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Divisions Building and home improvement trade
Rautakesko operates in the building and home improvement supplies trade in Finland, Sweden, Norway, the Baltic countries, Russia, and Belarus and the agricultural supplies trade in Finland. Rautakesko manages and develops its K-rauta, Rautia, K-maatalous, Byggmakker, Senukai and OMA retail chains and B2B sales in its operating area. Rautakesko is responsible for the chains’ concepts, marketing, sourcing and logistics services, store network, and retailer resources. There are 330 building and home improvement stores in eight countries and 90 agricultural stores in Finland.
Rautakesko aims to be the leading service provider in the building and home improvement trade. Rautakesko’s building and home improvement store chains
In terms of its chains’ retail sales, Rautakesko is one of the five largest companies in the European building and home improvement market. The principal European competitors operating in Rautakesko’s market area are Castorama (Kingfisher Group), Leroy Merlin (Groupe Adeo), DT Group, Bauhaus, Hornbach and OBI. Rautakesko is a partner in tooMax-x, a purchasing alliance. Rautakesko’s partnership in tooMax-x made it the third largest European sourcing channel for home building and interior decoration items.
The total retail market of this sector in Rautakesko’s operating area amounts to some €28 billion. It is estimated that the overall market change in the 2009 building and home improvement trade in the Baltic countries was -30%, in Norway -10%, in Sweden -5%, in Finland -15%, and in Russia -25%. The main reason for the decrease in demand has been the strong decline in the construction market, resulting from the recession.
Retail sales of Rautakesko’s chains totalled €3,778 million (incl. VAT) in 2009, a decrease of 18.0% from the previous year.
In Finland, the retail market in the building and home improvement sector totals some €3.4 billion and declined by 14.8% in 2009 (Finnish Hardware Association, DIY). The K-Group’s market share in this sector was some 38% (Finnish Hardware Association, DIY, own estimate).
In Finland, Rautakesko operates the K-rauta and Rautia retail chains and Rautakesko B2B Sales which serves construction companies, the manufacturing industry and other professional customers. Rautakesko also provides services at 33 customer contract stores operating outside the chains.
The K-rauta chain consists of 42 stores, with some 70% of sales going to consumers. The Rautia chain consists of 107 stores, 50 of which also operate as
The combined sales of the K-rauta and Rautia chains, Rautakesko B2B Sales and
In Sweden, the building and home improvement market totals some €3.8 billion (SCB). In 2009, the market declined by about 5% (SCB).
At the end of 2009, Rautakesko had 19 K-rauta stores of its own and one retailer-owned store in Sweden. Retail sales of K-rauta stores in Sweden totalled €235 million (incl. VAT), a growth of 0.7%. Rautakesko’s market share is about 6% (own estimate).
Private customers account for around 85% of K-rauta clientele. Principal competitors are Bauhaus, Byggmax, DT Group, and local speciality stores.
In Norway, the building and home improvement market totals some €4.7 billion (TBF), down by about 10% in 2009 (TBF).
Byggmakker Norge AS, which is owned by Rautakesko, manages the Byggmakker chain of 113 building and home improvement stores, 15 of which are owned by Byggmakker. Other stores in the chain are owned by retailer entrepreneurs who have chain contracts with Byggmakker. Retail sales of the chain’s stores totalled €963 million (incl. VAT) in 2009, a decrease of 13.8% from the previous year. Rautakesko’s market share in Norway is about 17% (TBF). More than half of all sales are to professional customers. Rautakesko’s competitors are Monter/Optimera (Saint Gobain), Maxbo and Coop.
In Estonia, the building and home improvement market totals some €0.4 billion (own estimate) and in 2009 the market decreased by 20% (own estimate). Rautakesko has nine building and home improvement stores in Estonia. Their retail sales totalled €76 million (incl. VAT) in 2009, a decrease of 21.4%. Professional customers account for some 59% of all customers. Rautakesko’s market share in Estonia is about 20% (own estimate). Rautakesko’s competitors are Ehitus ABC (Saint Gobain), Bauhof and Espak.
In Latvia, the building and home improvement market totals approximately €0.4 billion (CSB), a decrease of 30–40% in 2009 (CSB). Rautakesko has nine K-rauta stores of its own in Latvia. Retail sales of K-rauta stores totalled €61 million (incl. VAT) in 2009, a decrease of 30.3%. It is estimated that Rautakesko’s market share in Latvia is 16% (own estimate). Rautakesko’s competitors are Depo DIY and Kursi.
