2007-04-20 10:00:00 CEST
2007-04-20 10:00:00 CEST
REGULATED INFORMATION
Kesko Oyj - Quarterly report
Interim financial report for the period 1 January-31 March 2007: Kesko Group's strong growth continues
KESKO CORPORATION STOCK EXCHANGE RELEASE 20.04.2007 AT 11.00 1(22)
Interim financial report for the period 1 January-31 March 2007:
Kesko Group's strong growth continues
The Group's net sales in January-March 2007 were €2,193 million,
up 11.3% on the corresponding period of the previous year (€1,971
million). The operating profit excluding non-recurring items was
€59.8 million (€36.6 million). The operating profit was €62.4
million (€150.8 million). The Group's pre-tax profit excluding non-
recurring items was €61.1 million (€36.1 million). The pre-tax
profit was €100.9 million (€150.3 million). The consolidated net
profit in January-March was €107.4 million (€111.4 million). The
consolidated earnings per share were €1.06 (€1.13).
Net sales and profit, continuing operations
The Group's net sales in January-March 2007 were €2,193 million,
which is 11.3% up on the corresponding period of the previous year
(€1,971 million). The Group's net sales increased by 8.0% in
Finland and by 27.0% abroad. Excluding acquisitions and business
disposals, the Group's net sales increase was 11.6%. Exports and
foreign operations accounted for 19.8% (17.3%) of net sales.
The K-Group's (i.e. Kesko's and the chain stores') retail sales
were €2,446 million, an increase of 13.1% on the corresponding
period of the previous year.
The Group's profit before taxes for January-March was €100.9
million (€150.3 million). The operating profit excluding non-
recurring items was €59.8 million (€36.6 million), up €23.2
million on the previous year, due especially to Kesko Food's and
Rautakesko's good profit performances. The operating profit
excluding non-recurring items represented 2.7% (1.9%) of net
sales. The Group's operating profit was €62.4 million (€150.8
million). The operating profit included a net total of €2.7
million (€114.2 million) in non-recurring gains and losses from
disposal of fixed assets and operations, and impairment charges.
In 2006, the gains from disposal of fixed assets included €99.3
million received by Kesko for selling its retail store properties
to Niam Retail Holding Finland AB. The consolidated earnings per
share from continuing operations were €0.77 (€1.14). Equity per
share was €17.52 (€15.43).
Investments
The Group's investments for the period under review totalled €51.6
million (€56.6 million), which is 2.4% (2.9%) of net sales.
Investments in retail store sites amounted to €39.8 million (€37.5
million). Investments in acquisitions represented €0.7 million
(€6.2 million) of total investments. The Group's other investments
were €11.0 million. Investments in foreign business operations
represented 21.1% of total investments.
Finance
In January-March, the cash flow from operating activities was €-20
million (€-28 million) and the total cash flow from investing
activities was €55 million (€161 million). The latter was
increased by €50 million received for selling retail store
properties in the Baltic countries, and by €46 million for selling
SATO Corporation shares. The comparable cash flow from operating
activities was increased by the over €200 million price received
in March for selling real estate.
At the end of the period, liquid funds totalled €383 million (€186
million). The amount was affected by the €190 million price
received in December 2006 for selling Rimi Baltic AB shares.
Interest-bearing net debt was €171 million (€512 million). At the
end of the period, equity ratio was 44.6% (41.2%) and gearing 9.8%
(33.6%).
The Group's net financial income were €37.9 million (€-1.5
million), positively affected by the €37.1 million non-recurring
gain on SATO shares and interest income from liquid funds.
Taxes
The Group's income taxes for the first quarter were €21.7 million
(€37.1 million). The amount has been calculated based on the
anticipated effective tax rate of 21.5% for the whole year.
Discontinued operations
The sale to Rimi Baltic AB of food store properties that had been
leased to it was concluded in January. The gain on the disposal
was €28.2 million.
Seasonal nature of operations
The Group's operating activities are affected by seasonal
fluctuations. The net sales and operating profits of its business
segments are not earned evenly throughout the year. Instead they
vary by quarter depending on the characteristics of each business
segment. The first quarter typically has the least significance
with respect to its contribution to the Group's net sales and
profit.
Personnel
During the review period, the average number of personnel in the
Kesko Group, including joint ventures, was 19,919 (22,614)
converted into full-time employees. There was a decrease of 2,695
employees compared with the corresponding period of the previous
year. In Finland, the average decrease was 320 employees, while
outside Finland it was 2,375.
The number of personnel decreased as a result of Kesko's disposal
of its ownership interest in Rimi Baltic AB in December 2006.
At the end of March 2007, the total number of personnel was 23,087
(26,049), of whom 13,362 (13,736) worked in Finland and 9,725
(12,313) in other countries. Compared with the end of March 2006,
there was a decrease of 374 employees in Finland, and 2,588 in
other countries.
Market review
According to the preliminary data of Statistics Finland, the
Finnish economy grew by 5.5% in 2006, accelerated by a brisk
growth in exports, private consumption and investments. In 2007,
the growth rate of the Finnish economy is expected to decelerate
compared with 2006. The Finnish economy is expected to grow by
2.7% in 2007. It is forecast that private consumption will
increase by 2.4% and investments by 3%. The increase in consumer
prices is forecast to reach 1.8%. Housing construction investments
are estimated to grow by about 2% (ETLA, The Research Institute of
the Finnish Economy).
According to the preliminary data of Statistics Finland, in
January-February 2007, the volume of Finnish retail trade
increased by 6.7% compared with the corresponding period of the
previous year. The increase in the wholesale trade volume was 5.4%
in the same period.
The volumes of Finnish retail and wholesale trade are expected to
continue to grow also in 2007. The growth is expected to
decelerate somewhat compared with previous years, as the growth of
households' buying power slows down.
