• H1 profit up 2.9%
  • Sales increase 5.8%

Finnish retailer S Group has booked higher half-year profits on the back of improved sales.

S Group today (16 August) reported a 2.9% increase in first-half profit to EUR80.6m (US$99.6m). Retail sales were up 5.8% to EUR5.84bn.

The company said its supermarket sales rose 8.3% to EUR3.64bn. The supermarket channel is S Group's largest channel. It also operates formats including service stations and department stores.

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Economical review 16.08.2012

S Group's sales and economic development in January–June 2012

Summary

S Group

S Group's retail sales amounted to EUR 5,841.3 million in January–June.

Retail sales increased by 5.8 per cent.

Profit (cooperative enterprises + SOK Corporation) before extraordinary items and taxes was EUR 88.7 million (previous year: EUR 81.3 million).

S Group's total nonconsolidated operational result was EUR 80.6 million, compared to EUR 78.3 million in the previous year.

Capital expenditure totalled EUR 272 million (EUR 237 million).

Grocery sales increased by 8.0 per cent to EUR 3,258.2 million.

Consumer goods sales increased by 7.0 per cent to EUR 659.9 million.

The net increase in new outlets was 16. At the end of June, the number of outlets totalled 1,685, thirteen of which were in the Baltics and twelve in Russia.

Regional cooperatives

Retail sales were EUR 5,026.7 million.

Retail sales increased by 6.7 per cent.

Profit before extraordinary items and taxes was EUR 81.7 million (previous year: EUR 75.4 million).

SOK Corporation (SOK + subsidiaries)

Revenue totalled EUR 5,762 million (previous year: EUR 5,504 million).

Revenue increased by 4.7 per cent.

The majority of revenue consists of S Group's internal procurement and service operations.

Profit before extraordinary items and taxes was EUR 7.1 million (EUR 6.1 million).

Capital expenditure totalled EUR 42.7 million (EUR 36.0 million).

The number of SOK Corporation personnel increased by 508 people from the corresponding period last year, totalling 11,007 at the end of June.

Kuisma Niemelä, CEO of SOK:

– S Group's retails sales have developed positively. In January––June, the number of co-op members increased by almost 40,000.The co-op members were paid a total of more than EUR 180 million in bonus rewards.It seems that the co-op members' confidence in their own store manifests itself as a positive development in sales. Moreover, it enables S Group to further adhere to its investment programme as planned and continue to create new jobs.

– We believe however that SOK Corporation's operational result will remain slightly weaker than last year.The change resulted from weakened demand in the automotive trade and widely expanding operations in the neighbouring countries.The operational result of the entire S Group is likely to remain at the previous year's level.

S Group's sales grew by 5.8 per cent in the first half of the year

In the first half of the year, S Group's retail sales increased by 5.8 per cent to over EUR 5.8 billion.The grocery trade grew by 8.0 per cent, and the consumer goods trade by 7.0 per cent.In the first half of the year, the co-op members were paid a total of more than EUR 180 million in bonus rewards.

In January–June, S Group's retail sales (VAT 0 per cent) totalled EUR 5,841.3 million, up by 5.8 per cent compared to the corresponding period last year.

The retail sales of the regional cooperative enterprises increased by 6.7 per cent compared to the corresponding period last year, to EUR 5,026.7 million.The cooperative enterprises' proportion in S Group's sales was 86.2 per cent and in SOK Corporation's sales, 13.8 per cent.

S Group's grocery sales grew by 8.0 per cent to EUR 3,258.2 million.The consumer goods trade grew by 7.0 per cent to EUR 659.9 million.

S Group's total profit before extraordinary items and taxes was EUR 88.7 million, whereas the profit for the corresponding period was EUR 81.3 million in the previous year.S Group's total nonconsolidated operational result was EUR 80.6 million, compared to EUR 78.3 million in the previous year.

– Despite the uncertain economic outlook, S Group's operational result is likely to remain at the same level as last year, says CEO Kuisma Niemelä.

In the first half of the year, the cooperative enterprises' profit before extraordinary items and taxes was EUR 81.6 million (previous year: EUR 75.2 million).SOK Corporation's profit before extraordinary items and taxes was EUR 7.1 million (EUR 6.1 million).

