FINANCIAL STATEMENTS: PROFIT BEFORE EXTRAORDINARY ITEMS EUR 86 MILLION

The Group’s net sales for 2001 totalled EUR 6,214 million, which is 1.5% less than in the previous year (EUR 6,308 million). The Group’s profit before extraordinary items was EUR 85.7 million (EUR 125.8 million). Earnings per share were EUR 0.61 (EUR 1.00). Equity per share was EUR 14.93 (EUR 15.31). The figures are unaudited.

Market review
According to advance information, the volume of wholesale trade in Finland in January-November 2001 increased by 3.2% over the corresponding period of the previous year. The increase in the retail trade was 4.4%.

According to the survey of the Federation of Finnish Commerce and Trade, the wholesale trade (car trade excluded) is expected to grow in 2002 by 3.0% and the retail trade by 3.5%.

In 2001, consumer prices were 2.6% higher on average than a year earlier. In 2002, consumer prices are forecast to rise by about 1.5%. Private consumption is expected to grow by 2.5% and private investments by about 1% this year. According to Statistics Finland’s consumer survey, Finnish consumers’ confidence in the favourable development of both their own finances and the Finnish economy strengthened in January 2002.

Favourable economic development has continued in the Baltic countries. According to the European Union’s forecast, the GDP will grow this year by about 4.7% in Estonia, by about 4.5% in Latvia and by about 3.5% in Lithuania. Structural change is progressing rapidly in the trading sector and those retail stores that operate in chains are increasing their share of total sales. The value of the total grocery market is forecast to increase to EUR 4.5 billion this year.

In Sweden, investments in housing production are estimated to grow by about 3% and in other construction by about 10%. Private consumption is forecast to grow more rapidly in 2002 than in the previous year.

Net sales and profit

Net sales
The Group’s net sales for 2001 totalled EUR 6,214 million, which is 1.5% less than in the previous year (EUR 6,308 million). The decline resulted partly from a change in pricing practice. As part of the chain reform, Kesko decreased its wholesale prices to the K-retailers from the beginning of 2001. The new pricing system is estimated to have a decreasing effect of about two percentage points on net sales at an annual level in the whole Group and over three percentage points in Kesko Food. However, the change did not weaken the profit of business operations, because the services previously included in wholesale prices are now separately charged to retailers.

In 2001, the share of exports and foreign operations in net sales was 6.3%.

Profit
The Group’s profit before extraordinary items and taxes was EUR 85.7 million (EUR 125.8 million), which is 1.4% of net sales (2.0%). The operating profit was EUR 76.8 million (EUR 116.7 million). The operating profit includes profits and losses from sales of fixed assets and business operations and value adjustments to a total value of EUR 13.2 million (EUR 22.9 million). The drop in the Group’s operating profit was attributable to the decline in sales and to the additional costs of about EUR 9.0 million relating to the chain reform.

The VAT, including interest, refunded to K-Plus Oy exceeded by EUR 7.7 million the residual and additional VAT imposed on some Group companies in the same matter. The amount of the refunded VAT has been included in the results of the divisions, with Kesko Food’s share being EUR 6.5 million.

Pension costs were EUR 18.3 million higher than in the previous year, at which time the good investment income of the Kesko Pension Fund had decreased the pension benefits charged by it. The operating profit of the Sincera Oy investment company was EUR 3.4 million lower than in the previous year.

The Group’s net financial income was EUR 8.9 million (EUR 9.0 million).

Earnings per share were EUR 0.61 (EUR 1.00). Equity per share was EUR 14.93 (EUR 15.31).

The method used to disclose the divisions’ operating profit was changed at the beginning of 2001. The rents charged by the real estate function for the Group’s premises are stated as rent expenses of other divisions. The operating profit from real estate is included in the operating profit of common operations. Common operations also include the net expenses or income of other common operations, as well as Group items such as corporate management expenses and amortisation on consolidation.

