The ICA Group`s Annual Report 2006

Transcription

The ICA Group’s Annual Report 2006
Contents
This is ICA
1
President’s statement 6
Goals and strategies Market and trends
9
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 addition, ICA owns a 5-percent interest in the company Netto Marknad.
Vision
We make every day a little easier.
MissionTo 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
" "
"
ICA Sverige
72 %
ICA Norge
27 %
ICA Banken
0.7 %
Others
0.3 %
Wholly owned companies
ICA Sverige is one of Sweden’s leading food retailers. It is the principal
supplier to ICA retailers, who own and manage their stores independently.
Sales excl. VAT: SEK 48,301 million
(incl. Etos)
ICA Norge is one of Norway’s leading food retailers, with its own stores
as well as franchises.
Rimi Baltic is one of the leading and most modern food retail chains in
the Baltic region. Sales are not consolidated in the ICA Group 2006.
ICA Banken makes it easier for customers of ICA’s Swedish stores to
manage their finances and in the process strengthens their ties to ICA.
Business volume excl. VAT:
SEK 13,480 million
Employees: 4,752
Employees: 4,043
Employees: 9,132
Employees: 174
Etos operates a chain of wholly owned stores that combine health and
beauty products under one roof. A process has been initiated to wind
up Etos’ stores in Sweden.
Sales excl. VAT: SEK 34 million*
Employees: 16
Partly owned company
Netto operates a hard discount chain. In early 2007 ICA reduced its
interest in Netto from 50 percent to 5 percent. The concept comes
from Denmark, where Dansk Supermarked manages the chain. Sales
are not consolidated in the ICA Group.
* Included in ICA Sverige’s net sales.
Employees: 861
Ownership structure
Organization 2007
President and CEO
Kenneth Bengtsson
Marketing
Ingrid Jonasson Blank
ICA Sverige
Peder Larsson
ICA Norge
Trond Kongrød
Rimi Baltic
Antonio Soares
ICA’s corporate responsibility
In seven position statements, the ICA Group has
summarized its stance on ethics and corporate
responsibility, a philosophy it calls “ICA’s good
business.” The aim is to be a sustainable company
driven by the following values:
ICA will be driven by profitability and high ethical standards.
ICA will listen to customers and always base
decisions on their needs.
ICA will nurture diversity and growth among
its employees.
Finance
Sonat Burman-Olsson
Assortment &
buying
Anders Nyberg
Real Estate
Bo Liffner
ICA Banken
Jörgen Wennberg
ICA AB is 40 percent owned by Hakon
Invest AB (publ) and 60 percent by
Royal Ahold N.V. of the Netherlands.
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
Amsterdam and New York.
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 member organization for Sweden’s ICA
retailers. The remaining 33 percent is
owned by individual shareholders.
Global Compact’s ten principles for corporate responsibility.
ICA is a participant in the United Nations business initiative Global Compact and supports
the following ten international principles.
Businesses should:
1. Support and respect the protection of internationally proclaimed human rights
in areas they can impact.
2. Make sure that they are not complicit in human rights abuses.
3. Uphold the freedom of association and the effective recognition of the right
to collective bargaining.
4. Eliminate all forms of forced and compulsory labor.
5. Effectively abolish child labor.
6. Eliminate discrimination in respect of employment and occupation.
ICA will maintain an open dialogue internally
and with the community.
7. Support a precautionary approach to environmental challenges.
8. Undertake initiatives to promote greater environmental responsibility.
ICA will guarantee product safety and quality.
ICA will promote a healthy lifestyle.
ICA will adopt sound environment practices to
promote sustainable development.
9. Encourage the development and diffusion of environmentally friendly technologies.
10. Work against all forms of corruption, including extortion and bribery.
2006 in brief
he ICA Group’s net sales amounted to SEK 67,395 million (66,096),
T
an increase of 2.0 percent compared with 2005.
perating income amounted to SEK 2,297 million, an increase
O
of 18.4 percent compared with 2005.
he operating margin was 3.4 percent, an increase from
T
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
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
Net sales
Financial information
ICA AB will publish the following financial reports in 2007
May 15, 2007
Interim report January–March
August 21, 2007
Interim report April–June
November 13, 2007
Interim report July–September
Madelene Gummesson,
[email protected]
telephone +46-8-561 505 83.
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?
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
year, particularly for our small stores, which we
are very pleased about. This success is the result
of our strategy to reduce prices to meet customers’ wishes.
In Norway, where we underwent a major
restructuring of the store network during the year,
sales declined. ICA Norge is building a completely
new platform, and a large number of stores have
been sold, resulting in lower volume. The major
investments we are now making in new stores
and modernizations will cost us in the short term
but pay off in time.
Streamlining and coordination
ICA is not the same company it was four years
ago, organizationally or operationally. Our journey
has taken us down three paths. We have focused
on our core business, set our sights on market
leadership in the markets we serve, and more
clearly coordinated activities within the Group.
As part of the focus on our core business and
market leadership, several major structural deals
were completed in 2006. We divested ICA Meny
and reduced our interest in Netto, instead acquiring Kesko’s 50-percent share of our joint venture,
Rimi Baltic. Through the joint venture, we have
06 1
ICA ranks first on Nordic Brand
Academy’s list of Swedish companies
with the best reputation.
ICA GROUP
06 2
ICA AB presents strong results for
2005.
ICA is the first retailer in Norway to
introduce the keyhole symbol of
healthy foods.
taken a shortcut to market leadership in the Baltic
countries, an expansive region where we are very
optimistic about the future.
We made another strategic decision in 2006
– to wind up Etos stores in Sweden. We will instead
put Etos’ expertise in health and beauty to use in
ICA stores. There is great potential here for higher
sales.
During the year ICA Banken reported its first
operating profit, reaffirming the bank’s positive
trend for the year.
Continuous change
The original ICA idea – to have individual retailers
work together – is still the basis of ICA’s operations. Within the framework of our Group structure, we are seeking a balance between coordination and local accommodation. We constantly
reevaluate what should be done centrally or
locally. The dynamic nature of the business is the
key to ICA’s success.
In 2006 considerable emphasis was placed on
coordination to improve efficiencies and keep
pressure on costs. In 2007 we will further simplify
the organization and strengthen international purchasing work in particular. At the same time subsidiaries are being given greater responsibility for local
06 3
An Amnesty study gives ICA a good
rating for its management of risks
associated with human rights.
All Maxi ICA Stormarknad in Sweden
are certified for the Nordic Swan
eco-label.
06 4
ICA’s annual report is
published.
adjustments in every market where we operate.
The old saying “all business is local” still rings true,
and listening to customers is crucial to success.
Price pressure is here to stay
The price-cutting campaign we started in 2005
was by no means a temporary measure but a
necessity to remain competitive. We continued
to reduce prices in 2006, although the emphasis
was on significant cuts on specific products rather
than cuts across the board. Still, Swedish food
prices rose slightly during the year, mainly due to
more expensive imports of fruits, vegetables and
fish. The total price increase would have been significantly higher, however, if we had not worked
so diligently to keep prices in check. Our position
with regard to major suppliers is clear. We trust
them to take their share of responsibility and
improve efficiency in their part of the value chain.
We will only accept price increases warranted by
higher commodity or energy prices.
Our strategy is firm
We begin 2007 with a focus on four areas: ICA
Norge, product selection, human resource development and store renovations. We are working
intensely with improvements in all four areas.
ICA Norge
ICA Norge will be our top priority in 2007. Major
changes are under way, and further efforts are
needed to finish the job. Quality is our highest
priority, and we will be the best in the market in
terms of stores, product range and service. First
we have to be the best; then we can grow and gain
market shares.
06 5
ICA signs two agreements to sell real
estate holdings. One is a distribution
property in Helsingborg and the other
25 store properties in the south and
west of Sweden.
06 6
06 7
ICA AB signs an agreement to sell
ICA Meny to Nordic Capital.
The Swedish ICA stores post a
record volume increase in July.
www.ica.no is launched in Norway.
ICA takes part in a dialogue with the
EU Commission on the problem of
overweight.
06 8
ICA reports strong results for the first
half year.
ICA GROUP
Human resource development
ICA already ranks high as an employer in many
surveys. By offering the right development programs, incentives and career opportunities,
we will further strengthen our position as an
employer. Retailing is looking up, and we have
taken advantage of that to gain a position as the
most popular retail company in Sweden, which
we intend to achieve in Norway as well.
Store renovations
We have had a very ambitious program of new
store openings in Sweden, Norway and the Baltic
countries with grand openings practically every
week. We have a well-formulated plan for more
new stores in the years ahead, while also working to enhance our existing store network. The
average life of a store is becoming shorter, and
renovations are usually needed after only four or
five years in order to live up to customers’ expectations.
Product selection
Developing the right product range is critical for
ICA. I am convinced that the company that can
offer the best products and is the quickest to put
new items on the shelf will win the battle for customers. The health trend is obvious, and we are
continuing to improve our “ICA Gott liv” line. We
also know that customers are becoming more
demanding with regard to price and product
selection, and we will therefore continue to cut
prices and improve our range to include more prepared meals and organic products.
In conclusion, I would note that the great progress
we have made is the result of hard work, higher
store sales and major efficiencies which have
been possible thanks to the efforts of our employees. The organizational change we plan to implement at the beginning of 2007 will make us even
more efficient, and we will turn our attention to
further cost cuts during the year.
I am confident that the ICA idea, to combine
local management with central cooperation,
which will celebrate 90 years in 2007, is still a winning concept. We will continue to challenge ourselves whether we face success or setbacks.
Kenneth Bengtsson, President and CEO
06 9
ICA’s new warehouse in Helsingborg
is opened.
ICA Banken reports its first
operating profit.
The EU Commission approves the
sale of ICA Meny.
06 10
ICA Banken tops the customer satisfaction ranking by the Swedish Quality
Index.
ICA receives a prestigious logistics award.
ICA signs an agreement with Kesko Livs
to acquire Kesko’s interest in Rimi Baltic.
ICA and the Swedish Cancer Society
sponsor a campaign called “Buddy with
your Body” in Swedish schools.
ICA GROUP
06 11
ICA sells Christmas bread to benefit
the World Childhood Foundation.
All ICA Kvantum stores in Sweden
are certified for the Nordic Swan
eco-label.
06 12
The EU Commission approves ICA’s
acquisition of Kesko’s interest in Rimi
Baltic.
ICA signs an agreement with Dansk
Supermarked to reduce its holding in
Netto Marknad.
ICA AB decides to dissolve the Etos
stores in Sweden.
Goals and strategies
ICA’s vision is to make every day a little easier. Its mission is to be
the leading retailer with a focus on food and meals.
Operating margin, %
Financial goals
ICA’s long-term goal is to increase sales faster than
the total market is growing in each sector.
The profitability goal is an operating margin
(EBIT) of 3.5–4.0 percent. The return on equity
over a business cycle should be at least 14–16 percent and the long-term equity/assets ratio 30–35
percent.
Strategies
ICA will be a far-sighted, dynamic company with
solid finances and a commitment to the environment and social issues. The watchwords for ICA’s
way of working are prioritization, coordination,
simplification and cost cutting. In concrete terms,
the Group has formulated the following strategies
for its operations:
tilize economies of scales by coordinating
U
central functions and concepts
ICA will coordinate central functions and concepts at the Nordic level to take advantage of
synergies between companies. The efficiencies
that are gained will be largely reinvested in lower
prices.
Locally adapted concepts
While utilizing its scale to coordinate and take
advantage of synergies, ICA will continue to
adapt its local offerings to customer demand.
These local adjustments can be made by the
individual retailer or through concepts designed
for different geographic markets.
Cost efficiency
The ICA Group is working to improve the efficiency and reduce costs. Efficiency improvements in the organization and methodologies
lead to significant savings each year.
Price and assortment
ICA will focus on cutting prices while enhancing
its product range and improving efficiencies to
give customers what they want.
Common format strategy
The ICA Group has adopted a strategy for operations in Sweden and Norway consisting of four
formats: hypermarkets, supermarkets, convenience stores and discount stores.
!
ICA’s long-term objective is an operating margin of 3.5–4 percent. The operating margin rose in 2006 compared
with 2005 on the strength of a sales
increase by ICA Sverige and higher
capital gains from property sales.
Return on equity, %
ew stores and renovations
N
ICA will open new stores and renovate existing
units. By improving the store network and its
offerings, ICA will meet a variety of customer
needs.
Offer an attractive product range focused on
private labels, fresh foods and non-foods
ICA will continue to emphasize fresh foods,
non-food items and private label products. The
Group’s range of private label products gives
customers greater choice, high quality and lower
prices. These measures will increase sales and
profitability for retailers and the Group.
Corporate responsibility
ICA will maintain a strong local presence wherever it operates. The Group will contribute to a
sustainable society by minimizing the impact of
its operations on the environment and taking
responsibility for the conditions under which its
own products are produced. Moreover, ICA promotes the health of its customers and employees by offering safe and nutritious products and
continuously improving its work environments.
!
The Group’s objective is an average
return on equity of at least 14–16 percent over a business cycle. The return
on equity increased in 2006 to 25.7
percent.
Equity/assets ratio, %
!
The long-term objective for the
Group’s equity/assets ratio is 30–35
percent. The equity/assets ratio rose in
2006 to 28.8 percent.
ICA GROUP
personal
What are we going to eat tonight? It’s a question we all know too well. Convenient stores, inspiring
recipes and a broad range of attractive products are ICA’s way to help customers find an answer.
Taste and needs are personal, but ICA’s job is to listen to all its customers and try to meet their
various needs. Everyone should feel that we have something just for them – whether it be a family,
a young student or a senior citizen.
Market trends
A number of trends are impacting spending patterns and demands
on the retail sector. Stressful lifestyles, higher disposable income and a
growing interest in health are affecting what consumers buy. Retailers
constantly have to adapt their offerings to meet these trends and needs.
Efficiency and simplicity
Time is in short supply for most working people,
especially families with young children. At the
same time that more of us are working, we expect
a meaningful life outside our jobs and a chance for
self-realization. To find time for everything, many
people look for simple, time-saving solutions.
The search to save time is evident in every
aspect of the meal process – from planning and
shopping to actually sitting down to eat. We
expect to quickly find something in the store and
to quickly get in and out. We are also spending less
time preparing meals, and there are even those
who want to eat quickly.
Demand for food that is quick and easy to cook
is steadily growing, and retailers are meeting it
with a wide range of prepared and semi-prepared
foods. The need for speed is also forcing retailers
to make it easier for customers through clearer
signage, shorter traffic patterns, faster payments
with the help of self-service check-outs, and easyto-find recipes in stores and on the website.
Health and well-being
According to the World Health Organization
(WHO), overweight and weight-related diseases
are one of the greatest epidemics of our time.
Around 25 percent of Swedish children are overweight and some 40,000 are obese. Against this
backdrop, the health trend is becoming stronger year after year, and warnings and debates on
sugar, fat and various diets bombard us practically
on a daily basis.
Retailers expected to take their share of responsibility and offer foods that inspire and are good to
eat, but also help us live a healthy life. The health
trend will be an increasingly important factor
in the stores and products customers choose.
Health-conscious customers carefully plan what
they buy to make sure the food they eat not only
tastes good but is nutritious as well. More consumers also want help finding healthy alternatives
in stores as well as answers to their questions on
healthy cooking and diets.
12
ICA GROUP
Eating out is increasing
As disposable income rises and people feel pressured by a lack of time, the number of restaurant
visits is growing.
Fast-food chains and traditional restaurants
have experienced rapid growth in recent years.
Many people regard prepared meals as a good
alternative to cooking themselves. The biggest
difference between young families and people
without children is that the latter prefer to eat out,
while families often buy take-out.
Restaurants, which account for 27 percent
of meal purchases in Sweden, are regarded as a
strong competitor to retailers. Yet this also presents an opportunity for retailers, which in fact
already have nearly half the market for frozen,
refrigerated and fresh prepared food.
Experience and entertainment
Disposable household income is rising at the same
time that the increase in food prices has slowed in
recent years. People are choosing to spend more
of their additional money on travel, culture and
leisure activities. According to Statistics Sweden,
food purchases decreased by 1.7 percent between
1996 and 2005, while leisure and culture increased
by 1.2 percent and furniture and decorating rose
by 1.7 percent. More than ever, Swedes and Norwegians want to be entertained.
Internationalization and growth in foreign travel
have led many to want to try exciting new foods
at home. We are devoting more time to sophisticated cooking on weekends and want to find the
same ingredients in our neighborhood store that
we eat on vacation in Tuscany.
Many people are trying to change the bulk
shopping they generally do on weekends from a
“necessary evil” to an activity for the whole family. We want it to be fun to go shopping. One way
stores usually try to satisfy this demand is to offer
demonstrations of new products and inspiring
recipes in stores. Creating a more appealing environment is a future challenge for many stores.
More seniors and single-member households
The older share of the population is growing as
the large generation born in the 1940s begins
to retire. Forecasts indicate that the number of
Swedes ages 55–75 will increase from 20 to 24 percent between 2000 and 2020. Many in this generation have financial resources – around 70 percent
of their wealth is in disposable assets they are
happy to spend. They are active and fit and often
have sophisticated habits. The difference in preferences between older generations and younger
ones is shrinking.
There is a connection between the growing
population of seniors and the rising number of
single-member households, since so many older
people live alone
The increase in single-member households is
placing growing demands on stores to provide
smaller package sizes and offerings based not only
in large quantities. Many people who live alone also
lack storage space and in essence use stores as a
cupboard, so retailers have to adapt accordingly.
ICA meets the health trend head on
Demand for healthy products is growing stronger, and retailers and suppliers have realized
this trend is here to stay. To make it easier for
customers to find healthy alternatives on store
shelves, ICA has developed the ICA Gott liv line.
“Customers are informed and expect to be
inspired by products and find what they are looking for. With ICA Gott liv, we want to show we
offer products that are good to eat and good for
your health,” says Christina Karlsson, dietitian at
ICA AB.
The line, which was launched in 2005, includes
around 70 products in various categories. Most
meet the tough new keyhole criteria for sugar
and sodium. ICA Gott liv also offers healthy versions of less nutritious foods such as ketchup,
juice and jam.
ICA is continuously launching new products
in its healthy line. For example, it was the first in
the market to introduce a keyhole-labeled fresh
pasta – a high-fiber fettuccine.
“Through a contest on ICA.se, we learned that
this was the product customers wanted most.
It is tasty, nutritious and easy to prepare, which
people appreciate,” says Christina Karlsson.
During the year ICA Gott liv products were
added at stores in Norway.
New competence demanded of store personnel
As the education level of the population rises,
consumers become more conscious of, and
informed about, products, services and companies. They also place higher demands on supermarkets and their staff, expecting them to be able
to answer questions where products come from,
how they were purchased and their impact on the
environment and health.
Food retailers therefore have to continuously
provide training and competence development
for the entire value chain, covering ethics and the
environment as well as food safety and health.
This also means making retail a more attractive
career alternative for new, qualified employees.
ICA GROUP
13
inspiring
All of us want to be inspired in our daily lives. To do a good job, you need an inspiring and enriching
work environment. When it comes to a good meal, it takes exciting recipes, modern products and
attractive stores.
ICA’s corporate culture gives every employee clear goals and insight into how they can contribute to the company’s success. If ICA offers a fun and inspiring workplace, it will impact our entire
business, and be felt by customers in our stores.
The ICA Group
streamlines operations
The ICA Group has a simple organization to facilitate coordination
and speed up decision-making. In 2006 ICA completed a number of
structural deals to further streamline operations. The goal is to be a
leader in every market where ICA operates.
To handle the growing competition in the Nordic
retail market, ICA constantly tries to create and
maximize synergies between Group companies. The ICA Group’s organization is designed to
increase opportunities for coordination and quick
decision-making.
The organization frees up resources for subsidiaries to devote to local customer offerings.
ICA’s focus on its core business and market
leadership in all the markets where it operates is
the reason for the structural deals during the year.
The sale of ICA Meny, liquidation of the Etos stores
and reduced interest in the discount chain Netto
helped to streamline operations during the year.
Moreover, ICA acquired Kesko’s 50-percent interest in the joint venture Rimi Baltic and is now the
sole owner of the Baltic operations.
In 2007 ICA will focus on the Norwegian operations, product selection, human resource development and store renovations.
Product focus
ICA tries to offer customers a better, more attractive product range adapted to what they want
rather than what suppliers have to offer. Category
management, i.e., defining the product range in
the various countries and various store formats,
has therefore increased in importance.
An important element is to learn more about
customers’ needs, desires and buying habits.
With this knowledge, ICA can develop a range
with breadth and depth – in other words, a large
selection of popular products in a variety of price
classes. Fresh foods, non-foods, prepared meals,
and healthy and organic products are all part of
this work.
Another important aspect of the ICA Group’s
strategy is private label products, where customer
demand steers the offering. ICA’s private label
range offers customers quality products at lower
prices than the market leaders, at the same time
that they strengthen customer loyalty.
16
ICA GROUP
Work with private label products also gives ICA
insight into what it costs to develop and produce
various products, which is another way to help it
reduce prices.
Around 40 analysts work on preparing negotiation documentation and studying the production chain for various product groups to identify
potential cost savings and efficiency improvements.
More and more suppliers now admit that the
rapid growth in private labels is inspiring them to
be more efficient and innovative in their product
development, which also benefits customers.
Purchasing cooperations lower prices
ICA’s Nordic purchasing organization was created
in 2004 to coordinate the Group’s purchasing. The
goal is to continue to offer customers good prices.
One way is by being a stronger negotiating partner. ICA has been working for years to coordinate
purchases between its companies and through
close cooperation with Ahold.
The purchasing cooperation with Ahold has
advanced the furthest in fresh foods and private
label products, where an organization has been
developed for international purchases. The cooperation is continuously expanded to new categories such as exotic produce. The benefits in terms
of improved terms and lower costs are increasingly evident.
One of ICA’s most important strategies is to
enter into long-term partnerships with selected
suppliers. Together, they can analyze the value
chain and identify possible cost savings. Most of
the cooperations in these areas are with suppliers
of fresh foods and private label products.
Logistics
ICA is constantly working to improve efficiencies and reduce costs, which will benefit customers through further price cuts. In logistics, this is
evident in the new Nordic distribution network
which will be able to handle larger volumes and
high-quality fresh foods with long shelf lives. In
the process, ICA is taking responsibility for shipments from suppliers so that it can optimize transports to stores. Total exhaust emissions are being
reduced by about 20 percent compared with
today’s level for the same amount of goods.
During the year ICA opened a new warehouse
in Helsingborg. The ultramodern, 63,000 sq. m.
facility marks the first major link in ICA’s new distribution network. The highly automated warehouse will stock every product group except nonfoods and have 400 employees when fully ramped
up. Daily deliveries will be shipped to around 370
stores in southern Sweden, with frozen food deliveries ranging farther north, to nearly 700 stores.
To complement the Helsingborg warehouse,
ICA is looking at the possibility of adding a new
warehouse in Mälardalen.
Business and format development
ICA is continuously improving its store formats in
Sweden and Norway. The latest example is a new
concept in the ICA Nära profile designed for urban
customers. The central theme of the concept is
convenience and accessibility. Customers will
find it quick and easy to drop in for a few things,
though the stores will offer a wider selection than
traditional convenience stores. One such store
was successfully opened in Oslo in 2006 and
another will open in Stockholm in 2007.
Another store format now under development is designed for ICA Nära stores in residential
areas. The first opened in Norway in fall 2006 and
the first store in Sweden is scheduled to open in
spring 2007. These stores emphasize bread, produce and other fresh foods.
The trend toward one-stop shopping, where
customers find everything they need in one place,
is strong. This is clearly evident in the growth of
the Maxi ICA hypermarket profile. The roll-out of a
health and beauty department has been successful and will continue in 2007. During the year ICA
also developed and began testing a new pet food
department with an expanded product range.
Moreover, Maxi ICA has developed a compact
hypermarket designed for small communities. It
offers the convenience of a hypermarket with less
space but with a carefully selected range of products. Thus far six have been opened in Sweden
and three in Norway, all reporting successful sales.
Additional stores in this concept will be launched
in 2007. The format has been developed by ICA in
close cooperation with Rimi Baltic and is a good
example of how companies in the Group work
together and inspire each other.
ICA is also developing new formats for the
Kvantum and Supermarket profiles. One is the “big
supermarket,” which takes a traditional store and
adds a wider range of foods and meals but fewer
specialty products. In addition to developing new
formats, ICA is improving store efficiency through
better displays, cash register solutions and pricing
information. This is vital to continue to provide
customers good prices.
Prestigious logistics award
ICA was awarded first prize when
logistics specialist Schenker and Silf,
a Swedish supply chain management association, presented their
24th annual logistics awards. ICA was
praised for its packaged meat solution
which, according to the jury, “successfully combines logistics and business
strategy with product quality with
a clear focus on the end customer,
a daring and innovative effort that
serves as an inspiration for others.”
The award brings attention to logistics and highlights innovative thinking
and bold initiatives.
Focus on non-foods
Non-foods are a strategically important area for
ICA and growth opportunities are considered very
good. This line will help ICA consolidate its hypermarkets’ position as the one-stop shopping location customers want.
During the year all employees in non-foods
– from product development and purchasing to
operations and sales – were consolidated in a
single unit to coordinate work throughout the
value chain and thereby improve the offering for
customers and raise efficiency.
Central customer database
It is strategically important that ICA understands
its customers and their needs and desires. During
the year it therefore established a special department to manage the customer database that will
serve as the backbone of this work. Data will be
used to continuously improve the product range
based on customer demand, and in doing so
strengthen customer loyalty to ICA.
ICA’s market analysis department has
researched market trends and customer behaviors in the Nordic market that affect the retail sector. Among the most prominent are the growing
interest in health and wellness, the stressfulness
of daily life and an aging population. Read more
about current trends on pages 12–13.
Branding and marketing communications
ICA’s brand has a very strong position, and it is
the market leader in Sweden. The price-cutting
campaign was the focus of marketing communi-
ICA GROUP
17
cations in 2005. In 2006 there was a shift to other
areas such as health and diversity, e.g., in theme
issues in ICA’s customer magazine, Buffé, and
on www.ica.se. In December the website had a
record 974,538 unique visitors.
In the Norwegian market, ICA markets the ICA
and Rimi brands. ICA stands for the same values in
Sweden and Norway, although the brand does not
have the same strong position in the latter country. Rimi, which celebrates 30 years in Norway in
2007, is a discount concept people trust. ICA represents quality. The launch of private labels and
focus on health are two ways to convince customers of the advantages of shopping at ICA’s stores.
ICA’s private labels
When ICA puts its name on a product, it takes full responsibility. It guarantees that the product has been
quality tested and is acceptable from an environmental and ethical perspective. ICA’s private label products also help to strengthen the profitability of stores and the Group as well as the ICA brand.
Brand
Description
ICA
ICA is the umbrella brand associated with the Group’s core values: simple,
personal, safe, inspiring and modern. The products are sold in ICA stores in
Sweden and Norway.
ICA Gott liv
Launched in 2005, this line of healthy products is designed to make it easy for
customers to find items that taste good and are good for them. The line spans
a number of product categories.
ICA Ekologiskt
The ICA Group’s line of organic products, most of which are Krav-certified.
Several products are labeled EU-organic and available in Swedish and some
Norwegian stores
Skona
The ICA Group’s eco-label for detergents and dishwashing liquids, paper products and cleaners. Available in all Swedish and Norwegian stores.
Euro Shopper
The ICA Group’s discount product line, Euroshopper was developed cooperatively by nine European companies in 15 countries, including Kesko, Albert
Heijn, Dansk Supermarked and the ICA Group. Euroshopper is available in
Sweden, Norway and the Baltic countries.
Novaline*
Lightbulbs and batteries.
Prima Cookery*
Housewares.
Deco Design*
Candles, napkins, paper goods and linens.
Mywear*
Apparel.
*Sold in ICA and Rimi stores in Sweden, Norway and the Baltic countries.
18
ICA GROUP
ICA’s Corporate Responsibility
ICA’s corporate responsibility covers the areas
of quality, health, the environment and social
responsibility. Also included here is the ICA
Kitchen, which is responsible for the Group’s
extensive recipe service, and the Nordic customer
contact, which handled over 100,000 queries and
opinions from Swedish and Norwegian customers
in 2006. Read more about ICA’s corporate responsibility on pages 32–57.
Focus on ICA’s employees
ICA’s new Group organization with Nordic areas
of responsibility required extensive work with
competence development during the year. In
connection with the change, a competence audit
was conducted, which identified five priority
areas: communication, financial acumen, operational leadership, awareness about ICA and store
operations. During the year ICA’s HR department
worked intensely with internal training in all these
areas. Read more about ICA’s employees on pages
40–41.
ICA’s corporate communications department launched a new Group-wide intranet for
all employees in Sweden and Norway, including
office, logistics and store personnel. The new target group-focused intranet replaced seven separate intranets with the aim of increasing solidarity
within the Group and facilitating day-to-day work.
Financial control and development
ICA is working continuously to improve efficiency
in financial control. Shared Services is the clearest
example, having created uniform routines and systems for the Swedish and Norwegian operations
in accounting, payroll management, real estate
management and security, among other areas.
To implement the Swedish Code of Corporate Governance in 2007, an internal control unit
has been created within Shared Services. In 2006
Shared Services identified and documented the
key financial controls in the Group.
The aim of the ICA Group’s real estate operations is to provide suitable facilities and strategic
locations for the Group and ICA retailers by developing and actively managing properties.
Further coordination with new organization
In February 2007 ICA approved a new, simplified
organization with three Group functions: Assortment & buying, Marketing and Finance. Coordination at the Group level has been further strengthened, particularly in international purchasing.
Subsidiaries now have greater profit responsibility
and responsibility for local offerings. The companies take over portions of purchasing and product
development, particularly for fresh foods, as well
as certain aspects of marketing communications.
They also assume responsibility for logistical operations in their country.
The Assortment & buying Group Function
assumes responsibility for developing synergies and coordination in purchasing and product
development. The priorities are the Nordic/Baltic purchasing work and international purchasing
cooperation as well as Group logistics.
The Marketing Group Function, which is responsible for strategic changes, comprises business
development, strategic marketing communications and Corporate Responsibility. The Finance
Group Function has retained its previous structure, although ICA Real Estate reports directly to
ICA’s President and CEO.
ICA’s brand ranks high
On “Brand Day 2006” ICA received the Signum
award, presented for the best example of brand
management by a Nordic company. The jury gives
more weight to long-term branding than individual
campaigns. The Signum award was established
by Groth & Co, a patent and branding agency, and
was presented for the twelfth time.
ICA was also the biggest gainer in last year’s survey of well-known brands by Reputation Institute.
ICA took a big jump from fifth to second place.
Together with Nokia, ICA received the fewest negative responses, according to the survey, which is
conducted in 25 countries, including Sweden and
Norway, and measures public sentiment about
companies and their brands. In Norway, however,
ICA did not place among the 22 most visible companies in the survey
Organization 2007
President and CEO
Kenneth Bengtsson
Marketing
ICA Sverige
Peder Larsson
ICA Norge
Trond Kongrød
Rimi Baltic
Antonio Soares
Finance
Sonat Burman-Olsson
Assortment &
buying
Anders Nyberg
Real Estate
Bo Liffner
ICA Banken
Jörgen Wennberg
ICA GROUP
19
It is obvious to us at ICA that there can be no question about food safety. In fact, the customer
shouldn’t have to give it a thought. We are constantly working to guarantee high quality and product
safety through the entire value chain, from the supplier all the way to store shelf.
A good logistics system is the key to this work, and during the year ICA opened a new warehouse
in Helsingborg, an ultramodern facility covering 63,000 square meters.
secure
ICA Sverige
ICA Sverige is one of Sweden’s leading food retail companies. It is the
principal supplier to ICA retailers, who own and manage their stores
as independent businesses. In 2006 ICA Sverige AB posted revenue
of SEK 48,301 million. Sales in the 1,397 stores amounted to approximately SEK 87 billion, including VAT.
About ICA Sverige
Mission: To be the leading retail company with a focus on food and meals.
Sales 2006: SEK 48,301 million (46,752),
incl. Etos
Operating income 2006: SEK 2,557
million (1,607)
Number of annual employees*: 4,752
(4,917)
Number of stores: 1,397 (1,417)
* E xcluding employees hired by
individual ICA stores
Sales, SEK million
Highlights in 2006
Sales in Swedish ICA stores rose by 7 percent.
The smaller store profiles, ICA Nära and ICA
Supermarket, had the highest sales increases.
The food retailer ICA Sverige operates throughout the country in cooperation with independent
retailers, who own and manage their stores. ICA
Sverige promotes sales to consumers and assists
stores with advice and concrete measures to be
more efficient. ICA Sverige also identifies and
develops new locations and helps to enhance current stores through renovation or expansion, for
example.