In Lithuania, the building and home improvement market totals some €0.4 billion (own estimate) and it decreased by 40–50% in 2009 (own estimate). In Lithuania, Rautakesko has the majority shareholding in UAB Senuku prekybos centras, which is the market leader in the Lithuanian building and home improvement sector with a share of about 25%. The Senukai chain, which sells to both consumers and business customers, comprises 16 stores of its own, a logistics centre and 60 partner stores. Senukai’s retail sales totalled €311 million (incl. VAT) in 2009, a decrease of 41.6%. Its competitors include local building supplies outlets and speciality stores.
In Russia, the building and home improvement market totals some €14 billion (own estimate), a decrease of about 25% in 2009 (Ros Business Consulting and own estimate). There are 10 K-rauta stores in Russia and their retail sales totalled €200 million (incl. VAT) in 2009, a decrease of 16%. Rautakesko’s market share in Russia is about 2.0% (own estimate). Rautakesko’s competitors are Leroy Merlin, OBI, Castorama, Maxidom and Metrica.
In Belarus, the building and home improvement market totals some €1.0 billion (own estimate). OMA, the company acquired by Senukai in Belarus in July 2007, has four stores. Their retail sales amounted to €62 million (incl. VAT) in 2009, representing a decrease of 26.6%. The market share of OMA is about 5% of the total market (own estimate).
Kesko Agro Ltd’s business operations were reorganised at the beginning of 2009. The K-maatalous chain and the agricultural trade (agricultural implements, inputs and supplies, and the seed and grain trade) were transferred to Rautakesko, while the tractor and combine harvester business and Kesko Agro subsidiaries in the Baltic countries were transferred to the car and machinery trade.
In Finland, 90 K-maatalous agricultural stores form the K-maatalous chain. 52 of the stores in the chain are combined Rautia K-maatalous or K-rauta K-maatalous stores. Major customer groups are agricultural entrepreneurs and contractors.
In 2009, the net sales in the agricultural trade, which was transferred to Rautakesko, dropped by 32.6% in Finland. The reasons for this decline were the economic recession and a decrease in prices.
Rautakesko’s operations are based on strong chain concepts, efficient sourcing, and the best practices, which are duplicated internationally. Rautakesko operates in the background of the chains, combining their category management, purchasing, logistics, information system control and network improvements. The synergy benefits and economies of scale achieved enable the company to offer products and services to customers at competitive prices.
K-rauta is Rautakesko’s international concept. K-rauta operates in Finland, Sweden, Estonia, Latvia and Russia. The K-rauta concept focuses on wide selections, total solutions that make customers’ lives easier and a good price-quality ratio. The concept combines the service, selections and business models for consumers, builders and professional customers. Overall, the K-rauta chain’s competitive advantages include stores and attached builders’ yards that are larger than those of its competitors.
Rautia is the largest building and home improvement store chain in Finland. Its selections are targeted at builders, renovators and building professionals in particular. Key competitive advantages include comprehensive customer service, knowledge of the local market and the cooperation network. Many Rautia stores also complement their range with agricultural items.
The K-maatalous chain’s strengths in Finland include the K-maatalous retailers, who know the local customers and circumstances, and the wide product range combined with the comprehensive services and network. Active contacts and sales and the utilisation of data and information technology provide the basis for close cooperation between agricultural entrepreneurs and K-maatalous.
Byggmakker is the largest building and home improvement store chain in Norway. The chain’s business model is retailer entrepreneurship. Special strengths include sales of building supplies and knowledge of professional customers. The Norwegian concept has undergone a reform with the introduction of large Byggmakker outlets of a new type providing full service.
The Senukai chain is the market leader in Lithuania. The chain incorporates the Mega Store concept, which offers customers just about every product related to building and living at its stores of over 20,000 m2.
Rautakesko B2B Sales operates in Finland. Its customers include nationwide construction companies, the manufacturing industry and other professional customers. Rautakesko B2B Sales’ strengths include close cooperation with the network of Finnish K-rauta and Rautia stores through which a significant part of the deliveries are made.
Rautakesko’s net sales totalled €2,312 million, representing a decrease of 22.4%. Net sales in Finland amounted to €1,041 million, down by 21.1%. The building and home improvement trade contributed €744 million, and the agricultural supplies trade €297 million to the net sales in Finland. The net sales of subsidiaries in other countries totalled €1,271 million; the decrease was 23.4%. Foreign subsidiaries accounted for 55.0% of Rautakesko’s net sales.
Rautakesko’s operating profit excluding non-recurring items was €11.9 million, down by €44.4 million. Rautakesko’s investments totalled €84.7 million, with investments outside Finland accounting for 82.8%.
In 2009, two new K-rauta stores were opened in Sweden and one in Russia, Estonia and Latvia. In addition, the store site network was strengthened by other new and replacement stores. During the year, one K-rauta was closed down in Sweden and seven Byggmakker stores, five of which run by retailers, were closed down in Norway.