*) The figures for 2000 have been converted to comparable ones to correspond to the changed practice.

Net sales and profit in October-December
The Group’s net sales for the fourth quarter of 2001 were EUR 1,661 million, which is 2.1% more than in the previous year (EUR 1,628 million). The Group’s profit before extraordinary items in October-December was EUR 29.7 million (EUR 35.4 million). The Group’s operating profit was EUR 27.8 million (EUR 35.9 million), which includes EUR 7.7 million from the refunded VAT. Earnings per share were EUR 0.14 (EUR 0.29). Other key figures by quarter are presented in an attached table.

Investments
The Group’s investments totalled EUR 206.4 million (EUR 246.9 million), which is 3.3% (3.9%) of net sales. Investments in the buildings, fixtures and information technology of retail stores amounted to EUR 160.3 million, while investments in the real estate, fixtures and information technology used by Kesko and its subsidiaries for wholesale operations amounted to EUR 46.1 million.

Finance
Cash flow from business operations was EUR 209.0 million and from investing activities EUR -118.7 million. At the end of the year, the equity ratio was 53.6% (54.7%). The interest-bearing net debt was EUR 172.8 million (EUR 227.3 million). The liquid assets were EUR 126.9 million (EUR 77.4 million).

Group structure
Kesko Corporation’s commercial business operations were transferred to the subsidiaries established. The business operations of foods were transferred to Kesko Food Ltd and those of home and speciality goods to Keswell Ltd, starting from 1 April 2001. Starting from 1 October 2001, the business operations of hardware and builders’ supplies were transferred to Rautakesko Ltd, those of agricultural products to Kesko Agro Ltd and those of machinery to Kesko Machinery Ltd, which operates as Kesko Agro Ltd’s subsidiary.

On 1 January 2001, a Corporate Management Group was established in the Kesko Group. Its members represent the company’s active management. President and CEO Matti Honkala acts as the Board’s Chairman, and the other members are Kalervo Haapaniemi, Matti Halmesmäki, Erkki Heikkinen, Juhani Järvi, Matti Laamanen and Riitta Laitasalo.

Personnel
The Group’s average number of employees in 2001 was 11,544 (11,099), divided between the divisions as follows:

(The comparable figures have been adjusted to correspond to the new organisation. In calculating the average number of employees, part-time employees have been converted to full-time employees in relation to their working hours.)

The number was increased by the expansion of Kesko Food in the Baltic countries and of Rautakesko in Estonia and Sweden. On the other hand, the number was decreased by the outsourcing of service and support activities. The majority shareholding (80%) of the Group’s IT company, Tietokesko Oy, was sold to TietoEnator Corporation in the spring. This decreased the Group’s number of employees by 171. The Group employed 1,551 persons (938) abroad.

Divisions

Kesko Food
Kesko Food’s net sales amounted to EUR 3,433 million, which is 0.6% less than in 2000. The foreign subsidiaries’ share of net sales was 2.7%. However, net sales increased by 4.1% during the last quarter compared with the same period a year earlier, mainly due to the good sales during the Christmas season. The operating profit was EUR 40.0 million (EUR 41.0 million). Kesko Food’s profit includes EUR 6.5 million from the refunded VAT. The main factors contributing to the decreased profit were the costs of starting the new chain operations, expansion of business operations in the Baltic countries and investments in the retail store network.

Kesko Food’s total investments were EUR 90.6 million, with the investments in the retail store network being EUR 77.4 million.

The transfer to a pricing system and payment structure based on the new chain operating system decreased Kesko Food’s net sales by about three percentage points. As a whole, the chain operations have started almost as planned. There are great differences between Kesko Food’s sales to different chains and stores. In the retail trade, sales progressed best in the K-superstore chain, by 8.1%. Total food sales increased by about 5-6% in Finland. At the end of 2001, the total number of the K-food stores in Finland was 1,159.

