analyst breakfast meeting 29.9.2014
DESCRIPTION
Kesko's qaurterly meeting with analysts, presentation material.TRANSCRIPT
Analyst breakfast CFO
Jukka Erlund29.9.2014
Retail trade, trend development
70
75
80
85
90
95
100
105
110
115
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Turnover Volume index
29.9.2014Jukka Erlund2
Consumers’ expectations for own financesOwn finances in 12 months
0
2
4
6
8
10
12
14
16
1/0
0
7/0
0
1/0
1
7/0
1
1/0
2
7/0
2
1/0
3
7/0
3
1/0
4
7/0
4
1/0
5
7/0
5
1/0
6
7/0
6
1/0
7
7/0
7
1/0
8
7/0
8
1/0
9
7/0
9
1/1
0
7/1
0
1/1
1
7/1
1
1/1
2
7/1
2
1/1
3
7/1
3
1/1
4
7/1
4
Expectations for own finances
Expectation, 21st centuryaverage
Jukka Erlund3
Source: Statistics Finland
29.9.2014
Unemployment rate
Jukka Erlund4 29.9.2014
Source: Statistics Finland
Retail sales of non-food products, excl. fuel(index of turnover, yoy)
-5
0
5
10
15
2020
13
M01
20
13
M02
20
13
M03
20
13
M04
20
13
M05
20
13
M06
20
13
M07
20
13
M08
20
13
M09
20
13
M10
20
13
M11
20
13
M12
20
14
M01
20
14
M02
20
14
M03
20
14
M04
20
14
M05
20
14
M06
20
14
M07
Estonia
Latvia
Lithuania
Finland
Sweden
Norway
Jukka Erlund5
Source: Eurostat
%
29.9.2014
Jukka Erlund6
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
29.9.2014
Operating margin excl. non-recurringitems 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 specialitygoods
-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
29.9.2014Jukka Erlund7
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, total363.6 -3.9 2,870.2 -1.4
Home and speciality goods trade, total112.5 -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 0.2Car and machinery trade, total
78.1 -11.7 740.1 -1.2Common operations and eliminations
-14.2 -110.1Grand 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
3 mo rolling sales performance
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
Food trade
Jukka Erlund9
-15%
-12%
-9%
-6%
-3%
0%
3%
6%
9%
Home and speciality goods trade
-12%
-8%
-4%
0%
4%
8%
12%
16%
Building and home improvement trade
-30%
-20%
-10%
0%
10%
20%
30%
40%
Car and machinery trade
29.9.2014
Strategic priorities
Jukka Erlund10
Strengthening
sales growth and
improving
profitability
E-commerce and
multi-channel service
models
Utilising Russia’s
business
opportunities
29.9.2014
Strong financial position and good dividend payment capacity
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
Jukka Erlund11 29.9.2014
Shopping via online 2004-2013
Jukka Erlund12
Source: Statistics Finland
% from population of ages 16-74
Sometimes During 12 months During 3 months
29.9.2014
Jukka Erlund13
Food trade
•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
Total 916 stores
29.9.2014
Q3/2013-Q2/2014
Net sales, €M 1-6/2014
Change, %
Sales to K-foodstores
1,585 -3.4
Kespro 380 -2.8
K-ruoka Russia 51 ..
Total 2,112 -1.5
Operatingprofit *, €M
1-6/2014
1-6/2013
Total 99.4 99.0
Operating margin
4.7 4.6
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
Jukka Erlund14 29.9.2014
Food trade in Russia
Jukka Erlund15
• 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
29.9.2014
Jukka Erlund
Home and speciality goods trade
16
Operating profit *, €M
1-6/2014
1-6/2013
Total -41.0 -27.8
Operating margin -6.8 -4.2
Net sales, €M 1-6/2014
Change, %
K-citymarket, home and speciality goods
267 -6.1
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
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
Q3/2013-Q2/2014
29.9.2014
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
Jukka Erlund17 29.9.2014
Building and home improvement trade
Jukka Erlund18
Net sales, €M 1-6/2014
Change, %
Rautakesko, Finland 625 +1.6
K-rauta, Sweden 100 -3.0
Byggmakker, Norway
220 -7.5
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
Q3/2013-Q2/2014
29.9.2014
Building permits granted and building starts, mil. m3, variable annual sum
29.9.2014Jukka Erlund19
Source: Statistics Finland
* Preliminary data
Development of the number of transactions of dwellings in housing companies
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
2008 2009 2010 2011 2012 2013 1-6/2014
Whole country Greater Helsinki
Source: Statistics Finland
29.9.2014Jukka Erlund20
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
Jukka Erlund21 29.9.2014
Car and machinery trade
Jukka Erlund22
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
Q3/2013-Q2/2014
29.9.2014
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
Jukka Erlund23
• Market trend in new registrations of passenger cars in January-August+2.7%
• Sales performance of Kesko’s carand 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 onlineservices
• Challenging market situation in machinery trade
Market share (passenger cars),
new registrations 1-8/2014
29.9.2014
New registrations of passenger cars in Finland
Jukka Erlund
Source: Statistics Finland
24 29.9.2014
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 grocery trade.
Kesko to seek more competitive multi-channel home and speciality goods trade
29.9.2014Jukka Erlund25
Thank you!
• www.kesko.fi/investors
• Twitter.com/Kesko_IR
29.9.2014Jukka Erlund26