2017-10-25 08:00:31 CEST
2017-10-25 08:00:31 CEST
BIRTINGARSKYLDAR UPPLÝSNINGAR
Kesko Oyj - Interim report (Q1 and Q3)
Kesko's interim report for the period 1 January to 30 September 2017: Kesko's profitability improved
KESKO CORPORATION INTERIM REPORT 25.10.2017 AT 09.00
Kesko's interim report for the period 1 January to 30 September 2017: Kesko's
profitability improved
FINANCIAL PERFORMANCE IN BRIEF:
* The Group's net sales in January-September totalled €8,058 million (€7,415
million), an increase of 8.7%, or 1.4% in comparable terms
* Comparable operating profit was €215.8 million (€209.6 million)
* Operating profit was €267.7 million (€187.0 million)
* Comparable return on capital employed was 11.4% (12.5%) (rolling 12 months)
* Comparable profit before tax was €218.2 million (€211.2 million)
* Comparable earnings per share were €1.62 (€1.59)
* In comparable terms, the net sales for the next 12 months are expected to
exceed the level of the previous 12 months. Due to divestments and
restructuring, Kesko Group's net sales for the next 12 months are expected
to fall below the level of the previous 12 months. The comparable operating
profit for the next 12-month period is expected to exceed the level of the
preceding 12 months.
KEY PERFORMANCE INDICATORS
1-9 1-9 7-9 7-9
/2017 /2016 /2017 /2016
Net sales, € million 8,058 7,415 2,647 2,792
Operating profit, comparable,
€ million 215.8 209.6 102.5 98.2
Operating profit, € million 267.7 187.0 98.6 85.5
Profit before tax, comparable,
€ million 218.2 211.2 101.9 97.5
Profit before tax, € million 270.0 188.7 98.0 84.8
Capital expenditure, € million 232.8 637.7 62.7 73.6
Earnings per share, €, diluted 2.16 1.40 0.69 0.63
Earnings per share, comparable,
€, basic 1.62 1.59 0.72 0.73
Cash flow from operating activities
per share, € 1.87 0.63 1.03 0.81
Return on capital employed,
comparable, %, rolling 12 months 11.4 12.5 11.4 12.5
Return on equity, comparable, %,
rolling 12 months 9.9 10.1 9.9 10.1
30.9.2017 30.9.2016
Equity ratio, % 49.1 47.9
Equity per share, € 20.89 20.84
PRESIDENT AND CEO MIKKO HELANDER:
The implementation of our strategy towards becoming a more focused and unified
Kesko and K Group is proceeding well.
During the past quarter, net sales grew in comparable terms in all divisions.
Profitability improved compared to the year before and cash flow from operating
activities continued to strengthen further. Kesko's financial position is very
strong.
The strategy for the grocery trade and its implementation, which is proceeding
well, resulted in increased sales and improved profitability. The reworking of
K-food store chains is well under way. Sales and customer flows are growing for
all chains. The changes already made in K-Citymarkets have strengthened the
chain's market position. We are also pleased about the progress made in the
integration of Suomen Lähikauppa and the resulting synergy benefits, which have
materialised sooner than anticipated. Kespro continued to perform well both in
terms of sales and profitability.
In the building and technical trade, sales in Finland grew markedly and
profitability improved, with Onninen's operating profit in particular continuing
to increase. In Onninen's foreign operations, good progress has been made in
Poland in measures to improve profitability. Losses in Onninen's Swedish
operations have decreased, but work continues to improve profitability further.
In the Baltics and Belarus, investments and store renewals continued in an
effort to further strengthen Kesko Senukai's sales and market position. The
division's sales and operating profit were reduced by the divestments carried
out during the first half of the year in the speciality goods trade.
In the car trade, sales and profitability continued to develop positively, and
our market share increased during the quarter. The acquisition of AutoCarrera
and the good sales of Porsche also contributed to the division's improved
profitability.
As a sign of our long-term commitment to corporate responsibility, Kesko is
again included in the Dow Jones Sustainability Indices DJSI World and DJSI
Europe of the world's most responsible companies.
FINANCIAL PERFORMANCE
Net sales and profit for January-September 2017
The Group's net sales for January-September 2017 totalled €8,058 million, which
is 8.7% more than in the corresponding period of the previous year (€7,415
million). Net sales development was affected by both the acquisitions made in
2016 as well as the divestments made in the first half of 2017. In comparable
terms, net sales grew by 1.4% in local currencies, excluding the impact of
acquisitions and divestments. The Group's net sales increased by 6.6% in Finland
and by 1.8% in comparable terms. In other countries, net sales grew by 16.6% and
in comparable terms net sales were at the previous year's level. International
operations accounted for 21.7% (20.2%) of the Group's net sales.
The 1.8% growth in the net sales for the grocery trade was affected by the
acquisition of Suomen Lähikauppa on 12 April 2016 and changes to Suomen
Lähikauppa's store site network, as well as by the divestment of Russian
business operations on 30 November 2016. In comparable terms net sales increased
by 1.6%. The comparable change has been calculated by including in the net sales
those stores acquired from Suomen Lähikauppa which have been in the store
network during both this reporting period as well as the comparison period.
In the building and technical trade, net sales grew by 17.0%. In comparable
terms, net sales increased by 0.7% in local currencies. The comparable change
has been calculated excluding the impact of the Onninen acquisition on 1 June
2016, the divestment of the K-maatalous business on 1 June 2017, and the
divestment of the Asko and Sotka furniture trade on 30 June 2017. The net sales
for the building and technical trade excluding the speciality goods trade
increased by 31.9%, or 2.8% in comparable terms. Net sales for the speciality
goods trade decreased by 25.1% due to divestments.
Net sales in the car trade increased by 10.1%. In comparable terms, excluding
the impact of the acquisition of AutoCarrera in December 2016, net sales
increased by 3.3%.
During the reporting period, Kesko Group divested the K-maatalous business on 1
June 2017, and on 30 June 2017, the Asko and Sotka furniture trade, the Yamarin
boat business and the Yamaha representation.
1-9/2017 Change, % Change in local Operating Change,
Net sales, currency excl. profit, com- € million
€ million acquisitions and parable,
divestments, %
€ million
Grocery trade 3,883 +1.8 +1.6 136.3 +12.3
Building and
technical trade
excl. speciality
goods trade 2,902 +31.9 +2.8 65.2 +5.2
Speciality goods
trade 584 -25.1 -11.1 15.9 -7.6
Building and
technical trade
total 3,486 +17.0 +0.7 81.2 -2.3
Car trade 691 +10.1 +3.3 26.4 +4.4
Common functions
and eliminations -2 -61.7 (..) -28.2 -8.3
Total 8,058 +8.7 +1.4 215.8 +6.2
(..) Change over 100%
The Group's comparable operating profit in January-September amounted to €215.8
million (€209.6 million). Profitability improved in the grocery trade thanks to
increased sales, realised synergy benefits and the divestment of the loss-making
Russian operations in 2016. The operating profit for the building and technical
trade, excluding the speciality goods trade, was increased by the acquisition of
Onninen, which improved its profitability, while the operating profit for Kesko
Senukai and the operations in Sweden fell short on the year before. The
operating profit in the speciality goods trade decreased on account of
divestments. In the car trade, profitability improved due to growth in sales and
the acquisition of AutoCarrera's Porsche business.