The operating profit of Citymarket Oy, that carries on non-food trade in the K-citymarket hypermarkets, was EUR 2.7 million (EUR 11.2 million). The decline resulted from a lower than planned sales increase, an active investment programme and repercussions of the problems experienced when starting the chain operations at the beginning of the year.

The building of the retail store network in the Baltic countries progressed according to plan. In these countries, Kesko Food operates a hard discounter chain and a superstore chain. In May, Kesko Food purchased the Säästumarket hard discounter chain operating in Estonia. At the turn of the year, the chain had 33 stores. In addition, Kesko Food has in Estonia 3 SuperNetto stores, which will be converted to Citymarkets. Kesko Food’s share of the Estonian grocery trade is about 15%. Latvia’s first Citymarket was opened in Riga at the end of September and another Citymarket will be opened there in March 2002. Kesko Food’s target in the Baltic countries is to gain a share of about 25% of their total grocery market, which is currently about EUR 4.2 billion.

The comparable net sales of Kespro Ltd, which provides services to catering customers, kiosks, service stations and restaurants, decreased by 3.1%. A new type of wholesale outlet, based on a new concept, were opened in 2001 at Tammisto in Vantaa, and in Lahti. They differ from conventional wholesale and cash & carry outlets with respect to opening hours, wide range of goods, Internet services and fast deliveries. There were 18 cash & carry outlets at the end of the year.

Rautakesko
Rautakesko’s net sales amounted to EUR 746 million, a drop of 5.1%. The foreign subsidiaries’ share of net sales was 13.9%. In Finland, decreased housing construction reduced the sales of Rautakesko’s chains and the sales of the Industrial and Constructor Sales unit to construction firms and industry in particular. The operating profit was EUR 4.3 million (EUR 6.4 million). The decrease is accounted for by the costs arising from the expansion of foreign operations, particularly in Sweden, and by the initiation of the chain operating system in Finland. Investments amounted to EUR 22.9 million.

By the end of 2001, 45 stores were included in the K-rauta chain and 99 stores in the Rautia chain. As a result of the chain operations reform, five stores started to operate outside the K-Alliance. These stores’ effect on sales amounted to about EUR 6.4 million.

In October, Rautakesko signed an agreement on starting logistical co-operation with the Finland Post Corporation. Starting from the beginning of 2002, the joint venture established has provided central warehousing and related services to the K-rauta and Rautia chains and the Industrial and Constructor Sales unit of Rautakesko. Finland Post owns 60% and Rautakesko 40% of the joint venture.

The net sales of K-rauta AB in Sweden were EUR 48.5 million, a growth of 11.5% (currency-denominated increase 22.8%). There were ten K-rauta stores operating in Sweden at the end of 2001. New K-rauta stores will be opened in Göteborg and Södertälje in 2002. The hardware and builders’ supplies operations in Sweden were not profitable. The net sales of Fanaal AS in Estonia were EUR 36.0 million and those of Fanaal A/S in Latvia were EUR 15.2 million. There are four stores operating in Estonia and one in Latvia. Latvia’s first K-rauta store will be opened in Riga in spring, and the construction of a new K-rauta store in Haabersti has been started in Tallinn.

Kesko Agro
The net sales of Kesko Agro were EUR 699 million, an increase of 11.8%, which was better than expected. The foreign subsidiaries’ share of net sales was 5.6%. The operating profit was EUR 6.2 million (EUR 4.5 million). The subsidiaries Kesko Machinery Ltd, K-Maatalousyhtiöt Oy and Kesko Agro Eesti A/S improved their performance. The result was affected by the costs arising from the development of information systems and e-commerce and by the initiation costs in the Baltic countries. Kesko Agro’s investments were EUR 2.0 million.

