KESKO ROADSHOW CFO JUKKA ERLUND. LONDON 12 June 2015

Transcription

1 KESKO ROADSHOW CFO JUKKA ERLUND LONDON 12 June 2015

2 KEY FIGURES 2014 Net sales Operating profit* 9,071m 233m Equity ratio Liquid assets Return on capital employed* Book value of real estate 54.5% 598m 9.9% 1.4bn Personnel (FTE) Shareholders 19,976 39,869 * excl. non-recurring items 2

3 K-GROUP K-Group s sales 11.3bn Over 1.3 million customer visits every day Personnel 45,000 FOR SHOPPING TO BE FUN 3

4 KESKO NET SALES BY LINE OF BUSINESS 2014 Car trade 9% Agricultural trade 4% Sports trade 2% Furniture trade 2% Machinery trade 3% Grocery trade Finland 44% Building and home improvement trade 25% Grocery trade 4,754m Home improvement and speciality goods trade 3,000m Car and machinery trade 1,011m Kespro 9% Grocery trade Russia 1% 4

5 KESKO NET SALES BY COUNTRY 2014 Over 80% of net sales comes from Finland Belarus 1% Russia 4% Lithuania 4% Latvia 1% Estonia 1% Norway 5% Sweden 2% Finland 82% 5

6 NET SALES m % +11.1% +9.3% +3.3% -11.9% +3.9% +7.8% +2.4% -3.8% -2.6% Finland Other countries 6

7 OPERATING PROFIT m Operating profit excl. non-recurring items Non-recurring items 7

8 YEAR-ON-YEAR CHANGE IN FIXED COSTS EXCLUDING NON-RECURRING ITEMS 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% 10.3% 7.5% 8.0% 1.2% -2.0% -1.3% -1.0% -1.6% -1.9% -4.0% -4.5% -4.0% -4.4% 8

9 RETURN ON CAPITAL EMPLOYED MOVING 12 MO, EXCL. NON-RECURRING ITEMS % Grocery trade Home improvement and speciality Car and machinery Group total Capital goods trade trade employed: 1,013m 869m 161m 2,344m 9 Jukka Erlund

10 STRONG FINANCIAL POSITION Q1/2015 Q1/2014 Liquid assets 506m 532m Interest bearing net debt 41m 25m Equity ratio 51.5% 53.2% Expected cash flow 405 million from real estate arrangement Strong cash position enables growth and good dividend yield 10

11 EARNINGS / SHARE AND DIVIDEND 3.9% 3.7% 4.6% 4.8% 5.2% 5.0% Earnings / share excl. non-recurring items % Effective dividend yield Dividend 11

12 FINANCIAL TARGETS AND CAPITAL EXPENDITURE Return on capital employed 14% Return on equity 12% Interest bearing net liabilities / EBITDA < 2.5 Capital expenditure in approximately 1 billion Excluding possible acquisitions Dividend policy: Kesko Corporation distributes at least 50% of its earnings per share excluding non-recurring items as dividends, taking however the company's financial position and operating strategy into account. 12

13 ROCE AND ROE EXCL. NON-RECURRING ITEMS target ROCE ROE 13

14 CAPITAL EXPENDITURE BACK TO NORMAL LEVEL m average Capital expenditure in store sites Acquisitions Other capital expenditure 14

15 IMPROVING PROFITABILITY Profitable growth in three strategic areas Divestment of Anttila Improving cost efficiency Enhanced sourcing operations Efficient support functions and synergies in core processes The objective is to achieve cost savings of at least 50 million in fixed costs by the end of

16 OPERATING ENVIRONMENT 16

17 RETAIL TRADE TRENDS IN OPERATING COUNTRIES 10 8 % (moving 12 mo) Estonia Lithuania Norway Sweden Latvia Finland -2 1/2013 7/2013 1/2014 7/2014 1/ Source: Eurostat, excl. motor vehicles and fuels 5/2015 Jukka Erlund

18 CONSUMER CONFIDENCE IN FINLAND Expectations for own finances Expectation, 21st century average /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 1/15 Source: Statistics Finland 18