The operating profit was €267.7 million (€187.0 million). Items affecting
comparability totalled €51.9 million (€-22.6 million). The most significant
items affecting comparability were the €49.6 million gain on the divestment of
properties in the Baltics, the €19.7 million expenses related to the conversion
of the Suomen Lähikauppa chains and the transfer of stores to retailers, the
gain on the divestment of the K-maatalous business of €12.1 million, and the
gain on the divestment of the Asko and Sotka furniture trade amounting to €19.0
million.
Items affecting comparability, € million 1-9/2017 1-9/2016
Operating profit, comparable 215.8 209.6
Items affecting comparability
+gains on disposal +82.7 +5.0
-losses on disposal -1.7 -0.4
-impairment charges related to properties -0.5 -11.1
+/-structural arrangements -25.0 -13.7
+/-others -3.6 -2.4
Items affecting comparability, total 51.9 -22.6
Operating profit 267.7 187.0
The Group's profit before tax in January-September amounted to €270.0 million
(€188.7 million). The Group's earnings per share were €2.16 (€1.40). The
comparable earnings per share were €1.62 (€1.59). The Group's equity per share
was €20.89 (€20.84).
K Group's (Kesko and K-chain stores) retail and B2B sales (VAT 0%) for January-
September were €9,531 million, representing a growth of 1.4% compared to the
previous year (pro forma). The K-Plussa customer loyalty programme added 53,217
new households between January and September 2017. The number of K-Plussa
households stood at 2.3 million at the end of September and there were 3.6
million K-Plussa card-holders in total.
Net sales and profit for July-September 2017
The Group's net sales for July-September 2017 were €2,647 million, which is
5.2% less than in the corresponding period of the previous year (€2,792
million). The decrease was related to the divestments made during the previous
year and during the second quarter of this year. In comparable terms excluding
acquisitions and divestments, net sales grew by 1.8% in local currencies. The
Group's net sales decreased by 5.6% in Finland, or grew by 2.2% in comparable
terms. In other countries, net sales decreased by 4.0%, or grew by 0.6% in
comparable terms. International operations accounted for 23.4% (23.1%) of the
Group's net sales.
In the grocery trade, net sales decreased by 4.0%, affected by the transfer of
the acquired Suomen Lähikauppa stores to retailers and store closures, as well
as by the divestment of Russian business operations on 30 November 2016. In
comparable terms, net sales in the grocery trade grew by 2.4%. The comparable
change has been calculated by including in the net sales those stores acquired
from Suomen Lähikauppa which have been in the store network during both this
reporting period as well as the comparison period.
In the building and technical trade, net sales decreased by 9.4%. In comparable
terms, net sales increased by 0.8% in local currencies. The comparable change
has been calculated excluding the impact of the K-maatalous business sold on 1
June 2017 and that of the Asko and Sotka furniture trade, sold on 30 June 2017.
Excluding the impact of the speciality goods trade, net sales for the building
and technical trade grew by 3.3% and in comparable terms by 3.2%. Net sales for
the speciality goods trade decreased by 55.9% due to divestments.
In the car trade, net sales were up by 12.0%, and excluding the impact of the
acquisition of AutoCarrera in December 2016, by 3.2%.
7-9/2017 Net sales, Change, % Change in local Operating Change,
€ million currency excl. profit, comp- € million
acquisitions and arable,
divestments, %
€ million
Grocery trade 1,313 -4.0 +2.4 59.4 +10.2
Building and
technical trade
excl. speciality
goods trade 1,004 +3.3 +3.2 36.6 +2.0
Speciality goods
trade 117 -55.9 -15.5 6.1 -4.5
Building and
technical trade
total 1,121 -9.4 +0.8 42.7 -2.5
Car trade 212 +12.0 +3.2 8.8 +2.0
Common functions
and eliminations 0 (..) (..) -8.5 -5.4
Total 2,647 -5.2 +1.8 102.5 +4.3
(..) Change over 100%
The Group's comparable operating profit for July-September amounted to €102.5
million (€98.2 million). Profitability improved in the grocery trade due to good
sales development and realised synergy benefits. The divestment of the loss-
making Russian business operations in 2016 also had a positive impact on the
profit. In the building and technical trade, excluding the impact of the
speciality goods trade, Onninen's operating profit increased on the year before,
while the operating profits of operations in Sweden and Kesko Senukai decreased
on the previous year. The operating profit for the speciality goods trade
decreased due to divestments. Profitability improved in the car trade due to
growth in sales and the acquisition of AutoCarrera's Porsche business.
Operating profit amounted to €98.6 million (€85.5 million). Items affecting
comparability totalled €-4.0 million (€-12.7 million). The most significant
items affecting comparability were the €2.2 million costs related to the
discontinuation of Onninen's Russian business operations and to the conversion
of Suomen Lähikauppa's chains.
Items affecting comparability, € million 7-9/2017 7-9/2016
Operating profit, comparable 102.5 98.2
Items affecting comparability
+gains on disposal +0.6 +0.8
-losses on disposal -0.1 -0.1
- impairment charges related to properties -0.5 -3.1
+/-structural arrangements -2.5 -4.6
+/-others -1.4 -5.7
Items affecting comparability, total -4.0 -12.7
Operating profit 98.6 85.5
The Group's profit before tax for July-September amounted to €98.0 million
(€84.8 million). The Group's earnings per share were €0.69 (€0.63). The
comparable earnings per share were €0.72 (€0.73).
K Group's (Kesko and K-chain stores) retail and B2B sales (VAT 0%) for July-
September totalled €3,305 million, which represents a growth of 1.2% compared to
the previous year (pro forma).
Finance
Cash flow from operating activities for January-September was €186.0 million
(€62.4 million). Cash flow was strengthened by improved profitability and
release of working capital. Cash flow from investing activities was a positive
of €10.9 million (€-576.6 million) due to the proceeds from divestments
amounting to €199.5 million.
At the end of the period, liquid assets totalled €370 million (€245 million).
Interest-bearing liabilities at the end of September totalled €530 million (€545
million) and interest-bearing net debt amounted to €159 million (€299 million).
The equity ratio was 49.1% (47.9%) at the end of the period.
The Group's net finance income was €2.3 million (€3.3 million) for January-
September. The financial items include dividend income and interest income on
cooperative capital of €4.5 million, of which €2.3 million is interest income on
cooperative capital from Suomen Luotto-osuuskunta.
Cash flow from operating activities for July-September was €102.1 million (€80.2
million). The cash flow from investing activities was €-52.3 million (€-47.6
million).
The Group's net finance costs for July-September were €0.6 million (€1.1
million).
