at 1.7% increase, somewhat softer in our group owned stores. The increase in earnings were positive and satisfying. However, it's fair to say it's boosted by the fact that this year, we didn't have the new openings as we did last year. We do not have the same refurbishment as well in the larger stores as we also did last year. So for Hemship, the sales mix has always been Hemschep, the sales mix has also been positive to our margin, just the same as we noted in Billings. And the development for online has been favorable also in Hemschep. With strong online growth, we also stayed better efficiencies as well in Hampshire, which is reducing the negative margin impact from the online business. Now move to next page, Page 11. Going then to Akzo Snabgos. And from a growth perspective, Akzo Snabgos is this quarter's star. It really stands out in the quarter. And I return to the comment regarding our early and steady warm weather, which boosted demand from restaurants and cafes. Actual subgroups grew with almost 10% with a like for like sales of almost 9%. And if we look at the market, overall market for April to May, we don't have data for June there, we have seen a 6% growth. So the overall market is actually positive. But having said that, we are noting that we are growing faster than the market, which indicates that we're also gaining market shares in this segment. On profitability, we have a slightly lower margin than last year. This is mainly explained by the recent store expansion program in Stavros. Moving on to next page, Page 12. The last segment that I would like to comment on is DAGAB. On a first glance, it looks like it comes in with a soft sales with 1% growth. But here, we have to comment on the calendar effect. We have the Easter effect as well as less delivery days in the quarter. In addition to this, as you know, we don't any longer support MatHem. So if I have the calendar effect and the loss of MatHem, there is another 2% growth for DAGA. So total underlying growth is then 3%. Looking then at the profitability. DOGA maintained its margin in the quarter despite slightly higher cost in logistics and the online growth we see in Malpot this year. And a final comment on this slide. Axwood's private label share increased in the quarter. And obviously, it's very positive to see the increase by more than 2 percentage points. But I also want to be clear, on the half of this is the organic growth. The other half, approximately 1 percentage points, is due to reclassification of parts of our seafood page and at the same time hand over to our CFO, Mr. Anders Lexmann. Anders? Thank you, Karl. I will now lead you through Axon's financial position. Next page, please. Let me first summarize what you have heard from Claus from the Q2 with the development of the 1st 6 months. Net sales shows a good growth for the first half year with 4.9%. Our like for like sales within the stores were healthy 3.5 percent. The operating profit summed in the 1st 6 months up to SEK 980,000,000, which implies an operating margin in line with our long term goal of 4%. Next page. Our cash flow was much stronger this year, minus SEK 863,000,000 compared to approximately SEK 1,400,000,000 in 2017. The main difference is the 4 acquisitions we did last year. This ends up in a stronger cash position at half year end compared to last year. Our business generated a good cash flow, SEK 130,000,000 more than last year. Cash developments are mainly dominated by our investments in our business and the dividend payout in the Q1. With the dividend increase of SEK 1 to SEK 7 per share, we increased the total dividend payout with another SEK 200,000,000 compared to last year. In total, we paid out SEK 1,500,000,000. As last year, we have also this year in the second quarter repurchased shares to match this year's long term incentive program that the AGM approved in March. This year, SEK 30,000,000 compared to SEK 28,000,000 in 2017. To match this and last year's program, we now hold less than 400,000 Treasury shares. This dilution has no effect on earnings per share. Next page. Looking at our CapEx. We had investments of over SEK 400,000,000 during the 1st 6 months. This is less than half the estimated CapEx for the full year, but we plan to invest some more in the second half of twenty eighteen. So for the full year, we reiterate our guidance of a CapEx range between SEK 900,000,000 to SEK 1,000,000,000. The difference in investments between 2018 2017 is mainly the SEK 1,000,000,000 we invested in the 4 acquisitions last year. But during the 1st 6 months, we have invested some SEK 100,000,000 more excluding acquisition compared to last year. The difference is mainly due to higher investments in our wholesale business and IT. In wholesale, one major investment is our new fresh food ware housing in Johan Shopping. The warehouse projects has moved into the final phase where the automation will be installed in the second half of this year. IT investments contains both IT projects and infrastructure in stores and expand data capacity. Next page. Our net working capital has improved some in 2018, both in Swedish kroner and as a percentage of net sales. These graphs are showing the net working capital for 2018 on a rolling 12 month basis. The decrease in 2017 was due to acquisitions and now we have improved acquisitions and are back on the share of sales of minus 2.3 percent as prior to the acquisitions. If you break this down to the most important items, we have a stable or improved share the development of accounts payable and accounts receivable are positive. Next page. This chart shows our strong financial position. During the last 5 years, we have more often had a net debt receivable position than a net debt at the end of June. Last year, we utilized the debt as we acquired 4 businesses. This year, we have a small net debt receivable position of SEK 6,000,000. Everything else equal, this position will be built up through our strong cash flow as the year proceeds. We stand on a solid