2. Kesko today
Net sales Q3/13-Q2/14
5 000
4 000
3 000
2 000
1 000
0
€9,235m
Operating profit excl.
non-recurring items
Q3/13-Q2/14 €237m
250
200
150
100
50
0
-50
Food trade
Home and speciality goods trade
Building and home improvement trade
Car and machinery trade
• Kesko’s net sales €9.2bn
- K-Group’s sales €11.5bn
• 2,000 stores in eight
countries
• Over 1.3 million customer
visits every day
• Book value of real estate
€1.4bn
• Market capitalisation €2.8bn
(June 30, 2014)
• 40,000 shareholders
• 24,000 employees
2 SVP Arja Talma
9/2014
€m
3. Kesko has 2,000 stores engaged in chain
operations in eight countries
SVP Arja Talma 9/2014
Total about 56m consumers
Food trade
• Finland, Russia
Home and speciality
goods trade
• Finland, Estonia, Latvia,
Russia
Building and home
improvement trade
• Finland, Sweden, Norway,
Baltic countries, Russia,
Belarus
Car and machinery trade
• Finland, Baltic countries
3
4%
2% 82%
1%
5%
1%
3%
1%
4. Business models
Suppliers
and service
providers
Retailer
entrepreneurs’
retail trade, 51%
Kesko’s own
retail trade,
27%
B2B sales,
22%
Consumers
• Store concepts and
business models
• Sourcing, logistics and
marketing services
• Store chain
management
• Store sites
•Retailer resources
• Support processes
4 SVP Arja Talma 9/2014
5. Strategic priorities
Strengthening
sales growth and
improving
profitability
Strong financial position and good dividend payment capacity
5 SVP Arja Talma
E-commerce and
multi-channel service
models
Utilising Russia’s
business
opportunities
9/2014
6. Focus on profitability in DIY and Home
and speciality goods
400
350
300
250
200
150
100
50
0
-50
Operating profit excl. non-recurring items
2007 2008 2009 2010 2011 2012 2013
Food trade Home and speciality goods trade
Building and home improvement trade Car and machinery trade
Common operations and eliminations
6 SVP Arja Talma
9/2014
€m
7. Expansion of Kesko’s business
operations in Russia
• Retail growth in Russia is estimated to exceed Nordic
countries’ growth figures also in the coming years
• Kesko has now 13 K-rauta stores in Russia and net
sales total about €300 million
• Kesko has now 4 K-ruoka stores in St. Petersburg, the
target is a network of 10 stores by 2015
• Launch of business operations has been better than
expected
• Changes in the business model, concept and network of
Intersport Russia to improve profitability
7 SVP Arja Talma 9/2014
12. Capital expenditures will be adjusted to
annual level of €200-300 million
€m
500
450
400
350
300
250
200
150
100
50
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Capital expenditure in store sites Acquisitions Other capital expenditure
12 SVP Arja Talma 9/2014
13. Strong financial position
Liquid funds €461m €474m
Interest bearing net debt €78m €113m
Equity ratio 52.3% 50.5%
Gearing 3.5% 5.1%
13 SVP Arja Talma
Q2/2014 Q2/2013
9/2014
15. Financial targets
The objectives Target level Realised 2013
Net sales growth Growth rate exceeding
that of the market
Realised**: Furniture trade and Car trade in
Finland
Return on equity* 12% 7.7%
Return on capital
employed*
14% 9.8%
Interest-bearing net
debt/EBITDA
< 3 -0.3
Equity ratio 40–50% 54.5%
*Excluding non-recurring items
**Kesko’s own estimate
15 SVP Arja Talma 9/2014
16. Future outlook
Estimates of the future outlook for Kesko Group's net sales and
operating profit excluding non-recurring items are given for the 12
months following the reporting period (7/2014-6/2015) in comparison
with the 12 months preceding the reporting period (7/2013-6/2014).
Future prospects for the general economic situation and consumer
demand continue to be characterised by significant uncertainty in
Kesko's operating area. Due to the weakened economic situation and
the decline in consumers' purchasing power, demand in the trading
sector is expected to remain weak.
Kesko Group's net sales and operating profit excluding non-recurring
items for the next 12 months are expected to remain at the level of the
preceding 12 months, unless the overall consumer demand weakens
significantly.