Taxes
The Group's taxes for January-September were €45.9 million (€37.7 million). The
effective tax rate was 17.0% (20.0%). The Group's effective tax rate was lowered
by the tax-exempt gains on the sale of properties and subsidiaries. The Group's
taxes for July-September were €23.8 million (€16.4 million). The effective tax
rate was 24.3% (19.3%).
Capital expenditure
The Group's capital expenditure for January-September totalled €232.8 million
(€637.7 million), representing 2.9% (8.6%) of net sales. Capital expenditure in
store sites was €169.5 million (€158.6 million), in IT €21.6 million (€19.8
million) and other capital expenditure was €41.4 million (€28.2 million). The
comparison period includes acquisitions amounting to €431.0 million.
The Group's capital expenditure for July-September totalled €62.7 million (€73.6
million), representing 2.4% (2.6%) of net sales. Capital expenditure in store
sites was €52.4 million (€58.1 million), in IT €4.2 million (€10.9 million) and
other capital expenditure was €5.8 million (€4.6 million).
Personnel
In January-September, the average number of personnel in Kesko Group was 22,419
(21,947) converted into full-time employees. The increase was due to the
acquisitions of Suomen Lähikauppa and Onninen.
At the end of September 2017, the number of personnel stood at 25,288 (29,338),
of whom 12,603 (15,014) were employed in Finland and 12,685 (14,324) outside
Finland.
SEGMENTS
Seasonal nature of operations
The Group's operating activities are affected by seasonal fluctuations. The net
sales and the operating profits of the reportable segments are not earned evenly
throughout the year. Instead, they vary by quarter depending on the
characteristics of each segment. In terms of the level of operating profit, the
second and third quarter are the strongest, whereas the impact of the first
quarter on the full year profit is the smallest. The acquisitions of Suomen
Lähikauppa and Onninen increase the seasonal fluctuations between quarters. The
operating profit levels of Onninen and Suomen Lähikauppa are lowest for the
first quarter.
Grocery trade
1-9 1-9 7-9 7-9
/2017 /2016 /2017 /2016
Net sales, € million 3,883 3,814 1,313 1,367
Operating profit, comparable,
€ million 136.3 124.0 59.4 49.2
Operating margin, comparable, % 3.5 3.3 4.5 3.6
Capital expenditure, € million 142.9 188.4 45.3 49.1
Change,
Net sales, € million 1-9/2017 % 7-9/2017 Change, %
Sales to K-food stores 2,420 +3.6 833 +6.0
K-Citymarket, non-food 398 +1.0 139 +1.4
K-Market, own retail trade 408 +5.4 112 -44.6
Kespro 603 +2.9 211 +2.3
Others 54 -51.2 18 -48.9
Total 3,883 1.8 1,313 -4.0
January-September 2017
The net sales for the grocery trade in January-September amounted to €3,883
million (€3,814 million), representing a growth of 1.8%. Net sales development
was affected by the acquisition of Suomen Lähikauppa on 12 April 2016 and
changes in its store site network, as well as the divestment of Russian business
operations on 30 November 2016. In comparable terms net sales increased by
1.6%. The comparable change has been calculated by including in the net sales
those stores acquired from Suomen Lähikauppa which have been in the store
network during both this reporting period as well as the comparison period.
K Group's grocery sales grew by 2.1% (incl. VAT) if the impact of the
acquisition of Suomen Lähikauppa is excluded. K Group's grocery trade sales pro
forma growth was 0.4% (incl. VAT), which was affected by the Suomen Lähikauppa
store site network being smaller than the year before. In the Finnish grocery
market, retail prices are estimated to have remained at the level of the
previous year (incl. VAT, Kesko's own estimate based on the Consumer Price Index
of Statistics Finland) and the total market (incl. VAT) is estimated to have
increased by approximately 1.6% in January-September (Kesko's own estimate).
The acquisition of Suomen Lähikauppa was completed in April of the previous year
and the conversion of Siwas and Valintatalos into K-Markets began in May 2016.
By the end of May 2017, all Siwa and Valintatalo stores that continued operating
(at 409 store locations) had been converted into K-stores (408 K-Markets and 1
K-Supermarket). Of these, 166 stores had been transferred to retailers by the
end of September. The transfer of the stores to retailers will be complete by
the end of the first half of 2018.
The grocery trade's comparable operating profit for January-September amounted
to €136.3 million (€124.0 million), an increase of €12.3 million. Profitability
improved in the grocery trade thanks to increased sales, realised synergy
benefits and the divestment of the loss-making Russian operations in 2016. The
effect of Suomen Lähikauppa on the comparable operating profit for January-
September was €0.2 million (April-September 2016 €0.9 million). The Russian
business divested in November 2016 made a loss of €13.3 million in the
comparison period. The grocery trade's operating profit was €115.9 million
(€119.1 million). Items affecting comparability amounted to €20.4 million (€5.0
million), and they were mainly related to the €19.7 million restructuring of
Suomen Lähikauppa.
Capital expenditure in the grocery trade totalled €142.9 million (€188.4
million), of which the capital expenditure in store sites accounted for €133.4
million (€115.6 million).
July-September 2017
Net sales for the grocery trade in July-September were €1,313 million (€1,367
million), down by 4.0%. The development was affected by the transfer of the
acquired Suomen Lähikauppa stores to retailers and store closures, as well as
the divestment of Russian business operations on 30 November 2016. In comparable
terms, net sales in the grocery trade grew by 2.4%. The comparable change has
been calculated by including in the net sales those stores acquired from Suomen
Lähikauppa which have been in the store network during both this reporting
period as well as the comparison period.
K Group's grocery trade sales grew by 2.7% (incl. VAT) if the acquisition of
Suomen Lähikauppa is excluded. K Group's grocery trade sales pro forma growth
was 0.8% (incl. VAT), impacted by the reductions in Suomen Lähikauppa's store
site network compared to the year before. In the Finnish grocery market, retail
prices are estimated to have changed by approximately +0.2% compared to the
previous year.
The grocery trade's comparable operating profit in July-September amounted to
€59.4 million (€49.2 million), an increase of €10.2 million. Profitability
improved thanks to good development in sales and realised synergies. The
divestment of the loss-making Russian business operations in 2016 also had a
positive impact on the profit. The effect of Suomen Lähikauppa on the comparable
operating profit for July-September was €3.7 million (€2.4 million). The
business in Russia, divested in November 2016, made a loss of €4.0 million in
the comparison period. The grocery trade's operating profit was €59.3 million
(€44.8 million). Items affecting comparability were €-0.2 million (€-4.4
million).
Capital expenditure in the grocery trade totalled €45.3 million (€49.1 million)
in July-September, of which the capital expenditure in store sites accounted for
€46.4 million (€45.4 million).
In July-September, three K-Supermarkets (one replacement new building) and two
new K-Markets opened. Renewals and extensions were made in a total of 30 stores.
