Earnings Call: Q3 2021

Oct 21, 2021

And good morning, everyone. This is the Ax Food Third Quarter 2021 Cell Phone Conference. With me today are Claus Dahlko, our President and CEO and Anders Ekshorn, our CFO. In the Investors section of our website, you will find the presentation for today's call, which is intended to be viewed in conjunction with our prepared commentary. We encourage you to follow along with that presentation. After our prepared commentary, we will be taking questions. A recording of this call will be made available on the Axford website. And with that, I will now hand over the word to Klas. Thank you, Alex, and of course, good morning, everyone, and thanks for joining today's call. On Page number 2 in the presentation, you'll find the agenda for today. What I will do, I'll provide you with an update on the recent market developments and then go through the Q3 performance for Axwood. Anders will then take you through the financials. And after Anders' part, I will continue to talk about our strategy. Today, we will have a specific focus on some of our current initiatives within the area of sustainability. But I will also talk about the Beindal transaction, which which we closed on the 1st October. The last part of the presentation is about the outlook and the remainder of the year. And after that, we open up the line for questions. So let's get going and let's start. So please go to the next page, Page 3. And that will bring us to the market update. So please turn another page and go to Page number 4. During the Q3, demand in the food retail continued to be strong, but high comparison figures from last year and a low level of food price inflation dampened the overall growth. In pace with the easing of the restrictions surrounding the pandemic, it is now clear that we are seeing a change in the overall dynamics of the market. It is a continued gradual recovery for stores at central urban location, and it's also gratifying to see that the situation for cross border trade towards Norway is much better. In addition, the trend for the cafe and restaurant market and service trade has also improved significantly. Now in terms of e commerce, growth has come down a lot in the recent months, while this logic can be explained by the high comparison numbers. It also being driven by customers now increasingly returning to shopping in physical stores. So let's go to and look at the total growth in the food retail market, and we are now on Page number 5 in the presentation. The graph you see here on the left side shows monthly growth rates year on year. Growth has been low and hovering around 1% or somewhat above that over the past closed out for a couple of months. But in addition, on this page, you can see the trend for the food price inflation on the graph on the right hand side. While the inflation rate picked up a little bit on the sequential basis in the Q3, the growth rate was still very weak at 0.3%. Before we go to next page, I just would like to add that despite the current low level of overall growth, the food retail market is resilient and Consumption levels compared to the situation before the pandemic have remained high. Let's now move to Page number 6. As I said, growth in the e commerce remains low, and you can see this on the right graph on this page. This is, however, not only driven by high comps from last year. If we look at sales growth in the physical store, which is displayed in the left graph on this page, we now have 4 consecutive months of positive growth rates. A lot of consumers have been returning to stores in recent months as restrictions around the pandemic have been lifted, and consequently, physical The stores are capturing a higher share of the total growth. In the Q3, the online segment accounted for just over 4% of the total market, considerably lower than the 6% share in the Q2 this year. Now while online growth obviously has been Outpacing growth in physical stores in recent years, it is good to know and remind ourselves that physical stores still represent the overwhelming majority of sales in our market. So that sums up my comments on the recent market developments, and we are now on Page number 7 in the presentation. So let's now go to the Q3 developments for Axford. Therefore, please turn to Page number 8. Looking at total store sales for Axo Video Group 0.7% during the Q3, which was slightly below the market growth rate of 1.2%. In the online segment, we continued to outperform with growth that amounted to approximately 9%, while the market growth was 3%. Let's go to next page, Page number 9. And consolidated net sales for Axwood Grew by 2.2% during the Q3 and amounted to SEK 13,700,000,000. The increase refers mainly from new establishments and higher net sales for Snaglos and DAGA. Sales for Snaglos increased significantly, and DAGA posted solid growth with a recovery in service trade and a strong performance for our retail chain, Tempo. Now regarding sales per segment, I will go through them 1 by 1 when we cover the details by segment. So please now go to Page number 10. During the Q3, our operating profit includes items affecting comparability and more specifically, integration cost of SEK 18,000,000 associated with the Berndall transaction, which were charged against DOGA's operating profit. We've also noted a positive