According to Statistics Finland's consumer survey of March,
consumers continued to be very confident about their own finances
and the growth of Finland's economy. They also had higher
expectations of a decrease in unemployment than in previous
months.
The Estonian economy is forecast to grow by 8.9%, the Latvian
economy by 9.5% and the Lithuanian economy by 7.4% this year.
Private consumption is estimated to grow by about 13% in Estonia
and by 8-9% in Latvia and Lithuania. Consumer prices are forecast
to rise by 4.7% in Estonia, by 6.2% in Latvia and by 4% in
Lithuania (Nordea). The retail trade will continue growing briskly
in all Baltic countries.
This year the Swedish economy and private consumption are forecast
to grow by 3.5%. The increase in consumer prices is anticipated to
be 1.4% (Nordea). Due to brisk housing construction, total
building investments are forecast to continue increasing at a rate
of some 4% in 2007 (Sveriges Byggindustrier).
The Norwegian economy is forecast to grow by 3.4% and private
consumption by 3.2% in 2007. Consumer price inflation is
anticipated to be approximately 1% (Nordea).
The Russian economy is forecast to grow by 6.5%. Private
consumption and investments are estimated to continue increasing
at the brisk pace of 15% in 2007 (Nordea). The strong growth in
private consumption will be reflected positively in the growth of
retail trade. As income levels rise, households will have more
money to spend on the maintenance of homes, gardens and
countryside houses. The retail trade is growing rapidly and the
competitive situation is tightening as new local and foreign
operators enter the market.
The market and outlook for each of Kesko's business divisions are
discussed in the business division reviews of this interim
financial report.
Divisions
Kesko Food
In January-March, Kesko Food's net sales totalled €883 million, up
by 8.4%.
In January-March, Kesko Food's operating profit excluding non-
recurring items was €29.0 million (3.3% of net sales), i.e. €8.6
million, or 0.8 percentage points, more than in the previous year.
The operating profit increased as a result of improved cost
efficiency and good retail sales growth. Kesko Food's operating
profit was €29.2 million (€64.8 million). The comparable operating
profit was increased by non-recurring gains from property
disposals.
Kesko Food's investments totalled €24.4 million (€15.9 million),
of which investments in retail store sites were €19.0 million
(€12.5 million).
In January-March, the retail sales of the K-food stores increased
by 8.1%, totalling €1,135 million (including VAT). In March, the
sales increase was 9.1%. At the end of March, there were a total
of 1,073 K-food stores.
Kesko Food continued investing in the development of the K-food
store network. During the first months of the year, K-supermarkets
were opened in Siilinjärvi and Naantali, and a K-market in Nilsiä.
In addition, other renovations and extensions were implemented.
The total grocery trade market in Finland has continued to grow
steadily. The growth rate for January-March is estimated at about
4.5% up on the previous year. Prices rose at an average monthly
rate of 2.0% (Statistics Finland) compared with the comparable
period of the previous year.
Kesko Food's net sales and operating profit excluding non-
recurring items are expected to increase in 2007.
Rautakesko
In January-March, Rautakesko's net sales amounted to €534.1
million, an increase of 24.7%. Net sales in Finland were €215.4
million, an increase of 15.2%. Net sales of foreign subsidiaries
were €318.3 million, up 32.1%. Foreign subsidiaries contributed
59.6% to Rautakesko's net sales.
In Sweden, the net sales of K-rauta AB increased by 23.3% to €33.7
million. In Estonia, Rautakesko's net sales were up by 36.7% to
€17.3 million. In Lithuania, the net sales of UAB Senuku Prekybos
Centras (Senukai), in which Rautakesko has a majority interest,
increased by 36.9% to €89.2 million. In Latvia, Rautakesko's net
sales increased by 77.1% to €17.3 million. In Russia,
Stroymaster's net sales grew by 59.0% to €28.7 million. In Norway,
Byggmakker's net sales grew by 21.7% and were €130 million.
In January-March, Rautakesko's operating profit excluding non-
recurring items was €16.3 million (3.0% of net sales), i.e. €7.4
million, or 0.9 percentage points, more than in the corresponding
period of the previous year. The increase is particularly
attributable to the good sales performance, and was recorded
regardless of the fact that three new stores opened during the
period under review. Rautakesko's operating profit for January-
March was €18.6 million (€56.5 million). During the review and
comparable periods, the operating profit was increased by non-
recurring gains on real estate disposals.
Rautakesko's investments totalled €19.9 million (€12.9 million),
of which 41.2% (34.7%) was abroad.
At the end of March, the K-rauta chain in Finland comprised 40
stores and the Rautia chain 105 stores. The sales of the K-Group
hardware and builders' supplies stores in Finland increased by
15.5% to €203.7 million (including VAT). The sales of the
Rautakesko B-to-B Service increased by 23.9%.
Rautakesko operates 15 K-rauta stores in Sweden. The sixteenth K-
rauta in Sweden opened in Umeå. A new K-rauta will be opened in
Gävle in summer 2007 to replace the outlet destroyed in a fire in
August 2006. In Estonia, Rautakesko has five stores now that the
fifth K-rauta opened in Tallinn in March. In Latvia, Rautakesko
now has five stores of its own and one partner store. In
Lithuania, UAB Senuku Prekybos Centras (Senukai) operates 14
Senukai stores and 76 Partnershops. In Norway, Rautakesko owns
99.9% of Byggmakker Norge AS (former Norgros AS), a company
managing the Byggmakker chain of hardware and building materials
stores. The chain comprises 119 stores, 21 of which are owned by
Byggmakker. The other stores of the chain are owned by retailer-
entrepreneurs who have signed a chain agreement with Byggmakker.
Byggmakker Norge AS opened a new Byggmakker store in Oslo in
March. In Russia, Rautakesko has 7 K-rautas in St. Petersburg, two
of which are new and operate in conformity with the K-rauta
concept.