ICA retailers in Sweden make an average of
70 percent of their total purchases through ICA
Sverige. The remaining 30 percent mainly consists
of fresh foods, beverages, exotic produce and
bread, which in many cases come directly from
suppliers or local producers. It is in the interests of
individual retailers to make their purchases from
ICA Sverige and help ICA AB to achieve high efficiency and lower costs.
!
* Adjusted according to IFRS.
Market share
! New stores were opened at a fast pace in all store
profiles. In total, 13 stores were opened in 2006:
four Maxi ICA Stormarknad, one ICA Kvantum,
two ICA Supermarkets and six ICA Nära stores.
Most notable was the opening of hypermarkets
in metropolitan Malmö, Göteborg and Stockholm. A total of 45,000 square meters of new
sales space was added during the year. A large
number of stores in every profile were renovated.
The price-cutting campaign ICA Sverige began in
2005 has continued with further price reductions
in selected product categories.
Great effort was devoted to maximizing efficiencies in the product range, and a large number of
popular, value-added products were launched.
22
ICA’S COMPANIES
ICA continued to upgrade its distribution network, opening a new, ultramodern warehouse in
Helsingborg.
The “in-store logistics” project in Sweden and
Norway is designed to improve efficiency
throughout stores and make them more competitive.
Store profiles
To meet customer needs, ICA Sverige has developed four store profiles in the hypermarket,
supermarket and convenience store formats. All
the profiles developed positively during the year.
Hypermarkets developed strongly, with new
Maxi ICA stores opened at a rapid rate. Total store
revenue rose by 13.9 percent.
Stores in the small and medium-sized profiles,
ICA Nära and ICA Supermarket, performed especially well, posting sales increases of 3.9 and 4.3
percent, respectively. ICA’s own customer survey
showed that ICA Kvantum had the most satisfied
customers of all the profiles during the year.
The investments made in small rural stores
have proven successful, and the rate of store closings has slowed significantly. Only 33 stores, three
of which were in rural communities, were closed
during the year, compared with around 120 stores
a year in recent years.
Market
The Swedish food retail market (excluding gas
stations) continued to face strong price pressure
during the year and grew by 5.1 percent (2.3) to
SEK 222 billion. For the year, food prices rose 1.7
percent.
The Swedish food retail market is dominated by
three companies – ICA, Coop and Axfood – while
a fourth, BergendahlsGruppen, is mainly active in
southern Sweden. In 2006, however, BergendahlsGruppen opened new stores in Stockholm and
Mälardalen.
ICA has continued to cut prices. Sales for ICA
stores rose by 7 percent during the year, giving ICA
36.5 percent of the Swedish market. The average
purchase increased as well.
Growth for discounters has stagnated, and price
cuts by traditional players have strengthened their
competitive position. Typically, discounters carry
a limited product range and manage their businesses with very low costs.
Axfood’s chain, Willys, currently has around
100 stores. In the discount segment, Axfood has
also developed another concept, Willys Hemma,
with 43 stores. The German chain Lidl operates 117
stores in the Swedish market that carry a narrow
range of about a thousand items at low prices.
In 2006 ICA AB signed an agreement with Dansk
Supermarked to reduce its holding in the discount
concept Netto from 50 to 5 percent. Netto had
previously been jointly owned by ICA and Dansk
Supermarked.
Focus in 2007
ICA Sverige will work aggressively with various
measures to better adapt its product range to customer demand. Fierce competition in the Swedish
food retail market makes it likely that price pressures will continue in 2007.
The need for cost efficiencies to meet the growing competition continues unabated. The in-store
logistics project that will carry on in 2007 is an
example of how ICA is trying to work more simply
and efficiently.
The rate of new store openings remains high,
with a concentration in metropolitan areas. ICA
sees major potential to grow, especially in these
regions, where its market share is below average.
The transformation of the existing store network
will continue.
ICA Sverige’s store profiles as per December 31, 2006
ICA Sverige’s standard agreements
ICA Sverige serves an overall support
function for ICA stores, in accordance
with the so-called ICA agreement.
This is complemented by agreements
for each profile, through which the
stores join forces under the ICA name
to secure better purchasing terms
and carve out a clearer image in the
marketplace.
ICA agreements
A large number of the 1,397 Swedish
ICA stores have an ICA agreement – a
shareholder and financing agreement
whereby ICA Sverige AB retains the
rights to the store location while the
retailer owns and runs the store, usually as a limited company.
New stores are usually opened by
ICA Sverige, which then offers attractive financing terms to retailers to
run them.
Depending on the store’s size and
annual sales, the retailer then pays
a royalty and in some cases a profit
share to ICA Sverige. ICA Fastigheter
Sverige AB owns most of the store
properties or holds the leases on them.
To be convenient for customers and cover a variety of needs, ICA Sverige has developed four different store profiles.
Store profile
No. of
stores
Sales
incl. VAT
No. of
products
ICA Nära are small, convenient stores with good
service, a narrow product range and quality fresh
foods. Many serve as pick-up sites for Apoteket and
Systembolaget, the state-run pharmacy and alcohol
monopolies, and handle sales for ATG, the Swedish
off-track betting service.
746
SEK 13,408 m
3,000–5,000
At ICA Supermarket, customers can find most of
what they need on a daily basis or for special occasions. Personal service is high, and the stores carry a
wide range of fresh foods.
477
SEK 30,539 m
6,000–10,000
ICA Kvantum stores are larger and offer everyday
food items, anti-allergy foods, eco-labeled products
and specialty items from near and far. ICA Kvantum
also offers many health and beauty items as well as
books, magazines, CDs and DVDs.
122
SEK 23,202 m
10,000–30,000
52
SEK 19,443 m
30,000–45,000
Description
At Maxi ICA Stormarknad, customers will find everything they need at good prices under one roof. In
addition to a wide variety of foods, these stores carry
books, apparel, housewares, sporting goods and
everything for the garden. They have extended opening hours and are conveniently located for customers who drive to the store.
Maxi agreements
Maxi ICA hypermarkets have dedicated home and leisure departments,
which are operated as branches by
ICA Sverige’s subsidiary Maxi Special
AB. Maxi Special is responsible for
purchases and sales to these departments in Maxi stores. The properties
are usually owned by ICA Fastigheter
Sverige AB, which leases them to the
retailer’s company or to Maxi Special.
ICA’S COMPANIES
23
ICA Norge
ICA Norge is one of Norway’s leading food retailers, with 693 stores
operated by the company or as franchises. In 2006 ICA Norge posted
revenue of NOK 15,966 million, corresponding to SEK 18,361 million.
Store sales amounted to approximately NOK 20 billion, excluding VAT.
About ICA Norge
Mission: We will be the leading food
retail chain in Norway with a focus on
food and meals.
Sales 2006: NOK 15,966 million (16,418)
Operating income 2006: NOK 89
million (454)
Number of annual employees: 4,043
(4,052) (excluding employees of franchise stores)
Number of stores: 693 (747)
Sales, NOK million
Highlights of 2006
Sales in Norwegian ICA stores decreased by 1
percent. The best sales performance was posted
by ICA Maxi and ICA Supermarket.
New stores were opened at a fast pace and over
18,000 square meters of sales space was added
in every store profile during the year. A large
number of stores were renovated in every profile as well.
The food retailer ICA Norge operates through
its own stores and franchises. There are associated stores as well. ICA Norge promotes sales to
customers and assists stores with advice and concrete measures to improve efficiency. ICA Norge
also identifies and develops new locations and
helps to enhance current stores through modernization or expansion, for example.
!
Two new concepts for ICA Nær have been
developed, one for urban stores and one for
suburban areas. The urban concept focuses on
prepared foods, and both concepts have been
well received.
Market share
$
The range of private label products in ICA
Norge’s stores continues to grow, accounting
for 9 percent of sales in 2006, against 7 percent
the year before. The range of non-foods also
improved, particularly for ICA Maxi.
To make it easier for customers to eat a healthy
diet, ICA Norge introduced keyhole labeling in
its stores. Sales of keyhole products rose by
between 10 and 20 percent. Candy-free cashier
zones tested in one store have garnered a very
positive response.
The “in-store logistics” project in Sweden and
Norway is designed to improve efficiency
throughout the supply chain and make stores
more competitive.
24
ICA’S COMPANIES
A development program was offered during the
year for store staff and salaried employees to
provide information on priority areas and create better motivation among employees. Nearly
20,000 people participated in the web-based
training.
Franchise ’08 is a development program for 20
selected store managers who entered a twoyear training to take over a store and become a
franchisee.
A new business model has been developed to
increase the focus on store operations and sales.
Implementation will begin in 2007.
Store profiles
ICA Norge has four store profiles in the hypermarket, supermarket, convenience store and discount
formats. At the same time that Norwegian consumers are becoming more price conscious, they
want larger stores with a wider selection of prepared and fresh foods. With its four store profiles,
ICA Norge tries to meet these needs and cover
every position in the market.
The ICA Maxi hypermarket profile developed
strongly with sales rising by 11.7 percent in 2006.
The share of ICA Norge’s total sales from hypermarkets rose to 13.5 percent, against 12 percent in
2005. The Rimi discount concept accounted for
42 percent of sales, compared with 45 percent a
year earlier.
Of ICA Norge’s 693 stores, 415 are operated as
franchises, while 278 are wholly owned.
Market
The Norwegian food retail market (excluding convenience stores and gas stations) increased by 5.1
percent during the year, with sales of NOK 110 billion (excluding VAT). Food prices increased by 1.5
percent.
Coop Norge, NorgesGruppen and Rema
together account for a large share of sales in the
Norwegian market and therefore are ICA Norge’s
largest competitors. Discount chains account for
about half of sales.
ICA and Rimi stores in Norway saw their market share decline to 19 percent (20,2). The main
reason for the decrease is that ICA Norge, in order
to streamline its store structure, sold a number of
stores in 2006.
The hypermarket profiles ICA Maxi, OBS Stormarknad (Coop) and Smart Club are continuously
opening new stores. NorgesGruppen has focused
on its convenience store concept, at the same
time that ICA discontinued its operations as a
wholesale distributor to convenience stores after
divesting ICA Meny during the year.
The German discount chain Lidl, which entered
Norway in 2004, continues to open new stores
and at year-end had around 50. The chain has
expanded its range of Norwegian products to
meet customer demand.
Focus in 2007
At the beginning of 2007 ICA Norge will launch
“Take off,” a program to accelerate development in a number of areas and create Norway’s
best stores. ICA Norge will continue to open new
stores while modernizing its existing store network. New stores will be opened at a fast pace
with a focus on large formats. In total, slightly over
25,000 square meters of new sales space will be
added. In addition, around 130 stores, mainly in
the Rimi and ICA Nær profiles, will be renovated.
At the same time that it enhances its store network, ICA Norge will further strengthen the competence of its employees through various training
programs. ICA Norge continues to focus on its private labels, non-foods and fresh foods. Moreover,
ICA is trying to position itself as the leading food
retailer in terms of special offers, product range
and competence in the health area.
ICA Norge’s store profiles as per December 31, 2006
To be convenient for customers and cover a variety of needs, ICA Norge has developed four different store profiles.
Store profile
No. of
stores
Sales
excl. VAT
No. of
products
306
NOK 2,700 m
3,000–6,000
ICA Supermarked stores are designed for customers who appreciate good food and a wide variety.
Personal service is high and there is a wide selection of fresh foods, including a deli counter where
customers can find the latest food trends.
76
NOK 4,246 m
approx. 10,000
ICA Maxi stores carry everything in one location
at good prices. In addition to a wide selection of
foods, these stores sell books, apparel, housewares, music and DVDs. They are conveniently
located for customers who travel by car.
23
NOK 4,522 m
15,000–24,000
288
NOK 8,474 m
approx. 3,000
Description
ICA Nær convenience stores offer good service and
a specially designed product selection from local
suppliers.
Rimi discount stores make it easy and convenient
for customers to do their daily shopping. With
modern, airy stores, Rimi offers customers the
everyday products they need at good prices.
ICA Norge’s standard agreements
Ownership and operation of ICA
Norge’s stores is divided into two
main models: wholly owned branch
stores and franchises. All stores are
supported by an integrated system
for purchasing, product selection,
supply chain, administration and
marketing.
Branch stores
Branch stores are owned by ICA
Norge. They represent a small share
of the Rimi stores and nearly all ICA
Supermarked and ICA Maxi stores.
Franchise agreements
Retailers operate their stores as independent franchises and pay a fee to
ICA Norge based on a percentage
of their sales. ICA Norge provides a
number of central services including
marketing and administration. ICA
Norge owns or holds leases on most
of the franchise properties. ICA Nær
is a franchise chain, and slightly over
70 percent of Rimi stores are operated as franchises.
Associated stores
ICA Norge primarily assists so-called
associated chains with purchasing
and distribution. Examples include
Livi and Servicemat.
There are also 125 associated stores such as Livi and Servicemat, which had a turnover of NOK 475.5 million (excl. VAT) in
2006. Fokus Vest was converted during the year to ICA Nær.
*Sales refer to aggregate sales for both company-owned and franchised stores.
ICA’S COMPANIES
25
Rimi Baltic
Rimi Baltic is one of the leading and most modern food retail chains
in the Baltic region. The company was established as a joint venture
between ICA and Kesko Livs in January 2005. In October 2006 ICA and
Kesko concluded an agreement whereby ICA acquired Kesko’s 50-percent stake in Rimi Baltic, which thereby became a wholly owned subsidiary of ICA AB.
About Rimi Baltic
Mission: Rimi Baltic’s stores will be
its customers’ first choice in the fastgrowing markets of Estonia, Latvia
and Lithuania.
Sales 2006: EUR 972 million (809)
Operating income: EUR 2.2 million (1.4)
Number of annual employees: 9,132
(8,375)
A large number of new stores have been
opened, mainly hypermarkets, in all three countries. The number of hypermarkets is now 30,
against 24 at year-end 2005.
#
!
Implementation of an SAP enterprise system
was completed, an important step in the efforts
to improve efficiencies in business processes.
!
Market share
!
26
Highlights of 2006
Sales rose by 20.1 percent to EUR 972 million (809).
imi Baltic has a market share in the region of
R
approximately 16 percent.
Sales, EUR million
ICA’s acquisition of Kesko’s 50-percent interest in
Rimi Baltic is in line with ICA’s goal to be the leader
in every market where it operates. By integrating
Rimi Baltic as a wholly owned entity, ICA creates
an even stronger Nordic-Baltic organization. In
this way, it improves opportunities for synergies
in administration, IT and purchasing, especially in
private label and non-food products.
ICA’S COMPANIES
Store profiles
Rimi Baltic owns all its stores and coordinates their
supply chain. It operates four profiles in the Baltic
countries. Rimi Hypermarket and Rimi Supermarket focus on fresh foods and good service. They
have counters for hot and cold foods, deli, fish and
cheese. Rimi Baltic has also developed a compact
hypermarket format with an emphasis on atmosphere, comfort and efficient use of space.
To serve small communities and lower income
brackets, Rimi Baltic Livs offers two hard discount
chains: Säästumarket, Estonia’s largest discount
chain, and SuperNetto, which operates in Latvia
and Lithuania.
Market
A total of around 7.5 million people live in the three
Baltic countries: Estonia, Latvia and Lithuania. With
a population of nearly 3.5 million, Lithuania is the
largest market, followed by Latvia with 2.5 million
and Estonia with 1.5 million.
The Baltic market for food products grew by
above 15 percent (16) in 2006, to approximately
EUR 6 billion, SEK 55.5 billion (48), excluding VAT.
The discount market continues to grow, and
Rimi Baltic has a very strong position in this segment. The German discount chain Lidl had been
expected to establish operations in the Baltics in
2006, but decided not to enter the market.
In Estonia, Rimi Baltic’s market share was
approximately 24 percent and it shares market
leadership with cooperatively owned ETK. The
Selver chain had a market share of 11 percent and
Finland’s Prisma had a share of about 6 percent.
In Latvia, Rimi Baltic’s market share was approximately 22 percent (21). The biggest competitor
was Maxima (formerly Vilniaus Prekyba) of Lithuania, with 20 percent, followed by Elvi and Mego,
with 5 and 4 percent, respectively. During the year
Finland’s Prisma opened its first store in Latvia.
In Lithuania, Rimi Baltic is the fourth largest company, with approximately a 7 percent market
share. However, Rimi Baltic increased its sales in
Lithuania by as much as 40 percent during the
year. Maxima clearly dominated with a market
share of 41 percent, followed by the domestic
chain IKI with 16 percent and Norfa with approximately a 13 percent market share.
In 2006 Maxima was the overall market leader
in the region followed by Rimi Baltic.
Focus in 2007
The tendency of Baltic consumers to shop less
frequently and purchase more each time they do
is gradually growing. This benefits Rimi Baltic with
its strong position in the hypermarket format.
Lithuania is the largest market in the Baltics,
but is also the one where Rimi Baltic has its smallest market share. Rimi Baltic is therefore prioritizing growth in Lithuania. It will also continue to
improve internal efficiency.
Rimi Baltic plans to open a new warehouse in
Lithuania in 2007 and expand the warehouses in
Latvia and Estonia.
Number of store by country and formats as per December 31, 2006
Hypermarket
Supermarket
Discount
Total
Estonia
8
6
49
63
Latvia
13
30
47
90
9
22
21
52
30
58
117
205
Lithuania
Total
ICA’S COMPANIES
27
ICA Banken
ICA Banken offers financial services that make life a little easier for
customers and in the process strengthens their loyalty to ICA. During
the year the bank again reported a strong influx of new customers
and raised business volume by 9 percent.
About ICA Banken
Mission: To make life a little easier for
ICA’s customers through its financial
services and increase their loyalty
to ICA. It also reduces transaction
costs for ICA stores and ICA AB from
customers who use other bank and
credit cards.
Business volume (deposits + lending
incl. mortgages) 2006: SEK 13,480 million (12,316)
Deposits 2006: SEK 6,394 million
(5,930)
Sales 2006: SEK 459 million (316)
Operating income 2005: SEK 11
million (–82*)
Number of annual employees: 174 (154)
Number of ATMs: 69
Number of payment terminals: 6,000
* Operating income for 2005 is restated
due to changes in accounting principles
for the accrual of card fees.
A fair interest rate on current accounts, simpleto-understand terms and low fees are the philosophy at ICA Banken, which was established in
2001. In reality, ICA Banken offers its own branded
products in the financial sector. When ICA’s card
is used, it also reduces processing fees for ICA
retailers.
Highlights of 2006
ICA Banken’s goal was to earn a profit in 2006.
Operating income amounted to SEK 11 million.
ICA Banken has the most satisfied customers of
any Swedish bank, according to a survey of the
industry by the Swedish Quality Index. Product
range and quality were the most important factors behind its top ranking.
ICA Banken entered into a cooperative agreement with Nordnet that allows customers to
trade mutual funds, equities and warrants, and
to save for retirement through individual pension savings schemes. These services will be
launched in the second half 2007.
ICA Banken administers ICA’s 3.1 million card
customers. Among active customers, 1.6 million
pay with their cards when they shop at ICA, while
the rest use their cards to accumulate bonus
points. The number of banking customers – i.e.,
those who utilize ICA Banken’s banking services
– increased to 285,000 during the year.
In 2006 ICA Banken increased its number of
bank cards in issue by 40,000 to 213,000.
Through an agreement with the Swedish Migration Board, the bank issues compensation payments to asylum seekers through a card solution.
Market
Competition in the market has increased for both
deposits and loans, and interest rate hikes have
slowed growth.
Swedish customers tend to stick with the same
bank. The four major banks – SEB, Handelsbanken,
Swedbank and Nordea – account for about 80
percent of the market. Smaller niche banks such
as ICA Banken, Skandiabanken and Länsförsäkringar Bank continue to slowly but surely capture
market share from the big four.
Business volume, SEK million
ICA Banken took over responsibility for payment
terminals in Norwegian ICA and Rimi stores,
which lowers their processing fees. The bank
was already responsible for payment terminals
in Swedish ICA stores.
$
!
!
Customers of Nordea and Swedbank can withdraw up to SEK 2,000 at cash registers in ICA
stores. This offer is now being extended to customers of Länsförsäkringar Bank. ICA Banken
also launched family accident insurance.
Concept
ICA Banken offers the simplified services customers want. This includes current accounts and
various forms of bank cards. ICA Banken offers
customers unsecured loans on competitive terms.
Mortgage loans are offered in cooperation with
SBAB. Moreover, the bank is continuously adding
ATMs in ICA stores.
28
ICA’S COMPANIES
Focus in 2007
During the second half of 2007 ICA Banken’s
agreement with Nordnet will allow customers to
trade mutual funds, equities and warrants, and to
save for retirement. As a result, ICA Banken will be
able to provide a complete range of banking services to retail customers
The EU’s SEPA project – Single Payment Area
– will facilitate payments and make costs transparent between countries. One part of the process
is to convert to chip technology in combination with a magnetic strip on cards. ICA Banken
is working to ensure that payment terminals in
stores, and the cards it issues, are adapted to the
new technology.
Etos
The specialty retail chain Etos was launched in Sweden in 2002 with an
offering of health and beauty products. ICA has decided to transfer the
health and beauty concept to ICA stores and has begun liquidating Etos
stores in Sweden.
Within the ICA Group, Etos has contributed expertise in the health and beauty sector. It has tested
new ideas, created a product range and built relationships in the field that have been put to use in
other parts of the Group.
A pilot test to transfer the Etos concept to Maxi
ICA Stormarknad stores has proven successful
and continued in 2006. Another 19 Maxi stores
opened health and beauty departments during
the year.
Fakta Etos
Sales, SEK million
Sales 2006: SEK 34 million (35)
Operating income 2006: SEK –24 million (–20)
!
Netto Marknad
Netto was established in Sweden in 2001 as a joint venture between
ICA AB and Dansk Supermarked AS. In December 2006 ICA signed an
agreement with Dansk Supermarked to reduce its holding in Netto
from 50 percent to 5 percent.
The discounter Netto operates 84 stores in
Sweden and has 861 employees. As part of
the agreement with Dansk Supermarked, ICA
is taking over 21 Netto stores in the Mälardal
region and converting them to ICA stores.
About Netto
Sales, SEK million
Sales 2006: SEK 2,444 million (2,052)
Operating income 2005: SEK –138 million (–164)
!
2002 refers to August 30, 2001-August 31, 2002.
2003 refers to September 1, 2002-December 13, 2003.
ICA’S COMPANIES
29
simple
ICA’s vision is to make every day a little easier. Many people find there simply aren’t enough hours
in the day. We want to make easier for them to swing into a supermarket after work, to prepare a
homemade meal in the evening or to eat as healthy as they would like.
We try to simplify our customers’ lives in several ways: by offering a large selection of products, easily accessible banking services, convenient opening hours and access to tasty, nutritious
recipes.
Corporate Responsibility Report
quality
index
Our dialogue with the community
inspires and guides us
Focus on global issues
The global issues dominating 2006 included sustainable fishing, climate problems and social conditions in high-risk countries. In these and other
areas, ICA is working concretely to improve.
ICA’s work with sustainable development is not
done in isolation. Customers, employees, nonprofits and opinion makers are a major source of
inspiration to us, and we maintain an active dialogue with our communities to identify problem
areas and potential improvements in our work
with quality, the environment and social issues.
For example, in how we open new stores and how
our products are manufactured and distributed.
Positive feedback on health issues
Surveys in 2006 show that customers trust ICA
more than ever. Of the parameters that measure
corporate responsibility, we received the highest
ratings in the industry for how we make it easy for
customers and inspire them to eat a healthy diet.
Health issues are a major priority for ICA and an
area where the Nordic governments, the EU and
WHO place high expectations on retailers. This
year our work with health issues was manifested
in our Norwegian stores through the introduction
of keyhole labeling, which makes it easier for customers to find nutritious products.
Further work with environment
and social responsibility
The contacts we have had with representatives
of our communities show that ICA has much to
gain by providing clearer information on our environmental work. This will be a priority for Group
Management in 2007, when the focus will be on
shaping our product range to meet environmental
concerns and on the Group’s climate impact.
In addition, Group Management will in 2007
especially be keeping an eye on socially responsible sourcing from high-risk countries.
Even though price is still a central issue and
we are trying to cut costs at the purchasing level,
we never forget our fundamental values. We are
therefore pleased that our smaller stores and rural
stores have strengthened their position and are
more and more appreciated by customers.
We are committed to doing what we can to
contribute to a better society locally and globally
and be a positive force in society. Your opinions
on our work are always welcome.
environment
Employees
ehtics
Diversity a higher priority
In our annual survey of employees to see whether
we are living up to ICA’s good business philosophy, they feel we have made the most progress in
guaranteeing food safety and quality, promoting
healthy eating habits and managing the company with profitability and high ethical standards.
However, they also feel more can be done to promote diversity and personal development among
employees. Group Management has put this issue
on its agenda and it is one of the four priorities in
our long-term business plan that will be followed
up in 2007.
Kenneth Bengtsson
President and CEO
introduction
We at ICA have defined a number of positions that
describe what we do to contribute to society’s
development. We call them “ICA’s good business” and they are the foundation of the efforts
to strengthen our brands and achieve ICA’s vision
and mission.
Through ICA’s good business and the policies
linked to them, we also cover the ten international
principles in the United Nations Global Compact,
which ICA is a signatory to. Learn more about
ICA’s good business and the Global Compact on
pages 34–35.
health
ICA is one of the most visible companies in the Nordic region, and the
expectations of our customers and communities are a constant source
of inspiration. We are pleased that our work with the environment,
health, quality and social responsibility has received such a positive
response in various surveys, but we will not let ourselves be satisfied
and are constantly working to improve in these areas.
Lisbeth Kohls
Senior Vice President,
Corporate Responsibility
CORPORATE RESPONSIBILITY
33
index
ICA’s corporate responsibility strategy
environment
health
quality
ICA has a major responsibility for how its operations affect society.
ICA wants to contribute to the positive development of its communities and has established values, policies and guidelines to support this.
ICA acts responsibly in attracting
customers and employees and
maintaining a successful business.
Employees
ICA’s good business describes
ICA’s view on ethics and
social responsibility.
introduction
ehtics
The good business philosophy
is put into practice through
ICA’s policies and guidelines.
ICA helps managers and
employees develop an ethical
“compass”.
Work with ethics and corporate responsibility is
important to the ICA group’s vision to make every
day a little easier and its mission to be the leading
retailer in the Nordic region with a focus on food
and meals. With good profitability as a basis, ICA
wants to live up to the expectations of customers
and society with regard to accessibility, value for
the money, quality, health, the environment and
ethical issues. Work with sustainable development
is critical to the company’s long-term development.
ICA’s good business
One of the cornerstones of ICA’s strategy is to
contribute to society’s sustainable development.
This strategy is spelled out in seven position statements on ethics and corporate responsibility, a
philosophy called “ICA’s good business.” The aim
is to be a sustainable company driven by the following values:
ICA will be driven by profitability and high
ethical standards.
ICA clearly sets priorities for ethics,
the environment, health and
quality, as well as for its employees.
ICA will listen to customers and always base
decisions on their needs.
ICA will nurture diversity and growth among
its employees.
ICA will maintain an open dialogue internally
and with the community.
ICA will adopt sound environment practices
to promote sustainable development.
Policies and guidelines are in place to convert
these points into practice in day-to-day activities.
This is done through a systematic management
system in Group companies, cooperation with
other organizations and ongoing contact with key
stakeholders. Concrete goals and activities are
included in each company’s business plan.
34
To ensure that ICA’s employees are familiar with
the values that serve as the basis for the work with
ethics and corporate responsibility, ICA during the
year developed an interactive training program on
the good business philosophy that will be introduced in early 2007. The training will be part of
ICA’s introductory program for new employees,
and all employees, retailers and store managers
will participate. Around 70 percent of the members of the Group’s management teams have participated in a dialogue on ICA’s values and policies
and in discussions on ethical issues.
Management and organization
Group Management has ultimate responsibility for
the ICA’s CR goals and strategies. The Code of Professional Conduct and Ethics team is responsible
for ICA’s policies and their implementation, as well
as suggesting priorities and monitoring ethical
issues, risks and ICA’s reputation in society.
This cross-functional team is led by the head
of the Corporate Responsibility department. It
includes managers for Legal Affairs, Assortment &
buying (food products), Human Resources, Corporate Communications, ICA Sverige and ICA Norge.
During 2006 the team held six meetings and produced a summary of work in the area for Group
Management.
Day-to-day work on many of the issues is handled by the Corporate Responsibility department,
which organizationally falls under the Group marketing function at ICA AB. The Corporate Responsibility department has managers responsible for
health, quality, customer contacts, recipe development, the environment and social responsibility.
In 2006 Group Management decided to update
the information policy, modify the guidelines in
the quality and environmental policy, and to adapt
the business ethics policy guidelines to both Norway and Sweden. Managers responsible for CR
issues within the Ahold group met during the year
to identify shared priorities. Ahold has held ICA up
as a model in this work.
index
36–39
3. Uphold the freedom of association and the effective recognition
of the right to collective bargaining
36–39
4. Eliminate all forms of forced and compulsory labor
36–39
5. Effectively abolish child labor
36–39
6. Eliminate discrimination in respect of employment and occupation
36–41
7. Support a precautionary approach to environmental challenges
42–47
8. Undertake initiatives to promote greater environmental responsibility
42–47
9. Encourage the development and diffusion of environmentally friendly technologies
42–47
10. Work against all forms of corruption, including extortion and bribery.
Monitoring and reporting
For many years ICA has provided information on
its work in the areas of quality, the environment,
health, ethics and social concerns. The aim is to
establish common goals and key performance
indicators for the Group in the sustainability area,
though much still needs to be done before a common structure is in place between companies to
compile and monitor the necessary data.
ICA has used the Global Reporting Initiative
model (GRI) as a basis for its reporting and is developing an IT tool to support fact gathering in accordance with the model. The IT support will be put
to practical use at the earliest in fall 2007, and ICA’s
aim is to meet the GRI reporting requirements
within two years.
34, 36
International guidelines and standards
In 2005 ICA became a member of BSCI, Business
Social Compliance Initiative, through one of its
owners, Ahold. BSCI is a European initiative created to establish uniform criteria and a systematic approach to improving working conditions in
high-risk countries.
Since 2004 ICA is also a signatory of the UN
Global Compact and supports its ten international
principles on human rights, fair labor, environmental safety and countering corruption. ICA annually
reports on activities and results associated with
the ten principles of the UN initiative.
Two of the Group’s employees took part in the
Global Compact’s Nordic network meeting in Helsinki in May at which climate issues were discussed.
Points 7–9: ICA has increased sales of
organic products, improved its system
to monitor eco-labeled sales in Norway,
improved waste management, raised
logistics efficiency and monitored its
own and its haulers’ management systems.
Point 10: ICA monitors in accordance
with the guidelines in the business
ethics policy, including an inspection
program for competitive practices.
Internal dialogues on business ethics
are maintained by the Group’s management teams.
Talking to stakeholders
Based on its good business philosophy, ICA
wants its customers, owners, employees and
other stakeholders to feel that it practices what it
preaches.
ICA continuously receives feedback on its work
and progress through a dialogue with customers,
opinion makers and employees as well as through
surveys. In this way, it identifies priority areas and
opportunities for improvement.
35
health
2. Make sure that they are not complicit in human rights abuses
environment
36–39
Employees
1. Support and respect the protection of internationally proclaimed
human rights in areas they can impact
Points 1–6: ICA has a monitoring system
for private label products. For other
suppliers, it sets requirements in its policies. ICA systematically monitors suppliers in high-risk nations through BSCI
audits. During the year a new model was
developed for audits in primary production, e.g., farming and fishing. Visits
have been made to suppliers to discuss
potential improvements. ICA takes a
structured approach to gender equality
and diversity. It participates in the EU’s
“unconscious prejudice” project. Learn
more on page 40.
ehtics
Read more on page
introduction
Businesses should:
quality
The Global Compact’s ten principles for corporate responsibility
index
Ethics
introduction
ehtics
Employees
environment
health
quality
ICA’s products are produced under socially responsible conditions.
Through a continuous dialogue with customers and other stake
holders, ICA learns their views and ideas, which help the company
in its work with ethics and social responsibility.
Business ethics policy
– adopted December 2003
ICA’s business ethics policy includes
guidelines on relationships with suppliers and partners with regard to
bribery and gifts, fair competition and
shareholdings.
Quality and environmental policy
– revised and adopted January 2006
ICA’s quality and environmental policy,
which has been repeatedly updated
since 1989, covers operations, sourcing, information and competence, as
well as guidelines on ethical sourcing
and corporate social responsibilities
for suppliers. It also includes rules on
animal welfare.