base with an equity ratio well above our goal of 25%. We are, in other words, well equipped to continue our strategy of future growth. Next page. To sum up, we take a look at our capital employed. We have high capital efficiency with increased earnings over the last years and a stable level of capital employed, which have led to a return on capital employed of around 50% to recent years. And with this, Claus, I hand over to you again. Next page. Thank you, Anders. And let me now also then give you a quick update on our strategic agenda, and I'm now moving to Page 21. So let me start by reminding you of our strategic platform with the 6 areas in our strategy, where 3 is related to growth, customer offer, customer meeting and expansion 2 is in the efficiency area, our supply chain and work approach and last, but not definitely the least, our people. And throughout the strategy, in all areas, we work integrated with our sustainability efforts. That is actually the area I would like to start with today. So if I go to next page, Page 22, and as you can see on this slide, we have now been able to calculate our climate impact for 2017. We have our overall target to become climate neutral by 2020, and we must say we are making good progress. And compared to 2,009, we have reduced our CO2 emissions by 84%. And compared to last year, we have reduced our impact by 23%, which is the same pace as the year before. The largest climate footprint is made by our refrigerators and freezer units, but this is also where we make our greatest improvements. In place with the replacement units using more environmental friendly refrigerants, we are getting better and better. We are well on track and following our plan on phasing out the worst units, and we plan to handle these investments within the normal refurbishment programs during the coming 2 years. The 2nd largest impact on the environment is the transports to our stores. And last autumn, we took the decision to stop buying HVO by diesel since it contains palm oil. Now this was important to us to drive the development of sustainable transports. However, it means higher carbon footprint for Ax Food as a company going forward. There is no significant effect on this in 2017, as you can see on the chart, but it will have an impact on CO2 emissions from transport in 2018 unless we quickly see a change in the fuel offering. Going to the next page, Page 23. Let me now update you on some of the actions within the customer offer. But let me start by making a comment on the recent issue we are facing within the Swedish food production due to the very warm and sunny weather. This is something that we in Axwood looks very serious upon as it will have large consequences. Among other things, it is affecting the farmers' supply of cattle feed. We are working actively to find joint solutions within the food industry to support the farmers in this challenging situation. What and how large the impact will be is difficult to predict at this stage, but most likely, there was an increase in Swedish meat products already after the summer. But if I now go to Page 24, we'll then comment in terms of our customer offer that partly relate to this. And within our strategy, we want to increase the image of frozen food. We urge our consumers to use the freezer as a tool for better cooking. It's a smart way to get tasty food and to do the right for the environment every day. And a couple of weeks ago, in connection with Almedalteca, Axwood launched its 3rd version of March 2030, our suggestion to food strategy for Sweden to get a more sustainable society. And one of the 69 suggestions we came up with is to make consumers aware of the high nutritional content in frozen food. And there are more advantages. We reduce food waste by filling up the freezer as well as reduce the need for flight transportation. And if we want vegetables that is not in season, it's clever to buy frozen ones. And in Axwood's report, March 2030, we point out initiatives that are a mixture of what we urge the politicians to support and what we as retailer can achieve. One issue that both the authorities and we need to emphasize is to reduce the levels of sugar and salt. And we have taken a nice step in the quarter concerning sugar as we relaunched soft drinks of our private label with 30% less sugar. And by reducing the sugar content, we save 150 tons sugar per year and this obviously without changing its taste. So going out to the next page, Page 25. As we already talked about, we had a good development in our private label. And during the second quarter, we launched approximately 70 new product private label products and several of them vegetarian product is within the vegetarian product range. 17 of the products were organic with different product categories within the different product categories. We also launched cut salad in portion packages and research studies showing that despite its need for plastic for wrapping, it's better for the environment in total due to the reduced food waste, as half eaten salad packages are too often thrown away as food waste, and we hope to change this with a portion package products. Turn to next page, Page 26. And here, let me also give you an update on our expansion priorities, and it will be going down to the next page, Page 27. As on June 12, Apo Hem opened up its online pharmacy, and Apo Hem shall be the challenger to the physical pharmacies and have a price policy that is considerably lower. So far, Aperham has not the approval to handle prescriptions, but an application is pending. And right now, Aperham has an assortment of approximately 4,000 SKUs and 500 different brands in the range, including OTC drugs, health and beauty, fitness item as well as products for house pets. And the ambition over time is to offer approximately 10000 to 15000 items in addition to the 2 of the prescription drugs. Let's now move to Page 28. And then a final comment on our strategic view, I would like to share with you a touch on our supply chain, which