In January–June, S Group's capital expenditure was EUR 272 million (EUR 237 million).

The net increase in the number of new outlets was 16. At the end of June, S Group had 1,685 outlets.

– S Group's retails sales have developed positively. In January––June, the number of co-op members increased by almost 40,000.The co-op members were paid a total of more than EUR 180 million in bonus rewards.It seems that the co-op members' confidence in their own store manifests itself as a positive development in sales. Moreover, it enables S Group to further adhere to its investment programme as planned and continue to create new jobs.

Co-op membership

The number of members in the cooperatives participating in the Bonus system increased by 39,212 in January–June.At the end of June, the number of co-op members totalled 2,017,676. The co-op members are the sole owners of S Group's cooperative enterprises.Co-op membership is S Group's way of conducting its cooperative form of business and producing services and benefits for its co-op members.

In the first half of the year, the sales subject to Bonus rewards carried out by co-op members in S Group totalled EUR 4,584 million, up by 5.4 per compared to the corresponding period last year.The sales subject to Bonus rewards accounted for 66.9 per cent (67.1 per cent) of S Group's entire sales.Co-op members were paid a total of EUR 182.5 million in Bonuses (a purchase reward based on centralising their monthly purchases), up by 6.6 per cent (9.9 per cent) compared to the corresponding period last year.

The payment method-related benefit paid to co-op members increased by 17 per cent compared to the corresponding period last year, to EUR 2.7 million.The co-op members have been receiving the payment method-related benefit of 0.5 per cent since the beginning of 2008.The benefit is calculated from the total sum of purchases covered by the bonus scheme and made at Finnish S Group outlets using the S-Etukortti card.

 

Supermarket trade

S Group's supermarket trade sales increased by 8.3 per cent in January–June. This figure includes the grocery trade and consumer goods sales of the Prisma, S-Market, Sale, Alepa, Kodin Terra and S-Rauta stores, as well as the grocery trade and consumer goods sales at other supermarket trade units.

The number of supermarket outlets increased by 23 stores in January–June, resulting in the total number of 900 at the end of June.The S-Rauta network in particular grew significantly in the first half of the year.

This year, the supermarket trade network will continue to grow as new units will be opened in St. Petersburg, Riga and Kaunas.

– Sales in the Kodin Terra and hardware trade stores have developed positively and clearly faster than the market.Moreover, sales in the Prisma, Sokos and Emotion stores have grown compared to last year.Besides building, such product areas as sport, entertainment and appliances have developed very well, says CEO Kuisma Niemelä. 

During the spring, S Group has gradually started up the operations of a new logistics centre for consumer goods, and product groups will be transferred, step by step, to pass through the logistics centre in Sipoo. The start-up of operations has momentarily caused a shortage of goods in stores.

– Dominant food trends are clearly visible in the grocery trade. Natural ingredients are now popular. The popularity of low-carb diets is still visible in product groups' demand, although the greatest enthusiasm has subsided and the bakery and cereal volume has ceased to fall. The sales of organic products have increased by 24 per cent.

Service station stores and fuel trade

Service station store and fuel trade sales increased by 5.4 per cent in the first half of the year. At the end of June, there were 226 outlets (or 428, including all S Group's distribution outlets).

– Sales have been slightly brisker than last year.The growth in sales has partly been affected by the crude oil price, which has been higher than last year. It has increased the price of fuels.We expect the growth in sales in the remainder of the year to remain at the same level as last year.

Department stores and speciality stores

Retail sales by department stores and speciality stores increased by 2.1 per cent.At the end of June, there were a total of 21 Sokos stores and 30 Emotion stores.

Travel industry and hospitality business

The travel industry and hospitality business chains include Sokos Hotels, Radisson Blu Hotels and several restaurant chains.Retail sales increased by 4.5 per cent. There were 60 hotels at the end of June, and the number of separate restaurant outlets was 257. Including the units in other outlets, the total number of restaurant outlets was 762.

– The growth in sales has been affected by the increase in the average price in the Helsinki metropolitan area in particular. The Ice Hockey World Championship competition clearly picked up the sales in May, and the European Championship competition in Athletics attracted tourists to Helsinki at the end of June.Foreign demand has grown clearly better than domestic demand. Demand from Russia has grown especially. Despite the international financial crisis, we expect the demand to remain strong in the remainder of the year.