The hardware and builders' supplies market is anticipated to grow
in all countries in which Rautakesko operates. In 2007, 3-5%
growth is forecast for the Nordic countries and 10% for the Baltic
countries. About 10-15% growth is forecast for the St. Petersburg
area.
In 2007, Rautakesko will increase its investments in new store
sites, employee competence and a uniform information system. It is
expected that Rautakesko's net sales and its operating profit
excluding non-recurring items will grow in 2007.
VV-Auto
VV-Auto's net sales totalled €247.9 million, up by 7.6 %. The new
Volkswagen and Audi retail businesses acquired by VV-Auto at the
beginning of March 2006 contributed 2.1% to the growth of VV-
Auto's net sales.
In January-March, the operating profit was €11.7 million (4.7% of
net sales), up €0.6 million, or down 0.1 percentage points,
compared with the corresponding period of the previous year.
Investments totalled €1.6 million.
In January-March, first registrations of new passenger cars
totalled 40,204 in Finland, down by 8.2% on the previous year.
Compared with the previous year, first registrations of vans were
up by 11.7% to 4,887. The sale of new cars in Finland has been
constrained by a rise in interest rates and uncertainty about
future tax decisions. In addition, the prices of used cars have
come down, which increases the customer's cash payment in
exchange.
In January-March, VV-Auto's retail sales volume increased
significantly compared with the corresponding period of the
previous year. In addition to the business acquisition concluded a
year ago, the growth is attributable to investments in the outlets
of Turku and Herttoniemi.
In January-March, registrations of Volkswagen passenger cars
totalled 3,747 and their market share was 9.3%, compared with
11.5% in the previous year. The number of Volkswagen vans
registered was 902, while the market share was 18.5% (17.5%). In
January-March, first registrations of Audis were 1,540, and the
market share was 3.8%, compared with 3.5% in the previous year.
The registrations of new Seat passenger cars totalled 492 in
Finland, 216 in Estonia and 50 in Latvia. The market share in
Finland was 1.2%, compared with 0.4% in the previous year.
It is estimated that Finland's total market for passenger cars
will drop slightly in 2007 from the level of the previous year to
approximately 135,000. The total market for vans is expected to be
slightly bigger than in 2006.
VV-Auto's net sales are anticipated to grow in 2007. The operating
profit excluding non-recurring items is expected to equal the
level of the previous year.
Anttila
In January-March, Anttila's net sales totalled €119.7 million,
representing the level of the corresponding period of the previous
year. Sales were affected by the closing down of the City
department store in Helsinki due to the expiry of the lease in
January, and changes in the competitive situation due to the
opening of new shopping centres.
The sales of the Anttila department stores were €81.6 million
(incl. VAT), down 1.3%. The sales of the Kodin Ykkönen department
stores for home goods and interior decoration were €36.2 million
(incl. VAT), up 1.8%. Distance sales in Finland were €22.0
million, representing the level of the corresponding period of the
previous year. The sales trend was affected by a reduction in the
number of illustrated catalogues. The sales of NetAnttila,
engaging in distance sales, increased by 28.7%. Sales trends
varied significantly by product line, with the best performance
being recorded by fashion product lines.
In January-March, Anttila's operating loss excluding non-recurring
items was €0.9 million (-0.8% of net sales), an improvement by
€0.6 million, or 0.5 percentage points, on the corresponding
period of the previous year. Anttila's operating loss was €0.9
million (€10.8 million). Non-recurring items in the corresponding
period of the previous year included €12.3 million in gains on the
disposal of real estate.
The growth of the home goods market varies considerably by product
line. The growth is forecast to average 3-5%.
Anttila's net sales are expected to increase in 2007, while its
operating profit excluding non-recurring items is expected to
represent the level of the previous year.
Kesko Agro
In January-March, Kesko Agro's net sales were €168 million, an
increase of 3.6%. The net sales of foreign subsidiaries were €48
million, accounting for 28.6% of net sales.
Kesko Agro's net sales in Finland were €118 million, up by 4.6%,
which is mainly attributable to the trend in grain and tractor
sales. In January-March, the sales of the agricultural and
machinery trade in the Baltic countries decreased by 3.6%, due to
a decline in grain sales.
In January-March, Kesko Agro's operating loss excluding non-
recurring items was €0.6 million (-0.4% of net sales), i.e. €0.9
million, or 0.6 percentage points, smaller than in the
corresponding period of the previous year. The decrease of
operating loss, non-recurring items excluded, was attributable to
the good sales trend in Finland and cost savings. In January-
March, Kesko Agro's operating loss was €0.6 million (€-0.1
million). Kesko Agro's comparable operating loss included non-
recurring gains on the disposal of fixed assets.
In January-March, investments totalled €2.2 million, 81% of which
were in projects abroad.
At the end of the period under review, the K-maatalous chain
comprised 99 agricultural stores in Finland. The sales of the K-
maatalous chain increased by 18.2% to €134 million (including
VAT). Kesko Agro has six stores in Estonia, four in Latvia and
three in Lithuania.
It is estimated that Finland's total agricultural trade market
will remain at the level of the previous year. The total Baltic
market is anticipated to grow by about 5-10%.
Regardless of the structural changes taking place in the sector,
Kesko Agro's net sales and operating profit excluding non-
recurring items are expected to remain at the same level in 2007
as in 2006.
Other operating activities
Other operating activities comprise the reporting for Konekesko,
Intersport Finland, Indoor Group, Musta Pörssi, WellStep, Tähti
Optikko Group and Kauko-Telko.
In January-March, the aggregate net sales from other operating
activities were €248 million, up 9.0%. Net sales from foreign
operations were €51 million, contributing 20.7% to the net sales.