is partly a step we're taking in the direction before we move into the final logistical vision. And the steps we're doing at the moment is with the acquisition, going then to Page 29, With the acquisition of MAPOTECI, we got 3 dark stores. And we now take a further step and integrate online picking in 1 joint dark stores to become more efficient. So we are using the MAPOTECI dark store. At present, the products sold online in Villers and Hampshire is picked in our stores, but now we will launch one common picking facility for all food concepts ordered online, delivered to the home with focus on the larger cities. We start in Stockholm and plan to open up our first picking facility in the 1st part of 2019. And with this action, we will improve the efficiency of the online business even further. And as you can see on the picture on the slide, we also coordinate our online distribution, which will also be significantly easier when we have the same picking facility. We coordinate that with the 3 online brands, so we become more efficient and obviously also more sustainable. Let's now move to the last page, Page 30. So if I sum up again, we are reporting good sales growth despite negative Easter effect. Our online sales continued to show strong growth rates in all three brands, and we are increasing the productivity in this quarter in the online business. In our everyday work, we are considering how to run our business more sustainable, and the climate 2017 is showing we are making really positive progress in this area. And the development of our assortment when it comes to good and sustainable food includes the packaging of the products is another testimonial for us. We report record profit with strong profit development in all segments, not least, Village and Hampshire. And Axford has a strong balance sheet, no debt no net debt and a good equity ratio to support our future development. So that concludes the first part of my presentation. And with this, we open up for questions and also go into the next stage, which is the Q and A stage. So over to Our first question comes from the line of Stefan Hellstrom from Nordea. Please go ahead. Your line is now open. Thank you. Good day. Yes, first, I'd like to ask on the new dark store here, any effects that you expect from this in terms of maybe initially higher costs? And then when it's up and running, some savings, if you have any quantification you could share with us. Well, let me first say that we are using the existing dog stores. So this is more of an IT and technical development. It's still going to be manual. As we have shared, we are looking into building a logistical platform with optimization that we will do together with the logistics to the stores. So that will be the next more a bit more long term step. This is more to handle short term step in the larger cities, particularly, I would say, Stockholm and Gothenburg. So it will more relate to IT development and it will be within the range, so it will not be material in that perspective. Obviously, I can well, there will be savings. We will reach for better short term effects, not much will be expressed but rather capitalized the FX side. Yes, correct. You also mentioned in this quarter that online is burdening your margin less. Is it only due to volume leverage? Or have you done anything else in terms of, I don't know, adjustments to pricing or delivery terms, etcetera? No, we have not done anything except for, as you may remember, we made an adjustment for Hemship offering last fall. So obviously, comparing Hemship versus last year, that's an impact, but nothing else for the other ones. All right. And your growth, is the growth rate maintained, so to say, relative to, say, the last two quarters on your online sales? Yes, I would say so. All right. Then just also on Hampshire. I mean, it's obviously a negative calendar effect in this quarter, explaining the weak like for like sales. But still, you we still have quite high food price inflation and Hampshire's like for like sales is lagging, Ika Supermarket, for example, quite significantly. And I recall you had quite weak development also in Q1. I think you said then that you might be a little bit more campaigns, etcetera. Have you done that? Or is there something else to explain this sort of No, I think we have moved between the and I think it's when we're comparing, of course, we need to compare total growth and included we have moved some franchise and some through our group owned stores. But I would agree, if you look at the group owned stores in Hampshire in this quarter, it's on the weaker side. Some of that is reflecting the some refurbishment project that we're doing and some rebuild that is happening. But still, we need to work on Hampstead Groupon, continue to do that. We have increased some of our activities in the end of the quarter. But as you can see on the full quarter, we have not seen a significant change on that. So still work in progress. All right. Okay, good. Maybe a final one just on Apohem, if you can elaborate a bit on what Apohem brings to the table, say, relative to other online competitors like Apohem? No. But obviously, it's what it brings for us is that we as we're building this channel up, we will be able to offer our customer a full online pharmacy that we can include into the offer. So that's basically what it brings to us, which I think it will be something that we don't have today versus many of our colleagues have in the market. Good. Thanks. Thanks. Thank you. Our next question comes from the line of Daniel Schmidt from Denkse Bank. Please go ahead. Your line is now open. Yes. Hello. Good afternoon, Karl and Anders. Can you just if we sort of just look at the EBIT number for the quarter and compare that to last year, the €58,000,000 in improvement despite the negative Easter impact that you mentioned. Is it possible to quantify the moving parts here in terms of Easter? You said it in between the lines in terms of the top line impact and then you have