KESKO ROADSHOW CEO MIKKO HELANDER Q4/2015
KESKO TODAY ROLLING 12 MO Net sales 8,780m Operating profit* 247m Personnel 21,812 Shareholders 38,853 Market capitalisation 3.1bn (Sep 30, 2015) * excl. non-recurring items 2
K-GROUP K-Group s sales 11.3bn Operations is eight countries Over 1.3 million customer visits every day Personnel 45,000 FOR SHOPPING TO BE FUN 3
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
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
NET SALES m 10000 8000 +5.8% +11.1% +9.3% +3.3% -11.9% +3.9% +7.8% +2.4% -3.8% -2.6% 6000 4000 2000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Finland Other countries 6
OPERATING PROFIT m 500 400 300 200 100 0-100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Operating profit excl. non-recurring items Non-recurring items 7
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% -8.4% -10.6% 8
% 30 25 20 15 10 RETURN ON CAPITAL EMPLOYED MOVING 12 MO, EXCL. NON-RECURRING ITEMS 5 0 19.9 Grocery trade 6.9 Home improvement and speciality goods trade 29.0 Car trade 11.3 Group total 9
STRONG FINANCIAL POSITION Q3/2015 Q3/2014 Liquid assets 858m 503m Interest bearing net debt -394m -3m Equity ratio 54.2% 54.2% Cash flow 403 million from real estate arrangement Strong cash position enables growth and good dividend yield 10
EARNINGS / SHARE AND DIVIDEND 2.0 3.9% 3.7% 4.6% 4.8% 5.2% 5.0% 1.78 1.84 1.68 1.47 1.5 1.40 1.30 1.20 1.20 1.65 1.50 1.0 0.5 0.71 0.90 0.0 2009 2010 2011 2012 2013 2014 Earnings / share excl. non-recurring items % Effective dividend yield Dividend 11
FINANCIAL TARGETS AND CAPITAL EXPENDITURE Return on capital employed 14% Return on equity 12% Interest bearing net liabilities / EBITDA < 2.5 Capital expenditure in 2015 2017 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
ROCE AND ROE EXCL. NON-RECURRING ITEMS, % 16 14 12 10 8 6 4 2 0 14.714.6 14.0 12.4 10.5 9.6 10.0 10.2 8.1 7.4 3.8 14.0 13.1 12.0 9.8 9.9 8.7 8.8 9.0 7.7 7.6 6.9 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 target ROCE ROE 13
CAPITAL EXPENDITURE BACK TO NORMAL LEVEL m 450 400 350 300 250 200 150 100 50 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Capital expenditure in store sites Acquisitions Other capital expenditure average 14
MARKET SITUATION AND FUTURE OUTLOOK 15
RETAIL TRADE TRENDS IN OPERATING COUNTRIES ROLLING 12 MO 10 8 % (rolling 12 mo) 6 4 2 0-2 Estonia Lithuania Sweden Norway Latvia Finland Latest month Source: Eurostat, excl. motor vehicles and fuels 16
odotukset omasta taloudesta seuraavan 12 kk:n kuluttua CONSUMER CONFIDENCE IN FINLAND 16 Expectations for own finances 14 12 Expectation, 21st century average 10 8 6 4 2 0 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 1/15 7/15 Source: Statistics Finland 17
BUSINESS ENVIRONMENT Finland In Finland, owing to the decline of consumers purchasing power, the trading sector s performance is expected to remain weak in all product lines, which may be complicated further by actions taken to balance the public finances Skandinavia and the Baltic countries The market is expected to grow Russia Economic situation and consumers purchasing power, as well as the outlook have weakened further Belarus Consumers purchasing power is expected to strengthen, hyperinflation is expected to ease 18
FUTURE OUTLOOK 10/2015-9/2016 The general economic situation and the expected trend in consumer demand vary in Kesko s different operating countries. In Finland, owing to the decline of consumers purchasing power, the trading sector s performance is expected to remain weak in all product lines, which may be complicated further by actions taken to balance the public finances. In the Finnish grocery trade, the tough competitive situation is expected to continue. The market performance of the Finnish building and home improvement trade is expected to remain weak. The outlook for the car trade is also uncertain. With respect to foreign countries, the economic situation and consumers purchasing power, as well as the outlook in Russia have weakened further. Instead, in Sweden and Norway and the Baltic countries, the market is expected to grow. Kesko Group's net sales for the next 12 months are expected to be lower than the level of the preceding 12 months. The operating profit excluding nonrecurring items for the next 12-month period is expected to equal the operating profit level of the preceding 12 months. 19
PORTFOLIO STRATEGY 20
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 21
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 22
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 23
24 GROCERY TRADE
