Agreement signed for automation of Axfood’s new highly automated logistics centre

In October 2018 Axfood announced its plan to establish a highly automated logistics centre in Stockholm. Earlier this year the company communicated a Letter of Intent that had been signed with the German company Witron regarding the automation solution and one with NREP Logistics for a long-term lease. In July the lease was signed with NREP in accordance with the Letter of Intent. Now an agreement has been signed with Witron, a market leader in dynamic warehouse and order-picking systems, as well as end-to-end supply chain solutions, which will deliver a reliable automation solution for large volumes in all temperature zones.

The total contracted investment with Witron will amount to EUR 240 m during the period 2019-2023. The investment undertaking will be allocated in principal as follows: 20% in 2019, approximately 25% in 2021, approximately 45% in 2022, and the remainder in 2023. As previously communicated, Axfood expects that the cost level for the logistics operations, including the new lease and higher depreciation, will be even with the current cost level upon full operation. Thereafter it is estimated that the cost level will decrease in pace with larger volumes.

“I am happy that we have now signed an agreement with Witron. It means that we have all of the important pieces to the puzzle in place for the continued progress of the construction of our highly automated logistics centre outside Stockholm,” comments Klas Balkow, President and CEO of Axfood. “The solution will give us a more flexible, efficient and sustainable logistics chain for product supply to our stores and deliveries coupled to our rapidly growing online grocery business. With this investment we are taking a major step into the future and strengthening the entire Axfood family’s competitiveness.”

The highly automated logistics centre is expected to be in full operation in 2023 and will handle picking and deliveries to Axfood’s stores as well as to online customers. The warehouse will coordinate large parts of the logistics operations for the Stockholm and Mälardalen areas as well as areas northward, which today account for approximately 60% of Axfood’s volumes. The facility will replace existing warehouses in Jordbro, Borlänge, Årsta, Örebro, Skellefteå and Sätra. In addition, the facility will expand capacity by at least 40% compared with the current volume in the existing six warehouses.

“It feels very good to have the agreement on this important automation solution in place,” says Nicholas Pettersson, President of Dagab, Axfood’s purchasing and logistics company. “Witron is an established and strong partner. In other respects our progress is fully on track. In early September we received the building permit, and excavation work for construction of the warehouse building has been started. We have signed an agreement on a new planning tool and control system for transport flows, and have created the option to use additional land adjacent to the existing property. All of these steps are aimed at realising the enterprise value that this investment in our new logistics centre aims for.”

New financing agreement and currency hedging

In addition, Axfood has signed an agreement with Swedbank and SEB on a five-year revolving credit facility for SEK 3.5 bn with the aim of securing the financing of the investment and to act as the company's liquidity reserve.

In connection with signing of the Witron agreement, Axfood will be taking out currency hedges for the payment flows as follows: 100% of payments in 2019, 75% of payments in 2021, 50% of payments in 2022, and 25% of payments in 2023. During each of the fourth quarters starting in 2020, Axfood will hedge an additional 25 percentage points of each year's investment commitment until full hedging is achieved.

Capital Markets Day on 5 December

Axfood invites investors, analysts and the press to a Capital Markets Day to be held on Thursday, 5 December, from 9.30 a.m. to 12.30 p.m. at Urban Deli, Sveavägen 44, Stockholm. Axfood’s President and CEO Klas Balkow, CFO Anders Lexmon and Dagab’s President Nicholas Pettersson will be on hand together with Helmut Prieschenk, CEO of Witron, and additional representatives from Axfood to talk about the Group’s future logistics and the new, automated logistics centre in Stockholm. The presentations will also be available afterwards at axfood.se.

For further information, please contact:

Axfood’s press department, tel. +46 702 89 89 83