Sponsorship policy
– adopted February 2005
ICA follows the guidelines on sponsorships and events in the ICC International Code on Sponsorship and
the guidelines of the Swedish sponsorship and event association.
Customer policy
– adopted February 2005
ICA’s customer policy has guidelines
on interacting with customers, marketing, customer privacy and how
certain products are sold.
As a basis for this work, ICA has adopted policies,
supplemented by guidelines, to provide guidance
on certain issues.
Socially responsible sourcing
For years ICA has placed requirements on socially
responsible sourcing based on the UN declaration
on human rights and the core conventions of the
International Labour Organization (ILO). These
requirements are monitored through self-audits
by suppliers, visits by ICA staff and recommendations on third-party audits according to the Business Social Compliance Initiative (BSCI) or similar
certification.
Through Ahold, ICA is a member of BSCI, a
European network created to establish uniform
criteria and a systematic approach to corporate
social responsibility audits at the production level.
BSCI requires suppliers in high-risk countries
to undergo audits by an accredited third party.
Audits cover working conditions such as wages,
child labor, working hours, discrimination, safety
and medical care. If a supplier does not meet the
criteria, an action plan is drafted and followed up
within one year. Suppliers that meet all the requirements are not audited again for three years.
The advantage of the network is that suppliers do not have to undergo, and incur costs for,
repeated audits, since BSCI’s members use the
same requirements. ICA has access to the audit
results, which can assist further discussions with
the supplier on improvements.
Work with social responsibility in 2006
Company
Initiative
ICA Group
ICA’s quality and environmental policies were revised.
Visits focusing on social responsibility at suppliers in Vietnam, China and India.
Active participation in creating criteria for BSCI audits in primary production.
The “Global Kitchen” category was expanded to include 89 new products in the multi cultural range.
ICA’s almanac for 2007 was updated with several multicultural holidays.
Around 70 percent of the Group’s management teams received training
in ICA’s good business philosophy.
ICA Sverige
Training for security coordinators from large-store formats.
Interactive safety training for store employees in cooperation with ICA Academy.
Web-based risk assessment tool developed to analyze the risk of threats and violence in stores.
Over a one-week period customers received information on how to find out where their package
of ICA coffee came from using the website. Because ICA’s coffee is Utz Kapeh certified, customers
can trace every package back to where the beans were grown and read about the working conditions on that plantation.
ICA Norge
Implementation of an automatic cash handling system to increase security at Maxi stores.
A complete program was developed to reduce loss. The work will continue until 2008, when it will
be fully integrated in day-to-day operations.
Utz Kapeh was also launched on ICA coffee in Norway.
Rimi Baltic
36
New security routine introduced for reporting incidents.
index
BSCI’s aims are:
European platform for retail, industrial and import companies that encourages
audits and improvements in the social conditions for suppliers in high-risk countries.
Ethical Trading Initiative
– Norway (ETI-N)
A multi-stakeholder initiative involving Norwegian companies, employers’ organizations, trade unions and NGOs that encourages ethical trading (socially responsible sourcing). ETI-N identifies and develops good practices for its members. It
also assists them with training and advice how they can contribute to long-lasting
improvements in safety and environmental conditions in their supply chains. ICA
Norge is a member.
Etikakademin
Organization that encourages training on ethical issues in the business community.
Global Compact
UN initiative to encourage international companies to support human rights,
labor and the environment.
Swedish Partnership for
Global Responsibility
Initiative by the Swedish government to encourage companies to abide by fundamental principles of human rights, labor standards, environmental safety and anticorruption as spelled out in the Global Compact.
Ziedot.lv
Rimi Baltic works with the charity Ziedot.lv, which operates a portal where individuals and companies can donate money to specific charitable projects.
During the year the number of ICA’s suppliers that
have undergone BSCI audits increased. The target
for BSCI audits in 2006 was not reached, however.
This was due to the time needed to disseminate
information on BSCI internally and among suppliers, the need for a better overview of ICA’s total
supplier base, and a delay in implementation of a
BSCI tool for primary production.
The audits of ICA’s suppliers in 2006 found
deficiencies in management work (delegation of
responsibility, risk analysis, monitoring systems),
documentation (payroll data, personnel information) and occupational safety (safety equipment,
fire extinguishers, fire safety training). Deviations
were also found in working hours.
Socially responsible products
After oil, coffee is the world’s largest commodity.
Working conditions and social aspects on coffee
plantations are therefore closely monitored by
unions and human rights organizations. ICA’s own
coffee is certified by Utz Kapeh, an independent
organization that sets and monitors environmental, food safety and labor practice requirements
for workers and their families on coffee plantations.
Through ICA’s website, customers can find out
where every package of ICA coffee originates
from, including where and how the coffee was
grown, what environmental measures were taken
and the working conditions on the plantations.
Fairtrade-labeled products
The Swedish Fairtrade-labeled product selection
includes coffee, tea, cocoa, sugar, juice, bananas
and, on a seasonable basis, citrus fruits and grapes.
Sales of Fairtrade-labeled products by ICA Sverige
increased by 20 percent in 2006. ICA Norge raised
its sales of Fairtrade-labeled products by 8 percent.
ICA’s fresh cut roses are grown by farmers in
Kenya who take a progressive approach to their
employees and environmental concerns. In
December, ICA’s roses were Fairtrade certified.
To offer a standardized and predictable monitoring system
To reduce costs for customers and
suppliers to control and monitor
social issues
To create a network to share
experiences.
Members include Kesko, Jysk, Lindex,
Kapp Ahl, Dansk Supermarked, Lidl,
Metro, Migros and Puma.
High-risk countries
Risk countries according to BSCI
include: Bangladesh, Bulgaria, Cambodia, India, Indonesia, China, Malaysia,
Myanmar, Pakistan, the Philippines,
Romania, South Korean, Taiwan, Thailand, Turkey, Vietnam and countries in
Africa and Latin America.
Utz Kapeh* certified coffee means:
hemicals are used as little
C
as possible
onsideration is given to
C
employees’ health and safety
chools and healthcare are available
S
for workers and their families
ecords are kept on acreage, crop
R
histories, soil and chemical use
Coffee is fully traceable.
*Utz Kapeh means “good coffee”
in Mayan.
Stakeholder dialogue
ICA maintains an positive dialogue with stakeholders – especially with customers, though also suppliers, stakeholder groups, national and municipal
authorities, and unions. ICA has built up an extensive network of contacts and regularly meets
with consumer, environmental and human rights
organizations.
health
Business Social Compliance
Initiative (BSCI)
To coordinate socially responsible
standards
environment
Forum for companies that want to encourage human rights in their operations.
Discussions are held several times a year on human rights and corporate social
responsibility. The meetings are based on ABG’s recommendations on human
rights and may, for example, involve country- or industry-specific risk analyses,
human rights training and independent audits.
Employees
Amnesty Business Group
Business Forum
introduction
Aim
quality
To improve suppliers’ social
performance
Partner/Network
ehtics
Alliances and networks
37
2006
2005
Product complaints
16,660*
14,784
E-mail
39,189
26,121
Telephone calls
70,407
69,137
*Sales of private label products rose by 27 percent, while the number of complaints rose by 11 percent.
Sponsorships
Company
Aim
Activity
ICA Group
World Childhood
Foundation
Campaign where five kronor from every loaf of
Christmas bread sold is donated to the World Childhood Foundation, which is working to improve living
conditions for children in need. SEK 2.5 million was
collected in December in cooperation with the baking
company Pågens.
introduction
ehtics
Employees
environment
health
quality
index
Complaints, e-mail and telephone calls received by the Customer Call Center
ICA Sverige
Rimi Baltic
Red Cross
ICA has been working with the Red Cross for over 20
years, contributing editorial space in Buffé magazine
and on ICA.se. Over SEK 19 million has been collected
through 475 bottle and can recycling machines in
Swedish ICA stores.
Pink ribbon campaign
against breast cancer
ICA, its employees, stores and customers donated
SEK 5.85 million to the campaign in cooperation with
the Swedish Cancer Society.
“Buddy with Your Body”
For the sixth consecutive year valuable lessons on the
importance of eating at least five fruits and vegetables
a day were offered in ICA stores and schools around
Sweden. 125,000 children participated in the activity in
2006. In cooperation with the Swedish Cancer Society.
“Blodomloppet”
Series of runs around Sweden to recruit blood donors
and encourage exercise. A total of 36,000 runners
took part, an increase of 8 percent compared with
the previous year. This year’s campaign resulted in
over 4,000 new blood donors.
Pastureland project
Over 25,000 hectares of pastureland have been
restored. Through a number of local cooperations,
ICA has marketed free range beef since 1999. In cooperation with the World Wildlife Fund (WWF).
Youth sponsorships
Rimi Baltic in Estonia, Latvia and Lithuania sponsored a
number of charities in 2006, with an emphasis on children and young people. For example, it has contributed to hospitals, libraries, schools and orphanages.
Projects designed to strengthen small stores
38
Project/Partner
Aim
Association for Promotion
of Village Stores
Identify effective supply chain solutions and help develop
commercial and public services.
Arena for Growth / Swedbank,
Sweden’s municipalities, county
councils and ICA
Stimulate growth in a number of municipalities through
development and renewal in the private and public sectors.
County administrative board
in Västerbotten
Food retail outlets and municipal services provided in the
villages of Bygdsiljum and Rusksele.
Multiservice project/
Swedish Consumer Agency
Identify service needs and promote additional commercial and
public service points. A test is under way in four communities,
three of which involve ICA stores.
ICA conducts periodic surveys of opinions on its
corporate responsibility work in and outside the
company. Learn more on page 33.
During the fall of 2006 ICA halted all purchases
from an Indian vendor after accusations were
made against the company on Swedish Television’s news magazine, “Uppdrag granskning.” The
company, which supplied area rugs, was accused
of poor working conditions, among other things.
Earlier in the spring ICA was contacted by a Danish
news crew seeking comment on the accusations.
ICA conducted its own visits as well as two independent audits, but the information on improper
conditions in the television programs could not be
confirmed.
Contact with customers
ICA maintains an active dialogue directly with
customers in stores and through the Customer
Call Center, as well as through various surveys at a
local and national level. The Customer Call Center
processes suggestions from Swedish and Norwegian customers as well as any complaints concerning private label products.
Sponsorships and cooperations
Sponsorships are designed to support ICA’s longterm business plan. The emphasis is on health,
social responsibility, the environment and healthy
lifestyles. Accordingly, ICA’s management has
decided to actively support the Childhood Foundation, the Red Cross and the World Wildlife Fund.
In its athletic sponsorships, ICA works with
clubs that offer extensive children’s and youth
activities. It also sponsors organizations committed to young people.
Customer privacy
Personal information on Swedish customers is
obtained through the ICA customer card. With this
information, ICA can customize offerings while
managing the commitments that the card’s banking services entail. Safeguarding customer privacy
is a high priority, and in addition to current laws
ICA has drafted its own guidelines on personal
information.
In 2006 the Swedish Data Inspection Board
cited one ICA store for using the calculator function on its cash register to calculate the age of customers who buy beer and tobacco. ICA appealed
to the county administrative court, which decided
it is permissible to enter a birthday only, since it is
not considered personal information and manual
entries do not fall under the Personal Data Protection Act. On the other hand, employees cannot
scan in personal information unless they suspect
the customer is not 18 years old.
index
quality
ICA
health
environment
“We have goals for our work, measurements to
monitor our progress and thorough reporting
procedures,” says Lisbeth Kohls, Senior Vice President, Corporate Responsibility at ICA AB.
The study stated that ICA runs a high risk of
violating human rights due to its operations and
geographic presence. ICA received its highest
rating – 5 of 5 – for how it analyzes and manages
these risks.
ICA also received the highest rating for its key
performance indicators for policies, training and
management systems. Only with regard to trans-
parency did ICA receive a lower rating, 3.67. This
is because ICA’s work with human rights is not
independently audited, which is true of practically
all the companies in the study.
“The study did not look at how far we have
come in our implementation, but it does confirm
that we have good procedures in place and it will
spur us moving forward. We still have a lot left to
do before we can be satisfied,” says Lisbeth Kohls.
Amnesty Business Group is part of the Swedish section of Amnesty International. Its aim is
to influence and educate Swedish companies on
human rights issues. ICA is a member of Amnesty
Business Forum, a group of companies that maintains an open dialogue with Amnesty Business
Group.
In January 2007 Amnesty followed up with a
new study where ICA achieved similar results.
Low
1
2
3
4
5
Fulfillment of ABG’s recommendations
Consumer goods companies
Median for all companies in the study
Measures to improve security
The overall objective of ICA’s security work is
to protect employees, customers, property and
the businesses against all types of threats. ICA’s
systematic security work comprises security standards, routines, monitoring and evaluations.
The number of robberies in Swedish ICA stores
decreased compared with the previous year. The
robberies that occurred affected smaller stores,
but no employees were physically harmed. Psychological counseling for robbery victims has
been improved, resulting in fewer and shorter sick
leave absences.
Several of the robberies occurred after the
stores closed. The offenders mainly targeted
tobacco. One bomb threat was made directly
against an ICA store during the year; no bomb was
found.
The number of robberies in Norwegian ICA
and Rimi stores rose slightly. Security work during
2006 was aimed at limiting the number of armed
robberies and reducing loss. The long-term goal
at ICA Norge is to make ICA the safest store in the
market for customers, employees and suppliers.
ICA Fastigheter Sverige AB has developed a systematic fire safety program.
Service issues are a priority
In Sweden’s rural communities with only one
grocery store, around 50 percent are operated
by ICA. Just a couple of years ago ICA was closing
around a hundred stores a year due to shrinking
populations, greater competition and changes in
consumers’ buying habits.
Investments in computerization and expanded
services, including for Systembolaget and Apoteket, the state-run alcohol and pharmacy
monopolies, as well as postal and banking services, have helped a number of stores to survive.
Lower prices, skills training and store modernizations have also helped to strengthen the position
of smaller stores. In 2006, 33 stores were closed,
three of which were in rural communities.
Poor access to service isn’t only a problem in
rural areas, but suburbs as well. During the year
a project was started together with Göteborg
municipality to enhance services in the Hjällbo
area and contribute to a lively central shopping
district.
ehtics
ICA has an ombudsman for privacy issues to
whom customers can turn if they believe ICA has
not protected their information satisfactorily. No
complaints were submitted during the year.
Employees
* The recommendations cover five areas: policies, risk analysis,
training, management systems and transparency.
Number of robberies
2006
2005
ICA Sverige
34
51
ICA Norge
8
5
Rimi Baltic
0
0
Etos
0
0
Netto Marknad
5
2
39
introduction
In January 2006 Amnesty Business Group surveyed 110 large Swedish companies on how they
manage risks associated with human rights. The
study showed that ICA is working actively in the
area and compares well to other companies.
High
Exposure to risk
ICA receives good ratings in Amnesty study
index
Employees
Strategies for ICA’s HR work
m
p
ce
Lea
en
de
r
Co
ss
rs
it y
ne
Employees
ICA as an
employer
ve
ehtics
ip
Di
introduction
sh
et
environment
health
quality
ICA’s new Group organization with Nordic areas of responsibility has necessitated extensive changes. The shift toward more
specialized work areas has made competence development a
key issue.
ll
We
Strategic leadership: Strong Nordic
leadership to handle new challenges
in a fast-changing industry.
Gender equality and diversity strategy:
A structured approach to gender
equality and diversity issues.
Competence strategy: Ensure that
competence is in place in strategic
areas to facilitate ICA’s long-term
planning.
Wellness strategy: Position ICA as
a health-conscious employer.
ICA’s policy on employeeship
and leadership
ICA wants to ensure that all its
employees have the opportunity to
perform their best. Everyone should
be put in a position to do a good job.
The primary duty of a leader is to create such opportunities together with
their employees.
The goal is employees with a
sense of ownership who can, and are
expected to, take responsibility for
their jobs and career development.
ICA’s leadership policy encourages
managers to promote independence
and excellence.
40
HR strategies and objectives
The main strategy in the HR area is to strengthen
the ICA brand and its position as an employer.
Four areas are priorities: diversity, competence,
wellness and leadership. In each area, ICA has
established objectives and concrete activities.
Five competence priorities
With the new Nordic organization, a large number
of services were changed from general to more
specialized. A competence audit was conducted
in late 2005 to identify current strengths and areas
that needed improvement in order to reach ICA’s
business objectives. Since then, ICA has focused
on five priority areas: financial acumen, operational leadership, store operations, communications and familiarity with ICA as a company.
Leadership with a focus on
human resource development
Since many managers have become responsible for employees in both Sweden and Norway,
the need for a regional system for performance
reviews and evaluations has become obvious.
Late in the year a new model was launched for
employee development called MAP, a Swedish
acronym for goals, responsibility and personal
development.
The idea behind MAP is to underscore the connection between each employee’s performance
and the Group’s results. All employees of ICA
AB, ICA Sverige, ICA Norge and ICA Banken are
encompassed by the new system.
ICA’s employee survey (Cross) was conducted
for the first time in both Sweden and Norway.
Over 4,000 employees responded. Of note was
an increase in loyalty compared with the previous year.
Cross will serve as a basis for a dialogue on
working conditions and operational development.
Local results are being given special attention,
and managers and their employees are working
together to draft an action plan to improve each
workplace.
Diversity is a success factor
ICA’s success is dependent on having employees with different educations, ages, genders and
ethnic and national backgrounds. Diversity has
become an integral aspect of ICA’s extensive introductory program for new managers.
Everyone should have an equal chance to be
recruited and develop on the job. Factors such as
knowledge and personal qualities should determine hirings and promotions. One of ICA’s challenges is to utilize gender equality and diversity
work to capitalize on differences and thereby
improve its financial results and attractiveness as
an employer.
ICA is participating in an EU project called
“unconscious prejudice,” a collaborative effort
between the cities of Solna and Sundbyberg, the
Karolinska Institute, the Royal Institute of Technology, the National Labor Market Board and ICA.
The aim is to encourage awareness and encourage a discussion on prejudice, and in the long run
to change attitudes and behaviors. Around 20
employees from ICA are taking part.
Health and wellness
ICA’s occupational health and safety policy
states that work environments are an important
competitive advantage and a strategic issue. ICA
wants to maintain safe environments physically
and mentally to promote the development of
its employees and the business. The same high
quality demands that apply to other areas also
distinguish ICA’s work with occupational health
and safety.
A close cooperation with occupational health
service providers is important to these efforts.
Health concerns are prevented through a systematic approach and continuous reviews of tools
and methods.
Training
ICA has a long tradition with regard to training.
In 2005 a Nordic training organization called ICA
Academy was established, comprising two departments, one in Sweden and one in Norway.
New Nordic trainee program
ICA’s trainee program, which had been suspended
for a year, will be restarted in spring 2007. The program is offered to ten participants from Sweden
and Norway, each of whom is tied to a specific
function in ICA during the 14-month program.
11,556
6.13 %
6.4 %
9.5 %
5.4 %
environment
*The definition of employee turnover changed compared with 2005, when ICA Norge was not included.
The figure for 2006 includes Norway, store employees excluded.
Number of annual employees, employees and sick leave absences
No. of annual
employees
No. of employees
Sick leave, %
2006
2005
2006
2005
2006
2005
ICA Group
2,041
1,417
2,083
1,445
3.23
3.21
ICA Sverige*
4,752
4,917
6,025
5,769
7.32
7.11
ICA Norge
4,043
4,052
6,752
6,734
6.53
6.35
174
154
179
158
6.87
6.92
9,132
8,375
10,165
9,313
5.98
n/a
ICA Banken
Rimi Baltic
quality
index
Employee turnover*
11,698*
health
Sick leave (short- + long-term)
2005
Employees
Employer brand
ICA has a number of cooperations with schools
to call attention to the skills retailers need. One
important alliance is with the Nordic Retail Trade
Program in Norrtälje, which ICA helped to establish together with Coop, the local municipality,
Statoil and the Roslagen Savings Bank. ICA contributes its retail expertise, guest lecturers and a
scholarship for best retail-related thesis.
In Norway, familiarity with ICA is not as great
and activities in the Norwegian market were
therefore a priority during the year. The focus
was on attracting store managers. In 2006 ICA
expanded its cooperation with the Stockholm
School of Economics on its retail curriculum and
established an alliance with Treider College on
training for store managers.
Total number of annual employees in ICA Group
2006
ehtics
Future recruitment
ICA has a long-term program to maintain its reputation as an attractive employer and recruit the
employees it needs both short- and long-term.
Universum’s Career Barometer, which ranks
companies by their attractiveness as an employer,
ranked ICA in 19th in Sweden and 52nd in Norway.
Key performance indicators
* Including Etos.
introduction
ICA Academy has 35 employees who follow the
entire process, from needs audits and strategies
to implementation of various training programs.
The aim is to strengthen the profitability and
competitiveness of ICA’s stores as well as the
Group through training, guidance and as a partner
in developing operations. In all, around 35,000
employees received training in Sweden and Norway, a large part through web-based programs.
Number of men and women in management positions
Men %
Women %
Total
ICA AB
60
40
302
ICA Sverige
79
21
278
ICA Norge
65
35
939
ICA Banken
60
40
20
Rimi Baltic*
25
75
4
*Refers to only one employee per country.
Praktica
An important area is future recruitment to ICA
stores. Approximately 90 percent of the country’s
ICA retailers regularly accept trainees and interns.
ICA Sverige has developed a program, “Praktica: A
store in practice,” with accompanying materials,
to make it easy for stores to provide students with
interesting and educational internship opportunities.
41
index
Environment
The ICA Group’s quality and environmental policy, which has been
continuously updated since 1989,
covers operations, product selection,
information and competence issues.
Ethical guidelines for purchasing and
corporate social responsibility for
suppliers are included as well, as are
rules on animal welfare.
New store policy
ICA’s new store policy contains guidelines on environmental considerations for new stores in Sweden and
Norway.
introduction
ehtics
Employees
environment
health
quality
ICA works extensively to reduce the impact of its operations on the
environment, i.e., from its products, warehouses, transports and
stores. Through long-term prevention, ICA contributes to sustainable
development.
As a basis for its environmental work, ICA has
adopted policies together with guidelines for each
company.
ICA and the climate
ICA has worked for years to reduce its climate
impact. Reducing carbon dioxide emissions from
transports is one of the most important environmental issues. ICA has participated for several
years in the insurance company Folksam’s climate
index to evaluate this work. In 2006 ICA Sverige
came in fourth place. During the year ICA decided
to appoint a cross-functional project team that
will draft a climate strategy in 2007. This will serve
as a basis for Group Management’s decisions how
to address climate issues.
Environmental law
ICA’s environmental work is affected by a number
of laws and regulations. On July 1, 2006 the RoHs
directive took effect, prohibiting certain substances in electrical products such as lead, mercury, hexavalent chromium and cadmium.
The new EU chemicals legislation, REACH, was
adopted at the end of the year and will enter into
force on June 1, 2007. ICA has monitored the legislative process and in 2007 will evaluate how the
law affects operations.
Together with organizations, government agencies and businesses, ICA is participating in a number of environmental alliances and projects. See
the table below. One example is Framtida Handel
(Future Retail), a collaborative effort between
Swedish companies, municipalities, regions and
the national government to promote sustainable
development in the retail sector. ICA has participated in projects and on the steering committee
of Future Retail.
Partner/Network
Aim
World Wildlife Fund (WWF)
Over 25,000 hectares of pastureland have been restored. Through a number of local cooperations, ICA has marketed
free range beef since 1999.
Future Retail
The effects of distribution after business hours are being measured.
A method is being developed to prioritize and identify hazardous substances in products, including chemical products.
Consumers have been provided with better information how products affect the environment. The project has produced the environmental sales receipt, which explains the environmental impact of organic foods.
Review of experience with e-commerce and its effect on the environment.
42
Swedish Road Administration and five other
companies from various industries
Roundtable discussion that resulted in a declaration of intent on traffic and environmental safety requirements for
heavy transports.
WWF – Sweden Forest & Trade Network
ICA is participating in the Swedish Forest and Trade network organized by the WWF. The network consists of a number
of companies that encourage sustainable forest management.
Dagligvarehandelens Miljø- og emballasjeforum
Forum on environmental and packaging issues for Norwegian retailers.
Initiative
ICA Group
ICA’s quality and environmental policy was revised.
health
ICA participated in an industry initiative to protect threatened cod stocks
from the Barents Sea in the Swedish and Norwegian markets.
Organic products
Sales of organic products increased by 10 percent
in Swedish ICA stores in 2006. In Norwegian stores
sales rose by 30 percent. The number of available
organic products decreased slightly.
ICA decided to stop selling frozen cod from the Baltic Sea. It now carries only
fresh Baltic cod.
ICA Sverige
environment
ICA participated in a Swedish project to increase the availability and sale of
organic meat together with Ekokött and Swedish Meats, among others. During theme weeks sales rose by 74 percent.
Nordic Swan-labeled stores: All Maxi ICA hypermarkets, all ICA Kvantum,
15 ICA Supermarkets and 4 ICA Nära stores have been certified.
Employees
“Safe driving” weeks at all warehouses. The Swedish Road Administration
and driving schools discussed driving techniques that can reduce fuel consumption by 10 to 15 percent.
Pilot project at around 40 stores where vehicles that deliver mail to ICA
stores also remove old packaging. As a result, packaging does not have to be
returned in refrigerated trucks, which instead can be used to reship refrigerated foods to ICA’s warehouses.
ICA Norge
ehtics
Integrated production
To reduce the environmental impact from food
products not produced according to the rules for
organic production, ICA supports so-called integrated production (IP), where artificial fertilizers
and herbicides are documented and used in a controlled setting.
Growers of fruit and vegetables that are not
certified organic and supply ICA Sverige must
be certified according to EurepGap or other system of integrated production. In Norway, similar
requirements are placed on Norwegian growers
using KvalitetsSystem i Lantbruket (KSL).
The “IP Seal” is a quality seal that guarantees
that a producer lives up to stringent demands with
regard to food safety, animal welfare and environmental responsibility. ICA supports certified production and promotes its use.
index
Company
quality
Environmental work in 2006
Participated with government agencies and other retail chains in a campaign
to market and highlight organic foods, sales of which rose substantially during theme weeks.
The CoolICA system to control the temperature of refrigerated display cases
and freezers was introduced in all new and rebranded stores.
Rimi Baltic
Rimi Lithuania participated in a campaign to collect used batteries. Receptacles were placed in all Rimi stores.
Rimi Latvia continued to market locally produced foods, especially vegetables.
Eco-labeling
ICA regards eco-labeling as a form of value-added
that creates a sense of security and is easy for buyers and customers to understand. It has therefore
decided to prioritize product groups where criteria for eco-labeling are in place.
ICA carries a wide range of eco-labeled cleaning
products. All laundry detergents and dishwashing
products in the shared product range are ecolabeled by Nordic Swan or Good Environmental
Choice. Skona, ICA’s brand of environmentally
friendly cleaning products, is sold in Sweden and
Norway. Most of the products in the Skona line
are labeled with Nordic Swan or Good Environmental Choice. If a product cannot be eco-labeled
because criteria are not in place, it must still have
less of an environmental impact than other products in its category.
43
introduction
Environmentally friendly product range
By placing environmental demands on suppliers
and increasing the range of eco-labeled products,
ICA can help to reduce society’s total impact on
the environment.
health
quality
index
Sustainable primary production
ICA encourages conservation of natural resources
and sells only fish that has been legally caught in
terms of quotas, origin, fishing method and size.
As part of its effort to promote sustainable fishing,
ICA Sverige sells MSC-labeled fish gratins under its
private label. The Marine Stewardship Council guarantees the fish has been caught in compliance with
sustainable practices to protect stocks and their
environments while permitting responsible use.
Employees
environment
Transports and the environment
In the area of logistics, ICA has identified five principal ways in which its operations impact the environment: transports, waste management, energy
consumption, sourcing of products and services,
and use of coolants.
The vision of the logistics department is to set the
standard in environmental work in retail logistics in
the Nordic region. The guidelines in the quality and
environmental policy state that ICA will reduce the
impact from its transports, the area where it has
the greatest effect on the environment. This can
be done by maximizing load factors, coordinating
transports and return transports from suppliers,
and using double-deck trucks, railroads, ships and
alternative fuel vehicles.
The greatest progress in reducing the negative
impact on the environment has been achieved in
Sweden. ICA is trying to establish a common environmental management system for the Swedish
and Norwegian operations. The aim is to transfer
knowledge and routines between the two countries.
Eco sales receipt
--------------------------
ehtics
To all customers who purchased
ORGANIC MILK in Swedish ICA
stores in 2006*
introduction
-------------------------AMOUNT OF CHEMICAL PESTICIDES
SAVED, APPROX.: 3,800 kg
This promotes biological diversity – more
insects, birds and other fauna around the
farms – and reduces the risk of pesticide
contamination in groundwater and waterways.
---------------- ---------------- ---------------AMOUNT OF FERTILIZER
300,000 kg
(N+P) SAVED, APPROX.: This can help to reduce eutrophication .
---------------- ---------------- ---------------COWS THAT EAT ORGANICALLY AND
2,800
GRAZE NATURALLY, APPROX.: ---------------- ---------------- ---------------NO. OF FARMS WITH ORGANIC PRODUCTION,
111
APPROX.: ---------------- ---------------- ---------------LAND WITH ORGANIC
4,400 hectares
PRODUCTION: This means more land is cultivated and less
is developed.
---------------- ---------------- ---------------none
GMO: ---------------- ---------------- ---------------reduced
ENERGY CONSUMPTION : (no fertilizer production)
approx. 11,600 000 MJ
---------------- ---------------- ---------------Amount of cadmium pollution
70 g
avoided, approx.: ---------------- ---------------- ---------------increased
Biological diversity: This can lead to:
up to 125% more plant species
up to 60% more bird species
up to 20% more species of benif icial insects
and spiders
up to twice as many individual species
*
44
*
*
Eco sales receipt
--------------------------
To all customers who purchased
ICA’s organic bananas in
Swedish ICA stores in 2006*
--------------------------
AMOUNT OF CHEMIC AL PESTICIDES
SAVED, APPROX .: 4,900 kg
This promot es biolog ical diversity
– more
insects, birds and other f auna around
the
farms – and reduce s the risk of pestic
ide
contam inatio n in ground water and
waterw ays.
------ ------ ------ ------ ------ ----------- -----AMOUNT OF FERTIL IZER
(N+P) SAVED, APPROX .: 38,000 kg
This can help to reduce eutrop hicati
on.
------ ------ ------ ------ ------ ----------- -----LAND WITH ORGANIC PRODUCTION: 100
hectar es
------ ------ ------ ------ ------ ----------- -----GMO: none
------ ------ ------ ------ ------ ----------- -----ENERGY CONSUM PTION: reduce d
(no fertil izer production)
------ ------ ------ ------ ------ ----------- -----Biological diversity: increa sed
*
*
*
* The basis of calculation and sources can
be found at www.framtidahan del.se and
www.konsumentverket.se
The eco sales receipt project is
financed by the Swedish Board of Agriculture and the Swedish Consumer Agency.
Business travel, company cars and the environment
Personal travel to and from work as well as travel
on the job also affect the environment. ICA has
guidelines for meetings that clearly encourage
employees, whenever possible, to use telephone
and video conferencing. In 2006 the number of
video conferences tripled compared with the previous year.
ICA monitors its air travel from a financial and
environmental perspective. Despite intentions to
reduce emissions from business and air travel, they
increased in 2006. The main reason was an increase
in the number of trips between Stockholm, Oslo,
Helsingborg and Amsterdam as a result of ICA’s
organization with Nordic areas of responsibility.
The number of work-related train trips rose in
2006. Traveling by train instead of car reduced carbon dioxide emissions by 329 tons.
The share of environmentally friendly cars
in ICA’s fleet increased from 4.5 to 14 percent in
2006. During the fourth quarter one of every four
new cars delivered was environmentally friendly.
index
quality
Municipal contribution
“We have kept the environment in mind
throughout the entire process, from the choice
of suppliers and materials to how we can reduce
noise for our neighbors,” says Marie WinslowAndersson, the environmental coordinator for
logistics at ICA AB. “We have even received help
from municipal authorities to place a bus stop
next to the warehouse so that our employees
can take mass transit to work.”
ICA installed extra seals in delivery bays to
avoid the loss of hot or cold air when trucks
environment
health
ICA places tough environmental demands on all
new warehouse construction, renovation and
additions in Sweden. The new Helsingborg facility is no exception.
back up. Electrical outlets have been set up so
that they do not have to leave their refrigeration units running while waiting to be loaded or
unloaded. All storm drains in the area connect
to a treatment system.
Employees
ICA’s new warehouse in Helsingborg was inaugurated during the year. The environmental
impact of the facility was discussed in the early
planning stages. What resulted is an ultramodern warehouse not only from a logistics standpoint but also environmentally.
