SOK CORPORATION INTERIM REPORT 1 JANUARY–30 JUNE 2005 ECONOMIC ENVIRONMENT totalled EUR 4,151 million, an increase of 6.3 per cent on the previous year. Th e growth in sales was attributable largely to the Th e world economy grew by 5.0 per cent in 2004, an exceptionally favourable trend in the grocery trade and ABC service station robust pace of economic growth. Th is growth is set to continue at store and fuel sales. a healthy rate although it will decelerate to settle at around four per cent this and next year. Sales by business area Finland’s gross domestic product registered a growth of 3.7 per cent for last year. Growth for this year will remain perceptibly € million ± prev. yr. % below this rate. Th e more subdued economic growth predicted S markets 1 120 +5.6 for the eurozone and the prolonged labour dispute in the paper Prisma hypermarkets 876 +5.6 industry will slash growth in goods exports dramatically. ETLA, Sale and Alepa stores 241 +4.8 the Research Institute of the Finnish Economy forecasts a growth Grocery trade, total 2 236 +5,5 of 1.5 per cent for the GDP in the current year. Private consump- Service station stores and fuel sales 445 +23.6 tion expenditure is forecast to rise 2.8 per cent. Consumer confi dence has remained strong. However, confi - Department stores and speciality stores 161 +5.5 dence in Finland’s forthcoming economic trend and employment Hotels (accommodation) 87 +3.2 took a tumble during late spring. Weakened confi dence in the eco- Restaurants 210 0.0 nomic trend in Finland has aff ected consumer intentions only to a minor degree. Th e relatively healthy underlying tone in the Finn- Motor trade and accessories 381 -0.6 ish economy generates the conditions for consumer confi dence Agricultural trade 543 +5.1 to hold steady at a relatively optimistic level. In July, consumer Other profi t centres 8 +25.6 confi dence took a modest upward swing with the settlement of the labour market disputes. Operations in Finland, total 4 072 +6.2 Growth in retail sales in the current year is likely to remain more Baltic operations 79 +12.3 moderate than last year. Th is year, growth in households’ dispos- S Group, total 4 151 +6.3 able income will rise at a slower rate than in the two preceding years due to a slight acceleration in infl ation and no reduction in taxation. According to advance information from Statistics Fin- land, the value of retail sales, excluding the motor trade, was up At the end of June, the S Group had 1,384 locations in Finland, 4.5 per cent in January–May. as against 1,371 at the same time the year before. Th e advance information from Statistics Finland shows that Th ere were 22 regional cooperative societies and 20 local coop- the value of the motor trade was up 5.3 per cent by the end of erative societies. Th e number of cooperative societies’ members May. Growth within the grocery trade came to 1.9 per cent and came to 1,480,541 (an increase of 5.3%). the growth percentage in the department store trade amounted Investments by members of the cooperative societies amounted to 3.6 per cent. By the end of June, grocery sales by the member to EUR 651.2 million, representing growth of EUR 31.6 million companies of the Finnish Food Marketing Association were down on the same period a year earlier. 0.2 per cent on the previous year. According to the wholesale and Bonus sales by the S Group amounted to EUR 2,496.2 million, retail trade statistics issued by Statistics Finland, growth in apparel an increase of 12.8 per cent on the previous year. Members were sales for the fi rst four months of the year came to 6.6 per cent. paid a total of EUR 89.4 million in bonuses, an increase of EUR Hardware sales for the same period were up 7.4 per cent. 12.4 million on the previous year (an increase of 16.2%) According to the Finnish Hotel and Restaurant Association Th e S Group’s sales in the current year will top the previous FHR, sales in the hotel and restaurant sector grew by 2 per cent year’s fi gure. Judging by the trend in earnings in the fi rst part of in the fi rst quarter of the year. According to Statistics Finland, the the year, the S Group’s aggregate full-year earnings are estimated number of overnight stays in hotels showed an increase of 4.1 per to be on a par with the result in 2004. cent by the end of May. Following the slow months in the fi rst part of the year, demand in the agricultural trade took an upward swing with the onset of spring. Th e outlook for this season’s harvests is optimistic through- Development of the associated companies, out almost the entire country and even better than average in some 1 January–30 June 2005 areas. Th e trade situation at year-end, with the exception of de- SOK Corporation’s major associated company is the Inex Group, clined tractor sales, looks promising for the country as a whole. which is responsible for producing sourcing and logistics serv- ices for convenience goods as well as logistics services for general merchandise delivered to the S Group’s chain stores and certain S Group business development, other customers. 