effect from the reduction in payroll taxes for Janney and Please. But in total, group operating profit amounted to SEK 793,000,000 And the operating margin was 5.8%. Operating profit, excluding items affecting comparability, amounted to SEK 811,000,000 The corresponding margin was 5.9%. So in sum up, a very profitable quarter that matched a very strong quarter last year. Let's now go into each of our segments, and we'll start with the largest one, Billie. So please turn to Page number 11 in the presentation. In all, total sales growth for this segment amounted to 0.1%, and the like for like growth was negative at 1.2%. But I must say that the growth figures for Villas chain are low at the moment, but this should be viewed in the light of the fact that Villas is meeting among the highest comparison figures in the market. If you look at prior year growth for the larger format Village stores, I. E, growth in the Q3 2020 compared to Q3 2019, it amounted to almost 13%. In addition to that, this quarter, There was this negative effect of approximately 1 percentage point on total store sales from the closed villa stores in Boros that was damaged unfortunately by a fire in May. And we hope that we will be able to open the store fairly in the nearest future. Now for Eurocash, the performance was measured against the weak Q3 last year and sales increased as a result of gradually increasing 2019, they were considerably lower, and the decrease compared with that period was approximately 40%. One should bear in mind that certain degree of restrictions still were in place during most part of the quarter and certain board crossing remained closed. Now to this date, all restrictions have basically been lifted and all border crossing are open. And looking at the performance in the recent weeks, The trend is significantly better than before, and we are very pleased to see that things are gradually now getting back to normal. Operating profit for the Village segment decreased to SEK457,000,000 and the margin was 5.8%. The decrease is mainly attributable to the negative like for like sales performance. While the developments for food prices have been It's worth noting that we, as other business, face upwards pressure in terms of wages and salaries. Operating profit for Eurocash improved slightly as a result of the increased sales but was still considerably negative. Now I have to say, Villas has a unique position in the market. And If you go to Page 12, I just would like to highlight the progress made over the past 2 years, I. E, before the pandemic broke out to now. In terms of sales, growth was 12% from the Q3 2019 to the Q3 2021, which can be compared to 7% for the market as a whole. So clear market share gains for Villas chain. And during the 1st 9 months of this year, we estimate Villas market share at approximately 13% of the total food retail market in Sweden, which is up 1 percentage point from the same period 2019. Lillez has, over the past year, strengthened its concept and appeal with the consumers. This is obviously displayed by the market outperformance. But in addition to that, Villis often score high in independent ranking and reviews. And recently, Villis was named the fastest growing brand in terms of value among the 50 most valuable brands in Sweden, according to a major survey conducted by Brand Finance, the world's leading brand valuation consultancy. Let's now move to Hampshire and Page number 13 in the presentation. Total store sales growth was higher than the market and amounted to 2 point 0% and like for like growth was 1.5%. The franchise stores saw strong growth and like for like growth for the group owned stores was solid. The Tempur Chain continues its positive development and posted strong growth during the quarter of 5.6%. The operating profit for Hemshiep increased significantly and amounted to SEK 76,000,000, actually an all time high number for Hampshire in the quarter. And the operating margin was also significantly higher at 5.2%. The increase is mainly attributable to positive like for like store growth and improved sales mix and good cost control. Please now turn to Page number 14. While like for like sales for the group owned Hampshire stores increased partly owing to low comparison figures, Kempship is also benefiting now from the increased flow of people in central city locations. And as you can see here on the slide, the external source Data in the chart to the left has been compiled using aggregated information from mobile networks, and it shows that the movement in city centers in Sweden has picked up significantly. The data in the chart ranges from January 2020 to July this year, but the positive development has continued also after that. Well, with the sales trends for the stores in these locations are clearly positive, they nevertheless have some catching up to do before they are back to pre pandemic Levels. Now please turn to Snabios and Page number 15 in the presentation. Snabgoros again had a great quarter despite tough comparison period and posted all time high sales, operating profit and operating margin. Snabkos is benefiting from the recovery of the restaurant market. At the same time, the concept has strengthened And the customer base has grown during the past year, which is contributing to its performance. The 3rd quarter sales increased