Axfood AB
STO:AXFO
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Axfood AB
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Hello, and welcome to the presentation of Axfood Q2 results. [Operator Instructions] Today, I'm pleased to present CEO, Klas Balkow; and CFO, Anders Lexmon. Klas, please begin.
Thank you, and good morning, everyone, and thanks for joining today's call. As you heard with me here today is our CFO, Anders Lexmon; and we're here to present you the second quarter report for Axfood.
In the Investors section of the Axfood's website, you'll find the presentation for today's call, and a recording of the call will also be made available on the website.
So with that, I'd like to get started. So please turn to Page #2. Here, you will find the agenda. First, I'd like to provide you with a brief market overview and then go through the second quarter performance for Axfood. I will then hand over to Anders, who will take you through our financial position.
And following on this part, I will give you a brief update on our strategic agenda, including an update of the integration of Bergendahls Food. The last part of the presentation is a reminder of our outlook 2022. And as always, after the presentation, we'll open up for questions.
So please go to the next page, Page #3. But as I said, first, let me start by reflecting on the current exceptional market situation and turn to the next page, Page #4. I'd like to begin my market update by looking back where we were in March 2020, which was the start of a turbulent period. This is actually a slide that I used in the first quarter 2020, a little bit more than 2 years ago to illustrate the extreme situation that hit us all when the COVID-19 pandemic escalated all over the world and turned everything upside down.
Hoarding in stores and supply constraints was immediate, followed by a sharp decline in the cafe and restaurant market after WHO declared a global pandemic on March 11. We experienced a drop in customer traffic in city centers due to more people working from home. And in mid-March, Norway imposed travel restrictions and cross-border trade was more or less erased.
Please then turn to next Page #5. And after 2 years of struggling disturbances due to the pandemic, we are entering into a new exceptional times. When COVID-19 related restrictions were lifted in early February, we could see people returning to cafes and restaurants. Also, consumer traffic in city centers picked up as people returned to their offices and physical stores.
And in February travel restrictions from Norway to Sweden was lifted with sudden increase in cross-border trade as a result. Then, in late February, Russia invaded Ukraine, which started a whole new set of disruptions; supply constraints, shortage of raw materials and various logistical challenges, all of this fueling a sharp increase in food price inflation.
Turn to next Page #6. And coming from a long period of very low food price inflation and actually even deflation, we have, in recent months, moved to double-digit food price inflation. We haven't seen this level of development for decades. The development we see is a consequence of a number of external factors such as the corona pandemic, the war in Ukraine, sharply increased electricity and fuel prices, disturbances in the transport sector and shortages of raw materials and packaging.
The current situation affects the entire supply chain from primary production to our own operations and service levels are down due to extensive delays in deliveries from suppliers and a rapid shift in demand. As a result, logistic costs are increasing. And navigating all of this is something we are working hard to manage. We are working intensively with our suppliers to minimize the disruptions that we have in the supply chain. It is extremely difficult then to predict where this is going and how it will pan out. But I predict that food price inflation will continue to increase in the short term. But how much and for how long, it's, as said, difficult to predict.
Please now turn to Page #7. It is clear that consumers will be affected by the changes in the market and the consumers' behavior will change, adjusting to household budgets becoming more strained. However, there is a certain lag in the chain of reactions, while we have not yet seen major changes in our customers' buying pattern.
But if I should reflect a little bit, let me reflect briefly on what the tendencies are. We have experienced low price becoming increasingly attractive for consumers for quite some time now. And in the current market situation, that trend is accelerating. One can predict that this trend will continue, at least in the short term and that low price will become increasingly relevant for more consumers.
Also, campaigns are becoming more attractive from consumers. And it's clear that more customers choose discounted products to a larger extent. As price values are becoming increasingly important for consumers, also private label products are likely to become more attractive. And in our stores, we see a slightly higher frequency and lower average ticket value.
We also predict that consumers increased price sensitivity risk disadvantaging with consumption of sustainable food and that share of sales of sustainability labeled products will unfortunately go down. These are some of the indications of changed consumer behavior, which we can see tendencies towards today. However, we may not know, but in the fall we might see another reality.
Please now turn to next page, Page #8. At the same time as we experienced consumers starting to adjust to household budgets becoming more strange, we also see a consumer behavior coming back to what prevailed before the COVID-19 pandemic. As mentioned earlier, we are seeing consumers returning to physical stores, which is particularly evident in larger stores in central metropolitan locations. The Norwegian consumers is once again crossing the border into Sweden for larger food supply and with spent time in restaurants and cafes again.