Automotive trade and accessories

Sales in the automotive trade fell by 3.5 per cent in January–June. In January–March, sales increased by 26 per cent as the increase in the car tax, effective from the beginning of April, resulted in a growth peak in the business area at the beginning of the year.The number of automotive trade outlets in S Group totalled 49 at the end of June.

– The automotive trade in the first half of the year has been weaker than last year. The overall economic uncertainty as regards future events has affected the whole market and also decreased demand for trade-in cars and maintenance services. The sales of new passenger cars decreased by 6.2 per cent. The sales of new cars to companies have fallen by 17 per cent in the Helsinki metropolitan area, and 25 per cent in Helsinki.

Agricultural trade

Sales in the agricultural trade decreased by 3.4 per cent. The chains operating in the agricultural trade include Agrimarket and Multasormi stores. At the end of June, the number of agricultural trade outlets totalled 108.

– In the agricultural trade, demand has remained at the same level as last year. A distinctive feature in the business area is the continuously reducing number of agribusiness customers.In June, Hankkija-Maatalous Oy opened a second generation online store.

Neighbouring areas (the Baltics and St. Petersburg)

Retail sales by the operations in Finland's neighbouring countries totalled EUR 213.4 million, up by 38.4 per cent compared to the corresponding period in the previous year. Grocery sales in Finland's neighbouring countries totalled EUR 165.7 million, up by 42.8 per cent. This year, one new Prisma unit was opened to Tartu, Estonia. In the remainder of the year, a total of seven or eight units will be opened in St. Petersburg, Riga in Latvia, and Kaunas in Lithuania.

– Supermarket trade companies increased their sales over budget.The growth percentage for Lithuania, Latvia and St. Petersburg was more than 50, while it was 24 for Estonia. The economies of the Baltic countries are stably recovering from the recession after the financial crisis.

Outlets

At the end of June, S Group had 1,685 outlets, twelve of which are in Russia and 13 in the Baltic countries.

Banking

The interest shown by co-op members of the cooperative enterprises in S-Bank's services continued in the first months of the year, and S-Bank had slightly over 2.5 million customers at the end of June. S-Bank obtained approximately 55,000 new customers in the first half of the year.

In January–June, S-Bank granted an average of over 20,000 new S-Etukortti Visa cards per month. By the end of June, S-Bank had issued a total of 1,051,000 S-Etukortti Visa cards to co-op members of the cooperative enterprises.

At the end of June, S-Bank had EUR 2,419 million in deposits from private customers. The deposits from private customers had increased by EUR 47 million from the beginning of the year.

By the end of June, more than 1.1 million customers were using the bank's online services.

SOK Corporation (SOK + subsidiaries)

In January–June, SOK Corporation's revenue for 2012 totalled EUR 5,760 million, up by 4.6 percent year-on-year.

The revenue generated by the operating companies totalled EUR 883 million, up by 0.6 per cent.Revenue from procurement operations was EUR 4,480 million, up by 18.4 per cent year-on-year. The increase in revenue from procurement operations is mainly due to the increased centralisation of orders to procurement companies.

In January–June, revenue from the travel industry and hospitality business totalled EUR 122 million, standing at almost the same level as last year.The comparable revenue from the travel industry and hospitality business, in which the network changes made in the previous year have been considered, has grown during the first half of the year.Revenue from the automotive trade and accessories totalled EUR 98 million, down by 12.4 per cent year-on-year.

Revenue from the agricultural trade totalled EUR 471 million in the first half of the year, down by 7.4 per cent year-on-year.The decrease in revenue from the agricultural trade is affected by the transfer of corporate hardware trade operations within SOK Corporation, executed at the turn of the year, and the exceptional cereal commission business operations carried out in the previous year.

The business conducted by SOK Corporation in Finland's neighbouring countries consists of the supermarket trade, as well as the travel industry and hospitality business in the Baltic countries and the St. Petersburg area. Revenue from the business in Finland's neighbouring countries totalled EUR 214 million, up by 39.1 per cent year-on-year.

