Kesko Oyj Class A · OMXHEX:KESKOA
Kesko Oyj Class A — Non-Deal Roadshow (September 2023)
54 slides from Kesko Oyj Class A's roadshow presentation, September 2023
Slide 1: Successful Strategy Execution Driving Growth
KESKO SUCCESSFUL STRATEGY EXECUTION DRIVING GROWTH September 2023
Slide 2: K Group and Kesko Today
K GROUP AND KESKO TODAY Leading trading sector Profitable growth ~45 000 employees, #1 company in Northern Europe with retail sales strategy in 3 core divisions 1,800 stores and comprehensive digital of over €16bn services in 8 countries Strong financial Market cap nearly Sustainability at the posit
Slide 3: Kesko in a Nutshell
KESKO IN A NUTSHELL NET SALES OPERATING PROFIT Car trade Car trade Grocery trade Grocery trade €1,241m €77.8 €6,310m €458.6m Building and technical trade Building and €4,404m €11,926m technical trade €768.8m €262.4m 3 Q2 2023 rolling 12 months, division figures include common functions and eliminati
Slide 4: Business Operations Focused in Three Divisions
BUSINESS OPERATIONS FOCUSED IN THREE DIVISIONS €8,333 €6,338 €1,313 million million million GROCERY TRADE BUILDING AND TECHNICAL TRADE CAR TRADE ~1,200 stores in Finland, of which more than Serves three customer segments: technical Volkswagen, Audi, SEAT, Porsche and Bentley 500 offer on-line servic
Slide 5: Kesko's Business Model
KESKO’S BUSINESS MODEL g Customers B2C and B2B Retail sales to customers + Grocery stores, K-Rauta stores and main part of Intersport’s sales in Finland + Car dealers + Some of the building and home improvement trade in Norway I Kesko’s B2B trade 40%* + Kespr + Onninen in all operating countries + M
Slide 6: Kesko and K-Retailers
KESKO AND K-RETAILERS Wholesale, product strategy Chain agreement, chain steering Services and business KESKO support Store concepts Chain selections, wholesale Responsible purchasing channels, K-RETAILERS purchasing alliances, logistics Responsible for ensuring customer Own brands satisfaction, res
Slide 7: Successful Strategy
SUCCESSFUL STRATEGY GROWTH STRATEGY FOCUS: ONE UNIFIED GROCERY TRADE CUSTOMER EXPERIENCE BUILDING AND TECHNICAL TRADE DIGITALISATION SUSTAINABILITY CAR TRADE 7
Slide 8: Transformation from a Traditional Retailing Company into a Focused K Group
TRANSFORMATION FROM A TRADITIONAL RETAILING COMPANY INTO A FOCUSED K GROUP 8
Slide 9: Our Success Is Not a Coincidence
OUR SUCCESS IS NOT A COINCIDENCE The right strategic choices and their successful execution FOCUSING ON THREE CORE BUSINESSES MARKET LEADERSHIP IN NEIGHBOURHOOD STORES THROUGH THE SUOMEN LÄHIKAUPPA ACQUISITION MASSIVE DIVESTMENTS OF NON-CORE DIGITAL FORERUNNER IN THE EUROPEAN RETAIL BUSINESSES, INCL
Slide 10: Strong Profit Generation Also in a Weaker Market
STRONG PROFIT GENERATION ALSO IN A WEAKER MARKET 815 Comparable operating profit 800 776 769 Reported figures, € million 700 600 568 500 462 429 400 296 300 274 243 221 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q2/2023 rolling 12 months 2014 – 2019 continuing operations IFRS 16 impact
Slide 11: Sales Growth Through Existing Stores and Systems
SALES GROWTH THROUGH EXISTING STORES AND SYSTEMS HAS IMPROVED OUR EFFICIENCY Plenty of additional potential Retail and B2B sales Steady cost ratio growth for core businesses since 2014 improvement €6.0 bn 16.4% 2014: 19.2% Compared to Q2 2023 Costs / reported Group net sales, Q2 2023, rolling 12 mon
Slide 12: Strong Position in All Areas of Finnish Food Trade
STRONG POSITION IN ALL AREAS OF FINNISH FOOD TRADE • Strong No. 2 in the Finnish consumer grocery trade • No. 1 in Finnish foodservice business, with over 46% market, with ~36% market share market share • Finland’s most extensive grocery store network with • Largest online food store in the market,
Slide 13: Leading Player in Building and Technical Trade in Northern Europe
LEADING PLAYER IN BUILDING AND TECHNICAL TRADE IN NORTHERN EUROPE Total retail sales of €6.3 billion*, B2B accounts for over 80% of sales** TECHNICAL TRADE BUILDING AND HOME IMPROVEMENT TRADE • Net sales €2,352 million • Net sales €1,647 million • Operating profit €158.6 million • Operating profit €
