Keskos Journey Towards a More Focused Retailing Company Inv - - PowerPoint PPT Presentation

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Keskos Journey Towards a More Focused Retailing Company Inv - - PowerPoint PPT Presentation

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Keskos Journey Towards a More Focused Retailing Company Inv nvestor tor Present esentat atio ion n Q3/2018 1 K Group and Kesko in Brief Biggest in Finland , Profitable growth 42,000 employees, #1 #3 in Northern Europe strategy in 3

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SLIDE 1

Kesko’s Journey Towards a More Focused Retailing Company

Inv nvestor tor Present esentat atio ion n Q3/2018

1

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SLIDE 2

K Group and Kesko in Brief

2

#1

Biggest in Finland, #3 in Northern Europe with retail sales of nearly €13bn World’s most sustainable trading sector company Market cap approx. €5bn with 41,000 shareholders Profitable growth strategy in 3 core divisions Strong financial position with good dividend capacity 42,000 employees, 1,800 stores and comprehensive digital services in 8 countries

KESKO | Investor Relations | Q3/2018

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SLIDE 3

Gro rocer ery Tra rade de

  • Net sales approx. €5.4bn
  • Quality leader in the Finnish grocery market:

#2 in grocery retailing, #1 in foodservice B2B

  • Rapidly expanding online food store network
  • Market share at its highest in >15 years, ~37%
  • 1.2m customer visits per day
  • 1,200+ stores in the retailer business model
  • One of the most profitable players in Europe

Car Tra rade

  • Market leader with net sales of €0.9bn+
  • Operating the Volkswagen Group’s

business in Finland: Audi, Volkswagen, SEAT, Porsche and MAN

  • Value chain includes importing, retailing

and after sales as well as an extensive dealer and servicing network

  • Various service concepts developed

under the K-Caara platform

3

Core Divisions at a Glance

Buildi lding ng and d Technic nical l Tra rade

  • Net sales approx. €4bn
  • #1 operator in building and technical trade

in Northern Europe

  • 430 stores in 8 countries
  • 0.3m customer contacts per day
  • Comprehensive digital services
  • Serves three customer segments –

B2B share approx. 70%

KESKO | Investor Relations | Q3/2018

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SLIDE 4

€223.2m 64% €85.4m 24% €5.6m 2% €34.2m 10%

Net sales Comparable operating profit

4

Net Sales and Operating Profit by Division

€5,355m 52% €3,653m 35% €372m 4% €921m 9%

€10,302m €322.0m

Grocery trade Building and technical trade excl. speciality goods trade Speciality goods trade Car trade

Rolling 12 months Q3/18, continued operations KESKO | Investor Relations | Q3/2018

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SLIDE 5

Group Management Board

Mikko Helander President and CEO Jukka Erlund EVP, Chief Financial Officer Johan Friman President of the car trade division Ari Akseli President of the grocery trade division Matti Mettälä EVP, HR, Corporate Responsibility and Regional Relations Jorma Rauhala President of the building and technical trade division, Deputy to President and CEO Anni Ronkainen EVP, Chief Digital Officer Mika Majoinen Group General Counsel

KESKO | Investor Relations | Q3/2018 5

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SLIDE 6

Steady Progress Towards a Strong, More Focused Company Through Successful Portfolio Transformation

6

3/2015 Anttila 11/2016 Russian grocery trade 6/2017 K-maatalous 2/2018 Russian building and home improvement trade 4/2016 Suomen Lähikauppa 6/2016 Onninen 12/2016 AutoCarrera

KESKO | Investor Relations | Q3/2018

6/2017 Asko and Sotka furniture trade 10/2018 Sørbø retailer group* 6/2018 1A Group 6/2018 Gipling, Skattum Handel 6/2018 Kalatukku

  • E. Eriksson,

Reinin Liha 7/2018 Remaining shares of Konekesko Baltics*

Acquis uisit itio ions ns Divest estments ments

* Waiting for completion

Investments in core business operations €1.5bn, divestments €1.0bn

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SLIDE 7

Rationale: Faster neighborhood strategy implementation by acquiring the #4 retailer Purchase price: €60m + €60m store renewals Integration completed faster than expected ~60% share of the neighborhood market ~400 stores converted to K-Markets €700m additional net sales, €30m synergies Rationale: Expand brand portfolio within the VW Group to include Porsche passenger cars Purchase price: €27m Integration completed successfully Net sales €67m with an excellent operating margin of 8.2% (vs. net sales €49m in 2015) Being part of Kesko enables enhanced growth