19 BUSINESS ENVIRONMENT SLOWLY RECOVERING Finland Decline of purchasing power will level off, but is not expected to improve significantly in the next few years Skandinavia and the Baltic countries Steady economic growth is expected to continue Belarus Consumers purchasing power is expected to strengthen, hyperinflation is expected to ease 19

20 OPPORTUNITIES AND RISKS IN RUSSIA The world s richest country in terms of raw material reserves Around 150 million consumers and 13 metropolitan cities As yet, political and economical risks are greater than normal The economy has potential for strong growth as soon as the political situation is normalised 20

21 RETAIL SALES IN RUSSIA, RUB, bn Source: PMR Online Non-food products Food, beverages and tobacco

22 PORTFOLIO STRATEGY 22

23 KESKO STRATEGIC GROWTH AREAS Grocery trade Finland Russia Kespro, horeca business Building and home improvement trade Europe Car trade Finland The Baltic countries, primarily Estonia 23

24 INVESTING IN STRATEGIC GROWTH AREAS Good profitability achieved in all strategic growth areas Investments in range of 300 million / year, excluding potential acquisitions Also acquisitions are considered in all three strategic growth areas 24

25 KEY STRATEGIC OBJECTIVES Turning the market share in the Finnish grocery trade around Increasing the building and home improvement trade in Europe Strengthening the market leadership in the Finnish car trade The best omni-channel customer experience in the trading sector One unified Kesko, harvesting synergies 25

26 ALL BUSINESSES WILL BE DEVELOPED FURTHER Furniture trade Finland and Estonia Shoe trade Finland Agricultural trade Finland Sports trade Finland and Russia Machinery trade Finland and the Baltic countries 26

27 MAXIMISING VALUE CREATION ALSO IN OTHER BUSINESSES Important to have the best platform for Kesko s small and medium sized businesses to succeed in tight competition All options which improve competitiveness of other businesses and retailer entrepreneurs are possible 27

28 REAL ESTATE ARRANGEMENT TO BE CLOSED Kesko has agreed to set up a joint real estate investment company with AMF Pensionsförsäkring and Ilmarinen The combined fair value is 652 million and the properties owned by Kesko Group companies account for 485 million Cash flow to Kesko will be around 405 million Closing expected to take place in June 28

29 GROCERY TRADE 29

30 KESKO GROCERY TRADE KEY FIGURES IN 2014 Kespro 17% Net sales 4,754m Grocery trade Russia 2% Operating profit 223m Operating margin 4.7% ROCE 22.2% Grocery trade Finland 81% 30

31 KESKO QUALITY LEADER IN GROCERY High market share of 33% in Finland New customer focused strategy clearly differentiates Kesko in the market already improving market share development Steady and strong operating profit and cash flow Successful business concept in Russia Kesko is the most responsible food retailer in the world 31

32 STRATEGIC OBJECTIVES OF THE GROCERY TRADE Turning the market share in the Finnish grocery trade around Further improving quality and service level Investments to improve the K-supermarket and K-market store network Customer focused renewal of the K-citymarket concept Improving price competitiveness and price image Offering leading digital services in grocery Developed retailer business model 32

33 STRATEGY FOR RUSSIA Increasing operations and improving profitability in the St. Petersburg area Active in acquiring store sites K-ruoka is the best food store in the St. Petersburg area Identifying new growth possibilities in the Moscow area and possibly in other metropolitan cities in Russia 33

34 INCREASING THE HORECA BUSINESS Organic growth through strong international cooperation Differentiating the selection with private label products Supporting the service counter offering of the K-food stores Searching for expansion alternatives in Finland and the neighbouring areas 34

35 BUILDING AND HOME IMPROVEMENT TRADE 35

36 HOME IMPROVEMENT AND SPECIALITY GOODS TRADE 2014 Net sales 3,000m Operating profit 63m Operating margin 2.1% ROCE 7.9% Furniture trade 176m 6% Shoe trade 20m 1% Sports trade 186m 6% Building and home improvement trade Belarus 125m 4% Agricultural trade 372m 12% Building and home improvement trade Russia 250m 8% Others 20m 1% Building and home improvement trade Baltics 443m 15% Building and home improvement trade Finland 785m 26% Building and home improvement trade Scandinavia 625m 21% 36

