Frontpage Divisions Building and home improvement trade

Building and home improvement trade

Rautakesko is the leading retailer of building, renovation and home improvement supplies and services, operating in Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Russia and Belarus. Rautakesko develops the K-rauta, Rautia, K-maatalous, Byggmakker, Senukai and OMA retail chains and B2B sales in its operating area, with an emphasis on customer orientation.

Rautakesko's core functions include the centralised development of chain selections and services, purchasing and logistics, and the development of chain concepts and the store network. There are 363 building and home improvement stores in eight countries and 88 agricultural stores in Finland. All stores in Finland are run by retailer entrepreneurs. There are also retailer-run stores in Norway.

Rautakesko's strong chain concepts

Rautakesko's operations are based on strong chain concepts founded on proven customer needs, the retail company's best practices, which have been replicated internationally, and on efficient sourcing. Rautakesko's international business model combines the category management, purchasing, logistics, information system control and network improvements of the company's chains which operate in different countries. These synergy benefits enable the company to offer interesting products and services to customers at competitive prices.

K-rauta is Rautakesko's international concept, the key elements of which are wide selections, total solutions and services making customers' lives easier and a reliable price-quality ratio. The concept combines the total services and selections for consumers, builders and professional customers. The K-rauta chain operates in Finland, Sweden, Estonia, Latvia and Russia.

The Rautia chain has the widest building and home improvement store network in Finland. Its selections are targeted at builders, renovators and building professionals in particular. Key competitive advantages include comprehensive customer service, knowledge of local customers and the cooperation network. In many localities, Rautia and K-maatalous stores operate as combination stores.

K-maatalous operates in Finland. The chain's strengths include the K-maatalous retailers, who know the local conditions, the wide product range and the comprehensive services and network. Active contacts with agricultural entrepreneurs and the utilisation of data and information technology provide the basis for good customer satisfaction.

Byggmakker is the largest building and home improvement store chain in Norway. Its special strengths include sales of building supplies and knowledge of professional customers.

The Senukai chain is the market leader in Lithuania. The chain's Mega Store concept offers customers just about every product related to building and living at the stores of over 20,000 m².

OMA is the largest building and home improvement store chain in Belarus.

B2b customers' partner

Rautakesko B2B Sales operates in Finland and serves building professionals in cooperation with K-rauta and Rautia chains. Its customers include nationwide construction companies, the manufacturing industry, municipalities and other professional customers. In its customer service, Rautakesko B2B Sales benefits from the K-rauta and Rautia networks, through which a significant part of the deliveries are made.

Store network was strengthened

In 2011, a new K-rauta was opened in Kuopio, a Rautia store in Oulu and a K-maatalous store in Vieremä, Finland. In addition, all Rautakesko's chains in Finland carried out several significant concept and store type reforms in 2011. In Russia, a new K-rauta was opened in St. Petersburg and the first K-rauta store in Moscow. In Sweden, a new K-rauta was opened in Haparanda. In Norway, three renovated Byggmakker stores were opened: in Stiltre, Sogne and Hallingdal.

The K-rauta chain's Design Center is a design and service area that helps customers' shopping, idea generation and planning. The centralised display area provides customers with design and related services and product displays – a full range from ideas to installation.

K-rauta's revised k-rauta.com web service was introduced in all of the countries where the company operates and the content of the rautia.fi web service was developed in the Rautia chain. Instructional videos related to building, home improvement and energy efficiency, demand calculators, and pages with interior decoration trends and tips were added to the web sites of both chains.

From ideas to housing solutions

Rautakesko's aims for 2012 include sales growth that exceeds the market growth. The building and home improvement market development is expected to vary by operating country. There will also be country-specific differences between consumer and professional customer groups.

Rautakesko's capital expenditure on the expansion of Russian business operations will be significant. The plan is to open 11 new K-rauta stores in Russia in 2012–2015. The total capital expenditure will be around €300 million. The aim is to achieve net sales of €800 million in Russia by the end of 2015.

Rautakesko will also strengthen and revise the store site network in other countries. K-rauta stores are under construction in Kouvola, Turku and Ylivieska, Finland, in Uppsala and Linköping, Sweden, and in Moscow, Russia. Rautia-K-maatalous stores are under construction in Turku and Keuruu, and a Rautia store in Muhos.

The development of the web services and the design and installation services available for customers will continue in 2012. Social media will also be used in dialogue with customers.

Responsibility, environmental values and energy efficiency will continue to gain more importance in customers' purchasing behaviour. Rautakesko's chains aim to help customers with questions and projects related to energy efficiency. For chain store employees, there are two training programmes available: 'the Energy Expert' and 'the Energy Master', the latter of which provides a vocational qualification. A single service desk provides the customer with all the surveys, reports and plans they may need for energy-efficient construction and renovation, including related products and installations.

International category management and sourcing will be further intensified with the help of more efficient retail management. Rautakesko's own brands (Cello, Prof and FXA) will be developed on a long-term basis and their proportion of total sales will grow.

At the end of 2011, Rautakesko in Finland started the introduction of RAKSA, the new SAP based enterprise resource planning system. RAKSA will harmonise the business models which support the chain stores' and Rautakesko's business operations and the retail stores' information systems in most operating countries.