16 SVP Arja Talma 9/2014
20. Superior fresh foods departments
The most diversified
food selection for
families
20 SVP Arja Talma 9/2014
Service oriented fresh foods
market for home cooks
The freshest neighbourhood
store
Retailer’s online store,
citymarket.fi
Reliable food shopping regardless
of place and time
21. Pirkka – one of Finnish superbrands
• By far the most valued and best-known
store private label in Finland
• Launched in 1986
• Pirkka range comprises more than
2,200 products
– Some 100 of Pirkka products are
organic and some 40 are
Fairtrade products
• Introducing a new PL, K-Menu
• Total share of K-store PL-sales 19%
21 SVP Arja Talma 9/2014
22. Russian food market
• Market size some €255 billion
- Share of all retailing some 47%
• Operative EBITDA of peers 6-12%
22 SVP Arja Talma 9/2014
Retailer
Source: PMR
Revenues ’13,
€ bn
Magnit 13.4
X5 12.5
Auchan 7.2
Dixy 4.3
O’key 3.3
Metro 3.0
Lenta 2.0
23. K-ruoka
• Russian business operations started
in St. Petersburg in December 2012
- Total of 4 food stores and net
sales of € 71 million at the end of
2013
- Target is to open 3 new stores in
2014 and a network of 10 stores
by 2015
• Net sales target of the food trade
€500 million and positive result in
2017
• The basic concept is a large, better
than the average food store – ”Best in
Fresh”, with a selection of home and
speciality goods for everyday needs
23 SVP Arja Talma 9/2014
24. Home and speciality goods trade chains
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
24 SVP Arja Talma
9/2014
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
Q3/2013-Q2/2014
25. Strategic focus areas of home and
speciality goods trade
• Customer driven renewal of K-citymarket
home and speciality goods trade
• NetAnttila’s strong development and
improvement of Anttila’s profitability
- Expanding considerably the selection and
significantly improving customer
experience in online store
- Decisions are made to close 8 Anttila
department stores and 4 Kodin1
department stores
- Personnel reductions will total
approximately 400 full-time equivalents
• Maintaining Intersport Finland’s and Asko’s
and Sotka’s strong brands, market positions
and profitability
• Changes in the business model, concept and
network of Intersport Russia
• Increasing the share of e-commerce in all
chains
25 SVP Arja Talma 9/2014
26. Building and home improvement trade
Total 339 stores
Q3/2013-Q2/2014
•Net sales €2,623 million, -3.5%
•Operating profit* €39.0 million (1.5%), €+29.1 million
•Return on capital employed* 5.5%
26 SVP Arja Talma
9/2014
*excl. non-recurring items
27. Building and home improvement trade
market shares 2013
Sales by country in 2013
Finland, €1,718 m
Sweden, €207 m
Norway, €720 m
Estonia, €69 m
Latvia, €52 m
Lithuania, €266 m
Russia, €272 m
Belarus, €106 m
Market shares
Finland
Sweden
Norway
Estonia
Latvia
Lithuania
N-w and central
N-w and…
0 10 20 30 40
Russia
Belarus
27 SVP Arja Talma 9/2014
28. The biggest DIY-enterprises
in Europe 2013
14
12
10
8
6
4
2
Sources: Companies’ annual reports, companies’ webpages,
Baumarktmanager
NET SALES BN€
13.10 13.04
5.43
4.27
3.36 3.15
2.26
0
NET SALES € BN
28 SVP Arja Talma 9/2014
29. Strategic focus areas of building and
home improvement trade
• ’K-rauta makes it happen with you’
• Common selections, own brands
and reduced inventories
• Increasing B2B sales
• Strong development of
online services
• Cost efficiency and inventory
programs
• Nordic retailer business model
29 SVP Arja Talma 9/2014
30. Russian DIY market
• Retail chains share of DIY sales
about 50%
- Share of modern retail on the
increase
• K-rauta is the second largest
operator in St. Petersburg
- Targeting a network of some 10
stores
• The focus of the expansion will be
Moscow and cities nearby Moscow
• Net sales target of €500 million and
positive result in 2017
30 SVP Arja Talma 9/2014
31. Volkswagen 12.4%
Toyota 11.7%
Skoda 9.5%
Volvo 7.3%
Ford 6.9%
Audi 6.5%
Nissan 6.1%
Kia 5.6%
BMW 4.9%
Seat 1.6%
Others 27.5%
20.9%
Car and machinery trade
•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
31 SVP Arja Talma 9/2014
Source: TraFi
Q3/2013-Q2/2014
Market share (passenger cars),
new registrations 1-6/2014
32. Kesko as an investment
32 SVP Arja Talma 9/2014
33. Basic information
• Established in 1940
• Listed on the Helsinki Stock Exchange (NASDAQ OMX Helsinki) in 1960
• Employees 24,500, of whom 53% work in Finland and 47% outside Finland