Intelligent lighting saves electricity
From the very beginning ICA chose to have its
freezers facing north, since it is naturally colder
and waste heat can be recovered to heat the
facility’s offices.
“We have also utilized skylights to let in natural light and installed shatterproof glass in them.
Lighting systems are connected to motion
detectors, so that lights can be shut off in areas
where no one is working,” says Marie WinslowAndersson.
Like all of ICA’s new and renovated warehouses, Helsingborg uses only coolants that
do not harm the climate, in its case ammonia.
Good Environmental Choice-labeled electricity is already standard at ICA’s warehouses in
Sweden.
ehtics
Carbon dioxide emissions
Carbon dioxide emissions from transports and
other types of combustion contribute to the
greenhouse effect. Cutting fuel consumption
by conservative driving techniques and utilizing
ICA Sverige’s new distribution network will help
reduce emissions.
In Sweden, ICA has outsourced all transports to
independent haulers. ICA requires that they have
a plan how to reduce emissions of carbon dioxide
and carcinogens in relation to the mileage they
drive. All drivers must receive training on conservative driving techniques, which can reduce fuel
consumption by 10 to 15 percent. ICA also requires
its haulers to ensure that their drivers operate
vehicles drug- and alcohol-free, that they follow
speed restrictions and that they wear seat belts.
Opportunities to increase train transports are
constantly evaluated. In 2006 this work intensified. Wherever possible, shipments are sent by sea
between Hamburg and Västerås.
New warehouses designed with environment in mind
introduction
New logistics structure protects the environment
An important step to reach the vision is the new
logistics structure, which will be fully introduced
in 2010. Many products, including dairy products
and beverages, are currently distributed directly to
stores by suppliers. With the new structure, more
product groups will be distributed through ICA’s
warehouse. An environmental analysis shows that
this will cut total exhaust emissions from transports to ICA stores in Sweden. This leads to a 20
percent lower diesel consumption per delivered
cubic meter.
Diesel consumption and carbon dioxide emissions from transports between ICA’s warehouses and stores
Diesel consumption, liters
2006
CO2 emissions, tons
2005
2006
2005
46,530
ICA Sverige
19,051,283*
17,996,700
49,231
ICA Norge
2,502,200**
2,578,000***
6,506
6,703***
* The volume of goods transported increased in 2006, which led to higher diesel consumption.
In relation to the volume of goods delivered, diesel consumption per cubic meter decreased.
** ICA Meny was sold during the year.
*** Including ICA Meny Norge.
45
No. of organic products
Employees
ehtics
Sales trend, %
2006
2005
2006
2005
ICA Sverige
370
400
10
12
ICA Norge
n/a
157
30
n/a
Due to incomplete data, the number of organic products sold by ICA Norge cannot be provided for 2006.
Energy consumption in warehouses and stores (kWh/sq. m.)
Warehouses
environment
health
quality
index
Sales of organic products
Stores
2006
2005
2006
2005
ICA Sverige
249
242
522*
ICA Norge
249
n/a
568
580
Rimi Baltic
254
223
412
394
–
ICA Sverige and Rimi Baltic mainly rose due to higher sales and a higher share of refrigerated and frozen foods.
The use of CoolICA in Norway has had a positive effect on energy consumption in Norwegian stores.
* The figure for the year is an estimation of the store average.
Amount of corrugated board and soft plastics sorted and recycled from stores and warehouses (tons)
introduction
Corrugated board
ICA Sverige
Soft plastics
2006
2005
2006
2005
1,380*
1,431*
1,444
1,385
9,635
465
612
3,363**
586
190**
ICA Norge
10,396
Rimi Baltic
5,768
* Only from warehousing operations.
** Some data gaps occurred due to system changes.
Environmental work in warehouses and stores
ICA is continuously working to minimize the
environmental impact from its warehouses and
stores. Waste management and energy consumption are two important areas.
During the year all Swedish Maxi ICA hypermarkets and ICA Kvantum stores were Nordic Swan
certified.
The Swan, the official Nordic eco label, requires
that stores and the products they sell are adapted
to environmental concerns, that employees have
received training, and the staff and management
actively work to reduce the store’s environmental
impact.
Waste management
The goal of ICA’s waste management work is to
reduce the amount of waste that ends up in landfills. This is done by sorting and recycling materials
and reusing plastic crates. Corrugated cardboard
and shrink wrap are the two materials recycled
the most. All of ICA Sverige’s warehouses sort
compostable waste, which is converted into soil
or biogas. In 2006 ICA Sverige managed to reuse
or recycle 97 percent of its waste, compared with
93 percent in 2005. Technical advances in recycling stations and municipal facilities are the main
reason for the improvement.
ICA’s warehousing units in Norway have environmental stations where corrugated board, plastic and aluminum cans from stores are processed
before being sent to recycling.
ICA has drafted guidelines for minimum sorting levels in stores, primarily in Sweden. To ensure
compliance, a waste consultant has been brought
in to work with new construction and renovations. All corrugated board and plastic from Rimi
stores in the Baltic countries is recycled.
Emissions of carbon dioxide and nitrogen oxides from ICA employees’ air travel
Total no. of reserved flights
by ICA employees
Source: Carlson Wagonlit.
46
Emissions of CO2
from air travel
Emissions of NOX
from air travel
2006
2005
2006
2005
3,250
2,703
11.3
9.4
Energy savings
ICA is working to reduce energy consumption in
its stores and warehouses at the same time that
they handle larger volumes and a higher share of
energy-consuming refrigerated and frozen products. Certain warehouses in Sweden have taken
energy-conservation measures. This includes
reusing waste energy from cooling systems and
tying into the district heating network.
All of ICA Sverige’s warehouses use only Good
Environmental Choice-labeled electricity. This has
helped to reduce carbon dioxide emissions from
energy production by approximately 4,797 tons,
or about 8 percent of emissions from ICA’s distribution transports. A portion of the money from
quality
health
environment
Since 2002 ICA has offered only one type of frozen
Baltic cod in its central product line, corresponding to 1.2 percent of the total volume of frozen cod.
Cod sold under ICA’s private label comes from the
Barents Sea.
During the year ICA was criticized by Greenpeace,
which demanded an immediate stop to the sale of
Baltic cod. The organization’s studies show that at
least one of every three cod from the Baltic Sea is
illegally caught and that eastern cod stocks have
fallen below sustainable limits.
Contributions from stakeholders
“We have gathered data and advice on illegal fishing
and cod stocks in the Baltic Sea from several sources
to make an informed decision that will benefit all the
parties concerned in the long term: customers, the
environment and the fishing industry,” says Kerstin
Lindvall, head of environmental and social responsibility issues at ICA AB.
Two opposing opinions stood out from the information that was gathered. On the one hand, there
were those who recommended that ICA stop selling
cod from eastern Baltic stocks, which could help the
long-term survival of the Swedish fishing industry. Others felt, however, that a halt to sales is not an effective
means to safeguards stocks and that it punishes fishermen who legally fish within the Swedish quota.
Only fresh Baltic cod
After its decision, ICA will limit the Baltic cod sold in
the shared product range to fresh fish from Swedish
ships, docked in Swedish ports and inspected by
Swedish authorities.
Employees
ICA is conscious of the problem of depleted cod
stocks in the Baltic Sea and since 2002 has placed
requirements on the size and origin of the cod it
sells, and that it falls within current quotas. After a
discussion with experts and environmental organizations, ICA decided during the year to stop selling
frozen cod caught in the Baltic Sea.
index
Frozen Baltic cod halted
introduction
ehtics
purchases of Good Environmental Choice-labeled
electricity is donated to environmental projects involving Sweden’s waterways. In 2006 ICA
thereby indirectly contributed SEK 118,000.
The CoolICA system, which is used in around
290 Norwegian ICA stores, carefully monitors
energy consumption and temperatures in all
refrigerated display cases and freezers. CoolICA
has resulted in better food quality through more
accurate monitoring of temperatures as well as a
reduction in energy and service costs.
Environmental requirements in new construction
ICA has issued a number of environmental
requirements in Sweden for the new warehouses
it is building, including in terms of energy conservation and transport planning. In connection
with new construction, renovation or additions,
only climate-safe refrigerants such as ammonia
are used, and heat recovery is standard on all new
refrigeration systems.
47
index
Health
Health policy
ICA’s health policy states that it will
encourage customers and employees to eat a balanced diet of tasty
and nutritious foods. Healthy thinking should be evident in an inspiring
product selection, marketing and
communication. The policy is supported by the Nordic nutritional recommendations of the Nordic Council
of Ministers. ICA is also working to
reduce the harm caused by tobacco
and alcohol.
introduction
ehtics
Employees
environment
health
quality
Health and food are closely associated, which is why health is one of
the ICA Group’s highest priorities. ICA wants to inspire customers to
eat a healthy diet and make it easier for them to shop, prepare and eat
nutritious food.
Dialogue and debate on health
ICA has an open dialogue with politicians, government authorities and representatives of the food
industry on what retailers can do to reduce health
problems. WHO and the EU expect a great deal
from companies, and ICA has concrete results to
show for its work in this area.
ICA has played a prominent role in the development of the Ahold Healthy Living Programme,
where companies within Ahold help each other to
develop offerings that meet WHO’s guidelines.
Extensive discussions are under way in the EU
to implement an action plan against overweight
and obesity. Several leading retailers in Europe,
including ICA, met during the year with the head
of the EU directorate in charge of this issue to discuss how retailers can help alleviate the problem.
ICA has been active in Norway’s effort to
improve eating habits through its participation
in Kostforum’s working group on healthy food
labeling and through a trade group that is drafting
guidelines for marketing of fatty, sweet and salty
products to children. ICA has also participated in
seminars to spread awareness of keyhole labeling
and provided input to the Norwegian action plan to
promote healthier eating.
ICA has an active role on the food and health
council of the food retail trade organization
Svensk Dagligvaruhandel. The health experts
working together on the council serve as a consultation body for authorities and arrange training.
Dietitians employed by retailers often communicate the same message regarding food and health
to help consumers.
Trans fats and GI
Trans fats and the glycemic index (GI) were last
year’s major topic of discussion in the food indus-
Overview of the ICA Group’s healthy products 2006
No. of products
2005
Change in sales
compared with 2005
approx. 800
+23 %
(excl. fruit and vegetables)
approx. 700
+17 %
Sweden
72
49
+47 %
Norway
6
2
Cannot be measured
Sweden
365
320
–7.5 %
Norway
98
97
Cannot be measured
Sweden
450
n/a
+9 %
Norway
310
290
+5 %
Sweden
23
8
Has not been measured
–
–
–
2006
Keyhole-labeled products
Sweden
1,174*
(excl. fruit and vegetables)
Norway
ICA Gott liv
Products for food allergies
Fruit and vegetables
Functional foods **
Norway
(has no program)
* Figures are not comparable year-to-year since the keyhole criteria changed in 2006.
** As per Swedish Nutrition Foundation guidelines, see www.hp-info.nu
48
approx. 750*
index
quality
Company
Initiative
Partner
ICA Group
23 new products were launched in the ICA Gott liv line. The
products are designed to meet Nordic nutritional recommendations and most are keyhole-labeled.
ICA compiled facts and questions on health topics for the
brochure, “We want to make it easier for our customers to
have a healthy diet.”
ICA Sverige
“Buddy with Your Body” is a program that encourages
schoolchildren to eat more fruit and vegetables; 63 percent
of children in the second and fifth grades took part in the
school activity, conducted for the sixth consecutive year.
Swedish Cancer
Society
“Blodomloppet” runs were held around Sweden to recruit
new blood donors and encourage people to exercise. In total,
36,000 runners participated, an increase of 8 percent compared with the previous year. This year’s campaigns recruited
4,000 new blood donors.
Sweden’s
blood banks
Kortvasan – ICA’s family ski race held during the week of Vasaloppet, the world’s biggest cross country ski race; 7,000 skiers
started, including 850 ICA employees. Another 8,500 skiers
took part in the “Girls’ Vasa” race, also sponsored by ICA.
Vasaloppet
Publication of a cookbook with 60 recipes for customers
with multiple allergies.
Swedish Asthma
and Allergy
Association
introduction
Healthier product selection
ICA tries to offer a wide range of foods that inspire
customers to eat a healthy diet. By setting sales
targets for categories such as keyhole-labeled
products and foods for special nutritional needs
(Särnär/Fri for), ICA stores are motivated to display
and market these products.
Interest in eating a healthy diet increased
dramatically in 2006. In Eurobarometer surveys
conducted by the EU Commission, 43 percent of
Swedes said they had changed their eating habits
during the year, which ICA can confirm through its
sales figures.
The range – and sales – of whole grain products,
nuts and dried fruit, fresh fruit and vegetables,
peas, beans and lentils increased significantly during the year. Interest in functional foods, with scientifically proven health effects, is also high. ICA is
positive to this type of cutting-edge product and
offers a number of them.
Improvements in produce departments were
a priority during the year. ICA is broadening the
product range, and many stores have expanded
their sales space. In its future product development, ICA will focus on a healthier and/or organic
product range and on the ICA Gott liv line.
health
Work with health issues in 2006
environment
Lower sodium
After debating sugar, the public has turned its
attention to the sodium content in foods. ICA
has gradually begun reducing sodium in its private label products, mainly in the ICA Gott liv
line. Awareness among consumers of the risks
associated with salt also has to increase. ICA is
therefore working together with other retailers to
encourage suppliers to reduce the sodium content in foods and improve labeling to clearly show
sodium.
Employees
New keyhole criteria
The new Swedish criteria for keyhole-labeling,
which have been expanded to include naturally
healthy products, fully took effect on November
30, 2006. The criteria now include limits on sodium
and sugar as well as fats. Labeling also covers new
product groups such as meat, fish, fruit and vegetables. As a result, the number of keyhole-labeled
products in the range rose. In December 2006 there
were 1,174 keyhole-labeled products in ICA’s Swedish stores, excluding fruit and vegetables.
ehtics
try. Trans fats are formed when liquid vegetable
oils are heated in the presence of hydrogen, in a
process known as hydrogenation. ICA has been
working for some time to eliminate trans fats
from its private label products. After ICA was criticized during the year of trans fat in its microwave
popcorn, it substituted this for another fat.
The popularity of diets based on the GI method
has led to higher sales of whole grain products,
nuts, beans, peas and lentils. This is positive, but
ICA has reservations about the GI method and
instead recommends that customers follow the
Nordic nutritional guidelines, which also call for a
low glycemic diet.
New page on ICA.se with information, advice and
recipes for allergy sufferers and their families.
ICA Norge
Launch of keyhole labeling in Norwegian stores to encourage
customers to eat a healthier diet.
ICA’s brochure called “Crib sheet for good eating habits” was
translated to Norwegian and printed in 650,000 copies for
ICA’s customers. It is also used by health care providers to
teach patients about food labels and nutritional information.
250 retailers and employees of ICA Norge took part in a 90
km bicycle race to benefit the Norwegian Cancer Society.
Rimi Baltic
Sponsorship of a number of sporting events, including the
Solidarity Run and Olympic Runners’ Day.
49
index
quality
health
In Norway, ICA is working to become the country’s
leading retailer of healthy foods. In February 2006
ICA Norge introduced the keyhole label in its stores
to encourage customers to eat a healthier diet.
In 2005 ICA Norge reviewed the Norwegian product line to better track sales of various product
groups. ICA Norge had 750 keyhole-labeled products at year-end.
Products and services for allergy sufferers
The number of people with various types of food
allergies is increasing in the Nordic region. ICA is
therefore improving its range of foods for special
nutritional needs, Särnär and Fri for. The range
was modernized during the year and now includes
365 items in Swedish ICA stores and 98 in Norway.
ICA will increase the number in Norwegian stores
in 2007.
ICA always labels all the ingredients in its private
label products so that customers with food allergies can be certain of what they are eating. ICA
Sverige had previously taken the initiative to formulate an industry-wide agreement on the use of
the phrase, “May contain traces of...” The industry
would prefer not to have to use warning labels on
products that do not contain allergic ingredients.
Similar work began in Norway during the year, and
ICA is playing an active role.
In Norway, many ICA Supermarked and ICA
Maxi stores have a concept called “Fri for,” where
products free from gluten, lactose, egg and soy are
displayed in the same section, together with helpful information on the shelves where it is easily
accessible for consumers.
Rimi Baltic requires all its suppliers to label product contents, nutritional information and allergycausing ingredients on their packaging.
Information for allergy sufferers and their families has been made more accessible in Sweden
through ICA.se. The same information will be published on ICA’s Norwegian website.
introduction
Employees
Prior to launching the keyhole, ICA actively informed
public interest groups, government authorities and
suppliers.
“The introduction of the keyhole has been appreciated by customers, and on average we have seen 17
percent sales increases. Suppliers have been positive
about the labels, and other companies have shown
an interest in using it in their stores,” says Merete
Simonsen, marketing manager for ICA Norge.
To make it easier for retailers, suppliers and consumers, ICA is promoting the use of a common Nordic label for healthy foods.
The ICA Gott liv line of healthy products has been
successful in Swedish ICA stores, and a number of
products have been introduced in Norway as well.
In 2007 additional products will reach Norwegian
stores.
ehtics
environment
Health focus in Norway
50
Tobacco and health
To reduce the risk of selling tobacco and beer to
underage customers, the cash registers in all ICA
stores automatically remind cashiers to check IDs.
ICA conducts “undercover” purchases in Swedish and Norwegian stores to monitor the problem
of tobacco and beer sales to minors. In Sweden,
undercover purchases were made by an independent company, Projektbolaget, which has done
the same thing for Systembolaget, the stateowned alcohol retail monopoly. To avoid being
accused of entrapment, Projektbolaget uses only
people over the age of 18 who look younger.
Undercover purchases in 2006 showed that
the Swedish stores have not gotten any better at
checking identifications in connection with the
sale of tobacco, lottery and beer. Between 55 and
70 percent of stores handled ID checks satisfactorily. They were poorest at checking IDs for cigarettes, but were better at checking for beer. The
results are unsatisfactory, and ICA will provide
training and information to stores and conduct
further undercover purchases in 2007. It will also
review the technical alternatives available to
improve ID checks.
index
Quality
Quality assurance of private label products
Quality work in connection with private label
development is done in several stages. ICA’s quality
laboratory tests appearance, smell, taste, consistency and nutritional content. Detailed specifications describe each approved product’s microbiological limits, nutritional value, the supplier’s
traceability system and packaging information.
New and existing products are tested based on
these specifications. Production facilities must
meet ICA’s requirements on environmental and
product safety.
Produce is inspected to ensure that it meets
requirements in terms of weight, size, acidity,
sweetness and shelf life. As a complement to the
National Food Administration’s tests, ICA randomly inspects for pesticides. If any traces are
found, measures are immediately discussed with
the National Food Administration. In the fall of
2006 a shipment of apples was recalled due to
excess pesticide residue.
health
environment
Employees
– revised and adopted in January 2006
The ICA Group’s quality and environmental policy, which has been continuously updated since 1989, provides
covers operations, product selection,
information and competence issues.
Ethical guidelines for purchasing and
corporate social responsibility for
suppliers are included as well. They
cover working hours, salaries and animal welfare, among other areas. The
policy is complemented by practical
guidelines for day-to-day work within
the group and in stores.
ehtics
Food safety measures by suppliers
ICA participates in the Global Food Safety Initiative (GFSI), an international collaboration that
sets standards for evaluating food safety among
suppliers. ICA’s suppliers of private label products must be certified by GFSI, which requires
monitoring systems, inspection programs for critical points, Hazard Analysis and Critical Control
Points (HACCP), and traceability. A similar system,
EurepGap, is used for fruit and vegetables. As of
year-end 2006 the majority of suppliers of ICA’s
private label products had received certification.
Suppliers that cannot provide GFSI certification
are audited by ICA to determine whether they will
meet the standard within one year.
ICA requires that its other suppliers have selfinspection programs based on HACCP. This is confirmed through audits and questionnaires.
The local connection of each ICA store is often
reinforced by locally produced foods, mainly fresh
foods. Audits ensure that local suppliers operate
approved facilities, that self-inspections are based
on HAACP and that the company has a system for
recalling and tracing products. In 2006 around 240
local suppliers were audited.
Rimi Baltic has harmonized the quality requirements used in its sourcing agreements in the three
Baltic countries. The requirements are based on
national and EU laws. The company has a quality
organization responsible for quality assurance of
private label products.
Rimi Baltic has an extensive quality assurance
system to raise quality levels for fresh produce. In
addition, quality managers are employed at warehouses in each country to ensure the quality of
fresh foods.
Quality assurance of non-foods
For a number of years ICA has required its suppliers of private label non-foods to be certified
according to ISO 9000 or other relevant industry
standard. To determine how many of the about
200 private label suppliers meet this requirement,
ICA started to send out a questionnaire during
the year on quality, the environment and social
responsibility. Private label suppliers and other
suppliers outside Europe were asked to respond.
ICA also conducted quality audits at four nonfood suppliers in 2006.
introduction
The focus of ICA’s quality work is on guaranteeing product safety throughout the supply chain,
from primary producer to consumer. This includes
inspections and monitoring of production, product quality, warehousing, transports and handling
in stores – and covers products from local as well
as global suppliers.
quality
It is vital that customers have confidence in ICA and the products sold
in the Group’s stores. ICA wants to be associated with high quality and
is constantly working to improve quality in every area.
Traceability and recalls
An important part of the work with product quality is being able to trace a product or ingredient
backward and forward in the food chain. According to EU regulations, every level that handles a
product must be able to trace it one step backward and forward in the chain.
In 2006 ICA improved its systems for tracing
and recalling products. It has also coordinated
51
Company
Initiative
ICA Group
ICA has developed a web-based training program designed to give store employees basic information on food safety.
quality
index
Quality work in 2006
ICA’s quality and environmental policy was revised.
health
A pilot project in logistics was launched to evaluate a web-based self-inspection program for handheld computers designed to simplify monitoring and reporting. The
goal is to introduce the program in both the Swedish and Norwegian operations.
environment
ICA has begun formulating a standard for self-inspections by retailers to improve
food safety. The work has been done in cooperation with the National Food
Administration, Coop, Axfood and Bergendahls.
Employees
A handheld computer linked to a program for self-inspections in stores was introduced during the fall. Communication is wireless, which facilitates inspections and
monitoring of refrigerated products.
In cooperation with an auditing firm, around 240 local suppliers were inspected.
The aim is to support local suppliers and safeguard food quality from them when
they supply ICA stores.
ehtics
ICA Sverige
ICA has joined the Swedish Frozen Food Institute’s efforts to develop industrywide temperature guidelines for refrigerated and frozen foods. The work has been
done in cooperation with other retailers.
A HACCP plan has been drafted for all warehouses, along with a handbook on
logistics and quality work.
A review of rules for freshness dating was initiated to increase the number of days
products remain fresh in stores rather than in warehouses.
introduction
ICA participated in revising the rules for country of origin labeling.
A new quality laboratory was built in Helsingborg.
ICA Norge
Work was begun on developing routines and rules for handling fruit and vegetables in Norwegian warehouses.
Food safety training was held for all ICA Maxi and ICA Supermarked stores.
In a cooperative partnership with others in the industry, ICA has led the development of new industry guidelines for hygiene and food safety in the retail sector.
The work has been done on behalf of Norway’s Food Control Authority and will
continue in 2007.
A new quality laboratory was built in Oslo.
52
routines between Sweden and Norway. Improved
tracing has made recalls more efficient, limiting the number of stores that have to inspect or
remove products from their shelves. One example
occurred in fall 2006 when ICA had to issue a
recall due after discovering salmonella in ground
beef. Using the tracing system, ICA was able to
determine that the beef had reached only 49 of its
1,397 stores in Sweden.
Animal welfare
ICA applies strict rules on animal welfare comparable to Swedish and Norwegian laws. The rules
cover private label products, eggs and fresh and
frozen meat. For the Euroshopper private label
and other products containing meat, ICA requires
its suppliers to follow EU rules.
In-store quality assurance
ICA aspires to live up to customer demand that
its stores maintain high hygienic standards and
that its food products, especially fresh foods, are
safely handled. According to current EU laws,
every store must have its own inspection program
for hygienic practices and food safety. In Norway,
similar laws apply. The program covers routines,
staff training, labeling, food handling, maintenance of equipment and properties, and inspections of temperatures in refrigerated display cases
and freezers.
In its Swedish stores, ICA has introduced a webbased self-inspection program to monitor quality
work. Store employees record temperatures and
other inspection points with the help of a handheld terminal. This allows data to be monitored by
the stores as well as ICA centrally. Over 900 stores
began implementing the program during the year.
In Norway, outside consultants are brought in
to ensure proper inspections at ICA Maxi and ICA
Supermarked stores. ICA Nær and Rimi have an
electronic self-inspection system created by ICA.
In 2007 the web-based program will reach the
Norwegian stores as well. All ICA and Rimi stores
will be affected by the program.
Rimi Baltic maintains a dialogue with authorities
on its quality efforts. In Latvia, it is participating in
a process together with authorities and the trade
association to draft guidelines for food safety in
the retail sector.
Country of origin labeling
During the year Sweden’s then Minister of Agriculture Ann-Christine Nyqvist reviewed the voluntary
rules the industry adopted in 2003 for country of
origin labeling of meat and deli products. ICA’s
policy is to always provide information on where
its private label products come from, in accordance with the voluntary rules. Work was done in
2006 to revise the rules and increase their use.
ICA knows that customers want country of
origin labeling and is therefore pushing for greater
information on where products come from.
Of which private
label products
2005
2006
2005
ICA Sverige
99
92
43
44
ICA Norge
59
51
12
13
Rimi Baltic
406
472
19
13
ingredients with a genetically modified origin. No
such products have been or currently are included
in ICA’s range.
U.S. rice plantations were contaminated in
2006 by genetically modified rice, known as LL601.
This led to recalls from warehouses and stores.
After ICA detected LL601 in its self-inspections,
all U.S.-imported rice was analyzed. Authorities in
Sweden and Norway were of different opinions
how recalls should be conducted. In Sweden,
authorities decided to stop the rice at the warehouse, whereas Norwegian authorities chose to
inform the media and request recalls from stores.
* Contained means controlled production in an industrial or laboratory setting without the risk of spreading
genetically modified organisms to the surrounding
eco system.
Employees
A genetically modified organism (GMO) has had
its genetic code altered by technological means
to give it special characteristics. In general, ICA is
positive to new technology that leads to better
products for consumers. For ethical and environmental reasons, however, it questions the production and cultivation of genetically modified foods
and seeds that are not contained*.
For ICA to sell a product that has been produced with the help of genetic technology, it must
be ethically acceptable, safe for humans and the
environment, and clearly beneficial for consumers. Decisions whether to add such products to
ICA’s range are made by the company’s management, though no cases have arisen as yet. ICA’s
position that consumers should have the right to
all available information on a product naturally
applies to products that consist of or contain
ehtics
No genetically modified foods
environment
health
2006
quality
Total no. of recalls
index
Product recalls from stores
introduction
Quality assurance for warehouses and transports
All of ICA’s warehouses and distribution units work
in compliance with HACCP. ICA has the following
three critical control points: temperature, date
labeling and salmonella in imported animal products. It is crucial that the refrigerated chain remains
unbroken and that goods are stored and transported at the right temperature to ensure quality.
New EU regulations on hygiene and food safety
introduced during the year place higher demands
on self-inspections. Temperature limits have been
tightened on animal products. ICA has worked to
adapt its operations in Sweden and Norway to the
new rules.
In Sweden, follow-up inspections are made
when products are delivered to stores at incorrect temperatures. In 2006 only one product was
delivered at an incorrect temperature, a significant
improvement.
ICA Norge continued to work on improving
suppliers’ routines to ensure proper handling of
refrigerated products. On occasion certain products have not been sufficiently cooled after production, due to which their temperatures end up
being too high when transported to and stored at
ICA’s warehouses.
53
quality
index
GRI content index
– Global Reporting Initiative
environment
health
ICA is adapting its reporting according to the GRI. In 2007 IT support will be developed for this purpose with the goal of meeting GRI
reporting requirements within two years. Below is a summary of
ICA’s compliance.
Profile
Pages
Strategy and analysis
Employees
1.1
Statement from most senior decision maker
33
introduction
ehtics
Organizational profile
2.1
Name of the organization
1–2
2.2
Primary brands, products and/or services
18, 23, 25, 27–29
2.3
Operational structure of the organization
16
2.4
Location of organization’s headquarters
99
2.5
Countries
1, 37
2.6
Nature of ownership and legal form
22
2.7
Markets served
1
2.8
Scale of the reporting organization
41, 57–58, 61
2.9
Significant changes
57–67
2.10
Awards received
17
Report profile
3.1
Reporting period
3, 57
3.2
Date of most recent previous report
3
3.3
Reporting cycle
3
3.4
Contact point for questions
3, 99
Report scope and boundary
54
3.5
Process for defining report content
No data, see 35
3.6
Boundary of the report
1
3.7
Specific limitations
No data
3.8
Basis for reporting
1, 6–8, 57, 68
3.10
Restatements of information
No changes
3.11
Significant changes
60, 68
index
quality
health
3.12
environment
GRI
Pages
Table identifying location of standard disclosures
54–55
92–97
4.2
Chair
92
4.3
Independent members
92
4.4
Mechanisms for shareholders and employees
96
4.14
List of stakeholder groups
37–38, 43, 49
4.15
Selection of stakeholders
35, 37–38
ehtics
Governance structure of the organization
introduction
4.1
Employees
Governance
Performances indicators
Economic performance
EC1
Economic value generated and distributed
63–67
EC3
Coverage of the organization’s defined benefit plan obligations
38
EC8
Development and impact of infrastructure investments and services
38–39
Environmental performance
EN3
Direct energy consumption
46
EN5
Energy saved due to conservation and efficiency improvments
46
EN16
Total direct and indirect greenhouse gas emissions
46–47
EN18
Initiatives to reduce greenhouse gas emissions and reductions
achieved
43–45
EN20
NOx , SOx and other significant air emissions
46
EN22
Total weight of waste
46
Social performance
SO3
Percentage of employees trained in organization’s anti-corruption
policies and procedures.
36
55
Annual Report
ICA AB
Corporate identity number 556582–1559
A new organizational unit for non-foods was established during the
third quarter to consolidate the company’s resources in the area. The
new unit now has total responsibility for product selection, purchasing,
operations and sales of non-food products.
Operations
ICA AB is the parent company of the ICA Group, which operates
around 2,300 of its own and retailer-owned stores in Sweden, Norway
and the Baltic countries. ICA AB maintains its registered office in Stockholm at Svetsarvägen 16, SE-171 93 Solna. The subsidiaries ICA Sverige
AB and ICA Norge AS are sales companies responsible for operations,
sales and new store openings. ICA Banken offers financial services to
Swedish customers. ICA owned half of the companies Rimi Baltic, with
stores in the Baltic countries, and Netto Marknad, with discount stores
in Sweden, for the large part of 2006. Rimi Baltic is a subsidiary as of
December 31, 2006, and in February 2007 the holding in Netto was
reduced to 5 percent.
Fourth-quarter income includes a capital gain of SEK 341 million on
the sale of the warehouse property in Helsingborg. ICA Fastigheter
Sverige AB sold the property to Kundvagnen Holding AB on May 22
for SEK 946 million, and the deal was finalized in October. ICA has
signed a long-term lease with the buyer.
Financial summary
In December ICA began the process of shutting its Etos stores in Sweden, which sell health and beauty products, to instead focus on the
health and beauty concept at ICA stores. The expenses associated
with the process are marginal.
SEK million
Net sales
Operating income
January – December
2006
2005
67,395
66,096
2,297
1,940
Operating income excluding capital gains from real
estate sales and impairment losses on fixed assets
1,709
1,865
Income after tax
2,034
1,520
35,506
32,731
Total assets
Cash flow from operating activities
3,044
2,339
Operating margin, %
3.4
2.9
Operating margin excluding capital gains from real
estate sales and impairment losses on fixed assets, %
2.5
2.8
28.8
25.6
Return on equity excluding ICA Banken, %
25.7
20.3
Return on capital employed excluding ICA Banken, %
12.9
12.2
Highlights during the year
In February ICA AB announced that the subsidiary ICA Meny was for
sale. On June 16 it signed an agreement with Nordic Capital to sell ICA
Meny. The sale produced a capital gain for ICA AB of approximately
SEK 367 million.
On May 2 ICA Fastigheter Sverige AB sold a portfolio containing 25
store properties in western and southern Sweden to ING Real Estate.
The purchase price was SEK 870 million. The purchase raised ICA
AB’s operating income by SEK 89 million during the second quarter
of 2006.
During the year ICA Banken for the first time reported positive operating income, underscoring its positive development during the year.