The most significant store sites being built are a K-Citymarket and the Easton
shopping centre in Itäkeskus, Helsinki, and new K-Supermarkets in Tesoma,
Tampere, Ratina and Kaukajärvi, Turku, Suurpelto, Espoo, Kalasatama and
Laajasalo, Helsinki, and Oulu, Lapua, Kouvola and Kauniainen. K-Supermarkets
Kamppi, Hertta and Itäpoiju are being expanded.
In addition, an expansion to the grocery trade's central warehouse in Hakkila,
Vantaa is under construction.
Number of stores at 30.9. 2017 2016
K-Citymarket 81 80
K-Supermarket 231 226
K-Market** 822 996
Neste K 70 67
K-ruoka, Russia - 11
Others* 86 97
* Including online stores
** The total number of Suomen Lähikauppa's stores was 407.
In addition, several K-food stores offer e-commerce services to their customers.
Building and technical trade
1-9 1-9 7-9 7-9
/2017 /2016 /2017 /2016
Net sales, € million 3,486 2,979 1,121 1,238
Building and technical trade
excl. speciality goods trade 2,902 2,200 1,004 972
Speciality goods trade 584 780 117 266
Operating profit, comparable,
€ million 81.2 83.5 42.7 45.3
Building and technical trade
excl. speciality goods trade 65.2 60.0 36.6 34.6
Speciality goods trade 15.9 23.5 6.1 10.6
Operating margin, comparable, % 2.3 2.8 3.8 3.7
Building and technical trade
excl. speciality goods trade 2.2 2.7 3.6 3.6
Speciality goods trade 2.7 3.0 5.2 4.0
Capital expenditure, € million 57.8 428.0 8.9 15.1
1-9 Change, 7-9
Net sales, € million /2017 % /2017 Change, %
Building and home improvement
trade, Finland 682 +5.0 226 +5.5
K-Rauta, Sweden 159 -7.8 56 -9.1
Byggmakker, Norway 314 +0.1 105 -2.1
K-Rauta, Russia 141 +9.4 51 -0.4
Kesko Senukai, the Baltics 373 +4.1 143 +4.1
OMA, Belarus 91 +21.6 32 +12.4
Onninen 1,164 - 399 +6.2
Building and technical trade
excl. speciality goods trade total 2,902 +31.9 1,004 +3.3
Machinery trade 205 -12.1 65 -24.0
Leisure trade, Finland 142 -3.1 53 -2.0
Others 238 -40.6 0 -100.0
Speciality goods trade 584 -25.1 117 -55.9
Total 3,486 +17.0 1,121 -9.4
January-September 2017
The net sales for the building and technical trade in January-September were
€3,486 million (€2,979 million), up 17.0%. In comparable terms, net sales
increased by 0.7% in local currencies. In the calculation of the comparable
change, Onninen's net sales have been included for the period between 1 June and
30 September both for the reporting period and the comparison period, while the
net sales for the K-maatalous business, divested on 1 June 2017, and the Asko
and Sotka furniture trade, divested on 30 June 2017, have been excluded both for
the reporting period and the comparison period.
The net sales for the building and technical trade in Finland in January-
September were €1,738 million (€1,562 million), up 11.2%. In comparable terms
net sales increased by 1.2% in Finland. Net sales from foreign operations
amounted to €1,748 million (€1,417 million) for January-September, an increase
of 23.4%. Net sales from foreign operations in comparable terms remained at the
previous year's level. Foreign operations contributed 50.1% (47.6%) to the net
sales of the building and technical trade.
The net sales of the building and technical trade excluding the speciality goods
trade operations were €2,902 million (2,200 million) in January-September, an
increase of 31.9%. In comparable terms, net sales grew by 2.8%. Net sales for
the building and home improvement trade for January-September totalled €1,756
million (€1,690 million), an increase of 3.9%. In local currencies, net sales
were up by 2.3%. Net sales decreased in local currency in Norway by 1.4%, in
Sweden by 5.7% and in Russia by 6.7%. Net sales growth strengthened in the
building and home improvement trade especially in the B2B sector. Onninen's net
sales for January-September totalled €1,164 million (€512 million in June-
September 2016). In comparable terms, Onninen's net sales grew by 5.4%. The
market share of K Group's building and technical trade is estimated to have
strengthened in Finland. K Group's sales of building and home improvement
products in Finland increased by 3.5% and the total market (VAT 0%) is estimated
to have increased by about 0.7% (Kesko's own estimate).
Net sales for the speciality goods trade amounted to €548 million (€780 million)
for January-September, a decrease of 25.1%. The decrease in net sales was
affected by divestments carried out. The net sales for the machinery trade for
January-September amounted to €205 million (€233 million), a decrease of 12.1%
from the previous year. Net sales for the machinery trade in Finland were €89
million, down 25.5%. The net sales from foreign operations were €115 million, up
2.0%. Net sales for the leisure trade in Finland were €142 million (€146
million), down 3.1%. The net sales of the Asko and Sotka furniture trade, K-
maatalous business, Yamarin boat business and Yamaha representation, all
divested in June, totalled €279 million (January-September 2016 €455 million) in
the first half of the year.
In the building and technical trade, comparable operating profit for January-
September totalled €81.2 million (€83.5 million), down by €2.3 million on the
year before. The comparable operating profit for the building and technical
trade, excluding the speciality goods trade, was €65.2 million (€60.0 million),
an increase of €5.2 million. Profitability was boosted by Onninen's good profit
performance. Onninen's comparable operating profit for January-September
amounted to €22.2 million (€11.0 million for June-September 2016). Profitability
was weakened by Kesko Senukai's lower operating profit compared to the previous
year, which was partly due to the renewal and expansion of the store site
network in the Baltic countries and Belarus, as well as by the weaker profit
performance of operations in Sweden. The comparable operating profit for the
speciality goods trade was €15.9 million (€23.5 million), down by €7.6 million.
The comparable operating profit for the K-maatalous business and the Asko and
Sotka furniture trade, divested in June, was €6.8 million for the first half of
the year (€11.6 million in January-September 2016).
The operating profit for the building and technical trade was €156.4 million
(€72.5 million). The most significant items affecting comparability were the
€49.6 million gain from the divestment of properties in the Baltic countries,
the €12.1 million gain from the divestment of the K-maatalous business, and the
€19.0 million gain on the divestment of Asko and Sotka furniture trade.
The capital expenditure of the building and technical trade in January-September
totalled €57.8 million (€428.0 million), of which €35.1 million was related to
capital expenditure in store sites (€42.1 million). The comparison period in the
previous year includes €376.9 million in acquisitions.
July-September 2017
The net sales for the building and technical trade in July-September were €
1,121 million (€1,238 million), a decrease of 9.4%. In comparable terms, net
sales grew by 0.8%. The comparable change has been calculated excluding the
impact of the K-maatalous business sold on 1 June 2017 and that of the Asko and
Sotka furniture trade, sold on 30 June 2017.