• 40,000 shareholders
– 29% of all shares owned by non-Finnish
– 42% of B-shares owned by non-Finnish
• Market capitalisation €2.8 billion (June 30, 2014)
• Share series: A and B – voting rights 10:1
Number of shares
A
shares
31.7%
B
shares
68.3%
Voting rights
B shares
18%
A shares
82%
33 SVP Arja Talma 9/2014
34. Shareholders
Ownership by shareholder category
At 6/2014
The largest registered shareholders
At 6/2014 by number of shares
%
Non-financial corporations and housing
corporations 26%
Financial and insurance corporations 7%
General Government 5%
Households 27%
Rest of the world 29%
Others 6%
1 The K-Retailers´ Association 3,674,867 3.67
2 Vähittäiskaupan Takaus Oy 3,491,771 3.49
3 Kruunuvuoren Satama Oy 3,438,885 3.44
4 Valluga-sijoitus Oy 1,340,439 1.34
5 Elo Pension Company 1,192,968 1.19
6 Varma Mutual Pension
Insurance Company
1,130,986 1.13
7 Foundation for Vocational
Training in the Retail Trade
1,045,808 1.05
8 Kesko Oyj 1,002,735 1.00
9 Oy The English Tearoom Ab 1,000,000 1.00
10 Ilmarinen Mutual Pension
Insurance Company
841,587 0.84
34 SVP Arja Talma 9/2014
35. Real estate in 2013
Owned properties
Country
Area,
1,000 m2
Finland 758
Other Nordic countries 121
Baltic countries and Belarus 112
Russia 143
Total
Carrying amount
1,135
€1,423 M
Leased properties total
1,000 m2 2,963
Owned properties by region
35 SVP Arja Talma 9/2014
Finland 71%
Other Nordic
countries 6%
Baltic countries
and Belarus 3%
Russia 20%
Owned properties by division
Food 46%
Home and speciality
goods 14%
Building and home
improvement 30%
Car and machinery
5%
Others 5%
36. Kesko looks into setting up a real estate
investment trust
• Kesko is looking into selling some of the store sites it owns to a trust to be set up with
Kesko as one of its significant investors. Kesko Group would continue its operations in
the store sites under long-term leases signed in connection with their sales to the
trust.
• Kesko's objective is to set up a trust of mainly Kesko-owned store sites and shopping
centres in Finland, Sweden and Russia with a maximum fair value of approximately
€750 - 950 million. The trust is planned also to be made available to private investors.
Listing of units is also being assessed.
• The possible trust is expected to be launched in the course of 2014.
• The sale of store sites to the trust is estimated to generate a significant non-recurring
gain, the amount of which depends on the properties sold and return requirements
applied to them. These will be specified at a later stage in the assessment.
• Launching the real estate investment trust depends in addition to investor interest on
whether it is possible for Kesko to achieve such terms and conditions in the
arrangement that are economically justifiable for it, taking the Group's strong financial
position into account. Moreover, starting a real estate investment trust is subject to the
authorisation of the Financial Supervisory Authority.
36 SVP Arja Talma 9/2014
37. Reclassification of store sites
Old classification
Strategic properties 77%
Standard properties 19%
Development properties 4%
New classification
Strategic properties 53%
Standard properties 43%
Development properties 4%
Realisation properties 0%
37 SVP Arja Talma 9/2014
Key criteria for
strategic properties
• Catchment area
with over 100,000
inhabitants
• Store area over
2,000 m2
• Useful life over 10
years
• Development
possibilities
38. Kesko is one of the world's leading
companies in ESG
• In ’The Global 100 Most Sustainable Corporations in the World’ list since 2005.
• In the SAM (Sustainable Asset Management) Sustainability Yearbook 2013,
Kesko was classified into the bronze class in the Food & Drug Retailers sector.
• Included in the Dow Jones sustainability indexes DJSI World and DJSI Europe
since 2003.
• Included in the FTSE4Good index focusing on responsible investment since
2009.
• Best in its sector in the Nordic Carbon Disclosure Leadership climate index in
2011-2013.
• 2011-2013 World Finance Award for Best Corporate Governance in Finland
38 SVP Arja Talma 9/2014
39. Responsibility is an integral part of Kesko’s
strategy and key business operations
• Kesko’s updated responsibility programme includes objectives for
- responsible purchasing and sales
– sustainable choices and services for customers
– welfare in the workplace
– mitigation of climate change
– sustainable use of natural resources
– stakeholder inclusion.
