Kesko Oyj Class A · OMXHEX:KESKOA
Kesko Oyj Class A — Non-Deal Roadshow (August 2022)
50 slides from Kesko Oyj Class A's roadshow presentation, August 2022
Slide 1: Successful Strategy Execution Driving Growth
KESKO ROAD SHOW PRESENTATION SUCCESSFUL STRATEGY EXECUTION DRIVING GROWTH August - September 2022
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 €49.6m Grocery trade €917m €6,005m €457.4m Building and technical trade Building and €4,694m €11,588m technical trade €819.6m €349.3m 3 Q2 2022, rolling 12 months Division figures include common functions and eliminatio
Slide 4: Business Operations Focused in Three Divisions
BUSINESS OPERATIONS FOCUSED IN THREE DIVISIONS €8,028 €6,627 €918 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, 500 offer on-line services technical profession
Slide 5: Kesko's Business Model
KESKO’S BUSINESS Customers MODEL Consumers and B2B Kesko’s sales to retailers 48% Kesko’s own retailing 16%* Kesko’s B2B trade 36%* • K-Citymarket non-food • Grocery stores, K-Rauta stores and • Kespro in Finland sports trade in Finland • Budgetsport • Onninen in all operating countries • Most of ca
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: Continued Profitability Improvement
CONTINUED PROFITABILITY IMPROVEMENT Comparable operating profit Updated Q2/22 Reported figures, € million guidance 750–840 800 776 700 600 568 500 462 429 400 296 243 274 300 221 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2014-2019 continuing operations IFRS 16 impact 8
Slide 9: 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 €5.6 bn 16.4% 2014: 19.2% Compared to end of 2021 Costs / reported Group net sales 9 IFRS 16 impact sin
Slide 10: Strong Strategy Execution Over Acquisitions and Divestments
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 11: Transformation from a Traditional Retailing Company into a Focused K Group
TRANSFORMATION FROM A TRADITIONAL RETAILING COMPANY INTO A FOCUSED K GROUP 11
Slide 12: Grocery Trade
GROCERY TRADE Growing sales and improving profitability by offering the best customer experience in the business and differentiating ourselves from the competition A leading operator in Strong market leader Forerunner in trading Efficient logistics and IT Finnish grocery trade in foodservice sector
Slide 13: Building and Technical Trade
BUILDING AND TECHNICAL TRADE Seeking growth through sector consolidation in Northern Europe and continuous development of operations in each country Strong market leader Big growth potential Onninen’s position in Market leader in in Finland in Scandinavia Poland strong the Baltics Good development i
Slide 14: Car Trade
CAR TRADE Raising sales and profitability to a new level by offering the best customer experience in Finland, transforming and updating our operations, and collaborating more closely with the Volkswagen Group Leading operator in Used cars a significant Increasing service sales new car sales separate
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: Digital Sales Worth Over €1.6 Billion
DIGITAL SALES WORTH OVER €1.6 BILLION DIGITAL TRADE SALES €1,637 million • Digital trade has a crucial role in Kesko’s growth 3% 2% 19 % strategy 41 % • B2B especially strong in digital trade: 35 % • Kespro & Onninen • Good online growth also in B2C Online grocery for consumers Foodservice Technical
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: 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 18
Slide 19: Solid Dividend Track-Record
SOLID DIVIDEND TRACK-RECORD 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. Dividend in four instalments in 2022 1,5 1.5 1.43 1.06
Slide 20: The Best Q2 in Kesko's History
KESKO HALF-YEAR FINANCIAL REPORT Q2/2022 THE BEST Q2 IN KESKO’S HISTORY – RECORD RESULT IN BUILDING AND TECHNICAL TRADE Mikko Helander President and CEO 26.7.2022
Slide 21: Key Events in Q2
KEY EVENTS IN Q2 • The best Q2 result in Kesko’s history, impact of the 4-6/2022 4-6/2021 pandemic on Kesko’s businesses has clearly diminished Net sales, € million 3,108.5 2,988.2 • Building and technical trade: record result Net sales growth*, % 3.9 12.0 • Grocery trade: sales grew and profitabili
Slide 22: Net Sales
NET SALES Comparable growth 3.9% € million + €120 million € million 11,588 11,300 3,108 2,988 2,902 11,000 11 000 33,000 000 2,870 2,707 2,539 22,000 000 10,000 10 000 1 000 1,000 99,000 000 0 2021 Q2/2022 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 rolling 12 months 22