strongly by 14.3% and 11.6% in our like for like sales. In addition to the increase in the customer base, new establishment Higher average ticket value also contributed to the growth. We are continuing to develop our membership based store concept Snugglers Club, And it's contributing to a greater extent to Snaglios sales. In late August, we also expanded Snaglios Club with a new store and are seeing steady growth in membership and interest for this new concept. With the positive development in like for like sales, Snaglios' operating profit increased closed out of the quarter and amounted to SEK 77,000,000. The operating margin was 6.8%. We are now on Page 16 and the operating performance for the DAGAB segment. Sales for DAGAB increased by 1.8%, driven by higher sales to hemp ships, snub gos and the service trade. Owing to a high level of activity and strong focus on productivity, Dagar once again reported favorable earnings despite certain disruptions in the general supply chain that affected Falcone. These disruptions relate to the current fragile state of the global supply chain with issues relating to production and shortages in, for example, raw materials, packaging materials and transports. Dogab operating profit, excluding items affecting comparability, was essentially unchanged compared with the strong quarter a year ago and totaled NOK247,000,000. The operating margin, excluding items affecting comparability, was 2.0%. The prior year period was favorably affected by a positive currency effect. So overall, a very solid Performance for DAGAP in the 3rd quarter with high efficiency. And a few more comments. Marta Tessie that is Reporting in the Daghav segment continues to develop its concept. And with the further easing of the restriction in the restaurant market, Urban Deli showed continued positive sales performance. And the strong trend for Aper Hem continues with high growth and focusing now on strengthening its brand. With that, let's move to Page number 17, and I would like to hand over to our CFO, Mr. Anders Lexmann, who will present our financial position. Anders, please take it from here. Thank you, Klas. And then we are on Page 18. Let me first sum up with the net sales and operating profit for the 1st 9 months. Net sales for the group increased with 1.9 percent to SEK 4,800,000,000. Store sales for the actual group increased by 1.4% and was in line with the overall market growth for the period. The operating profit, excluding items affecting comparability of SEK 72,000,000 increased with SEK 92,000,000 or 4.7%. The operating margin increased from 4.9% to 5.0%. Items affecting comparability consist of costs relating to the acquisition and integration of Berndorf Food and was recognized in the second and third quarters. Let's then turn to Page 19. Looking at the cash flow for the 1st 9 months, We continue to show higher operating profit compared to last year, mainly due to strong margin development in Hampshire, Pennsylvania and also high efficiency in the Daghav operation. We We have a slightly negative working capital effect of SEK 52,000,000 in the period. And further, we saw a higher investment activity in the 1st 9 months compared to last year. The deviation is mainly related to investments in the supply chain and in IT. And I'll come back to the capital expenditure on the next slide. SEK 1,500,000,000 loan was raised at the end of Q3 when utilizing the revolving credit facility as a preparation for closing of the Berrianddal acquisition as of the 1st October. The second dividend payout was made in September SEK 3.75 per share and thereby a total dividend of SEK 7.25 per share was paid out for 2021, an increase of SEK 52,000,000 compared to last year. And to summarize, The total cash flow for the period amounts to SEK 809,000,000, a positive deviation of SEK 862,000,000 compared to last year. Let's then turn to Page 20. Total investments for the 1st 9 months amounted to SEK 1,209,000,000, of which SEK 444,000,000 was attributable to automation solutions in our wholesale operation. The investments in our retail operation included both refurbishments and new establishments and were in line with last year. The investment in our wholesale operation was in line with last year if we exclude investment in automation, as I mentioned before. The investments in our IT operation was up 56,000,000, mainly due to infrastructure in stores and new merchandise solutions in our ERP systems. Let's then turn to Page 21. In the 1st 9 months, we have further decreased our net working capital compared to sales from minus 3.4% to minus 4.0% on a rolling 12 month basis. We have continued our focus on working capital with improved payment terms on accounts payable and our SCF program also helps us increase accounts payable. Then let's go to Page 22. Looking then at the development of net debt At the end of September, we had a net receivable position of SEK 462,000,000 excluding IFRS 16, slightly higher compared to September last year of EUR 350,000,000. The net debt to EBITDA ratio increased slightly and the equity ratio decreased from 24% last Q3 to 22.2%. The main reason for the changes in these key ratios was the RCF drawdown of SEK 1,500,000,000 at the end of the quarter due to the completion of the Beindal acquisition at the 1st October. Let's enter on to Page 23. The