• Statements and policies supporting the work of buyers and stores
include:
- Palm oil policy
- Stand on sandblasting of jeans
- Fish and shellfish statement
- Timber policy
• In supplier assessment for high-risk countries, Kesko uses
international auditing systems, BSCI auditing and SA8000
certification.
39 SVP Arja Talma
9/2014
41. Kesko’s operating profit excluding non-recurring
items for January-June at
previous year’s level
• Kesko’s net sales were €4.5 billion, change -1.8%
– Sales increased in the building and home improvement trade and in the
car trade
• Operating profit excl. non-recurring items was €86.7 million (€88.4 million)
– Profitability improved significantly in the building and home improvement
trade, but continued to weaken in Anttila
– Enhancement measures continued in all business operations
– Return on capital employed excl. non-recurring items was 9.9% (9.3%)
• Strong financial position
– Liquid assets €461 million (€474 million)
– Equity ratio 52.3% (50.5%)
• Total net sales from Russia are expected to exceed €1 billion in 2017 and
operations are expected to be profitable
• Kesko Group's net sales and operating profit excluding non-recurring items for
the next 12 months are expected to remain at the level of the preceding 12
months, unless the overall consumer demand weakens significantly
41 SVP Arja Talma 9/2014
42. 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
42 SVP Arja Talma
Source: Statistics Finland
9/2014
43. Profit for 1-6/2014
43 SVP Arja Talma
1-6/2014 1-6/2013
Net sales, €m 4,499 4,580
Fixed costs excl. non-recurring items, €m 874 884
Operating profit excl. non-recurring items,
€m
87 88
Non-recurring items, €m -30 8
Net financial items, €m 1 -3
Income tax, €m 15 28
Net profit for the period, €m 42 65
9/2014
45. Net sales by division (€m)
45 SVP Arja Talma
1-6/2014 Change 4-6/2014 Change
Food trade 2,112 -1.5% 1,106 +0.6%
Home and speciality
goods trade
600 -10.0% 288 -10.5%
Building and home
improvement trade
1,317 +1.2% 736 -0.6%
Car and machinery
trade
556 +0.9% 283 -6.0%
Group total 4,499 -1.8% 2,371 -2.1%
9/2014
49. Return on capital employed
excl. non-recurring items, moving 12 mo
SVP Arja Talma
-5.2%
5.5%
20.1%
9.9%
%
30
25
20
15
10
5
0
-5
-10
Home and Group total
speciality goods
trade
Food
trade
Car and
machinery trade
Building and
home
improvement
trade
49
25.7%
€792 m €412 m €713 m €160 m €2,384 m
Capital
employed:
9/2014
50. Steady profit performance
in the food trade
+0.6%
1,099 1,106
2,144 2,112
2400
2000
1600
1200
800
400
0
4-6/13 4-6/14 1-6/13 1-6/14
100
80
60
40
20
50 SVP Arja Talma
-1.5%
• Kesko Food’s net sales down 1.5%
- Decreased purchasing power also
reflected on the food trade
- Increase in prices has stopped
- Sales of K-food stores below market
performance
• In Russia, sales and profitability of food
stores better than expected
• Profitability improved by cost savings
• Capital expenditure €47 million
(€44 million)
• Four new K-supermarkets and two new
K-markets opened in Finland
50.8 52.9
99.0 99.4
0
4-6/13 4-6/14 1-6/13 1-6/14
9/2014
Net sales, €m
Operating profit excl.
non-recurring items, €m
51. Market situation in the home and speciality
goods trade continued to deteriorate
322 288
667
600
800
600
400
200
0
4-6/13 4-6/14 1-6/13 1-6/14
-10.0
-18.3
-27.8
-41.0
0
-10
-20
-30
-40
-50
4-6/13 4-6/14 1-6/13 1-6/14
51 SVP Arja Talma
• Profitability of the home and speciality
goods chains negatively impacted by sales
decline
• Anttila's profit continued to decline and
was clearly loss-making
- Eight Anttila department stores and
four Kodin1 department stores to be
closed
- Decisions on a total reduction of
around 400 full-time equivalents in
department stores and centralised
functions
• Intersport Finland's profit remained at a
good level despite sales decline
• Sales of online stores increasing
- Musta Pörssi to concentrate on
e-commerce
• Capital expenditure €7 million (€14 million)
-10.0%
-10.5%
9/2014
Net sales, €m
Operating profit excl.