Slide 14: Leading Car Trade Player in Finland
LEADING CAR TRADE PLAYER IN FINLAND • Kesko operates a major part of VW Group’s businesses • Net sales €1,241 million • One of the leading operators in market in new car sales, • Operating profit €77.8 million market share 14.1% • Operating margin 6.3% • Fast growing used car business • All business
Slide 15: Forerunner in Trading Sector Digitalisation
FORERUNNER IN TRADING SECTOR DIGITALISATION Using digitalisation to improve customer experience and make operations more efficient Online and digital sales Data and analytics at the core Digitalisation of stores and Digitalisation increases growing forcefully of business operations processes proceed
Slide 16: Sales via Digital Channels Already €1.9 Billion
SALES VIA DIGITAL CHANNELS ALREADY € 1.9 BILLION 3% 2% 12% 41% 42% K-ruoka.fi (online grocery) Kespro (food service) Onninen Building and home improvement Sportstrade 16 Q2 2023 rolling 12 months, excl. VAT
Slide 17: Kesko Updated Its Sustainability Strategy
KESKO UPDATED ITS SUSTAINABILITY STRATEGY MANAGEMENT REMUNERATION TIED TO SUSTAINABILITY TARGETS SUSTAINABILITY STRATEGY VISION: IMPLEMENTATION WITHIN DIVISIONS: WE ENABLE SUSTAINABLE CHOICES FOR OUR CUSTOMERS AND DRIVE CHANGE THROUGHOUT • GROCERY TRADE THE VALUE CHAIN • BUILDING AND TECHNICAL TRADE
Slide 18: Focus Areas and Key Objectives
FOCUS AREAS AND KEY OBJECTIVES WE ENABLE SUSTAINABLE CHOICES FOR OUR CUSTOMERS AND DRIVE CHANGE THROUGHOUT THE VALUE CHAIN Achieving carbon neutral K Group Ensuring sustainability in the supply chain Increasing the safety and wellbeing of Committing to K Code of Conduct • Carbon neutrality by 2025 a
Slide 19: Financial Targets
FINANCIAL TARGETS Operating margin, comparable Over 6% Return on capital employed, comparable, % Over 14.5% Interest-bearing net debt/EBITDA, at maximum 2.5 excluding IFRS 16 impact 19
Slide 20: Dividend Proposal
DIVIDEND PROPOSAL Board dividend proposal to the Annual General Meeting: €1.08 / share Proposed to be paid in four instalments in 2023 Kesko's dividend policy: In the long-term, Kesko aims to distribute a steadily growing dividend of some 60-100% of its comparable earnings per share, taking into acc
Slide 21: Latest News: Kesko Acquires the Danish Builders' Merchant Davidsen
LATEST NEWS: KESKO ACQUIRES THE DANISH BUILDERS’ MERCHANT DAVIDSEN AND ENTERS DENMARK 23 August 2023
Slide 22: Davidsen in Brief
DAVIDSEN IN BRIEF • Kesko acquires 90% of the family-owned Davidsen A/S STORE NETWORK • Family-owned builders’ merchant company headquartered in Kolding, Greenland Denmark • One of the largest building materials retailers focusing on the B2B segment with ~9% market share, ~30% market share in Southe
Slide 23: Davidsen Transaction Key Points
DAVIDSEN TRANSACTION KEY POINTS • The agreed debt-free enterprise value for 100% of the company is approximately €190 million, of which Kesko will acquire 90%, which equals approximately €170 million • The Davidsen family continues with a 10% ownership and will support the company’s development and
Slide 24: Big Potential in Building and Home Improvement Market in Denmark
BIG POTENTIAL IN BUILDING AND HOME IMPROVEMENT MARKET IN DENMARK • The Danish building and home improvement market was approximately €5.7 billion in 2022, which is over 1.5x the size of the Finnish market of €3.7 billion • Three largest builders’ merchant companies Stark, Bygma and Davidsen represen
Slide 25: Competitive Landscape in Danish Building and Home Improvement Business
COMPETITIVE LANDSCAPE IN DANISH BUILDING AND HOME IMPROVEMENT BUSINESS Competitive landscape and positioning, illustrative Builders’ merchants Broad Assortment breadth Focused B2C Customer focus B2B 25
Slide 26: Davidsen Acquisition and Entry to Denmark Are Important Strategic Steps