SOK Corporation's revenue and operational result

Supermarket trade

SOK Corporation is involved in the supermarket trade in Estonia, Latvia, Lithuania, and St. Petersburg in Russia.Investments in neighbouring countries continue with the opening of new units in St. Petersburg, Riga and Kaunas this year.Revenue grew by 42.1 per cent from the previous year, to EUR 191 million.The operational result from the supermarket trade was EUR -11.0 million (EUR -13.2 million).The result was better than last year due to increased revenue and improved profitability.

Travel industry and hospitality business

Revenue from the travel industry and hospitality business remained at the same level as last year, totalling EUR 122 million (EUR 122 million).The operational result improved, being EUR 0.3 million positive (EUR 5.5 million negative).

The revenue of Sokotel Oy, engaged in SOK's travel industry and hospitality business in Finland, fell by 3.4 per cent. The drop was due to the reduction of the hotel network as a result of the business divestments completed in 2011.The comparable sales have developed positively and the business area's forecast for the current year is slightly positive.Sokotel Oy's operational result improved clearly compared to the corresponding period last year.The company's comparable sales have developed positively, while the company's price competitiveness has improved.

Hotel usage levels in Tallinn and St. Petersburg have increased, which has resulted in an increase in revenue.AS Sokotel's revenue in Tallinn grew by 13.7 per cent, and OOO Sokotel's revenue in St. Petersburg grew by 20.1 per cent.The result of both hotel companies improved due to increased revenues and improved efficiency.

Automotive trade and accessories

Compared to the corresponding period last year, revenue from SOK Corporation's automotive trade and accessories fell by 12.4 per cent to EUR 98 million.The comparable revenue decreased by 2.8 per cent.

The operational result from the automotive trade and accessories for the first half of the year remained EUR 10.9 million negative, being weaker than last year (EUR 5.3 million negative).The decreased revenue due to the low demand for cars and the drop in the relative gross margin levels have generated a weaker result.

Agricultural trade

The agricultural trade comprises the agricultural, gardening and hardware trade carried on by Hankkija-Maatalous Oy and its subsidiaries.Revenue from the agricultural trade decreased by 7.4 per cent to EUR 471 million.The drop was due to the transfer of the building material business aimed at companies to Hankkija-Maatalous Oy's subsidiary S-Yrityspalvelu Oy from1 January 2012, and the significant export deliveries of intervention cereals completed in the comparison year of 2011.As a result of the decreased revenue from the cereal trade, the operational result from the agricultural trade was somewhat weaker than in the previous year (EUR 5.0 million), standing at EUR 4.1 million.

Procurement

Revenue from procurement operations increased by 18.4 per cent to EUR 4,480 million.The total result from the procurement operations amounted to EUR 6.2 million (EUR 5.6 million).

Inex Partners Oy's revenue was EUR 2,512 million in January–June.The comparable grocery trade sales increased by 6.0 per cent, but the consumer goods sales decreased by 1.0 per cent.The deliveries by Prisma and Sokos chains, in particular, have been at a lower level than planned.The result of Inex Partners for the first half of the year was weaker than in the previous year, as a result of reduced volumes, a more sluggish growth rate, and the start-up of the new logistics centre for consumer goods.

Meira Nova Oy's revenue grew by 11.0 per cent to EUR 182 million.The more favourable result development than last year is attributable to the good development of sales and the effective management of fixed costs and capital costs.

The revenue of North European Oil Trade Oy was EUR 1,790 million, up by 5.7 per cent year-on-year.The growth in revenue was mainly attributable to increased world market prices of oil products.The company's operational result was lower than last year due to a change in world market prices, but it was clearly positive.

Outlook for the remainder of 2012

SOK Corporation's operational result will be significantly affected by the development of the overall economy, both in Finland and its neighbouring countries the Baltics and Russia.It is expected that the Russian economic development will continue to be stable but the domestic economic situation in the remainder of 2012 will be affected by the overall uncertainty in the economy.Even so, we expect that the operational result from the domestic travel industry and hospitality business will surpass the previous year's level.The result from the automotive trade and accessories will show a loss as a result of the make and network changes carried out last year.Moreover, the result from the agricultural trade is likely to be slightly weaker than the previous year's level.

Despite the uncertain economic outlook, S Group's operational result is likely to remain at the previous year's level.

 

Original source: S Group