Interim report Q3/2021: The best result in Kesko’s history

FINANCIAL PERFORMANCE IN BRIEF:                            

7-9/2021

  • Group net sales in July-September totalled €2,902.4 million (€2,651.9 million), an increase of 7.8% in comparable terms, reported net sales grew by 9.4%
  • Comparable operating profit totalled €236.4 million (€181.8 million), up by €54.5 million
  • Operating profit totalled €236.5 million (€224.6 million)
  • Comparable earnings per share €0.43 (€0.33)
  • Reported Group earnings per share €0.43 (€0.48)

1-9/2021

  • Group net sales in January-September totalled €8,429.9 million (€8,006.9 million), an increase of 8.6% in comparable terms, reported net sales grew by 5.3%
  • Comparable operating profit totalled €572.0 million (€402.1 million), up by €184.0 million when Kesko Senukai is treated as a joint venture also for the comparison period (illustrative comparison figures)
  • Operating profit totalled €570.3 million (€444.6 million)
  • Comparable earnings per share €1.03 (€0.66)
  • Reported Group earnings per share €1.03 (€0.81)

 
KEY PERFORMANCE INDICATORS

  7-9/2021 7-9/2020 1-9/2021 1-9/2020 1-12/2020
Net sales, € million 2,902.4 2,651.9 8,429.9 8,006.9 10,669.2
Operating profit, comparable, € million 236.4 181.8 572.0 402.1 567.8
Operating margin, comparable, % 8.1 6.9 6.8 5.0 5.3
Operating profit, € million 236.5 224.6 570.3 444.6 600.2
Profit before tax, comparable, € million 219.3 163.6 522.5 331.5 481.9
Profit before tax, € million 220.0 220.0 523.7 389.3 527.6
Cash flow from operating activities, € million 381.2 286.6 882.8 844.0 1,152.4
Capital expenditure, € million 69.1 174.8 196.0 342.9 398.4
           
Earnings per share, €, basic and diluted 0.43 0.48 1.03 0.81 1.09
Earnings per share, comparable, €, basic 0.43 0.33 1.03 0.66 0.97
  1-9/2021 1-9/2020 1-12/2020
Return on capital employed, comparable, %, rolling 12 months 16.3 11.0 12.0
Return on equity, comparable, %, rolling 12 months 24.3 17.3 17.8

Kesko is reporting Kesko Senukai Group, which is part of Kesko’s building and technical trade segment and operates in the Baltic countries and Belarus, as a joint venture as of 1 July 2020. Kesko Senukai Group was reported as a subsidiary until 30 June 2020. In order to enable the comparison of financial performance indicators between reporting periods, Kesko reports illustrative Group performance indicators to be used alongside indicators based on IFRS consolidated financial statements. In segment data, Kesko Senukai is reported as a joint venture also for the comparison periods, as this method is used in management reporting.

Illustrative Group performance indicators 7-9/2021* 7-9/2020 1-9/2021* 1-9/2020 1-12/2020
Net sales, € million 2,902.4 2,651.9 8,429.9 7,580.2 10,242.6
Operating profit, comparable, € million 236.4 181.8 572.0 388.0 553.6
Operating margin, comparable, % 8.1 6.9 6.8 5.1 5.4
Operating profit, € million 236.5 176.9 570.3 382.8 540.0

Reported

In this interim report, the comparable change % in net sales has been calculated in local currencies and excluding the impact of Kesko Senukai and the acquisitions and divestments completed in 2020 and 2021. The comparable operating profit has been calculated by deducting items affecting comparability from the reported operating profit. The illustrative performance indicators have been calculated for the comparison periods as if Kesko Senukai had been consolidated as a joint venture.

OUTLOOK AND GUIDANCE FOR 2021

Kesko Group’s outlook is given for the year 2021, in comparison with the year 2020.

Kesko estimates that its comparable operating profit in 2021 will be in the range of €740 – 800 million.

The company issued a stock exchange release on 14 October 2021 and raised its profit guidance. Before, the company estimated that the comparable operating profit would be in the range of €650 – 750 million. In 2020, Kesko’s illustrative comparable operating profit totalled €554 million.

The guidance upgrade was based on better-than-anticipated sales growth and profit development especially in the building and technical trade division, and the division’s more positive outlook for the remainder of the year.