non-recurring items, €m
52. Sales and profit of the building and home
improvement trade on the increase
740 736
1,302 1,317
1500
1000
500
0
4-6/13 4-6/14 1-6/13 1-6/14
19.5
26.6
2.9
16.2
30
20
10
0
4-6/13 4-6/14 1-6/13 1-6/14
52 SVP Arja Talma
• In terms of local currencies, sales were
up in all countries, at 5.8% in total
• Market position of K-rauta and Rautia in
Finland continued to strengthen
• Operating profit was up from the
previous year due to sales increase and
cost savings
-Profit improved especially in foreign
operations
• Capital expenditure €27 million
(€22 million)
+1.2%
-0.6%
9/2014
Net sales, €m
Operating profit excl.
non-recurring items, €m
53. Volkswagen continued as market leader
-6.0%
301 283
+0.9%
551 556
800
600
400
200
0
4-6/13 4-6/14 1-6/13 1-6/14
30
20
10
53 SVP Arja Talma
• Market share of Audi, Volkswagen and
Seat 21.0% (21.1%)
• VV-Auto’s net sales performance +3.4%
- Market performance of new
registrations of passenger cars and
vans +4.6% in Finland
• Konekesko’s net sales performance
-5.7%, market performance declined in the
agricultural machinery trade
• Profitability of the car trade at a good level
due to sales increase and enhancement
13.0 measures
10.9
20.8 19.1
0
4-6/13 4-6/14 1-6/13 1-6/14
9/2014
Car and machinery trade:
Net sales, €m
Operating profit excl.
non-recurring items, €m
56. Operating profit as % of net sales
Operating margin
excl. non-recurring
items
Q3/13-
Q2/14,
% of net
sales
Q3/12-
Q2/13,
% of net
sales
Change,
pp
56 SVP Arja Talma 9/2014
Q2/14,
% of net
sales
Q2/13,
% of net
sales
Change,
pp
Food trade 4.7 4.4 0.2 4.8 4.6 0.2
Home and speciality
goods’ trade
-1.5 0.3 -1.9 -6.3 -3.1 -3.2
Building and home
improvement trade
1.5 0.4 1.1 3.6 2.6 1.0
Car and machinery
trade
3.1 3.6 -0.5 3.8 4.3 -0.5
Total 2.6 2.5 0.1 2.9 2.9 0.0
57. Kesko Group’s sales 1-7/2014
July 2014 1.1. -31.07.2014
€ million Change, % € million Change, %
Food trade, total 375.1 0.7 2,506.5 -1.0
Home and speciality goods trade, total 103.4 -5.7 708.2 -9.4
Building and home improvement trade, Finland 96.5 -3.4 737.8 1.2
Building and home improvement trade, other
139.6 -0.4 846.7 0.8
countries
Building and home improvement trade, total 236.1 -1.6 1,584.4 1.0
Car and machinery trade, total 92.9 -5.9 662.0 0.2
Common operations and eliminations -10.4 -95.9
Grand total 797.1 -1.5 5,365.1 -1.5
Finland, total 631.4 -1.1 4,372.1 -2.4
Other countries, total 165.7 -2.9 993.0 2.4
Grand total 797.1 -1.5 5,365.1 -1.5
57 SVP Arja Talma 9/2014
58. Maturities of interest-bearing liabilities
€ million
At 31 Dec.
2013 2014 2015 2016 2017
2018
and
later
Loans from financial institutions 27.3 0.6 24.4 0.2 0.1 1.9
Bonds 242.4 242.7
Private placement notes (USD) 100.3 43.5 26.1 17.4
Pension loans 31.9 5.8 5.8 5.8 5.8 8.7
Finance lease liabilities 18.8 7.6 2.8 2.7 2.6 3.2
Payables to K-retailers 113.4 113.4
Other interest-bearing liabilities 21.6 21.6
Unused commercial paper programmes, €359m
Two unused committed borrowing facilities, total €100m
58 SVP Arja Talma 9/2014
60. Development of value and volume of
retail trade sales, %
%
15
10
5
0
-5
-10
Source: Statistics Finland Value Volume
60 SVP Arja Talma 9/2014
61. Development of value and volume of
daily consumer goods trade, %
%
15
10
5
0
-5
-10
Value Volume
Source: Statistics Finland
61 SVP Arja Talma 9/2014
62. Building permits granted and building
starts, mil. m3, variable annual sum
* Preliminary data
Source: Statistics Finland
62 SVP Arja Talma 9/2014
63. New registrations of passenger cars in
Finland
Source: Statistics Finland
63 SVP Arja Talma
9/2014