The net sales for the building and technical trade in Finland for July-September
were €502 million (€622 million), a decrease of 19.2%. In comparable terms, net
sales increased by 1.1% in Finland. Net sales from foreign operations amounted
to €619 million (€616 million) for July-September, an increase of 0.5%. Net
sales from foreign operations were up by 0.6% in comparable terms. Foreign
operations accounted for 55.2% (49.8%) of the net sales for the building and
technical trade.
The net sales for the building and technical trade excluding the speciality
goods trade operations were €1,004 million (€972 million) in July-September, an
increase of 3.3%. In comparable terms, net sales in local currencies, excluding
acquisitions and divestments, increased by 3.2%. Net sales for the building and
home improvement trade for July-September totalled €612 million (€597 million),
an increase of 2.4%. In comparable terms, net sales grew by 2.2%. Net sales
decreased in local currency in Norway by 1.5%, in Sweden by 8.6% and in Russia
by 6.0%. Onninen's net sales amounted to €399 million (€376 million) for July-
September, an increase of 6.2%. In comparable terms, Onninen's net sales grew by
6.0%. K Group's sales of building and home improvement products in Finland
increased by 4.1% and the total market (VAT 0%) is estimated to have increased
by about 0.5% (Kesko's own estimate).
Net sales for the speciality goods trade amounted to €117 million (€266 million)
for July-September, a decrease of 55.9%. The decrease in net sales was affected
by the divestments carried out. The net sales of the machinery trade for July-
September amounted to €65 million (€85 million), a decrease of 24.0% from the
previous year. Net sales for the machinery trade in Finland were €15 million
(€32 million), down 54.1%. Net sales for the machinery trade's foreign
operations totalled €50 million (€53 million), down 5.4%. Net sales for the
leisure trade in Finland were €53 million (€54 million), down 2.0%. The net
sales for the Asko and Sotka furniture trade, K-maatalous business, Yamarin boat
business and Yamaha representation, all divested in June, totalled €140 million
in July-September 2016.
The comparable operating profit for the building and technical trade for July-
September totalled €42.7 million (€45.3 million), down by €2.5 million on the
year before. The comparable operating profit for the building and technical
trade, excluding the speciality goods trade, was €36.6 million (€34.6 million),
an increase of €2.0 million. Profitability improved thanks to the increase in
the operating profit for Onninen. Onninen's comparable operating profit for
July-September amounted to €13.3 million (€8.8 million). Profitability was
weakened by Kesko Senukai's lower operating profit compared to the previous
year, which was partly due to the renewal and expansion of the store site
network in the Baltic countries and Belarus, as well as by weak profit
performance in Sweden. The comparable operating profit for the speciality goods
trade was €6.1 million (€10.6 million). The K-maatalous business and the Asko ja
Sotka furniture trade, divested in June, accounted for €4.4 million of the
comparable operating profit for the comparison period.
The operating profit for the building and technical trade was €39.9 million
(€37.9 million). Items affecting comparability totalled €-2.8 million (€-7.4
million).
The capital expenditure of the building and technical trade in July-September
totalled €8.9 million (€15.1 million), of which €5.5 million was related to
capital expenditure in store sites (€12.4 million).
The most important store sites under construction are a K-Rauta in Lapua,
Finland, a K-Senukai store in Daugavpils, Latvia, a K-Rauta Onninen in Karlstad,
Sweden, two K-Senukai stores in Lithuania, and two building and home improvement
stores in Belarus. Two Onninen Express stores are under construction in Finland.
Number of stores at 30.9. 2017 2016
Building and technical trade
K-Rauta, Finland* 138 46
Rautia* - 95
K-maatalous - 80
K-Rauta, Sweden 18 20
Byggmakker, Norway 82 86
K-Rauta and K-Senukai, Estonia 8 8
K-Rauta and K-Senukai, Latvia 8 8
K-Senukai, Lithuania 22 22
K-Rauta, Russia 14 13
OMA, Belarus 16 13
Onninen 145 149
Speciality goods trade
Intersport, Finland** 56 58
Budget Sport** 11 11
The Athlete's Foot** 6 2
Asko and Sotka, Finland and the Baltics ** - 100
Kookenkä** 37 38
Konekesko - 1
* The K-Rauta and Rautia stores were combined to form the K-Rauta chain,
launched with a new brand image in March 2017 in Finland
** Including online stores
In addition, the building and home improvement stores offer e-commerce services
to their customers.
One Onninen store in Sweden operates in the same store with K-Rauta.
Car trade
1-9 1-9 7-9 7-9
/2017 /2016 /2017 /2016
Net sales, € million 691 628 212 190
Operating profit, comparable,
€ million 26.4 22.0 8.8 6.8
Operating margin, comparable, % 3.8 3.5 4.2 3.6
Capital expenditure, € million 14.0 11.2 5.2 3.1
Change,
Net sales, € million 1-9/2017 % 7-9/2017 Change, %
VV-Auto 648 +3.3 196 +3.2
AutoCarrera 43 - 17 -
Total 691 +10.1 212 +12.0
January-September 2017
Net sales for the car trade for January-September were €691 million (€628
million), an increase of 10.1%. The comparable development of net sales without
AutoCarrera, purchased in December 2016, amounted to +3.3%. The combined market
performance of first time registered passenger cars and vans in January-
September was +1.2% (+12.4%). The combined market share for cars and vans
imported by VV-Auto was 18.6% (18.2%) in January-September.
In the car trade, profitability continued to improve thanks to good sales
performance and the acquisition of AutoCarrera's Porsche business. The
comparable operating profit for January-September amounted to €26.4 million
(€22.0 million), an increase of €4.4 million. AutoCarrera's comparable operating
profit was €2.5 million. The operating profit for January-September totalled
€26.4 million (€22.0 million).
Capital expenditure for the car trade for January-September was €14.0 million
(€11.2 million).
July-September 2017
Net sales for the car trade for January-September were €212 million (€190
million), an increase of 12.0%. The comparable development of net sales without
AutoCarrera, purchased in December 2016, amounted to 3.2%. The combined market
share for cars and vans imported by VV-Auto was 18.5% (17.2%) in July-September.
In the car trade, profitability continued to improve thanks to good sales
performance and the acquisition of AutoCarrera's Porsche business. The
comparable operating profit in July-September amounted to €8.8 million (€6.8
million), an increase of €2.0 million. AutoCarrera's comparable operating profit
was €1.4 million. The operating profit for July-September totalled €8.8 million
(€6.8 million).
Capital expenditure for the car trade for July-September was €5.0 million (€3.1
million).
Number of stores at 30.9. 2017 2016
VV-Auto, retail trade 13 10
AutoCarrera 3 -
Changes in Group composition
Konekesko Ltd, a Kesko Corporation subsidiary, sold its Yamarin boat business to
Inhan Tehtaat Oy Ab, a subsidiary owned by Yamaha Motor Europe N.V. At the same
time, the transfer of the representation of Yamaha's recreational machinery in
Finland from Konekesko Ltd to Yamaha Motor Europe N.V. was also completed.
