The ICA Group's Annual Report 2006

The ICA Group’s Annual Report 2006 Contents This is ICA 1 President’s statement 6 Goals and strategies 9 Market and trends 12 ICA’s organization – Group functions 16 ICA Sverige 22 ICA Norge 24 Rimi Baltic 26 ICA Banken 28 Etos 29 Netto 29 Corporate Responsibility Report 32 Governance of the Group’s CR work 34 Ethics 36 Employees 40 Environment 42 Health 48 Quality 51 GRI Index 54 Annual Report 56 Directors’ report 57 Definitions of Key Financial Ratios 61 Consolidated Income Statement 63 Consolidated Balance Sheet 64 Changes in Consolidated Shareholders’ Equity 66 Consolidated Statement of Cash Flows 67 Supplementary Information, the Group 68 Parent Company Income Statement 83 Parent Company Balance Sheet 83 Changes in Parent Company’s Shareholders’ Equity 85 Parent Company Statement of Cash Flows 85 Supplementary Information, Parent Company 86 Audit report 90 Board of Directors 92 Group Management 2007 94 Corporate governance 96 Glossary and abbreviations 98 Addresses 99 This is ICA The ICA Group (ICA AB) is one of the Nordic region’s leading retail companies, with around 2,300 of its own and retailer-owned stores in Sweden, Norway and the Baltic countries. The Group includes the sales companies ICA Sverige, ICA Norge, Rimi Baltic and Etos. ICA also offers financial services to Swedish customers through ICA Banken. In addi- tion, ICA owns a 5-percent interest in the company Netto Marknad. Vision We make every day a little easier. Mission To be the leading retailer with a focus on food and meals. ICA’s companies In 2006 the ICA Group had sales of SEK 67,395 million and operating income of SEK 2,297 million. The Group had a total of 11,698 employees. Share of consolidated sales Wholly owned companies ICA Sverige is one of Sweden’s leading food retailers. It is the principal Sales excl. VAT: SEK 48,301 million " supplier to ICA retailers, who own and manage their stores indepen- (incl. Etos) " dently. Employees: 4,752 ICA Norge is one of Norway’s leading food retailers, with its own stores Sales excl. VAT: SEK 18,361 million as well as franchises. Employees: 4,043 " Rimi Baltic is one of the leading and most modern food retail chains in Sales excl. VAT: SEK 8,993 million the Baltic region. Sales are not consolidated in the ICA Group 2006. ICA Sverige 72 % Employees: 9,132 ICA Norge 27 % ICA Banken makes it easier for customers of ICA’s Swedish stores to Business volume excl. VAT: ICA Banken 0.7 % manage their finances and in the process strengthens their ties to ICA. SEK 13,480 million Others 0.3 % Employees: 174 Etos operates a chain of wholly owned stores that combine health and Sales excl. VAT: SEK 34 million* beauty products under one roof. A process has been initiated to wind up Etos’ stores in Sweden. Employees: 16 Partly owned company Netto operates a hard discount chain. In early 2007 ICA reduced its Sales excl. VAT: SEK 2,444 million interest in Netto from 50 percent to 5 percent. The concept comes from Denmark, where Dansk Supermarked manages the chain. Sales Employees: 861 are not consolidated in the ICA Group. * Included in ICA Sverige’s net sales. Organization 2007 Ownership structure ICA AB is 40 percent owned by Hakon Invest AB (publ) and 60 percent by President and CEO Royal Ahold N.V. of the Netherlands. Kenneth Bengtsson Through a shareholder agreement, Royal Ahold and Hakon Invest jointly share decisive influence over ICA AB. Royal Ahold is a Dutch retail group listed on the stock exchanges in Marketing Finance Amsterdam and New York. Ingrid Jonasson Blank Sonat Burman-Olsson Hakon Invest, which is listed on the Nordic Exchange, is an investment company specializing in the Nordic retail sector. It is 67 percent owned by ICA-handlarnas Förbund, the mem- Assortment & ber organization for Sweden’s ICA ICA Sverige ICA Norge Rimi Baltic Real Estate ICA Banken buying Peder Larsson Trond Kongrød Antonio Soares Bo Liffner Jörgen Wennberg retailers. The remaining 33 percent is Anders Nyberg owned by individual shareholders. ICA’s corporate responsibility In seven position statements, the ICA Group has Global Compact’s ten principles for corporate responsibility. summarized its stance on ethics and corporate ICA is a participant in the United Nations business initiative Global Compact and supports responsibility, a philosophy it calls “ICA’s good the following ten international principles. business.” The aim is to be a sustainable company Businesses should: driven by the following values: 1. Support and respect the protection of internationally proclaimed human rights ICA will be driven by profitability and high ethi- in areas they can impact. cal standards. 2. Make sure that they are not complicit in human rights abuses. ICA will listen to customers and always base 3. Uphold the freedom of association and the effective recognition of the right decisions on their needs. to collective bargaining. 