SEB Seminar CFO 8.1.2015 Copenhagen
Kesko today Kesko s net sales 9.2bn - K-Group s sales 11.4bn Net sales Q4/13-Q3/14 9,166m 2,000 stores in eight countries Over 1.3 million customer visits every day Book value of real estate 1.4bn Market capitalisation 2.9bn (Dec. 30, 2014) 40,000 shareholders 23,000 employees Food trade Home and speciality goods trade Building and home improvement trade Car and machinery trade 2
Q4/2013-Q3/2014 key figures Q4/13-Q3/14 Q4/12-Q3/13 Net sales, million 9,166 9,412 Net sales performance, % -2.6-3.1 Gross margin, % 13.8 13.6 Fixed costs*, million 1,751 1,777 Operating profit*, million 238 243 Profit before tax, million 187 227 Return on capital employed*, % 10.0 9.7 Equity ratio, % 54.2 52.9 Capital expenditure, million 197 228 * excluding non-recurring items 3
Kesko s divisions Q4/2013-Q3/2014 Food trade Net sales: 4,345 M (47%) Operating profit: 204.0m ROCE: 26.1% Home and speciality goods trade Net sales: 1,362 M (15%) Operating profit: -26.7m ROCE: -6.6% Building and home improvement trade Net sales: 2,609 M (28%) Operating profit: 44.7m ROCE: 6.3% Car and machinery trade Net sales: 1,022 M (11%) Operating profit: 31.1m ROCE: 19.3% 4
Kesko changed its divisional structure Combination of the building and home improvement trade with the home and speciality goods trade Integration of the non-food part of the K-citymarket chain into Kesko Food Focus is on e-commerce and online services The objective is to improve efficiency and to have a more competitive multi-channel non-food trade Starting from 1 January 2015, the reportable segments are the grocery trade, the home improvement and speciality goods trade, and the car and machinery trade 5
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 6
How retail is changing? Growth of e-commerce and multichannel retailing in all product lines Consumers are increasingly product-aware and demanding The importance of customeroriented services as a competitive asset is emphasised Slow economic growth and consumers price awareness Increasing proportion of retailers private label brands Customer loyalty programmes will be interactive and provide more individual rewards 7 13.11.2014
Retail sales of non-food products, excl. fuel (index of turnover, yoy, cumulative 12 months avg) 12 10 8 6 4 2 0-2 -4 Estonia Latvia Lithuania Finland Sweden Norway 2014M10 2013M01 2013M02 2013M03 2013M04 2013M05 2013M06 2013M07 2013M08 2013M09 2013M10 2013M11 2013M12 2014M01 2014M02 2014M03 2014M04 2014M05 2014M06 2014M07 2014M08 2014M09 % Source: Eurostat 8
Consumers expectations for own finances Own finances in 12 months, Finland 16 14 12 10 Expectations for own finances Expectation, 21st century average 8 6 4 2 0 1/00 7/00 1/01 7/01 1/02 7/02 1/03 7/03 1/04 7/04 1/05 7/05 1/06 7/06 1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12 1/13 7/13 1/14 7/14 Source: Statistics Finland 9
Russian retail growth has exceeded GDP growth % 20 15 10 5 0-5 2000 2002 2004 2006 2008 2010 2012 1-9/2014-10 Source: Bofit Retail GDP 10
Food trade Total market 16.6 billion 34.0% Total 913 stores Q4/2013-Q3/2014 K-Group 34.0% Net sales 4,345 million, -0.6% Operating profit* 204.0 million (4.7%), +4.2 million Return on capital employed* 26.1% *excl. non-recurring items S-Group 45.7% Suomen Lähikauppa 7.0% Lidl 6.6% Others 6.8% Source: Nielsen 11
Food trade K-food stores focus areas: Superior fresh food departments Pirkka and K-Menu private labels - Share of sales 19% Developments in e- commerce, personalised marketing and pricing 12
Food trade in Russia Business was begun in St. Petersburg - First store in 12/2012 - Net sales for 2013 71million - Today, a total of five K-ruoka stores Net sales target for 2017 500 million and a positive business result Best in Fresh concept Extensive fresh foods selections 13
Home and speciality goods trade Division of sales, 2013 Total 356 stores Q4/2013-Q3/2014 Net sales 1,362 million, -9.5% Operating profit* -26.7 million (-2.0%), -29.1 million Return on capital employed* -6.6% *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 14
Improvement of Anttila s profitability Customer driven renewal of K-citymarket non-food Maintaining Intersport Finland s and Asko s and Sotka s strong brands, market positions and profitability Improvement of Anttila s profitability - Concept renewal - Closing down of 12 department stores - 6 in 2014, 6 during Q - Cost savings - Personnel reductions total approximately 400 FTEs 15
Building and home improvement trade Total 339 stores Q4/2013-Q3/2014 Net sales 2,609 million, -2.2% Operating profit* 44.7 million (1.7%), +28.8 million Return on capital employed* 6.3% *excl. non-recurring items 16
Building and home improvement trade Sales performance of Kesko s building and home improvement trade in January- November -0.2% - Performance in local currencies +3.2% Especially in Norway and Russia, sales affected by exchange rate movements - Impact on NOK -7% - Impact on RUB -16% Significant differences in country-specific market developments Strengthening B2B sales Strong development of online services Cost efficiency and inventory programs 17
Building permits granted, mil. m3, moving annual total, Finland Source: Statistics Finland 18
Car and machinery trade Market share (passenger cars), new registrations 1-11/2014 Volkswagen 12.4% Toyota 11.9% Skoda 9.2% Volvo 7.2% Q4/2013-Q3/2014 Net sales 1,022 million, -1.6% Operating profit* 31.1 million (3.0%), -4.1 million Return on capital employed* 19.3% *excl. non-recurring items 19 Source: TraFi 20.0% Ford 7.1% Nissan 6.2% Audi 5.9% Kia 5.9% Seat 1.7% Others 32.5%
New registrations of passenger cars in Finland Source: Statistics Finland 20
Kesko continues the preparation of a real estate arrangement The intention is to sell some of the store sites to a joint venture instead of a REIT. Expected to be implemented during H. Kesko would remain as one of its significant investors and continue operating on the store sites under long-term leases. The fair value of store sites planned to be sold from Finland and Sweden has been specified at a maximum of around 670 million. Launching depends also on whether it is possible for Kesko to achieve such terms and conditions in the arrangement that are economically justifiable. The sale of store sites is estimated to generate a significant non-recurring profit. Owned properties 1,423 M Strategic properties 53% Standard properties 43% Development properties 4% Realisation properties 0% 21
Mikko Helander is Kesko Corporation's new Managing Director Kesko Corporation's Board of Directors has appointed Mikko Helander, M.Sc. (Tech.), as Kesko Corporation's Managing Director and Kesko Group's President and Chief Executive Officer as from 1 January 2015 Helander joined Kesko as Kesko Corporation's Executive Vice President and Member of the Group Management Board on 1 October 2014 Helander has acted as the Chief Executive Officer of Metsä Board Corporation and as a Member of the Executive Management Team of Metsä Group since 2006 President and CEO Matti Halmesmäki will retire on 31 May 2015 22
Contact information IR@kesko.fi www.kesko.fi/investors Twitter.com/Kesko_IR 23