At the same time, online food purchases have declined as consumers are returning to physical stores. Although I have to say the share of e-commerce is still significantly higher than before the corona pandemic.
Please turn to next Page #9. In these times, Axfood is very well-positioned. Let me remind you of our structure and portfolio of concept and brands. Willys is benefiting from the accelerating low price trend. With recently acquired minority shareholding in City Gross, we have also a presence in the hypermarket segment. Hemkop has a good position in central metropolitan locations benefiting from customers returning to physical stores as well as location close to home.
Eurocash benefits from cross-border trading, picking up now to more normal levels. Snabbgross and Urban Deli are positively impacted by the strong recovery of the cafe and restaurant market. And this, combined with Hemkop's broad takeaway offering in urban stores, we meet various customer demands in times when price value is important.
And as a result of the divestment of Mat.se, Axfood is now the second largest owner in Mathem, meaning that we have a good position in pure-play online retail with home deliveries. Most likely, we also have the strongest click-and-collect offering in the market through Willys. And Dagab has a key role streamlining the product supply of group-owned stores and external customers, such as franchise stores and convenience retailers.
Please now turn to the next page, Page #10. And with that, let me now go through the market development in more detail. The graph on the left side on this page shows market growth rates on a monthly basis year-on-year. And the graph on the right side shows quarterly food price inflation year-on-year.
Market growth in the second quarter was 5.4%. As shown in the graph to the right on this slide, the inflation rate continued its upward trend during the second quarter and amounted to 8.9%. This development was driven by price increases across most categories. Also, the level of inflation escalated during the quarter and the inflation rate in June was high at 11.2%.
Please turn to next Page #11. And on this slide, you will find the monthly market growth rates year-on-year for physical stores and online. As evident by the market data, there has been continued return to physical stores, driven by increased traffic in city centers.
However, the trend for growth in e-commerce has been weak, mainly due to high comps. But compared to pre-pandemic numbers, share of e-commerce sales has more or less doubled.
That sums up my market overview and please go to next Page #12. And we are now moving into Axfood's performance during the second quarter.
So again, please turn Page to #13. Our total retail sales grew strongly at 9.7% during the second quarter, which was clearly higher than the market growth of 5.4%. In the online segment, growth was negative 27.5% while growth in the market was negative at 27.6%. But when we extract Mat.se, our online growth was negative 18.3% during the second quarter, which is clearly better than the market.
Please turn to next Page #14. Our consolidated net sales for Axfood grew by 32.8% during the second quarter and amounted to SEK 18.5 billion. The increase in net sales attributable to Bergendahls Food acquisition, food price inflation, continued strong recovery in both cross-border trade and service trade and through increased customer traffic in physical stores. As mentioned, e-commerce sales was down in the second quarter. The share of retail sales attributable to an e-commerce was 5.3% despite the divestment of Mat.se, clearly higher than the market that reported an e-commerce share of sales of 4.3% in the second quarter and significantly higher than before the COVID-19 pandemic. I will go through the sales segment by segment in more detail shortly.
But please now move to next Page #15. In total, group operating profit amounted to SEK 789 million, and the operating margin was slightly down to 4.3%. Reported operating profit includes items affecting comparability of net minus SEK 39 million. Adjusted operating profit, excluding items affecting comparability, amounted to SEK 828 million, and the corresponding margin was 4.5%. The increase in the adjusted operating profit was supported by the return to physical stores and cross-border trading, higher volumes from the acquired Bergendahls Food, the divestment of Mat.se and effective cost control in our store operations. This compensated for higher purchase prices, higher electricity and fuel costs and negative currency effects.
We also reported lower delivery reliability than normal for Dagab as a consequence of substantial delays in incoming deliveries and unusually rapid shift in demand, which resulted in higher logistical costs. However, in all, a strong second quarter with higher profit, but a slightly lower operating margin.
Let me now walk you through segment by segment and turn to Page #16. Let me start by Willys. Net sales growth for Willys amounted to 13% and like-for-like retail sales increased by 11.2%, development, as you have seen well above the market. With the increasing food price inflation, low price is becoming increasingly relevant for the Swedish consumers, which benefits Willys as a leading low-price player. The price development and increased customer traffic in stores explained growth of the Willys concept. And following the lifted travel restrictions between Sweden and Norway in mid-February, the performance of Eurocash significantly improved.