1 January–30 June 2005 Th e Inex Group’s net turnover in January–June amounted to Th e S Group comprises cooperative societies and SOK with its EUR 981 million, an increase of 8.1 per cent. Th e company post- subsidiaries. Th e S Group’s retail sales during January–June 2005 ed a profi t, with improved earnings on the previous year. – 1 – OPERATIONS OF SOK CORPORATION, subsidiary AS Sokotel has signed a preliminary agreement with 1 JANUARY–30 JUNE 2005 Pontos Oy for building a new hotel in the heart of Tallinn next to the present Sokos Hotel Viru. Th e hotel is scheduled to open its doors in the spring 2007. Operations of SOK Changes after the close of the report period SOK is the parent company of SOK Corporation. In accordance Tampereen Sokos Oy and KOy Tampereen Valtakulma will merge with its statutes, SOK’s task is to promote and develop the opera- into SOK, and AS Ramare will merge into AS Prisma Peremarket. tions of the cooperative societies and other organisations belong- SOK and Cooperative Tradeka Corporation have entered into ing to the S Group and to attend to the management and super- negotiations concerning the transfer of the entire shares outstand- vision of the Group’s overall resources for maximum effi ciency, ing of the sourcing and logistics company Inex Partners Oy to whilst also monitoring, within the framework of the Cooperatives SOK. Act, the operations and best interests of the S Group and its con- stituent organisations. SOK is in charge of the S Group’s strategic guidance. Its tasks Net turnover are to provide the S Group companies with services related to SOK Corporation’s net turnover for the period 1 January–30 June chain management, membership and marketing along with gen- 2005 was EUR 2,029 million, an increase of 12.0 per cent on the eral chain and corporate services, including development activities same period a year earlier. Operations abroad accounted for 3.7 connected with these services and the S Group’s other operations. per cent of net turnover. Other important services for the S Group’s operations are pur- chasing, rental services and assortment and invoicing services for SOK Corporation’s net turnover by business area goods delivered directly from manufacturers to the chain units. Via its nationwide and regional subsidiaries, SOK is able to off er € million € million ± prev. yr. its members a wider spectrum of services in accordance with the 1 Jan.–30 June 1 Jan.–30 June % decisions taken within the S Group. In addition, in the Baltic area 2005 2004 SOK engages in the grocery and motor trade as well as the hotel Grocery trade 36 27 29.9 business via its subsidiaries. Fuel sales 328 168 95.3 Department stores and Changes in the Group structure speciality stores 16 51 -68.9 Changes during the report period Hotel and restaurants 84 81 3.1 In a deal made at the beginning of the year, the Tampereen Sokos Oy business was sold to Pirkanmaa Cooperative Society. In the Motor trade and accessories 187 181 3.5 same connection, SOK sold the shares in KOy Kauppahalli Piha to Agricultural trade 433 431 0.5 Pirkanmaa Cooperative Society, and KOy Tampereen Valtakulma Consumer goods sourcing 244 224 9.3 sold the Sokos property it owned to Sampo Pankki plc, a bank. EDI invoicing 674 635 6.1 In transactions between SOK and HOK-Elanto, SOK’s subsidi- ary Sokotel Oy sold the Memphis restaurant and Coff ee House Real-estate, rental and other businesses that operate in the Helsingin Sokos property to HOK- service operations 106 101 4.7 Elanto on 1 January 2005. Sokotel Oy will continue to run the Eliminations -79 -88 -10.3 Sokos Hotel Vaakuna and the Ravintola Loiste restaurant business Total 2 029 1 812 12.0 in the above premises. Sokotel Oy in turn purchased the Hotel Presidentti business from HOK-Elanto on 1 January 2005.