Kesko Oyj Class A · OMXHEX:KESKOA
Kesko Oyj Class A — Investor Presentation (May 2023)
52 slides from Kesko Oyj Class A's investor presentation, May 2023
Slide 1: Successful Strategy Execution Driving Growth
KESKO SUCCESSFUL STRATEGY EXECUTION DRIVING GROWTH May 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 €15bn 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 €55,4 Grocery trade €968m €6,238m €464.0m Building and technical trade Building and €4,756m €11,930m technical trade €797.2m €310.9m 3 Q1 2023, division figures include common functions and eliminations
Slide 4: Business Operations Focused in Three Divisions
BUSINESS OPERATIONS FOCUSED IN THREE DIVISIONS €8,233 €6,765 €975 million million million GROCERY TRADE BUILDING AND TECHNICAL TRADE CAR TRADE ~1,200 stores in Finland, of which more than Serves three customer segments: Volkswagen, Audi, SEAT, Porsche and Bentley 500 offer on-line services technical
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: Good Profitability
GOOD PROFITABILITY Comparable operating profit Reported figures, € million Guidance 815 680-800 800 776 700 600 568 500 462 429 400 296 300 274 221 243 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 10 2014-2019 continuing operations, IFRS 16 impact as of 2018
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 €6.2 bn 16.5% 2014: 19.2% Compared to 2022 Costs / reported Group net sales 11 IFRS 16 impact since 201
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 over 36% market share market share • Finland’s most extensive grocery store network with • Largest online food store in the mark
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 €6.5 billion*, B2B accounts for over 80% of sales** TECHNICAL TRADE BUILDING AND HOME IMPROVEMENT TRADE • Net sales €2,286 million • Net sales €2,377 million • Operating profit €173.7 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 €911 million • Market leader in new car sales 17.0% (2021) • Operating profit €48.4 million • Fast growing used car business • Operating margin 5.3% • Nationwide service and charging networks • All
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 Q1 2023, luvut ilman alv.
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: A Good Result in a Weakened Economic Situation
KESKO INTERIM REPORT Q1/2023 A GOOD RESULT IN A WEAKENED ECONOMIC SITUATION Mikko Helander President and CEO 28 April 2023
Slide 22: Key Events in Q1
KEY EVENTS IN Q1 1-3/2023 1-3/2022 • Grocery trade: sales grew, performance particularly strong in Kespro Net sales, € million 2,828.0 2,707.3 • Building and technical trade: operating profit decreased markedly from the exceptional levels of the comparison period 4.4 6.5 Net sales growth, %* • Car t
Slide 23: Net Sales
NET SALES Comparable growth 4.4% + €121 million € million € million 12,000 12 000 11,930 11,809 3,108 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 2022 Q1/2023 rolling 12 months 23
Slide 24: Operating Profit
OPERATING PROFIT Down by €17.9 million - €17.9 million € million € million 242.8 815.1 797.2 236.0 800 200 192.6 600 143.7 125.9 400 100 200 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 2022 Q1/2023 Operating margin 5.3% 7.6% 8.1% 6.5% 4.5% 6.9% 6.7% Rolling 12 months 24 Comparable figures
Slide 25: Good Return on Capital Employed
GOOD RETURN ON CAPITAL EMPLOYED % 19.6 19.2 19.4 20 17.4 16.9 16.1 13.8 12.7 10 0 Grocery trade Building and technical trade Car trade Group 2022 Q1/2023 25 Comparable figures, rolling 12 months
Slide 26: Strong Financial Position
STRONG FINANCIAL POSITION Cash flow weakened by inventory growth • Inventories up by some €250 million since the end of the comparison period Q1/2023 Q1/2022 • Nearly half of this is new cars as their availability has improved, Cash flow from operating activities, € million 27.0 71.0 plenty of cars
Slide 27: Kesko's Q1 Result Has Risen to a New Level Despite a More Difficult Economy