During the second quarter, we once again see a more normal influx of customers from Norway, even though we are still not back to where we were pre-pandemic. Operating profit for the Willys segment increased to SEK 465 million and the margin was 5.1%. The higher operating margin is explained by strong improvement in earnings for Eurocash and overall a good cost control.
Let me also mention the Willys store in [indiscernible] that was tragically damaged by fire last week. Luckily, no one was hurt physically. We estimate the closed store to have limited effect on growth in the next quarter since Willys will redirect customers to our second store in [indiscernible] during the time the damaged stores is being rebuilt, which will take some time.
Moving on now to the next page, Page #17, and we'll now move to Hemkop. Net sales growth for Hemkop amounted to 6.9% and retail sales for Hemkop including Tempo increased by 3.5%. As an effect of the return after the corona pandemic, customer traffic increased in larger stores in central metropolitan locations. However, store close to home and the Tempo chain were negatively affected by decline in customer traffic, a clear post-pandemic effect. The operating profit for Hemkop amounted to SEK 64 million and the operating margin was slightly down at 3.8%.
Let me now comment Snabbgross, with that turn to Page #18. Once again, Snabbgross had a great quarter and posted all-time high sales and operating profit. Second quarter sales increased strongly by 33.7% in total and 29.3% like-for-like. The strong growth is mainly attributable to the recovery of the cafe and restaurant market and by food price inflation. But I also would like to highlight Snabbgross strong development in newly established stores and increased interest in Snabbgross club store concept with a membership growth of over 40%. And with the strong sales development, Snabbgross operating profit increased significantly in the quarter and amounted to SEK 81 million. The operating margin was also substantially higher at 6.2%.
Let me now end up and comment on Dagab, so please go to next page, Page #19. With the contribution from the acquired Bergendahls Food, sales for Dagab increased by 34.1%. Excluding Bergendahls Food, sales growth amounted to 12.7% due to the strong sales to retail chains and service trade. Operating profit was SEK 233 million, which corresponded to an operating margin of 1.4%. Operating profit includes items affecting comparability with the Bergendahls Food integration cost and the structural costs associated with the logistical platform restructuring.
The adjusted operating profit amounted to SEK 289 million and the adjusted operating margin was 1.7%. The higher operating profit is explained by the strong growth and the increased volumes from the acquired Bergendahls Food. At the same time, operating profit was negatively affected by higher fuel costs, negative currency effect and higher logistical costs as a result of lower level of service caused by the product shortages at suppliers and transport-related disruptions.
With that, I'd like to hand over to Anders, who will present our financial position. Please turn to next page, Page #20. Anders, please go ahead.
Thank you, Klas. And then let's turn to Page 21. Let me first sum up the net sales and operating profit for the first half year. Net sales for the group increased with 29.3% to SEK 35.1 billion, including the acquisition of Bergendahls Food.
Store sales for the Axfood group increased by 7% and was stronger than the overall market growth also for the first half year. The operating profit, excluding positive items affecting comparability of SEK 143 million increased with SEK 255 million to SEK 1.480 billion. The operating margin decreased from 4.5% to 4.2%. Items affecting comparability consists of a capital gain of SEK 221 million recognized in Q1 due to the divestment of Mat.se and costs relating to the ongoing integration of Bergendahls Food and structural costs attributable to the new logistical structure in Dagab.
Let's then turn to Page 22. Looking at the cash flow for the period. We continue to show higher operating profit compared to last year, mainly due to the capital gain from the divestment of Mat.se. However, excluding one-offs, we can see a strong underlying performance in all operating segments. We have a positive deviation of SEK 107 million in net working capital compared to last year. This is mainly explained by an increase in accounts payable.
The investing activities for the period increased with SEK 961 million compared to last year due to our automation investment in Dagab and I'll come back to the investments in the next slide. During Q2, Axfood carry out the rights issue of just below SEK 1.5 billion to finance the acquisition of Bergendahls and the minority item in City Gross. The rights issue also enabled us to continue to further invest in our operations. In connection with the rights issue, we made a net debt amortization of SEK 1.1 billion during the second quarter.
The AGM decided the total dividend for 2021 to SEK 7.75 per share, an increase of SEK 0.25 compared to last year. SEK 4 per share was paid out in Q1 and the remaining amount, SEK 3.75 per share will be paid out in September. And to summarize, the total cash flow for the period amounts to minus SEK 405 million compared to SEK 10 million last year.
