Kesko Oyj Class A · OMXHEX:KESKOA
Kesko Oyj Class A — Q1 2021 Earnings Presentation
56 slides from Kesko Oyj Class A's earnings presentation, May 2021
Slide 1: Kesko Interim Report Q1/2021: Another Record Quarter
KESKO INTERIM REPORT Q1/2021 Another Record Quarter Mikko Helander, President and CEO Jukka Erlund, CFO
Slide 2: K Group and Kesko Today
K Group and Kesko Today Biggest in Finland, Profitable growth K Group has 46,000 #1 #3 in Northern Europe with retail sales of €14bn strategy in 3 core divisions employees, approx. 1,800 stores and comprehensive digital services in 8 countries Strong financial Market cap approx. World’s most sustain
Slide 3: Kesko in a nutshell
Kesko in a nutshell Net Sales Operating profit Car trade Car trade Speciality Speciality €28.5m Grocery trade goods trade Grocery trade goods trade €930.0m €14.6m €396.0m €204.6m €5,771.1m Building and Building and technical trade technical trade €3,542.8m €10,426.3m €198.0m €605.2m 3 Q1 2021 rollin
Slide 4: Operations focused in three divisions
Operations focused in three divisions €5,771 €3,747* €930 million million million Grocery trade Building and technical trade Car trade 1,240 stores in Finland, of which 500 offer Serves three customer segments: Volkswagen, Audi, SEAT, Porsche, on-line services technical professionals, Bentley, and M
Slide 5: Our business models
Our business models Kesko operates a retailer business model in Finnish grocery and DIY/builders’ merchant market, where independent K- retailers engage in retail in Kesko's chains. Net sales by Car trade is Kesko’s own retailing. business model in 2020 B2B trade is a significant, growing part of Ke
Slide 6: Growth Strategy
Growth Strategy Focus: Grocery trade One unified Building and technical trade Car trade 6
Slide 7: Strong Strategy Execution
Strong Strategy Execution Over 30 acquisitions and divestments Investments in growth Divestments €3 billion €1 billion Acquisition of Carlsen Fritzøe Handel AS Divestment of operations in Russia Acquisition of Fresks stores Divestment of agricultural trade Byggmakker acquisitions Divestm
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: Solid Dividend Track-record
Solid Dividend Track-record Dividend for 2020: €0.75/Share, Nearly €300 Million 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 account the company’s financial position and strategy. Kes
Slide 10: Group Management Board Composition
Group Management Board Composition Jorma Rauhala* Ari Akseli Matti Virtanen Jukka Erlund President, building and President, grocery President, car trade EVP, technical trade trade Chief Financial Officer * Deputy CEO Mikko Helander President and CEO Anni Ronkainen Matti Mettälä Karoliina Partanen Ri
Slide 11: Sustainability Drives Us in Everything We Do
Sustainability Drives Us in Everything We Do Responsible Good corporate purchasing and Environment governance and sustainable selections finance Working Customers’ Society community sustainable lifestyles 11
Slide 12: International Recognition for Kesko's Sustainability Efforts
International Recognition for Kesko’s Sustainability Efforts THE MOST SUSTAINABLE GROCERY TRADE COMPANY IN THE WORLD for the seventh year Kesko has been on the list every year since 2005 Kesko has been included for 16 years 12
Slide 13: Kesko a Leading Operator in Digital Trade in Northern Europe
Kesko a Leading Operator in Digital Trade in Northern Europe
Slide 14: Digital Trade Sales of Nearly €1.3 billion
