KESKO ROADSHOW CFO JUKKA ERLUND Q3/2015

Transcription

1 KESKO ROADSHOW CFO JUKKA ERLUND Q3/2015

2 KEY FIGURES 2014 Net sales Operating profit* 9,071m 233m Equity ratio Liquid assets Return on capital employed* 54.5% 598m 9.9% 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 Agricultural and machinery trade 7% Sports trade 2% Furniture trade 2% Car trade 9% Grocery trade Finland 44% Building and home improvement trade 25% Grocery trade 4,754m Home improvement and speciality goods trade 3,568m Car trade 766m 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 15% 10% 5% 0% 10.3% 7.5% 8.0% 1.2% -5% -10% -15% -4.0%-4.5%-4.0% -2.0% -1.3%-1.0% -1.6% -1.9% -4.4% -10.6% 8

9 % RETURN ON CAPITAL EMPLOYED MOVING 12 MO, EXCL. NON-RECURRING ITEMS Grocery trade 4.9 Home improvement and speciality goods trade 29.8 Car trade 10.9 Group total 9

10 STRONG FINANCIAL POSITION Q2/2015 Q2/2014 Liquid assets 843m 461m Interest bearing net debt -359m 78m Equity ratio 52.2% 52.3% Cash flow 403 million from real estate arrangement Strong cash position enables growth and good dividend yield 10

11 EARNINGS / SHARE AND DIVIDEND % 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 Capital expenditure in store sites Acquisitions Other capital expenditure average 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 10,0 8,0 % (rolling 12 mo) 6,0 4,0 2,0 0,0 Estonia Lithuania Sweden Norway Latvia Finland -2,0 Source: Eurostat, excl. motor vehicles and fuels 17

18 odotukset omasta taloudesta seuraavan 12 kk:n kuluttua CONSUMER CONFIDENCE IN FINLAND 16 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 7/15 18 Lähde: Tilastokeskus Source: Statistics Finland

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 INVESTING IN STRATEGIC GROWTH AREAS Grocery trade (Finland, Russia, Kespro) Building and home improvement trade (Europe) Car trade (Finland, the Baltic countries) 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 23

24 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 24

25 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 Furniture trade (Finland and Estonia) Agricultural trade (Finland) Machinery trade (Finland and the Baltic countries) Shoe trade (Finland) Sports trade (Finland and Russia) All options which improve competitiveness of other businesses and retailer entrepreneurs are possible 25

26 REAL ESTATE ARRANGEMENT COMPLETED The joint real estate investment company established by Kesko, AMF Pensionsförsäkring and Ilmarinen started operating in June The combined fair value was 652 million and the properties owned by Kesko Group companies accounted for 485 million Cash flow to Kesko was 403 million 26

27 27 GROCERY TRADE

28 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% 28

29 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 29

30 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 30

31 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 31

32 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 32

33 HOME IMPROVEMENT AND SPECIALITY GOODS TRADE 33

34 HOME IMPROVEMENT AND SPECIALITY GOODS TRADE 2014, EXCL. ANTTILA Net sales 3,245m Operating profit 64m Operating margin 2.0% ROCE 7.4% Furniture trade 176m Shoe trade 20 Konekesko Baltics 96m Konekesko Finland 161m Agricultural trade 372m Sports trade 186m Building and home improvement trade Belarus 125m Building and home improvement trade Russia 250m Others 20m Building and home improvement trade Baltics 443m Building and home improvement trade Finland 785m Building and home improvement trade Scandinavia 625m 34

35 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

36 300 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 36

37 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 37

38 CAR TRADE 38

39 CAR TRADE 2014 Market Share in 2014 Net sales 766m Operating profit 29m Operating margin 3.8% ROCE 30.1% 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% 39

40 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 40

41 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 41

42 THE WORLD S MOST SUSTAINABLE RETAIL OPERATOR 42

43 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 FTSE4Good index focusing on responsible investment since 2009 Included in the Dow Jones sustainability indexes DJSI World and DJSI Europe At the top of the Nordic Carbon Disclosure Leadership climate index in

44

45 BASIC INFORMATION Established in 1940 Listed on the Helsinki Stock Exchange (Nasdaq Helsinki) in ,000 shareholders 28% of all shares owned by non-finnish 40% of B-shares owned by non-finnish Market capitalisation 3.0 billion (June 30, 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% 45

46 SHAREHOLDERS % % 1 K-retailers Association 3,793, Vähittäiskaupan Takaus Oy 3,491, Kruunuvuoren Satama Oy 3,438, Ilmarinen Mutual Pension Insurance Company 2,050, The largest registered shareholders At 6/2015 by number of shares 5 Valluga-sijoitus Oy 1,340, Varma Mutual Pension Insurance Company 1,130, Foundation for Vocational Training 7 in the Retail Trade 1,080, Oy The English Tearoom Ab 1,000, Elo Pension Company 896, Kesko Oyj 876,

47 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% 47

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

49 TREND IN FOREIGN OWNERSHIP, % (31.12.) % Q2/2015 All shares B share 49

50 UNEMPLOYMENT RATE Source: Statistics Finland 50

51 RETAIL TRADE, TREND DEVELOPMENT Turnover Volume index 51

52 DAILY CONSUMER GOODS TRADE, TREND DEVELOPMENT Turnover Volume index 52

53 GRANTED PERMITS AND STARTED BUILDINGS, MIL. M3, MOVING ANNUAL TOTAL *) The data is based on estimation Source: Statistics Finland 53