Slide 23: Comparable Operating Profit
COMPARABLE OPERATING PROFIT Growth in comparable terms €16.6 million + €16.6 million € million € million 819.6 236.4 236.0 800 775.5 219.4 203.5 200 600 143.7 116.2 400 100 200 0 0 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 2021 Q2/2022 Operating 4.6% 7.3% 7.1% 8.1% 7.1% 5.3% 7.6% 6.9% margin rolling 12 mo
Slide 24: Return on Capital Employed Continued to Improve
RETURN ON CAPITAL EMPLOYED CONTINUED TO IMPROVE % 20.6 20.7 20.5 20 19.0 17.9 17.2 14.0 13.7 10 0 Grocery trade Building and technical trade Car trade Group 2021 Q2/2022 24 Comparable figures, rolling 12 months
Slide 25: Strong Financial Position
STRONG FINANCIAL POSITION Q2/2022 Q2/2021 Cash flow from operating activities, € million 262.4 346.6 Liquid assets, € million 345.3 366.7 Capital expenditure, € million 124.6 82.7 Interest-bearing net debt excl. lease liabilities, € million 197.8 194.4 Interest-bearing net debt/EBITDA (rolling, excl
Slide 26: Grocery Trade: Strong Position in All Areas of Food Trade
GROCERY TRADE STRONG POSITION IN ALL AREAS OF FOOD TRADE HELPED OUR PERFORMANCE IN A CHANGING MARKET 26
Slide 27: Grocery Trade: Net Sales Grew by 5.1%
GROCERY TRADE NET SALES GREW BY 5.1% + €75 million € million € million 6,005 1,515 1,557 1,551 5,909 1,476 5 900 5,900 1 500 1,500 1,382 1,361 11,000 000 5 600 5,600 500 5 300 5,300 0 55,000 000 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 2021 Q2/2022 rolling 12 months 27
Slide 28: Grocery Trade: Operating Profit €123.9 Million
GROCERY TRADE OPERATING PROFIT €123.9 MILLION + €15.3 million € million € million 457.4 442.9 150 131.0 400 122.2 123.9 120 108.6 300 90 81.1 80.3 200 60 100 30 0 0 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 2021 Q2/2022 rolling 12 months Operating margin 6.0% 7.4% 8.1% 8.4% 5.8% 8.0% 7.5% 7.6% 28 Comparab
Slide 29: Improved Profit Thanks to Kespro and Grocery Stores
GROCERY TRADE Q2 IMPROVED PROFIT THANKS TO GOOD DEVELOPMENT IN KESPRO AND GROCERY STORES • Kespro’s performance continued strong, sales growth 29.4% • Sales to K Group grocery stores grew by 1.0% • Consumer online grocery sales down by 8.8% from last year’s exceptional levels • K-Citymarket’s home a
Slide 30: Grocery Trade: Market and Operating Environment
GROCERY TRADE MARKET AND OPERATING ENVIRONMENT Despite inflation, food’s share of consumption expenditure expected to continue to stay low • Shopping in grocery stores returning to normal levels Food’s share of consumption expenditure % in Finland • Foodservice market returning to normal as restrict
Slide 31: Kesko a Strong Operator in All Areas of Food Trade
KESKO A STRONG OPERATOR IN ALL AREAS OF FOOD TRADE We are able to meet various differing customer needs • Interest towards quality food has grown, and the trend continues • Popularity of eating out and high-quality ready meals continues to grow • At the same time, price is an increasingly important
Slide 32: Total Finnish Food Trade Market Some €20 Billion
GROCERY TRADE TOTAL FINNISH FOOD TRADE MARKET SOME €20 BILLION Kesko the only operator that is strong in all three areas 2% • Sales heavily focused on grocery stores, 88% of total sales 10 % • Foodservice wholesale to companies and public operators the fastest growing area 88 % • Consumer online gro
Slide 33: Building and Technical Trade: Focus on B2B Trade Led to a Record Result
BUILDING AND TECHNICAL TRADE FOCUS ON B2B TRADE LED TO A RECORD RESULT 33
Slide 34: Building and Technical Trade: Net Sales Grew by 8.6%
BUILDING AND TECHNICAL TRADE NET SALES GREW BY 8.6% + €106 million € million € million 4,694 4,388 1,335 1,229 11,200 200 1,133 1,102 1,124 4,000 4 000 924 800 33,000 000 400 0 22,000 000 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 2021 Q2/2022 rolling 12 months 34
Slide 35: Building and Technical Trade: Operating Profit €109.5 Million
BUILDING AND TECHNICAL TRADE OPERATING PROFIT €109.5 MILLION € million + €1.1 million € million 349.3 318.0 120 108.4 109.5 300 104.5 90 73.8 200 61.5 60 31.4 100 30 0 0 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 2021 Q2/2022 rolling 12 months Operating 3.4% 8.8% 9.2% 6.7% 5.5% 8.2% 7.2% 7.4% margin 35 Com
Slide 36: Sales Growth Continued in B2B Trade