In 2009, Rautakesko continued to seek synergy and efficiency benefits in order to develop its international operations. Rautakesko made a cooperation agreement with tooMax-x Handels GmbH. The purchasing cooperation ensures an increasingly comprehensive and competitively-priced selection of products for customers.
Major focal areas of the year included centralised category management and supply chain management. The product lines are responsible for the centralised formation of joint selections in all countries.
The construction of the international logistics network continued. A service agreement for central warehousing operations in Norway and Sweden was signed with Itella, Rautakesko’s logistics partner.
The structure of the K-rauta concept’s displays was revised. Customer visits and shopping are made easier by presenting different styles and price options clearly and together. The K-rauta chain is piloting the new design and service area business model at K-rauta Vantaanportti.
The service structure of the Rautia concept was clarified by increasing product and usage information to help customers.
The competence of Rautakesko staff was enhanced in 2009 with the help of a retail management training programme. The aim is to create a coherent strategic retail way of thinking and to ensure that best practices are shared.
Master Training for retail store staff in the SMS project (Store Management System) was started in Estonia, Latvia, Norway and Sweden.
Rautakesko’s aims include exceeding the market growth in 2010.
The recession will continue to be clearly felt in the building and home improvement trade. Demand in the building repair and interior decoration business is expected to remain at a good level, and sales of yard and gardening items will clearly increase. Demand for various services, such as design, transportation and installation is anticipated to further increase as customers are pressed for time and want tailored solutions.
Customer purchasing behaviour and consumption habits are becoming more and more varied. The importance of energy efficiency, environmental values and responsibility in consumers’ decision-making will increase. Besides traditional shopping in physical stores, the use of the internet as a channel providing information and shopping sites will be emphasised. New international service providers will enter the market and new business models will arise.
The new K-rauta store concept focuses on interior decoration and gardening. Product groups and categories are presented in a centralised display area close to desks providing service and design assistance. More comprehensive product information and signage facilitate self-service.
In the Rautia chain, special emphases will include the ‘home yard’ concept and sales of houses.
In the agricultural trade, the aim is to develop the K-maatalous concept and improve market position to meet customer expectations. Objectives include the most active sales and the best total selection of products and services in the agricultural trade, including the K-maatalous cultivation programme.
The store network will be strengthened. In 2010, one new K-rauta will be opened in Finland, two new stores in Russia and one in Belarus. A new K-rauta will also be opened in Sweden.
The Best Practise Retail Solution, Rautakesko’s most important project that aims to achieve uniform business models, will continue. The project will harmonise the business models and retail information systems in the countries where Rautakesko operates.
Enhancement of electronic customer information will continue in 2010. The aim is to launch the chains’ new websites, first in Finland and later in other countries.
International cooperation concerning product lines will intensify. Rautakesko’s international logistics network with Itella Logistics will expand.
The target is that by the end of 2010 all purchases from the Far East will be made via tooMax-x sourcing cooperation.
The strong development of Rautakesko’s own international brands continued. Cello, Prof, Fiorin and FXA offer a reliable and affordable solution for the building and renovation needs of both consumer and professional customers. Major launches in 2009 included Cello exterior paints and Cello storage systems.
In 2010 own brands will focus on improving the efficiency of selections and increasing international coverage. The web service of the Cello brand will be enhanced to make a channel which serves customers better.
Through its cooperation with tooMax-x, Rautakesko also participates in the charity work carried out by Eurogroup. In 2009, a school for over one thousand pupils, built as a cooperation project, was opened in Southern China. The Eurogroup organisation also provides training and consultation to various operators and carries out audits on factories in the Far East.
Rautakesko adopted a policy on ensuring origin and traceability of timber and wood products in October 2009. Rautakesko accepts the FSC and PEFC certification systems and is committed to the principles of responsible sourcing. Rautakesko’s aim is to always ensure origin and traceability of the timber and wood products purchased and sold by the company.
The K-maatalous Experimental Farm in Hauho does pioneering research and development work for agriculture by testing plant varieties, fertilisation and protection. The cultivation programme of K-maatalous includes guidelines on the choice of seed, on fertilisation, on plant protection and liming.
Rautakesko’s chains aim to promote energy-efficient and healthy living. In the future, energy-efficiency, environmental values and responsibility will have a higher impact on both private and public decision-making.
The K-environmental store system was incorporated into the business concept in all Finnish chain stores. The focus of K-environmental stores, among other things, is on environmentally-friendly product selections and product labelling, on recycling and preventing the generation of waste at the stores, on store energy-use management and cleaning practices.
The Rautia chain’s heat renovation truck presented economical heating systems and energy-efficient solutions for renovation and building, while also encouraging customers to reduce their household-related burden on the environment.
