Kesko Oyj Class A · OMXHEX:KESKOA
Kesko Oyj Class A — Q3 2023 Earnings Presentation
36 slides from Kesko Oyj Class A's earnings presentation, Oct 26, 2023
Slide 1: Kesko Interim Report Q3/2023: A Fine Performance in a Weak Market
KESKO INTERIM REPORT Q3/2023 A FINE PERFORMANCE IN A WEAK MARKET MIKKO HELANDER PRESIDENT AND CEO 26 October 2023
Slide 2: Key Events in Q3
KEY EVENTS IN Q3 7-9/2023 7-9/2022 • Grocery trade: sales at a good level Net sales, € million 2,949.1 3,009.8 • Building and technical trade: profit decreased as construction volumes weakened Net sales growth, % -2.0 3.7 • Car trade: sales and profit grew clearly in all car trade business segments
Slide 3: Net Sales
NET SALES - €61 million € million € million 12 000 12,000 11,809 11,865 3,108 3,105 3,010 2,983 2,949 33,000 000 2,828 2,707 11,000 11 000 22,000 000 10,000 10 000 1 000 1,000 0 9,000 9 000 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months 3
Slide 4: Operating Profit
OPERATING PROFIT - €34.7 million € million € million 300 815.1 236.0 242.8 800 734.2 207.6 208.1 200 192.6 600 143.7 125.9 400 100 200 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months Operating 5.3% 7.6% 8.1% 6.5% 4.5% 6.7% 7.1% 6.9% 6.2% margin 4 Comparable figures
Slide 5: Return on Capital Employed
RETURN ON CAPITAL EMPLOYED % 19.6 19.1 20 17.6 16.9 16.8 12.8 14.7 14.1 10 0 Grocery trade Building and technical trade Car trade Group 2022 Q3/2023 5 Comparable figures, rolling 12 months
Slide 6: Strong Financial Position
STRONG FINANCIAL POSITION Good cash flow from operating activities Q3/2023 Q3/2022 • Cash flow strengthened on the comparison period Cash flow from operating activities, € million 394.9 318.8 thanks to further improvement in working capital Liquid assets, € million 169.6 313.4 management in all divi
Slide 7: Ongoing Improvements in Cost Efficiency
ONGOING IMPROVEMENTS IN COST EFFICIENCY Fixed costs down by €9 million despite inflation 7-9/2023 7-9/2022 • Cost cuts and savings in all divisions and 451.9 460.8 Fixed costs, € million Group common operations - Personnel expenses, € million 176.1 180.9 • Personnel expenses down by 2.6% despite - O
Slide 8: Strong Position in Finnish Food Trade Yielding Good Results
GROCERY TRADE STRONG POSITION IN FINNISH FOOD TRADE YIELDING GOOD RESULTS 8
Slide 9: Grocery Trade Net Sales
GROCERY TRADE NET SALES + €19.9 million € million € million 6,330 6,125 1,618 1,624 1,593 1,551 1,574 1,495 6,000 6 000 11,500 500 1,382 5 500 5,500 11,000 000 5,000 5 000 500 4,500 4 500 0 4 000 4,000 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months 9
Slide 10: Grocery Trade Operating Profit
GROCERY TRADE OPERATING PROFIT - €15.2 million € million € million 460.4 443.3 150 133.4 400 123.9 122.8 118.4 118.2 120 300 90 80.3 83.9 200 60 100 30 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months Operating 5.8% 8.0% 8.5% 7.6% 5.6% 7.3% 7.4% 7.5% 7.0% margin Comparabl
Slide 11: Key Themes in Grocery Trade in Q3
KEY THEMES IN GROCERY TRADE IN Q3 • Price continues to be important, but demand for premium products has started to recover • Campaigns and other marketing efforts have caused customer visits and sales in K Group grocery stores to increase • K Group's grocery sales grew by 3.6%, loss of market share
Slide 12: A Good Result in a Bad Economic Cycle
BUILDING AND TECHNICAL TRADE A GOOD RESULT IN A BAD ECONOMIC CYCLE 12
Slide 13: Building and Technical Trade Net Sales
