Kesko Q3 2020: Kesko celebrates 80th anniversary with all-time record result

FINANCIAL PERFORMANCE IN BRIEF, CONTINUING OPERATIONS:                                         

7-9/2020

  • Net sales for the Group's continuing operations in July-September totalled €2,651.9 million (€2,803.9 million); in comparable terms net sales increased by 4.6%, reported net sales decreased by 5.4%
  • The comparable operating profit totalled €181.8 million (€152.0 million), up by €38.2 million when
    Kesko Senukai is recognised as a joint venture also for the comparison period (illustrative comparison figures)
  • Operating profit totalled €224.6 million (€148.6 million)
  • Comparable earnings per share were €0.33 (€0.25)
  • Reported earnings per share for continuing operations were €0.48

1-9/2020

  • Net sales for the Group's continuing operations in January-September totalled €8,006.9 million (€7,986.1 million); in comparable terms net sales increased by 3.3%, reported net sales were flat year-on-year
  • The comparable operating profit totalled €402.1 million (€331.9 million), up by €74.4 million when
    Kesko Senukai is recognised as a joint venture also for the comparison period (illustrative comparison figures)
  • Operating profit totalled €444.6 million (€320.1 million)
  • Comparable earnings per share were €0.66 (€0.52)
  • Reported earnings per share for continuing operations were €0.81

 

KEY PERFORMANCE INDICATORS

 

7-9/2020

7-9/2019 1-9/2020 1-9/2019 1-12/2019
Continuing operations          
Net sales, € million       2,651.9 2,803.9 8,006.9 7,986.1 10,720.3
Operating profit, comparable, € million 181.8 152.0 402.1 331.9 461.6
Operating margin, comparable, % 6.9 5.4 5.0 4.2 4.3
Operating profit, € million 224.6 148.6 444.6 320.1 447.8
Profit before tax, comparable, € million 163.6 129.3 331.5 263.1 370.7
Profit before tax, € million 220.0 154.8 389.3 297.6 403.3
Cash flow from operating activities, € million 286.6 191.6 844.0 619.9 893.1
Capital expenditure, € million 174.8 132.2 342.9 602.9 686.1
           
Earnings per share, €, basic and diluted          
Continuing operations 0.48 0.32 0.81 0.60 0.83
Discontinued operations - 0.00 - 0.02 0.03
Group, total 0.48 0.31 0.81 0.63 0.86
Earnings per share, comparable, €, basic          
Continuing operations 0.33 0.25 0.66 0.52 0.74
 

1-9/2020

1-9/2019 1-12/2019
Continuing operations      
Return on capital employed, comparable, %, rolling 12 months 11.0 9.6 9.6
Group      
Return on equity, comparable, %, rolling 12 months 17.3 14.4 15.1

Kesko reports 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 and segment figures to be used alongside indicators based on IFRS consolidated financial statements. In segment data, Kesko Senukai is reported consolidated as a joint venture also for the comparison periods, as this method is used in management reporting.

Illustrative Group performance indicators

7-9/2020* 7-9/2019 1-9/2020 1-9/2019 1-12/2019
Continuing operations          
Net sales, € million 2,651.9 2,568.9 7,580.2 7,352.2 9,862.0
Operating profit, comparable, € million 181.8 143.7 388.0 313.6 434.7
Operating margin, comparable, % 6.9 5.6 5.1 4.3 4.4
Operating profit, € million 176.9 140.3 382.8 301.8 421.0
Profit before tax, comparable, € million 163.6 123.8 327.6 252.6 356.7
Profit before tax, € million 172.3 149.4 337.7 287.3 389.3

*Reported 7-9/2020

In this interim report release, the comparable change % in net sales has been calculated in local currencies and excluding the impact of Kesko Senukai and acquisitions and divestments completed in 2020 and 2019. 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 reporting period 1-9/2020 and the comparison periods as if Kesko Senukai had been consolidated as a joint venture.

OUTLOOK AND GUIDANCE FOR 2020

Outlook for Kesko Group's continuing operations is given for year 2020, in comparison with year 2019.

Kesko specifies its profit guidance for 2020. The company now estimates that the comparable operating profit for its continuing operations will be in the range of €530-570 million in 2020. Before, the company estimated that the comparable operating profit for continuing operations would be in the range of €510-570 million.

Retail sales in K-food stores have remained strong in the grocery trade. In the building and technical trade, sales remain at a good level in both B2B and B2C trade. The car trade has recovered well from the decline in sales in H1. At the same time, Kesko has managed to improve cost efficiency.

Expectations for the remainder of the year are good in the grocery trade and building and technical trade with, for example, household consumption more focused on domestic purchases than previously estimated.

The outlook is based on the epidemic situation remaining under control in Kesko’s operating countries.
However, concerns over the expansion of the Covid-19 epidemic and general economic weakening remain high. A worsened epidemic situation would have a negative impact on Kesko’s businesses and, for example, Christmas sales.

PRESIDENT AND CEO MIKKO HELANDER:

The results for the third quarter of 2020 were the best in Kesko’s history. Sales grew in all divisions. Net sales grew by 4.6% in comparable terms, totalling €2,651.9 million. The comparable operating profit totalled €181.8 million, representing an increase of €38.2 million when accounting for the change in the consolidation method of Kesko Senukai. Cash flow from operating activities totalled €286.6 million, and grew by €95.0 million. We were also able to meet our long-term financial targets faster than we had anticipated.

Our strategy is working well in the grocery trade, and our market share has continued to strengthen further in both grocery sales and foodservice. Sales to grocery stores rose by 11.4% and K-Citymarket’s home and speciality goods trade also grew. Despite the exceptional circumstances, we have managed to offer safe and successful shopping for our customers, complemented by inspiring digital services that make life easier, such as online grocery sales. The positive customer experiences are reflected in the good sales development of all K Group grocery store chains. Kespro managed to clearly grow its market share in a challenging operating environment.

Good performance in all operating countries in the building and technical trade division clearly strengthened our profit performance. Growth in consumer sales remained very strong. Performance was also good in B2B trade, in both building and home improvement trade and Onninen, which increased our market share. In addition to organic growth, we continued to execute our growth strategy with the acquisitions of the Carlsen Fritzøe building and home improvement trade chain in Norway and the Bygg & Interiör business in Sweden. We continue our strategic review of operations in the Baltic States and Belarus.

In the car trade, there was an upturn in demand during the summer for both new and used cars. Net sales for the car trade division grew by 9.6%. Servicing and spare part sales were also good. The positive development in the car trade has been affected by our wider range and improved availability of cars. Demand has especially continued to grow for all-electric cars and rechargeable hybrids.

The Covid-19 epidemic has remained under control in all of Kesko’s operating countries. However, concerns over the expansion of the epidemic and general economic weakening remain high. We estimate that the comparable operating profit for Kesko’s continuing operations will be in the range of €530-570 million in 2020.

Kesko celebrates its 80th anniversary this year. The company was founded under exceptional circumstances back in October 1940, and since then, Kesko and K Group have grown into a leading retail operator in Northern Europe. I want to thank our customers, K-retailers, all K Group personnel, Kesko’s shareholders and all other stakeholders for these past 80 years.

 

Audiocast and teleconference of President and CEO Mikko Helander in English

 
Webcast in Finnish

 
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