(Press release 30 June 2017)
In March of this year, Kesko and Oriola announced their intention to establish a
new chain of health, beauty and wellbeing across Finland. Finland's Competition
and Consumer Authority approved the establishment of the joint venture on 26
June 2017 and the establishment of the company was finalised at the end of June.
Both parties own 50 per cent of the new company. (Press release 30 June 2017)
Kesko Corporation sold Indoor Group, which is responsible for the Asko and Sotka
furniture trade, to a company owned by Sievi Capital Oyj, three franchising
entrepreneurs from the Sotka chain and Etera Mutual Pension Insurance Company.
The debt free price of the sale, structured as a share transaction, was €67
million. (Press releases on 20 June 2017 and 30 June 2017)
Kesko Corporation sold its K-maatalous business to Swedish Lantmännen ek för.
The debt free price of the sale, structured as a share transaction, was €38.5
million. (Press release 1 June 2017)
Kesko sold seven store sites used by Kesko Senukai in Estonia and Latvia to the
property investment company UAB Baltic Retail Properties. At the same time,
Kesko acquired a 10% shareholding in the property investment company. (Press
release 24 May 2017)
Kesko Food Ltd, K-citymarket Oy and Kespro Ltd, subsidiaries wholly-owned by
Kesko Corporation, merged into Kesko Corporation on 28 February 2017.
Kesko Corporation's subsidiary Konekesko Ltd sold 45% of its Baltic
subsidiaries' shares to Danish Agro a.m.b.a.'s group company DAVA Agravis
Machinery Holding A/S. In the same context, an agreement was made on options to
expand DAVA Agravis' ownership to include the whole share capital of the Baltic
machinery trade companies and Danish Agro group's ownership to include
Konekesko's agricultural machinery business in Finland. (Stock exchange release
on 10 February 2017)
Shares, securities market and Board authorisations
At the end of September 2017, the total number of Kesko Corporation shares was
100,019,752, of which 31,737,007, or 31.7%, were A shares and 68,282,745, or
68.3%, were B shares. At 30 September 2017, Kesko Corporation held 555,615 own B
shares as treasury shares. These treasury shares accounted for 0.81% of the
number of B shares, 0.56% of the total number of shares, and 0.14% of votes
attached to all shares of the Company. The total number of votes attached to all
shares was 385,652,815. Each A share carries ten (10) votes and each B share one
(1) vote. The Company cannot vote with own shares held by it as treasury shares
and no dividend is paid on them. At the end of September 2017, Kesko
Corporation's share capital was €197,282,584.
The price of a Kesko A share quoted on Nasdaq Helsinki was €43.85 at the end of
2016, and €44.88 at the end of September 2017, representing an increase of
2.3%. Correspondingly, the price of a B share was €47.48 at the end of 2016, and
€45.37 at the end of September 2017, representing a decrease of 4.4%. In
January-September, the highest A share price was €45.99 and the lowest was
€40.11. The highest B share price was €48.59 and the lowest was €41.51. In
January- September, the Nasdaq Helsinki All-Share index (OMX Helsinki) was up by
8.4% and the weighted OMX Helsinki Cap index by 8.6%. The Retail Sector Index
was down by 4.6%.
At the end of September 2017, the market capitalisation of A shares was €1,424.4
million, while that of B shares was €3,072.8 million, excluding the shares held
by the parent company as treasury shares. The combined market capitalisation of
A and B shares was €4,497.1 million, a decrease of €101.2 million from the end
of 2016.
In January-September 2017, a total of 1.0 million (1.3 million) A shares were
traded on Nasdaq Helsinki, a decrease of 22.0%. The exchange value of A shares
was €43.5 million. The number of B shares traded was 38.4 million (39.1
million), a decrease of 1.8%. The exchange value of B shares was €1,709.2
million. Nasdaq Helsinki accounted for 42.3% of the Kesko A and B share trading
in January-September 2017. Kesko shares were also traded on multilateral trading
facilities, the most significant of which was BATS. (source: Fidessa).
The Board holds a valid authorisation to decide on the transfer of a maximum of
1,000,000 own B shares held by the Company as treasury shares (the 2016 share
issue authorisation). On 1 February 2017, the Board decided to grant own B
shares held by the Company as treasury shares to persons included in the target
group of the 2016 vesting period, based on this share issue authorisation and
the fulfilment of the vesting criteria of the 2016 vesting period of Kesko's
three-year share-based compensation plan. This transfer of a total of 192,822
own B shares was announced in a stock exchange release on 15 March 2017. Based
on the 2014-2016 share-based compensation plan decided by the Board, a total
maximum of 600,000 own B shares held by the Company as treasury shares could be
granted within a period of three years based on the fulfilment of the vesting
criteria. The Board decided on the vesting criteria and the target group
separately for each vesting period. In January- September, a total of 2,328
shares granted based on the fulfilment of the vesting criteria of the share-
based compensation plan 2014-2016 was returned to the Company in accordance with
the terms and conditions of the share-based compensation plans. The returns
during the reporting period were notified in a stock exchange release on 12 May
2017 and 18 September 2017. The share-based compensation plan 2014-2016 was
announced in a stock exchange release on 4 February 2014.
On 1 February 2017, Kesko Corporation's Board of Directors made a decision to
establish a new share-based long-term incentive scheme for Kesko's top
management and key persons selected separately. The scheme consists of a
performance share plan (PSP) as the main structure, and of a restricted share
pool (RSP), which is a complementary share plan for special situations. Besides
the PSP, the Board has made a decision to establish a share-based bridge plan to
cover the transitional phase during which Kesko transfers from a one-year
performance period to a longer performance period in its long-term incentive
scheme structure. If the performance criteria set for the PSP 2017-2020 plan are
achieved in full, the maximum number of series B shares to be paid based on this
plan is 340,000 shares. If all the performance criteria set for the Bridge Plan
are achieved in full, the maximum number of series B shares to be paid based on
the Bridge Plan is 340,000 shares. The total maximum amount of share awards
payable under the RSP 2017-2019 is 20,000. The new share-based incentive scheme
was announced in a stock exchange release on 2 February 2017.
Kesko's Board of Directors holds a valid authorisation decided by the Annual
General Meeting held on 4 April 2016 to transfer of a total maximum of
1,000,000 own B shares held by the Company as treasury shares (the 2016 share
issue authorisation). Based on the authorisation, own B shares held by the
Company as treasury shares can be issued for subscription by shareholders in a
directed issue in proportion to their existing holdings of the Company shares,
regardless of whether they own A or B shares. Shares can also be issued in a
directed issue, departing from the shareholder's pre-emptive right, for a
weighty financial reason of the Company, such as using the shares to develop the
Company's capital structure, to finance possible acquisitions, capital
expenditure or other arrangements within the scope of the Company's business
operations, and to implement the Company's commitment and incentive scheme. Own
B shares held by the Company as treasury shares can be transferred either
against or without payment. A share issue can only be without payment, if the
Company, taking into account the best interests of all of its shareholders, has
a particularly weighty financial reason for it. The authorisation also includes
the Board's authority to make decisions concerning any other matters related to
share issues. The amount possibly paid for the Company's own shares is recorded
in the reserve of unrestricted equity. The authorisation is valid until 30 June
2020.
