The document discusses Kesko Group's business performance and retail trends. It summarizes Kesko's Q3 2013-Q2 2014 key figures and sales performance by division. Kesko's food trade saw sales decline 1.4% in January-August. The home and speciality goods trade declined 9.3% due to changes in consumer behavior. Building and home improvement trade sales rose 0.2% excluding currency impacts. Car and machinery trade sales were flat. Looking ahead, Kesko plans to integrate its home/speciality goods and building/home improvement divisions to create a more competitive multi-channel offering, in response to the growing importance of e-commerce.

1. Analyst breakfast
CFO
Jukka Erlund
29.9.2014

2. Retail trade, trend development
115
110
105
100
95
90
85
80
75
70
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Turnover Volume index
2 Jukka Erlund 29.9.2014

3. Consumers’ expectations for own finances
Own finances in 12 months
0
2
4
6
8
10
12
14
16
1/00
7/00
1/01
7/01
1/02
7/02
1/03
7/03
1/04
7/04
1/05
7/05
1/06
7/06
1/07
7/07
1/08
7/08
1/09
7/09
1/10
7/10
1/11
7/11
1/12
7/12
1/13
7/13
1/14
7/14
Expectations for own finances
Expectation, 21st century
average
3 Jukka Erlund
Source: Statistics Finland
29.9.2014

4. Unemployment rate
Source: Statistics Finland
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5. Retail sales of non-food products,
excl. fuel
(index of turnover, yoy)
%
20
15
10
5
0
-5
2013M01
2013M02
2013M03
2013M04
2013M05
2013M06
2013M07
2013M08
2013M09
2013M10
2013M11
2013M12
2014M01
2014M02
2014M03
2014M04
2014M05
2014M06
2014M07
Estonia
Latvia
Lithuania
Finland
Sweden
Norway
Source: Eurostat
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29.9.2014

6. Q3/2013-Q2/2014 key figures
Net sales, € million 9,235
Net sales performance, % -2.7
Gross margin, % 13.8
Fixed costs*, € million 1,758
Operating profit*, € million 237
Profit before tax, € million 206
EPS*, € 1.75
Liquid assets, € million 461
Return on capital employed*, % 9.9
Equity ratio, % 52.3
Capital expenditure, € million 181
* excluding non-recurring items
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29.9.2014

7. Operating margin excl. non-recurring
items by division
1-3/
2012
4-6/
2012
7-9/
2012
10-12/
2012
1-3/
2013
4-6/
2013
7-9/
2013
10-12/
2013
1-3/
2014
4-6/
2014
Food 3.4 3.5 4.6 4.0 4.6 4.6 5.1 4.2 4.6 4.8
Home and
speciality
goods
-3.5 -0.2 0.2 6.6 -5.2 -3.1 -0.6 4.9 -7.3 -6.3
Building and
home
improvement
-1.4 1.9 2.4 -1.6 -3.0 2.6 3.4 -0.2 -1.8 3.6
Car and
machinery
4.4 3.7 4.4 2.1 3.1 4.3 3.8 1.5 3.0 3.8
Total 1.0 2.4 3.2 2.9 0.9 2.9 3.5 2.8 0.9 2.9
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8. Kesko Group’s sales 1-8/2014
8 Jukka Erlund 29.9.2014
August 2014 1.1.-31.08.2014
€ million Change,
%
€ million Change, %
Food trade, total
363.6 -3.9 2,870.2 -1.4
Home and speciality goods trade, total
112.5 -8.5 820.7 -9.3
Building and home improvement trade, Finland
100.5 -6.7 838.3 0.1
Building and home improvement trade, other
countries
138.2 -2.7 984.9 0.3
Building and home improvement trade, total
238.7 -4.4 1,823.2 0.2
Car and machinery trade, total
78.1 -11.7 740.1 -1.2
Common operations and eliminations
-14.2 -110.1
Grand total 778.8 -5.6 6,143.9 -2.1
Finland, total 620.8 -5.7 4,993.0 -2.8
Other countries, total 158.0 -5.2 1,151.0 1.3
Grand total 778.8 -5.6 6,143.9 -2.1