And then let's turn page to Page #23. As I mentioned, total investments for the first half year amounted to SEK 1.435 billion, SEK 839 million higher than the first half year 2021. The increase is mainly explained by higher investments in our wholesale operation and we follow our plan for 2022. During the second quarter, SEK 538 million was paid out for investments in automation and for the first half year, SEK 721 million was invested in automation. The investments in our retail operation during the first half of the year was down somewhat compared to last year due to lower pace in acquisitions and establishments. Refurbishments were in line with last year. And the total investment in our joint operation were also in line with last year.
Then turn page to Page 24. During the first half year, the net working capital rolling 12 as a percent of sales was minus 3.6%, a setback of 0.3% compared to last year. The NBC is negatively impacted by the UTP regulation and the dilutive effect of the Bergendahls acquisition. Despite UTP, we have continued our focus on working capital with improved payment terms and accounts payable. And that together with our SCF program helps us increase the accounts payable.
Going forward, we will continue our focus to mitigate the UTP effect and the dilution due to the Bergendahls acquisition. And as we have communicated earlier, we expect this figure to stabilize on approximately minus 3% after the full effect of UTP and Bergendahls.
Next page, Page 25. The net debt, excluding IFRS 16 has decreased with SEK 721 million during the first half of 2022 to SEK 515 million, mainly as a result of the rights issue, but also negatively impacted the automation investment and debt amortization. The net debt-to-EBITDA ratio has decreased to 1.2% and the equity ratio has increased with 4.9 percentage points to 24.8% compared to Q2 last year. The improvements on the ratios was explained by the rights issue.
And then turn to Page 26. The capital employed increased with approximately SEK 3.3 billion compared to Q2 last year due to the acquisition of Bergendahls. Capital employed was in line with year-end 2021. And return on capital employed was 26.4%, slightly above Q2 last year.
And that ends my part of the presentation and I thereby hand over to you again, Klas.
Thank you, Anders. And let me now give you a brief update on some of our focus areas going forward. So with that, we are now on Page 27, but let's please go to Page #28.
On this page, you can see the 6 growth promoting and efficiency enhancing priorities that we work with to become the market leader in affordable, good and sustainable food. And today, I will focus on 3 relevant topics within our strategic agenda. The integration of Bergendahls Food; our investments in our supply chain and sustainability.
So please move to the next page, Page #29. The integration of Bergendahls Food into Dagab operation is proceeding well in line with plan. During the second quarter, a common sourcing and business organization has been established, while we from now on will refer to Dagab Hassleholm instead of Bergendahls Food.
The wholesale conversion to Dagab systems and processes was completed at the end of April, supporting not only City Gross, but also other external customers, such as Mathem, [ Bellna ], Foodora and [ Mate ], among others. This is an important step for our ongoing efforts to ensure that economies of scale and expected synergies are being realized. Preparation for the conversion of City Gross point-of-sale system began in May and conversion of the first City Gross store was done in June. The conversion is expected to be completed around the end of 2022. We put obviously a lot of effort in all aspects of the integration on Dagab Hassleholm to make this integration as smooth as possible.
Please go to the next page, Page #30. And Axfood's investment in logistics will form the basis of an efficient, flexible and supportive product supply and a stronger customer offering to the group store chain as well as external customers. We are actually building a top-class nationwide logistical platform with a high automation level in Balsta, north of Stockholm, replacing 6 of our current warehousing operations. We're also investing substantially in several of our sites to create an even more competitive product supply.
Please go to next page, Page #31. And on this slide, it shows the major components of our future logistical platform. We are well on track, and it's fascinating actually to witness the progress in all of these initiatives. In Balsta, approximately 95% of automation for dry supply is now in place. Advanced tests will begin after the summer and the ramp-up of the facility will start towards the end of the year. Also, the installation of the largest rooftop solar panel facility in Sweden has begun on the roof of the facility in Balsta. For the high-bay warehouse in [ Backain ], Gothenburg, we are planning to start construction this autumn. And in Landskrona, construction is well underway. The manual part will be put into operation in November and will be supplemented with automation during the later part of 2023.
Please go to next page, Page #32. It's also important for me to emphasize the importance of sustainability because when food price increase, there is a risk that sustainable and healthy food will be given less of a priority to the consumers. However, as we all know, the climate and environmental challenges are bigger and more critical than ever. And sustainability is a priority for Axfood in all parts of our business.