Kesko's Board of Directors also held a valid authorisation decided by the Annual
General Meeting held on 4 April 2016 to acquire a maximum of 1,000,000 own B
shares of the Company (the 2016 authorisation to acquire own shares). B shares
are acquired with the Company's distributable unrestricted equity, not in
proportion to the shareholdings of shareholders, at the market price quoted in
public trading organised by Nasdaq Helsinki Ltd ("the exchange") at the date of
acquisition. The shares are acquired and paid in accordance with the rules of
the exchange. The acquisition of own shares reduces the amount of the Company's
distributable unrestricted equity. B shares are acquired for use in the
development of the Company's capital structure, to finance possible
acquisitions, capital expenditure and/or other arrangements within the scope of
the Company's business operations, and to implement the Company's commitment and
incentive scheme. The Board makes decisions concerning any other issues related
to the acquisition of own B shares. The authorisation was valid until 30
September 2017.
In addition, Kesko's Board of Directors holds a share issue authorisation,
decided by the Annual General Meeting held on 13 April 2015, to issue a maximum
of 20,000,000 new B shares (the 2015 share issue authorisation). The shares can
be issued against payment to be subscribed by shareholders in a directed issue
in proportion to their existing holdings of the Company shares regardless of
whether they hold A or B shares, or, departing from the shareholder's pre-
emptive right, in a directed issue, if there is a weighty financial reason for
the Company, such as using the shares to develop the Company's capital structure
and financing possible acquisitions, capital expenditure or other arrangements
within the scope of the Company's business operations. The amount paid for the
shares is recognised in the reserve of invested non-restricted equity. The
authorisation also includes the Board's authority to decide on the share
subscription price, the right to issue shares for non-cash consideration and the
right to make decisions on other matters concerning share issues. The
authorisation is valid until 30 June 2018.
At the end of September 2017, the number of shareholders was 41,955, which is
2,551 more than at the end of 2016. At the end of September, foreign ownership
of all shares was 31.2%. Foreign ownership of B shares was 44.6% at the end of
September.
Flagging notifications
According to a notification received by Kesko Corporation, the combined voting
rights in respect of shares in Kesko held by K-Retailers' Association, its
Branch Clubs and the Foundation for Vocational Training in the Retail Trade rose
to 15 per cent on 3 February 2017 and exceeded 15 per cent on 6 February 2017.
(Stock exchange release on 7 February 2017)
Key events during the reporting period
The court of arbitration dismissed Voimaosakeyhtiö SF's action against Kestra
Kiinteistöpalvelut Oy concerning the further financing of the Fennovoima nuclear
power plant project. (Stock exchange release on 10 January 2017)
Kesko Corporation's Board of Directors decided to establish a new share-based
long-term incentive scheme for Kesko's top management and key persons selected
separately. In addition, the Board of Directors decided to grant a total of
192,822 own B shares held by the Company as treasury shares, based on the
fulfilment of the performance criteria of the 2016 performance period of Kesko's
share-based compensation plan 2014-2016, to 130 Kesko management employees and
other named key persons. (Stock exchange release on 2 February 2017)
Kesko Corporation's subsidiary Konekesko Ltd sold 45% of its Baltic
subsidiaries' shares to Danish Agro a.m.b.a.'s group company DAVA Agravis
Machinery Holding A/S. In the same context, an agreement was made on options to
expand DAVA Agravis' ownership to include the whole share capital of the Baltic
machinery trade companies and Danish Agro group's ownership to include
Konekesko's agricultural machinery business in Finland. (Stock exchange release
on 10 February 2017)
Kesko Corporation and Oriola-KD Corporation start building a completely new kind
of store chain in Finland, specialising in overall wellbeing. The companies have
signed an agreement to establish a joint venture. Finland's Competition and
Consumer Authority approved the establishment of the joint venture on 26 June
2017 and the establishment of the company was finalised. Both parties own 50 per
cent of the new company. The first phase objective is to build a chain of 100
stores and an online store. The plan is, if legislation is amended, to expand
the business to include pharmaceuticals. (Stock exchange release on 13 March
2017, press release 30 June 2017)
The trading symbols of Kesko Corporation shares changed as of 15 March 2017. The
new symbols are KESKOA (share series A) and KESKOB (share series B). (Stock
exchange release on 13 March 2017)
Kesko Corporation sold its K-maatalous business to the Swedish Lantmännen ek
för. The debt free price of the sale, structured as a share transaction, was
€38.5 million. Kesko Corporation recorded a profit of €12.2 million on the
disposal. On 26 May 2017, the Finnish Competition and Consumer Authority (FCCA)
announced that it approves the disposal, and it was completed on 1 June 2017.
The approval was not subject to any conditions. (Stock exchange release on 11
April 2017, press release on 1 June 2017)
Kesko Corporation sold Indoor Group, which is responsible for the Asko and Sotka
furniture trade chains, to a company owned by Sievi Capital Oyj, three
franchising entrepreneurs from the Sotka chain and Etera Mutual Pension
Insurance Company. The debt free price of the sale, structured as a share
transaction, was €67 million, and the sale was completed on 30 June 2017. Kesko
Corporation recorded a profit of €19.0 million on the divestment. (Press
releases on 20 June 2017 and 30 June 2017)
Kesko has been listed on the Dow Jones Sustainability Indices DJSI World and
DJSI Europe. Kesko's scores rose especially in the areas of environmental
responsibility and social responsibility. (Press release 13 September 2017)
Mika Majoinen, 53, Master of Laws, has been appointed Kesko Group General
Counsel, a position he will take up on 1 January 2018. He will also become a
member of Kesko's Group Management Board. Kesko's current Group General Counsel,
EVP Anne Leppälä-Nilsson will retire on 31 December 2017, in accordance with her
contract. (Stock exchange release 21.09.2017)
Kesko enters into cooperation with Alibaba to open a food online store in China.
The aim of the cooperation between K Group and Alibaba on this project is to
export Finnish food brands to the growing market in China. At the same time,
Kesko will learn from a global pioneer in e-commerce. (Press release 29.9.2017)
Lauri Peltola, EVP, Marketing and Corporate Affairs and member of Group
Management Board, leaves Kesko by the end of the year. Kesko has started a
process to create a succession plan for Lauri Peltola. (Stock exchange release
29.09.2017)
Resolutions of the 2017 Annual General Meeting and decisions of the Board's
organisational meeting
Kesko Corporation's Annual General Meeting held on 3 April 2017 adopted the
financial statements and the consolidated financial statements for 2016 and
discharged the Board members and the Managing Director from liability. The
General Meeting also resolved to distribute €2.00 per share as dividends, or a
total of €198,932,930.00. The dividend pay date was 12 April 2017.