9. 3 mo rolling sales performance
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Food trade
16%
12%
8%
4%
0%
-4%
-8%
9 Jukka Erlund
9%
6%
3%
0%
-3%
-6%
-9%
-12%
-15%
Home and speciality goods
trade
-12%
Building and home
improvement trade
40%
30%
20%
10%
0%
-10%
-20%
-30%
Car and machinery trade
29.9.2014

10. Strategic priorities
Strengthening
sales growth and
improving
profitability
Strong financial position and good dividend payment capacity
10 Jukka Erlund
E-commerce and
multi-channel service
models
Utilising Russia’s
business
opportunities
29.9.2014

11. Retail trends
• Growth of e-commerce and multi-channel
retailing in all product lines
• Consumers are increasingly product
conscious and demanding
• Importance of customer-oriented
services as a competitive tool
emphasized
• Slow economic growth and
consumers’ price awareness
• Increasing proportion of private
labels
• Customer loyalty programs to be
made interactive and provide more
individual rewards
11 Jukka Erlund 29.9.2014

12. Shopping via online 2004-2013
% from population of ages 16-74
Sometimes During 12 months During 3 months
Source: Statistics Finland
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29.9.2014

13. Food trade
Total 916 stores
•Net sales €4,356 million, +0.0%
•Operating profit* €203.7 million (4.7%),
€+10.6 million
•Return on capital employed* 25.7%
*excl. non-recurring items
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29.9.2014
Q3/2013-Q2/2014
Net sales, €M 1-6/
2014
Change,
%
Sales to K-food
stores
1,585 -3.4
Kespro 380 -2.8
K-ruoka Russia 51 ..
Total 2,112 -1.5
Operating
profit *, €M
1-6/
2014
1-6/
2013
Total 99.4 99.0
Operating
margin
4.7 4.6

14. Food trade
• Sales performance of Kesko’s food
trade in January-August -1.4%
- Two delivery days less than in the
previous year
- Zero price inflation
• Weakened purchasing power,
importance of price, private label
brands
• Renewal of fresh foods departments
• Responsibility
• Quick and easy shopping
• Online food retailing
14 Jukka Erlund 29.9.2014

15. Food trade in Russia
• 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
• Purchases mainly from local markets,
Finnish products and Pirkka have a
prominent position
− Majority of products not affected
by sanctions
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29.9.2014

16. Home and speciality goods trade
Q3/2013-Q2/2014
Jukka Erlund
16
Net sales, €M 1-6/
K-citymarket,
home and
speciality goods
Anttila 143 -16.1
Intersport, Finland 78 -10.5
Intersport, Russia 8 -21.9
Indoor 85 -3.0
Musta Pörssi 10 -37.2
Kenkäkesko 10 -7.5
Total 600 -10.0
Operating profit *,
€M
2014
267 -6.1
1-6/
2014
Change,
%
1-6/
2013
Total -41.0 -27.8
Operating margin -6.8 -4.2
Total 368 stores
•Net sales €1,390 million, -10.2%
•Operating profit* €-21.5 million (-1.5%),
€-26.9 million
•Return on capital employed* -5.2%
*excl. non-recurring items
29.9.2014

17. Home and speciality goods trade
• Sales performance of the home and speciality
goods trade in January-August -9.3%
• Change in customer behaviour most notably
visible in the home and speciality goods trade
• Consumer demand has weakened and
competition tightened at both physical and
online stores
• Key objective is to achieve growth in online
services and e-commerce
• Improving Anttila’s profitability
- Concept renewal
- Improvement in cost efficiency and
network adjustment
17 Jukka Erlund 29.9.2014

18. Building and home improvement trade
Q3/2013-Q2/2014
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Net sales, €M 1-6/
2014
Change,
%
Rautakesko, Finland 625 +1.6
K-rauta, Sweden 100 -3.0
Byggmakker,
220 -7.5
Norway
K-rauta, Estonia 36 +17.1
K-rauta, Latvia 25 +6.3
Senukai, Lithuania 137 +20.5
K-rauta, Russia 118 -8.1
OMA, Belarus 57 +14.4
Total 1,317 +1.2
Operating profit
*, €M
1-6/
2014
1-6/
2013
Total 16.2 2.9
Operating margin 1.2 0.2
Total 339 stores
•Net sales €2,623 million, -3.5%
•Operating profit* €39.0 million (1.5%),
€+29.1 million
•Return on capital employed* 5.5%
*excl. non-recurring items
29.9.2014