We have a broad agenda that includes activities linked to the entire food system. And let me just highlight a few of the initiatives that we've been working on during this quarter. Hemkop introduced climate signage in all stores to guide customers to sustainable choices through tips on, for example, seasonal vegetables, plant-based proteins and dishes made from saved ingredients. To increase the level of knowledge and help suppliers in different countries to reduce their emissions, a new climate educational tool has been developed by Axfoundation and Axfood among others.
And as the first company in the grocery industry, Axfood has built a database that includes approximately 18,000 different packaging materials. The database will speed up the transition to recyclable packaging of renewable or recycled material. To increase the supply of more sustainable product produced seafood, Axfood supports RE:OCEAN, which is a large-scale and circle investment in land-based salmon farming. Every year, 10,000 tonnes of salmon will be produced in one of the largest Swedish food investments ever. But we need to do more and we need to work together.
I strongly believe there is a need for both courage and action in politics with measures that benefit both the environment and household wallets. Therefore, Axfood has proposed to reduce the food VAT for sustainable food as a way to speed up green transition of the food system. A differentiation of VAT would give consumers the opportunity to buy sustainable food at lower prices, while at the same time motivating food companies to make changes so their goods meet the requirements for different sustainability labels.
Please now go to Page #33. And let's now turn to the outlook for 2022. And the guidance we gave last quarter is unchanged, but please go to Page 34. The 2022 operating profit will be charged with certain structural costs associated with transition to the new logistical center and the integration of Bergendahls Food totaling approximately SEK 340 million. Capital expenditures are expected to amount to between SEK 2.6 billion and SEK 2.7 billion, excluding acquisitions and the right-of-use assets. And as a reminder, we plan to increase the rate of expansion and establish 8 to 13 new stores during this year 2022.
And with that, let's turn to the final page of the presentation, Page 35. And let me summarize. The second quarter of 2022 has been a quarter with a strong growth and market gain in exceptional times. But we are well-positioned in the prevailing market and the integration of Bergendahls Food is proceeding well in line with plan. We have a very strong financial position, supported by the rights issue and a solid agenda for continued growth. And that ends the presentation from our side today.
And I will now like to hand over to the operator to open up the line for questions. Thank you.
[Operator Instructions] The first question comes from Niklas Ekman at Carnegie.
I have a couple of questions. Firstly, I'm curious if you could elaborate a little bit on price elasticity. If you look at the market now we have inflation of almost 9%, but the market only grew 5.5% as you said, so 3.5% volume decline, even more so in June. But looking at your numbers, we see fairly limited impact of that. Can you elaborate a little bit on your view on price elasticity and why you are kind of not seeing any tangible elasticity in your numbers? That's my first question.
My view and I think that -- and I commented on it a bit that there are 2 major trends at the moment. One is the post-pandemic trend and then you have the inflation. And it is our viewpoint that we track pricing frequently and that we are more or less in line with the rest of the market in this area. So then we have grew or more than the market is very much related to some of our, I think, strong concepts, particularly as you've seen, Willys is doing a really strong quarter.
So from that, that is one way of looking at the elasticity. Then I think also, as I pointed out, it's a bit early. We see some trends. We see some increase in campaigns. We see some increase in frequency, a little bit lower ticket value, but we are very early in this. And I think it's going to be interesting to see how this starts to fall out a little bit later after the summer. But the elasticity is there, I would say, if you look at the price that we have in the market, we are equally competitive. It's just that we have gained some more volumes in this quarter.
And kind of on that topic, if you look at Willys did very well during COVID while Hemkop was struggling. And now obviously the comps are difficult for Willys, they're easy for Hemkop and still you're kind of seeing the same trend or even more so an acceleration in Willys and a continued weakness in Hemkop. What would you attribute this to?
Well, I think if you look at the numbers, the Hemkop and that here -- so even if we only not comment specifically the franchise and the group on, but it's actually the group on is very clear in the report. That's the number we are reporting, you see that Hemkop is actually growing more than the market in that aspect. And that is obviously -- and while the franchise is more -- have a more position themselves in the -- where the consumers are living. So they are more -- they had a very strong development during the pandemic. Now they are falling back a bit.
Tempo chain that is now included in our numbers, if you look at that 3.5% had a very strong development in the -- during the pandemic and is now meeting very high comps. So I think it's more of a return a bit on the pandemic at this stage that differs more than anything else. And then we, of course, in our -- so we need to measure that towards the market. But then of course, we also have Willys and Willys is clearly doing -- outperforming the market in this period, also included and supported by Eurocash. But my point, Niklas, is that we shouldn't say that Hemkop is really struggling because if we are only comparing them to Willys, you need to compare it to the market.