The inauguration of our new, fully automated warehouse in Helsingborg took place in September. The warehouse is an important part of
ICA’s distribution network and is Sweden’s largest distribution center
for consumer goods.
the group
In October ICA Baltic AB signed an agreement with Kesko Livs Ab
to acquire its 50 percent interest in Rimi Baltic AB. ICA AB paid EUR
190 million in cash for the shares in December 2006 and EUR 50 million for four properties in Estonia in February 2007. The acquisition
was approved by the EU Commission in December, and Rimi Baltic is
reported as of January 1, 2007 as a wholly owned subsidiary of ICA AB.
director’s report
Key financial ratios
parent company
The Board of Directors and the President of ICA AB hereby present
the annual report for the financial year January 1, 2006 – December
31, 2006. All amounts are in millions of Swedish kronor (SEK million)
unless indicated otherwise.
audit report
Financial review
ICA AB signed an agreement with Dansk Supermarked in December
to change the ownership structure of Netto, with ICA reducing its
interest from 50 percent to 5 percent. As part of the transaction, ICA
is taking over 21 Netto stores in the Mälardal area, some of which will
be converted to ICA stores while others will be shut down. The transaction was finalized on February 15, 2007 after approval was received
from the Swedish Competition Authority.
Financial year 2006
For 2006 ICA noted a significant increase in net income, slightly over 58
percent, to SEK 2,401 million. Store sales in Sweden have been strong,
and ICA Banken for the first time reported positive operating income
for the full year. Moreover, capital gains on property sales, including
impairment losses on fixed assets and the sale of ICA Meny, affected
income positively. On the other hand, income was affected by weak
development in the fourth quarter. In ICA Norge’s case, it was mainly
due to lower sales volume and a lower gross margin. ICA Sverige’s
income was charged with start-up costs for the new warehouse in Helsingborg and additional expenses. However, the year was distinguished
first and foremost by a number of structural deals that have given ICA a
new starting point for the future.
During the year ICA Meny and the holding in Netto were sold at the
same time that Kesko’s 50 percent interest in the former joint venture
Rimi Baltic was acquired. A decision was made to shut the Etos stores
in Sweden and instead focus on the health and beauty concept in ICA
stores. These structural changes were the result of a conscious strategy to streamline operations and concentrate on what ICA is best at –
retailing in general and consumer goods in particular. In this way, ICA can
continue to improve and be the leader in the markets where it is active.
Income in Norway declined significantly in 2006. This is mainly due
to lower sales volume and a lower gross margin, higher operating
expenses in stores due to a fast pace of new store openings, and structural costs to shut and modernize stores. While necessary, the major
changes under way in Norway in recent years have resulted in lower
annual report
57
director’s report
the group
parent company
audit report
income and the loss of market share. In 2007 ICA therefore launched
a program called “Take-off 2007” to accelerate the Norwegian business in a number of key areas: the ICA Maxi concept will be refined to
better meet customer needs; greater emphasis will be placed on nonfood products; and product lines will be improved with regard to both
private labels and fresh foods. ICA is continuing to strengthen its store
network by opening new stores and modernizing existing ones at the
same time that it broadens its product range, increases the emphasis
on price and continues to put effort into the area of health products.
With these changes, ICA expects to gradually improve its customer
offering in Norwegian stores.
The fast pace of new store openings continued in 2006. ICA managed to open a number of new units and rebrand many others. In Norway and Sweden, a total of 23 new stores were opened and nearly 350
existing stores were modernized. Many stores saw a pickup in sales,
even smaller ICA Supermarket and ICA Nära stores in Sweden. ICA will
maintain the same fast pace of store openings in 2007 and focus on the
development and upgrade of the existing store network. Today the average life of a store is shorter than ever before, and upgrades are needed
after just four or five years to meet customer needs and expectations.
ICA Sverige is one of the country’s leading retail companies, with a
focus on food and consumables. It is the main supplier to ICA retailers,
who own and manage their stores independently. In 2006 ICA Sverige
had net sales of SEK 48,267 million. Sales in the 1,397 stores amounted
to approximately SEK 87 billion including VAT. Sales in Swedish ICA
stores rose by 7.0 percent. The smaller store profiles, ICA Nära and ICA
Supermarket, reported especially positive sales trends. New stores
were opened at a rapid rate and comprised all store profiles. In total,
13 stores were opened in 2006: 4 Maxi ICA Stormarknader stores, 1
ICA Kvantum store, 2 ICA Supermarkets and 6 ICA Nära stores. Most
notable was the opening of hypermarkets in the metropolitan regions
of Malmö, Göteborg and Stockholm. In all, 45,000 square meters of
retail space was added during the year. ICA’s major investment in an
improved distribution network continued, and a new, ultramodern
warehouse was opened in Helsingborg.
ICA Norge is one of Norway’s leading retail companies, with a focus
on food and consumables. ICA Norge has 693 stores operated by the
company or as franchises. In 2006 ICA Norge reported net sales of NOK
15,966 million. Store sales amounted slightly over NOK 20 billion excluding VAT. Sales for Norwegian ICA stores decreased by 1.0 percent. The
best sales trends were posted by ICA Maxi and ICA Supermarket. New
stores were opened at a rapid rate, and slightly over 18,000 square
meters of retail space was added in every store profile during the year.
A large number of stores in every profile were renovated as well. Two
new concepts were developed for ICA Nær: one for urban areas and
one for suburbs. The urban concept emphasizes prepared meals, and
both concepts have been very well received. To make it easier for Norwegian customers to eat a healthy diet, ICA Norge began using keyhole
labeling in its stores. Sales of keyhole products have risen by between
10 and 20 percent. Sugar-free zones have been tested around the registers in one store, and reactions have been very positive.
Rimi Baltic is one of the leading, most modern food retail chains in
the Baltic countries. The company was established as a joint venture
between ICA and Kesko Livs in January 2005. In October 2006 ICA and
Kesko concluded an agreement whereby ICA would acquire Kesko’s
50% interest in Rimi Baltic. Rimi thereby became a wholly owned sub-
58
annual report
sidiary of ICA AB. Net sales rose by 19.6 percent to SEK 8,993 million
(7,517). A large number of stores have been opened, mainly hypermarkets and discount stores, in all three countries. The number of hypermarkets has increased to 30, compared with 24 at year-end 2005.
ICA Banken offers services that make it easier for ICA’s customers to
manage their finances and in the process strengthens their ties to ICA.
During the year the bank again reported a strong increase in new customers and raised its business volume by 9.5 percent. ICA Banken has
the most satisfied banking customers in Sweden, according to a survey
of the industry by the Swedish Quality Index. Its product range and
product quality were strong contributing factors. ICA Banken took over
responsibility for payment terminals in Norwegian ICA and Rimi stores,
which has reduced their credit card processing costs. It had already
been responsible for payment terminals in Swedish ICA stores.
The Etos retail chain was launched in Sweden in 2002 and has maintained an offering of health and beauty products as part of a unified
concept. ICA has decided to focus on the health and beauty concept in
ICA stores and has begun the process of liquidating Etos.
Netto was established in August 2001 as a joint venture between
ICA AB and Dansk Supermarked AS. In December 2006 ICA signed an
agreement with Dansk Supermarked to reduce its interest in Netto
from 50 percent to 5 percent. The Netto discount chain manages 84
stores in Sweden. As part of the agreement with Dansk Supermarked,
ICA is taking over 21 Netto stores in the Mälardal region and converting
some of them to ICA stores. ICA will retain its 5 percent interest in the
company until further notice.
Income summary
Consolidated net sales in 2006 amounted to SEK 67,395 million
(66,096), an increase of 2.0 percent. ICA Sverige’s sales rose by 3.3 percent. Sales for ICA Norge decreased by 3.6 percent; in local currency
sales decreased by 2.7 percent. ICA Banken’s sales rose by 44.9 percent,
while business volume climbed 9.5 percent.
Consolidated operating income for 2006 rose by SEK 357 million or
18.4 percent to SEK 2,297 million (1,940) thanks to a continued strong
sales trend for ICA Sverige and capital gains on real estate sales, which
amounted to SEK 588 million (75) during the year, including impairment
losses on fixed assets. At the same time operating income was affected
by substantially lower income for ICA Norge. Underlying income for
ICA Sverige is very strong, nearly SEK 700 million better than the previous year, while ICA Norge reported underlying income that is approximately SEK 300 million lower than the previous year. The year included
investments of SEK 330 million in a new logistics structure in Sweden, a
new store structure in Norway and new projects and security solutions
in IT. An income-based premium and staff bonus of nearly SEK 100 million have been allocated due to ICA Sverige’s high income.
Operating income for ICA Sverige amounted to SEK 2,557 million
(1,607). The increase is due to improved market positions and the fact
that year-earlier operating income was charged with expenses for the
price-cutting campaign launched in March 2005. Capital gains on real
estate sales in Sweden also contributed to the income improvement
and rose by SEK 454 million to SEK 465 million (11), including impairment
losses on fixed assets.
Operating income for ICA Norge decreased substantially to SEK 114
million (534). The decrease is mainly due to structural costs to shut and
modernize stores, a lower gross margin and lower sales, and higher
ICA store sales during the year
The following tables refer to store sales to consumers. In Sweden, this
includes Swedish retailer-owned ICA store sales. In Norway, franchise
store sales are included. Sales for retailer-owned and franchised stores
are not consolidated in the Group.
The information is based on accepted practices in each country. This
means that the Swedish sales figures include VAT, while the Norwegian
sales figures do not.
audit report
ICA store sales in Sweden
January–December 2006
SEK M
Maxi ICA Stormarknad
19,443
13.9 %
5.2 %
ICA Kvantum
23,202
7.3 %
6.0 %
ICA Supermarket
30,539
4.3 %
5.0 %
ICA Nära
13,408
3.9 %
5.2 %
Total
86,593
7.0 %
5.4 %
Store sales incl. VAT
parent company
Change,
comparable
stores
Change,
all stores
the group
In 2006 private label sales in Sweden rose from 15 percent to 17 percent
year-to-year.
ICA and Rimi store sales in Norway
January–December 2006
Change,
comparable
stores
0.5 %
NOK M
Change,
all stores
ICA Maxi
2,700
11.7 %
ICA Supermarked
4,246
8.6 %
2.3 %
ICA Nær
4,522
–4.4 %
0.8 %
8,474
–6.7 %
–0.5 %
19,942
–1.0 %
0.5 %
Store sales excl. VAT
Rimi
Totalt
director’s report
operating expenses resulting from the fast pace of new store openings. The decline in income was partly offset by capital gains on real
estate sales, which, after deducting impairment losses on fixed assets,
amounted to SEK 124 million (-36). The large part is attributable to the
sale of a Norwegian shopping center in February 2006.
ICA Banken reported positive operating income for the first time in
2006 – SEK 11 million (–82) for the full-year. The income improvement is
the result of higher business volumes.
The ICA Group Functions segment (formerly ICA AB) reported an
operating loss of SEK –373 million (–161). The lower result was due to
changes in the principles for distributing expenses within the Group,
which is an element in the effort to create a uniform organization. The
deficit was also due to higher IT expenses for warehousing and logistics
operations, IT security and IT consultants, higher expenses for financial
administration in stores and in the Group, and expenses for an incomebased premium and staff bonus.
Net sales for Rimi Baltic during the period amounted to SEK 8,993
million (7,517), an increase of 19.6 percent. ICA’s share of Rimi Baltic’s
loss amounted to SEK –12 million, slightly higher than the year-earlier
loss of SEK –8 million. The result includes expenses for the fast pace of
new store openings.
Net sales for Netto Marknad during the year amounted to SEK
2,444 million (2,052), an increase of 19.1 percent. ICA’s share of Netto
Marknad’s loss for the year improved to SEK –86 million (–100) compared with the same period last year. The result includes structural
costs of SEK 26 million in the fourth quarter due to write-down of
stores.
ICA Meny was sold as of September 19 and consolidated in the ICA
Group through August. Net sales for ICA Meny for the period January – August amounted to SEK 4,383 million. For the period January
– December 2005 net sales were SEK 5,775 million. The capital gain on
the company sale and ICA Meny’s income after tax amounted to SEK
367 million (–2).
After-tax income from continuing operations rose by 33.8 percent
to SEK 2,034 million (1,520). The tax expense for the year amounted to
SEK 12 million (147). The lower tax expense compared with the previous
year is due in part to the sale of properties through companies and in
part to lower results from operating units, especially in Norway. Net
income including results from discontinued operations rose by 58.2
percent to SEK 2,401 million (1,518).
In 2006 private label sales in Norway rose from 7 percent to 9 percent
year-to-year.
Number of stores
ICA stores in Sweden, including retailer-owned stores
Store profile
Maxi ICA Stormarknad
Dec.
2005
New
Converted
Closed
Dec.
2006
45
4
3
0
52
ICA Kvantum
126
1
–4
–1
122
ICA Supermarket
488
2
–4
–9
477
ICA Nära
758
6
5
–23
746
1,417
13
0
–33
1,397
Closed
Dec.
2006
Total
ICA and Rimi stores in Norway, including franchised stores
Dec.
2005
New
Converted
ICA Maxi
20
4
–1
0
23
ICA Supermarked
69
5
5
–3
76
ICA Nær
334
0
8
–36
306
Rimi
324
1
–12
–25
288
Total
747
10
0
–64
693
Store profile
annual report
59
audit report
parent company
the group
director’s report
Financial position
The Group’s total assets rose by SEK 2,775 million to SEK 35,506 million
(32,731). Total assets have increased as a result of the acquisition of all
the shares in Rimi Baltic AB and the consolidation of its operations, and
decreased as a result of the sale of ICA Meny. The increase in intangible
fixed assets is due to the acquisition of Rimi Baltic. Capital employed
increased by SEK 1,619 million to SEK 25,780 million. The equity/assets
ratio was 28.8 percent (25.6). The Group’s net debt excluding ICA
Banken was SEK 4,539 million (6,096).
The Group’s finance company is being audited by the Swedish tax
authorities. An exchange of correspondence with the tax authorities
has recently begun.
priority areas: financial understanding, operational leadership, store
operations, communication and awareness of ICA as a company.
One of ICA’s challenges is to utilize its gender equality and diversity
work to capitalize on differences and thereby positively impact the
company’s earnings and attractiveness as an employer. ICA’s occupational health and safety policy states that working environments are
an important competitive advantage and strategic issue. ICA strives to
maintain positive physical and mental work environments to promote
employee health short- and long-term as well as contribute to the
development of its staff and the business as a whole. The same high
quality demands apply to environmental health and safety as to other
operations.
Statement of cash flows
Cash flow from operating activities amounted to SEK 3,044 million
(2,339) during the period. Cash flow from investing activities amounted
to SEK –389 million (–1,076), of which sales by ICA Meny amount to
SEK 883 million and the investment in Rimi Baltic to SEK 1,410 million.
Cash flow from financing activities amounted to –1,872 million (–1,410),
which largely relates to amortization of loans. The Group’s liquid assets
totaled SEK 3,749 million (2,920) as of December 31.
Based on sound profitability, ICA shall meet the expectations of its
customers and society at large in terms of stores that provide accessibility and value for the money, quality, health, environment and ethical
concerns. We see sustainable development as an integral factor in the
long-term development of the company. ICA has reported on initiatives
in these areas for several years. The ICA Group has taken an important
step in this field by introducing the GRI model (Global Reporting Initiative) as a basis for such information.
Investments
Investments in 2006 amounted to SEK 2,423 million (2,547).
Change in accounting principles
Financial guarantees are initially recognized at fair value according to an
amendment to IAS 39 Financial Instruments: Recognition and Measurement. ICA Banken’s card fees, which were previously recognized as revenue when charged to the customer, are now divided evenly over the
year. Net interest income and net commission income in ICA Banken
are recognized in net sales, whereas net interest income was previously included in other operating income. For more information on the
amendment, see Note 1.
Financial risk management
The financial strategy of the ICA Group is conservative and focuses on
defining and managing financial risks. ICA Banken accounts for part of the
Group’s total assets, which means that the financial risk taking account of
the bank’s operations is higher than normal for a retail company.
The Board of Directors is responsible for establishing the financial
policy, which governs the Group’s financial risk management. Within
the ICA Group, financial risks are managed centrally through the
Group’s finance function.
For more information on ICA’s risk management, see the notes to
the consolidated accounts – Note 22 for Principles of financial risk management and Note 23 for Financial instruments.
Human resources
The Group had an average of 11,698 employees (11,556).
The principal HR strategy is to strengthen ICA’s brand and position
as an employer. Its four priority areas are diversity, competence, health
and wellness, and leadership. Goals and concrete activities are linked to
each area. A competence audit was conducted in late 2005 to identify
existing competencies and areas that need strengthening in order to
reach ICA’s business objectives ICA. As a result, ICA has worked on five
60
annual report
Organization for social responsibility in at-risk countries
Through Ahold, ICA became a member of the BSCI (Business Social
Compliance Initiative) network in 2005. This organization is a European
initiative founded to develop common criteria and systematic efforts
to improve working conditions at supplier companies in at-risk countries.
Global Compact
The ICA Group is also a signatory to the UN Global Compact. This commits ICA to ten international principles covering human rights, working
conditions, the environment and countering corruption.
ICA’s good business
In seven position statements, the ICA Group has summarized its stance
on ethics and corporate responsibility, a philosophy it calls “ICA’s good
business.” The aim is to be a sustainable company driven by the following values:
ICA will be driven by profitability and high ethical standards.
ICA will listen to the customers and always base decisions
on their needs.
ICA will nurture diversity and growth among its employees.
ICA will maintain an open dialogue internally and with the community.
ICA will adopt sound environment practices to promote sustainable
development.
Policies and guidelines are in place to convert these points into practice
in day-to-day activities. This is done through a systematic management
system in the subsidiaries, cooperation with other organizations and
regular contact with key stakeholders.
2002
2003
2004 IFRS
2005 IFRS1
2006 IFRS
70,908
71,980
73,334
71,663
67,395
4,103
4,437
3,514
3,248
3,545
–1,276
–1,695
–1,280
–1,275
–1,248
2,297
audit report
Five-year summary for the ICA Group
Depreciation/amortization
Operating income before goodwill amortization and impairment
2,827
2,742
2,234
1,973
Goodwill amortization and impairment
–292
–622
–257
–15
–
Operating income
2,535
2,120
1,977
1,958
,2,297
Net financial items
Tax
Minority share
–451
–312
–236
–287
–251
2,084
1,808
1,741
1,671
2,046
–350
–32
–226
–148
–12
–24
1
1,710
1,777
1,515
1,523
2,401
Result from discontinued operations
Net income for the year
the group
Net sales
Operating income before depreciation/amortization
parent company
Condensed income statement
367
Intangible fixed assets
2,762
2,288
2,064
1,914
3,447
Tangible fixed assets
14,469
11,639
12,675
12,441
13,232
Financial fixed assets
4,047
3,936
3,185
4,914
3,959
–
–
186
49
181
8,826
9,245
9,780
10,493
10,938
Other fixed assets
Other current assets
Liquid assets and short-term investments
3,967
4,446
3,198
2,920
3,749
Total assets
34,071
31,554
31,088
32,731
35,506
Shareholders’ equity
11,939
12,169
7,094
8,386
10,216
258
34
15,563
Minority interests
Interest-bearing liabilities and provisions
Non-interest-bearing liabilities and provisions
Total shareholders’ equity and liabilities
12,032
9,527
15,150
15,774
9,842
9,824
8,844
8,571
9,727
34,071
31,554
31,088
32,731
35,506
director’s report
Condensed balance sheet
Key financial ratios
Operating margin, %
Return on capital employed, %
3.6
2.9
2.7
2.7
3.4
15.6
13.1
12.9
12.2
12.9
Return on equity, %
16.5
15.7
16.9
20.4
25.7
35.8
38.7
22.8
25.6
28.8
1
Including the discontinued operations of ICA Meny in accordance with the annual report for 2005.
Five-year summary
Information on the years 2002 – 2003 is based on previously released
information from annual reports prepared in accordance with the
provisions of the Annual Accounts Act and the general advice of the
Swedish Accounting Standards Board. As of 2004 information is
provided according to IFRS.
Definitions of key financial ratios:
Capital employed = Total assets less non-interest-bearing liabilities and
provisions.
Return on equity = Income after tax as a percentage of average equity.
The operations of ICA Banken are excluded from both the income
statement and balance sheet in the calculation of return on equity.
Equity/assets ratio = Shareholders’ equity as a percentage of total assets.
ICA AB
The Parent Company comprises four overall functions for Retail,
Finance, Marketing and Supply Chain. The Parent Company’s net sales
amounted to SEK 783 million (480) with income after financial items of
SEK 400 million (446).
Operating margin = Operating income as a percentage of net sales.
Return on capital employed = Income after financial income as a percentage of average capital employed. The operations of ICA Banken
are excluded from both the income statement and balance sheet in the
calculation of return on capital employed.
Board of Directors and Management/Board’s rules of procedure
During the year the Board of Directors of ICA AB consisted of eight
members elected by the Annual General Meeting with four deputies,
as well as two members with two deputies appointed by the unions.
All members appointed by the Annual General Meeting are connected
annual report
61
audit report
with the owners of ICA AB. The CEO, CFO and Chief Counsel (Board
Secretary) participate in the Board’s work, which follows special rules
of procedure that ensure that the Board receives the information it
needs to monitor and develop business operations. The Board convened on nine occasions in the financial year 2006.
parent company
Board committees
The Board is able to establish committees to complement its work.
The committees are subordinate to the Board and report to it on an
ongoing basis.
director’s report
the group
Audit Committee
The Board of Directors has appointed an Audit Committee to oversee
accounting and reporting of financial information. The Audit Committee is also responsible for evaluating the Group’s systems for internal
oversight and control. Among the Committee’s other duties are to
handle auditing issues from the external and internal audit. The Audit
Committee’s work is governed in its rules of procedure, which are laid
down by the Board of Directors.
The Audit Committee consists of two members: John Rishton (Chairman) and Claes-Göran Sylvén. In addition, assistants to the members,
the external auditors, internal auditors and ICA AB’s President and CFO
normally attend all or part of the committee’s meetings. In 2006 the
Audit Committee held six meetings.
Executive Committee
The Board has appointed the Chairman, Deputy Chairman and President to an Executive Committee responsible for continuous monitoring of the Group’s operations. The committee also prepares issues
that will be discussed by the Board and supports the presidents and
other senior executives of the subsidiaries in the implementation and
execution of the decisions taken by the Board. The committee also has
a mandate to decide on investments that do not require treatment by
the Board.
Compensation Committee
The Board has given the Executive Committee a mandate to act as a
Compensation Committee for the purpose of deciding on compensation principles for senior executives in Group Management, though not
for the President, whose salary is determined by the Board.
Internal control over financial reporting
The Board has decided that the company will voluntarily meet the
requirements for internal control over financial reporting according
to the Swedish Code of Corporate Governance. ICA will also apply the
methods for testing key controls. Initial documentation for processes
and key controls as well as evaluations were completed in 2006, and
the internal routine will take effect in 2007.
Approval of financial reports
The financial reports included in this annual report were approved by
the Audit Committee on February 16 and by the Board of Directors on
February 19, 2007.
Ownership structure
Royal Ahold owns 60 percent and Hakon Invest AB (publ) 40 percent of
the shares in ICA AB. Through a shareholder agreement, neither party
has control of the company and the two share equal voting power in
the Board and at the Annual General Meeting.
62
annual report
Important events after conclusion of the financial year
In February 2007 ICA decided to simplify the Group’s organizational
structure. Four Group functions have been reduced to three, at the
same time that the subsidiaries now have clearer responsibility for
local customer offerings and coordination in certain areas at the
Group level. The changes are also being implemented to facilitate
future cost cuts. In connection with the new organizational structure,
the composition of ICA’s Group Management will change as well.
In January ICA Eiendom AS sold a real estate portfolio mainly comprised of retail properties to ERIV. The sales price amounted to NOK
516 million with a capital gain of approximately NOK 100 million that
will positively affect ICA’s operating income in the first quarter of 2007.
Trond Kongrød was appointed the new President and COO of ICA
Norge in January. He was most recently format director for the Norwegian ICA formats.
In January ICA Norge launched “Take off 2007,” a program designed to
boost business in a number of areas and create Norway’s best stores.
ICA Norge will strengthen its store network by opening new stores
and modernizing existing stores. This is being done at the same time
that the product range is being broadened, greater focus is placed on
prices and further efforts are devoted to health products.
ICA Eiendom AS has sold a property in Norway to Klaveness Eiendom AS for NOK 330 million. The capital gain of approximately NOK
90 million affects ICA’s operating income in 2007.
ICA’s ownership changes in Netto were approved by the Swedish
Competition Authority on February 5, 2007 and finalized on February
15, which means that ICA subsequently owns 5 percent of Netto.
Proposed appropriation of earnings
The following funds are at the disposal of the Annual General Meeting (SEK):
Retained earnings
Total
7,194,463,033
657,348,438
7,851,811,471
The Board of Directors and the President propose
that the earnings be distributed as follows:
To the shareholders, a dividend of
958,000,000
Carried forward
6,893,811,471
Total
7, 851, 811,471
The proposed dividend conforms to the agreement between the shareholders, which states that the annual dividend will amount to at least
40 percent of net income for the year. The Group’s equity/assets ratio
following the dividend is 26.1 percent.
2006
2005
2, 3
67,395
66,096
4
–57,640
–56,933
9,755
9,163
Gross profit
Selling expenses
4
–4,521
–4,573
Administrative expenses
4
–3,658
–2,869
Other operating revenue
Share of associated companies’ net income
Operating income
7
805
303
14
–84
–84
2, 5, 6, 8, 9
2,297
1,940
Financial income
Financial expenses
Net financial items
10
Income before tax
Tax
11
Income after tax before result from discontinued operations
17
NET INCOME FOR THE YEAR
107
103
–358
–376
–251
–273
2,046
1,667
–12
–147
2,034
1,520
367
–2
2,401
1,518
2,393
1,531
8
–13
parent company
Cost of sales
Note
the group
Net sales
director’s report
(SEK million)
audit report
Consolidated Income Statement
Attributable to:
Parent Company’s shareholders
Minority interest
Consolidated Income Statement 2006, SEK million
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annual report
63
Consolidated Balance Sheet
Note
Dec. 31 2006
2005-12-31
12
3,447
1,914
13
(SEK million)
audit report
ASSETS
parent company
Fixed assets
Buildings and land
8,148
6,944
Investment properties
997
1,541
Leasehold improvements
564
552
2,833
2,336
Equipment
the group
Construction in progress
1,068
12,441
23
Shares in associated companies and joint ventures
14
63
687
Receivables from related parties
21
320
583
Other financial fixed assets
ICA Banken’s receivables
director’s report
690
13,232
16
Long-term receivables
Deferred tax assets
11
Total fixed assets
Current assets
23
Inventory
15
108
138
2,810
2,558
658
948
3,959
4,914
181
49
20,819
19,318
3,550
3,228
2,554
2,931
Current receivables
Accounts receivable
Tax assets
215
1,553
ICA Banken’s receivables
16
1,679
Receivables from related parties
21
10
26
18
113
Prepaid expenses and accrued income
1,849
1,753
Liquid assets
3,749
2,920
1,146
674
Total current assets
14,687
13,413
TOTAL ASSETS
35,506
32,731
Other receivables
Assets held for sale
64
132
annual report
17
(SEK million)
Dec. 31 2006
Note
2005-12-31
audit report
Shareholders’ equity, provisions and liabilities
500
12,557
354
273
Retained earnings
–3,208
–4,978
Shareholders’ equity related to Parent Company’s shareholders
10,203
8,352
Minority interest
Total shareholders’ equity
13
19
10,216
8,371
783
Long-term liabilities
23
Provisions for pensions
19
760
Deferred tax liability
11
648
519
3,366
5,068
Liabilities to credit institutions
Other provisions
104
105
Other liabilities
2,764
2,430
Total long-term liabilities
7,642
8,905
Current liabilities
the group
Reserves
500
12,557
director’s report
Other paid-in capital
parent company
18
Share capital
23
Liabilities to credit institutions
Accounts payable
941
368
5,690
4,914
Deposits, ICA Banken
16
6,394
5,930
Liabilities to related parties
21
20
32
Tax liabilities
Other liabilities
6
91
2,452
2,054
Provisions
72
43
2,073
2,023
Total current liabilities
17,648
15,455
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
35,506
32,731
Accrued expenses and deferred income
Consolidated Balance Sheet 2006-12-31, SEK million
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annual report
65
Changes in Consolidated Shareholders’ Equity
audit report
Shareholders’ equity related to Parent Company’s shareholders
(SEK million)
Opening balance, January 1, 2005
Share capital
Other paid
-in capital
Reserves
Retained
earnings
Total
500
12,557
–104
–5,892
7,061
–10
–10
–5,902
7,051
Change in accounting principle
parent company
Opening balance, shareholders’ equity, after
change in principle
500
12,557
–104
The year’s change in translation reserve
395
395
The year’s change in hedging reserve
–18
–18
Acquisition of minority
Total change in net worth excluding transactions with company’s owners
500
12,557
273
the group
Dividend
7,094
–10
33
7,084
395
–18
–1
–1
1,531
1,531
–13
1,518
–4,371
8,959
19
8,978
–607
–607
–607
500
12,557
273
–4,978
8,352
19
8,371
500
12,557
273
–4,978
8,352
19
8,371
–13
–13
–4,991
8,339
Opening balance, shareholders’ equity, after
change in principle
director’s report
33
Closing balance, December 31, 2005
Change in accounting principle
500
12,557
The year’s change in translation reserve
The year’s change in hedging reserve
The year’s change in revaluation reserve
273
500
12,557
annual report
500
12,557
8,358
38
38
38
498
498
498
354
Dividend
19
–455
Total change in net worth excluding transactions with company’s owners
–13
–455
Acquisition of minority
66
Minority
Total shareinterest holders’ equity
354
–455
–14
–14
2,393
2,393
8
2,401
–2,598
10,813
13
10,826
–610
–610
–3,208
10,203
13
10,216
–610
Consolidated Statement of Cash Flows
(SEK million)
2006
Note 24
2005
2,046
1,667
679
1,368
Adjustments for non-cash items
Income tax paid
Cash flow from operating activities before change in working capital
–220
–348
2,505
2,687
parent company
Income after financial items
audit report
Operating activities
Inventory (increase - / decrease +)
–165
105
Loan portfolio ICA Banken (increase + / decrease -)
–378
–1,084
–146
–250
Short-term receivables (increase - / decrease +)
Short-term liabilities (increase + / decrease -)
1,228
881
3,044
2,339
–2,423
–2,547
the group
Changes in working capital
Proceeds from sale of fixed assets
2,196
489
–131
–162
465
575
Proceeds from borrowings
Repayment of borrowings
Purchase of operations
Note 25
–1,420
–
Proceeds from sale of operations
924
523
Investment in financial fixed assets
–29
–110
Proceeds from sale of financial fixed assets
130
83
24
–76
Investment in associated companies
Divestment of associated companies
–125
149
Cash flow from investing activities
–389
–1,076
director’s report
Investing activities
Purchase of fixed assets
Financing activities
Change in minority share in equity
Repayment of borrowings
–13
0
–2,046
–5,933
797
5,130
Proceeds from borrowings
Dividend paid
Cash flow from financing activities
–610
–607
–1,872
–1,410
Cash flow of the year
Liquid assets at beginning of year
Exchange rate differences
783
–147
2,920
3,198
2006
Liquid assets at end of year
46
–131
3,749
2,920
2005
Consolidated Statement of Cash Flows, SEK million
2006
–
From the income statement
+2,505
2005
+
–
+
+2,687
Inventory
–165
+105
Short-term receivables, incl. loan portfolio ICA Banken
–524
–1,334
Short-term liabilities
+1,228
+881
+3,044
+2,339
Sale of fixed assets
+3,125
+1,244
Investment in fixed assets
–3,514
–2,320
–1,262
–803
Dividend paid
–610
–607
Cash flow of the year
+783
–147
Grafik Bonanza
annual report
67
Supplementary information, the Group
audit report
Note 1 Accounting principles
parent company
These consolidated accounts are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU Commission
and the interpretations of the International Financial Reporting Interpretation
Committee (IFRIC). The company also follows the Swedish Accounting Standards Board’s recommendation RR 30:05 Supplementary accounting rules for
groups, which specifies additional disclosure requirements in accordance with
the Annual Accounts Act.