DAVIDSEN ACQUISITION AND ENTRY TO DENMARK ARE IMPORTANT STRATEGIC STEPS • Kesko has a consistent strategy in building and technical trade: to consolidate the market in Northern Europe and to be among the leading players in B2B business in each country • The Danish market is not yet consolidated, gre
Slide 27: Strong Performance in a Challenging Market
KESKO HALF-YEAR FINANCIAL REPORT Q2/2023 STRONG PERFORMANCE IN A CHALLENGING MARKET
Slide 28: Key Events in Q2
KEY EVENTS IN Q2 • Grocery trade: sales improved compared to earlier this year, 4-6/2023 4-6/2022 Kespro also continued to perform well Net sales, € million 3,104.7 3,108.5 • Building and technical trade: result down due to weakened construction volumes Net sales growth, % -0.1 4.0 • Car trade: sale
Slide 29: Net Sales
NET SALES A decrease of 0.1%, or -0.8% in comparable terms - €3.8 million € million € million 12 000 11,926 12,000 11,809 3,108 3,105 3,010 2,983 33,000 000 2,828 2,707 11 000 11,000 22,000 000 10,000 10 000 11,000 000 0 9,000 9 000 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 rolling 12 months
Slide 30: Operating Profit
OPERATING PROFIT Down by €28.4 million - €28.4 million € million € million 815.1 242.8 800 768.8 236.0 207.6 200 192.6 600 143.7 125.9 400 100 200 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 Operating 6.9% 6.4% 5.3% 7.6% 8.1% 6.5% 4.5% 6.7% margin rolling 12 months 30 Comparable figures
Slide 31: Good Return on Capital Employed
GOOD RETURN ON CAPITAL EMPLOYED % 19.6 19.1 20 18.5 16.9 15.8 14.9 14.7 15.1 10 0 Grocery trade Building and technical trade Car trade Group 2022 Q2/2023 31 Comparable figures, rolling 12 months
Slide 32: Strong Financial Position
STRONG FINANCIAL POSITION Good cash flow from operating activities Q2/2023 Q2/2022 • Cash flow strengthened year-on-year, as working capital Cash flow from operating activities, € million 285.2 262.4 management improved in all three divisions Liquid assets, € million 271.0 345.3 • Interest-bearing n
Slide 33: Grocery Trade: Good Result in Food Trade
GROCERY TRADE GOOD RESULT IN FOOD TRADE 33
Slide 34: Grocery Trade: Net Sales Up by 4.7%
GROCERY TRADE NET SALES UP BY 4.7% + €73 million € million € million 6,310 1,618 1,624 66,200 200 1,551 1,574 6,125 1,495 1 500 1,500 1,382 55,900 900 11,000 000 55,600 600 500 5,300 5 300 0 55,000 000 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 rolling 12 months 34
Slide 35: Grocery Trade: Operating Profit €118.4 Million
GROCERY TRADE OPERATING PROFIT €118.4 MILLION - €5.4 million € million € million 460.4 458.6 150 133.4 400 123.9 122.8 118.4 120 300 90 80.3 83.9 200 60 100 30 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 rolling 12 months Operating margin 5.8% 8.0% 8.5% 7.6% 5.6% 7.3% 7.5% 7.3% 35 Comparabl
Slide 36: Grocery Trade Key Topics in Q2
GROCERY TRADE KEY TOPICS IN Q2 • Market still price-driven, price inflation for groceries at 10.9% • Campaigns and other marketing efforts saw customer visits and sales in K Group grocery stores increase • Grocery sales in K Group grocery stores up by 4.6%; this fell short of the market, but less so
Slide 37: Building and Technical Trade: Profitability Weakened, but Still Remained Good
BUILDING AND TECHNICAL TRADE PROFITABILITY WEAKENED, BUT STILL REMAINED GOOD 37
Slide 38: Building and Technical Trade: Net Sales Down by 10.8%
BUILDING AND TECHNICAL TRADE NET SALES DOWN BY 10.8% - €139 million € million € million 4,591 1,288 4,404 1 200 1,200 1,150 1,149 1,071 1,083 1,023 4,000 4 000 800 3 000 3,000 400 0 2 000 2,000 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 rolling 12 months 38 Figures excluding sports trade
Slide 39: Building and Technical Trade: Operating Profit €72 Million
BUILDING AND TECHNICAL TRADE OPERATING PROFIT €72 MILLION - €35.2 million € million € million 323.8 120 107.2 300 99.6 262.4 90 72.0 200 60.8 60 56.2 30.0 100 30 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 rolling 12 months Operating 5.2% 8.3% 8.7% 5.6% 2.9% 6.3% 7.1% 6.0% margin 39 Compara