19. Building permits granted and building
starts, mil. m3, variable annual sum
* Preliminary data
Source: Statistics Finland
19 Jukka Erlund 29.9.2014

20. Development of the number of transactions
of dwellings in housing companies
80 000
70 000
60 000
50 000
40 000
30 000
20 000
10 000
0
2008 2009 2010 2011 2012 2013 1-6/2014
Whole country Greater Helsinki
Source: Statistics Finland
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21. Building and home improvement trade
• Sales performance of Kesko’s building and
home improvement trade in January-
August +0.2%
- Performance in local currencies +4.3%
• Especially in Norway and Russia, sales
affected by exchange rate movements
- Impact on NOK -8%
- Impact on RUB -14%
• Significant differences in country-specific
market developments
• Increasing e-commerce and online
services and strengthening B2B sales
21 Jukka Erlund 29.9.2014

22. Car and machinery trade
Q3/2013-Q2/2014
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Net sales, €M 1-6/
2014
Change,
%
VV-Auto 410 +3.4
Konekesko 146 -5.7
Total 556 +0.9
Operating profit *,
€M
1-6/
2014
1-6/
2013
Total 19.1 20.8
Operating margin 3.4 3.8
•Net sales €1,042 million, +0.4%
•Operating profit* €32.3 million (3.1%),
€-4.6 million
•Return on capital employed* 20.1%
*excl. non-recurring items
29.9.2014

23. Volkswagen 12.6%
Toyota 11.5%
Skoda 9.4%
Volvo 7.2%
Ford 7.0%
Audi 6.3%
Nissan 6.1%
Kia 5.7%
Mercedes-Benz 4.8%
Seat 1.7%
Others 27.7%
20.6%
Car and machinery trade
• Market trend in new registrations of
passenger cars in January-August
+2.7%
• Sales performance of Kesko’s car
and machinery trade in January-
August -1.2%
- VV-Auto +4.1%
- Konekesko -13.4%
• Market share of Volkswagen, Audi
and Seat continued to strengthen
− Strong brands
− Emphasis on after-sales
services
• Increasing number of online
services
• Challenging market situation in
machinery trade
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Market share (passenger cars),
new registrations 1-8/2014
29.9.2014

24. New registrations of passenger cars in
Finland
Source: Statistics Finland
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29.9.2014

25. Kesko to seek more competitive multi-channel
home and speciality goods trade
In the home and speciality goods trade and the building and home improvement trade, the
importance of e-commerce and online services has greatly increased and the improvement of
competitiveness necessitates major renewal. In response to these requirements, Kesko is
seeking synergies especially in the production of online services and the development of
concepts. At the same time, the planned changes will form a basis to improve profitability and
the organisational structure will be evaluated. Also the combination of the building and home
improvement trade with the home and speciality goods trade, as well as the integration of the
non-food part of the K-citymarket chain, currently part of the home and speciality goods
division, into Kesko Food operations, are planned.
The objective is to offer customers multi-channel building, interior decoration and home and speciality
goods stores and services. The aim of the planned integration of resources is to achieve better
customer satisfaction as well as improved competitiveness and profitability. In Kesko’s food trade, the
annual sales are around €4.4 billion, in the building and home improvement trade around €2.7 billion
and in the home and speciality goods trade around €1.4 billion. As at 30 June 2014, the food trade
employed 4,035 people, the building and home improvement trade 10,520 people and the home and
speciality goods trade 8,111 people.
The changes will be planned in more detail and the required cooperation negotiations will be
conducted during the rest of 2014. The aim in Kesko Group’s reporting is that starting from 1 January
2015, the reportable segments would be the grocery trade, the home improvement and speciality
goods trade, and the car and machinery trade. Kesko will publish comparatives according to the new
reporting structure in the first quarter of 2015.
President Terho Kalliokoski is responsible for the planning concerning the home improvement and
speciality goods trade and President Jorma Rauhala is responsible for the planning concerning the
25 grocery Jukka trade.
Erlund 29.9.2014

26. Thank you!
• IR@kesko.fi
• www.kesko.fi/investors
• Twitter.com/Kesko_IR
26 Jukka Erlund 29.9.2014