capital employed increased with approximately SEK 1,700,000,000 for the 1st 9 also debt due to the RCF drawdown of SEK 1,500,000,000. Return on capital employed decreased somewhat as well due to the increased net debt and the closing of the Berndal transaction. At the Capital Market Day in December, we will come back in more details how and what financial impact the acquisition will have on Exelts' financials. And then to sum up, we can conclude that Axle would continue to invest in the future and at the same time have a strong cash flow and a solid financial position. And with that, Claus, that ends up my part of the presentation. So I hand over to you again. Thank you, Anders. And now I would like to end up this part with going into our strategic agenda. So please then turn to Page 25. And obviously, a natural start is that in mid September, we received clearance from the Swedish Competition Authority for the acquisition of the position of the wholesale business Brandalfood and a minority shareholding amounting to 9.9% in Cityros, which is a part of the strategic partnership. Through this deal, which was completed on October 1, we have to state that we've made history in Swedish food retail. The acquisition creates Economy of scale and synergies and through greater efficiency and improvements in the assortment and logistics also benefits wholesale customers as well as consumers. As a reminder, the transaction is expected to create annual cost synergies of approximately SEK 200,000,000 that are expected to be realized successively through 2025. Excluding integration and transaction costs, it is expected that the acquisition will make a Positive contribution to earnings per share from 2022. Move to Page 26 and a few comments on what's happening right now. We are now at work on the integration of the operation, and I must say, it feels really great to welcome all the new colleagues to the Axfel family. And right now and until the Q2 next year, our main focus will be on integrating the wholesale operation of Daimdal Thud with Dagap. After this, we will turn our focus to integrating the stores, including city gross with our group's processes and IT infrastructure. And of course, there will be some overlap between these two processes, but we will certainly make progress also with the store integration before mid next year. But on a high level, this is what the integration process will look like at this moment. Moving on then from Berndael's transaction, and we are now on Page 27. At Axford, we are pursuing a strategy of growth promoting and efficiency enhancing priorities to become the market leader in good and sustainable food. And I'm sure many of you are already familiar with how we work with our 6 strategic focus areas, and you can see them on this slide. But today, I would like to highlight some initiatives within the area of sustainability. Our sustainability work is extensive and goes across the entire operation. Long term sustainable decision will enable us to grow faster than the market, create new business opportunities and profitable growth and contributing, of course, also to a more sustainable development. If you then go to Page number 28. The most recent United Nation climate report shows that it is urgent to take effective measures that protect the environment and reduce greenhouse gas emissions. Towards this end, at Axwood, we recently presented Our food strategy in the report Food 2,030, which includes 100 recommendations for sustainability measures for the business sector, politicians and authorities. 14 of the recommendations in this year's report are new and address, among other things, the need to invest in novel ways to process seafood, support for longer grazing periods for dairy cows and the requirement that all Swedish beef should have basic animal welfare certification. In our group, we'll continue to take our responsibility and work intensively with sustainability issues. But to bring about real positive change, we want to see more fast and bolder initiatives from decision makers in order to facilitate the transition to a more sustainable food system. Let's now move to Page number 21 or 29. We are continuing to focus on renewable energy. And in partnership with Elight, a leading company in power purchase agreements for solar energy, Sweden's largest solar park will now be built. With the facility, it is put in when it's put into operation into 2023, it will cover approximately 15% of our total electricity consumption. With this initiative, we are taking the next major step in this area. In addition to making our own operation more green, we're also helping to significantly boost the supply of solar energy in Sweden. Now we have worked on the issue of solar power for many years, and our first solar power facility was actually built at Daghav's warehouse in Gothenburg, back in 2013. We have a goal for solar panels to be installed on at least 25% of suitable roof surfaces at our warehouses and stores, of course, with the approval of the property owners. Up until last year, our greenhouse gas emission had been reduced by 76% compared with the base year of 2,009, a decline that was attributable to renewable electricity from solar, wind and hydropower, a higher share of fossil free good transportations, fewer non environmentally friendly refrigerators and