The following standards and interpretations had been published but not yet
entered into force at the time this annual report was approved:
IFRS 7 Financial instruments: Disclosures and amendments to IAS 1 Presentation of Financial Statements
IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting
in Hyperinflationary Economies
the group
IFRIC 8 Scope of IFRS 2
IFRIC 9 Reassessment of Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment
director’s report
IFRS 7 does not necessitate any changes in the recognition and valuation
of financial instruments, although disclosure requirements have changed
compared with IAS 32 and IAS 30. IFRS 7 changes the disclosure requirements
in IAS 1. IFRS 7 will be applied in 2007 in accordance with the standard. IFRS 7 is
expected to have little effect on the financial reports when it is applied. None
of the pronouncements that have been issued have an effect on the financial
reports.
Accounting principles applied
Changes in accounting principles
According to an amendment to IAS 39 published in August 2005, financial
guarantees are initially recognized at fair value, subsequent to which they are
recognized at the higher of the amount according to IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount according to IAS 39.
The new principle has applied since January 1, 2006, in accordance with IAS 39.
The effect on shareholders’ equity as of January 1, 2006 is SEK –13 million.
The annual fee that ICA Banken charges for its bank cards was previously
recognized as revenue when the customer was charged. According to the
amended principle, the annual fee is divided evenly over the course of the
year. Although the previous principle has in many cases been a practice for
banks, ICA believes that the amended accounting principle better shows how
card revenues were earned. The amended principle affects the Group’s shareholders’ equity by SEK –10 million as of January 1, 2005.
ICA Banken’s net interest income is now recognized in net sales together
with its net commission income. Net interest income had previously been
recognized as other operating income. Net interest income amounts to SEK
278 million (215). The comparative year is restated.
Basis of accounting
The consolidated accounts are based on historical acquisition costs, with
the exception of financial derivatives and certain financial assets, which are
recognized at fair value. The Parent Company’s functional currency is Swedish
kronor, which is also the reporting currency for the Parent Company and the
Group. Consequently, the financial reports are presented in Swedish kronor.
Non-current assets and disposal groups held for sale are recognized at the
lower of their previous carrying amount and fair value after deducting selling
expenses.
The preparation of the financial statements in conformity with IFRS
requires that management make use of judgments, estimates and assumptions that affect the application of the accounting principles and the carrying
amounts in the income statement and the balance sheet. Estimates and
assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which
form the basis of making the judgments about carrying amounts of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates and judgments.
68
annual report
Consolidated accounts
The consolidated accounts comprise the Parent Company, ICA AB, and its subsidiaries. A subsidiary is included in the consolidated accounts as of the date
the Parent Company secures a controlling influence over the company and is
no longer included as of the date the Parent Company’s controlling influence
over the company ceases.
The minority interest initially consists of the minority’s share of the fair
value of the net assets and is recognized in shareholders’ equity separately
from the Parent Company’s equity. The income or loss from the minority
interest is recognized in the income statement separately from the Parent
Company’s results as a portion of results for the period.
The purchase accounting method is applied to the acquisition of subsidiaries. The acquisition cost of an acquisition consists of the fair value on the
acquisition day of the assets and new and contingent liabilities plus direct
purchase costs. Acquired identifiable assets, liabilities and obligations are recognized at fair value. The difference between acquisition cost and fair value
is recognized as goodwill. If the acquisition cost is less than the fair value of
acquired identifiable assets, liabilities and contingent liabilities, the difference
is recognized directly through profit or loss.
In incremental acquisitions, each transaction is treated individually. Goodwill is determined for each acquisition based on fair value on the transaction
date and the compensation paid for the acquisition. Changes in the fair value
of shares that had already been owned are recognized as a revaluation in
shareholders’ equity.
For all units included in the consolidated accounts, uniform accounting
principles are applied. This also applies to companies reported according to
the equity method. All intra-Group transactions are eliminated.
Investments in associated companies
Holdings in associated companies are reported according to the equity
method. An associated company is a unit in which the Group has a significant
but not controlling influence. Application of the equity method means that
investments in associated companies are recognized in the balance sheet at
cost plus any changes in the Group’s share of the associated company’s net
assets less any impairments and dividends. The income statement reflects the
Group’s share of associated companies’ income after tax.
The difference between the acquisition cost of the acquired shares and the
fair value of the Group’s share of the identifiable assets and liabilities in the
associate is accounted as goodwill (excess value) or in case of a negative difference is recognized directly through profit or loss. The Group’s investments
in associated companies comprise goodwill, which is dealt with in accordance
with the accounting principles for goodwill described below. Impairment testing is conducted on reported shares in associated companies when there are
indications of diminished value.
In transactions between Group companies and associated companies, the
portion of unrealized gains corresponding to the Group’s share of the associated company is eliminated. Unrealized losses are eliminated correspondingly
as long as there is no indication of impairment.
Investments in joint ventures
A joint venture is a contractual arrangement whereby two or more parties
undertake an economic activity subject to joint control. ICA reports joint
ventures according to the equity method.
In transactions between Group companies and joint ventures, the portion
of unrealized gains corresponding to the Group’s share of the jointly controlled company is eliminated. Unrealized losses are eliminated correspondingly as long as there is no indication of impairment.
Transactions in foreign currency
Transactions in foreign currency are translated to the functional currency
at the exchange rate on the transaction day. Monetary assets and liabilities
expressed in foreign currency are translated to the functional currency at the
exchange rate on the closing day. Exchange rate differences are recognized
through profit or loss. Non-monetary assets and liabilities are recognized at
historical acquisition costs translated at the exchange rate on the transaction
day. All Group companies with a functional currency other than the reporting
current are restated as follows:
Assets
and liabilities including goodwill and consolidated surpluses and deficits are translated from the foreign operations’ functional currency to the
Group’s reporting currency, Swedish kronor, at the closing day exchange rate.
Revenue
Revenue is recognized to the extent it is likely that the economic benefits will
be accrued by the Group and the revenue can be reliably estimated. Revenue
from retail sales is recognized when the customer pays at the store. Wholesale
revenue is recognized upon delivery of the goods. Sales of alcoholic beverages
are recognized exclusive of selective purchase taxes. Revenue from franchise
sales is recognized upon delivery for goods and other franchise revenue.
Rental revenue is recognized in the period to which it relates.
Revenue from the sale of services includes royalties, franchise fees and
revenue from various forms of consulting services. The revenue is recognized
through profit or loss as it is earned.
Dividends are recognized through profit or loss when the right to receive
payment has been determined.
Revenue from property sales is normally recognized on the closing day
unless the risks and benefits were transferred to the buyer on an earlier day.
The determination whether the risks and benefits were transferred to the
buyer takes into consideration what the parties have agreed to regarding the
risks and benefits and any arrangement as to the further management of the
property.
Sale and leaseback
In cases where a property has been sold and then leased back, an overall assessment is made of who controls the significant risks and benefits associated
with the property and whether the Group has retained a controlling interest in
the property. A controlling interest exists, for example, if a leaseback property
is leased to an independent ICA retailer.
If the assessment shows that the significant risks and benefits as a whole remain in the Group, revenue from the sale is not recognized on the transaction
day, but rather when these risks and benefits are later transferred to the buyer.
If the Group has retained a controlling interest, no revenue is recognized until
this interest ceases.
If the risks and benefits are retained by the Group, or the Group retains an
interest in the property, the Group continues to recognize the property in the
balance sheet as if no sale had taken place, and it is still depreciated based
on its estimated useful life. The proceeds received from the sale are treated
as a loan and recognized as a liability. Leasing fees are split between interest
expenses and amortization of the liability.
Goodwill and trademarks
Goodwill represents the portion of the acquisition cost exceeding the fair value
of the acquired share of the subsidiary’s net assets on the acquisition day. Net
assets refer to the difference between identifiable assets, liabilities and contingent liabilities in an acquired subsidiary, associated company or joint venture.
In accordance with IFRS 3, it is assumed that the goodwill has an indefinite
useful life. Intangible assets with an indefinite economic life are not amortized.
Goodwill is recognized at acquisition cost less any accumulated impairment.
The goodwill arising from business acquisitions is attributed at the time of
the acquisition to the cash-generating units that benefit from the acquisition.
Trademarks have an indefinite useful life. Impairment testing is conducted
annually or when there is an indication of diminished value.
Other intangible assets
Other intangible assets are recognized in the balance sheet at acquisition cost
less accumulated amortization and impairment losses. Depreciation is booked
on a straight-line basis over the estimated economic life of the assets.
Tangible fixed assets are recognized at acquisition cost less accumulated
depreciation and any impairment. Acquisition cost includes the acquisition
price and direct expenses. The cost of tangible fixed assets is depreciated to
estimated residual value. Depreciation is booked on a straight-line basis over
the estimated economic life of the assets.
audit report
Non-current assets held for sale
Assets are classified as non-current assets held for sale if they are available
for immediate sale, a decision has been made to sell them and it is likely that
a sale will be made within 12 months. Non-current assets held for sale are valued when the reclassification is made, in accordance with IFRS 5, at the lower
of book value and estimated sales value less selling expenses.
Discontinued operations are part of a company that has either been disposed of or is classified as held for sale and:
parent company
When foreign operations are divested, the cumulative exchange rate differences
are recognized through profit or loss together with the gain or loss on the sale.
represents
a separate line of business or geographical area of operations,
the group
exchange rate differences that arise through translation are recognized
All
directly in shareholders’ equity as a translation reserve.
Properties used by the Group or leased to ICA retailers are reported as
operating properties. Other properties, which are leased to third parties, are
reported as investment properties. Investment properties are recognized at
acquisition cost less accumulated depreciation and any impairment. Depreciation is booked on a straight-line basis over the estimated economic life of the
assets to estimated residual value. Residual value and economic lives are reassessed at the close of each year and adjusted when necessary.
part of a coordinated plan to dispose of separate line of business or geois
graphical area of operations or
a subsidiary acquired exclusively with a view to resale.
is
director’s report
Revenue
and expenses in foreign operations are translated to Swedish kronor at the average exchange rate for the period.
The classification as discontinued operations is made upon a sale or an earlier
date when the operations meet the criteria to be classified as held for sale.
As long as a non-current asset is classified as held for sale, there is no
depreciation.
Depreciation and amortization
Depreciation and amortization are calculated on the acquisition cost of the
assets. Depreciation and amortization schedules are based on estimated economic lives. An asset’s residual value and economic life is estimated annually.
Buildings
20 – 40 years
20 – 40 years
6 – 20 years
Store equipment and trucks
7 – 10 years
IT systems
Other equipment
3 – 5 years
3 – 10 years
Impairment
The carrying amount of tangible fixed assets is tested for impairment when
events or other circumstances indicate that the carrying amount cannot be
recovered. In the test, the carrying amount is compared with the higher of
the asset’s fair value less selling expenses and the value in use. Value in use
consists of the present value of the future net cash flow the asset generates. If
a single asset does not generate a cash flow independent of other assets, cash
flow is calculated for the group of assets, i.e., a cash-generating unit. The value
in use calculation of future net cash flows uses a discounting factor before tax
that reflects the market’s current estimate of the time value of money and the
risks associated with the asset. If the carrying amount exceeds the higher of
the asset’s net realizable value and value in use, the asset is written down to
the higher of its net realizable value and value in use.
Goodwill, assets with an indefinite economic life and intangible assets that
are not yet taken in use are tested annually for impairment. Testing for impairment can take place more often when events or other circumstances indicate
a decrease in value during the year.
Impairment losses are recognized through profit or loss if the recoverable amount is lower than the asset’s book value. Impairment losses can be
reversed if the assumptions used in the calculation that led to the original
impairment have changed. Impairment reversal is limited to the depreciated
amount that would have been recognized had the original impairment not
occurred. Reversal of impairment is recognized through profit or loss. Impairment of goodwill is not reversed.
annual report
69
parent company
audit report
Inventory
Inventory is valued at the lower of acquisition cost and net realizable value.
Acquisition cost is determined using the first-in, first-out (FIFO) method. Acquisition cost consists of all purchase costs after deducting supplier allowances
related to products in stock.
Net realizable value corresponds to the estimated sales price under normal
conditions less estimated costs to finish the product and the costs required to
make the sale.
ICA receives supplier allowances in form of discounts and other types of
payments that effectively reduce the company’s purchase cost from suppliers
or costs for sales-promoting activities performed by ICA to the benefit of the
supplier.
the group
Financial instruments
A financial asset or financial liability is recognized in the balance sheet when
the company becomes party to the instrument’s contractual conditions. A
financial asset is removed from the balance sheet when the rights in the agreement are realized, expire or the company loses control over them. A financial
liability is removed from the balance sheet when the obligation in the agreement is fulfilled or otherwise relieved.
For spot purchases and spot sales of financial assets, settlement date accounting is applied.
Financial instruments are recognized at amortized cost or fair value depending on the initial categorization according to IAS 39.
director’s report
Calculation of fair value of financial instruments
The fair value of derivatives is determined using the official market quotes
on the balance sheet day. If such quotes are unavailable, generally accepted
methods are used such as discounting of future cash flows to listed market
interest rates for each maturity. Translation to Swedish kronor is made at the
quoted rate on the balance sheet day.
All derivatives are recognized at fair value in the balance sheet and are
included in other short-term receivables or other short-term or long-term
liabilities depending on maturity. For derivatives not reported as hedges and
those included in a fair value hedge, changes in value are recognized through
profit or loss. For derivatives that meet the requirements for cash flow hedges,
changes in value are recognized in equity until the hedged item is recognized
through profit or loss. The Group applies hedging accounting for interest risk.
The amount in the hedging reserve is recognized through profit or loss as the
derivative’s value declines toward zero.
Amortized cost
Amortized cost is calculated with the help of the effective interest method,
which means that any premiums and discounts as well as directly attributable
expenses and revenue are accrued over the maturity of the contract with the
help of estimated effective interest rate. The effective interest rate is the rate
that produces the instrument’s acquisition cost as a result of the present value
calculation of future cash flows.
Netting of financial assets and liabilities
Financial assets and liabilities are offset and recognized net in the balance
sheet when there is a legal right of set-off and when the intent is to settle the
items with a net amount or to realize the asset and settle the liability at the
same time.
Interest
Interest income is recognized as it is earned. Interest income is calculated on
the basis of the underlying asset’s yield according to the effective interest rate.
Loan expenses and interest are recognized in profit or loss in the period to
which they are attributable.
Interest expenses associated with new construction or major renovations
or additions are capitalized as part of the production cost of the fixed asset.
Other long-term receivables
Other long-term receivables mainly consist of loans recognized at amortized
cost. If the expected holding period is more than one year, they are considered long-term receivables, and if it is less they are considered other receivables. These receivables are categorized in accordance with IAS 39 as “Loans
and receivables.” Assets in this category are carried at amortized cost.
Short-term receivables
Accounts receivable and other receivables are categorized as “Loans and receivables,” which means that they are recognized at amortized cost. Accounts
70
annual report
receivable with short anticipated maturities, usually due for payment after
10-45 days, are initially reported at the invoiced amount without discounting
according to the amortized cost method. An estimation of impaired loans is
made when it is no longer likely that the full amount will be obtained.
Interest-bearing receivables
Interest-bearing receivables mainly consist of ICA Banken’s lending in the form
of unsecured credits and card credits to customers. The amount outstanding is carried at amortized cost on the payment date and subsequently after
taking into account established and anticipated credit losses. Loans are recognized in the balance sheet after deducting anticipated credit losses.
Liquid assets
Liquid assets comprise cash, bank balances and other short-term investments with an original maturity of no more than three months as well as bank
overdraft facilities. In the balance sheet, overdraft facilities are recognized as
borrowings among current liabilities. Cash and bank balances are recognized
at nominal amounts and other short-term investments at their fair value with
changes in value recognized through profit or loss.
Liabilities to credit institutions, other liabilities and borrowings ICA Banken
Liabilities to credit institutions, deposits in ICA Banken and other liabilities are
carried at amortized cost. Any gain or loss that arises when the loan is repaid
is recognized through profit or loss. Long-term liabilities have been anticipated
maturity of more than one year, while short-term liabilities have a maturity of
less than one year.
Accounts payable
Accounts payable are categorized as “Other liabilities,” which means they are
recognized at amortized cost. The anticipated maturity of accounts payable
is short, due to which the liability is recognized at nominal amount without
discounting.
Provisions
Provisions are recognized in the balance sheet when the Group has a legal or
informal obligation resulting from an event that has occurred and it is likely
that an outflow of resources associated with the economic benefits will be
required to fulfill the obligation and the amount can be reliably estimated. If
the effect of the time value of the future payment is considered significant,
the value of the provision is determined by estimating the present value of the
expected future cash flow with a discounting factor (before tax) that reflects
the market’s current valuation of the time value. The gradual increase in the
allocated amount necessitated by the present value calculation is recognized
as in interest expense through profit or loss. Provisions are tested at the close
of each year.
Provisions for restructuring are recognized when the Group has established
a detailed, formal restructuring plan and the restructuring has either begun or
been publicly announced.
A provision for contract losses is recognized when the benefits the Group
expects to receive from a contract are lower than the unavoidable costs to
fulfill the contract’s obligations.
Pensions and other post-employment benefits
The Group has both defined-contribution and defined-benefit pension plans.
In the latter, the company bears the risk for the benefits as agreed to. In a
defined-contribution plan, the company does not have any obligation beyond
paying the contractual fees to the plan.
Fees for defined-contribution plans are recognized as a cost through profit
or loss as the right is earned.
The Group’s obligation with respect to defined-benefit pension plans is
calculated separately for each plan annually. The calculation is an estimate of
the present value of future entitlements that employees have earned through
service to the company. The fair value of plan assets is deducted from the
present value of the pension obligation. The calculation is based on a number
of assumptions. The discount rate is the rate on the closing day for government bonds with a maturity corresponding to that of the obligation. The
calculation is performed by a qualified actuary using the so-called projected
unit credit method.
Actuarial gains and losses arise either as a result of a difference between an
assumption and the actual outcome or because an assumption has changed.
For actuarial gains and losses arising after the transition date for IFRS, January 1, 2004, the so-called corridor rule is applied. This means that when the
cumulative actuarial gain or loss exceeds a limit corresponding to 10 percent
ICA as lessor
Assets subject to a finance lease are recognized in the balance sheet as a
receivable at an amount equal to the net investment in accordance with the
lease. Lease payments received are recognized as amortization of the receivable or financial income. This income is allocated based on a pattern reflecting
a constant periodic return over the lease term.
Assets subject to an operating lease are presented according to the nature
of the asset. Lease revenue from operating leases is recognized in income on a
straight-line basis over the lease term. Direct costs incurred at the start of the
lease are expensed on a straight-line basis over the lease term.
Income tax
Income taxes consist of current and deferred tax. Income taxes are recognized
through profit or loss except when the underlying transaction is recognized
directly against shareholders’ equity, while the associated tax is recognized in
shareholders’ equity.
Current tax is tax that will be paid or received in the current year. This
includes adjustments in current tax attributable to previous periods.
Deferred tax is recognized in accordance with the balance sheet method,
which is based on temporary differences between the recognized and taxable
values of assets and liabilities. The following temporary differences are not
taken into account: temporary differences that arise in the first-time reporting
of goodwill, the first-time reporting of assets and liabilities from a transaction
other than a business acquisition and which, at the time of the transaction,
affects neither the recognized nor taxable gain or loss, and temporary differences attributable to shares in subsidiaries, associated companies and joint
ventures not expected to be reversed in the foreseeable future. The valuation
of deferred tax is based on how the carrying amounts of assets and liabilities
are expected to be realized or settled. Deferred tax is calculated applying the
tax laws and tax rates in effect or essentially in effect on the closing day.
Deferred tax assets are recognized for all deductible temporary differences
and unutilized tax loss carryforwards to the extent it is likely that future taxable gains will be available. The carrying amounts for deferred tax assets are
tested on each closing day and reduced to the extent it is no longer likely that
they can be utilized.
audit report
parent company
ICA as lessee
Leasing fees for operating leases are recognized through profit or loss and
divided on a straight-line basis over the life of the lease.
Significant finance leases are recognized as fixed assets and liabilities in the
balance sheet, while in the income statement the cost is recognized among
operating expenses and interest.
Sale of loan portfolio and ending of store financing by ICA
In November ICA signed a cooperation agreement with Nordea on store
financing. At the same time Nordea took over the Swedish portfolio of operating loans to ICA retailers. In accordance with the agreement, ICA will compensate Nordea for future credit losses. The sale is part of ICA’s focus on its core
business. As of December 31, 2006 outstanding operating loans amount to SEK
230 million (410) and the maximum compensation from ICA for credit losses
amounts to SEK 22 million (39).
According to IAS 39, an asset shall continue to be recognized in the balance
sheet if the majority of the risks associated with the asset are retained by
the seller. As ICA essentially retains the risk of future credit losses after the
sale, the loans continue to be recognized in the balance sheet. The nominal
value of the loan portfolio is included in other long-term loans and the selling
proceeds received as other financing.
the group
Leasing
Leases are classified in the Group as either operating or finance. In a finance
lease, essentially all economic risks and benefits associated with ownership
are transferred from the lessor to the lessee. All other leases are operating.
Sale and leasebacks
Each year ICA AB builds a number of stores in attractive locations. At the same
time it sells older properties, which are leased back by ICA AB and sublet to
the ICA retailer on identical leasing terms. ICA has determined that in such
sale and leaseback arrangements the significant risks and benefits are retained
within the Group. The combined transaction is therefore treated as a financing
and as such, the properties continue to be recognized in the consolidated
balance sheet and depreciation continues over their estimated useful life. The
proceeds received are accounted as a long-term liability, while the lease fee is
split between interest expenses and amortization of the liability.
Consolidation according to IFRS
In accordance with IAS 27, ICA AB consolidates companies in which it exercises a controlling influence. All store companies in which ICA has more than
50 percent of the votes have been consolidated. ICA has analyzed other store
companies to determine whether it exercises a controlling influence even if
ICA owns less than 50 percent of the votes. In accordance with IAS 27 and
SIC 12, one indication that ICA could be considered to exercise a controlling
influence over a store company is if ICA has retained a majority of the risks
and economic benefits. Before selling the loan portfolio, as described above,
ICA was the principal financial backer for around 100 stores and therefore retained certain risks related to these store companies. This relationship ceased,
however, when the loan portfolio was sold to Nordea. Based on a review of
agreements and financial information, it has been determined that ICA retailers and franchisees exercise a controlling influence over each store company.
Consequently, ICA AB has not consolidated these store companies.
director’s report
of the greater of the present value of the commitment and the fair value of
plan assets, the net gain or loss is recognized over the employees’ expected
remaining working lives.
When there is a difference between how the pension cost is determined
in a legal entity and the Group, a provision or receivable is recognized for the
special employer’s contribution based on this difference. No present value
calculation is made for the provision or receivable.
Impairment of fixed assets
The determination whether a fixed asset has been impaired or not requires
an assessment of its recoverable value. Recoverable value is the higher of
the asset’s value in use and fair value less selling expenses. The calculation of
value in use requires an assessment of future cash flows and discount rates. A
change in assumptions regarding, among other things, future cash flows and
discount rates could change the carrying amount of fixed assets.
Pensions
The calculation of defined-benefit pensions requires assumptions with regard
to future payroll and interest rates. Because of the long maturity of the pensions in these plans, the uncertainty of these assumptions is high and may
necessitate corrections in the future that affect future liabilities and expenses.
Segment reporting
A segment is a distinguishable component of the Group that provides goods
and services (operating area) within a particular economic environment
(geographical area) and that is subject to the risks and returns that differ from
other segments.
For ICA, business areas are considered its primary segments and countries
its secondary segments.
Damages and provisions
ICA AB and its subsidiaries are involved in a number of disputes related to the
Group’s operations. These disputes have a built-in uncertainty. The Board of
Directors’ assessments of the outcome of these disputes are based on assessments made by external and internal attorneys. If there is thought to be more
than a 50 percent likelihood that ICA will lose, a provision has been allocated
accordingly.
Important assumptions and estimates
The consolidated accounts are based on various assumptions and estimates
made by the Board of Directors. These assumptions affect the carrying
amounts of assets and liabilities, of income and expenses, and of pledged
assets and contingent liabilities. Estimates may deviate from future results.
The assumptions and estimates that the Board of Directors feels are most
important and where there is the greatest risk of future changes in the values
of assets and liabilities are as follows.
Supplier allowances
There are a number of different types of contracts governing supplier allowances. To calculate allowances, certain types of contracts require assumptions
about future sales and purchasing volumes. If these assumptions change, it
could lead to a different calculation of the allowances.
annual report
71
audit report
Credit losses ICA Banken
ICA Banken’s credit losses consist of allocations for anticipated and established credit losses. If the financial situation of ICA Banken’s customers
changes, it could affect the level of credit losses.
Taxes
One of the duties of the Swedish tax authority is to review the company’s operations to determine whether it has managed its taxes according to current
law. If the tax authority were to determine that the company has not done so,
it could lead to a different tax expense.
Note 2 Segment reporting
parent company
The Group’s operations are divided into the following business areas: ICA
Sverige, ICA Norge, ICA Baltic and ICA Banken. ICA Sverige, ICA Norge and ICA
Baltic relate to retail operations in each respective geographical region. ICA
Banken conducts banking operations. ICA Meny is reported as a discontinued
operation. See also Note 17. ICA Baltic operated as joint venture in 2005 and
2006, but as of December 18, 2006 is a wholly owned subsidiary.
All internal transactions are based on market prices
ICA Sverige
ICA Banken
2006
2005
2006
2005
2006
2005
External net sales
47,927
46,325
18,359
19,036
0
15
458
316
Internal net sales
374
427
2
3
–
–
–
–
8
1
5
24
–12
–8
–
–
2,557
1,607
114
534
–12
42
11
–82
Assets
14,187
13,532
9,252
10,754
5,182
1,020
7,365
6,660
Liabilities incl. provisions
12,094
12,114
5,346
6,589
4,538
800
6,733
6,047
1,260
1,064
1,003
1,221
–
–
7
15
379
412
614
587
–
–
71
69
–
Operating income
the group
ICA Baltic
2005
Share of associated companies’ net profit
director’s report
ICA Norge
2006
Investments in fixed assets
Depreciation
1
22
68
95
–
–
–
Other non-cash items
–536
71
–175
21
12
–
–
–
Average number of employees
4,752
4,917
4,043
4,052
–
–
174
154
Impairment losses
Corporate
External net sales
2006
2005
651
404
Eliminations
2006
Discontinued
operations
(ICA Meny)
Total
2006
2005
2006
2005
2006
2005
67,395
66,096
4,383
5,775
71,778
71,871
–84
–84
2,335
1,951
Internal net sales
463
443
0
0
Share of associated companies’ net profit
–85
–101
–84
–84
–373
–161
2,297
1,940
38
11
Assets
19,180
19,023
–19,660
–19,485
35,506
31,504
–
1,227
35,506
32,731
Liabilities incl. provisions
10,194
11,186
–13,615
–13,549
25,290
23,187
–
1,173
25,290
24,360
Investments in fixed assets
101
182
2,371
2,482
52
65
2,423
2,547
Depreciation
115
80
1,179
1,148
17
25
1,196
1,173
–
4
69
121
–
–
69
121
–2
32
–701
124
–
–
–701
124
2,041
1,417
11,010
10,540
688
1,016
11,698
11,556
Operating income
Impairment losses
Other non-cash items
–839
2005
Total continuing
operations,
ICA Group
Continuing operations
Net sales
–873
Discontinued operations
Operating income
Net sales
Total
Operating income
Net sales
Operating income
Country
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
Sweden
49,036
47,045
2,206
1,404
3,044
4,294
26
10
52,080
51,339
2,232
1,414
Norway
18,359
19,036
91
534
1,339
1,481
12
1
19,698
20,517
103
535
Denmark
2
2
Estonia
Latvia
15
15
Lithuania
Total
72
annual report
67,395
66,096
2,297
1,940
4,383
5,775
38
11
71,778
71,871
2,335
1,951
Salaries and other remuneration to Board,
President and EVP
Investments
in fixed assets
Assets
Country
2006
2005
2006
2005
Sweden
22,616
20,990
1,357
1,299
Norway
9,771
11,716
1,014
1,248
24
25
–
–
860
–
–
–
Latvia
1,177
–
–
–
Lithuania
1,059
–
–
–
35,506
32,731
2,371
2,547
Denmark
Estonia
Total
2006
2005
Salaries and similar remuneration
52
41
Cost of pensions and similar remuneration
18
11
Of the salaries and other remuneration, SEK 12 million (8) relates to bonuses.
Gender distribution of Board of Directors
and Management
2006
2005
39
40
audit report
According to balance sheet:
Board of Directors
Men
Women
8
9
47
49
Men
68
57
Women
29
23
Total
97
80
Total
parent company
Note 2 Cont.
2006
2005
Wholesale sales
43,427
41,377
Retail sales
18,803
18,424
1,648
1,623
Rental revenue
Net interest income and commissions ICA Banken
Other services for ICA retailers and franchisees
Net sales
459
316
3,058
4,356
67,395
66,096
Net interest income and commissions in ICA Banken are recognized as of
2006 as net sales. In the annual report for 2005, net interest income for ICA
Banken was included on the line other operating revenue.
Benefits to Senior Executives
No fees were paid to the Board members appointed by the Annual General
Meeting. Employee representatives received a fee of SEK 4,000 per meeting, to
which Board members received background material, with decision points on
the agenda, prior to the meetings.
The salary paid to the company’s President amounted to SEK 11 million (9)
during the year, including a bonus of SEK 5 million (4). The employment contract of the President of the Parent Company stipulates a 12-month term and
severance pay for two years if terminated by the company. If the President
resigns, the term of notice is six months. The President is entitled to receive
pension benefits from age 60. The company covers the obligation by annually paying pension premiums to insurance companies corresponding to 35
percent of the President’s salary. The Group does not have other post-employment obligations to the President.
director’s report
Note 3 Net sales by revenue source
the group
Management
Note 4 Expenses by type of expense
Cost of sales
2006
2005
51,275
51,107
Personnel expenses
5,877
5,514
1,703
1,486
Cost of premises
2,164
2,084
1,248
1,270
Other expenses
3,552
2,914
Total expenses
65,819
64,375
Note 6 Audit expenses
2006
2005
12
15
Audit fees
Deloitte
Other audit firms
Total
2
2
14
17
5
1
Consulting fees
Deloitte
Note 5 Personnel expenses, pensions, etc.
The number of employees is calculated on the basis of the Group’s measure of
normal working hours (1,800 hours).
20061
Women
Men
Sweden
2,659
4,401
Norway
2,344
Total, Group
5,003
1
Note 7 Other operating revenue
2006
2005
Profit shares and share dividends
148
128
6,867
Capital gains
657
175
2,367
4,689
Total
805
303
6,853
11,556
20051
Total
Women
Men
7,060
2,381
4,486
2,294
4,638
2,322
6,695
11,698
4,703
Total
Figures include the discontinued operations of ICA Meny.
annual report
73
Note 8 Leases
Note 9 Exchange rate differences in operating income
Finance leases
audit report
Receivables related
to finance leases
with ICA as lessor.
Maturity date within 1 year
Maturity date later than within
1 year but within 5 years
parent company
Maturity date later than 5 years
Minimum
leasing fees
Present value of
minimum leasing fees
2006
2005
2006
2005
97
80
92
76
204
372
169
302
7
13
5
9
308
465
266
387
Less: Unearned interest
–42
–78
Present value of minimum
leasing fees
266
387
the group
director’s report
Total
–1
–25
2006
2005
311
Interest income
107
78
76
Market valuation of financial derivatives
–
18
–
7
107
103
2005
The year’s leasing expense
2,200
2,202
Of which minimum leasing fees
2,088
2,183
112
19
Of which variable fees
The year’s leasing revenue from sublet assets
–1,146
–1,096
Future contractual minimum leasing fees:
2,317
2,466
Financial income
Financial expenses
Interest expenses
–338
–376
Market valuation of financial derivatives
–6
–
–14
–
–358
–376
Current tax
2006
2005
Current tax on net income for the year
–266
–172
Deferred tax on temporary differences
254
25
–12
–147
Financial expenses
Note 11 Taxes
Reconciliation between current tax rate and effective tax
Current tax rate, %
28.0
28.0
Tax-exempt income
–29.4
–21.5
Result from associated companies’ net income
1.1
1.4
Other non-deductible expenses and tax-exempt income
0.9
1.0
Effective tax rate
0.6
8.9
2006
2005
–79
61
Between 1-5 years
7,143
6,166
Later than 5 years
6,127
8,439
Reported deferred tax assets and tax liabilities
15,587
17,071
Fixed assets
Total
Future minimum leasing fees
for contracts on sublet assets
4,502
7,586
ICA as lessor
The Group leases out buildings and equipment. Rents are fixed, although
variable rents based on revenues do occur. Leasing fees are contracted over
an average lease period of 10 years. Rents change in accordance with index
clauses in the agreements.