In the building and technical trade division, growth in B2B trade has continued stronger than anticipated in all operating countries. The growth has been underpinned by stronger-than-anticipated volume development in the construction market and continued rise in raw material prices. Raw material prices have risen the most in building materials such as wood products, metals and plastic products. Expectations regarding the remainder of the year are more positive than before, especially in the building and technical trade division.

In the grocery trade division, retail sales have developed well while Kespro’s foodservice business has strengthened compared to the year before.

In the car trade division, sales margin growth and cost adjustments have supported profitability, but availability issues caused by component shortages may weaken profitability in the fourth quarter.

The company has managed to improve its cost ratio in all divisions by further increasing operational efficiency.

Estimates for the remainder of the year are made more difficult by the continuing pandemic and challenges in predicting customer behaviour. Estimates are also made more difficult by uncertainties regarding the availability of goods and price inflation.

PRESIDENT AND CEO MIKKO HELANDER:

Kesko posted its best-ever result in Q3. Sales grew and profitability improved in all divisions. Net sales grew by 7.8% in comparable terms, totalling €2,902.4 million. Our comparable operating profit totalled €236.4 million, representing an increase of €54.5 million. The grocery trade division and the building and technical trade division both recorded their all-time best profitability. Profit for the car trade division improved markedly. Profitability in both grocery trade and building and technical trade has risen to the level of the best European operators. The strong growth is based on the successful execution of our growth strategy and a favourable market situation.

Strong development continued in food trade. Our strength there lies in our extensive network of well-placed stores combined with efficient online grocery operations and our foodservice business, as well as our well-functioning retailer business model. Our strategic goal is to constantly improve customer experiences. Sales grew in all our grocery store chains. The division’s comparable operating profit totalled €122.2 million. Online grocery sales grew by 17.3% despite the strong comparison figures. Our market share in food trade grew. K Group’s grocery sales grew by 3.3% and net sales for Kespro’s foodservice business by 8.9%.

In the building and technical trade division, growth continued strong in all operating countries, driven by B2B trade. The successful execution of country-specific strategies and strong demand resulted in a record third quarter. Strong development continued for Onninen and K-Rauta in Finland. Sales and profitability development was good also in Norway and Sweden both in building and home improvement trade and technical trade. Profitability was also supported by the changes made in recent years and the acquisitions completed and their successful integration. The division’s net sales grew by 14.6% in comparable terms, and its comparable operating profit rose to €104.5 million. The growth has been underpinned by strong construction market performance and the continued rise in raw material prices.

Our transformation process in the car trade division is proceeding well and yielding results. The division’s net sales grew by 6.7%, and its comparable operating profit rose to €18.2 million. The division’s profitability was underpinned by sales margin growth and cost adjustment measures. Demand was strong for both new and used cars, although availability issues related to component shortages have slowed down new car deliveries and hindered used car availability. The planned exemption of all-electric vehicles from car tax in Finland as of 1 October impacted the timing of car deliveries.

The importance of sustainability continues to grow. Concrete efforts to stop climate change will be in the forefront in upcoming years. In mitigating climate change, the role of the trading sector extends clearly beyond reducing emissions from its own operations. In all our business divisions, we provide our customers with information on their choices and encourage them to adopt more sustainable lifestyles. We also challenge our suppliers and the whole supply chain to cut emissions and set their own tangible emission reduction targets.

The Nordic countries are among the most stable and well-functioning societies globally. Good overall economic development is estimated to continue in our operating countries. Household savings have grown and people have money to spend. Domestic demand is expected to continue to stay high. The so-called green transition will also increase public and private investment and offer growth opportunities for all our divisions.

We will continue the execution of our growth strategy. Our strong food trade operations form a foundation for ongoing profitable growth in the grocery trade division. Our grocery stores together with Kespro’s foodservice business form a strong, unique combination. In the building and technical trade division, our strong country-specific actions will support growth. Over 75% of the division’s net sales now come from B2B trade and demand in B2B trade is growing forcefully. In the car trade division, wider sector transformation and our own transformation efforts support sales growth. We will continue our efforts to grow our sales and improve profitability. The results we have achieved act as proof that our strategy is working and we have made the right choices.

 

Audiocast and teleconference of President and CEO Mikko Helander in English

 
Webcast in Finnish

 
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