freezers and less business travel by air. The goal for us is to achieve net 0 emissions from our own operation by 2,030. Please turn to the next page, Page 30. We also have a goal to sell more sustainable label label product, and this goal aims to help consumers make conscious and safe choices and to drive our work on developing and being better at selling a sustainable assortment. We continue to expand our private label in this area and we have recently launched a number of very interesting new products. Garam, our private label, have launched MSC certified burger made of cod and al, as well as vegetarian kebab made of wheat and field bean. In addition, caviar made of seaweed was also launched as a vegetarian option to Fish Roll. These are just some examples of products that have been launched in the past months. But in addition to developing our own private label products, We also work with close collaboration with suppliers and also through partnership. And just last week, CasioMeatly was Launched in collaboration with the Swedish social entrepreneur, Linea Falkinger. CasuMeatly is a new and vegetarian meat based on cashew apples that normally would have been become waste in the harvesting process of cashew nuts. All in all, a sustainable and innovative product that really fit with what we at Axle want to do, and we are happy to be able to support this initiative with a broad launch out in more than 300 of our stores and online. So let's now turn page, and we are now on Page 31 in the presentation. And with that, let's turn into the outlook. So please go to Page number 32. Our outlook for the year is unchanged. For capital expenditures, we will be in the upper end of the range of SEK 1,800,000,000 to SEK 1,900,000,000. This estimate includes an investment of SEK 585,000,000 in automation solution for a new logistical center in Bolstad as well as SEK 150,000,000 investment in land in connection with the facility to secure further expansion possibilities. And in terms of expansion, we plan to establish 5 to 10 new stores, and we also continue the online rollout by adding more stores and locations for our e commerce to consumers. Right now, we have established 7 new group owned stores this year. And so what we are seeing is that we will finish up in the upper end of the store guidance range also in terms of our store expansion. Please now turn to the next page, Page 33. So to sum up, we are yet to again close a solid quarter with increased sales and high profitability. But a lot is happening within our group, and we have a high pace of development. As we are now in the beginning to see a return on the new normal After the pandemic, it is important to stay in tune with and address the customers' changed expectations and behaviors, And we are well positioned in the changing market with our strong and distinctive concept. The deal with Beindals and other investments we are making also represent a large leap that we'll be taking in the coming years to ensure long term profitable and sustainable Growth. We are now on Page 34. And before we go into the Q and A, just a reminder that our Capital Market Day 2021 will be held on December 16 from 1 p. M. To approximately 4:30 p. M. At this event, we will cover many areas that are of importance for our group, and details around this event will be available on our website. And with that, please turn to Page 35, and I hand over to the operator to open up the line for questions. Thank you. Thank There will now be a brief pause for questions are being registered. The first question comes from Frederic Eversham from ABG. Please go ahead. Your line is open. Thank you. Good morning, guys. Good morning. First question on Eurocash. So when I look at the last 12 months, it seems like the negative effect from Eurocash is around minus €150,000,000 or so or 20 basis points on the margin if we look at EBIT. So If you get back to sort of pre COVID levels, that would support group earnings by some 5% or so according to my calculations. And my Question is, do you expect to get back to pre COVID levels in Eurocash? Or do you fear that some Norwegians, I suppose, will continue to shop in Norway, for instance? Well, I and I think we also commented that After the last quarter when we actually made a survey from the Norwegians in terms of how they look at the situation and their interest in going back. And we were very pleased to note that the survey indicates very clearly that They are eager to get back to the cross border shopping. It is not only a price question, but it is. It's They can find on this side of the border. So we have high expectations to go back to a more normal level when now the borders Are opening up. So and as I commented as well in this report, we are not where we want we were not in this quarter back to normal levels. But now since it has opened up fully, it is clearly An increase in traffic and a positive experience, particularly in the stores. And obviously, Our coworkers are really pleased to see all the customers now coming into our stores. Perfect. Thanks. Second one on the disruptions within the supply chain, even though it doesn't seem too dramatic given that the margin held up fairly well in DAGA. But Do you see any improvements of the situation? Or is it still difficult? No. I mean, I think it's been challenging in terms of our