In Finland, the net sales of agricultural trading grew by 8.3%. This was mainly attributable to increased grain sales, thanks to the good harvest in 2000. On the other hand, as the amount and quality of the crop harvested in the autumn of 2001 were poorer than expected, the volume of the grain trade is expected to decrease. Kesko Agro started the import and marketing of German Deutz-Fahr tractors in Finland and the Baltic countries in May. There were 110 K-agricultural stores at the end of the year.

The net sales of Kesko Machinery rose by 11.4%. However, sales slowed down towards the end of the year. At the end of the year, Kesko Machinery signed an agreement on the sale of Fiat-Hitachi construction machinery in Finland and the Baltic countries. The aim is a market share of over 10%.

The agricultural and machinery business in Estonia and Latvia has progressed according to plan. An agricultural and machinery store was opened in Riga in May. A subsidiary, UAB Kesko Agro Lietuva, was established in Lithuania in autumn and it started operating at the beginning of 2002. New full-service agricultural and machinery stores will be opened in Tallinn and Vilnus this spring. Kesko Agro’s target is to be the market leader in the Baltic agricultural business.

Keswell
Keswell’s net sales were EUR 695 million, a drop of 4.3%. The decrease in comparable figures was 2.9%, when the speciality clothing trade included in the figures is taken into account. The operating loss was EUR 5.9 million (EUR 7.8 million). In October-December, Keswell’s operating profit was EUR 15.1 million (EUR 7.5 million). Investments were EUR 12.9 million.

The net sales of the Anttila Group were EUR 464.3 million, an increase of 3.0%. The mail order business grew by 11.2% and increased its market share in Estonia in particular. NetAnttila exceeded its sales target clearly. The sales of the Kodin Ykkönen department stores for home goods and interior decoration increased by 21.7%, partly due to the two new department stores opened in the previous year. The home and speciality goods sales of the Anttila department stores declined by 2.4%. The Anttila Group’s operating loss was EUR 1.4 million, which was clearly lower than in the previous year (EUR 6.3 million). The operating profit of the Anttila department stores was EUR 2.2 million. In October-December, the Anttila Group’s operating profit was EUR 14.1 million. The result for the whole year was affected by the initiation costs of the three department stores opened at the end of 2000 and by investments in e-commerce. There were 27 Anttila department stores and 7 Kodin Ykkönen department stores for home goods and interior decoration operating at the end of the year.

In the sports trade, retail sales developed clearly better than in the previous year and the retail store network developed favourably. Four new Intersport megastores were opened in 2001. The sales of the Intersport chain grew by 7.1%. The net sales of Kesko Sports increased by 5.5%. There were a total of 85 Intersport and Kesport stores operating at the end of the year.

The net sales of Kesko Musta Pörssi were 16.7% lower than in the previous year. The retail sales of the Musta Pörssi chain decreased clearly compared with 2000, mainly due to diminished TV and mobile phone sales. As part of the chain operations reform, ten Musta Pörssi stores started operating outside the K-Alliance. Five new Musta Pörssi Maailma department stores for home technology and two new Musta Pörssi stores were opened in 2001. There were a total of 51 Musta Pörssi stores operating at the end of the year.

The net sales of Kesko Shoes went down by 6.5%. Some of the K-kenkä chain’s stores were reorganised into the new Kenkäexpertti group. At the end of the year, there were 33 stores operating in the K-kenkä chain, 27 stores in the Andiamo chain and 48 stores in the Kenkäexpertti group.

VV-Auto
The VV-Auto Group’s net sales were EUR 391 million, a drop of 18.8%. The operating profit was EUR 14.2 million (EUR 17.8 million). Investments were EUR 6.1 million.

The overall car trade in Finland dropped sharply. The number of new cars registered was 18.7% lower and that of commercial vehicles 1.1% lower than in the previous year. There was uncertainty in the car market, which was caused by the prevailing economic conditions and the debate about the taxation of imported cars.