54 NEW REGISTRATIONS OF PASSENGER CARS IN FINLAND Source: Statistics Finland 54

55 INTERIM REPORT JANUARY-JUNE

56 KEY EVENTS IN Q2 K-food stores market share is estimated to have increased Profitability of the home improvement and speciality goods trade continued to improve Real estate arrangement was completed as planned, positive cash flow effect 403 million Liquid assets rose to 843 million, Kesko has a very strong financial position New strategy was published 56

57 FINANCIAL PERFORMANCE Q2/ 2015 Q2/ 2014 H1/ 2015 H1/ 2014 Net sales, m 2,227 2,371 4,310 4,499 Operating profit, m Operating profit excl. non-recurring items, m Operating margin excl. non-recurring items, % Net profit for the period, m Net profit for the period excl. nonrecurring items, m

58 NET SALES IN LOCAL CURRENCIES EXCL. ANTTILA IN Q2-2.2% AND H1-0.8% TOTAL CHANGE FOR Q2-6.0% AND FOR H1-4.2% m 5,000 4,000 4,499 4,310 3,000 2,000 1,000 2,371 2,227 0 Q2/2014 Q2/2015 Reported net sales,, incl. Anttila H1/2014 H1/

59 Q2 NET SALES BY DIVISION Car and machinery trade 277m 12% 1,149m 52% Grocery trade Home improvement and speciality goods trade 797m 36% 59

60 OPERATING PROFIT EXCL. NON-RECURRING ITEMS IMPROVED IN Q2 AND H1 m Q2/2014 Q2/2015 H1/2014 H1/

61 STEADY PROFIT PERFORMANCE CONTINUES OPERATING PROFIT EXCL. NON-RECURRING ITEMS m Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/

62 RETURN ON CAPITAL EMPLOYED INCREASES EXCL. NON-RECURRING ITEMS, ROLLING 12 MO % Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/

63 STRONG CASH FLOW ALSO WITHOUT REAL ESTATE ARRANGEMENT m Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Cash flow after capital expenditure Q1/ Q2/

64 FINANCIAL POSITION Equity ratio, % Liquid assets, m Interest-bearing net liabilities, m Capital expenditure, m Return on capital employed*, % Return on equity*, % * Excl. non-recurring items, rolling 12 mo 64

65 65 GROCERY TRADE

66 NET SALES FOR Q2 AND H1 m 2,500 2,000 2,304 2,252 1,500 1,000 1,202 1, Q2/2014 Q2/2015 H1/2014 H1/

67 OPERATING PROFIT EXCL. NON-RECURRING ITEMS FOR Q2 AND H1 m Q2/2014 Q2/2015 H1/2014 H1/

68 GROCERY TRADE IN Q2 K-food stores market share in Finland is estimated to have increased Profitability improved to 3.8% from the first months of the year (Q1: 3.2%) Sales in Russia increased by 36% in roubles Kespro s market share increased and profitability remained at a good level 68

69 MARKET SHARE IS ESTIMATED TO HAVE INCREASED SINCE APRIL, NO SIGNIFICANT CHANGE IN THE LONG TERM %

70 K-GROUP S PERFORMANCE IN THE GROCERY TRADE HAS BEEN GOOD Exceptional operating environment, consumers purchasing power has declined for three years Due to intense competition and consumers decreased purchasing power, food prices have fallen by 1% in 2015 K-Group has succeeded by investing in both price and quality As the economic cycle turns, the K-Group will have even better preconditions for success 70

71 HOME IMPROVEMENT AND SPECIALITY GOODS TRADE 71

72 NET SALES IN LOCAL CURRENCIES EXCL. ANTTILA IN Q2 +0.1% AND H1 +1.0% TOTAL CHANGE FOR Q2-10.4% AND FOR H1-8.0% m 2,000 1,500 1,651 1,519 1, Q2/2014 Q2/2015 Reported net sales,, incl. Anttila H1/2014 H1/

73 OPERATING PROFIT EXCL. NON-RECURRING ITEMS IMPROVED CLEARLY IN Q2 AND H1 m Q2/2014 Q2/2015 H1/2014 H1/

74 HOME IMPROVEMENT AND SPECIALITY GOODS TRADE IN Q2 Building and home improvement trade Market share is estimated to have increased in Finland, Sweden, the Baltics and Russia Operating profit has improved for nine consecutive quarters Best profit improvement was seen in Sweden In the speciality goods trade, K-maatalous improved its result in a difficult operating environment 74

75 CAR AND MACHINERY TRADE 75

76 NET SALES FOR Q2 AND H1 m Q2/2014 Q2/2015 H1/2014 H1/

77 OPERATING PROFIT EXCL. NON-RECURRING ITEMS FOR Q2 AND H1 m Q2/2014 Q2/2015 H1/2014 H1/

78 CAR AND MACHINERY TRADE IN Q2 Profitability remained at a good level despite the challenging operating environment Uncertainty related to car taxation has been removed Volkswagen continues as the market leader Net sales growth of the machinery trade 3.4%, profitability improved Yamarin boats had good sales performance 78

79 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 (7/2015-6/2016) in comparison with the 12 months preceding the reporting period (7/2014-6/2015). The general economic situation and the expected trend in consumer demand vary in Kesko s different operating countries. In Finland, the trading sector s performance is expected to remain weak and the tough competitive situation 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 are estimated to remain weak. 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. 79

80 THE TRAIN KEEPS RUNNING Loss-making department store trade Anttila s divestment Profitability problems in the building and home improvement trade in Sweden and Norway clear profitability improvement Real estate arrangement incomplete real estate arrangement completed Declining food trade market share market share is estimated to have increased Strategy new focused strategy 80

81 CONTACT INFORMATION Twitter.com/Kesko_IR 81