service levels. And for the whole market, it's been kind of Neutral for everyone as it has been disruptions a little bit all over. In the end of the quarter, I think it has improved. So it goes clearly in the right direction, and we hope that, that will stabilize as we move along. But as you all know, the whole supply chain situation in the world is an issue that we need to follow closely. But So far, and we've been able to handle it in a positive way. And obviously, it differs in our way. We have A range of products and a range of suppliers. So if one supplier has issues, We can add another one. So we have a little bit more flexibility to make sure that we have a true good customer offer, so we are not having empty shelves. Right. Excellent. And last one from me. On the private label share in Realista was down a bit, I think, year on year. And I suppose your gross margin for the group was slightly lower than last year as well. So do you think that this is an effect of markets normalizing and people getting back to offices and so forth? No, it is I think we're looking at the overall trend here. And as I comment, we are Constantly working with our regular brands and with the innovative there, and we also are adding more brands in our private label And then driving that agenda as well. So I don't think you can connect me to that. Okay, perfect. Thanks. That's all my questions. Thanks. Thank you. The next question comes from Daniel Schmidt from Danske Bank. Please go ahead. Your line is open. Yes. Good morning, Claus and Anders. A couple of questions. Coming back To Berndorf Food, which has been consolidated by the 1st October. You gave us some numbers in May in connection with the announcement stating, I think, that you saw that Beindel Food were making SEK 90,000,000 on EBIT on the rolling 12 months as of the end Q1, would you care to update that number by the end of September rolling 12? Good morning, Daniel. I think the I don't know if you can comment on that any, Anders. I haven't the exact numbers here, Daniel, actually. So They closed their annual year End of August. So that we can come back to that. We don't have it by end of September. No. So do you have it by the end of August? Has there been any change to this SEK 90,000,000? Because they've been on this turnaround trajectory. They have increased the results, yes, in the recent the last year. Yes. And also compared to where you were in March or is that the same? No. There is some higher earnings in Bernalburg when we saw the figures for August. Yes. But And one can add, Daniel as well, which has been and again, it is the acquisition was made October 1. And Prior to that, it's the communication and all that is related to Berndas, but they've been public in terms of Syttego has made What I would say, what I've seen, a good performance the last months as well, which is positive, of course. But am I getting you right in believing that €90,000,000 that you talked about by the end of March, rolling 12 months, maybe that's Is that sort of 100 or 95 or something like that by the end of August? Slightly above 90. Okay. Okay. So clearly, the source, they're moving continuously in a positive direction. That's fair to assume then. And also when it comes to Citigroup, as you said, Klas. And I think you, Anders, you also said that you will be back In connection with the CMD in December in more details. But is it too early to give any indication when it comes to Purchase price allocation in terms of amortizations in connection with the transaction, what we should expect On a yearly basis and also anything sort of when it comes to the timing of synergies, was that entirely Sort of something you will talk about in a month's time or 2 months' time? Yes. Quick answer is that as We are just now focusing very much on making closing this deal and we'll give you more update at the CMD. Okay. Just coming back also to Eurocash again. If I do the math also, I think You said you were 60% down in Q3 last year and you're still down 40%, slightly more Versus Q3 2019, but implicitly that means that you grew by around 40% in the quarter versus Q3 2020. And I think you said you were growing by 5% in connection with the Q2 report when referring to July or the first the beginning of July. Are you close to the levels that you were by the end of September, beginning of October, where you were in the 2 years ago or you're still trading quite a bit? No, you are into days weeks Here, Daniel, the end. But September, there was the quarter has improved as you made your math, so that's right. Now the full opening was actually after well, it was actually in the beginning of Q4. And But I what I can say is that I've been positive to see the effects of the full opening. So but hey, let's sum up some more weeks and see how this develops. But it's the positive start. Yes. Okay. And then maybe finally, you're saying, of course, that and everyone can see that and experience that sort of inner city traffic Picking up and that's good for Hemshupp. And I guess also good for Snab Gross. Are you seeing that And more sort of fully blown in Q4 as we start Q4 compared to the average in Q3. I think as the trend is clear, as we showed also with some external data that we as consumers are now returning more to cities and so forth and to some of these locations. And how this