KESKO | Investor Relations | Q3/2018 7

Accelerated Growth and Value Creation with Transformational Acquisitions in All Core Divisions

Rationale: Stronger position in B2B, expansion into technical trade with HEPAC and electrical Purchase price: €369m Integration ongoing Net sales €1,591m and EBITDA €55m (vs. respectively €1,456m and €39m in 2015) Further improvement of sales and profitability to continue in line with strategy

* Rolling 12 months Q3/18

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SLIDE 8

STRATEGIC FOCUS AREAS

Profitable growth Business focus Quality and customer

  • rientation

Best digital services One unified K

VISION BUSINESS FOCUS

We Continue With Our Existing Growth Strategy

8

Grocery trade We are the customers' preferred choice and the quality leader in the European trading sector Grocery trade Building and technical trade Car trade

VALUE

The customer and quality – in everything we do

KESKO | Investor Relations | Q3/2018

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SLIDE 9

Our Strategy Responds to the Changing Retail Landscape

Digitalisation and eCommerce Increasingly individual customer behaviour Sustainability and strong brands Globalisation Increased consumer knowledge and power Convenience

KESKO | Investor Relations | Q3/2018 9

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SLIDE 10

Net sales

€m 8,821 8,487 10,007 10,492 10,302 2014 2015 2016 2017 R12M Q3/18

Comparable operating profit

€m 221 243 274 296 322 2.5% 2.9% 2.7% 2.8% 3.1% 2014 2015 2016 2017 R12M Q3/18

KESKO | Investor Relations | Q3/2018 10

Our Growth Strategy Is Delivering Improving Results

+6%* +10%*

Net sales growth €1.7bn in 2014-2017 Operating profit growth €76m in 2014-2017

Continued operations *CAGR

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SLIDE 11

Moving Towards Our Financial Targets

11

Kesko’s dividend policy

* Comparable figures, continued operations, ** Comparable figures, Group

Payout ratio (5y average) : 103.4% Dividend yield (5y average B share) : 5.4% Return on Capital Employed, %* Return on Equity, %** Interest-bearing net debt / EBITDA 14.0 13.8 12.0 11.6 <2.5 0.6 At least 50% of comparable earnings per share distributed as dividends

Target level

  • Roll. 12 months Q3/18

KESKO | Investor Relations | Q3/2018

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SLIDE 12

Capex*

€m

KESKO | Investor Relations | Q3/2018 12

Strong Financial Position Provides Latitude for Further Growth Initiatives and Continued Good Dividends

194 219 282 350

*Additionally, to acquisitions €462m in 2016 and €166m in rolling 12 months Q3/2018

301

  • Financial position strong despite €1.3bn investments

in 2015-2017

  • M&A firepower for additional acquisitions up to

above €1bn

  • Steady growth targeted in dividends
  • Cash flow generation to be further enhanced with

higher earnings, organic capex decreasing from the 2017 level and improvement potential in NWC

143 167 217 256 174 34 20 29 33 49 17 31 36 61 78 2014 2015 2016 2017 R12M Q3/18 Store sites ICT and digital Other

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SLIDE 13

We Select Our Growth Initiatives Carefully

13

M&As considered using the following criteria

Value creation & good strategic fit Opportunities in all divisions – the greatest potential is in building and technical trade Justified price tag Contribution to our financial targets Focus on Northern Europe – it’s the market we know and where we have the capability to create local competitive edge Clear integration plan

KESKO | Investor Relations | Q3/2018

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SLIDE 14

Grocery Trade

14 KESKO | Investor Relations | Q3/2018

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SLIDE 15

Successful Strategy Execution in Grocery Trade

KESKO | Investor Relations | Q3/2018 15

2015 Net sales Operating profit €4,673m €5,355m €177m €223m

All chain brands redesigned

  • Approx. 90% out of 1,200 stores modernised

Close to 600 stores and over 220 retailers in the multi-store model Daily customer flow increased from 900,000 to >1.2m Implementation of store-specific business ideas New customer feedback system: >1m contacts annually New eCommerce and K-Ruoka mobile app with 600,000 users

Growth, profitability and increased efficiency Brand and store redesigns Developing the retailer business model Customer and quality

  • Roll. 12 months Q3/18
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SLIDE 16