Digital Trade Sales of Nearly €1.3 billion Online store sales of nearly €1 billion 2% 3% • Online stores for consumers: 19% • K-Ruoka, K-Rauta, Byggmakker, Intersport, Budgetsport 35% 41% • Online stores for B2B customers: • Kespronet, Onninen, K-Rauta, K-RautaPRO, Byggmakker K-Ruoka.fi Kespro • Ele
Slide 15: Kesko's Online Stores Fast-Growing and Profitable Business
Kesko’s Online Stores Fast-Growing and Profitable Business +343% +74% +25% +101% K-Ruoka.fi K-Rauta.fi Onninen.fi Sports trade Q1/2021, rolling 12 months
Slide 16: Rapid online growth thanks to our digital strategy
Rapid online growth thanks to our functional and successfully executed digital strategy
Slide 17: Biggest Online Grocery Operator on the Market
Biggest Online Grocery Operator on the Market Retail sales Market share Growth €230m 54% 343% Q1/21, rolling 12 months in 2020 Q1/21, rolling 12 months
Slide 18: The Best Online Grocery Customer Experience on the Market
The Best Online Grocery Customer Experience on the Market • The most user-friendly online store application on the market • The biggest selection of up to 30,000 products • Competitive prices • Fast and reliable home delivery and pick-up services • Of the 1,200 K-food stores, 500 now offer online gr
Slide 19: Solid Foundation in Efficient Processes and Capabilities
Solid Foundation in Efficient Processes and Capabilities • Extensive, versatile supply channels • Nationwide store network enabling efficient home deliveries • Collection constantly becoming more efficient • Nearly all Finnish households part of the K-Plussa loyalty scheme • Extensive utilisation of
Slide 20: Online sales of groceries will grow significantly in Finland
Online sales of groceries will grow significantly in Finland during this decade We aim to continue to be the clear market leader in Finnish online grocery trade also going forward
Slide 21: Key Figures Q1 2021
Ml Key Figures Q1 2021
Slide 22: Key Events in Q1
Key Events in Q1 • All-time best Q1 result 1-3/2021 1-3/2020 • Retail sales growth continued strong in K Group Net sales, € million 2,539.4 2,540.4 grocery stores Illustrative net sales, € million 2,539.4 2,355.6 • Sales development good in building and technical trade Operating profit, € million* 1
Slide 23: Net Sales
Net Sales Growth in comparable terms 5.9% Rolling 12 months + €184 million € million € million 10 500 10,500 10,426 2,652 2,662 2,573 2,539 10,243 2 500 2,500 2,356 10,000 10 000 2 000 2,000 9,500 9 500 1 500 1,500 9,000 9 000 1,000 1 000 8,500 8 500 500 0 8,000 8 000 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 2
Slide 24: Comparable Operating Profit
Comparable Operating Profit Growth in comparable terms €51.5 million Rolling 12 months + €51.5 million € million € million 605.2 600 553.6 200 181.8 165.6 500 160 141.5 400 116.2 120 300 80 64.6 200 40 100 0 0 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 2020 Q1/2021 Operating 5.4% 5.8% 2.7% 5.5% 6.9% 6.2% 4.6% ma
Slide 25: Return on Capital Employed
Return on Capital Employed ROCE target clearly exceeded % 20 18.0 16.9 15 13.1 13.4 12.0 11.2 10 7.7 6.3 5 0 Grocery trade Building and technical trade Car trade Group 2020 Q1/2021 25 Rolling 12 months, comparable figures
Slide 26: Strong Financial Position
Strong Financial Position Q1/2021 Q1/2020 Cash flow from operating activities, € million 155.1 135.7 Liquid assets, € million 316.3 265.4 Capital expenditure, € million 44.2 99.0 Interest-bearing net debt excl. lease liabilities, € million 249.1 482.4 Interest-bearing net debt/EBITDA (rolling, excl.