KESKO GROCERY TRADE KEY FIGURES ROLLING 12 MO Total market 16.7 billion Net sales 4,684m Operating profit* 185m Operating margin* 4.0% ROCE* 19.9% * excl. non-recurring items K-Group 33.1% S-Group 45.7% Lidl 7.6% Suomen Lähikauppa 6.8% Others 6.8% Source: Nielsen 25
RETAIL STORES Sales 2014 million, VAT 0% Number of stores at 30.9.2015 Concept 1,505+581 81 Hypermarket 1,725 220 Supermarket 1,216 459 103 8 Neighbourhood store Compact hyper, Russia Others 161 136 Incl. online store Total 5,292 904 26
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 27
INCREASING THE HORECA BUSINESS Organic growth through strong international cooperation Searching for expansion alternatives in Finland and the neighbouring areas Supporting the service counter offering of the K-food stores 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 28
HOME IMPROVEMENT AND SPECIALITY GOODS TRADE 29
HOME IMPROVEMENT AND SPECIALITY GOODS TRADE KEY FIGURES ROLLING 12 MO Net sales 3,351m Operating profit* 60m Operating margin* 1.8% ROCE* 6.9% * excl. non-recurring items 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 2014 Building and home improvement trade Baltics 443m Building and home improvement trade Finland 785m Building and home improvement trade Scandinavia 625m 30
PROFITABLE GROWTH IN BUILDING AND HOME IMPROVEMENT TRADE Market shares in 2014 Finland Sweden Norway Estonia Latvia Lithuania N-w and central N-w Russia and Belarus 0 10 20 30 40 Operating profit, million 70 60 50 40 30 20 10 0 2012 2013 2014 31
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 32
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 33
34 CAR TRADE
CAR TRADE KEY FIGURES ROLLING 12 MO Net sales 745m Operating profit* 27m Operating margin* 3.7% ROCE* 29.0% * excl. non-recurring items 2014 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% 35
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 36
THE WORLD S MOST SUSTAINABLE RETAIL OPERATOR In January 2015, Kesko was ranked fifth on The Global 100 Most Sustainable Corporations in the World list. 37
KESKO IS THE MOST RESPONSIBLE FOOD AND STAPLES RETAILER IN THE WORLD In 2015, Kesko rose to CDP s Climate A List for the first time scoring the maximum 100 points At the top of the Nordic Carbon Disclosure Leadership climate index since 2011. In 2015, Kesko was awarded the full 100 points 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 since 2009 Included in the STOXX Global ESG Leaders index family since 2011 Included in the Dow Jones sustainability indexes DJSI World and DJSI Europe 2003-2014 38
BASIC INFORMATION Established in 1940 Listed on the Helsinki Stock Exchange (Nasdaq Helsinki) in 1960 39,000 shareholders 28% of all shares owned by non-finnish 41% of B-shares owned by non-finnish Market capitalisation 3.1 billion (Sep 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% 40
SHAREHOLDERS % % 1 K-retailers Association 3,816,860 3.82 2 Vähittäiskaupan Takaus Oy 3,491,771 3.49 3 Kruunuvuoren Satama Oy 3,438,885 3.44 4 Ilmarinen Mutual Pension Insurance Company 2,050,632 2.05 The largest registered shareholders At 9/2015 by number of shares 5 Valluga-sijoitus Oy 1,340,439 1.34 6 Varma Mutual Pension Insurance Company 1,130,986 1.13 Foundation for Vocational Training 7 in the Retail Trade 1,084,431 1.08 8 Oy The English Tearoom Ab 1,000,000 1.00 9 Elo Pension Company 896,968 0.90 10 Kesko Oyj 876,455 0.88 41
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 42
REAL ESTATE IN 6/2015 Owned properties Country Area, 1,000 m 2 Classification Finland 550 Other Nordic countries 66 Baltic countries and Belarus 113 Russia 179 Total Carrying amount 908 1,070m Strategic properties 59% Standard properties 32% Leased properties total 1,000 m 2 3,008 Development properties 8% Realisation properties 1% 43
OPERATING MARGIN BY DIVISION EXCL. NON-RECURRING ITEMS Q1/ 2014 Q2/ 2014 Q3/ 2014 Q4/ 2014 Q1/ 2015 Q2/ 2015 Q3/ 2015 Grocery trade 4.1 4.6 5.1 4.9 3.2 3.8 3.8 Home improvement and speciality goods trade -4.1 1.0 2.2 0.4-1.8 3.9 4.2 Car trade 4.6 3.7 3.6 3.0 4.7 3.4 3.5 Total 0.9 2.9 3.6 2.7 1.3 3.4 3.7 44
TREND IN FOREIGN OWNERSHIP, % (31.12.) % 60 50 40 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014Q3/2015 All shares B share 45
UNEMPLOYMENT RATE Source: Statistics Finland 46
RETAIL TRADE, TREND DEVELOPMENT 120 110 100 90 80 70 60 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Statistics Finland 47 Turnover Volume index
DAILY CONSUMER GOODS TRADE, TREND DEVELOPMENT 120 110 100 60 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 48 90 80 70 Source: Statistics Finland Turnover Volume index