In the agricultural trade, the focus will be on the development of the cultivation programme and the machinery sales network.

Building and home improvement trade market

The total retail market in Rautakesko's operating area is around €25 billion (own estimate).

In Finland, the retail market in the building and home improvement sector totals over €3.5 billion (VAT 0%) and increased by about 4.5% in 2011 (Finnish Hardware Association, DIY).

In Sweden, the building and home improvement market totals around €3.1 billion (VAT 0%) and increased by about 1% (own estimate).

In Norway, the building and home improvement market totals about €5.3 billion (VAT 0%), up about 6% (own estimate).

In Estonia, the building and home improvement market totals about €0.3 billion (VAT 0%), up about 8% (own estimate).

In Latvia, the total building and home improvement market is about €0.3 billion (VAT 0%), up about 5% (own estimate).

In Lithuania, the total building and home improvement market is about €0.5 billion (VAT 0%) and increased by about 10% (own estimate).

In Russia, the total market for building, home improvement and interior decoration products is around €12 billion (VAT 0%) and increased by about 15% (own estimate).

In Belarus, the total building and home improvement market is about €0.6 billion (VAT 0%) and it decreased by 50% in terms of euros, while in terms of the local currency, the size of the market remained nearly unchanged (own estimate).

Agricultural trade market

The Finnish agricultural trade market totals about €1.7 billion, up around 10% in 2011 (own estimate). Price increases of products and agricultural inputs contributed to the growth of the market.

 

Operating environment

Building and home improvement trade

Market share in Sweden 7% (HUI, own estimate).
Main competitors: Bauhaus, Byggmax, Beijer Bygg and Hornbach

Market share in Norway 18% (TBF).
Main competitors: Monter/Optimera (Saint Gobain), Maxbo and Coop

Market share in Estonia 18% (own estimate).
Main competitors: Ehitus ABC
(Saint Gobain), Bauhof, Espak and Bauhaus

Market share in Latvia 16% (own estimate).
Main competitorss: Depo DIY and Kursi

Market share in Lithuania 30% (own estimate).
Main competitors: Bauhof, Emeritazas and speciality stores

Market share in Northwestern and central Russia 5% (St. Petersburg and Moscow, own estimate).
Main competitors: Leroy Merlin, OBI, Castorama, Maxidom, Metrika

Market share in Belarus 9% (own estimate).
Main competitors: Novoselkin, Materik

Agricultural supplies trade

K-Group's building and home improvement trade, number of stores, and retail and B2B sales	Number		Sales, (VAT 0%) € million
	2011	2010	2011	2010
K-rauta*	41	41	586	546
Rautia*	106	106	489	463
Rautakesko B2B Sales			226	199
K-maatalous*	88	88	417	378
K-customer contract stores	31	32	49	52
Finland, total	266	267	1,767	1,637
K-rauta, Sweden	21	20	216	209
Byggmakker, Norway	110	112	942	864
Other Nordic countries, total	131	132	1,159	1,073
K-rauta, Estonia	9	9	60	52
K-rauta, Latvia	8	9	53	47
Senukai, Lithuania	17	17	251	228
Baltic countries, total	34	35	363	328
K-rauta, Russia	14	12	237	204
OMA, Belarus	6	5	80	72
Russia and Belarus, total	20	17	317	277
Building and home improvement trade, outside Finland total	185	184	1,839	1,677
Building and home improvement trade, total	451	451	3,605	3,314
* In 2011, one K-rauta store and 49 Rautia stores also operated as K-maatalous stores * In 2010, one K-rauta stores and 50 Rautia stores also operated as K-maatalous stores
Building and home improvement trade segment’s key figures			2011	2010
Net sales		€ million	2,716	2,519
Operating profit		€ million	26.3	23.9
Operating profit excl. non-recurring items		€ million	26.6	24.0
Operating profit as % of net sales excl. non-recurring items		%	1.0	1.0
Capital expenditure		€ million	109.8	78.2
Return on capital employed* excl. non-recurring items		%	3.8	3.8
Personnel average			8,874	8,379
* cumulative average
Building and home improvement trade segment’s net sales in 2011			€ million	Change, %
Building and home improvement trade, Finland			1,233	6.0
K-rauta, Sweden			215	3.3
Byggmakker, Norway			592	8.2
Rautakesko, Estonia			59	13.6
Rautakesko, Latvia			53	11.1
Senukai, Lithuania			249	9.8
Rautakesko, Russia			237	16.4
OMA, Belarus			80	9.2
Total			2,716	7.8
Building and home improvement trade segment’s capital employed at 31 December, € million			2011	2010
Non-current assets			561	505
Inventories			277	254
Short-term receivables			264	246
./. Non-interest-bearing debt			-363	-365
./. Provisions			-2	-2
Capital employed**			738	638
** capital employed at the end of financial year

Energy experts

The 'Energy Expert' service provided by K-rauta and Rautia stores aims to make it easy for customers to improve energy efficiency in their homes. Services and products available for customers include energy savings surveys, thermal camera inspections, air and ground heat pumps, solar water heaters and solar panels, installations included.