Slide 27: Grocery Trade: Strong Growth Continued
GROCERY TRADE Strong Growth Continued
Slide 28: Grocery Trade Net Sales
Grocery Trade Net Sales Growth 3.0% Rolling 12 months + €39 million € million € million 5,800 5 800 5,771 5,732 1 600 1,600 1,517 1,431 1,462 5,700 5 700 1,400 1 400 1,321 1,361 5,600 5 600 1,200 1 200 5 500 5,500 1,000 1 000 5,400 5 400 800 5,300 5 300 600 5 200 5,200 400 200 5,100 5 100 0 5,000 5
Slide 29: Grocery Trade Operating Profit
Grocery Trade Operating Profit Growth €20.8 million Rolling 12 months € million + €20.8 million 396.0 € million 400 375.2 140 350 123.2 120 300 108.7 100 250 83.0 81.1 80 200 60.4 60 150 40 100 20 50 0 0 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 2020 Q1/2021 Operating margin 4.6% 5.8% 7.4% 8.1% 6.0% 6.5% 6.9% 2
Slide 30: Grocery Trade Q1
Grocery Trade Q1 Market Q1 K Group • Total grocery trade market growth 5.8%*, • Grocery sales in K-food stores up by 6.1% grocery prices up by 1.4%* • Sales grew clearly in all grocery store chains • Consumption focused on domestic purchases, especially retail • Our market share rose to 37.8% • Grow
Slide 31: Growing Sales by Improving Customer Experience
Growing Sales by Improving Customer Experience Higher NPS supports faster-than-market growth Sales growth in 2020 Δ 4% 12 11% 10 Total market cumulative change 8 7% 8.6% 6 4 2 0 NPS below 61 NPS over 61 31
Slide 32: Bigger Sales per Square Metre Boost Result
Bigger Sales per Square Metre Boost Result +12.2% +10.2% 6 830 6 179 6 389 6 196 6 373 5 918 6 004 5 696 -14.2% 1 448 1 284 1 256 1 243 Retail sales, € million Number of stores Sales per square metre €/m² 2016 2017 2018 2019 32
Slide 33: Still Plenty of Potential in Implementing Store-Specific Business Ideas
Still Plenty of Potential in Implementing Store-Specific Business Ideas • We have a good and functional retailer business model our competitors cannot copy • We are developing and changing stores more based on customer data • Store digitalisation improves customer experience and makes operations mor
Slide 34: Strong Basis for Continued Growth in the Grocery Trade
Strong Basis for Continued Growth in the Grocery Trade Further potential Further improving efficiency Pioneering Strong market position to improve per square metre and other customer experience digital solutions in foodservice operational efficiency Continued investments in growth and transformation
Slide 35: Building and Technical Trade: Strong Development Continued in All Areas
BUILDING AND TECHNICAL TRADE Strong Development Continued in All Areas
Slide 36: Building and Technical Trade Net Sales
Building and Technical Trade Net Sales Growth in comparable terms 7.7% Rolling 12 months € million € million + €108 million 3 800 3,800 3,747 3,640 1,000 1 000 954 951 918 924 3,600 3 600 816 800 3,400 3 400 600 400 3,200 3 200 200 0 3,000 3 000 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 2020 Q1/2021 36 Illustra
Slide 37: Building and Technical Trade Comparable Operating Profit
Building and Technical Trade Comparable Operating Profit Growth €24.8 million Rolling 12 months € million € million + €24.8 million 212.5 200 187.7 80 73.2 70 63.7 150 60 50 44.3 100 40 31.4 30 20 50 10 6.5 0 0 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 2020 Q1/2021 Operating 0.8% 6.7% 7.7% 4.8% 3.4% 5.2% 5.7% m
Slide 38: Building and Technical Trade Q1
Building and Technical Trade Q1 Market Q1 K Group • Construction activity remained at a good level • Good development continued for K-Rauta and Onninen in Northern Europe in Finland • B2C trade continued high as consumption was • Development in Norway continued strong in all operations domestically
Slide 39: Fragmented Market Offers Big Potential for Consolidation
Fragmented Market Offers Big Potential for Consolidation Technical Professional DIY Technical Professional DIY * trade builders trade builders * Retail market 2019 (€bn) 2.4 3.3 1.8 2.2 1.8 1.4 Market position #4-5 #3 #3 #1 #1 #1 Retail sales €bn 2019 0.3 0.5 0.2 0.9 0.8 0.5 Market share 10% 14% 38%