37 PROFITABLE GROWTH IN BUILDING AND HOME IMPROVEMENT TRADE Market share in Finland over 40% Market #1 or #2 in Finland, Norway, Estonia, Latvia, Lithuania and Belarus Eight consecutive quarters of improving profitability Strong position in B-2-B trade #1 in Finland, Norway and Estonia Operating profit, million

38 300 STORES IN EIGHT COUNTRIES Norway 671m 82 stores Finland 1,190m 138 stores TOTAL RETAIL SALES 2,881m Sweden 197m 20 stores Estonia 78 M 8 stores Lithuania 317m 19 stores Latvia 53m 8 stores Russia 250m 13 stores Belarus 125m 11 stores 38

39 STRATEGIC OBJECTIVES OF THE BUILDING AND HOME IMPROVEMENT TRADE Kesko #5 in Europe strong potential for further growth organically or through acquisitions Providing excellent services from the same store network to the three different customer segments A common core for all countries to ensure efficient operations Offering the best omni-channel digital services 39

40 40 CAR TRADE

41 CAR AND MACHINERY TRADE 2014 Konekesko Baltics 96m 9% Net sales 1,011m Konekesko Finland 161m 16% Operating profit 30m Operating margin 2.9% ROCE 18.3% VV-Auto 756m 75% 41

42 THE CAR TRADE IS ONE OF KESKO S THREE STRATEGIC GROWTH AREAS VV-Auto s market share in the Finnish passenger car and van trade has risen from 15% to 21% within ten years Throughout recent years, Volkswagen has been the best selling car brand in Finland and Audi has been number one in its competitive segment VV-Auto s retail net sales have quadrupled within ten years from 100 million to 400 million VV-Auto s profitability has remained at a good level despite the difficult market situation 42 42

43 PASSENGER CAR MARKET IN FINLAND Market Share in 2014 Average CO2 emissions of passenger cars in 2014: 128 g/km Diesel cars 40%, petrol cars 60% Only 200 electric cars Golf segment 50% of total market Increasing segment, SUV 20% of total market Average age of registered cars in Finland 13.5 years Volkswagen 12.3% Toyota 11.9% Skoda 9.2% Volvo 7.3% Ford 7.0% Nissan 6.1% Audi 6.0% Kia 5.7% Seat 1.7% Others 32.8% Source: TraFi (Finnish Transport Safety Agency) 43

44 STRATEGIC OBJECTIVES OF THE CAR TRADE Co-operation with Volkswagen AG: Volkswagen aims to be the biggest car manufacturer by Volkswagen is the biggest R&D investor in the world VV-Auto will focus on Volkswagen Group's car brands Sales growth and growing market share in Finland and in the Baltics Increasing retail sales by investing in new sales and service channels Developing customer loyalty with new finance and service models The best omnichannel customer experience in car trade 44

45 45

46 BASIC INFORMATION Established in 1940 Listed on the Helsinki Stock Exchange (Nasdaq Helsinki) in ,000 shareholders 27% of all shares owned by non-finnish 39% of B-shares owned by non-finnish Market capitalisation 3.8 billion (March 31, 2015) Share series: A and B voting rights 10:1 Number of shares Voting rights A shares 31.7% B shares 68.3% A shares 82% B shares 18% 46

47 SHAREHOLDERS % 1 K-retailers Association 3,770, Vähittäiskaupan Takaus Oy 3,491, Kruunuvuoren Satama Oy 3,438, Ilmarinen Mutual Pension Insurance Company 2,110, Valluga-sijoitus Oy 1,340, Varma Mutual Pension Insurance Company Foundation for Vocational Training in the Retail Trade 1,130, ,073, Elo Pension Company 1,056, Oy The English Tearoom Ab 1,000, Kesko Oyj 876, The largest registered shareholders At 4/2015 by number of shares 47

48 REAL ESTATE IN 2014 Owned properties Country Area, 1,000 m 2 Classification Finland 770 Other Nordic countries 117 Baltic countries and Belarus 113 Russia 164 Total Carrying amount 1,164 1,430 M Strategic properties 53% Standard properties 43% Leased properties total 1,000 m 2 2,958 Development properties 4% Realisation properties 0% 48