Slide 40: Building and Technical Trade Key Topics in Q2
BUILDING AND TECHNICAL TRADE KEY TOPICS IN Q2 BUILDING AND HOME IMPROVEMENT TRADE • Rising inflation and interest rates have seen construction activity clearly decrease in Northern Europe, especially in new building construction • Building and home improvement net sales and profit decreased in all o
Slide 41: Building and Technical Trade Key Topics in Q2: Technical Wholesale
BUILDING AND TECHNICAL TRADE KEY TOPICS IN Q2 TECHNICAL WHOLESALE • Net sales up by 3.8%, down by 5.3% in comparable terms • Sales grew in Norway, but were down in the other operating countries • Operating margin declined to 5.5% • Decline in operating margin attributable to, among other factors, th
Slide 42: Car Trade: Strong Result
CAR TRADE STRONG RESULT 42
Slide 43: Car Trade: Net Sales Up by 24.9%
CAR TRADE NET SALES UP BY 24.9%* + €61 million € million € million 1,241 338 316 1,200 1 200 1,125 296 292 300 277 261 900 200 600 100 300 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 rolling 12 months * Comparable 43 Figures including sports trade
Slide 44: Car Trade: Operating Profit €24.3 Million
CAR TRADE OPERATING PROFIT €24.3 MILLION € million € million + €9.2 million 80 77.8 30 64.3 25 24.3 60 19.5 20 16.5 17.5 15.3 15.1 40 15 10 20 5 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 2022 Q2/2023 rolling 12 months Operating margin 5.8% 5.5% 5.6% 6.0% 6.2% 7.2% 5.7% 6.3% 44 Comparable figures, incl
Slide 45: Car Trade Key Topics in Q2
CAR TRADE KEY TOPICS IN Q2 • New car deliveries increased significantly year-on-year, causing net sales and operating profit to increase • Sales development good in used car sales and services • Order book for new cars remains above normal levels, but weakening market has seen new car orders decreas
Slide 46: EBIT €208 Million: Strong Performance in a Challenging Market
EBIT €208 MILLION STRONG PERFORMANCE IN A CHALLENGING MARKET 46
Slide 47: Operating Environment Challenging Companies
OPERATING ENVIRONMENT CHALLENGING COMPANIES • Inflation • Rising interest rates • Weakened purchasing power • High employment • Energy transformation • Russia’s offensive war in Ukraine • Geopolitical tensions 47
Slide 48: The Importance of Strategy Grows in a Challenging Market
THE IMPORTANCE OF STRATEGY GROWS IN A CHALLENGING MARKET GROWTH STRATEGY FOCUS : ONE UNIFIED GROCERY TRADE CUSTOMER EXPERIENCE BUILDING AND TECHNICAL TRADE DIGITALISATION SUSTAINABILITY CAR TRADE 48
Slide 49: In Good Shape to Generate Profits
IN GOOD SHAPE TO GENERATE PROFITS • A good strategy: focusing on our own strengths • Strong customer relationships, some 2 million daily customer visits • Ability to respond quickly to changes in operating environment • Continuously improving efficiency and managing cost ratio • Strong balance sheet
Slide 50: Good Success in Improving Efficiency and Managing Cost Ratio
GOOD SUCCESS IN IMPROVING EFFICIENCY AND MANAGING COST RATIO Fixed costs down by €5.5 million despite inflation • Cost cuts and savings in all divisions and Group 4-6/2023 4-6/2022 common operations Fixed costs, € million 494.9 500.3 • A 2.6% reduction in personnel expenses despite - Personnel expen
Slide 51: Outlook and Guidance for 2023
OUTLOOK AND GUIDANCE FOR 2023 51
Slide 52: Outlook for 2023
OUTLOOK FOR 2023 In the grocery trade division, B2C trade is estimated to remain stable, and the foodservice market to grow. Inflation will increase sales, but also causes costs to rise. Operating profit is expected to remain at a good level. In the building and technical trade division, the market
Slide 53: Guidance for 2023 (Specified)
GUIDANCE FOR 2023 (SPECIFIED) Kesko specifies the outlook and guidance first given in its financial statements release on 2 February 2023 and repeated in the first-quarter interim report on 28 April 2023. Guidance is given for the year 2023, in comparison with the year 2022. Kesko now estimates that
Slide 54: Al
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