the maybe the lack of major refurbishments. And you mentioned SEK 15,000,000, if I remember correctly, when it comes to M60. And maybe they sort of square each other out. And then if you look at sales mix, how much has that impacted this 12% EBIT improvement year on year, you think? Well, without going into to quantify the various areas, I think you're spotting the right elements here. Obviously, partly, if I look at Hampshire, you're right, we had a large refurbishment last year that costed us some significant money as well as we have the yield in effect. And if you look, and I would say the majority for us is the sales mix that has been positive. It's positive in normal cases due to the Easter effect that Easter normally is a low margin period, and we're able to hold up sales, if we look at Villas as an example, in this period despite the Easter effect. While at the same time, we are not having the low margin Eastern items in this period. That was the starting point of the quarter. Then it followed up by a positive for us mix when it comes to the warm May, June, we have some product categories like meat, frozen goods, soft drinks and so on that is somewhat positive for us from a margin perspective, and that mix was favorable for us. And then as I commented on, it is also with the when we are now becoming more and more we're getting more and more volume into the online business and we're getting more and more productive, which is also less burdening for us versus last year. Is it fair to assume that the sales mix, which was recorded by the early arrival of the summer, has a more positive impact than less of a dilution effect from online compared to last year? Or are they sort of evenly impacting the quarter? I know you're pushing me for giving me some numbers, but I think that again, the sales mix has been very positive with the Eastern and the summer sales has been positive for us. All right. Okay. Okay, good. Can I just also ask a comment on the pharmacy business? And you've been up and running for a month and prescribed drugs will be added to the assortment. Do you know when to start with? As I pointed out, it's pending the approval, and sometimes that could take time. So we basically have done what we call a soft launch, where we are out and testing the site and starting to sell to consumers. But obviously, it will not be fully up, and we will be more out for the relaunch when we have the full offer. So we expect that to come within this year, but again, it's pending the approval. Yes. And you can just look at the assortment that you have now. You are different to some extent, I believe in my eyes at least, when you look at the assortment, it's sort of more a mix between a grocery store and a pharmacy. And is that deliberate in terms of joint dark store ambitions when it comes to Stockholm to start with? Is Alfaheme also included in those plans? No, but I think if you look at the offers that is out there, you have some of the dry items within this kind of offer. But obviously, when you have we have not built out the full range yet. So our aim is to become a relevant pharmacy online provider. Okay. So the perception might be sort of changing as It is the perception in the beginning a little bit, I would agree to that. Yes. Okay. And then more sort of a long term question when it comes to the lead store then sort of if you come back to your beliefs and the store expansion on the other side when it comes to Italy, it's what should we expect? And could you say anything more about that in the coming few years? Well, I think if you look at the store expansion program, and I comment that on the previous quarter that we will be in the lower range, we have seen some stores that is moving to 2019. And we also, as I mentioned today, we have one store that's going to be reopened 2020. We will have more stores coming into the pipeline in 'nineteen and 'twenty again. And we still see positive opportunities for open physical stores for Villiers. At the same time, we also are very pleased to see the development every time we open up for online. For Willis, as an example, we're getting a very positive response. We are also, I think, having a very high click and collect rate, which is obviously positive for us, which leads to that we can open up online in outside the largest cities in Sweden, Stockholm, Gothenburg, Mon. Would you say that your ambitions and sort of the money and the approach that you allocate to finding new store locations hasn't really changed. I think it has changed as we are obviously following. We are very cautious. We are not looking for I mean, in terms of format, it's more it's not the larger format, it's more a bit smaller formats in general terms. We're also looking at opportunities to add the full omnichannel service into the format and also to be flexible is a key ingredient. But again, coming into the development, of course, if we are seeing a positive where we can gain market share, still online is 2% of the total market. Even we expect that it will be so that it will grow for sure, and it will continue to grow, but still the large part of our business for the coming years will be in stores. Thank you. That was all. Thank you. Our next question comes from the line of Fredrik Avison from Kepler Cheuvreux. First, congrats on the strong results. And the first question on Hampshire, you mentioned fewer large refurbishments and obviously a positive effect on profitability from that. Should we expect similar positive effects on profitability in Hampshire looking into the second half of the year as well? That's my first question. The second one is on transportation costs. We've seen recently some significant increases in fuel prices in Sweden. Can you maybe give some color on what you see in terms of those transportation costs going forward and how this might be affecting profitability ahead? Yes. If I start with the first one, rightly so that if you look at one large impact we had last year was Hampshire City that was opened up