Kesko's presentation in SEB Nordic Seminar

SEB SeminarCFO Jukka Erlund

8.1.2015Copenhagen

Kesko today

Net sales Q4/13-Q3/14€9,166m

Food trade

Home and speciality goods trade

Building and home improvement trade

Car and machinery trade

Jukka Erlund2

• Kesko’s net sales €9.2bn

- K-Group’s sales €11.4bn

• 2,000 stores in eight

countries

• Over 1.3 million customer

visits every day

• Book value of real estate

€1.4bn

• Market capitalisation €2.9bn

(Dec. 30, 2014)

• 40,000 shareholders

• 23,000 employees

1/2015

Jukka Erlund3

Q4/2013-Q3/2014 key figures

Net sales, € million 9,166 9,412

Net sales performance, % -2.6 -3.1

Gross margin, % 13.8 13.6

Fixed costs*, € million 1,751 1,777

Operating profit*, € million 238 243

Profit before tax, € million 187 227

Return on capital employed*, % 10.0 9.7

Equity ratio, % 54.2 52.9

Capital expenditure, € million 197 228

* excluding non-recurring items

1/2015

Q4/13-Q3/14 Q4/12-Q3/13

Kesko’s divisionsQ4/2013-Q3/2014

1/2015Jukka Erlund4

Food trade

Building and home improvement trade Car and machinery trade


Net sales: €4,345 M

(47%)

Operating profit:

€204.0m

ROCE: 26.1%


(15%)

Operating profit:

€-26.7m

ROCE: -6.6%


(28%)

Operating profit:

€44.7m

ROCE: 6.3%


(11%)

Operating profit:

€31.1m

ROCE: 19.3%

• Combination of the building and home improvement

trade with the home and speciality goods trade

• Integration of the non-food part of the K-citymarket

chain into Kesko Food

• Focus is on e-commerce and online services

• The objective is to improve efficiency and to have a

more competitive multi-channel non-food trade

• Starting from 1 January 2015, the reportable

segments are the grocery trade, the home

improvement and speciality goods trade, and the car

and machinery trade

Kesko changed its divisional structure

Jukka Erlund5 1/2015

Strategic priorities

Jukka Erlund6

Strengthening

sales growth and

improving

profitability

E-commerce and

multi-channel service

models

Utilising Russia’s

business

opportunities

1/2015

Strong financial position and good dividend payment capacity

How retail is changing?

• Growth of e-commerce and multi-channel retailing in all productlines

• Consumers are increasinglyproduct-aware and demanding

• The importance of customer-oriented services as a competitive asset is emphasised

• Slow economic growth and consumers’ price awareness

• Increasing proportion of retailers’ private label brands

• Customer loyalty programmeswill be interactive and providemore individual rewards

Jukka Erlund7 13.11.2014

Retail sales of non-food products, excl. fuel(index of turnover, yoy, cumulative 12 months avg)

-4

-2

0

2

4

6

8

10

122

01

3M

01

20

13

M0

2

20

13

M0

3

20

13

M0

4

20

13

M0

5

20

13

M0

6

20

13

M0

7

20

13

M0

8

20

13

M0

9

20

13

M1

0

20

13

M1

1

20

13

M1

2

20

14

M0

1

20

14

M0

2

20

14

M0

3

20

14

M0

4

20

14

M0

5

20

14

M0

6

20

14

M0

7

20

14

M0

8

20

14

M0

9

20

14

M1

0

Estonia

Latvia

Lithuania

Finland

Sweden

Norway

8

Source: Eurostat

%

1/2015Jukka Erlund

Consumers’ expectations for own financesOwn finances in 12 months, Finland

0

2

4

6

8

10

12

14

16

1/0

07/0

01/0

17/0

11/0

27/0

21/0

37/0

31/0

47/0

41/0

57/0

51/0

67/0

61/0

77/0

71/0

87/0

81/0

97/0

91/1

07/1

01/1

17/1

11/1

27/1

21/1

37/1

31/1

47/1

4

Expectations for ownfinancesExpectation, 21st centuryaverage

Jukka Erlund9

Source: Statistics Finland

1/2015

Russian retail growth has exceededGDP growth

-10

-5

0

5

10

15

20

2000 2002 2004 2006 2008 2010 2012 1-9/2014

Retail GDP

1/2015Jukka Erlund10

Source: Bofit

%

Jukka Erlund11

Food trade

•Net sales €4,345 million, -0.6%

•Operating profit* €204.0 million (4.7%),

€+4.2 million

•Return on capital employed* 26.1%

*excl. non-recurring items

Total 913 stores

1/2015

Q4/2013-Q3/2014 K-Group 34.0%

S-Group 45.7%

Suomen Lähikauppa 7.0%

Lidl 6.6%

Others 6.8%

34.0%

Total market €16.6 billion

Source: Nielsen

Food trade


K-food stores’ focus areas:

• Superior fresh food

departments

• Pirkka and K-Menu private

labels

- Share of sales 19%

• Developments in e-

commerce, personalised

marketing and pricing

Food trade in Russia

Jukka Erlund13

• Business was begun in St. Petersburg

- First store in 12/2012

- Net sales for 2013 €71million

- Today, a total of five K-ruoka

stores

• Net sales target for 2017 €500 million

and a positive business result

• ‘Best in Fresh’ concept

− Extensive fresh foods selections

1/2015

Jukka Erlund


14 1/2015

Total 356 stores


•Operating profit* €-26.7 million (-2.0%), €-29.1 million

•Return on capital employed* -6.6%


Division of sales, 2013

Hypermarkets, non-food, €613 m

Department stores, €380 m

Sports, €272 m

Furniture, €196 m

Home electronics, €41 m

Shoes, €42 m

Q4/2013-Q3/2014

Improvement of Anttila’s profitability

• Customer driven renewal of K-citymarket

non-food

• Maintaining Intersport Finland’s and Asko’s

and Sotka’s strong brands, market

positions and profitability

• Improvement of Anttila’s profitability

- Concept renewal

- Closing down of 12 department stores

- 6 in 2014, 6 during Q1/2015

- Cost savings

- Personnel reductions total

approximately 400 FTEs



Jukka Erlund16

Total 339 stores

1/2015


•Operating profit* €44.7 million (1.7%), €+28.8 million



Q4/2013-Q3/2014


• Sales performance of Kesko’s building and

home improvement trade in January-

November -0.2%

- Performance in local currencies +3.2%

• Especially in Norway and Russia, sales

affected by exchange rate movements

- Impact on NOK -7%

- Impact on RUB -16%

• Significant differences in country-specific

market developments

• Strengthening B2B sales

• Strong development of

online services

• Cost efficiency and inventory programs


Building permits granted, mil. m3, moving annual total, Finland



Volkswagen 12.4%

Toyota 11.9%

Skoda 9.2%

Volvo 7.2%

Ford 7.1%

Nissan 6.2%

Audi 5.9%

Kia 5.9%

Seat 1.7%

Others 32.5%

20.0%

Car and machinery trade



•Operating profit* €31.1 million (3.0%),

€-4.1 million



Source: TraFi

Q4/2013-Q3/2014

Market share (passenger cars),

new registrations 1-11/2014

New registrations of passenger cars in Finland

Jukka Erlund


20 1/2015

Kesko continues the preparation of a real estate arrangement

• The intention is to sell some of the store sites

to a joint venture instead of a REIT.

• Expected to be implemented during H1/2015.

• Kesko would remain as one of its significant

investors and continue operating on the store

sites under long-term leases.

• The fair value of store sites planned to be sold

from Finland and Sweden has been specified

at a maximum of around €670 million.

• Launching depends also on whether it is

possible for Kesko to achieve such terms and

conditions in the arrangement that are

economically justifiable.

• The sale of store sites is estimated to generate

a significant non-recurring profit.


Owned properties € 1,423 M

Strategic properties 53%

Standard properties 43%

Development properties 4%

Realisation properties 0%

Mikko Helander is Kesko Corporation's new Managing Director

• Kesko Corporation's Board of Directors has

appointed Mikko Helander, M.Sc. (Tech.), as

Kesko Corporation's Managing Director and

Kesko Group's President and Chief

Executive Officer as from 1 January 2015

• Helander joined Kesko as Kesko

Corporation's Executive Vice President and

Member of the Group Management Board

on 1 October 2014

• Helander has acted as the Chief Executive

Officer of Metsä Board Corporation and as a

Member of the Executive Management

Team of Metsä Group since 2006

• President and CEO Matti Halmesmäki will

retire on 31 May 2015


Contact information

• [email protected]

• www.kesko.fi/investors

• Twitter.com/Kesko_IR