KESKO’S Q1 RESULT HAS RISEN TO A NEW LEVEL DESPITE A MORE DIFFICULT ECONOMY + €68.4 million 143.7 • Significant improvement in Q1 result compared to 125.9 116.2 2019, despite a more difficult operating environment • 2019 was the last regular year before exceptional world events, and the economic cyc
Slide 28: Profit Has Risen to a New Level as a Result of a Good Strategy
PROFIT HAS RISEN TO A NEW LEVEL AS A RESULT OF A GOOD STRATEGY AND ITS SUCCESSFUL EXECUTION GROWTH STRATEGY FOCUS: ONE UNIFIED GROCERY TRADE CUSTOMER EXPERIENCE BUILDING AND TECHNICAL TRADE DIGITALISATION SUSTAINABILITY CAR TRADE 28
Slide 29: Grocery Trade: Good Result in Food Trade
GROCERY TRADE GOOD RESULT IN FOOD TRADE 29
Slide 30: Grocery Trade: Net Sales Up by 8.2%
GROCERY TRADE NET SALES UP BY 8.2% + €113 million € million € million 6,238 1,618 6 200 6,200 6,125 1,551 1,574 1,495 1,500 1 500 1,382 5,900 5 900 11,000 000 5,600 5 600 500 5 300 5,300 0 5,000 5 000 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 2022 Q1/2023 Rolling 12 months 30
Slide 31: Grocery Trade: Operating Profit €83.9 Million
GROCERY TRADE OPERATING PROFIT €83.9 MILLION € million + €3.6 million € million 460.4 464.0 150 133.4 400 123.9 122.8 120 300 90 83.9 80.3 200 60 100 30 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 2022 Q1/2023 Rolling 12 months Operating margin 5.8% 8.0% 8.5% 7.6% 5.6% 7.5% 7.4% 31 Comparable figures
Slide 32: Grocery Trade Key Facts in Q1
GROCERY TRADE KEY FACTS IN Q1 • Grocery sales in K Group stores grew by 2.1%, sales to the grocery stores up by 4.6% • Customer visits in K Group stores increased • K-Citymarket’s home and speciality goods (non-food) sales increased by 3.8% • Good development in Kespro’s sales, up by 28.0% • Grocery
Slide 33: Q1 Result in Grocery Trade Has Risen to a New Level
Q1 RESULT IN GROCERY TRADE HAS RISEN TO A NEW LEVEL + €27.1 million • Q1 result in grocery trade has risen by nearly 50% 83.9 compared to 2019 81.1 80.3 • In 2019, consumer purchasing power was good and the popularity of eating out growing 60.4 56.8 • Rising interest rates and inflation have signifi
Slide 34: Focus on Customer Loyalty and Good Profitability
FOCUS ON CUSTOMER LOYALTY AND GOOD PROFITABILITY K GROUP GROCERY STORE MARKET SHARE 36.1% KESPRO’S MARKET SHARE 46.1% • Market share down by 1.3 percentage points in 2022 • Market share up by 2.0 percentage points in 2022 • Of this, 0.8 percentage points attributable to competitors opening • Diverse
Slide 35: Building and Technical Trade: Good Result in a Weakening Market
BUILDING AND TECHNICAL TRADE GOOD RESULT IN A WEAKENING MARKET 35
Slide 36: Building and Technical Trade: Net Sales Down by 4.4%
BUILDING AND TECHNICAL TRADE NET SALES DOWN BY 4.4% - €49 million M€ 4,805 4,756 € million 1,335 1,203 11,200 200 1,124 1,143 1,075 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 2022 Q1/2023 Rolling 12 months 36 Growth % comparable
Slide 37: Building and Technical Trade: Operating Profit €32.6 Million
BUILDING AND TECHNICAL TRADE OPERATING PROFIT €32.6 MILLION - €29 million € million € million 339.8 120 310.9 109.5 102.8 300 90 66.0 200 61.5 60 32.6 100 30 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 2022 Q1/2023 Rolling 12 months Operating margin 5.5% 8.2% 8.5% 5.8% 3.0% 7.1% 6.5% 37 Comparable figures
Slide 38: Building and Technical Trade Key Facts in Q1
BUILDING AND TECHNICAL TRADE KEY FACTS IN Q1 • Onninen’s comparable technical wholesale net sales grew in Finland, Sweden, Norway and the Baltics, and decreased in Poland • Sales down in building and home improvement trade in all operating countries due to a decrease in construction activity • Deman
Slide 39: Q1 Result in Building and Technical Trade Also at a New Level
Q1 RESULT IN BUILDING AND TECHNICAL TRADE ALSO AT A NEW LEVEL + €29.3 million • Q1 result in building and technical trade has 61.5 multiplied compared to 2019 • Construction and renovation activity in 2019 was good across Northern Europe • In 2020 and H1/2021, demand grew as a result of the 32.6 31.