The General Meeting resolved to leave the number of Board members unchanged at
seven. The Annual General Meeting held on 13 April 2015 elected seven (7) Board
members for terms of office in accordance with the Articles of Association
expiring at the close of the Annual General Meeting to be held in 2018. Those
Board members are retailer Esa Kiiskinen, Master of Science in Economics Tomi
Korpisaari, retailer, eMBA Toni Pokela, eMBA Mikael Aro, Master of Science in
Economics Matti Kyytsönen, Master of Science in Economics Anu Nissinen and
Master of Laws Kaarina Ståhlberg. Korpisaari and Ståhlberg resigned from the
membership of the Company's Board of Directors as of 1 March 2016. The General
Meeting held on 4 April 2016 replaced Korpisaari and Ståhlberg by retailer,
trade technician Matti Naumanen and Managing Director, Master of Science in
Economics Jannica Fagerholm until the close of the Annual General Meeting to be
held in 2018.
The General Meeting elected the firm of auditors PricewaterhouseCoopers Oy as
the Company's Auditor, with Mikko Nieminen, APA, as the Auditor with principal
responsibility.
In addition, the General Meeting approved the Board's proposal for its
authorisation to decide on donations in a total maximum of €300,000 for
charitable or corresponding purposes until the Annual General Meeting to be held
in 2018, and to decide on the donation recipients, purposes of use and other
terms of the donations.
After the Annual General Meeting, Kesko Corporation's Board of Directors held an
organisational meeting in which it elected M.Sc. (Econ.) Jannica Fagerholm as
the Chair of the Audit Committee, eMBA Mikael Aro as its Deputy Chair, and M.Sc.
(Econ.) Matti Kyytsönen as its member. Business College Graduate Esa Kiiskinen
(Ch.), eMBA Mikael Aro (Dep. Ch.) and M.Sc. (Econ.) Anu Nissinen were elected to
the Board's Remuneration Committee.
The resolutions of the Annual General Meeting and the decisions of the Board's
organisational meeting were announced in more detail in stock exchange releases
on 3 April 2017.
Responsibility
In September, Kesko was added to the Dow Jones Sustainability Indices DJSI World
and DJSI Europe. Kesko's scores rose especially in the areas of environmental
responsibility and social responsibility.
In August, K Group and the World Wildlife Fund began a multi-year collaboration
to save Finland's endangered migratory fish populations. K Group and WWF will
jointly map different parts of Finland to find obstacles in migratory fish
spawning grounds, and in a spirit of cooperation with landowners, local K-
retailers and volunteers, make the spawning grounds once again accessible for
fish. The aim is to generate more awareness of and discussion about Finland's
endangered migratory fish populations.
K Group hosts the most extensive network of free-of-charge recharging points for
electric cars. There are currently 80 recharging points in 23 locations. During
2017, dozens of new recharging points will be built in Neste K service stations,
and going forward, 10-15 new charging points will be built on K-Citymarket
parking lots every year.
In September, Pirkka Parhaat Benella Rainbow Trout was introduced to K-food
stores. The rainbow trout is farmed in Finland using sustainably produced feed.
In September, K Group took part in Food Waste Week for the fifth time. The
campaign aims to encourage decreases in food waste and a greater appreciation of
food. In 2013, K Group set itself the target of reducing food waste from its K-
food stores by 10% by year 2020. Currently, food waste is being reduced at a
rate of 1-2% per year.
In September, K-Rauta opened a new free-of-charge advice service for renovation.
The Remonttineuvonta service offers advice on all kinds of questions related to
renovation.
K-Market was one of the two main partners of the Lähiöfest2017 neighbourhood
festival. During the festival week at the end of September, K-Market hosted a
workshop envisioning a food store of the future, set up a pop-up restaurant in
the Helsinki suburb of Vuosaari, and took part in marketplace events that
livened up different neighbourhoods around Helsinki.
Risk management
Kesko Group has an established and comprehensive risk management process. Risks
and their management responses are regularly assessed within the Group and
reported to the Group management. Kesko's risk management and risks associated
with business operations are described in more detail on Kesko's website in the
Corporate Governance section.
The most significant near-future risks in Kesko's business operations are
associated with price competition in the Finnish grocery trade, the
implementation of the growth strategy of the building and technical trade, as
well as the change in the trading sector caused by digitalisation. Positive
change is estimated to have taken place in 2017 in the risks described in
Kesko's 2016 Report by the Board of Directors, financial statements and the
following risks described on Kesko's website. Purchasing power and trading
sector demand are estimated to be developing positively in line with the general
economic development in Finland. With regard to the implementation of the
neighbourhood market strategy in the grocery trade, the changes to and
integration of the stores that were transferred to K Group in the acquisition
have proceeded according to plans and the work will be completed in the first
half of 2018.The risks and uncertainties related to economic development are
described in the outlook section of this release.
Outlook
Estimates for the outlook for Kesko Group's net sales and comparable operating
profit are given for the 12-month period following the reporting period
(10/2017-9/2018) in comparison with the 12 months preceding the end of the
reporting period (10/2016-9/2017).
The general economic situation and the expected trend in consumer demand vary in
Kesko's different operating countries. In Finland, the trading sector is
expected to grow. In the Finnish grocery trade, intense competition is expected
to continue, although, as purchasing power increases, the importance of quality
will be emphasised more than previously. In the building and technical trade,
the growth in the B2B business is expected to continue stronger than the growth
in the B2C business. In the Nordic countries and the Baltics, the market is
expected to grow but at a somewhat slower rate. The trend in the Russian market
is expected to remain modest.
In comparable terms, the net sales for the next 12 months are expected to exceed
the level of the previous 12 months. Due to divestments and restructuring, Kesko
Group's net sales for the next 12 months are expected to fall below the level of
the previous 12 months. That development results from the divestments of the
Russian grocery trade, the K-maatalous business, the Asko and Sotka furniture
trade, the Yamarin boat business and Kesko's Yamaha representation as well as
store closures and the transfer of Suomen Lähikauppa stores to retailers.
The comparable operating profit for the next 12-month period is expected to
exceed the level of the preceding 12 months.
Helsinki, 24 October 2017
Kesko Corporation
Board of Directors
The information in the interim report is unaudited.
Further information is available from Jukka Erlund, Executive Vice President,
Chief Financial Officer, telephone +358 105 322 113, Kia Aejmelaeus, Vice
President, Investor Relations, telephone +358 105 322 533, and Eva Kaukinen,
Vice President, Group Controller, telephone +358 105 322 338. A Finnish-language
webcast of the interim report briefing can be viewed at 11.00 at www.kesko.fi.
An English-language audio conference on the interim report will be held today at
14.00 (Finnish time). The audio conference login is available on Kesko's website
at www.kesko.fi.
Kesko Corporation's financial statements release for 2017 will be published on
1 February 2018. In addition, Kesko Group's sales figures are published each
month. News releases and other Company information are available on Kesko's
website at www.kesko.fi.
KESKO CORPORATION
ATTACHMENTS: Interim report 1-9/2017 pdf
DISTRIBUTION
Nasdaq Helsinki Ltd
Main news media
www.kesko.fi
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