In January-March, the operating profit from other operating
activities, non-recurring items excluded, was €10.6 million (4.3%
of net sales), which was up by €5.2 million, or 1.9 percentage
points, on the corresponding period of the previous year. This is
mainly attributable to the good profit performance of Indoor Group
and Musta Pörssi. The operating profit was €10.7 million (€9.1
million). The operating profit was improved by the €0.1 million
non-recurring gain on the disposal of fixed assets. The operating
profit of the review period was improved by the €3.7 million non-
recurring gain on the disposal of operating activities and fixed
assets.
In January-March, investments totalled €2,7 million.
In January-March, the net sales of Konekesko were €62 million (€49
million), an increase of 26.7% from the previous year. In Finland,
sales were €49.6 million, up by 22.6%. Konekesko's export sales
totalled €13.8 million, an increase of 50.4%.
In January-March, the net sales of Intersport Finland were €38
million, up by 11.5%.
In January-March, Indoor Group's net sales were €46 million, up by
12.0%. The aggregate net sales of the furniture trade in the
Baltic countries and Sweden were €9.9 million, an increase of
65.4%.
In January-March, the net sales of Musta Pörssi Oy were €32
million, up by 14.3%.
In January-March, WellStep Oy's net sales decreased by 17.2% to €6
million.
In January-March, the net sales of the Tähti Optikko Group were €6
million, up 7.5%.
In January-March, Kauko-Telko's net sales were €58 million (€62
million), down by 7.4% from the previous year. Foreign operations
contributed €27.4 million, or 47.3%, to the net sales.
It is expected that in 2007, the net sales of other operating
activities will remain at the level of the previous year and the
operating profit excluding non-recurring items will increase
slightly.
Changes in Group structure
No significant changes took place in the Group structure during
the period under review.
Decisions of the Annual General Meeting
Kesko Corporation's Annual General Meeting held on 26 March 2007
adopted the financial statements for 2006 and discharged the
members of the Board of Directors and the Managing Director from
liability. The Annual General Meeting also decided to distribute a
dividend of €1.50 per share, as proposed by the Board of
Directors, or total dividends of €146,314,669.50. The record date
for dividend distribution was 29 March 2007 and the payment date
was 5 April 2007.
The Annual General Meeting decided to leave the number of Board
members unchanged at seven. The members of the Board of Directors
elected by the Annual General Meeting of 27 March 2006 are Pentti
Kalliala, Ilpo Kokkila, Maarit Näkyvä, Seppo Paatelainen, Keijo
Suila, Jukka Säilä and Heikki Takamäki. The term of office of each
Board member, in accordance with the Articles of Association, is
three years, with the term starting at the close of the General
Meeting electing the member and expiring at the close of the third
Annual General Meeting after the election (in 2009).
The Annual General Meeting decided to leave the Board members'
fees unchanged. The Annual General Meeting decided that the
monthly fees will be as follows: Board Chairman €5,000, Deputy
Chairman €3,500 and Board member €2,500. The Annual General
Meeting also decided that a fee of €500 will be paid for each
Board of Directors' meeting and for each meeting of its
committees. However, the fee of the Chairman of a Committee
meeting will be €1,000, unless he/she also acts as Chairman or
Deputy Chairman of the Board of Directors.
The Annual General Meeting elected PricewaterhouseCoopers Oy,
Authorised Public Accountants, as the company's single auditor,
with Pekka Nikula, B.Sc. (Econ.), APA, as the auditor with
principal responsibility.
The Annual General Meeting approved the Board of Directors'
proposal to amend the Articles of Association. Most of the
amendments were due to the new Companies Act. The major amendments
were the removal of rules on minimum and maximum capital, and that
the company has one auditor which should be a firm of auditors
authorised by the Central Chamber of Commerce.
The Annual General Meeting also approved the Board of Directors'
proposal to authorise the Board of Directors to issue shares. By
virtue of the authorisation, the Board can decide on the issuance
of a maximum of 20,000,000 new B shares. New shares can be issued
either against payment to company shareholders in proportion to
their existing shareholdings regardless of whether they consist of
A or B shares, or, in deviation from shareholders' pre-emptive
subscription rights, to be used as consideration in possible
company acquisitions, other company business rearrangements, or to
finance investments. The company must have a weighty financial
reason to deviate from the pre-emptive subscription rights. The
authorisation includes an authorisation to decide on the share
subscription price, to issue shares against non-cash
consideration, and to decide on other matters relating to share
issues. The authorisation is valid for two years after the
decision of the Annual General Meeting.
In addition, the Annual General Meeting approved the Board's
proposal to grant stock options for no consideration to the Kesko
Group management, other key Kesko personnel, and to Sincera Oy, a
subsidiary wholly owned by Kesko Corporation. The company has a
weighty financial reason for granting stock options because they
are part of Kesko's share-based incentive plan. The options are
intended to motivate the management and other key persons to work
on a long-term basis in order to increase shareholder value, and
to align their interests with those of their employer. The
aggregate number of options is 3,000,000 at the maximum. The
options give the right to subscribe for an aggregate maximum of
3,000,000 new B shares of the company. The share subscription
price of a stock option is based on the trade volume weighted
average price of a Kesko Corporation B share on the Helsinki Stock
Exchange in April 2007, 2008 and 2009. The exercise period for
2007A options will be from 1 April 2010 to 30 April 2012, for
2007B options from 1 April 2011 to 30 April 2013, and for 2007C
options from 1 April 2012 to 30 April 2014.
The decisions of the Annual General Meeting were published in more
detail in a stock exchange release on 26 March 2007.
Corporate governance
Kesko Food Ltd and Rautakesko Ltd, major subsidiaries fully owned
by Kesko Corporation, elected the members of their Boards of
Directors at their Annual General Meetings held on 23 March 2007.
The compositions of the Boards were announced in a stock exchange
release on 23 March 2007.