Slide 40: Building and Technical Trade Sales Still at a Good Level
BUILDING AND TECHNICAL TRADE SALES STILL AT A GOOD LEVEL Economic recession weakening demand Technical wholesale Building and home Building and home 609 improvement, B2B improvement, B2C 392 359 333 148 128 Q1/2019 Q1/2023 Q1/2019 Q1/2023 Q1/2019 Q1/2023 • Sales markedly above the 2019 levels • Sale
Slide 41: Green Transition and Need to Improve Energy Efficiency Upholding Demand
GREEN TRANSITION AND NEED TO IMPROVE ENERGY EFFICIENCY UPHOLDING DEMAND Products related to green transition approximately 35% of sales Ground and Wind power and Solar panels EV charging air source infrastructure heat pumps construction Plumbing and Water saving Energy-efficient Insulation lighting
Slide 42: Car Trade: Best Result Ever
CAR TRADE BEST RESULT EVER 42
Slide 43: Car Trade: Net Sales Up by 27.2%
CAR TRADE NET SALES UP BY 27.2% € million + €57 million € million 300 968 265 911 242 900 229 231 208 200 600 100 300 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 2022 Q1/2023 Rolling 12 months 43
Slide 44: Car Trade: Operating Profit €16.9 Million
CAR TRADE OPERATING PROFIT €16.9 MILLION + €7 million € million € million 55.4 48.4 20 16.9 40 15 13.3 12.9 12.3 9.9 10 20 5 0 0 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 2022 Q1/2023 Rolling 12 months Operating margin 4.8% 5.6% 5.5% 5.3% 6.4% 5.3% 5.7% 44 Comparable figures
Slide 45: Car Trade Key Facts in Q1
CAR TRADE KEY FACTS IN Q1 • Net sales grew by 27.2% • Strong growth in new car sales as availability improved • Sales also grew markedly in used cars and services • Profitability at 6.4% thanks to sales growth and measures to transform and improve the efficiency of operations • Strong order book, ne
Slide 46: Q1 Result in Car Trade Has Risen to a Record Level
Q1 RESULT IN CAR TRADE HAS RISEN TO A RECORD LEVEL Transformation efforts, profit capacity in all businesses, and strong order book yielding results + €9.2 million • Q1 result in car trade has doubled since 2019 16.9 • In 2019, the market was normal and there were no availability issues with cars •
Slide 47: Sustainable Kesko
SUSTAINABLE KESKO 47
Slide 48: Kesko Is One of the Most Sustainable Trading Sector Companies in the World
KESKO IS ONE OF THE MOST SUSTAINABLE TRADING SECTOR COMPANIES IN THE WORLD DOW JONES SUSTAINABILITY INDICES ’GLOBAL 100’ LISTING • Among the most esteemed sustainability indices, based on • Annual listing by Corporate Knights of the 100 most an extensive sustainability assessment by Standard & susta
Slide 49: Kesko's Good Result Benefits Both Shareholders and Employees
KESKO’S GOOD RESULT BENEFITS BOTH SHAREHOLDERS AND EMPLOYEES Kesko’s Annual General Meeting resolved to pay total dividends of €430 million to nearly 90,000 shareholders for the year 2022 Performance-based bonuses totalling €53 million paid to Kesko personnel based on the good annual result All Kesk
Slide 50: Guidance
GUIDANCE 50
Slide 51: Guidance for 2023
GUIDANCE FOR 2023 Kesko repeats the outlook and guidance given in its financial statements release on 2 February 2023. Kesko estimates that its comparable operating profit in 2023 will be in the range of €680–800 million. The guidance is based on an estimated relatively short recession in Kesko’s op
Slide 52: Al
Al