Slide 40: Strong Execution of Country-Specific Strategies
Strong Execution of Country-Specific Strategies Enables Growth Also Going Forward Continue putting Continue to develop Continue to improve Utilise B2C trade activity basics in order and digital sales channels and customer experience also going forward improving efficiency services further Continue s
Slide 41: Towards the Best in Europe
Towards the Best in Europe Operating margin, % Best 8 operators in Europe 6 Kesko 6-8% 4 5.2% Kesko 2 ~2% 0 2014 2020 Time 41
Slide 42: Car Trade: Demand Recovering and Sales Up
CAR TRADE Demand Recovering and Sales Up
Slide 43: Car Trade Net Sales
Car Trade Net Sales Growth 16.8% Rolling 12 months € million + €37 million 930 € million 900 893 260 244 250 234 223 200 192 800 150 100 700 50 0 600 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 2020 Q1/2021 43
Slide 44: Car Trade Operating Profit
Car Trade Operating Profit Growth €5.1 million Rolling 12 months € million + €5.1 million € million 30 28.5 12 11.2 25 23.4 10 20 8 7.4 6.1 6.2 15 6 3.8 10 4 2 5 0 0 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 2020 Q1/2021 Operating 2.7% 2.0% 3.0% 2.6% 4.3% 2.6% 3.1% margin 44 Comparable figures
Slide 45: Car Trade Q1
Car Trade Q1 Market Q1 K Group • New car first registrations -0.6% • Updated strategy for the car trade division • Market returning to normal levels • Sales returned to pre-pandemic levels • Used car market continues to grow • New models support sales, order backlog significantly strengthened • Comp
Slide 46: Large Growth and Profit Potential in the Market
Large Growth and Profit Potential in the Market The entire Finnish automotive industry value pool 2019, estimated EBIT, € million Kesko’s position 135-160 Import and Strong position new car retail 190-210 Used car retail Potential for improvement 260-280 Aftersales (retail) Potential for improvement
Slide 47: Growth Strategy Will Underpin Strong Development Also in Years to Come
Growth Strategy Will Underpin Strong Development Also in Years to Come
Slide 48: A Well-Functioning Strategy
A Well-Functioning Strategy 48
Slide 49: Steady Profit Improvement
Steady Profit Improvement Comparable operating profit, reported figures, € million Guidance 2021 700 €570 – 670 million 600 568 500 462 429 400 296 274 300 221 243 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2014-2019 continuing operations IFRS 16 impact 49
Slide 50: Grocery Trade Well-Positioned to Continue Sales Growth
Grocery Trade Well-Positioned to Continue Sales Growth Also in Upcoming Years Estimates for the Finnish market We will continue our own strong actions • Total demand may stay above pre-pandemic levels • We will continue to redesign stores based on store-specific business ideas • Foodservice to retur
Slide 51: Strong Country-Specific Actions to Support Growth in Building and Technical Trade
Strong Country-Specific Actions to Support Growth in Building and Technical Trade Also in Upcoming Years Estimates for the Northern European market We seek profitable growth in all operating countries • Building and renovation estimated to stay • In Finland, we will continue to strengthen the at a g
Slide 52: Transformation in Mobility Offers Growth Potential
Transformation in Mobility Offers Growth Potential in Upcoming Years Volkswagen Group Market in Finland Our transformation continues • World's leading car manufacturer • Pressure to update the vehicle stock • Improving profitability • Investing €46 billion in electric • Focus in taxation shifting fr
Slide 53: Guidance
Guidance
Slide 54: Guidance
Guidance Kesko estimates that its comparable operating profit in 2021 will be in the range of €570-670 million. Before, the company estimated that the comparable operating profit would be in the range of €520-620 million. The illustrative comparable operating profit in 2020 was €554 million. 54
Slide 55: Kesko Celebrates Its 80th Anniversary
KESKO CELEBRATES ITS 80TH ANNIVERSARY
Slide 56: Contact
Contact Hanna Jaakkola Vice President, Investor Relations tel. +358 40 5666 070 hanna.jaakkola@kesko.fi 56