GRANTED PERMITS AND STARTED BUILDINGS, MIL. M3, MOVING ANNUAL TOTAL *) The data is based on estimation Source: Statistics Finland 49
FIRST REGISTRATIONS OF PASSENGER CARS IN FINLAND Source: Statistics Finland 50
INTERIM REPORT JANUARY-SEPTEMBER 2015 PRESIDENT AND CEO MIKKO HELANDER 22 OCTOBER 2015 51
KEY EVENTS IN Q3 Measures taken to strengthen the competitiveness of the grocery trade have progressed as planned and the division s profitability remained at a good level Market share and profitability of the building and home improvement trade continued to strengthen New cars have continued to sell well despite Volkswagen s emissions issue Balance sheet very strong, liquid assets 858 million 52
Q3 NET SALES GROWTH +1.2% IN LOCAL CURRENCIES EXCL. ANTTILA m 7,000 6,000 6,804 6,513 5,000 4,000 3,000 2,000 2,304 2,203 1,000 0 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 Reported net sales,, incl. Anttila 53
Q3 NET SALES BY DIVISION Car trade -2.6% 170m 8% Home improvement and speciality goods trade +4.5% 857m 39% 1,171m 53% Grocery trade -0.6% Comparable change 54
OPERATING PROFIT EXCL. NON-RECURRING ITEMS m 200 150 170.8 185.3 100 84.0 82.5 50 0 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 55
STEADY PROFIT PERFORMANCE CONTINUES OPERATING PROFIT EXCL. NON-RECURRING ITEMS m 100 80 60 69.8 83.6 66.8 67.6 84.0 61.9 76.4 82.5 40 20 18.6 19.1 26.5 0 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 56
RETURN ON CAPITAL EMPLOYED INCREASES EXCL. NON-RECURRING ITEMS, ROLLING 12 MO % 12 10 8.8 9.3 9.7 9.8 9.9 9.9 10.0 9.9 10.2 10.9 11.3 8 6 4 2 0 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 57
CASH FLOW AFTER CAPITAL EXPENDITURE m 600 541.1 200 206.1 100 80.3 75.8 79.9 82.4 98.6 39.3 0-100 -200-100.5 Q1/2013 Q2/2013 Q3/2013 Q4/2013-138.5 Q1/2014 Q2/2014 Q3/2014 Q4/2014-139.3 Q1/2015 Q2/2015 Q3/2015 58
FINANCIAL POSITION 30.9.2015 30.9.2014 Equity ratio, % 54.2 54.2 Liquid assets, m 858 503 Interest-bearing net liabilities, m -394-3 Capital expenditure, m 152 151 Return on capital employed*, % 11.3 10.0 Return on equity*, % 8.0 8.4 * Excl. non-recurring items, rolling 12 mo 59
60 GROCERY TRADE
NET SALES m 3,500 3,494 3,424 3,000 2,500 2,000 1,500 1,000 1,190 1,171 500 0 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 61
OPERATING PROFIT EXCL. NON-RECURRING ITEMS m 180 160 140 120 100 80 60 40 20 0 60.3 44.8 161.0 123.0 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 62
GROCERY TRADE IN Q3 Measures taken to strengthen the competitiveness of the grocery trade have progressed as planned and the division s profitability remained at a good level. Price level in Finnish grocery trade has fallen by around 1% The K-Group responds to changes in the competitive environment both by renewing store concepts in line with strategy and improving its operational efficiency Effect of the real estate arrangement completed in June on the operating profit excluding non-recurring items was -3.3 million. Sales in Russia were down by 2.5% in euros and up by 42% in roubles Kespro s market share increased and profitability remained at a good level 63
HOME IMPROVEMENT AND SPECIALITY GOODS TRADE 64
Q3 NET SALES GROWTH +4.5% IN LOCAL CURRENCIES EXCL. ANTTILA m 3,000 2,500 2,731 2,514 2,000 1,500 1,000 942 857 500 0 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 Reported net sales,, incl. Anttila 65
OPERATING PROFIT EXCL. NON-RECURRING ITEMS CONTINUED TO INCREASE IN Q3 m 60 56.1 40 35.8 20 20.6 0-3.3-20 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 66
HOME IMPROVEMENT AND SPECIALITY GOODS TRADE IN Q3 Building and home improvement trade Market share is estimated to have grown in Finland, Norway, the Baltics and Russia Operating profit has improved in ten successive quarters Net sales and profitability strengthened in the agricultural and machinery trade In the leisure trade, Budget Sport s sales increased markedly Asko s sales performance +8% 67
68 CAR TRADE
NET SALES m 600 592 571 400 200 175 170 0 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 69
OPERATING PROFIT EXCL. NON-RECURRING ITEMS m 30 20 23.8 22.3 10 6.3 6.0 0 Q3/2014 Q3/2015 Q1-Q3/2014 Q1-Q3/2015 70
ORDER BACKLOG AT END OF SEPTEMBER HIGHER THAN THE YEAR BEFORE 7000 Backlog of customer orders (pcs) Rolling 12 mo average (pcs) 6000 5000 4000 3000 2000 1000 0 71 7000 6000 5000 4000 3000 2000 1000 0 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13 11/13 12/13 01/14 02/14 03/14 04/14 05/14 06/14 07/14 08/14 09/14 10/14 11/14 12/14 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15 9/15
CONTACT INFORMATION IR@kesko.fi www.kesko.fi/investors Twitter.com/Kesko_IR 72