Contractual leasing expenses under existing agreements fall due for payment as follows:
Future contractual minimum leasing fees:
2006
2005
36
17
241
205
Later than 5 years
222
210
Total
499
432
Variable fees included in results
495
477
annual report
–
–22
92
2006
Between 1-5 years
–24
174
Operating leases
ICA as lessee
The Group leases buildings and equipment. Lease fees are agreed to over an
average period of 10 years. Rents change in accordance with index clauses in
the agreements.
Contractual leasing expenses under existing agreements fall due for payment as follows:
0
–22
Financial income
ICA enters into finance leases on store equipment. The average lease period is
seven years. Interest is variable with an average rate of 3.95 persent (3.65). Variable fees included in income for the period amount to SEK 6 million (4).
The non-guaranteed carrying amount of assets under finance leases as of
December 31, 2006 is estimated at SEK 0 million (0).
The fair value of receivables with respect to finance leases as of December
31, 2006 are estimated at SEK 266 million (387), based on the estimated present
value of anticipated cash flows at current market interest rates, i.e., the present value rate.
74
Cost of sales
2005
0
Note 10 Net financial items
Receivables are recognized in the following items:
Other current receivables
2006
Net sales
Total
Long-term receivables
Purchases of goods and services in foreign currency have produced exchange
rate differences on the following levels of operating income.
Inventory
6
3
Provisions
–66
79
Tax loss carryforwards
Untaxed reserves
Financial derivatives
Total deferred tax assets (+) deferred tax
liabilities (-), net
96
41
–413
–644
–11
–10
–467
–470
As reported in balance sheet:
Deferred tax assets
Deferred tax liabilities
181
49
–648
–519
The Group has no unreported deferred tax liabilities or tax assets on temporary differences. Capitalized tax assets from tax loss carryforwards are likely
to be offset against future profits, since taxable surpluses have been generated
historically and taxable surpluses are very likely to arise in the future.
Note 11 Cont.
Business acquisition/divestment
Balance,
Dec. 31, 2005
27
61
48
–14
Inventory
2
1
3
Provisions
88
–9
79
67
–26
41
–720
76
–644
Untaxed reserves
0
–3
–7
–515
25
–7
27
–470
Balance,
Jan. 1, 2006
Recognized through
profit or loss
Recognized through
shareholders’ equity
Business acquisition/divestment
Balance,
Dec. 31, 2006
–250
–79
Total
Fixed assets
–10
61
110
Inventory
3
3
6
Provisions
79
–145
–66
Untaxed reserves
41
55
96
–644
231
–413
Total
–10
0
–1
–470
254
–1
parent company
Fixed assets
Recognized through
shareholders’ equity
the group
Recognized through
profit or loss
–11
–250
director’s report
Balance,
Jan. 1, 2005
audit report
Change in deferred tax in temporary differences an tax loss carryforwards
–467
Tax assets are denoted by (+) and tax liabilities by (-) in the table above.
Note 12 Intangible fixed assets
Accumulated acquisition cost
Opening balance, Jan. 1, 2005
Purchases
Sales/disposals
Exchange rate difference
Closing balance, accumulated
acquisition cost, Dec. 31, 2005
Goodwill
Trademarks
IT systems
Other
1,665
–
412
203
67
–
74
21
–195
–
–12
–23
68
–
1
–
1,605
–
475
201
Trademarks
IT systems
Other
0
–
–
–
Impairment losses for the year
–15
–
–
–
impairment losses, Dec. 31, 2005
–15
–
–
–
–15
–
–
–
–
–
–
0
–15
–
–
0
Accumulated impairment losses Goodwill
1,605
–
475
201
Purchases
998
673
75
99
Sales/disposals
–37
–
–25
–29
–52
–1
–2
–2
2,514
672
523
269
Goodwill
Trademarks
IT systems
Other
–176
–40
–95
–42
–
1
acquisition cost, Dec. 31, 2006
Accumulated amortization
Amortization for the year
impairment losses, Dec. 31, 2006
Net carrying amount
As of Dec. 31, 2005
1,590
–
204
120
As of Dec. 31, 2006
2,499
672
143
133
Amortization of intangible fixed assets is included in the following income
statement items.
Selling expenses
2006
2005
–55
–137
–109
–
–164
–137
amortization, Dec. 31, 2005
–271
–81
Total
–271
–81
Impairment losses for intangible fixed assets are included in the following
income statement items.
–109
–55
amortization, Dec. 31, 2006
–380
–136
2006
2005
Selling expenses
–
15
Total
–
15
annual report
75
Note 12 Cont.
parent company
audit report
Useful life of intangible assets
Trademarks refer to what was acquired in connection with the acquisition of
Rimi Baltic AB. The useful life is indefinite and impairment testing is conducted
annually or when there is an indication of diminished value.
IT systems relate to capitalized development expenditures for IT systems.
The useful life is calculated for each system and amounts to between three
and five years. Amortization is booked on a straight-line basis over the useful
life of the assets. The remaining amortization schedule for IT systems is approximately 2 years.
Other intangible assets consist of tenancy rights and other intangible surplus values in connection with the acquisition of store operations. Amortization is booked over the estimated useful life of the assets.
Acquisition cost, opening balance
Purchases
the group
Dec. 31, 2006 Dec. 31, 2005
ICA Norge
1,501
1,556
ICA Baltic
998
–
ICA Meny
Total
–
34
2,499
1,590
director’s report
Goodwill is distributed among cash-generating units. Goodwill impairment
tests are conducted annually and when there is an indication of impairment
loss. The recoverable amount for a cash-generating unit is determined based
on calculations of value in use. The calculations are based on the estimated
future cash flow in budgets and forecasts for the upcoming three years. Cash
flows beyond this period are extrapolated based on inflation, which in no
case exceeds 3 percent. The need for working capital is expected to remain at
the same level as in year 3. The discount rate is 7.1 percent before tax. ICA has
elected not to allocate goodwill to a level lower than segments, but for impairment testing groups of cash-generating units are analyzed as well.
Other impairment testing
For intangible assets other than goodwill, a recoverable amount is determined
when there is an indication that the asset has decreased in value. During the
year no circumstances have occurred that would motivate impairment testing.
2006
2005
Buildings and land
8,741
Purchases
8,882
1,642
129
Sales/disposals
–30
–,1,056
Reclassifications
138
632
–140
154
10,351
8,741
Accumulated acquisition cost, closing balance
Depreciation, opening balance
Sales/disposals
Reclassifications
Depreciation for the year
Accumulated depreciation, closing balance
Residual value according to plan, closing balance
–1,797
–1,933
0
405
–173
–
–9
–38
–224
–218
0
–13
–2,203
–1,797
8,148
6,944
Land
76
480
476
Buildings
2,590
2,551
Total
3,070
3,027
annual report
2,667
59
–327
–228
Reclassifications
–547
–660
–105
149
1,164
1,987
–446
–580
312
203
Sales/disposals
–8
–16
–40
–53
15
–
–167
–446
997
1,541
Tax assessment value of Swedish properties
Land
12
12
Buildings
23
25
Total
35
37
An internal valuation of all investment properties shows that their fair value
exceeds book value by SEK 286 million (322).
The following amounts have been recognized through profit or loss for
investment properties:
Rental income
Direct costs for properties that generated
rental income
Direct costs for properties that did
not generate rental income
2006
2005
140
186
21
26
0
0
2006
2005
861
565
Purchases
222
193
Sales/disposals
–67
–69
Reclassifications
–32
149
–28
23
956
861
–309
–222
Sales/disposals
Reclassifications
19
–
–
–8
–
–10
–99
–67
–3
–2
–392
–309
564
552
Equipment
2006
2005
6,602
6,987
Purchases
1,239
849
98
–121
–185
–1,253
Reclassifications
Sales/disposals
Tax assessment value of Swedish properties
1,987
Sales/disposals
Note 13 Tangible fixed assets
2005
156
Impairment testing of goodwill
In the consolidated balance sheet, goodwill is distributed among the Group’s
cash-generating units identified by segment as follows:
2006
140
6,602
–4,266
–4,404
128
888
Sales/disposals
–6
–36
–669
–699
4
–15
–4,809
–4,266
2,833
2,336
Construction in progress
Opening balance
1,068
713
Expenses capitalized during the year
1,130
1,175
Reallocations during the year
–755
–838
Reclassifications
–717
–7
2006
2005
–
–1
Revenue
5,622
4,785
Expenses
–5,719
–4,882
–98
–97
1,355
1,387
Impairment loss for the year
–36
26
Closing balance
690
1,068
Expenses capitalized during the year include SEK 32 million (20) in capitalized
interest based on an interest rate of 2.9 percent (2.3).
Impairment losses for tangible fixed assets are included in the following
income statement items:
Income
Fixed assets
Current assets
Total assets
821
680
2,176
2,067
675
2006
2005
–23
–25
661
Selling expenses
–
–72
713
727
–
–4
Current liabilities
802
665
–23
–101
2,176
2,067
2006
2005
49
166
0
3
Cost of sales
Total
Shareholders’ equity and liabilities
audit report
–112
7,642
parent company
the group
changed from that of a subsidiary to a joint venture with a 50% interest for
ICA. Operations were financed jointly by the two owners and with external
loans. Both owners provided equal guarantees for the operations. On December 18, 2006 ICA AB acquired the remaining 50% of Rimi Baltic AB from Kesko
Livs Ab, and Rimi Baltic has since been a wholly owned subsidiary of the ICA
Group. In the income statement Rimi Baltic AB is recognized as a joint venture
for the full-year 2006, but in the balance sheet Rimi Baltic AB is consolidated as
of December 31, 2006.
ICA AB and Dansk Supermarket each own 50% of Netto Marknad AB, which
operates the Netto discount concept in Sweden. Both companies have contributed a share of the capital. Furthermore, the owners finance operations
with loans. ICA has not provided any guarantees for the company. In December 2006 an agreement was reached by the owners whereby ICA reduced its
interest to 5%. The transaction was approved by competition authorities on
February 5, 2007 and finalized on February 15, 2007. As part of the agreement,
ICA is taking over 21 stores in the Mälardal area, which will be converted to ICA
stores or shut down.
The following table summarizes ICA’s share of the revenue, expenses, assets and liabilities of its joint ventures. The table includes income statement
and balance sheet information for Rimi Baltic and Netto for both 2005 and
2006. Since Rimi Baltic was recognized as a joint venture until December 31,
2006, this provides a fair picture of the income statement and balance sheet
for both years.
director’s report
Note 13 Cont.
Associated companies
Note 14 Shares in joint ventures, associated companies and subsidiaries
Carrying amount, associated companies
Joint ventures
Carrying amount, joint ventures
2006
2005
Carrying amount, opening balance
657
31
New share issues and shareholders’ contribution
125
76
Group change
–613
639
Share of profit
–98
–109
–25
20
Disposals
–
–
46
657
0
0
Share of shareholders’ equity
46
657
Total
46
657
Carrying amount, closing balance
Goodwill and other consolidated surplus values
Shares in joint ventures, interest %
Netto Marknad, ICA & DSG AB
Rimi Baltic AB
Purchases
Undistributed share of associated
companies’ net income
Disposals
13
19
–44
–149
–1
10
17
49
Impairment losses, opening balance
–19
–19
Impairment losses disposed companies
+19
Write downs for the year
–
–
Accumulated impairment losses, closing balance
0
–19
17
30
Dec. 31, 2006 Dec. 31, 2005
50
50
100
50
In 2005 ICA AB and Kesko Livs Ab formed a jointly owned food retail business
in the Baltic countries. ICA’s food retail operations in the Baltic region thereby
annual report
77
Note 14 Cont.
Note 16 ICA Banken
audit report
Shares in associated companies
The following table summarizes the most significant holdings of shares in
associated companies:
parent company
Ownership, %
Profit share
Dec. 31,
2006
Dec. 31,
2005
Dec. 31,
2006
Dec. 31,
2005
HB Luntmakaren
50
50
0
0
HB Näringshuset
–
50
7
1
Berg Senteret AS
–
49
–
7
23
KS Oti-Senteret AS
–
–
–
34
34
0
2
Kremmergården ANS
–
–
–
–8
Rensvik Sentrum AS
–
50
0
–6
7
6
14
25
Myra Senter AS
Other associated companies
director’s report
the group
Total
ICA Banken’s lending to private persons matures as follows:
2006
No longer than 3 months
Longer than 3 months but no longer than 1 year
Longer than 1 year but no longer than 5 years
2005
1,237
913,
442
640
2,131
2,558
The ownership percentages above refer to votes, which in every case is the
identical to the share of capital.
Longer than 5 years
Shares in subsidiaries
Holdings in subsidiaries directly and indirectly owned by ICA AB. The list is
limited to operating companies
ICA Banken has as a principle to classify a receivable as impaired when payments of interest or principal are overdue by more than 60 days. Impaired
loans, net, amounted to 1.19 percent (1.09) of lending. The provision ratio is a
reserve for credit losses in relation to total impaired loans. The provision ratio
for impaired loans amounted to 62 percent (59).
Ownership, %
Dec. 31,
2006
Dec. 31,
2005
Total lending
679
–
4,489
4,111
Direct holdings
Reg. office
ICA AS
Oslo
100
100
ICA Baltic AB
Stockholm
100
100
ICA Banken AB
Stockholm
100
100
ICA Danmark A/S
Copenhagen
100
100
2006
2005
ICA Detalj AB
Stockholm
100
100
Net sales
4,383
5,775
ICA Fastigheter AB
Stockholm
100
100
Cost of sales
–4,063
–5,472
ICA International Services BV
Zaandam, Holland
100
100
Selling expenses
–204
–197
ICA Reinsurance S.A
Luxembourg
99
99
–78
–95
ICA Ahold Trading AB
Stockholm
100
100
Financial items
–11
–14
Income before tax
27
–3
Tax
–9
1
Result after tax but before result from disposal
18
–2
Indirect holdings
Note 17 Non-current assets held for sale and discontinued operations
ETOS AB
Nacka
100
100
ICA Norge AS
Oslo, Norway
100
100
ICA Sverige AB
Stockholm
100
100
Result from disposal of discontinued operations before tax
ICA Eiendom Norge AS
Oslo, Norway
100
100
ICA Fastigheter Sverige AB
Västerås
100
100
Tax attributable to result from disposal
of discontinued operations
ICA Sourcing and Services BV
Zaandam, Holland
100
100
Result from disposal of discontinued operations after tax
349
Rimi Baltic AB
Stockholm
100
100
Result from discontinued operations, net after tax
367
In addition to the companies listed above, the ICA Group comprises 216 operating and dormant companies. A complete list of all Group companies can be
obtained from ICA’s corporate communications department.
Note 15 Inventory
Inventory of goods for resale
Deduction for obsolescence in inventory
Inventory
78
ICA Banken conducts banking operations, including card operations as well
as savings and lending. Lending consists of customer loans (loans without
security) and second mortgages. In addition, the bank offers mortgages
through SBAB.
Since ICA Banken’s lending is almost exclusively to a large number of
private persons, there is no concentration of credit risks. Savings and lending
carry variable interest rates with the exception of a small portion of lending
with a fixed 3-month rate. This means that the total interest risk is marginal.
The bank’s surplus liquidity is invested in short-term government securities
and other low-risk investments. The bank carries very small amounts in foreign currency, due to which its currency risk is also marginal. The fair value of
financial assets and liabilities corresponds to their carrying amount.
annual report
2006
2005
3,598
3,258
–48
–30
3,550
3,228
349
0
–2
In September 2006 the holding in ICA Meny was sold. ICA Meny is a supplier
to restaurants, the foodservice sector and convenience stores. ICA Meny
constituted a separate line of business and is recognized as a discontinued
operation as of June 2006. At the time Meny was classified as a discontinued
operation, no gain or loss arose in connection with its valuation at fair value
less selling expenses.
In 2006 ICA Meny reported cash flow from operating activities of SEK 14
million (47), with cash flow from investing activities of SEK -15 million (-46) and
cash flow from investing activities of SEK 0 million (0).
Accounts receivable
819
Other receivables
57
Liquid assets
0
Provisions
–102
Accounts payable
–399
Other liabilities
–797
Disposed assets and liabilities, net
57
Assets held for sale:
2006
2005
1,146
674
A process is under way in the Group to ensure an efficient capital structure.
As an element in this process, the Group is selling buildings and land that in
certain cases are leased back. Fixed assets held for sale relate to buildings and
land in Norway and Sweden that in certain cases are sold and in other cases
are sold and leased back through operating leases.
Impairment losses of SEK 46 million (45) were reported during the year
when these assets were classified as held for sale.
Note 18 Shareholders’ equity
audit report
335
Hedging reserve
The hedging reserve comprises the effective share of the cumulative net
change in the fair value of a cash flow hedging instrument attributable to
hedging transactions that have not yet occurred.
parent company
144
Inventory
Revaluation reserve
The revaluation reserve comprises changes in value attributable to tangible
and intangible fixed assets. In incremental acquisitions, the revaluation of
the previously owned interest in the assets is recognized in the revaluation
reserve.
Retained earnings including net income for the year
Retained earnings including net income for the year include earnings in the
Parent Company and its subsidiaries and associated companies. Earlier provisions to the statutory reserve, excluding transferred share premium reserves,
are included in this shareholders’ equity item.
the group
2006
Reserves
Translation reserve
The translation reserve comprises all exchange rate differences that arise
through the translation of financial reports from foreign operations that have
prepared their reports in a currency other than one in which the Group’s
financial reports are presented. The Parent Company’s and Group’s reports
are presented in Swedish kronor.
Dividend
Shareholders received a total dividend of SEK 610 million (607), or SEK 122 (121)
per share.
The Board of Directors has proposed a total dividend of SEK 958 million,
or SEK 192 per share. The dividend proposal will be presented to the Annual
General Meeting in May 2007 for resolution.
director’s report
The effect on individual assets and liabilities in the group attributable to the
disposal is as follows:
For a summary of shareholders’ equity, refer to the report,
“Changes in shareholders’ equity.”
Note 19 Pensions
Specification of the shareholders’ equity item reserves
2006
2005
Translation reserve
Translation reserve, opening balance
334
–61
Translation differences for the year
–455
395
Translation reserve, closing balance
–121
334
–61
–43
Hedging reserve
Hedging reserve, opening balance
Change in hedging reserve
Hedging reserve, closing balance
38
–18
–23
–61
Revaluation reserve
Revaluation reserve, opening balance
–
–
Change in revaluation reserve
498
–
Revaluation reserve, closing balance
498
–
2006
2005
273
–104
–455
395
38
–18
Total reserves
Reserves, opening balance
Changes in reserves for the year
Translation reserve
Hedging reserve
Revaluation reserve
498
–
Reserves, closing balance
354
273
Practically all employees in Sweden receive pension benefits in accordance with
collective agreements. Salaried employees receive defined-benefit pensions
according to the ITP plan. Pension obligations are secured through provisions
in the balance sheet and insurance premiums. Unionized employees receive
defined-contribution pensions according to the STP plan through AMF pension.
All employees in Norway are covered by occupational pension agreements.
Although defined-benefit pensions are used, the majority of employees in
Norway receive defined-contribution pensions. The defined-benefit plans are
secured through both the payment of fees to insurance companies and provisions in the balance sheet. In addition to occupational pensions, unionized employees have the opportunity to retire at age 62. This is secured in part through
the payment of fees and in part through provisions in the balance sheet.
There are no healthcare costs in the Group’s plans that significantly affect
the reported obligation for defined-benefit plans.
Commitments for retirement pensions and family pensions for white-collar
employees in Sweden are secured by insurance through Alecta. In accordance
with a pronouncement from the Swedish Accounting Standards Board’s
Emerging Issues Task Force, URA 42, this a defined-benefit plan covering
multiple employers. For the fiscal year the company did not have access to
information that would make it possible to recognize it as a defined-benefit
plan. The ITP pension plan secured through insurance from Alecta is therefore
recognized as a defined-contribution plan. Annual pension premiums covered
by Alecta amount to SEK 31 million (32). Alecta’s surplus can be divided
between policy-holders and/or insureds. As of September 30, 2006 Alecta’s
surplus in the consolidation level was 141 percent (128 percent as of December
31, 2005), based on a fair value calculation of Alecta’s assets as a percentage of
insurance obligations calculated using Alecta’s actuarial assumptions, which
does not agree with IFRS 19.
As of December 31, 2006 the share capital consists of 5,000,000 shares
(5,000,000) with a nominal value of SEK 100.
Other paid-in capital
Relates to shareholders’ equity contributed by the owners. The principal contribution from the owners took place in connection with the implementation
of ICA’s new structure in 2000.
annual report
79
Note 19 Cont.
audit report
Cost of defined-benefit pensions
2005
57
65
Interest expense
38
48
Assumed rate of return on plan assets
–3
–4
Reported actuarial gains (-) losses (+)
10
6
102
115
Pension cost for defined-benefit pensions
parent company
2006
Cost of vested benefits during the period
Pension cost for defined-contribution pensions
119
95
Total pension costs
221
210
Of the total pension cost, SEK 154 million (138) is included in the cost of sales
and SEK 67 million (72) in administrative expenses.
The assumed return on plan assets is based on long-term expectations regarding the return for each asset class. This return is based on an inflation assumption and historical data on returns for various asset classes. The assumed
return for each asset class, together with the mix of assets expected to be held
long-term, produces a total assumed return on plan assets.
Important actuarial assumptions (%)
2006
2005
Discount rate
4.0
4.0
Inflation
1.5
1.5
Rate of salary increase
3.0
3.0
Assumed return on plan assets
5.5
5.5
Amounts for current year
and comparative year
Present value defined-benefit obligations
the group
Carrying amount in balance sheet
director’s report
2005
2004
–1,108
–966
68
72
76
–1,021
–1,036
–890
2006
2005
Present value of funded obligations
134
84
Fair value of plan assets
–68
–72
Experience-based adjustments for obligations
–68
66
12
Experience-based adjustments for plan assets
13
Present value of unfunded obligations
955
1,024
Unrecognized actuarial losses (-) gains (+)
–261
–253
Carrying amount
760
783
The amount is recognized in its entirety on the provisions for pensions line in
the balance sheet.
Change in pension obligations
2006
2005
Opening balance, present value pension obligations
1,108
969
Deficit (-) surplus (+)
In accordance with the transitional rules for IAS 19 Employee Benefits, comparative information is not provided for all items in the table above.
Note 20 Pledged assets and contingent liabilities
Pledged assets
Chattel mortgages
Cost of vested benefits during the period
57
65
Real estate mortgages
Interest expense
38
48
Restricted cash
63
93
Total
–28
–32
Actuarial gains (-) losses (+)
Pension disbursements
Changes in exchange rates
Effects of disposals and business acquisitions
Closing balance, present value pension obligations
Change in plan assets
Opening balance, plan assets
Assumed return on plan assets
Actuarial gains (+) losses (-)
–6
–
–143
–35
1,089
1,108
2006
2005
72
76
3
5
13
–
–28
–31
Contributions
31
44
Changes in exchange rates
–4
–
Effects of disposals and business acquisitions
–19
–22
Closing balance, plan assets
68
72
Actual return on plan assets
16
5
Pension disbursements from plan assets
Plan assets distributed by asset class
2006
2005
Bonds and other interest-bearing securities
40
50
Equities
18
14
Real estate
8
5
Other assets
2
3
68
72
Total plan assets
80
Plan assets
2006
–1,089
annual report
2006
2005
–
–
585
360
5
5
590
365
Guarantees for subsidiaries
–
–
Liability associated with partnerships
1
1
Guarantees and contingent liabilities
173
900
Total
174
901
Contingent liabilities
In connection with an extensive reorganization that took effect in January
1990, shareholders in the three regional companies ICA Eol AB, ICA Essve AB
and ICA Hakon AB were offered the opportunity to tender their shares in the
regional companies in exchange for shares in ICA AB (publ) or cash. ICA AB
(publ) subsequently called for a compulsory redemption and obtained preferential possession of the regional companies. A protracted arbitration process
relating to the three cases concluded in June 1997, when ICA’s claim regarding
the redemption amount gained full approval. However, the administrators
chose to appeal the arbitration ruling to the district court, which in April 2004
came down on the side of the arbitration ruling. The administrators appealed
to the court of appeal, which in 2006 affirmed the district court’s judgment.
The administrators have petitioned the Supreme Court. ICA has recognized a
liability in accordance with the court of appeal’s ruling. If the final ruling falls
in favor of the administrators, the company will have to pay approximately
SEK 150 million more than it has recognized as a liability. The company and its
legal advisers are of the opinion that there is no reason to recognize a liability
exceeding the court of appeal’s ruling.
Owners
Royal Ahold
52
25
8
7
Hakon Invest AB (publ)
20
87
3
9
RIMI Baltic AB
–
–
–
–
Netto Marknad AB
1
–
293
3
1
8
26
1
74
120
330
20
Sales
Purchases Receivables
to related from related from related
parties
parties
parties
Liabilities
to related
parties
Joint ventures:
Total
2005
Owners
Royal Ahold
4
20
23
12
Hakon Invest AB (publ)
1
45
1
19
Joint ventures:
RIMI Baltic AB
15
–
255
–
Netto Marknad AB
0
–
288
–
–
–
42
1
20
65
609
32
Total
The ICA Group has had daily transactions with the board members who are
ICA retailers. This is a natural part of their role as ICA retailers. All transactions
were made on market terms and refer to the sale of goods, consulting services
and rent for premises.
The management of the ICA Group and the Board of Directors of ICA AB
have received the following amounts:
2006
2005
Short-term compensation
52
41
Post-employment compensation
18
11
Total
70
52
audit report
Liabilities
to related
parties
parent company
2006
Sales
Purchases Receivables
to related from related from related
parties
parties
parties
Liquidity risk
Liquidity risk is defined as the risk that the Group cannot fulfill its short-term
payment obligations. ICA’s financial policy states that the liquidity reserve
must amount to a level where the reserve can handle the fluctuations that can
be expected in day-to-day liquidity within a 12-month period. To ensure this,
the Group has bank overdraft facilities and unutilized credit facilities. Its strong
cash flow and unutilized loan facilities enabled the Group to meet its liquidity
needs without difficulty in 2006. At year-end 2006 borrowings amounted to
SEK 5,715 million (6,474) and the liquidity reserve to SEK 7,353 million (5,416).
Foreign currency risk
Foreign currency risk is defined as the risk that changes in exchange rates will
affect cash flow. The primary foreign currency risk in the ICA Group is the
transaction exposure that arises due to the import of goods paid in foreign
currency. The risk norm in the financial policy is that 100% of the outstanding
transaction exposure will be hedged. This exposure is hedged for the next
3-6 months. Currency hedges are arranged on the order date. For non-foods,
the currency hedge is based on projected volumes. According to the financial
policy, borrowings in foreign currency are hedged. The foreign currency
risk that arises because the Group has invested in foreign subsidiaries is not
actively hedged in the financial market.
the group
Transactions between ICA AB and subsidiaries affiliated with the company
have been eliminated in the consolidated accounts and are not indicated
in this note. Transactions between the Group and other related parties are
indicated below.
ICA has signed a number of commercial agreements with its owners, joint
venture partners and associated companies. The scope of these transactions
is indicated in the tables below
policy states that the Group will tie up its interest rates for 18 months with a
mandate to deviate from this norm by +/- 6 months. Interest rate swaps are
used to adjust interest rate exposure.
Credit risk
Credit risk is defined as the risk that a counterparty in a financial transaction
cannot fulfill its obligations according to a contract and that any security
does not cover the company’s claim. The banks and financial institutions
that the Group works with must have a creditworthiness corresponding to at
least “A” from Standard & Poor’s or “A2” from Moody’s Investor Service. For
commercial counterparties with which the company has a large exposure,
individual assessments are made. The maximum credit exposure corresponds
to the book value of financial assets. The credit risk that arises through ICA
Banken’s lending to the public is managed by performing credit checks on all
loan applicants.
director’s report
Note 21 Related-party transactions
Note 23 Financial instruments
Interest rate risks
Following is a summary of the Group’s interest-bearing assets and liabilities
together with their effective interest rates. Long-term financial liabilities
include the effect of interest rate swaps that convert the liability to a fixed
interest rate.
2006
2005
Effective
interest Total SEK
rate, %
million
In total, this group has been granted loans and credits from ICA Banken of
SEK 1 million (0).
Effective
interest Total SEK
rate, %
million
Financial assets
Note 22 Principles of financial risk management
The Group has a central function for financial management whose primary
purpose is to ensure that the Group has secured financing through loans and
lines of credit, to handle cash management and to actively manage and control financial exposure in line with the Group’s financial policy.
The financial instruments managed by the finance department consist of
bank credits, short- and long-term loans, short-term investments and derivatives. The Group also has other financial instruments such as accounts receivable and payable, which are directly tied to the ICA Group’s operations.
ICA’s principal risk exposure relates to interest rates, liquidity, foreign currencies and credits.
Interest rate risk
Interest rate risk is defined as the risk that changes in market interest rates will
affect cash flow or the fair value of financial assets and liabilities. The financial
Long-term interest-bearing
6.6
3,558
5.7
3,600
Short-term interest-bearing
2.4
5,353
1.4
4,643
Financial liabilities
Long-term interest-bearing
4.3
6,993
4.0
8,386
Short-term interest-bearing
1.6
8,570
1.3
7,388
Foreign currency risks
One hundred percent of the Group’s major foreign currency exposures from
operations-related transactions is hedged with forward exchange contracts.
As a result, there are no significant exposures in foreign currencies as of December 31, 2006 over and above the Group’s functional currencies (SEK and NOK).
Fair value of financial assets and liabilities
The Group’s interest-bearing assets and liabilities, excluding derivatives,
carry a fixed interest rate of up to 3 months, which means that their carrying
amount essentially corresponds to their fair value.
annual report
81
The net assets of the acquired companies on their acquisition dates were as
follows:
audit report
Note 23 Cont.
The fair value of financial instruments classified as financial assets held for sale
is as follows:
2006
Interest rate swaps
parent company
Forward exchange contracts
2005
Asset
Liability
Asset
Liability
28
–
13
38
8
17
10
0
Short-term investments in ICA Banken have a short maturity, which means
that their fair value corresponds to their carrying amount.
Rimi Baltic
Carrying
amount before
acquisition
Value according
to acquisition
analysis for
acquired 50%
1,470
1,026
629
194
Inventory
576
288
Accounts receivable and other receivables
483
243
Liquid assets
346
173
–849
–468
Accounts payable and other current
liabilities
–1,403
–698
Net identifiable assets and liabilities
1,252
the group
Note 24 Statement of cash flows
2006
2005
1,196
1,175
69
119
Impairment losses
Undistributed earnings from associated companies
director’s report
Interest received
Interest paid
Capitol gains/losses
Provisions
Sale and leaseback effects
Total non-cash items
85
90
–90
–104
205
392
–613
–175
5
16
–178
–145
679
1,368
Values in the statement of cash flows for 2005 include discontinued operations. For a disclosure of cash flows for discontinued operations, see the Note
17 Non-current assets held for sale and discontinued operations.
Interest paid is recognized under financing activities and interest received
under investing activities. Adjustments for this are made in the item Adjustments for non-cash items.
Group goodwill
Purchase price paid1
On December 18 the Group acquired the remaining 50% of Rimi Baltic AB
from Kesko Livs AB. In the income statement Rimi Baltic AB is recognized as a
joint venture for the full-year 2006, but in the balance sheet Rimi Baltic AB is
consolidated as of December 31, 2006. Rimi Baltic is engaged food retail operations through 205 stores in Estonia, Latvia and Lithuania. The purchase price
was SEK 1,756 million. The contribution to consolidated income after tax for
2006 for the acquired 50 percent was SEK –12 million.
During the year the Group acquired two store operations in Sweden. The
operations were acquired from ICA retailers, who managed them under the
ICA agreement, which stipulates how valuations are made in connection with
such sales. The acquired stores will be sold to new ICA retailers. The Group
will only own and run the stores for a short period. The total purchase price
for the store operations was SEK 12 million. The contribution to consolidated
income after tax for 2006 was SEK 2 million.
If all store acquisitions had taken place as of January 1, 2006, consolidated
net sales would have increased by SEK 9,073 million and income after tax
would have decreased by SEK –8 million.
82
annual report
1,756
Cash (acquired)
–346
Net cash outlay
1,410
Store operations
Value according to
acquisition analysis
7
Inventory
5
Accounts receivable and other receivables
11
Liquid assets
2
0
Accounts payable and other current liabilities
–13
Net identifiable assets and liabilities
12
Purchase price paid1
12
Cash (acquired)
–2
Net cash outlay
10
1
Note 25 Business combinations
758
998
he amount includes fees for legal services of SEK 1 million related to Rimi Baltic and
T
SEK 0 million related to store operations.
Goodwill from the acquisition of Rimi Baltic relates to the value of being represented in a geographical market with strong economic growth and for an
established, efficient logistics organization.
