Kesko Oyj Class A · OMXHEX:KESKOA
Kesko Oyj Class A — Non-Deal Roadshow (December 2023)
62 slides from Kesko Oyj Class A's roadshow presentation, December 2023
Slide 1: Successful Strategy Execution Driving Growth
KESKO SUCCESSFUL STRATEGY EXECUTION DRIVING GROWTH December 2023
Slide 2: Kesko Today
KESKO TODAY KEY FINANCIALS Q3/2023* 2022 Leading trading sector ~45 000 employees, Net sales, € million Operating profit, € million** 11,865.3 734.2 11,809.0 815.1 #1 company in Northern Europe with retail and B2B sales of over €16bn 1,800 stores, 3 divisions, comprehensive digital services in 8 cou
Slide 3: Kesko Segment Key Figures
KESKO SEGMENT KEY FIGURES NET SALES OPERATING PROFIT Car trade Car trade Grocery trade Grocery trade €1,256m €85.6 €6,330m €443.4m Building and technical trade Building and €4,305m €11,865.3m technical trade €734.2m €232.6m 3 Q3 2023 rolling 12 months, division figures include common functions and e
Slide 4: Grocery Trade
GROCERY TRADE In brief: Market and market shares: Operates in Finland, business comprises three grocery store Total Finnish grocery trade market €21–22 billion, food- chains with some 1,200 stores across the country, online service market €2.3 billion; market shares 36% (grocery grocery services and
Slide 5: Building and Technical Trade: Technical Wholesale
BUILDING AND TECHNICAL TRADE TECHNICAL WHOLESALE In brief: Market and market shares: Operates in 7 countries. Kesko subsidiary Onninen offers Total market (est.) for 8 countries (incl. Denmark) €23 billion; technical wholesale products and services (offering varies Kesko’s market shares Finland 44%,
Slide 6: Still Further Potential for Growth
TECHNICAL TRADE STILL FURTHER POTENTIAL FOR GROWTH Market size €23 billion Technical trade Retail market 2021 (€bn) 2.8 Technical trade Share of current operating Retail market 2022 (€bn) 2.8 41%* market (2022) Market share 44% Technical trade Retail market 2021 (€bn) 5.4 Technical trade Share of cu
Slide 7: Building and Technical Trade: Building and Home Improvement
BUILDING AND TECHNICAL TRADE BUILDING AND HOME IMPROVEMENT In brief: Market and market shares: Operates in 6 countries; offers products and services for Total market (est.) for 8 countries (incl. Denmark) €25 billion; building, renovation, garden, interior decoration and home Kesko’s market shares F
Slide 8: Successful Acquisitions Carried Out – Still Further Possibilities
BUILDING AND HOME IMPROVEMENT SUCCESSFUL ACQUISITIONS CARRIED OUT – STILL FURTHER POSSIBILITIES Market size €25 billion Professional Consumers builders Professional Consumers Retail market 2022 (€bn) 4.2 2.0 builders Market share 13% Retail market 2022 (€bn) 2.3 1.4 Market share 45% Professional Con
Slide 9: Car Trade
CAR TRADE In brief: Market and market shares: Operates in Finland; imports and sells Volkswagen Group Total first registrations of new cars in Finland approx. car brands, sells used cars, and offers car-related services 100,000 in 2022, of which Kesko’s K-Auto accounted for (e.g. servicing, leasing,
Slide 10: Net Sales Breakdown
NET SALES BREAKDOWN B2C trade and B2B trade Grocery trade B2C net sales B2C net sales ~ 60% B2B Total net sales in 2022 €11,809 million B2C Building and B2B ~ 40% technical trade net sales net sales B2B B2C Car trade net sales B2B 10
Slide 11: Successful Strategy: Growth Strategy
SUCCESSFUL STRATEGY GROWTH STRATEGY FOCUS: ONE UNIFIED GROCERY TRADE CUSTOMER EXPERIENCE BUILDING AND TECHNICAL TRADE DIGITALISATION SUSTAINABILITY CAR TRADE 11
Slide 12: 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 13: Strong Profit Generation Also in a Weaker Market
STRONG PROFIT GENERATION ALSO IN A WEAKER MARKET Comparable operating profit Reported figures, € million 815 800 776 680-730 700 600 568 500 462 429 400 296 300 274 221 243 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 Guidance 2023 2014 – 2019 continuing operations 13 IFRS 16 impact
Slide 14: Sales Growth Through Existing Stores and Systems Has Improved Our Efficiency
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 Q3 2023 Costs / reported Group net sales, Q3 2023, rolling 12 mon
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 €2.0 Billion
SALES VIA DIGITAL CHANNELS ALREADY € 2.0 BILLION 3% 2% 12% 41% 42% K-ruoka.fi (online grocery) Kespro (food service) Onninen Building and home improvement Sportstrade 16 Q3 2023 rolling 12 months, excl. VAT
Slide 17: 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 18: 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 19: 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 • Carbon neutrality by 2025 and zero emissions by 2030 in our own operations and transports Ensuring sustainability in the supply chain Increasi
Slide 20: 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 20
Slide 21: Dividend
DIVIDEND Dividend to be paid in 2023: €1.08 / share in four instalments. 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. 1.54 1,5 1
Slide 22: Latest News: Kesko Acquires Davidsen and Enters Denmark
LATEST NEWS: KESKO ACQUIRES THE DANISH BUILDERS’ MERCHANT DAVIDSEN AND ENTERS DENMARK
Slide 23: 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, Denmark Greenland • One of the largest building materials retailers focusing on the B2B segment with ~9% market share, ~30% market share in Southe
Slide 24: 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 25: 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 26: 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 26
Slide 27: 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 28: A Fine Performance in a Weak Market
KESKO INTERIM REPORT Q3/2023 A FINE PERFORMANCE IN A WEAK MARKET 28
Slide 29: 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 30: 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 30
Slide 31: 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 31 Comparable figures
Slide 32: 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 32 Comparable figures, rolling 12 months
Slide 33: 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 34: 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 35: Strong Position in Finnish Food Trade Yielding Good Results
GROCERY TRADE STRONG POSITION IN FINNISH FOOD TRADE YIELDING GOOD RESULTS 35
Slide 36: 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 36
Slide 37: 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 38: 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 39: A Good Result in a Bad Economic Cycle
BUILDING AND TECHNICAL TRADE A GOOD RESULT IN A BAD ECONOMIC CYCLE 39
Slide 40: 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 40 Figures excluding sports trade
Slide 41: 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% 41 Com
Slide 42: 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 43: 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 44: Another Good Result in Car Trade
CAR TRADE ANOTHER GOOD RESULT IN CAR TRADE 44
Slide 45: 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 45 Figures including sports trade
Slide 46: 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 46 Figures incl. sports trade
Slide 47: 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 48: Strong Position and Profitability Among the Best in Europe in Food Trade
STRONG POSITION AND PROFITABILITY AMONG THE BEST IN EUROPE IN FOOD TRADE 48
Slide 49: 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 50: 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 51: 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 52: 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 53: 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 54: The Challenging Building and Technical Trade Market Also Presents Opportunities
THE CHALLENGING BUILDING AND TECHNICAL TRADE MARKET ALSO PRESENTS OPPORTUNITIES 54
Slide 55: 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 56: 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 57: 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 57 K Group sales in 2022, incl. retail and B2B; figures for Norway incl
Slide 58: 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 59: Guidance and Outlook
GUIDANCE AND OUTLOOK 59
Slide 60: 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 61: 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 62: Al
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