BUILDING AND TECHNICAL TRADE Q2 SALES GROWTH CONTINUED IN B2B TRADE • Onninen’s performance continued strong in all operating countries • B2B sales continued to grow also in building and home improvement trade, but the pace slowed down • B2C sales still at a good level, but clearly down from the pea
Slide 37: Building and Technical Trade: Market and Operating Environment
BUILDING AND TECHNICAL TRADE MARKET AND OPERATING ENVIRONMENT • Construction and renovation activity has continued high in Northern Europe • Growth comes from B2B trade • Volumes down in B2C trade, returning to normal pre-pandemic levels • Rise in prices causing the market to grow • Rising interest
Slide 38: Construction Increasingly Outsourced to Professionals
CONSTRUCTION INCREASINGLY OUTSOURCED TO PROFESSIONALS Kesko’s sales 80% B2B, 20% consumers • Construction and renovation have become increasingly technical and subject to B2C trade • Renovators tighter regulation: as a result, they are increasingly outsourced to professionals • Home and garden build
Slide 39: Serving Three Customer Segments According to Local Needs
SERVING THREE CUSTOMER SEGMENTS ACCORDING TO LOCAL CUSTOMER NEEDS Technical professionals Professional builders Consumers • Technical contractors • Construction companies • Renovators • Infrastructure • Renovation contractors • Home and garden builders • Industry • Decoration contractors • Decorator
Slide 40: Good Performance in All Operating Countries Has Yielded Record Results
GOOD PERFORMANCE IN ALL OPERATING COUNTRIES HAS YIELDED RECORD RESULTS COMPARABLE OPERATING PROFIT 2021 AND 2020 €180.7 million €30.5 million €70.4 million Profit improved in all €126.5 million €15.4 million €29.5 million countries Strong market leader in Good position achieved in Position in Norway
Slide 41: Car Trade: Active Measures Resulted in Improved Profitability
CAR TRADE ACTIVE MEASURES IN ALL CAR TRADE AREAS RESULTED IN IMPROVED PROFITABILITY 41
Slide 42: Car Trade: Net Sales Down by 20.6%
CAR TRADE NET SALES DOWN BY 20.6% - €60 million € million € million 1,028 11,000 000 300 289 260 261 917 229 219 208 200 800 100 0 600 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 2021 Q2/2022 rolling 12 months 42
Slide 43: Car Trade: Operating Profit €12.9 Million
CAR TRADE OPERATING PROFIT €12.9 MILLION - €1.4 million € million € million 52.2 49.6 20 50 18.2 14.3 40 15 12.9 11.2 30 10 9.9 8.6 20 5 10 0 0 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 2021 Q2/2022 rolling 12 months Operating 4.8% 4.3% 4.9% 7.0% 3.9% 5.6% 5.1% 5.4% margin 43 Comparable figures
Slide 44: Good Result in a Difficult Market
CAR TRADE Q2 GOOD RESULT IN A DIFFICULT MARKET • Net sales down due to availability issues with new cars • Sales continued strong despite the availability issues, order book at a record level • Profitability boosted by sales margin growth and cost-efficiency • Measures to grow the used car business
Slide 45: Car Trade: Market and Operating Environment
CAR TRADE Q2 MARKET AND OPERATING ENVIRONMENT • Car trade registrations down due to availability issues, used car sales also down • Service business demand stable, charging services growing • Share of electric and hybrid cars of passenger car sales growing fast, tax breaks and rise in fuel prices ac
Slide 46: Better Profitability Through Transformation
BETTER PROFITABILITY THROUGH TRANSFORMATION Significant profit improvement potential once car availability returns to normal levels • All operations turned to profit: new cars, used cars, and services • New cars: the most extensive and versatile selection of low-emission electric, hybrid and combust
Slide 47: Summary and Guidance
SUMMARY AND GUIDANCE 47
Slide 48: Quarter Result Improved for 13 Consecutive Quarters
KESKO’S QUARTER-RESULT HAS IMPROVED ON ITS COMPARISON PERIOD FOR 13 CONSECUTIVE QUARTERS THE IMPACT OF THE PANDEMIC ON KESKO’S BUSINESSES HAS CLEARLY DIMINISHED THE RECORD RESULT IS A STRONG INDICATION THAT OUR STRATEGY IS WORKING AND PEOPLE IN K GROUP ARE DOING AN EXCELLENT JOB UNDER CHANGING CIRCU
Slide 49: Guidance for 2022
GUIDANCE FOR 2022 Kesko estimates that its 2022 comparable operating profit will be in the range of €750 – 840 million. Previous estimate for 2022 comparable operating profit was €730 – 840 million. Comparable operating profit in 2021 was €776 million. 49
Slide 50: For Shopping to Be Fun
K FOR SHOPPING TO BE FUN