Strategic Direction to Continue Profitable Growth

KESKO | Investor Relations | Q3/2018 16

Most customer-

  • riented and

inspiring food stores Developing and modernising the store network Offering a seamless omni- channel customer experience Developing retailer entrepreneurship as a competitive advantage Expanding the foodservice business

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SLIDE 17

A Seamless Customer Experience in All Channels

Sales €2.1bn Comprehensive concept renewal 72 out of 81 store redesigns completed Current store network optimal and competitive Sales €1.8bn Rebranding, 178 out of 242 stores renewed Store network expansion profitably Sales €2.0bn Modernisation, nearly all of 784 stores made over Store network expansion profitably Sales €0.1bn Further developing the service station concept 65 out of 73 stations redesigned Future network of 85 service stations

*Store numbers from November 2018 **Foodservice B2B, ***Kesko estimate

Share of online sales of the total grocery market is still small, but growing fast Our online sales growth in Q3/2018 Higher average purchase than in physical stores Our online net sales target for 2019

0.4%*** +€40m 40m +74% 5x 5x

K-food stores offering online services

146 146

NPS, high customer satisfaction

67 67

Rebranding nding and d store e modernis rnisati tion pro rogre ress ssing ing well* Extendi ending ng gro rocer ery online ne network rk – strong rong gro rowth th expe pecte ted People/sq. km, low population density in Finland affecting choice of viable solutions

18 18

17

Sales €0.8bn with 14 cash & carry outlets Brand redesign, launch of K-RuokaPro online store Expanding central warehousing, adding new outlets **

KESKO | Investor Relations | Q3/2018

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SLIDE 18

Our Grocery Trade Among the Most Profitable Retailers in Europe

  • Market share growth with good profitability
  • Exceeding customer expectations with store-specific business ideas
  • Retailer model as a competitive advantage
  • Growth from eCommerce and mobile services
  • Expanding the foodservice business

18

Future va value creating ng action

  • ns

KESKO | Investor Relations | Q3/2018

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SLIDE 19

Building and Technical Trade

19 KESKO | Investor Relations | Q3/2018

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SLIDE 20

Strategy Execution Progressing in Building and Technical Trade

KESKO | Investor Relations | Q3/2018 20

Continued operations, comparable operating profit, building and technical trade excluding speciality goods trade

Financial performance

2015

  • Roll. 12 months Q3/18

Net sales Operating profit €1,989m €3,653m €62m €85m

Focusing on core business Operational efficiency

Acquisitions of Onninen, Skattum, Gipling and Sørbø and 1A Group Kesko-Senukai arrangement Divestments in speciality goods and machinery trade Divestment of K-Rauta Russia Changed management model and country focus Turnaround achieved in Poland, measures continue in Sweden Merging the K-Rauta and Rautia chains New digital services and eCommerce

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SLIDE 21

Strategic Direction to Become an Even Stronger Operator in the Northern European Building and Technical Trade

KESKO | Investor Relations | Q3/2018 21

Country focus with specified strategic actions Three customer segments served according their specific customer needs Synergies – within individual countries and between the

  • perating countries

Organic growth and profitability improvement Selected acquisitions to win a chosen country and segment

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SLIDE 22

Technical professionals

Technical contractors

  • Infrastructure
  • Industry
  • Retailers

Consumers

  • Renovators
  • Home and garden builders
  • Decorators
  • Gardeners

KESKO | Investor Relations | Q3/2018 22

Value Creation to Three Customer Segments

Professional builders

  • Construction companies
  • Renovation contractors
  • Decoration contractors

Customer drivers differ in each customer segment:

  • 100% availability for key items
  • Personal sales, always available
  • Deep assortment
  • Competitive prices
  • Approachable and competent

customer service with advice

  • Easy to shop, good availability
  • Showrooms and visual displays
  • 100% availability for key items
  • Reliable next day deliveries
  • Personal sales, always available
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SLIDE 23

Sharper Country Specific Focus to Bring Results – Good Profit Improvement Potential in All Markets

Jorma Rauhala

Customers

Endre Espeseth Olli Pere Martti Forss Knut Strand Jacobsen Arturas Rakauskas Martti Forss Endre Espeseth

KESKO | Investor Relations | Q3/2018 23

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SLIDE 24

Market Offering Ample Opportunities for Organic Growth

  • As Well As Selected Acquisitions

Building & home improv. Onninen Retail market 2017 (€bn)

5.0 2.5

Onninen Building & home improv. Onninen Building & home improv. Onninen Building & home improv. Building & home improv. Onninen