BUILDING AND TECHNICAL TRADE NET SALES - €99.4 million € million € million 4,591 1,288 4,305 1,200 1 200 1,150 1,149 1,071 1,083 1,050 1,023 4 000 4,000 800 3,000 3 000 400 0 22,000 000 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months 13 Figures excluding sports trade
Slide 14: Building and Technical Trade Operating Profit
BUILDING AND TECHNICAL TRADE OPERATING PROFIT - €29.8 million € million € million 323.8 120 107.2 300 99.6 232.6 90 72.0 69.8 200 60.8 60 56.2 30.0 100 30 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months Operating 5.2% 8.3% 8.7% 5.6% 2.9% 6.3% 6.6% margin 7.1% 5.4% 14 Com
Slide 15: Key Themes in Building and Technical Trade in Q3
KEY THEMES IN BUILDING AND TECHNICAL TRADE IN Q3 BUILDING AND HOME IMPROVEMENT TRADE • Construction activity has clearly decreased in Northern Europe as a result of rising inflation and interest rates, especially in residential building • Good profitability despite market weakening • Operating profi
Slide 16: Key Themes in Building and Technical Trade: Technical Trade
KEY THEMES IN BUILDING AND TECHNICAL TRADE IN Q3 TECHNICAL TRADE • Net sales down by 0.5%, or by 9.4% in comparable terms, due to construction market weakening • A significant part of the decrease in comparable sales due to solar power products, where sales in the comparison period were exceptionall
Slide 17: Another Good Result in Car Trade
CAR TRADE ANOTHER GOOD RESULT IN CAR TRADE 17
Slide 18: Car Trade Net Sales
CAR TRADE NET SALES €15.2 million € million € million 1,256 338 316 11,200 200 1,125 311 296 292 300 277 261 900 200 600 100 300 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months 18 Figures including sports trade
Slide 19: Car Trade Operating Profit
CAR TRADE OPERATING PROFIT €7.9 million € million € million 85.6 80 30 64.3 24.3 24.3 60 20 19.5 17.5 16.5 15.3 15.1 40 10 20 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/23 2022 Q3/2023 rolling 12 months Operating 5.8% 5.5% 5.6% 6.0% 6.2% 7.2% 7.8% 5.7% 6.8% margin 19 Figures incl. sports trade
Slide 20: Key Themes in Car Trade in Q3
KEY THEMES IN CAR TRADE IN Q3 • New car deliveries up significantly on the comparison period, resulting in a rise in net sales and operating profit • Used car sales grew clearly, and market share in used cars strengthened • Service sales also developed well • Order book for new cars still at a good
Slide 21: Strong Position and Profitability Among the Best in Europe in Food Trade
STRONG POSITION AND PROFITABILITY AMONG THE BEST IN EUROPE IN FOOD TRADE 21
Slide 22: Kesko Has a Strong Position in All Areas of Food Trade
KESKO HAS A STRONG POSITION IN ALL AREAS OF FOOD TRADE UNLIKE OTHER EUROPEAN OPERATORS Kesko’s retail and B2B sales in food trade over €8 billion Market share in total Finnish food trade 37.3% • Total market for grocery stores and restaurants in Finland over €30 billion 32% • Grocery store sales app
Slide 23: Finland's Most Extensive Network of Grocery Stores with 1,200 Stores
FINLAND’S MOST EXTENSIVE AND VERSATILE NETWORK OF GROCERY STORES WITH 1,200 STORES • K Group grocery store retail sales approx. €7.2 billion • Market share over 35%*, up by some 3 percentage points since 2015 • Some 1.2 million customer visits to the stores every day, customer flows growing • Market
Slide 24: New Hypermarkets and Neighbourhood Stores
NEW HYPERMARKETS TO BE OPENED IN FINNISH GROWTH CENTRES, NEW NEIGHBOURHOOD STORES ACROSS THE COUNTRY • K-Supermarket Columbus in Eastern Helsinki to be converted into a K-Citymarket hypermarket in 2024 • New K-Citymarket in Kivistö, Vantaa in 2026 • Planning and permits for K-Citymarket stores in Ku
Slide 25: Kesko the Only Operator in Foodservice with a Nationwide Network
