Kesko half-year financial report 1.1.-30.6.2024: Good performance in a weak market

FINANCIAL PERFORMANCE IN BRIEF:

4-6/2024

• Group net sales in April-June totalled €3,093.4 million (€3,104.7 million); reported net sales were down by 0.4%, and comparable net sales by 4.1%
• Comparable operating profit totalled €178.3 million (€207.6 million)
• Operating profit totalled €159.2 million (€206.3 million)
• Cash flow from operating activities totalled €309.0 million (€285.2 million)
• Comparable earnings per share €0.30 (€0.38); reported earnings per share €0.26 (€0.38)

1-6/2024

• Group net sales in January-June totalled €5,852.9 million (€5,932.7 million); reported net sales were down by 1.3%, and comparable net sales by 4.8%
• Comparable operating profit totalled €277.7 million (€333.5 million)
• Operating profit totalled €256.4 million (€328.9 million)
• Cash flow from operating activities totalled €421.6 million (€312.2 million)
• Comparable earnings per share €0.46 (€0.60); reported earnings per share €0.42 (€0.59)

KEY PERFORMANCE INDICATORS

In this half-year financial report, the comparable change % in net sales has been calculated in local currencies and excluding the impact of acquisitions and divestments completed in 2023 and 2024. The comparable operating profit has been calculated by deducting items affecting comparability from the reported operating profit.

OUTLOOK AND GUIDANCE FOR 2024 (SPECIFIED)

Kesko Group’s profit guidance is given for the year 2024, in comparison with the year 2023.

Kesko’s operating environment is estimated to remain challenging in 2024.
Kesko’s net sales and operating profit are estimated to remain at a good level in 2024 despite the challenges in the company’s operating environment. Kesko estimates that its comparable operating profit in 2024 will amount to €620–680 million. Previously, the comparable operating profit was estimated to amount to €620-700 million. The profit guidance specification is based on development in the first year-half and on updated estimates regarding development in building and technical trade and car trade in latter half of the year.

The profit guidance is based on an estimate of a relatively short recession in Kesko’s operating countries. Key uncertainties impacting Kesko’s outlook are developments in inflation and interest rate levels, and geopolitical crises and tensions.

In grocery trade, B2C trade and the foodservice market are expected to remain stable despite tightened price competition, and inflation is expected to slow down in 2024. Profitability in grocery trade is estimated to remain good also in 2024.

In building and technical trade, the market is expected to continue to decline in 2024. The economic cycle will have the biggest impact on new residential building, while the decline in other building construction, renovation building and infrastructure construction is expected to be smaller. The cycle is expected to turn in 2025. Profitability in building and technical trade is estimated to fall short of the 2023 level, but to still remain at a reasonably good level in 2024.

In car trade, new car sales are expected to fall short of the 2023 level. Sales of used cars and services are expected to grow. Profitability in car trade is estimated to still remain good in 2024, but to fall short of the 2023 level.

PRESIDENT AND CEO JORMA RAUHALA:

The second quarter of the year came in line with expectations, and Kesko again managed a good performance in a challenging market. Our net sales totalled €3,093.4 million, representing a decrease of 0.4% year-on-year, or 4.1% in comparable terms. Our comparable operating profit totalled €178.3 million. The cash flow from operating activities was strong at €309.0 million, and our cost-efficiency remained good.

Net sales for the grocery trade division totalled €1,596.5 million, representing a decrease of 1.7% year-on-year, while the comparable operating profit stood at €114.5 million. K Group grocery sales were down by 1.1%. Online grocery sales grew by 13.5%, driven especially by express deliveries. Net sales for the foodservice business decreased by 1.3%, but still exceeded market growth. Price inflation in groceries has clearly slowed down, and stood at 0.1%. Our customer flows have continued to grow thanks to campaigns, while price is an important consideration for customers. In June, legislative changes enabled the sales of beverages with an alcohol content of at maximum 8% in grocery stores: we introduced new products in a responsible manner, and have seen that wines are typically acquired alongside food.

In the building and technical trade division, profitability weakened as expected due to the weak construction cycle in the Nordic countries. In Poland and the Baltic countries, the cycle has turned, leading to an upturn in Onninen’s sales in those markets. The division’s net sales totalled €1,203.7 million, and were up thanks to the Davidsen acquisition, while the comparable operating profit totalled €56.1 million. The sales and profit of solar power products in particular fell short of the levels of the comparison period, which impacted Onninen’s relative performance. Inventories are now at a healthier level in both building and home improvement trade and technical trade. The market is showing signs of picking up in all our operating countries, even though the cycle continues to be weak.

In the car trade division, net sales and profit decreased in the second quarter as expected. The market demand for new cars was muted, while the market for used cars grew slightly. The division recorded net sales of €298.7 million and a comparable operating profit of €14.9 million. Although new car sales were down, customer demand for new models was at a good level. Growth in used car sales outpaced the market notably, and growth in service sales also continued strong. In May, we announced that we would be acquiring the operations of Autotalo Lohja to strategically strengthen our car dealership network in Southern Finland.

In June, Kesko published a strategy update. The main pillars of the strategy remain intact, while each division’s competitive advantages and objectives have been refined. Kesko’s growth strategy continues to centre around profitable growth in three selected divisions, namely grocery trade, building and technical trade, and car trade. We seek sales growth, improved customer experience, and profitability and efficiency in all businesses, with the help of e.g. digital services and artificial intelligence. Kesko’s financial targets remain unchanged.

Kesko’s net sales and operating profit are estimated to remain at a good level in 2024 despite the challenges in our operating environment. We are specifying our profit guidance, and now estimate that the comparable operating profit in 2024 will amount to €620–680 million.

FURTHER INFORMATION, AUDIOCONFERENCE AND WEBCAST

Further information is available from Anu Hämäläinen, Executive Vice President, Chief Financial Officer, tel.
+358 105 323 713, Hanna Jaakkola, Vice President, Investor Relations, tel. +358 105 323 540, and Eva Kaukinen, Vice President, Group Controller, tel. +358 105 322 338. An English-language audio conference on the results briefing will be held on 23 July 2024 at 9.00 am (EEST). The audio conference login is available on Kesko's website at www.kesko.fi. A Finnish-language webcast of the interim report briefing can be viewed at 11.30 am (EEST) at www.kesko.fi.

Kesko's interim report for January-September 2024 will be published on 30 October 2024. In addition, Kesko Group's sales figures are published monthly. News releases and other company information are available on Kesko's website at www.kesko.fi.

This is a summary of Kesko Corporation’s January-June 2024 half-year financial report. The complete report is attached to this release and also available at www.kesko.fi/en/investor/