The share of the cars imported by the VV-Auto Group was 13.3% of the total number of new cars registered. The market share of Volkswagen cars was 9.4% and that ofVolkswagen vans was 18.7%. Concerning mini buses, Volkswagen continues to be the market leader with a 62.7% market share.

Kaukomarkkinat
The Kaukomarkkinat Group’s net sales were EUR 291 million, which was 1.2% less than in the previous year. The Group’s operating profit was EUR 6.8 million (EUR 4.5 million). Investments were EUR 11.9 million.

Net sales developed most favourably in Telko, which had been included in the Group foronly part of 2000, as well as in Leipurien Tukku and in the Chinese trade. Sales of telecommunications products, home technology and office automation recorded the biggest decreases. The Group’s operating profit increased 52.0% over the previous year. It has been possible to reduce costs by developing operating processes, so that the whole Group’s costs in comparable figures were lower than in the previous year.

Kaukomarkkinat purchased the whole share capital of Intotel Oy in September. The company’s net sales for 2000 were EUR 5.8 million.

Shares and equities market
Kesko Corporation’s share capital is EUR 180,426,800, with 35.2% of the share capital consisting of A shares and 64.8% of B shares.

The price of the company’s A share was EUR 16.95 at the end of 2000 and EUR 15.00 at the end of 2001, a drop of 11.5%. The price of the B share was EUR 10.75 at the end of 2000 and EUR 10.30 at the end of 2001, a decrease of 4.2%. In 2001, the HEX general index dropped by 32.4% and the HEX portfolio index by 22.3%, while the trading sector price index increased by 13.4% during the year.

At the end of 2001, the market capitalisation of A shares was EUR 476 million and that of B shares EUR 602 million, i.e. the total market capitalisation for all shares was EUR 1,078 million.

During 2001, 1.2 million of Kesko’s A shares with a total value of EUR 20.5 million and 14.2 million B shares with a total value of EUR 139.1 million were traded on the Helsinki Exchanges.

Kesko and the euro
Kesko adopted the euro as its accounting currency on 1 January 2002. The prices of Kesko’s stock items remained in markkas until 31 December 2001. The transfer to the euro took place according to plan, with no problems.

Main events in 2001
A new chain operating system was adopted between Kesko and about 1,450 K-retailers, starting at the beginning of 2001. The new chain or customer agreement was approved by over 98% of all K-retailers. Co-operation is intensified in the management of the whole operating chain.

On 10 April 2001, Kesko Corporation was served a summons by nine Citymarket retailers to whom Kesko had given notice. One of the retailers cancelled the summons later. These retailers primarily demanded that Kesko pay damages amounting to approximately EUR 13.8 million for serving notice, which they claimed to be contrary to contract. In addition, on 6 September 2001, Kesko was served a summons by four Andiamo retailers to whom Kesko had given notice. These retailers primarily demanded that Kesko pay damages amounting to approximately EUR 0.9 million for serving notice, which they claimed to be contrary to contract. Kesko contests all the claims presented against it on the grounds that they are unjustified and considers that it has had sufficient legal grounds to serve notice to terminate the agreements.

Kesko Corporation sold the majority shareholding (80%) of its IT subsidiary, Tietokesko Oy, to TietoEnator Corporation. The company has continued to produce information technology services for the Group as an associated company, starting from 1 June 2001.

On 4 May 2001, Kesko published its first report on corporate responsibility. It is based on the recommendation of the international Global Reporting Initiative organisation. In October, Kesko was awarded as Finland’s best overall reporter on issues relating to the environment and corporate responsibility.

During 2001, the Finnish Competition Authority granted fixed-term exceptional permits for the fixed pricing system of the Kesko Group’s retail store chains.

On 15 October 2001, Kesko opened a new Internet portal for consumers, www.plussa.com. The K-Alliance’s former K-netti.com service and Pirkka.fi pages were combined to form the new portal.