Fair point. And on the topic of Eurocash, which you mentioned, how far from 2019 levels are you at the moment, is it possible to quantify?
Well, we are, I would say, could we be 10%, 15% off from fully speed, which is very much related. When we look at traffic, you get some traffic data from the borders, it relates a little bit to that traffic decline. So not fully up to speed yet, but also significantly, obviously, better than we've seen for a couple of years. And I think we'll see how this evolves. We have hopes that this will continue to strengthen, but we'll see.
Perfect. And a final question for me. Just you mentioned supply constraints. You mentioned the service levels here. I mean, obviously your margins are holding up here very well. But have you seen any problems in forwarding input costs? And I am talking both the raw material, but also petrol, transportation, all those things, forwarding those immediately, have there been any costs that you have been forced to absorb short-term? Or are you pretty much forwarding all the costs you're seeing more or less directly to consumers?
Well, I think we are -- as I mentioned, we -- that's also in the report that we are -- the costs that we see from the suppliers is not fully reflected. There is some time lag in all of this. And I think we'll continue to see some time lag. We also have higher costs as you point out. And I think we are at this stage also very much focusing on getting our service levels in order, which is obviously -- that drives more and more of an inefficiency more than direct costs, I would say in our system, which obviously we are not happy about.
But -- and we're working, of course, with the suppliers on that as we have the transports is a struggle, but some particular delay, which means that even if we don't have lack of food in our stores, there could be also lack of days when they come in, which could mean that you get some shortages as from time to time. But in general terms, it's more of a productivity constraint that we want to see moving up later on.
The next question comes from Fredrik Ivarsson at ABG.
I have a few as well. I'll take the questions one by one. So Klas, you mentioned the unusual rapid shift in demand, which impacted the margin in Dagab. Curious, can you give some color to this statement? Was it a product shift or a shift between the chains or maybe both I suppose?
Well, I think I mentioned it related to -- there is obviously a shift now and you're coming into some of the details here in terms of how we operate, where we historically have a lot of good data in terms of when we have campaigns or with products, how they will spend in the chains with now sudden shifts. Just take as an example, you can take coffee or you can take that as a massive increase, obviously the campaigns with coffee is now driving more than it did before. So you have -- and the same goes for many other areas.
So it's a bit of a shift within this assortment, so to speak, that is struggle. So slightly more -- or slightly -- some higher effects on consumers is more attracted to campaigns, which is expected, but then also in the normal flow where we are adjusting our data based on historically, we've gone on historical data. Now we need to look at it a bit different and how that we can -- so the challenge obviously is to forecast and see how much we should buy in on each of the assortment so we can meet the new patterns out there.
That's clear, understood. And the second one on food price inflation. You mentioned a couple of times you haven't been fully been able to compensate for the higher food production costs and so forth. Does that mean that you expect CPI to actually accelerate from the almost 11% that we saw in June going forward?
My -- I think, as I said, how much and how this will turn out is obviously -- it's difficult to say a number. But there's a pressure we are currently seeing from the suppliers in terms of price increases going forward just is a clear indication of that, unfortunately, we have to expect that you will see some further inflation moving forward, particularly in the short-term. How much and how this will turn out, I think it's also very much related to what happens now moving forward. There are some indications of that raw materials will go down. But obviously it depends on many factors.
We, at this stage, is also a bit concerned looking into the heat wave that is coming into Southern Europe. There are some countries there that could hit the farming. So how it will turn out is difficult, but short-term, I expect that you will continue to see further inflation.
Yes. That's probably a good guess. And then last question, a follow-up on Niklas' question on Eurocash. You said 10% to 15% below pre-pandemic levels. Is that a good proxy for us to use in terms of EBIT? So can we assume 10% to 15% lower EBIT in Eurocash versus Q2 2019?
Well, we are now still in the ramp-up. We also have one more store, so I was referring more to like-for-like. So we have one more store in the chain today. And obviously we have done a lot of work with Eurocash. So how this actually will turn out going forward, it's -- I will not guide on that. But I think we are though fairly pleased on that the terrible red numbers we saw during the pandemic is now up to black numbers again. And we hope now which is going to be the strongest period, Q3 here, will turn out good. So -- and also hope that the traffic will continue to increase.
[Operator Instructions] There are no more questions at this time, so I hand the word back to the speakers for any concluding remarks.
Well, I just want to conclude, thanks for listening and I wish you all a nice summer. Thanks a lot.