4.6 3.1 2.1 2.7 1.2 5.5 4.2 1.1

Market position

#3-4 #4 #2 #5-11 #6 #1 #1 #1

Retail market 2017 (€bn) Market position Retail market 2017 (€bn) Market position Retail market 2017 (€bn) Market position Retail market 2017 (€bn) Market position Retail market 2017 (€bn) Market position

EE #2 LAT #3 LIT #1 EE #2 LAT #4 LIT #3

Optimera Mester- gruppen Maxbo Coop Byggmax Bauhaus XL Bygg Woody Beijer Tadmar (Saint Gobain), BIMs (GC) Sonepar W.E.G (Würth) Mile Materik Praktik Bauhof Ehitus ABC Espak Bauhaus Depo DIY Kursi Ermitazas Moki-Vezi Key competitors Ahlsell LVI Dahl SLO Rexel STARK S Group Bauhaus Key competitors FEB (Ahlsell), SLO W.E.G (Würth) Sanistal EVA-SAT Sanistal, Dahlgera (Dahl) Elektrobalt (Würth) Key competitors Ahlsell Dahl Elektroskandia Key competitors Ahlsell Elektroskandia Solar Key competitors Key competitors

KESKO | Investor Relations | Q3/2018 24

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SLIDE 25

Good Value Creation Potential for Upcoming Years in Building and Technical Trade

2 4 6 8 10

25

Kesko

~2%

Best European

  • perators

6-8%

Operating margin (%)

KESKO | Investor Relations | Q3/2018

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SLIDE 26

Car Trade

26 KESKO | Investor Relations | Q3/2018

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SLIDE 27

Strong Strategy Execution in Car Trade

KESKO | Investor Relations | Q3/2018 27 Continued operations, comparable operating profit

Financial performance

2015 Net sales Operating profit €748m €921m €26m €34m

Growing the business in collaboration with the VW Group Launching new mobility services

Acquisition of Porsche business in Finland SEAT sales started in all own retail outlets – growth in market share K-Caara platform for used car sales, rental, leasing and repair services First K Charge electric car charging stations opened Piloting car sharing at selected K-Supermarket and K-Rauta stores New digital services, e.g. 30% growth in online service booking

  • Roll. 12 months Q3/18
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SLIDE 28

Car Trade Strategy Targets Faster Than Market Growth

KESKO | Investor Relations | Q3/2018 28

Growing the business in collaboration with the VW Group Expanding the service business independent

  • f the VW Group

Best customer experience – in all channels

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SLIDE 29

Car Trade Targeting to Grow Faster Than the Market

  • Close partnership with the VW Group
  • Targeting market share growth
  • Improving profitability in importing, retailing and after-sales
  • Expanding new mobility services
  • Omni-channel customer experience

29

Future va value creating ng action

  • ns

KESKO | Investor Relations | Q3/2018

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SLIDE 30

Kesko Selected Again in the Prestigious Dow Jones Sustainability Indices, DJSI World and DJSI Europe

Kesko received the industry best overall score in the Environmental Dimension

30 KESKO | Investor Relations | Q3/2018

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SLIDE 31

Sustainability at Kesko – Value Creation for All Stakeholders

  • Kesko’s responsibility programme contains both short-

term and long-term objectives and has six themes:

  • Good corporate governance and finance
  • Customers
  • Society
  • Working community
  • Responsible purchasing and sustainable selections
  • Environment
  • Value created through e.g. responsible purchasing with full

amfori BSCI audits of suppliers' factories or plantations, supporting customers in making sustainable choices or mitigating climate change by reduced energy consumption

KESKO | Investor Relations | Q3/2018 31

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SLIDE 32

32

Financial Calendar for 2019 6 February 2018 Financial Statement Release Week 10 2018 Annual Report 8 April AGM (planned date) 25 April Q1/2019 Interim Report 24 July Q2/2019 Half Year Report 24 October Q3/2019 Interim Report Contact Kia Aejmelaeus, VP Investor Relations, +358 40 765 4616 Follow www.kesko.fi/investor, twitter.com/Kesko_IR

Further Information

KESKO | Investor Relations | Q3/2018

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SLIDE 33

Appendix: Q3/2018 Highlights and Outlook

33 KESKO | Investor Relations | Q3/2018

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SLIDE 34

Highlights Q3/2018

Net sales growth +3.5% All-time-best quarterly result,

  • perating profit €113 million

Continued strong market share and profit development in grocery trade Building and technical trade operating profit up by €7 million * Cash flow from operating activities €131 million