The organising meeting of Kesko Corporation's Board of Directors
held after the Annual General Meeting on 26 March 2007 decided to
leave the compositions of its committees unchanged. The Board
elected Maarit Näkyvä as the Chairman of its Audit Committee, and
Seppo Paatelainen and Keijo Suila as its members. The Board
elected Heikki Takamäki as the Chairman of its Compensation
Committee, and Pentti Kalliala and Keijo Suila as its members. The
committees' terms of office always expire at the Annual General
Meeting. On the basis of the evaluation of independence carried
out by the Board of Directors, all members of the Audit Committee
are independent of the company and its significant shareholders.
The decisions of the organising meeting of the Board of Directors
were published in a stock exchange release on the day of the
meeting.
Shares and the securities market
An increase in the share capital (€46,376) corresponding to the
share subscriptions (23,188) made with the options of Kesko
Corporation's year 2003 stock option scheme was entered in the
Trade Register on 12 February 2007. The new shares were included
in the main list of the Helsinki Stock Exchange with old B shares
for public trading on 13 February 2007. In consequence of the
increase, Kesko Corporation's share capital increased to a total
of €195,086,226. Of all shares, 31,737,007, i.e. 32.5%, are A
shares and 65,806,106, i.e. 67.5%, are B shares.
The price of a Kesko A share was €38.43 at the end of 2006 and
€38.90 at the end of the review period in March 2007, representing
an increase of 1.2%. The price of a B share was €40.02 at the end
of 2006 and €39.93 at the end of March 2007, a decrease of 0.2%.
From the beginning of 2007 until the end of March 2007, the
Helsinki Stock Exchange All Share index (OMX Helsinki) rose by
7.1%, the weighted OMX Helsinki CAP index by 6.1%, and the
Consumer Staples Index by 2.5%.
At the end of the review period, the market value of A shares was
€1,234.6 million, while that of B shares was €2,627.6 million.
Their combined market capitalisation was €3,862.2 million, an
increase of €10 million from the beginning of the year. During the
first months of 2007, approximately 1 million A shares were traded
on the Helsinki Stock Exchange at a total value of €39.1 million,
while 33.3 million B shares were traded at a total value of
€1,334.4 million.
The 2003D stock options of the year 2003 option scheme were
included on the main list of the Helsinki Stock Exchange on 1
April 2005. The number of 2003D options traded during the review
period was 42,788 at a total value of €1.6 million.
The 2003E stock options were included on the main list of the
Helsinki Stock Exchange on 3 April 2006. The number of 2003E
options traded during the review period was 77,445 at a total
value of €2.2 million.
The 2003F stock options were included on the main list of the
Helsinki Stock Exchange on 2 April 2007.
The Board of Directors was authorised by the Annual General
Meeting of 26 March 2007 to issue a maximum of 20,000,000 new B
shares. The Board has no other valid authorisation concerning an
issue of shares, options or other special rights entitling to
shares.
The Annual General Meeting of 26 March 2007 decided to grant stock
options for no consideration to the Kesko Group management, other
key Kesko personnel, and to Sincera Oy, a subsidiary wholly owned
by Kesko Corporation. The stock options shall be marked with the
symbols 2007A, 2007B and 2007C, and their total number shall be
3,000,000 at the maximum. Each option entitles its holder to
subscribe for one B share, so that a maximum of 3,000,000 new B
shares can be subscribed for with the options in compliance with
the terms and conditions of the stock option plan. The Board's
share issue authorisation and the year 2007 stock option scheme
were disclosed in more detail in a stock exchange release on 26
March 2007.
Flagging notifications
Kesko Corporation did not receive any flagging notifications
during the review period
Main events
Fiesta Real Estate AS, an Estonian subsidiary of Kesko
Corporation, sold the food trade properties leased by Rimi Baltic
AB in Estonia to Rimi Baltic for €50 million. Kesko was expected
to gain approximately €25 million on the property transaction. The
€28.2 million gain on the disposal was recognised in discontinued
operations for the first quarter of 2007 (stock exchange release
on 4 January 2007).
On 16 February 2007, Kesko Corporation and Varma Mutual Pension
Insurance Company completed a deal in which Kesko sold its SATO
Corporation shares to Varma. Kesko's ownership interest in SATO
was approximately 16.5%. The price of the shares was about €46
million and the gain on the disposal (€37.1 million) was
recognised for the first quarter of 2007 (stock exchange releases
on 7 and 16 February 2007).
Events after the end of the review period
No significant events took place after the end of the review
period.
Future outlook
In 2007, the Kesko Group divisions are expected to perform as
described in the above division reviews.
The Group's sales growth will continue during the next six months,
although it is expected that the peak of the economic cycle has
been reached and that this will slow the sales growth rate. Due to
the expansion of the retail store network and the more rapid
market growth in the Baltic countries and Russia than in Finland,
sales will continue to grow more strongly in other countries than
Finland.
It is expected that the Kesko Group's operating profit for the
next six months, non-recurring items excluded, will remain at a
good level despite the costs resulting from the major expansion of
the retail store network.
Helsinki, 20 April 2007
Kesko Corporation
Board of Directors
The figures of the interim financial report are unaudited.
Further information is available from Arja Talma, Senior Vice
President, CFO, telephone +358 1053 22113, and Juhani Järvi,
Corporate Executive Vice President, Deputy to the President and
CEO, telephone +358 1053 22209. An English-language web conference
on the interim financial report will be held today at 14.30
(Finnish time). The web conference login is available at
www.kesko.fi.