KESKO THE ONLY OPERATOR IN THE FOODSERVICE BUSINESS WITH A NETWORK THAT SPANS THE WHOLE COUNTRY KESPRO CASH-AND-CARRY OUTLETS AND CENTRAL WAREHOUSE • In addition to its major B2C grocery business, Kesko is the leading operator in Finnish foodservice business, which is exceptional on a European scale
Slide 26: Foundation for Finnish Grocery Trade Healthy
FOUNDATION FOR FINNISH GROCERY TRADE HEALTHY All operators enjoy good profitability, only minor changes in market shares since 2010 • Three main players in Finnish grocery trade 60 50 • Profits generated by Kesko, S Group and Lidl Finland at a good European level 40 30 • No significant changes in K
Slide 27: The Challenging Building and Technical Trade Market Also Presents Opportunities
THE CHALLENGING BUILDING AND TECHNICAL TRADE MARKET ALSO PRESENTS OPPORTUNITIES 27
Slide 28: Kesko a Leading Operator in Building and Technical Trade B2B in Northern Europe
KESKO A LEADING OPERATOR IN BUILDING AND TECHNICAL TRADE B2B IN NORTHERN EUROPE Total market nearly €40 billion TECHNICAL TRADE • Market size in Northern Europe approx. €23 billion • Kesko the market leader in Finland, and also in electro-technical trade in Norway; strong position in Poland and the
Slide 29: Cyclical Fluctuations Are Natural for the Construction Sector
CYCLICAL FLUCTUATIONS ARE NATURAL FOR THE CONSTRUCTION SECTOR • Downcycle impacting new residential building the most, which accounts for 20-30% of all construction, depending on the country • Decline in other building construction, renovation building, and infrastructure construction smaller • Urba
Slide 30: K Group Is a Leading Operator in Building and Technical Trade in Northern Europe
K GROUP IS A LEADING OPERATOR IN BUILDING AND TECHNICAL TRADE IN NORTHERN EUROPE NORWAY Sales €1.5 billion FINLAND SWEDEN Sales €2.9 billion Sales €700 million POLAND AND THE BALTICS Sales €1.6 billion DENMARK Sales €560 million 30 K Group sales in 2022, incl. retail and B2B; figures for Norway incl
Slide 31: Strong Position and Good Profitability Underpinned by the Right Strategic Choices
STRONG POSITION AND GOOD PROFITABILITY UNDERPINNED BY THE RIGHT STRATEGIC CHOICES Profitability at the level of the best European peers FOCUS ON B2B TRADE EXPANSION TO TECHNICAL TRADE GROWTH IN SCANDINAVIA AND MARKET CONSOLIDATION COUNTRY-SPECIFIC APPROACH TO MANAGING THE BUSINESS AND TO STRATEGIES
Slide 32: Kesko Set to Continue Growth in Building and Technical Trade
KESKO SET TO CONTINUE GROWTH IN BUILDING AND TECHNICAL TRADE Slowdown in economic growth accelerating market consolidation • Kesko intends to continue to take an active part in the consolidation of the building and technical trade B2B market in Northern Europe also going forward • The objective is t
Slide 33: Guidance and Outlook
GUIDANCE AND OUTLOOK 33
Slide 34: Strong Performance Also in a Weaker Market
STRONG PERFORMANCE ALSO IN A WEAKER MARKET Comparable operating profit Reported figures, € million 815 800 776 680-730 Kesko specifies its profit guidance for 2023 700 600 568 Comparable operating profit in 2023 is estimated 500 462 to be in the range of €680–730 million 429 400 296 300 274 Before,
Slide 35: Outlook for 2024
OUTLOOK FOR 2024 Kesko’s operating environment is estimated to remain challenging in 2024. Kesko’s operating profit is expected to remain at a good level also in 2024 despite the challenges in the company’s operating environment. In grocery trade, B2C trade and the foodservice market are expected to
Slide 36: Thank You!
THANK YOU! Al