Press release 16 February 2006
For publication at 13.00 p.m.

A wider clientele of loyal customer-owners drives the Finnish S Group's success

The S Group, the cooperative societies and SOK Corporation performed well in 2005, with sales outpacing the market in all their main business areas. The S Group's market position strengthened. The aggregate net profit of the cooperative societies and SOK Corporation hit a new record.

The number of customer-owners increased by over 115,000 new members during the year, bringing the total membership to 1,534,710 at the end of the year. Members were paid EUR 194 million in Bonuses.

Operating according to cooperative principles, the companies belonging to the S Group use their profits to reward members and to develop services for them.

On 14 February 2006, the Financial Supervision Authority granted a credit institution licence to the S Group to operate a bank. Today, SOK's Supervisory Board decided to found S-Pankki Oy (S-Bank Ltd), which will carry on deposit banking operations.

• The S Group's aggregate profit before extraordinary items was EUR 398 million, as against EUR 321 million a year earlier.
  

• The S Group's retail sales in 2005 rose to EUR 8,464 million, an increase of 6.6 per cent on the previous year.
  

• The S Group's grocery sales grew by 6.9 per cent in Finland. The Group's market share of the grocery trade is estimated to have risen significantly during 2005.
  

• Members were paid EUR 194 million in Bonuses, an increase of 16 per cent on the figure a year earlier.
  

• The number of customer-owners grew by more than 115,000 new members during the year, reaching a total membership of 1,534,710 at the end of the year. For the fifth year running, more than 100,000 new members joined the S Group.
  

• SOK Corporation's net turnover was up 11.3 per cent on the previous year, to EUR 4,209 million. Profit before extraordinary items was EUR 69.0 million, as against EUR 54.4 million a year earlier.
  

• Aggregate sales by the Baltic units were EUR 169 million. The S Group's operations in the Baltic countries provided employment for more than 1,000 people in 2005.

"The S Group had a sound financial position at the close of the year. Purposeful and long-term work to develop businesses and services that benefit our members has created a solid foundation for good financial performance. It's good news for the S Group that our growing number of members have further increased their patronage of the S Group locations. A membership made up of loyal customers is also an indication that Finns place their trust in the S Group and are interested in its activities. The cooperative societies are truly the stores that 1.5 million Finns have made their own," observes Kari Neilimo, SOK's chief executive.

A nearly 80 million euro improvement in the S Group's earnings

The S Group posted aggregate profit before extraordinary items of EUR 398 million, up nearly EUR 80 million on the figure a year earlier. The cooperative societies' aggregate result was EUR 329 million. All the regional cooperative societies reported a profit. The net profit improved substantially on the previous year.

The S Group's total capital expenditures in 2005 amounted to EUR 315 million, as against EUR 323 million a year earlier.

The S Group's retail sales in Finland up 6.6 per cent

The S Group's retail sales in Finland rose to EUR 8,464 million last year. Growth amounted to 6.6 per cent, outpacing the average growth in Finland's retail trade.

The cooperative societies' share of the S Group's retail sales was EUR 7,244 million, or 85.6 per cent, and SOK Corporation accounted for 14.4 per cent. Retail sales by cooperative societies were up 8.8 per cent on the previous year.

The S Group's grocery sales in Finland increased by 6.9 per cent on the previous year and were EUR 4,237 million, or 50.1 per cent of the S Group's retail sales in Finland. Grocery sales in the Baltic countries amounted to about EUR 77 million, up 46.4 per cent on the previous year.

"The S Group strengthened its market position in most of its business areas. Service station store and fuel sales showed the greatest proportionate increase in sales, as did the grocery trade. Within the grocery trade, the trend in sales by the S Group was well above the overall rate of growth on the markets, rising to take the market leader position. Operations in the Baltic countries also grew rapidly," observes Kari Neilimo.

The S Group's sales in Finland showed the following growth rates by business area: grocery trade 6.8 per cent, service station store and fuel trade 22.2, department stores and speciality stores 5.0, hotel and restaurant business 2.0 and agricultural trade 4.4 per cent, respectively. Vehicle and automotive accessories sales were down 3.9 per cent on the previous year. Operations in the Baltic countries grew by 11.7 per cent.

Bonus sales account for 63 per cent

More than 115,000 new members joined the S Group's cooperative societies last year. During the past five years the S Group has welcomed more than 100,000 new members each year. Membership totalled 1,534,710 at the end of the year.

Bonus sales by the S Group's companies totalled EUR 5,331 million, up 13 per cent.

Of the S Group's sales in Finland, bonus sales to members accounted for 63.0 per cent, representing growth of 3.3 percentage points on the previous year.

Members were paid EUR 194 million in Bonuses, an increase of 16 per cent on the figure a year earlier.

The S Group's nationwide bonus system partners in 2005 included Elisa Corporation, Hertz car rentals, Isku Interior Oy, Matka-Vekka (a travel operator), the Silmäasema chain of opticians and the Tapiola Group of insurance companies. Purchases by members from partners granting a Bonus increased by 8 per cent and reached EUR 774 million.