KESKO CORPORATION
Paavo Moilanen
Senior Vice President, Corporate Communications
ATTACHMENTS
Consolidated income statement
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Group indicators
Group contingent liabilities
Net sales by division
Operating profit by division
Operating profit by division excluding non-recurring items
Investments by division
Group indicators by quarter
Divisions' net sales by quarter
Divisions' operating profits by quarter
Divisions' operating profits, excluding non-recurring items, by
quarter
Personnel, average number and number at 31 March
The K-Group retail sales
Kesko Corporation's interim financial report for the first six
months of 2007 will be published on 18 July 2007 and the interim
financial report for the first nine months of 2007 on 17 October
2007. In addition, the Kesko Group sales figures will be published
each month. News releases and other company information are
available at www.kesko.fi.
DISTRIBUTION
Helsinki Stock Exchange
Main news media
********
ATTACHMENTS:
This interim financial report has been prepared in accordance with
the IAS 34 standard. The interim financial report has been
prepared in accordance with the same principles as the annual
financial statements for 2006.
Consolidated income statement
(€ million)
1-3/2007 1-3/2006 Change, 1-
% 12/2006
Net sales 2,193 1,971 11.3 8,749
Cost of sales -1,880 -1,695 10.9 -7,474
Gross profit 313 276 13.6 1,275
Other operating income 130 234 -44.4 661
Staff cost -131 -126 4.0 -544
Depreciation and impairment -29 -30 -3.9 -160
charges
Operating expenses -221 -203 8.9 -869
Operating profit 62 151 -58.6 363
Financial income* 50 7 (..) 38
Financial expenses -12 -9 30.0 -44
Income from associates 1 1 -43.5 1
Profit before taxes 101 150 -32.9 358
Income tax -22 -37 -41.8 -107
Net profit from continuing 79 113 -29.9 251
operations
Net profit from discontinued 28 -2 (..) 128
operations*
Net profit 107 111 -3.6 379
Attributable to:
Equity holders of the 104 110 -5.6 369
parent company
Minority interest* 3 1 (..) 10
Earnings per share (€) for
profit attributable to the
equity holders of the parent
company
Continuing operations
Basic 0.78 1.16 -32.8 2.47
Diluted 0.77 1.14 -32.7 2.45
Whole Group
Basic 1.07 1.14 -6.4 3.80
Diluted 1.06 1.13 -6.2 3.76
*Change over 100%
Income tax has been calculated on the profit for the review period
as a proportion of
the estimated tax for the whole financial year.
Consolidated balance sheet
(€ million)
31.3.200 31.3.200 Change, 31.12.20
7 6 % 06
ASSETS
Non-current assets
Intangible assets 247 306 -19.4 248
Tangible assets 1,126 1,150 -2.1 1,115
Investments 28 41 -31.1 37
Loans and receivables 130 140 -6.9 126
Pension assets 229 214 6.8 220
Total 1,760 1,851 -4.9 1,746
Current assets
Inventories 841 822 2.3 789
Trade and other receivables 943 851 10.9 852
Marketable securities* 333 117 (..) 341
Cash on hand and balances 50 69 57
with banks -26.8
Non-current assets held for 1 3 -41.1 22
sale
Total 2,168 1,862 16.5 2,061
Total assets 3,928 3,713 5.8 3,807
*Change over 100%
Consolidated balance sheet
(€ million)
31.3.2007 31.3.2006 Change, % 31.12.20
06
EQUITY AND LIABILITIES
Equity 1,709 1,494 14.4 1,750
Minority interest 31 28 11.3 27
Total equity 1,740 1,522 14.4 1,777
Non-current liabilities
Pension obligations 4 4 -0.4 4
Interest-bearing 319 400 -20.4 317
Non-interest-bearing 17 20 -16.3 18
Deferred tax liabilities 114 118 -2.9 113
Provisions 17 19 -9.9 17
Total 471 561 -16.1 469
Current
Interest-bearing 236 298 -20.9 293
Non-interest-bearing 1,467 1,325 10.7 1,254
Provisions* 14 7 (..) 14
Total 1,717 1,630 5.4 1,561
Total equity and 3,928 3,713 5.8 3,807
liabilities
*Change over 100%
Consolidated statement of changes in equity (€ million)
Share Issue Share Other Curre Reval Re- Minor Tot
capit of premi- reser n-cy u- taine ity al
al share um ves trans-ation d inter
capit latio surpl earni est
al n us ngs
diffe
r-
ences
Balance at
1 Jan. 193 1 189 246 -4 0 857 27 1,5
2006 08
Shares
subscribed 1 1 2 4
for with
options
Option 1 1
cost
Currency
translatio
n 0 0 0
difference
s
Fair value
changes 4 4
Dividends -106 -
106
Net profit
for the 110 1 111
period
Balance at
31 Mar. 194 2 191 246 -4 4 861 28 1,5
2006 22
Balance at
1 Jan. 195 0 196 246 -6 0 1,120 27 1,7
2007 77
Shares
subscribed 0 0 0 0
for with
options
Option 0 0
cost
Currency
translatio 1 1 2
n
difference
s
Minority
interest 1 1
Fair value
changes -1 -1
Dividend
-146 -
146
Net profit
for the 104 3 107
period
Balance at
31 Mar. 195 0 196 246 -5 -1 1,078 31 1,7
2007 40
Consolidated cash flow
statement
(€ million)
3/2007 3/2006 Change, 12/2006
%
Cash flow from operating
activities
Profit before tax 129 149 -13.1 487
Planned depreciation 29 33 -12.8 142
Financial income and expenses* -38 2 (..) 7
Other adjustments -39 -121 -67.5 -215
Working capital
Current non-interest-bearing -95 -90 6.2 -85
receivables,
increase (-)/decrease (+)
Inventories -51 -35 46.4 -36
increase (-)/decrease (+)
Current non-interest-bearing 72 49 46.9 142
liabilities,
increase (+)/decrease (-)
Financial items and taxes -26 -15 68.9 -114
Net cash from operating -20 -28 -29.6 328
activities
Cash flow from investing
activities
Investments -57 -53 6.9 -237
Disposals of fixed assets 112 233 -51.9 450
Loans granted 0 -19 -98.7 -10
Net cash used in investing 55 161 -65.9 203
activities
Cash flow from financing
activities
Debt increase* 0 22 (..) 18
Debt decrease -53 -87 -39.4 -159
Dividends paid* 0 0 (..) -113
Equity increase 0 4 -96.4 6
Short-term money market 2 0 (..) -140
investments*
Other items* 3 0 (..) -3
Net cash used in financing -48 -61 -21.9 -390
activities
Change in cash and cash -12 72 (..) 141
equivalents*
Cash and cash equivalents 257 114 (..) 115
at 1 Jan. *
Currency translation difference 0 0 -59.9 1
Cash and cash equivalents at 31 244 186 31.1 257
Mar.