will fully develop, it will if it will be equal to 2019, I think We'll have to see. I mean, I think it's a positive that we start to return, but we also, as I think many of us are Relating to is that how much will we go back to office? Will we go back as pre the pandemic 5 days a week or less? And how will that impact the traffic and so forth. I think it's a bit early to make clear statements of this, how it will be equally the same or if it will be some shifts. But the statement that we do is it's positive to see that we're now getting more and more return. We're also seeing And overall, a return to physical stores in general, which is reflecting our numbers. Yes. Do you think that the trend is more obvious when it comes to snubgroass than when it comes to industry traffic for Hemshag? Yeah. Well, Snagios is very much supporting the cafe and restaurant market. And clearly, that is more of a Digital number, if the cafe and restaurant market is they have been more since the restriction has been East up. Even if you've been open before, you have restriction in terms of how many could sit in every table and so So now they can have fully operation. Of course, that is supporting the overall cafe and restaurant market. But I have to say, And I think it's since I am I think Snamburgus is making a fantastic quarter because if you look at last year, we were we had actually a very high number last year as well, which was there was some ease and restrictions Last year in Q3, particularly in the summer period, and Snagroz made a very strong performance during that period. And despite that, we are clearly outperforming last year with now the even further ease of restrictions. But I think the whole Cafe and restaurant market is now clearly gaining and picking up. Yes, absolutely. Okay. Thank you. That's all for me. Thanks. Thank you. The next question comes from Niklas Ekman from Carnegie. Please go ahead. Your line is open. Thank you. Yes, a couple of questions here. Firstly, on food inflation. If you look at the monthly food inflation, To reverse from deflation of 1% in May to inflation now of 1% in September. I'm curious what you see Where this is heading short to medium term, what kind of inflation rates are we likely to see? And also in the past, The food inflation tends to be positive for your earnings. Do you think this could still be the case? Or is there anything that's different this time around? It's difficult to predict, and I think you have many wise people who's trying out to say how the inflation will be. But you're right, if you look at it, we're coming from a deflation period and now A more gradual inflation over even included in the quarter, even if the sum up of the full quarter was 0.3, but now it has increased also in September. Now there are many things that we should relate to that. And I think you also need to look at last year, which was a fairly high inflation year. Now in this year, we have the currency, they have the some raw materials effect and so forth. So I think it is a bit tricky to say exactly how it will, but the trend right now is somewhat more or at least that we're not in the deflation mode. But obviously, we'll see how this turns out. We're also meeting in Q4 versus last Q4, a lower inflation rate. So we are, in one way, meeting easier comps in that perspective. Okay. Fair enough. And then turning back to the issue of supply disruptions in Ndaga that you mentioned before here. Are you Actually seeing significant shortages or is it mainly a question of delays and or rising costs? I mean, I think in the quarter, it has been A disturbing quarter in or on certain product in certain areas, But we've been able to balance that. We're taking in different products and not other articles. So we've been able to keep it up fairly good, but it has been a bit disturbing for DAGA to handle this and because we're getting shortage on 1 products that And it's been a bit tricky for doing some of the campaigns if a supplier gets short, then we had to replace that and so forth. So it's been more of a bit on the tricky side. We've seen somewhat lower service grade levels to our stores. I think we've been able to handle it fairly okay. As I comment for some other questions, it has improved over the quarter. So it's getting better and better, and I hope we will continue to do that. Very good. Thanks. And finally, just a question on value and loss. You Talk about cost synergies of SEK 200,000,000. Do you also see any kind of sales synergies with when merging these two businesses? Well, particularly when we I mean, since the merger now is on the wholesale business And obviously, that creates some synergies. But obviously, we also think and believe that if we do this Right. We can work on the assortment. We can be more relevant, and we can do with the scale, we can be more effective with our campaigns and so So obviously, we think over the period here and also some time to go ahead, I think this will benefit to make us even a more stronger players that could be more relevant to the consumers as well. But the majority part initially is where we can get more synergies out of the costs. Then obviously, we hope that we can support Citigroup in with our logistical platform in a different way versus historical. And as I said, pleased to see their positive development last