Comparable figures, continuing operations *Excluding the speciality goods trade

KESKO | Investor Relations | Q3/2018 34

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SLIDE 35

Growth in Net Sales and Operating Profit

Q3/2018 Q3/2017 1-9/2018 1-9/2017

Net sales, €m 2,642 2,596 7,728 7,917 Net sales growth, % +3.5 +1.6 +3.6 +1.5 Operating profit, €m 112.6 100.5 241.7 215.8 Operating margin, % 4.3 3.9 3.1 2.7 Profit before tax, €m 111.8 100.3 237.7 218.7 Earnings per share, € 0.81 0.71 1.77 1.64 Return on capital employed, % * 13.8 12.4 Return on equity, Group, % * 11.6 9.9

Comparable figures, continuing operations * Rolling 12 months

KESKO | Investor Relations | Q3/2018 35

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SLIDE 36

Strong Financial Position

30.9.2018 30.9.2017

Equity ratio, % 48.5 49.1 Liquid assets, €m 319 370 Interest-bearing net debt, €m 229 159 Interest-bearing net debt / EBITDA * 0.6 0.4 Continuing operations Q3: Cash flow from operating activities, €m 130.5 97.8 Cash flows from investing activities excl. acquisitions, €m

  • 59.5
  • 52.6

Cash flows from investing activities incl. acquisitions, €m

  • 216.3
  • 52.6

* Rolling 12 months

KESKO | Investor Relations | Q3/2018 36

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SLIDE 37

Group Net Sales

Comparable Q3 growth +3.5%

2,558 2,763 2,596 2,575 2,413 2,673 2,642

500 1000 1500 2000 2500 3000 3500 4000 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

10,492 10,302

2000 4000 6000 8000 10000 12000 2017 Q3/18

€m €m

Continuing operations

Ro Rolli lling g 12 months ths

KESKO | Investor Relations | Q3/2018 37

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SLIDE 38

Group Operating Profit

Q3 profit improvement €12 million

31.5 83.8 100.5 80.4 40.0 89.0 112.6

20 40 60 80 100 120 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

296.2 322.0

40 80 120 160 200 240 280 320 2017 Q3/18 Operating margin 1.2% 3.0% 3.1% 1.7% 3.9% 2.8% 3.1%

€m €m

Comparable operating profit, continuing operations Impact of the divested Asko and Sotka, K-maatalous and Yamarin businesses, Yamaha representation and Baltic real estate on operating profit: €5.8 million in Q2/17, €4.6 million in Q1/17

Ro Rolli lling g 12 months ths

3.3% 4.3%

KESKO | Investor Relations | Q3/2018 38

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SLIDE 39

Return on Capital Employed 13.8%

Comparable, rolling

23.7 10.1 23.5 12.4 24.9 9.9 21.5 13.8

10 20 30

Grocery trade Building and technical trade Car trade Group, continuing operations Q3/17 Q3/18

%

KESKO | Investor Relations | Q3/2018 39

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SLIDE 40

Grocery Trade

Q3 Q3

  • Continued strong growth in customer numbers, sales and market share
  • Online food sales grew by +74%
  • Kespro continued to perform well in the foodservice market
  • We continued investments in store sites, digital services and logistics operations

40

The market et

  • Grocery trade market growth 4.3%, of which price development +2.4% *
  • Good market development, importance of quality and selections increased
  • Demand for good online food sales services rising

* The Finnish Grocery Trade Association

KESKO | Investor Relations | Q3/2018

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SLIDE 41

Grocery Trade Net Sales

Comparable Q3 growth +6.2%

1,243 1,327 1,313 1,399 1,276 1,327 1,352

500 1000 1500 2000 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

5,282 5,355

4000 4500 5000 5500 2017 Q3/18

€m €m Ro Rolli lling g 12 months ths

KESKO | Investor Relations | Q3/2018 41

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SLIDE 42

Grocery Trade Operating Profit

Operating profit grew by over €5 million

26.4 50.5 59.4 67.0 38.7 52.8 64.7

10 20 30 40 50 60 70 80 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

203.4 223.2

20 40 60 80 100 120 140 160 180 200 220 240 2017 Q3/18 Operating margin 2.1% 3.8% 4.5% 4.8% 3.9% 4.2% 3.0%

