Handelsbanken's Mid/Small Cap seminar SVP, Arja Talma June 16, 2014 Stockholm

Handelsbanken's Mid/Small Cap seminar SVP, Arja Talma June 16, 2014 Stockholm

Kesko today Kesko s net sales 9.3bn - K-Group s sales 11.6bn 2,000 stores in eight countries Over 1.3 million customer visits every day Book value of real estate 1.4bn Market capitalisation 3.1bn (March 31st, 2014) 41,000 shareholders 23,000 employees Net sales Q2/13-Q1/14 9,285m 5 000 4 000 3 000 2 000 1 000 0 Operating profit excl. non-recurring items Q2/13-Q1/14 239m 250 200 150 100 50-50 Food trade Home and speciality goods trade Building and home improvement trade Car and machinery trade 0 2

Kesko has 2,000 stores engaged in chain operations in eight countries Total about 56m consumers Food trade Finland, Russia Home and speciality goods trade Finland, Estonia, Latvia, Russia 5% 2% 1% 82% 1% 4% Building and home improvement trade Finland, Sweden, Norway, Baltic countries, Russia, Belarus 3% 1% Car and machinery trade Finland, Baltic countries 3

Strategic priorities Strengthening sales growth and improving profitability E-commerce and multi-channel service models Utilising Russia s business opportunities Strong financial position and good dividend payment capacity 4

Focus on strengthening sales and market share performance Kesko s net sales m 12000 10000 8000 +2.2% +5.8% +11.1% +9.3% +3.3% -11.9% +3.9% +7.8% +2.4% -3.8% 6000 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Finland Other countries 5

Steady profit performance regardless of difficult market situation m 500 450 400 350 300 250 200 150 100 50 0-50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Operating profit excl. non-recurring items Non-recurring items 6

Significant strengthening of cash flow m 500 400 300 200 100 0-100 -200-300 -400-500 2008 2009 2010 2011 2012 2013 414m -152m Cash flow from operating activities Cash flow from investing activities 7

Year-on-year change in fixed costs excluding non-recurring items 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% 10.3% 7.5% 8.0% 1.2% -4.0% -4.5% -4.0% -2.0% -1.3% 8

Capital expenditures will be adjusted to annual level of 200-300 million m 500 450 400 350 300 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Capital expenditure in store sites Acquisitions Other capital expenditure 9

Expansion of Kesko s business operations in Russia Retail growth in Russia is estimated to exceed Nordic countries growth figures also in the coming years Kesko has now 13 K-rauta stores in Russia and net sales total about 300 million Kesko has now 4 K-ruoka stores in St. Petersburg, the target is a network of 10 stores by 2015 Launch of business operations has been better than expected Changes in the business model, concept and network of Intersport Russia to improve profitability 10

Russian retail growth has exceeded GDP growth % 20 15 10 5 0-5 2000 2002 2004 2006 2008 2010 2012-10 Source: Rosstat Retail GDP 11

Divisions 12

Food trade Total 916 stores Q2/2013-Q1/2014 Net sales 4,348 million, +0.0% Operating profit* 201.5 million (4.6%), +20.5 million Return on capital employed* 24.9% *excl. non-recurring items 13

Food trade market shares 2013 Total market 16.6 billion 34.0% K-Group 34.0% S-Group 45.7% Suomen Lähikauppa 7.0% Lidl 6.6% Others 6.8% Source: Nielsen K-food stores competitive advantage projects - fruit & vegetables - bakery - service counters (meat, fish, ready-to-eat) 14

Pirkka one of Finnish superbrands By far the most valued and bestknown store private label in Finland Launched in 1986 Pirkka range comprises more than 2,200 products Some 100 of Pirkka products are organic and some 40 are Fairtrade products Introducing a new PL, K-Menu Total share of K-store PL-sales 19% 15

Russian food market Market size some 255 billion - Share of all retailing some 47% Operative EBITDA of peers 6-12% Retailer Revenues 13, bn Magnit 13.4 X5 12.5 Auchan 7.2 Dixy 4.3 O key 3.3 Metro 3.0 Lenta 2.0 Source: PMR 16

K-ruoka Russian business operations started in St. Petersburg in December 2012 - Total of 4 food stores and net sales of 71 million at the end of 2013 - Target is to open 3 new stores in 2014 and a network of 10 stores by 2015 Net sales target of the food trade 500 million and positive result in 2017 The basic concept is a large, better than the average food store Best in Fresh, with a selection of home and speciality goods for everyday needs 17

Home and speciality goods trade chains Division of sales, 2013 Total 371 stores Q2/2013-Q1/2014 Net sales 1,424 million, -9.8% Operating profit* -13.3 million (-0.9%), -28.0 million Return on capital employed* -3.1% *excl. non-recurring items Hypermarkets, non-food, 613 m Department stores, 380 m Sports, 272 m Furniture, 196 m Home electronics, 41 m Shoes, 42 m 18