Note 26 Investment commitments
In 2006 the Group entered into agreements to acquire tangible fixed assets for
SEK 2,004 million (1,077).
Note 27 Other information
In 2000 ICA Ahold AB issued an offer to the shareholders in ICA AB (publ) to
tender their class B and C shares in the company for SEK 821.31 per share. The
offer was accepted by more than 99 percent of the shareholders. The former
ICA Ahold AB subsequently called for the compulsory redemption of the
outstanding shares and obtained preferential possession of the shares. ICA
Ahold AB and ICA AB (publ) were merged in 2002. The purchase of outstanding shares will not impact ICA’s financial position as Ahold, in accordance with
the shareholder agreement, finances this through shareholders’ contributions.
Parent Company Income Statement
783
480
Cost of sales
–411
–199
Gross profit
372
281
–602
–363
–230
–82
1,146
1,057
7
Result from shares in Group companies
Interest income and similar profit/loss items
12
8
Impairment on associated companies
–150
–165
Interest expenses and similar profit/loss items
–378
–372
400
446
153
52
553
498
Appropriations
18
Income before tax
Income taxes
8
104
93
657
591
Note
Dec. 31, 2006
Dec. 31, 2005
9
42
48
10
173
178
NET INCOME FOR THE YEAR
the group
Result from financial investments:
3, 4, 5, 6
director’s report
Operating income
2005
audit report
2006
2
Net sales
parent company
Note
(SEK million)
(SEK million)
ASSETS
FIXED ASSETS
11
12
33,842
33,844
13
46
70
Other financial fixed assets
15
4
4
8
6
10
34,113
34,154
Deferred tax assets
Total fixed assets
Current assets
Current receivables
Accounts receivable
Receivables from Group companies
63
166
2,545
1,915
Receivables from associated companies
81
0
Tax assets
75
129
Other receivables
Cash and bank balances
Total current assets
TOTAL ASSETS
16
24
19
178
148
0
0
2,966
2,377
37,079
36,531
annual report
83
(SEK million)
Note
Dec. 31, 2006
Dec. 31, 2005
audit report
Shareholders’ equity, provisions and liabilities
17
Restricted equity
500
8,788
8,788
Revaluation reserve
8,532
8,532
7,194
6,604
parent company
500
Statutory reserve
Non-restricted equity
the group
Share capital (5,000,000 shares)
Provisions
Retained earnings
657
591
25,671
25,015
18
1,466
1,620
19
286
243
Untaxed reserves
Provisions for structural costs
director’s report
Total provisions
10
19
296
262
8,000
8,000
8,000
8,000
Liabilities to Group companies
14
Total long-term liabilities
Current liabilities
Accounts payable
Liabilities to Group companies
192
1,171
Liabilities to associated companies
42
–
Other liabilities
20
73
16
Total current liabilities
TOTAL SHAREHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
84
265
1,094
225
198
1,646
1,634
37,079
36,531
Pledged assets
20
5
5
20
9,945
10,160
annual report
Changes in Parent Company’s Shareholders’ Equity
Net income
for the year
500
8,788
8,532
7,278
–227
24,871
Group contributions received
348
348
Tax on Group contributions
–188
–188
Dividend
–834
227
–607
591
591
500
8,788
8,532
6,604
591
25,015
500
8,788
8,532
6,604
591
25,015
Group contributions received
846
846
–237
–237
Dividend
–19
500
8,788
8,532
7,194
audit report
Retained
earnings
–591
parent company
Share capital
Revaluation
reserve
–610
657
657
657
25,671
the group
(SEK million)
Statutory
reserve
director’s report
Restricted equity
Parent Company Statement of Cash Flows
2006
2005
400
446
649
756
Income tax paid
–99
–205
Cash flow from operating activities before change in working capital
950
997
1,008
1,022
(SEK million)
Note 21
Operating activities
Change in working capital
Short-term receivables (increase - / decrease +)
Short-term liabilities (increase + / decrease -)
–794
–764
1,164
1,255
Investing activities
–64
–176
Purchase of operations
Purchase of tangible fixed assets
–
–26
Investment in financial fixed assets
–
–7
Proceeds from sale of financial fixed assets
1
–
–125
–75
Investment in associated companies
Interest received
12
8
–176
–276
Dividend paid
–610
–607
Interest paid
–378
–372
Cash flow from financing activities
–988
–979
Cash flow for the year
0
0
Liquid assets at beginning of year
0
0
Liquid assets at end of year
0
0
Cash flow from investing activities
Financing activities
annual report
85
Supplementary Information, Parent Company
audit report
Note 1 Accounting principles
Salaries and other remuneration
parent company
The Parent Company has prepared its annual report according to the Annual
Accounts Act (1995:1554) and the Swedish Accounting Standards Board’s
recommendation RR 32:05 Reporting by a legal entity. RR 32:05 means that
the Parent Company, in the annual report for the legal entity, will apply all
IFRS and pronouncements approved by the EU as far as possible within the
framework of the Annual Accounts Act and with consideration to the connection between reporting and taxation. RR 32:05 specifies the exemptions from
and supplements to IFRS. As a whole, this results in the following differences
between the Group’s and the Parent Company’s accounting principles.
the group
Subsidiaries, associated companies and joint ventures
Shares in subsidiaries, associated companies and joint ventures are reported
in the Parent Company according to the purchase method. Reported revenue
is limited to dividends received, provided that they are attributable to profits
earned after acquisition.
Taxes
In the Parent Company, untaxed reserves include deferred tax liabilities. In
the consolidated accounts, on the other hand, untaxed reserves are divided
between deferred tax liabilities and shareholders’ equity.
director’s report
Leases
In the Parent Company, all leases are reported according to the rules for
operating leases.
Defined-benefit pension plans
The Parent Company uses a different basis to calculate defined-benefit pension plans than in IAS 19. The calculations by the Parent Company comply
with the Act on Safeguarding Pension Benefits and the Financial Supervisory
Authority’s regulations, which are a prerequisite for tax deductibility. The
biggest differences compared with IAS 19 are how the discount rate is determined, that the calculation is based on current salary levels and does not take
into account future salary increases, and that all actuarial gains and losses are
recognized as soon as they arise.
Group contributions and shareholders’ contributions for legal entities
The Parent Company reports Group contributions and shareholders’ contributions in accordance with the pronouncements of the Swedish Accounting
Standards Board’s Emerging Issues Task Force. Shareholders’ contributions are
recognized directly against the shareholders’ equity of the recipient and are
capitalized in the shares and participations of the contributor, to the extent
impairment is not required. Group contributions are reported according to
their financial impact. This means that Group contributions paid to minimize
the Group’s tax are recognized directly against retained earnings after deducting their tax effect.
2006
Board and President
2005
13
10
Other employees
626
381
Total, Parent Company
639
391
Social security expenses
2006
2005
Social security expenses
357
204
Of which pensions1
121
62
1
Of the pension costs, 6 (2) relates to the Board and President.
Absenteeism, Parent Company
As % of normal working hours
2006
2005
Sick leave
absences
Of which longterm sick leave
Sick leave
absences
Of which longterm sick leave
Younger than 29
years
1.9
0.3
1.5
0.3
30 – 49 years
2.5
1.1
3.1
1.9
50 years and
older
4.3
3.1
4.3
3.1
Total
2.8
1.4
3.1
1.9
Men
1.6
0.7
2.0
1.2
Women
3.7
2.0
4.0
2.5
Gender distribution of
Board of Directors and Management
2006
2005
10
10
Board of Directors
Men
Women
–
–
10
10
Men
6
6
Women
2
2
Total
8
8
2006
2005
Deloitte
4
3
Total
4
3
Total
Management
Note 4 Audit expenses
Note 2 Intra-Group purchases and sales
Audit fees
Of the year’s total net sales, 17 percent (16) relates to sales to subsidiaries.
No audit fees were paid to accounting firms during the year.
Note 3 Personnel expenses, pensions, etc.
The number of employees has been calculated on the basis of the Group’s
measure of normal working hours (1,800 hours).
2006
2005
811
440
Men
725
472
Total
1,536
912
Women
86
annual report
Note 5 Depreciation and amortization
Depreciation and amortization of tangible and intangible fixed assets are
included in the following income statement.
2006
2005
99
77
Total
99
77
2005
–99
2006
2005
Current tax on net income for the year
–129
19
15
–4
7
237
188
Restatement of final tax
Future contractual minimum lease fees:
0
–3
104
93
7
Maturity date year 2
5
3
2
2
Reconciliation between current tax rate and effective tax
0
1
Current tax rate, %
28
28
Maturity date year 5 or later
0
0
Tax-exempt income
–58
–60
14
17
Other non-deductible expenses
Total
11
Reported tax expense
11
13
–19
–19
Fixed assets
3
5
Provisions
3
5
Total
6
10
Effective tax rate
Deferred tax assets related to
Note 7 Result from financial investments
Assets
2006
2005
Results from shares in Group companies
Dividends
1,146
1,057
Total
1,146
1,057
10
5
0
2
Other interest income and similar profit/loss items
Interest income, Group companies
Other interest income
Total
Write-down of associated companies
2
1
12
8
–150
–165
Other interest expenses and similar profit/loss items
Interest expenses, subsidiaries
Other interest expenses
Total
Total result from financial investments
–365
No deferred tax is recognized directly against shareholders’ equity. The Group
has no unrecognized deferred tax liabilities or tax assets on temporary differences.
Change in deferred tax in temporary differences and tax loss carryforwards
Balance,
Jan. 1, 2005
Reported
through
profit or loss
Balance, Dec.
31, 2005
Fixed assets
0
5
5
Provisions
3
2
5
Total
3
7
10
Balance,
Jan. 1, 2005
Reported
through
profit or loss
Balance, Dec.
31, 2005
Fixed assets
5
–2
3
Provisions
5
–2
3
10
–4
6
–363
–13
–9
–378
–372
630
528
Write-down of associated companies is included in operating income.
director’s report
The year’s leasing fees
2006
Current income tax
parent company
The company leases buildings and equipment. There are no significant rental
agreements in the Parent Company. Contractual lease expenses under existing
leases fall due for payment as follows:
audit report
Note 8 Taxes
the group
Note 6 Operating leases
Total
(Tax assets are denoted by (+) and tax liabilities by (-) in the table above.)
Note 9 Intangible fixed assets
Dec. 31, 2006 Dec. 31, 2005
85
Purchases
24
18
109
85
67
Amortization, opening balance
–37
–14
–30
–23
Accumulated amortization, closing balance
–67
–37
42
48
annual report
87
Note 10 Tangible fixed assets
Note 11 Financial fixed assets
Equipment
Dec. 31, 2006 Dec. 31, 2005
audit report
Purchases
parent company
64
157
–
20
–11
0
593
540
–362
–293
Group change
–
–15
Sales/disposals
11
0
–
34,357
34,359
–515
–515
–
–
–515
–515
33,842
33,844
235
160
Shareholders’ contributions
126
75
361
235
–54
173
178
–6
0
Change for the year
6
–6
Accelerated depreciation, closing balance
0
–6
173
172
Book value, closing balance
26
–2
–362
Accelerated depreciation, opening balance
34,333
–
Sales
–69
34,359
Purchases
–420
the group
director’s report
363
Group change
Sales/disposals
Dec. 31, 2006 Dec. 31, 2005
540
–165
–
–150
–165
–315
–165
46
70
Note 12 Shares in subsidiaries
Specification of ICA AB’s direct holdings of shares in subsidiaries.
Book value
Number
Capital and
votes,%
Nominal
value
Dec. 31, 2006
Dec. 31, 2005
100
100
NOK 1.0
1
1
Irland
11,301
100
11,300.0
–
1
556615–4620
Stockholm
1,000
100
100.0
1
1
ICA Baltic AB
556042–7410
Stockholm
30,000
100
15.0
184
184
ICA Banken AB
516401–0190
Stockholm
1,000,000
100
100.0
628
628
ICA Danmark A/S
25610024
Denmark
51,000
100
DKK 51.0
10
10
ICA Detalj AB
556604–5448
Stockholm
1,000
100
0.1
16,717
16,717
ICA Ekonomibyrå AB
556054–0675
Västerås
10,000
100
1.0
–
1
ICA Fastigheter AB
556604–5471
Stockholm
1,000
100
0.1
2,425
2,425
ICA International Services BV
34177382
Netherlands
10,000
100
EUR 0.1
13,864
13,864
ICA Reinsurance SA
915/93
Luxembourg
99
99
11.9
12
12
33,842
33,844
Corp. ID no.
Reg. office
ICA AS
988 351 032
Norway
ICA Ahold Export Unltd
318221
ICA Ahold Trading AB
A complete list of first- and second-tier subsidiaries can be obtained free of charge from the company’s corporate communications department.
Note 13 Shares in associated companies and joint ventures
Specification of ICA AB’s direct holdings in associated companies and joint ventures
Book value
Corp. ID no.
Number
Interest %
Dec. 31, 2006
Dec. 31, 2005
969658–3419
–
50
0
0
556615–2269
50 000
50
46
70
46
70
HB Luntmakaren, Stockholm
Joint ventures
Netto Marknad, ICA & DSG AB, Halmstad
Total
The share of votes and share of capital are identical.
88
annual report
Note 18 Appropriations and untaxed reserves
Dec. 31, 2006 Dec. 31, 2005
ICA Finans AB1
1
8,000
8,000
Dec. 31, 2006 Dec. 31, 2006
Appropriations
Change in tax allocation reserve
Of which 0 (0) falls due for payment more than five years after the closing day.
Change in accelerated depreciation
147
58
6
–6
153
52
audit report
Note 14 Long-term liabilities to Group companies
Dec. 31, 2006 Dec. 31, 2005
Accelerated depreciation
0
6
Tax allocation reserve, financial year 2001
–
301
407
407
Shares in tenant-owner associations
2
2
275
275
Other long-term securities holdings
1
1
275
275
Other long-term receivables
1
1
238
238
Total
4
4
118
118
153
–
1,466
1,620
the group
Note 15 Other financial fixed assets
parent company
Untaxed reserves
Note 16 Accruals
Other prepaid expenses
56
42
Supplier bonuses
94
80
Other accrued revenue
28
26
178
148
Total
Accrued salary, vacation pay and
social security expenses
Accrued interest expenses
Other accrued expenses
Total
Note 19 Provisions for pensions
All employees receive pension benefits according to collective agreements.
Salaried employees receive defined-benefit pensions according to the ITP
plan. Pension obligations are secured through provisions in the balance sheet
and through insurance premiums.
Reconciliation of carrying amount
for self-managed pensions
Opening balance, principal on pension obligations
165
141
6
5
54
52
225
198
Note 17 Shareholders’ equity
For a list of shareholders’ equity, see the report, “Changes in shareholders’
equity.”
Restricted equity
Restricted equity may not be reduced through profit distributions.
Cost charged against this result
112
25
14
11
7
Pension disbursements
–5
–5
Transferred pensions, Group
Closing balance, principal on pension obligations
12
115
286
243
Of the total pension obligation, FPG/PRI pensions account for SEK 252 million
(218). The entire amount is covered by the Act on Safeguarding Pension Benefits.
Specification of recognized pension costs
2006
2005
25
14
Self-managed pensions:
Cost excluding interest expense
Interest expense
Share capital
As of December 31, 2006 the share capital consists of 5,000,000 shares
(5,000,000) with a nominal value of SEK 100.
Insured pensions:
Statutory reserve
Share premium reserves that arose before January 1, 2006 have been transferred to the statutory reserve in accordance with the transitional rules in the
Annual Accounts Act.
Special employer’s contribution on pension returns
Retained earnings
Consists of previous year’s earnings less paid dividends. Together with net
income for the year, retained earnings comprise the capital available for distribution to the shareholders.
A dividend of SEK 610 million has been paid to the shareholders (607).
2005
243
Interest expense
Total cost of self-managed pensions
Revaluation reserve
When a tangible or financial fixed asset is revaluated, the revalued amount is
allocated to a revaluation reserve.
2006
director’s report
Dec. 31, 2006 Dec. 31, 2005
Insurance premiums
Tax on pension returns
Cost of credit insurance
Recognized pension cost
11
7
36
21
95
49
1
1
23
11
1
1
120
62
Important actuarial assumptions
2006
2005
Discount rate
3.6 %
3.6 %
Pension calculations are based on salary levels on the closing day.
annual report
89
Audit Report
Note 20 Pledged assets and contingent liabilities
Dec. 31, 2006 Dec. 31, 2005
audit report
Pledged assets
Restricted cash
5
5
Total
5
5
9,945
10,155
Guarantees for subsidiaries
parent company
Guarantees and contingent liabilities
Total
–
5
9,945
10,160
Note 21 Statement of cash flows
2006
the group
director’s report
Impairment losses
2005
99
77
150
165
131
43
Other provisions
–9
19
Interest received
–12
–8
Interest paid
378
372
Total
649
756
Paid and received interest is recognized under financing activities and investing activities, respectively. The transfer of interest items is included in adjustments according to the table.
Stockholm, February 19, 2007
Claes-Göran Sylvén
Anders Moberg
Chairman
Vice Chairman
Dirk Anbeek
Peter Berlin
Dick Boer
Fredrik Hägglund
Per Jansson
Kenneth Ljungberg
Per-Anders Olofsson
John Rishton
Kenneth Bengtsson
President
To the annual meeting of the shareholders of ICA AB
Corporate identity number 556582–1559
We have audited the annual accounts, the consolidated accounts, the
accounting records and the administration of the board of directors
and the managing director of ICA AB for the financial year 2006. The
board of directors and the managing director are responsible for these
accounts and the administration of the company as well as for the
application of the Annual Accounts Act when preparing the annual
accounts and the application of international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when
preparing the consolidated accounts. Our responsibility is to express
an opinion on the annual accounts, the consolidated accounts and the
administration based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards in Sweden. Those standards require that we plan
and perform the audit to obtain reasonable assurance that the annual
accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes
assessing the accounting principles used and their application by the
board of directors and the managing director and significant estimates
made by the board of directors and the managing director when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts
and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions
taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the
managing director. We also examined whether any board member or
the managing director has, in any other way, acted in contravention of
the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our
opinion set out below.
The annual accounts have been prepared in accordance with the
Annual Accounts Act and give a true and fair view of the company’s
financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated
accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual
Accounts Act and give a true and fair view of the group’s financial position and results of operations. The statutory administration report is
consistent with the other parts of the annual accounts and the consolidated accounts.
We recommend to the annual meeting of shareholders that the
income statements and balance sheets of the parent company and the
group be adopted, that the profit of the parent company be dealt with
in accordance with the proposal in the administration report and that
the members of the board of directors and the managing director be
discharged from liability for the financial year.
Stockholm, February 21, 2007
Deloitte AB
Jan Berntsson
Authorized Public Accountant
90
annual report
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Balance sheet
The balance sheet explains the company’s financial position. On one
side are its assets – what it has spent its money on. The other side
shows its liabilities and shareholders’ equity – in other words, how
the assets have been financed or where the money on the asset side
comes from.
The balance sheet provides a snapshot. As soon as something occurs
to affect the company’s finances, the balance sheet will change as well.
director’s report
Income statement
The income statement shows the revenue generated by the business
and the expenses incurred over a specific period. Revenue is an indication of how the company performed, based on what customers were
prepared to pay for its products or services. Expenses represent what
the company consumed during the period. The difference between
revenue and expenses is the company’s profit.
audit report
Graphics and color codes have been added to the annual report this
year to make the financial information easier to understand. A few
basic financial terms and how they are connected are explained below.
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Connection
The balance sheet shows the value of the company’s assets and how
they are financed as of a specific date. The income statement shows
the company’s revenue and expenses for the period.
The income statement shows how shareholders’ equity in the balance sheet changed during the year.
The graphics and color codes have been developed by Bonanza.
annual report
91
Board of Directors
Claes-Göran Sylvén
Anders Moberg
CEO, Hakon Invest AB
President and CEO, Royal Ahold
Born: 1959
Born: 1950
Elected: 1999
Elected: 2004
Other assignments:
Chairman of Forma Publishing
Group. Board member of the
Swedish Federation of Trade,
Cervera and UGAL.
Other assignments:
Board member Velux A/S, DFDS
A/S and Husqvarna AB, Chairman Clas Ohlson.
Chairman
Vice Chairman
Dick Boer*
John Rishton
COO Europe, Royal Ahold,
President and CEO, Albert Heijn
CFO, Royal Ahold
Born: 1957
Elected: 2006
Born: 1958
Elected: 2006
Other assignments:
Board member of Raad Nederlandse Detailhandel, CBL, Platform Detailhandel, DuVo and
VGL, Shared chairman ECR
Nederland, Vice chairman CBL,
Member of the Supervisory
Board SVM-pact, Kobalt and
Rode Kruis Ziekenhuis.
92
Per-Anders Olofsson
Dirk Anbeek
ICA retailer
Born: 1949
SVP Franchises & Real Estate,
Arena NL, Royal Ahold
Elected: 1997
Born: 1963
Other assignments:
Vice Chairman of ICA-handlarnas Förbund and Chairman of
the ICA Sverige Advisory Board.
Elected: 2003
ICA GROUP
Other assignments:
Board member JMR.
Fredrik Hägglund
Peter Berlin
General Counsel, Hakon Invest AB
ICA retailer
Born: 1967
Born: 1960
Elected: 2004
Elected: 2005
Other assignments:
Director of EuroCommerce
and Anti Corruption Institute.
Other assignments:
Vice Chairman of ICA’s district
board in Malmö. Board member
of ICA-handlarnas Förbund.
Kenneth Ljungberg
Per Jansson
Risk Manager, ICA AB
Logistics worker, ICA Sverige AB
Employee representative,
Salaried Employees’ Union, HTF
Employee representative, Swedish
Commercial Employees’ Union.
Born: 1942
Born: 1950
Elected: 1985
Elected: 2002
Other assignments:
Employee representative on the
board of ICA Sverige AB. Board
member of the HTF local at ICA
Stockholm. Safety delegate at
ICA HQ Solna.
Deputies
Elected by the Annual
General Meeting
Employee representatives
Göran Hesseborn
Pontus Bergman
Magnus Rehn
Peter Wakkie
Stig-Åke Lundström
Joost Sliepenbeek
* Dick Boer, COO Europe, Royal Ahold, was elected to the
board in October 2006. Arthur Brouwer resigned his position at Ahold and his board position in October 2006.
ICA GROUP
93
Group Management 2007
Kenneth Bengtsson
President and CEO, ICA AB
EVP Marketing, ICA AB
Born: 1961
Born: 1962
Employed: 1999
Employed: 1986
Other assignments:
Chairman of the Swedish Federation of Trade. Director of the
World Childhood Foundation,
the Confederation of Swedish
Enterprise and CIES. Member of the Coca-Cola Retailing
Research Council Europe.
Other assignments:
Director of Forma Publishing
Group, the Association of Swedish Advertisers, the Swedish
Cancer Society, Bilia and the
CIES Marketing Council.
Anders Nyberg
Sonat Burman-Olsson*
EVP Assortment & Buying,
ICA AB
CFO
Born: 1956
Employed: 2007
Born: 1958
Employed: 2006
Other assignments:
Director of GS 1 AB.
* Sonat Burman-Olsson succeeded Karl Wistrand
as CFO of ICA AB in February 2007.
94
ICA GROUP
Peder Larsson
Trond Kongrød*
COO, ICA Sverige AB
COO, ICA Norge AS
Born: 1957
Born: 1961
Employed: 1999
Employed: 2004
Other assignments:
Director of the Swedish Grocers’
Federation.
Other assignments:
Director of Netidentitet AS.
* Trond Kongrød succeeded Erland Björn
as CEO of ICA Norge in January 2007.
Antonio Soares
COO, Rimi Baltic
Born 1949
Employed 2002
ICA GROUP
95
Corporate governance
The Management and the Board of Directors are entrusted to ensure
that the demands of ICA’s owners and other stakeholders for efficient operational control are met.
Ownership structure
ICA AB is a joint venture 40 percent owned by
Hakon Invest AB and 60 percent by Royal Ahold
N.V. Through a shareholder agreement, Royal
Ahold and Hakon Invest jointly share decisive
influence over ICA AB.
Annual General Meeting
The rules on the Annual General Meeting can
be found in the Companies Act and the articles
of association. The meeting elects the Board of
Directors and auditors and adopts the income
statement, balance sheet and proposed appropriation of earnings.
Besides the Annual General Meeting, four
Extraordinary General Meetings were held in 2006.
The Annual General Meeting on May 4, 2006
resolved, among other things, to adopt the income
statement and balance sheet for 2005 and to pay a
total dividend of SEK 610 million to the shareholders.
Extraordinary General Meetings treated
changes on the Board during the year. New to
the Board are John Rishton (member), Dick Boer
(member), Peter Wakkie (deputy), Magnus Rehn
(deputy) and Pontus Bergman (deputy).
Board of Directors and its work
The Board’s work follows special rules of procedure that ensure that the Board receives the
information it needs to monitor and improve the
company’s operations. The Board adopted the
rules of procedure for the period ending at the
Annual General Meeting in 2007 at its meeting
on December 15, 2006. In addition to the items
treated in accordance with the Companies Act,
the rules of procedure include committee directives and rules on quorums.
In 2006 the Board of ICA AB consisted of eight
members and four deputies elected by the Annual
General Meeting as well as two members with
two deputies appointed by the unions. Arthur
Brouwer stepped down from his position at Ahold
and his membership on ICA’s Board in October. Ahold, which has the right to nominate his
replacement according to the shareholder agree-
96
ICA GROUP
ment, nominated Dick Boer, President and CEO of
Ahold’s subsidiary Albert Heijn. Dick Boer joined
the Board in October. All members appointed by
the Annual General Meeting are affiliated with the
owners of ICA AB. The Chief Executive Officer,
Chief Financial Officer and Chief Counsel (Secretary of the Board) are not members of the Board
but participate in the Board’s work.
No fees have been paid to the Board members
elected by the Annual General Meeting.
The employee representatives have received a
fee of SEK 4,000 per meeting.
During fiscal year 2006 the Board held nine
meetings. Among other things, it decided during
the year on:
The sale of the warehouse property in Helsingborg;
The sale of certain property holdings in Sweden
and Norway;
The sale of the subsidiary ICA Meny;
The acquisition of the remaining 50 percent in
Rimi Baltic AB;
An agreement on ownership changes in Netto
and the acquisition of 21 Netto stores in the
Mälardal region.
Moreover, the Board took up the customary
investment issues regarding the store network.
Nomination Committee
ICA does not have a Nomination Committee since
the shareholder agreement between its owners
gives each of them the right to nominate their
own representatives to the Board.
Board committees
The Board is able to establish committees to
complement its work. The committees are subordinate to the Board and report to it on an ongoing
basis.
Audit Committee
The Board of Directors has appointed an Audit
Committee to monitor accounting and reporting of financial information. The Audit Committee is also responsible for evaluating the Group’s
systems for internal oversight and control. Among
the Committee’s other duties are to handle auditing questions from the external and internal audit.
The Audit Committee’s work is governed in its
rules of procedure, which are laid down by the
Board of Directors.
The Audit Committee consists of two members: John Rishton (Chairman) and Claes-Göran
Sylvén. In addition, assistants to the members,
the external auditors, internal auditors and ICA
AB’s President and CFO normally attend all or part
of the Committee’s meetings. In 2006 the Audit
Committee held six meetings.
Executive Committee
The Board has appointed the Chairman, Deputy
Chairman and CEO to an Executive Committee
responsible for continuous monitoring of the
Group’s development. The Committee also prepares issues that will be discussed by the Board
and supports the presidents and other senior
executives of the subsidiaries in the implementation and execution of the decisions taken by the
Board. The Committee has a mandate to decide
on investments that do not require discussion by
the Board.
Compensation Committee
The Board has given the Executive Committee a
mandate to act as a Compensation Committee to
decide on compensation principles for senior executives in Group Management, though not for the
President, whose salary is determined by the Board.
Internal control over financial reporting
The Board has decided that the company will
voluntarily meet the requirements on internal
control over financial reporting according to the
Swedish Code of Corporate Governance. ICA will
also apply methods to test key controls. Initial
documentation on processes and key controls, as
well as evaluations, were completed in 2006, and
the internal routine will take effect in 2007.
Auditors
The accounting firm of Deloitte has been ICA’s
auditors since September 2000 and was reelected
most recently at the Annual General Meeting on
May 4, 2006 for a mandate period of four years.
The company’s chief auditor, Jan Berntsson, participated in one Board meeting during the year.
President and other senior executives
The Board of Directors appoints the President and
CEO. According to the Swedish Companies Act,
the Board’s rules of procedure and the President’s
instruction, the President is responsible for day-today management of the company. The President
keeps the Board continuously informed on the
operations and development of the company and
the Group. Together with the other senior executives, the President is a member of Group Management, which meets regularly to discuss the company’s development and make decisions affecting
operations. Group Management is presented on
pages 94–95.
ICA’s policies
ICA’s Group Management has adopted a number
of policies that govern operations. They are summarized in a document called “ICA’s good business,” which contains seven positions on ethics
and corporate responsibility, which are further
developed in the following policies. Each policy
includes guidelines that support day-to-day operations.
Business ethics policy, including the Competition Law Compliance program
Occupational health and safety
(for each subsidiary)
New store policy
Health policy
Information policy, including guidelines for
financial information
Customer policy
Approval of financial reports
The financial reports in this annual report were
approved by the Audit Committee on February 16
and by the Board of Directors on February 19, 2007.
Sponsorship policy
The cross-functional management team for business ethics has responsibility under Group Management for continuously monitoring compliance
with these policies.
ICA GROUP
97
Glossary and abbreviations
Glossary
Abbreviations
Compact hypermarket – Smaller version of a
hypermarket.
BCSI – Business Social Compliance Initiative
Ecological – Grown and produced according to
KRAV’s or the EU’s rules, i.e., essentially without
pesticides or fertilizer.
EurepGap – International quality assurance system for horticultural products, www.eurep.org
IFRS – International Financial Reporting Standards
MSC – Marine Stewardship Council, www.msc.org
REACH – Registration Evaluation Authorisation
and restriction of Chemicals
Fairtrade-label – Ethical label for sustainable
products, grown and produced according to special criteria with a focus on working conditions,
www.rattvisemarkt.se
RoHs – Restriction of the use of certain Hazardous
Substances in Electrical and Electronic Equipment
Good Environmental Choice – www.snf.se
Hard discount – Discount stores with limited
product range.
ICA Ekologiskt – The ICA Group’s line of ecological products, www.ica.se
Joint venture – Partnership jointly managed by
two or more companies that share the risks and
profits.
Keyhole – Swedish National Food Administration’s symbol for foods that are leaner and contain less sugar and sodium but more fiber than
other foods of the same type, www.slv.se
Non food – Products excluding food, e.g. apparel
and housewares.
Number of employees – Number of hours
worked in each company of the ICA AB Group
divided by 1,800.
Primary production – Farming and fishing, for
example.
Swan – Official Nordic ecolabel of the Nordic
Council of Ministers, www.svanen.nu
Utz-Kapeh – Foundation that certifies coffee
growers that take social and ecological
responsibility for their coffee production,
www.utzkapeh.org
For definitions of key financial ratios, see page 61.
ICA GROUP
GRI – Global Reporting Initiative,
www.globalreporting.org
EuroShopper – The ICA Group’s discount
product range.
Global Compact – UN initiative to encourage
companies to support human rights, labor and
the environment, www.unglobalcompact.org
98
CR – Corporate Responsibility
Addresses
ICA AB
President and CEO Kenneth Bengtsson
SE-171 93 Solna, Sweden
Visiting address: Svetsarvägen 16
Tel: +46 8 561 500 00
www.ica.se
ICA Banken AB
President Jörgen Wennberg
Tel: +46 8 561 505 00
www.ica.se
ICA Sverige AB
President Peder Larsson
Tel: +46 8 561 500 00
www.ica.se
Rimi Baltic AB
President Antonio Menezes Soares
A. Deglava Str 161
Lv 1021 Riga, Latvia
Tel: +371 704 55 50
www.rimibaltic.com
ICA Norge AS
President Trond Kongrød
Postboks 6500 Rodeløkka
N-0501 Oslo, Norway
Visiting address: Sinsenveien 45
Tel: +47 23 05 50 00
www.ica.no
ICA Fastigheter AB
President Bo Liffner
SE-721 84 Västerås, Sweden
Visiting address: Stenborgsgatan 4
Tel. +46 21 19 30 00
www.ica.se/fastigheter
citigatestockholm.com
PHoto: martin löf
PRINT: alfa print
item number: 850095
ICA GROUP
99
The ICA Group’s Annual Report 2006

The ICA Group`s Annual Report 2006

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