The K-rauta stores’ nationwide campaign on energy-saving bulbs helped customers choose more energy-efficient and responsible lighting solutions.
Rautakesko participates in a project financed by Sitra, the Finnish Innovation Fund, and lead by Demos Helsinki, which supports people in their everyday energy choices.
Building and home improvement trade
Finland, market share 38% (Finnish Hardware Association, DIY, own estimate)
Competitors: Starkki, Terra, S-rauta, Agrimarket, Bauhaus
Sweden, market share 6% (HUI, own estimate)
Competitors: Bauhaus, Byggmax, DT Group
and local speciality stores
Norway, market share 17% (TBF)
Competitors: Monter/Optimera (Saint Gobain), Maxbo and Coop
Estonia, market share 20% (own estimate)
Competitors: Ehitus ABC (Saint Gobain), Bauhof and Espak
Latvia, market share 16% (own estimate)
Competitors: Depo DIY, Tapeks/Aile and Kursi
Lithuania, market share 25% (own estimate)
Competitors: local building supplies and speciality stores
Russia, market share 2.0% (ROS Business Consulting, own estimate)
Competitors: Leroy Merlin, OBI, Castorama, Maxidom, Metrica
Belarus, market share 5% (own estimate)
Agricultural trade
Finland, K-maatalous chain
Main competitor: Agrimarket chain
K-Group’s building and home improvement trade, |
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| Number | Sales (incl. VAT) € million |
||||
| 2009 | 2008 | 2009 | 2008 | ||
| K-rauta* | 42 | 42 | 617 | 669 | |
| Rautia* | 107 | 102 | 541 | 556 | |
| Rautakesko B2B Sales | 197 | 279 | |||
| K-maatalous* | 90 | 91 | 448 | 629 | |
| K-customer contract stores | 33 | 34 | 68 | 72 | |
| Finland, total | 272 | 269 | 1,871 | 2,206 | |
| K-rauta, Sweden | 20 | 19 | 235 | 233 | |
| Byggmakker, Norway | 113 | 118 | 963 | 1,118 | |
| Building and home improvement stores, other Nordic countries total |
133 | 137 | 1,198 | 1,351 | |
| K-rautakesko, Estonia | 9 | 8 | 76 | 96 | |
| K-rauta, Latvia | 9 | 8 | 61 | 87 | |
| Senukai, Lithuania | 16 | 16 | 311 | 532 | |
| Building and home improvement stores, Baltic countries total |
34 | 32 | 447 | 715 | |
| K-rauta, Russia | 10 | 9 | 200 | 240 | |
| OMA, Belarus | 4 | 3 | 62 | 84 | |
| Building and home improvement stores, other countries total |
14 | 12 | 262 | 324 | |
| Building and home improvement trade, outside Finland total |
181 | 181 | 1,907 | 2,391 | |
| Building and home improvement trade, total |
453 | 450 | 3,778 | 4,597 | |
| * In 2009, 2 K-rauta stores and 50 Rautia stores also operated as K-maatalous stores * In 2008, 2 K-rauta stores and 47 Rautia stores also operated as K-maatalous stores |
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|
2009 | 2008 | |||
| Net sales | € million | 2,312 | 2,978 | ||
| Operating profit | € million | 19.6 | 19.4 | ||
| Operating profit excl. non-recurring items | € million | 11.9 | 56.4 | ||
| Operating profit as % of net sales excl. non-recurring items |
% | 0.5 | 1.9 | ||
| Investments | € million | 84.7 | 122.7 | ||
| Return on capital employed* excl. non-recurring items |
% | 1.8 | 9.0 | ||
| Personnel average | 8,789 | 10,400 | |||
| * cumulative average | |||||
|
€ million | change, % | |||
| Building and home improvement trade, Finland | 1,041 | -21.1 | |||
| K-rauta AB, Sweden | 187 | 0.6 | |||
| Byggmakker, Norway | 477 | -16.4 | |||
| Rautakesko, Estonia | 63 | -22.1 | |||
| Rautakesko, Latvia | 48 | -32.9 | |||
| Senukai (excl. OMA) | 260 | -42.1 | |||
| OMA | 53 | -25.5 | |||
| Stroymaster Group, Russia | 169 | -16.8 | |||
| Total | 2,312 | -22.4 | |||
| (..) change over 100% | |||||
|
2009 | 2008 | |||
| Non-current assets | 494 | 459 | |||
| Inventories | 196 | 273 | |||
| Short-term receivables | 222 | 220 | |||
| ./. Non-interest-bearing debt | -284 | -299 | |||
| ./. Provisions | -4 | -5 | |||
| Capital employed** | 624 | 649 | |||
| ** capital employed at the end of month | |||||