Strategic focus areas of home and speciality goods trade Customer driven renewal of K-citymarket home and speciality goods trade NetAnttila s strong development and improvement of Anttila s profitability - Expanding considerably the selection and significantly improving customer experience in online store - Plans are made to close approximately 1/3 of the Anttila department store network Maintaining Intersport Finland s and Asko s and Sotka s strong brands, market positions and profitability Changes in the business model, concept and network of Intersport Russia Increasing the share of e-commerce in all chains 19

Building and home improvement trade Total 339 stores Q2/2013-Q1/2014 Net sales 2,627 million, -4.8% Operating profit* 31.9 million (1.2%), +26.2 million Return on capital employed* 4.4% *excl. non-recurring items 20

Building and home improvement trade market shares 2013 Market shares Finland Sweden Norway Estonia Latvia Lithuania N-w and central N-w and Russia Belarus Sales by country in 2013 Finland, 1,718 m Sweden, 207 m Norway, 720 m Estonia, 69 m Latvia, 52 m Lithuania, 266 m Russia, 272 m Belarus, 106 m 0 10 20 30 40 21

Russian DIY market Retail chains share of DIY sales about 50% - Share of modern retail on the increase K-rauta is the second largest operator in St. Petersburg - Targeting a network of some 10 stores The focus of the expansion will be Moscow and cities nearby Moscow - Targeting a network of 15-20 stores 22

Car and machinery trade Passenger cars, first registrations Q1/2014 Volkswagen 12.0% Toyota 11.9% Skoda 9.5% Volvo 7.9% Q2/2013-Q1/2014 Net sales 1,060 million, 4.9% Operating profit* 34.4 million (3.2%), 0.2 million Return on capital employed* 21.5% *excl. non-recurring items 23 Source: TraFi 20.3% Audi 6.9% Ford 6.5% Nissan 5.8% Kia 5.7% Seat 1.4% Others 32.4%

Kesko as an investment 24

Basic information Established in 1940 Listed on the Helsinki Stock Exchange (NASDAQ OMX Helsinki) in 1960 Employees 23,400, of whom 52% work in Finland and 48% outside Finland 41,000 shareholders 26% of all shares owned by non-finnish 38% of B-shares owned by non-finnish Market capitalisation 3.1 billion (March 31, 2014) Share series: A and B voting rights 10:1 Number of shares Voting rights A shares 31.8% B shares 68.2% A shares 82% B shares 18% 25

Strong financial position Q1/2014 Q1/2013 Liquid funds 532 m 411 m Interest bearing net debt 25m 233 m Equity ratio 53.2% 51.7% Gearing 1.1% 10.2% 26

Dividend policy Kesko Corporation distributes at least 50% of its earnings per share excluding non-recurring items as dividends, taking however the company's financial position and operating strategy into account. 2,5 2,0 1,5 1,0 0,5 2.24 0.80 1.44 1.00 1.28 69% 127% 0.57 0.90 0.71 2.08 0.29 1.78 73% 1.30 1.85 1.84 0.01 1.20 1.27 65% 82% 1.47 1.20 1.75 0.07 83% 1.68 1.40 Effective dividend yield 2008 5.6% 2009 3.9% 2010 3.7% 2011 4.6% 2012 4.8% 2013 5.2% 0,0-0.19-0,5 2008 2009 2010 2011 2012 2013 Earnings/share, excl. non-rec. items, basic Non-recurring items Dividend 27

Real estate in 2013 Owned properties Country Area, 1,000 m 2 Finland 758 Other Nordic countries 121 Baltic countries and Belarus 112 Russia 143 Total Carrying amount 1,135 1,423 M Leased properties total 1,000 m 2 2,963 Owned properties by region Finland 71% Other Nordic countries 6% Baltic countries and Belarus 3% Russia 20% Owned properties by division Food 46% Home and speciality goods 14% Building and home improvement 30% Car and machinery 5% Others 5% 28

Kesko looks into setting up a real estate investment trust Kesko is looking into selling some of the store sites it owns to a trust to be set up with Kesko as one of its significant investors. Kesko Group would continue its operations in the store sites under long-term leases signed in connection with their sales to the trust. Kesko's objective is to set up a trust of mainly Kesko-owned store sites and shopping centres in Finland, Sweden and Russia with a maximum fair value of approximately 750-950 million. The trust is planned also to be made available to private investors. Listing of units is also being assessed. The possible trust is expected to be launched in the course of 2014. The sale of store sites to the trust is estimated to generate a significant non-recurring gain, the amount of which depends on the properties sold and return requirements applied to them. These will be specified at a later stage in the assessment. Launching the real estate investment trust depends in addition to investor interest on whether it is possible for Kesko to achieve such terms and conditions in the arrangement that are economically justifiable for it, taking the Group's strong financial position into account. Moreover, starting a real estate investment trust is subject to the authorisation of the Financial Supervisory Authority. 29

Reclassification of store sites Old classification Strategic properties 77% Standard properties 19% Development properties 4% New classification Strategic properties 53% Standard properties 43% Development properties 4% Realisation properties 0% Key criteria for strategic properties Catchment area with over 100,000 inhabitants Store area over 2,000 m2 Useful life over 10 years Development possibilities 30

Contact information IR@kesko.fi www.kesko.fi/investors Twitter.com/Kesko_IR 31