The excessive amount of VAT paid by K-plus Oy, a Group company, was refunded to it by a decision made on 13 November 2001. The amount refunded, including interest, exceeds by EUR 7.7 million the amount of residual and additional taxes earlier imposed on some Group companies.

On 20 December 2001, Kesko and EBRD, the European Bank for Reconstruction and Development, signed an agreement on co-operation concerning two real estate companies in the Baltic countries. These companies’ combined share capital will be EUR 34 million. In addition, EBRD will arrange a loan of EUR 50 million, which will be used to primarily finance real estate projects in Estonia and Latvia. The agreed ownership share of EBRD in the Estonian and Latvian real estate companies is 19.9%.

At the end of January 2002, Carrols Oy, a Kesko Food subsidiary, signed an agreement on the sale of the Carrols hamburger chain’s business operations to a subsidiary owned by the Burger-In Group. The deal becomes effective on 1 March 2002 upon the fulfilment of the conditions included in the agreement. The deal concerns the transfer of the Carrols trademarks and the Carrols chain’s restaurant operations.

Future outlook
The chain operations reform, which significantly increases the efficiency of co-operation between Kesko and the retailers, has been implemented in large part and the positive consequences of the reform are becoming visible. Kesko will continue to invest actively in both Finland and the Baltic countries.

In 2002, Kesko Group’s net sales are expected to increase in Finland at no less than the growth rate of the market.

Due to the improvement actions carried out and the streamlining of the corporate structure, Kesko Group’s operating profit, excluding one-off items, is forecast to increase compared with the previous year.

Proposed distribution of profit
The Group’s distributable reserves are           EUR 837,257,662.44
The parent company’s distributable reserves are                  EUR 742,734,053.66,
of which the net profit for the year is                                      EUR 80,977,792.62

The Board of Directors proposes to the Annual General Meeting that the distributable reserves be used as follows:
To be paid to shareholders as dividends

(at EUR 0.60 per share)                                                       EUR 54,128,040.00

To be reserved for charitable donations at
the discretion of the Board of Directors                 EUR 250,000.00

To be carried forward as retained

earnings                                                                           EUR 688,356,013.16

Helsinki, 13 February 2002
Kesko Corporation
Board of Directors

Further information:Juhani Järvi, Executive Vice President and CFO, telephone +358 1053 22209 and Teemu Kangas-Kärki, Vice President, Corporate Controller, telephone +358 1053 22113. Juhani Järvi will also answer questions sent to www.kesko.fi (financial statements 2001 discussion) on 13 February 2002 at 13.00-14.00 hrs.

KESKO CORPORATION
Corporate Communications

Erkki Heikkinen
Senior Vice President

ATTACHMENTS
Group net sales by division
Consolidated income statement and balance sheet
Group key indicators

Group cash flow
Group contingent liabilities
Group key indicators by quarter
Net sales and operating profit of divisions by quarter

The Board of Directors has decided to convene the Annual General Meeting at the Helsinki Fair Centre at 1 p.m. on 22 April 2002 to handle the matters stipulated in the Articles of Association.

The record date for payment of the proposed dividends is 25 April 2002. The Board of Directors proposes to the Annual General Meeting that the dividend payment date be set for 3 May 2002.

Kesko Corporation’s interim report for the first three months of 2002 will be published at 8 a.m. on 15 May 2002, for the first six months of 2002 at 8 a.m. on 8 August 2002 and for the first nine months of 2002 at 8 a.m. on 13 November 2002. In addition, Kesko Group’s sales figures are published each month. Releases and other company information are available on Kesko’s Internet pages, at Investor information, www.kesko.fi

DISTRIBUTION
HEX Helsinki Exchanges
Main news media

ATTACHMENTS:

The figures are unaudited. The figures for 2000 have been converted to comparable ones. The figures in this report are based on markka-denominated accounting, and the euro-denominated figures have been calculated by using the conversion rate 5.94573. The Finnish financial statements with markka figures are available from Kesko Corporate Communications.