*Change over 100%
Group indicators
3/2007 3/2006 Change, %
Return on invested capital, % 23.5 27.8 -15.5
Return on invested capital, %, 22.4 16.2 38.4
moving 12 months
Return on equity, % 24.4 29.4 -17.0
Return on equity, moving 12 23.0 16.9 36.2
months
Equity ratio, % 44.6 41.2 8.1
Investments, € million* 51.6 56.6 -8.9
Earnings per share, basic, €* 0.78 1.16 -32.8
Earnings per share, diluted, €* 0.77 1.14 -32.7
Earnings per share, basic, €** 1.07 1.14 -6.4
Earnings per share, diluted, 1.06 1.13 -6.2
€**
Equity per share, € 17.52 15.43 13.5
Personnel, average 19,919 22,614 -11.9
* Continuing operations
** Whole Group
Divisions
Net sales by division,
continuing operations 1-3/2007 1-3/2006 Change
€ million € million %
Kesko Food, Finland 879 809 8.6
Kesko Food, other 4 5 -17.6
countries*
Kesko Food, total 883 814 8.4
Rautakesko, Finland 215 187 15.2
Rautakesko, other 319 241 32.1
countries*
Rautakesko, total 534 428 24.7
VV-Auto, Finland 242 227 6.5
VV-Auto, other 6 3 91.5
countries*
VV-Auto, total 248 230 7.6
Anttila, Finland 114 114 -0.1
Anttila, other 6 6 -1.9
countries*
Anttila, total 120 120 -0.2
Kesko Agro, Finland 118 113 4.6
Kesko Agro,
other countries* 50 50 1.3
Kesko Agro, total 168 163 3.6
Other operating
activities, Finland 197 189 4.0
Other operating 51 38 33.8
activities,
foreign countries*
Other operating 248 227 9.0
activities, total
Common operations and -8 -11 -
eliminations
Finland, total 1,759 1,629 8.0
Other countries, total* 434 342 27.0
Group, total 2,193 1,971 11.3
*Exports and net sales in countries other than Finland
Operating profit by 1-3/2007 1-3/2006 Change
division, incl. non-
recurring items
€ million € million € million
Kesko Food 29.2 64.8 -35.6
Rautakesko 18.6 56.5 -37.9
VV-Auto 11.7 11.1 0.6
Anttila -0.9 10.8 -11.7
Kesko Agro -0.6 -0.1 -0.5
Other operating 10.7 9.1 1.7
activities
Common operations and -6.3 -5.0
eliminations -1.4
Group's operating profit 62.4 150.8 -88.4
Operating profit by 1-3/2007 1-3/2006 Change
division excl. non-
recurring items,
€ million € million € million
Kesko Food 29.0 20.5 8.6
Rautakesko 16.3 8.8 7.4
VV-Auto 11.7 11.1 0.6
Anttila -0.9 -1.5 0.6
Kesko Agro -0.6 -1.6 0.9
Other operating 10.6 5.5 5.2
activities
Common operations and -6.3 -6.2 -0.2
eliminations
Total 59.8 36.6 23.2
Investments by division 1-3/2007 1-3/2006 Change
€ million € million € million
Kesko Food 24 16 8
Rautakesko 20 13 7
VV-Auto 2 15 -13
Anttila 1 2 -1
Kesko Agro 2 2 0
Others 3 9 -6
Group, total 52 57 -5
Group's contingent liabilities 3/2007 3/2006 Change, %
(€ million)
For own commitments 226 251 -10.1
For associates 0 0 0
For shareholders 1 1 0
For others 11 35 -68.0
Lease liabilities 12 7 66.7
Liabilities arising from
derivative financial
instruments
Fair
value
Values of underlying 3/2007 3/2006 at 31
instruments Mar. 2007
at 31 Mar.