The S Group's commercial chains

The S markets are still both the S Group's and the country's largest chain of grocery markets. At the end of the year the chain comprised 372 locations, an increase of three locations. The chain's aggregate sales, excluding fuelling sites, amounted to EUR 2,341 million, an increase of 6.6 per cent.

The Prisma hypermarkets continued their strong sales growth. Sales reported by the chain, excluding restaurants, fuelling sites and other additional services, amounted to EUR 1,881 million, an increase of 6.4 per cent. There were 47 Prismas at the end of the year, an increase of one location. In addition, four Prismas are operating in Tallinn.

The Sale and Alepa chains had aggregate sales of EUR 495 million, a rise of 7.2 per cent. The number of locations increased by 18 and totalled 260 at the end of the year.

There were 71 ABC service station stores and 191 ABC unmanned stations at the end of the year. The number of unmanned stations also includes those in operation at the market stores. All in all, there were 304 fuel distribution sites, or 24 more than in the previous year. The service station store and fuel trade reported sales of EUR 972 million, representing an increase of 22.2 per cent.

There were 20 Sokos departments stores at the end of the year. The number of locations remained the same as the year before. The Sokos department stores posted consumer goods sales of EUR 312 million, an increase of 4.7 per cent.

At the end of the year, the Sokos Hotels chain comprised 38 hotels in Finland as well as the Sokos Hotel Viru in Tallinn. The Radisson SAS chain included 6 hotels. In addition, the S Group had three smaller hotels. Sales by the hotel and restaurant business amounted to EUR 635 million, representing an increase of 2.0 per cent on the previous year. The business had three fewer locations than a year earlier, standing at 277. The number of restaurants and cafés totalled 512, when including those locations that operate in hotels and supermarkets.

The S Group had 46 car dealerships at the end of the year, one more than a year earlier. They reported sales of EUR 688 million, down 3.9 per cent on the year before. In addition, SOK operated units in the motor trade in Estonia and Latvia.

There were 152 agricultural outlets at the end of the year, of which 131 were Agrimarkets, 8 were machine centres and the other 13 were agricultural and hardware stores. The agricultural business, including the grain trade, recorded sales of EUR 1,043 million, an increase of 4.4 per cent on the previous year.

The S Group had 1,392 locations in Finland at year-end, or 21 locations more than a year ago. In addition, there were 10 locations in the Baltic countries.

SOK Corporation reports higher net turnover and improved earnings

Net turnover generated by SOK Corporation, which comprises SOK and its subsidiaries, totalled EUR 4,209 million, up 11.3 per cent. This was largely attributable to growth in Baltic operations and the healthy trend in the procurement companies' business operations. Net turnover for SOK's business operations in Finland, excluding the procurement companies, was down slightly on the previous year, due partly to sales of business operations to cooperative societies.

"In accordance with the S Group's strategy, SOK Corporation is developing more and more into a centre that provides end-to-end procurements, chain management and services. This is reflected in the breakdown of SOK Corporation's net turnover," says Kari Neilimo.

SOK Corporation's result before extraordinary items was EUR 69.0 million, compared with EUR 54.4 million a year earlier. All the business areas except for consumer goods sourcing reported a profit. The operating profit from consumer goods sourcing was at the budgeted level.

SOK Corporation's return on investment was 7.6 per cent, as against 17.0 per cent for the business area companies. The equity ratio at the end of the year was 28.4 per cent. The Corporation's investments totalled EUR 68.2 million.

Personnel strength

The number of the S Group's employees at the turn of the year was 28,092, whereas SOK Corporation had a staff of 5,052 people at the same date.

Honing the S Group's processes in 2006

"The S Group endeavours to develop its operations over the long term. Across the entire S Group, 2006 will be a year of growth in our business activities, which will be supported through major investments. On the other hand, the acquisitions that have already been made will call for a good deal of attention as we strive to adjust the operations and personnel of the acquired companies - in a well-controlled way - to the S Group's operational models. Despite the growth in net turnover, earnings in the current year will probably come in below last year's owing to large one-off capital expenditures, " says Kari Neilimo.

New S Group bank obtains a credit institution licence

At its meeting held on 16 February 2006, SOK's Supervisory Board decided to found S-Pankki Oy (S-Bank Ltd), which will carry on deposit banking operations. On 14 February 2006, the Financial Supervision Authority granted a credit institution licence for the bank, which will begin operations during 2007.

The S Group's bank will primarily serve its members, at whom the benefits offered by the bank will be directed. The planned services will be built around the present account and card services. In future, a member can activate an international payment and credit card facility in his or her S Benefit Card, handle daily finances, for example, through the online bank and make withdrawals from an ATM.

"S-Bank Ltd's main target group is our members. The present S Benefit Card and its services will nevertheless remain unchanged, and customers need not change the way they presently handle these matters," says Kari Neilimo.

For additional information, contact:
Kari Neilimo, CEO, tel. +358 10 76 80200
Jukka Salminen, Director of the Administrative Division, tel. +358 10 76 81860, +358 50 63 827
Jari Annala, Vice President, Finance, tel. +358 10 76 82040, +358 50 566 5032

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