49 THE WORLD S MOST SUSTAINABLE RETAIL OPERATOR 49

50 KESKO IS THE MOST RESPONSIBLE FOOD AND STAPLES RETAILER IN THE WORLD In The Global 100 Most Sustainable Corporations in the World list since 2005 In the Sustainability Yearbook 2015, 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 At the top of the Nordic Carbon Disclosure Leadership climate index in

51 OPERATING MARGIN EXCL. NON-RECURRING ITEMS BY DIVISION 1-3/ / / / / 2015 Grocery Home improvement and speciality goods Car and machinery Total /2015

52 KEY EVENTS 1-3/2015 Sales of the grocery trade increased slightly and profitability remained at a good level Profitability improved markedly in the home improvement and speciality goods trade, sales increased in local currencies and market share grew especially in Finland Divestment of Anttila will significantly improve Kesko s profitability, but did not yet have a material impact on the Q1 profit In the car trade, profitability remained at a good level Kesko s financial position is very strong 52

53 PROFIT FOR 1-3/ / /2014 Net sales, m 2,082 2,129 Change in net sales, % Operating profit excl. non-recurring items, m Operating margin excl. non-recurring items, % Non-recurring items, m Operating profit, m Net financial items, m 0-2 Income tax, m -7 3 Net profit for the period, m Net profit for the period excl. non-recurring items, m

54 NET SALES FOR 1-3/2015 Home improvement and speciality goods trade Car and machinery trade 261m 13% 722m 35% 1,103m 53% Grocery trade 54

55 NET SALES FOR 1-3/2015 m 2,500 2,129 2,000 2, % 1,500 1, Q1/2014 Q1/2015

56 OPERATING PROFIT FOR 1-3/2015 EXCL. NON-RECURRING ITEMS m Q1/2014 Q1/

57 FINANCIAL POSITION 1-3/ /2014 Equity ratio, % Liquid assets, m Capital expenditure, m Interest-bearing net liabilities, m Inventories, m Return on capital employed*, % * excl. non-recurring items, rolling 12 mo 57

58 GROCERY TRADE m Net sales m 1,200 1,000 1,102 1, Operating profit excl. non-recurring items Q1/2014 Q1/ Q1/2014 Q1/

59 GROCERY TRADE K-food stores have lowered the prices of some 650 products nevertheless, the sales of the grocery trade division increased slightly and its profitability remained at a good level In a consumer survey, the perception of the K-Group as Finland s best food expert increased significantly in the first quarter consumers are interested in both price and quality Kespro s market share grew and profitability remained at a good level In Russia, net sales were up 24% in the local currency 59

60 HOME IMPROVEMENT AND SPECIALITY GOODS TRADE m Net sales m Operating profit excl. non-recurring items Q1/2014 Q1/ Q1/2014 Q1/

61 HOME IMPROVEMENT AND SPECIALITY GOODS TRADE Market position of K-rauta and Rautia strengthened in Finland and market share is already in excess of 40% In Sweden, the profitability of the home improvement trade continued to improve In Russia, the sales of the home improvement trade were up 17% in roubles and operating profit improved markedly The divestment of Anttila will significantly improve Kesko s profitability, but it did not yet have a material impact on the Q1 profit 61

62 CAR AND MACHINERY TRADE m Net sales m Operating profit excl. non-recurring items Q1/2014 Q1/ Q1/2014 Q1/

63 CAR AND MACHINERY TRADE Profitability of the car trade remained at a good level Market share of the car trade 18.8% Volkswagen the most registered car brand in Finland The Car of the Year, VW Passat, is selling excellently Audi continues as number one in its competition group 63

64 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 (4/2015-3/2016) in comparison with the 12 months preceding the reporting period (4/2014-3/2015). The general economic situation and the expected trend in consumer demand vary in Kesko s different operating countries. In Finland, demand in the trading sector is expected to be weak also in the current year and the tight competitive situation in the grocery trade and the speciality goods trade is expected to continue. In Sweden, Norway and the Baltic countries, the growth in demand in the trading sector is expected to continue. In Russia, the economic situation and consumers purchasing power will weaken. Kesko Group's net sales for the next 12 months are expected to be lower than the level of the preceding 12 months and the operating profit excluding nonrecurring items for the next 12 months is expected to exceed the level of the preceding 12 months 64

65 CONTACT INFORMATION Twitter.com/Kesko_IR 65