month, and I hope we'll continue to support that. Very clear. Thank you for taking my question. Thanks. Thank you. The final question comes from Magnus Raman from Kepler Cheuvreux. Please go ahead. Your line is open. Thank you. A lot of questions already been answered. But Perhaps on online growth here with CATIA and clearly above the markets. And in terms of penetration, you're also above the market. And at the same time, You reiterate that online sales in aggregate is unprofitable for you, I believe. And for the long term, you've stated that Customers need to carry more of the delivery costs for a sort of sustainable profitability profile for online groceries. And so how do you view these different facts in relation to your own pricing for delivery and what's your sort of No, but I think I mean, our guiding story is that we are going to meet the expectations from the customers and the demand from the customers and I want to make sure that we are a very good alternative, both in physical stores and on the online part. So we are driving 2 agendas here, but we think it is as a whole, in our language, The omni channel is the way we go for it. And when it comes to profitability, I think we've been clear around that, that to take Sure. The big step, you need to go into the back end with the automation. And the part of that is, as you've seen the plans that we have, with the Bolster investment, but also as we announced in July that we're also making an e commerce automation in Gothenburg. So that will support and help. Now the Click and Collect alternative is also better in terms of profitability. And to the point that you have in terms, I think, we have one retailer that is very clear in terms of what this is costing, that is Willis, who has a clear fee system out there, which is very transparent to the consumers and is also very appreciated by the consumers. But that fee is still not covering your costs, correct? Well, it depends on if you look at it. But over time, when you're getting up the volumes, it will do. All right. Okay. And then, yeah, it's been a lot of topics and questions relating to potential increasing profitability for you going Forward and perhaps I could just continue on one more or perhaps, but one further here. You mentioned I think it was Mention here that your increased IT investments in stores here, do they also Sort of relate to a ramp up in the rollout of automated checkouts. And perhaps you can update us on what share of checkouts being made in total in your systems are automated checkouts today. And if you have any targets ahead, then Potentially, if you can give us any lead to what type of profitability of another transaction by basis for what type of profitability improvement you get from automated checkouts? Thank you. Well, we continue Magnus to roll out the sales check out solutions in our stores when we in new stores and also in when we refurbished them and so on. And approximately 2 thirds of the stores today for Exo Total have this solution. But in terms of if you would kind of all your checkouts, how many what's the penetration of automated checkouts? 2 thirds, 2 thirds in our stores. Is that really you're talking about now number of stores that have automated checkouts? Or are you talking about the actual number of checkouts being made? Number of stores. Right. So what I was alluding to was The penetration of checkouts of your total Shales. Each company making one checkout or of your total share, if you like. Okay. I understand. Of the sales in terms of how many goes through the checkout and how many goes through the normal cashier. I don't sit with that number handy, unfortunately. But is it like is it 1 fourth or is it half or any? We'll get back to you on that. We can talk that with Alex. We can get back to that. But obviously, as you're pointing out, the automation part of this is positive, but also gives the opportunity to give even further service in the stores with the staff rather than just sitting in the cash shop. Excellent. And just a final sort of follow-up on that. 1IT, How your competitor, Coop, for example, has launched the ability to shop completely in the store with your smartphone without Having any sort of physical device in the store, does that is that a step you will take as well? And does that further sort of improved profitability or is it requiring a lot of IT development? So do you have a comment? It is requiring IT IT Development, we already have it out in a few stores today in Villis. So we are already having that in a few stores that we're offering. But it's also somewhat early days to see how this because that's you're coming back to in terms of how many Consumers actually are using it, and I would say it's still fairly low. But we'll see how that develop. If that will be some stickiness in that, The consumers rather go with their mobile phone when they shop or if they want to have one of the other tools that we are offering. And I think you'll see how that turns out if because obviously, when you're shopping 1 or 2 or 3 items, maybe more convenient versus when you're shopping for the items, etcetera. All right. Thank you. Thanks. Thank you. We have no further questions. So I will pass back to the speakers. Well, then just to end up and we'd just like to say thank you for listening in and have a good day. Thank you.