Building and technical trade strategy

15.09.2020

The strategic objective for the building and technical trade division is to establish itself as an even stronger operator in Northern Europe. The coronavirus epidemic began to have a significant impact on our operations from mid-March 2020 onwards, but overall the impact on sales for the building and technical trade division has been moderate so far.

We continue the determined execution of our growth strategy, but for now our focus is on managing the crisis brought on by the coronavirus epidemic. Information on the impacts of the epidemic on Kesko’s businesses can be found under the Operating environment section.

Our strategic objectives:

STRATEGIC OBJECTIVE	WHAT WE ARE DOING
Country focus, with country-specific strategic actions	Finland: Focusing on fully utilising the potential provided by our market-leading position and constantly improving customer experience by expanding Onninen's services and focusing on implementing storespecific business ideas in K-Rauta; actively developing multichannel business in the leisure trade Norway: Seeking growth in sales and profitability by developing Byggmakker's business Sweden: Continuing measures to improve profitability; utilising synergies from acquisitions and serving our three customer segments comprehensively The Baltics and Belarus: Focusing on growing and redesigning the store network Poland: Systematically developing the business
Serving three different customer segments according to their specific customer needs	Continuing digital channel development by customer segment Striving for the best customer experience in all channels
Seeking synergies	Actively seeking synergies within operating countries in e.g. logistics and support functions, and between the countries in e.g. in sourcing, digital services and concept development Utilising synergies obtained from integrating acquisitions
Organic growth and profitability improvement	Continuing systematic actions to support growth and profitability improvement Increasing the role of our own brand products
Targeted acquisitions	Continuing acquisitions in selected markets and segments

Business environment

Megatrends affecting building and technical trade

Market consolidation
Outsourcing of construction to professionals
Growth in renovation building
Non-traditional players entering the market
Digital becoming increasingly important for the customer journey

Comparable figures, excl. speciality goods trade

The building and technical trade strategy review can be read in Kesko's 2019 Annual Report.

Markets

The building and home improvement trade market by country, along with the improvement from the previous year (retail trade, VAT 0%), market shares and main competitors
Market area	Market size and change	Market share	Main competitors
Finland	€3.2 billion (-0,6%), (RaSi ry, Finnish Hardware Association, DIY)	43% (RaSi ry, Finnish Hardware Association, DIY)	STARK, S Group, Bauhaus
Sweden	€4.8 billion (+3.0%), (Byggmaterialhandlarna and Kesko’s own estimate)	8%*	Beijer, XL Bygg, Optimera, Woody, Bauhaus, Byggmax, Bolist
Norway	€5.0 billion (+1.0%), (Virke, Kesko's own estimate)	10%*	Optimera, Mestergruppen, Coop, Maxbo
Estonia	€0.6 billion (+5.5%)**	19%**	Espak, Bauhof
Latvia	€0.6 billion (+0.9%)**	17%**	Depo, Kursi
Lithuania	€1.1 billion (+5.9%)**	36%**	Ermitazas, Moki-Vezi, Depo
Belarus	€1.4 billion (+9.1%)*	11%*	Mile, Materik, Praktik

* Kesko’s own estimate

**K-Senukai’s selection, Kesko’s own estimate

Onninen’s market by country, along with the improvement from the previous year (retail trade, VAT 0%), market shares and main competitors
Market area	Market size and change	Market share	Main competitors
Finland	€2.2 billion (+1.1%), (STK, Talteka)	38% (STK, Talteka)	Dahl, Ahlsell, SLO, Rexel
Sweden	€2.1 billion (+3.1%), (SEG, electrotechnical trade)	5% (SEG)	Dahl, Ahlsell, Elektroskandia, Rexel
Norway	€1.4 billion (+3.0%), (EFO, electrotechnical trade)	17% (EFO)	Elektroskandia, Solar, Ahlsell, Berggård Amundsen, Otra
Poland	€5.1 billion (+3.0%)*	5%*	GC Group (BIMs, HTI, Hydrosolar), Grudnik, TIM, Kaczmarek, Alfa Elektro, Grodno
Estonia	€0.4 billion (+8.6%)*	11%*	FEB (Ahlsell), W.E.G (Würth), Dahl, Esvika, SLO
Latvia	€0.4 billion (+11.5%)*	5%*	Sanistal, EVA-SAT, Energokomplekss, SLO
Lithuania	€0.6 billion (+5.4%)*	3%*	Sanistal, Dahlgera, Elektrobalt, SLO

* Kesko’s own estimate

The leisure goods market in Finland, along with the improvement from the previous year (retail trade, VAT 0%), market shares and main competitors
Market	Market size and change	Market share	Main competitors
The sports trade	Around €0.9 billion (-0.3%), (Textile and Fashion Suppliers and Retailers Finland TMA and Kesko’s own estimate)	Intersport, Budget Sport, The Athlete's Foot ja Kesport 28%*	XXL, Stadium, hypermarkets and online stores
The shoe trade	Around €0.3 billion (-2.6%), (Textile and Fashion Suppliers and Retailers Finland TMA and Kesko’s own estimate)	Kookenkä and Kenkäexpertti 10%*	Other speciality stores, department stores, hypermarkets, sports stores and online stores

* Kesko’s own estimate

Building and technical trade in figures

	Number		*Sales (pro forma) (VAT 0%), € million**
Retail sales and number of stores	2019	2018		2019	Change, %
K-Rauta and Rautia	131	135		1,075.1	1.9
Rautakesko B2B Service	-	-		255.5	-2.4
Onninen, Finland	57	56		926.6	3.3
Leisure trade, Finland	107	109		283.5	-0.2
Finland, total	295	300		2,540.7	1.7
K-Rauta, Sweden	18	18		164.3	-6.3
K-Bygg, Sweden	34	-		204.4	-2.3
Onninen, Sweden	-	13		99.4	17.7
Byggmakker, Norway	63	65		485.6	-6.6
Onninen, Norway	18	25		258.1	-5.1
Kesko Senukai, Baltic countries	42	40		723.1	12.6
Onninen, Baltic countries	17	15		85.4	10.5
Machinery trade, Baltic countries	-	-		131.4	-10.4
OMA, Belarus	17	17		146.6	14.4
Onninen, Poland	36	36		283.3	-0.8
Other countries, total	245	229		2,536.5	1.6
Building and technical trade, total	540	529		5,077.2	1.7
In addition, building and technical trade stores offer e-commerce services to their customers. Two Onninen stores in Finland and one Onninen store in Sweden operate in the same store premises with K-Rauta.

Key figures			Rolling 12 mts 6/2020	2019	2018
Net sales, € million			4,429.1	4,331.1	4,102.6
Building and technical trade excl. speciality goods trade			-	3,984.5	3,728.0
Speciality goods trade			-	346.7	374.6
Operating profit, comparable, € million			175.6	142.8	126.8
Building and technical trade excl. speciality goods trade			-	133.3	117.5
Speciality goods trade			-	9.5	9.3
Operating margin, comparable, %			4.0	3.3	3.1
Building and technical trade excl. speciality goods trade			-	3.3	3.2
Speciality goods trade			-	2.7	2.5
Return on capital employed, comparable, %, rolling 12 months			8.8	7.4	7.9
Capital expenditure, € million			80.5	332.7	200.7
Personnel, average			-	12,630	11,668

Properties				2019	2018
Owned properties, capital, € million				222	169
Owned properties, area, 1,000 m²				298	235
Leased properties, lease liabilities, € million				758	748
Leased properties, area, 1,000 m²				1,253	1,169