4. Eliminate all forms of forced and compulsory labor. ICA will nurture diversity and growth among its employees. 5. Effectively abolish child labor. 6. Eliminate discrimination in respect of employment and occupation. ICA will maintain an open dialogue internally 7. Support a precautionary approach to environmental challenges. and with the community. 8. Undertake initiatives to promote greater environmental responsibility. ICA will guarantee product safety and quality. 9. Encourage the development and diffusion of environmentally friendly technologies. ICA will promote a healthy lifestyle. 10. Work against all forms of corruption, including extortion and bribery. ICA will adopt sound environment practices to promote sustainable development. 2006 in brief The ICA Group’s net sales amounted to SEK 67,395 million (66,096), an increase of 2.0 percent compared with 2005. Operating income amounted to SEK 2,297 million, an increase of 18.4 percent compared with 2005. The operating margin was 3.4 percent, an increase from 2.9 percent 2005. Net sales, SEK million Operating income, SEK million # ! ! ! * 2004–2006 according to IFRS. * 2004–2006 according to IFRS. The year in numbers 2006 2005 Net sales 67,395 66,096 Operating income 2,297 1,940 Operating margin 3.4 2.9 Income after net financial items 2,046 1,667 Average number of employees during the year 11,698 11,556 ICA AB will publish the following financial reports in 2007 Financial information Madelene Gummesson, May 15, 2007 Interim report January–March [email protected] telephone +46-8-561 505 83. August 21, 2007 Interim report April–June November 13, 2007 Interim report July–September Financial information is also available at www.ica.se > About ICA. modern ICA celebrates 90 years in 2007. The company was founded by independent retailers who joined together to coordinate purchases and take advantage of economies of scale. The ICA “good business” philosophy was thought by many to be impossible. In the end, however, combining the desire of the retailers to manage on their own with their willingness to cooperate proved to be a winning concept. The ICA of today is not the same company it was 90 years ago, but the idea of local management and central cooperation makes just as much sense now as it did then. The business is built on five core values; simple, personal, safe, inspiring and modern. ICA is quite a spry 90 year old, don’t you think? modern Dynamic structure is the recipe for success Operationally, 2006 was a successful year for ICA AB with a generally positive sales trend. Many new stores were established and a number of major structural deals were completed. As a whole, ICA has created a stable platform to maintain market leadership in the markets that the company serves. For ICA stores in Sweden, 2006 was a strong sales taken a shortcut to market leadership in the Baltic year, particularly for our small stores, which we countries, an expansive region where we are very are very pleased about. This success is the result optimistic about the future. of our strategy to reduce prices to meet custom- We made another strategic decision in 2006 ers’ wishes. – to wind up Etos stores in Sweden. We will instead In Norway, where we underwent a major put Etos’ expertise in health and beauty to use in restructuring of the store network during the year, ICA stores. There is great potential here for higher sales declined. ICA Norge is building a completely sales. new platform, and a large number of stores have During the year ICA Banken reported its first been sold, resulting in lower volume. The major operating profit, reaffirming the bank’s positive investments we are now making in new stores trend for the year. and modernizations will cost us in the short term but pay off in time. Continuous change The original ICA idea – to have individual retailers Streamlining and coordination work together – is still the basis of ICA’s opera- ICA is not the same company it was four years tions. Within the framework of our Group struc- ago, organizationally or operationally. Our journey ture, we are seeking a balance between coordi- has taken us down three paths. We have focused nation and local accommodation. We constantly on our core business, set our sights on market reevaluate what should be done centrally or leadership in the markets we serve, and more locally. The dynamic nature of the business is the clearly coordinated activities within the Group. key to ICA’s success. As part of the focus on our core business and In 2006 considerable emphasis was placed on market leadership, several major structural deals coordination to improve efficiencies and keep were completed in 2006.

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