Interest rate derivatives
Forward and future contracts 48 - -0.15
Interest rate swap contracts 202 205 -0.69
Currency derivatives
Forward and future contracts 369 136 1.69
Currency swap contracts 100 100 -10.31
Commodity derivatives
Electricity derivatives 38 26 -0.60
Figures by quarter
Group indicators by 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
quarter 2006 2006 2006 2006 2007
Net sales, € million 1,971 2,277 2,196 2,304 2,193
Change in net sales, % 15.6 12.8 6.2 8.2 11.3
Operating profit, € 150.8 91.6 82.6 37.6 62.4
million
Operating profit, % 7.7 4.0 3.8 1.6 2.8
Operating profit excl. 36.6 89.4 82.4 71.4 59.8
non-recurring items, €
million
Operating profit excl. 1.9 3.9 3.7 3.1 2.7
non-recurring items, %
Financial -1.5 0.4 1.5 -5.9 37.9
income/expenses,
€ million
Profit before tax, € 150 92 84 31 101
million
Profit before tax, % 7.6 4.0 3.8 1.4 4.6
Return on invested 27.8 17.7 16.5 30.4 23.5
capital, %
Return on equity, % 29.4 11.3 17.4 36.4 24.4
Equity ratio, % 41.2 41.7 43.8 47.0 44.6
Investments, € million* 56.6 60.1 45.8 88.0 51.6
Earnings/share, €* 1.14 0.42 0.67 0.21 0.77
Equity/share, € 15.43 15.79 16.46 17.94 17.52
* Continuing operations
Divisions' net sales by 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
quarter, € million 2006 2006 2006 2006 2007
Kesko Food 814 931 899 971 883
Rautakesko 428 572 588 541 534
VV-Auto 230 221 186 152 248
Anttila 120 111 132 185 120
Kesko Agro 163 212 174 206 168
Other operating 227 239 224 259 248
activities
Common operations and -11 -9 -7 -10 -8
eliminations
Group's net sales 1,971 2,277 2,196 2,304 2,193
Divisions' operating 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
profits by quarter incl. 2006 2006 2006 2006 2007
non-recurring items, €
million
Kesko Food 64.8 38.9 32.6 36.9 29.2
Rautakesko 56.5 32.0 34.3 16.5 18.6
VV-Auto 11.1 11.9 5.0 1.4 11.7
Anttila 10.8 -0.6 7.1 21.4 -0.9
Kesko Agro -0.1 8.1 1.0 0.3 -0.6
Other operating 9.1 7.7 6.3 -17.3 10.7
activities
Common operations -1.4 -6.4 -3.7 -21.6 -6.3
Group's operating profit 150.8 91.6 82.6 37.6 62.4
Divisions' operating 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
profits, excl. non- 2006 2006 2006 2006 2007
recurring items, by
quarter, € million
Kesko Food 20.5 38.7 32.5 37.0 29.0
Rautakesko 8.8 31.7 34.2 16.5 16.3
VV-Auto 11.1 11.9 5.0 1.5 11.7
Anttila -1.5 -0.6 7.2 21.4 -0.9
Kesko Agro -1.6 8.1 1.0 0.3 -0.6
Other operating 5.5 7.0 6.2 2.7 10.6
activities
Common operations -6.2 -7.4 -3.7 -8.0 -6.3
Group's operating profit 36.6 89.4 82.4 71.4 59.8
Personnel, 1-3/2007 1-3/2006 Change
average number
Kesko Food 5,647 6,159 -512
Rautakesko 8,271 6,433 1,838
VV-Auto 727 389 338
Anttila 1,935 2,011 -76
Kesko Agro 841 877 -36
Others 2,498 2,417 81
Group companies, total 19,919 18,286 1,633
Kesko Food's joint 0 4,328 -4,328
ventures
Kesko Group, total 19,919 22,614 -2,695
Number of personnel 2007 2006 Change
at 31 Mar.*
Kesko Food 7,335 7,722 -387
Rautakesko 8,970 6,968 2,002
VV-Auto 747 400 347
Anttila 2,583 2,697 -114
Kesko Agro 857 910 -53
Others 2,595 2,673 -78
Group companies, total 23,087 21,370 1,717
Kesko Food's joint 0 4,679 -4,679
ventures
Kesko Group, total 23,087 26,049 -2,962
* Total number including part-time employees
K-Group's retail sales (incl. VAT) in January-March 2007
(preliminary data):
1.1. - 31.3.2007
K-Group food stores € Change,
million %
K-citymarket 394.8 8.0
K-supermarket 340.5 6.8
K-market 277.9 12.4
Other K-food stores and 121.5 -2.4
mobile stores
Finland, total 1,134.8 8.1
Food stores, total 1,134.8 8.1
K-Group hardware and
builders' supplies stores
K-rauta 114.2 16.3
Rautia 89.5 14.4
Finland, total 203.7 15.5
K-rauta, Sweden 42.5 23.9
K-rauta, Estonia 20.5 38.3
K-rauta, Latvia 20.4 77.3
Senukai, Lithuania 105.5 36.7
Stroymaster, Russia 33.9 59.0
Byggmakker, Norway 231.6 16.9
Other countries, total 454.4 27.2
Hardware and builders' 658.1 23.3
supplies stores, total
Kesko Group car stores
Helsingin VV-Auto and Turun 115.6 35.1
VV-Auto
Finland, total 115.6 35.1
Anttila
Anttila department stores 81.6 -1.3
Kodin Ykkönen department 36.2 1.8
stores for home goods
and interior decoration
Distance sales (Mail Order 22.0 0.8
and NetAnttila)
Finland, total 139.8 -0.2
Anttila Mail Order, Estonia 6.1 -3.2
and Latvia
Other countries, total 6.1 -3.2
Anttila, total 145.9 -0.3
K-Group agricultural stores
K-maatalous 134.2 18.2
Finland, total 134.2 18.2
Kesko Agro, Estonia 14.5 7.8
Kesko Agro, Latvia 19.4 -1.4
Kesko Agro, Lithuania 17.1 27.8
Other countries, total 51.0 9.7
Agricultural stores, total 185.2 15.7
Other operating activities
Kesko Group machinery
stores
Yahama Center 2.1 -2.3
Finland, total 2.1 -2.3
K-Group home and speciality
goods stores
Intersport 65.8 8.2
Kesport 7.0 5.4
Asko 22.2 2.9
Sotka 27.0 8.5
Musta Pörssi 44.9 10.8
Andiamo and K-kenkä 9.1 8.4
Kenkäexpertti 2.7 8.7
Tähti Optikko chain 13.3 3.5
Finland, total 194.1 7.6
Furniture sales, Sweden, 12.0 64.0
Estonia and Latvia
Other countries, total 12.0 64.0
Home and speciality goods 204.1 7.4
stores, total
Other operating activities, 206.2 9.9
total
Finland, total 1,922.2 10.1
Other countries, total 523.5 25.5
Retail sales, total 2,445.7 13.1
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