€m €m

Comparable operating profit

Ro Rolli lling g 12 months ths

4.0% 4.8%

KESKO | Investor Relations | Q3/2018 42

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SLIDE 43

Building and Technical Trade

Q3 Q3

  • K-Rauta in Finland performed well
  • Onninen’s performance remained good in Finland and Poland in particular
  • Acquisitions of Byggmakker chain companies increased operating profit in Norway
  • Efforts to improve the profitability of K-Rauta and Onninen in Sweden continued
  • Kesko Senukai’s strong sales performance continued in the Baltics

43

The market et

  • Market situation is expected to remain good, but growth pace is expected to slow down somewhat
  • Renovation building is gaining more ground in the construction market

KESKO | Investor Relations | Q3/2018

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SLIDE 44

Building and Technical Trade Net Sales

Comparable Q3 growth excluding speciality goods trade +2.5%

841 968 953 877 802 995 978 232 234 117 80 75 106 111 200 400 600 800 1000 1200 1400 1600 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 3,639 3,653 663 372 500 1000 1500 2000 2500 3000 3500 4000 4500 2017 Q3/18

4,302 4,025 1,073 1,202 1,070 957 877 €m €m

Continuing operations

Building and technical trade excl. speciality goods Speciality goods trade

Ro Rolli lling g 12 months ths 1,102 1,089

KESKO | Investor Relations | Q3/2018 44

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SLIDE 45

Building and Technical Trade Operating Profit

Operating profit excl. speciality goods +€7m, operating margin from 3.6% to 4.2%

2.8 27.9 34.5 13.7 31.2 41.6 3.0 6.8 6.1 2.2 4.4

  • 5

5 10 15 20 25 30 35 40 45 50 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 78.9 85.4 16.2 5.6 20 40 60 80 100 2017 Q3/18 Operating margin 0.5% 2.9% 3.8% 1.5% 3.0% 2.2% 2.2% 2.3%

€m €m

Comparable operating profit, continuing operations

Building and technical trade excl. speciality goods Speciality goods trade

5.8 34.8 40.7 14.0

  • 2.2

95.2 91.0 Ro Rolli lling g 12 months ths

  • 0.3%

33.4

4.2%

45.9

KESKO | Investor Relations | Q3/2018 45

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SLIDE 46

Car Trade

Q3 Q3

  • Net sales and operating profit at a good level
  • Excellent performance in the Porsche business: sales +35%, profitability strengthened further
  • Order book for new cars +12%

46

The market et

  • Q3 first registrations of passenger cars and vans at last year’s level, up 5% in 1-9/2018
  • New WLTP emissions testing causing delays in deliveries on the market
  • Measures to prevent rise in car tax expected from the Finnish government

KESKO | Investor Relations | Q3/2018

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SLIDE 47

Car Trade Net Sales

Q3 sales -5.6% due to implementation of new WLTP emissions testing

245 234 212 218 259 244 200 50 100 150 200 250 300 350 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 909 921 100 200 300 400 500 600 700 800 900 1000 2017 Q3/18

€m €m Ro Rolli lling g 12 months ths

KESKO | Investor Relations | Q3/2018 47

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SLIDE 48

Car Trade Operating Profit

Q3 profitability good despite the decrease in net sales

10.0 7.6 8.8 6.7 11.0 8.7 7.8 2 4 6 8 10 12 14 16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 33.1 34.2 5 10 15 20 25 30 35 40 2017 Q3/18 Operating margin 4.1% 3.2% 4.2% 3.1% 4.2% 3.6% 3.7%

€m €m Ro Rolli lling g 12 months ths

3.6% 3.9%

KESKO | Investor Relations | Q3/2018 48

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SLIDE 49

Outlook

Estimates for the outlook for the net sales and comparable operating profit for Kesko Group's continuing operations are given for the 12-month period following the reporting period (10/2018-9/2019) in comparison with the 12 months preceding the end of the reporting period (10/2017-9/2018). 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 B2B sales is expected to continue stronger than the growth in the retail market. The market is expected to grow in the Nordic and Baltic countries, but at a somewhat slower rate. In comparable terms, the net sales for continuing operations for the next 12 months are expected to exceed the level

  • f the previous 12 months. The comparable operating profit for continuing operations for the next 12-month period is

expected to exceed the level of the preceding 12 months. However, investments in the expansion of logistics

  • perations and in information systems and digital services will burden profitability during the period. Furthermore, in

the car trade, profitability is burdened by the shift to WLTP emissions testing, which postpones car delivery times.

KESKO | Investor Relations | Q3/2018 49

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SLIDE 50