in the later part of Q3 last year. So you will get the impact, you'll get the positive effect out of that. We will also refurbish some we still have a refurbishment program in Hampshire. We'll continue to do that. So part of that will continue, while the large one, Hampshire City, will also be in effect for the 1st part of Q3, not Q4. Then transport, yes, we see an increased cost for transport also. We've already seen that in this quarter. And even if we are as I pointed out with Doug, we've been able to maintain his margin even if so you have that in the number early today, but we expect to continue to see larger fuel prices. Okay. So if I read you right, it's we shouldn't expect accelerating costs from the higher transportation It all depends, of course, where the fewer parts will go. But I think they've at least so far been able to you're not what you can say will not everything the same, you will not see any significant changes on the margins due to that. Yes. That's very clear. And back to the first question. So the larger store refurbishments, that was mainly the Hampshire city. It's not a general thing in Hampshire. Well, we had almost 50 refurbishments last year. The large one, which one was closed, was large. Now this year, we also have refurbishment that will be more the same of the smaller ones, and we'll have one a little bit larger, but it will be somewhat slower pace in terms of refurbishment in Hampshire this year versus last year. Perfect. Yes, that's very clear. Thanks. That's all from me. Thank you. Thank you. Our next question comes from the line of Nicholas Ekman from Carnegie. I just wanted to ask, given that you've touched upon the problems on the supply side due to the weather, you've touched upon this several times in the presentation. I was just curious if you expect this could have any material impact on your sales or earnings in the Q3. Are you expecting a material impact to volumes? And if so, do you think that you can mitigate this through price hikes? And I know that in the past, when you do see these kind of issues, you tend to be quite good at compensating for it. I was just wondering because you mentioned it several times in the presentation, if there's anything different in the magnitude this time. It's a good relevant question. And obviously, what we have seen, and I comment that from the Q2 perspective, it's been more a volitive part for logistic and supply due to the demand has been different. It's been very up and down versus in certain categories. And of course, that is challenging. But I think we can handle that. What my point right now is that if you talk with everyone at least, and that's just more due to the recent weeks' development the last few weeks in terms of the extreme weather condition that we start to see and that how that is impacting the farmers. It's just that we are working with them, and we need to flag that there is an uncertainty in this area. How big and what that will do, I have to say, we don't know. But obviously, with most likely, we'll see some impacts and perhaps also some differences in the supply. As an example, the meat will probably an overcapacity that we need to secure and handle, while some other areas will be lack of supply for it. So why I'm addressing it is, of course, that we are part of the and we have a large part of our business in Swedish food production, and we want to continue with that. And therefore, we want to support and work with the situation that has come up. How that will evolve, it's difficult, and we need to we're addressing more or less, so we need to follow this closely. Okay. But at the moment, you don't see a reason why earnings should be significantly negative impact? No, no, no. Our next question comes from the line of Fredrik Skoglund from LENSAGNE. I have a short question on the refrigerator side. As you mentioned, you are trying to lower the refrigerators. And also with the new EU regulations taking out more harmful refrigerators. How do you see your investment needs going forward? How much have you changed already in terms of your refrigerators in the stores? And yes, that's the question really. Yes. No, as I tried to present there is that we have worked with this since several years as well as we have so we have changed and as we are doing the refurbishment of our stores, we have changed to the new better equipment that handles the regulation. So we see that we are actually on a good path to be able to handle it up till 2020. Or for the remaining part, we can sort that out with the for temporary solutions. So and we will do this within the normal investment levels that we currently have for the store refurbishment program. So that's the overall so we what my point is that we are well in line with the new regulation and is working that as well in line with the normal refurbishment program. Can you say just how much have you changed already? And are you going for the CO2 cooling? Or what kind of cooling fluid do you use? Yes. We are slightly above 50%, and we are going for the now you need to help me what it's called. Is it called CO2 or it's the new that covers the that is covering the new regulation. That is CO2. Yes. CO2, yes. Okay. Thank you. If you want to, we can contact you separately to, if you want to have more details exactly on what we are changing to since I'm a bit vague on the exact formulation there. But my point is that since this is a big topic for us from a sustainability point of view and there are also regulation in it that we are working with this. We've done it for some years and we are converting as we move along, in line with when the regulation fills in, in 2020. Okay. Thank you. Thanks. Thank you. There are no further questions at this time. So I'll hand the call back to you, Klas. Well, with that then, I thank you for listening, and I wish you a great summer. And we'll be in touch, if not before in October. Thanks. This now concludes our conference call. Thank you all for attending. You may now disconnect your line.