Kesko’s half-year financial report 1 Jan. -30 June 2023: Strong performance in a challenging market

FINANCIAL PERFORMANCE IN BRIEF:

4-6/2023

• Group net sales in April-June totalled €3,104.7 million (€3,108.5 million).
  Net sales at the same level as the year before, in comparable terms down by 0.8%
• Comparable operating profit totalled €207.6 million (€236.0 million)
• Operating profit totalled €206.3 million (€238.3 million)
• Cash flow from operating activities totalled €285.2 million (€262.4 million)
• Comparable earnings per share €0.38 (€0.45), reported earnings per share €0.38 (€0.45)

1-6/2023

• Group net sales in January-June totalled €5,932.7 million (€5,815.8 million).
  Net sales up by 2.0%, or by 1.7% in comparable terms
• Comparable operating profit totalled €333.5 million (€379.7 million)
• Operating profit totalled €328.9 million (€382.9 million)
• Cash flow from operating activities totalled €312.2 million (€333.5 million)
• Comparable earnings per share €0.60 (€0.71), reported earnings per share €0.59 (€0.71)

KEY PERFORMANCE INDICATORS

In this half-year financial report release, the comparable change % in net sales has been calculated in local currencies and excluding the impact of acquisitions and divestments completed in 2023 and 2022. The comparable operating profit has been calculated by deducting items affecting comparability from the reported operating profit.

OUTLOOK AND GUIDANCE FOR 2023 (SPECIFIED)

Kesko specifies the outlook and guidance first given in its financial statements release on 2 February 2023 and repeated in the first-quarter interim report on 28 April 2023.

Guidance is given for the year 2023, in comparison with the year 2022. Kesko now estimates that its comparable operating profit in 2023 will be €680-760 million. Before, the company estimated that its comparable operating profit would be in the range of €680-800 million.

The specified guidance is based on developments in the first half of the year, as well as updated estimates on weakened development in the construction market. Key uncertainties impacting Kesko’s outlook are developments in inflation and interest rate levels, and Russia’s ongoing offensive war in Ukraine.

In the grocery trade division, B2C trade is estimated to remain stable, and the foodservice market to grow. Inflation will increase sales, but also causes costs to rise. Operating profit is expected to remain at a good level.

In the building and technical trade division, the market is expected to decline compared to 2022. New building construction is estimated to decrease, but renovation building to grow slightly. Operating profit is expected to remain at a good level.

In the car trade division, car availability has improved, but orders for new cars are expected to remain below last year’s level. Demand for used cars and services is estimated to remain at a good level. Profitability is expected to remain good.

PRESIDENT AND CEO MIKKO HELANDER:

Kesko’s performance in the second quarter of 2023 was strong in a challenging market. Our net sales totalled €3,104.7 million and were thus at the same level as the year before. Our comparable operating profit totalled €207.6 million. The Group’s cash flow from operating activities was good, and we continued investments in line with our growth strategy during the quarter. Kesko’s growth strategy and its successful execution in all divisions are yielding results also in a more challenging operating environment.

In the grocery trade division, net sales grew by 4.7% and profitability was at a good level. The division’s net sales totalled €1,624.0 million and its comparable operating profit €118.4 million. Grocery sales in K Group grocery stores were up by 4.6%: this fell short of the market, but less so than in the first months of the year. Campaigns and other marketing efforts have seen customer visits and sales in our grocery stores increase. K Group’s online grocery sales grew by 3.8%. The Norwegian Oda announced in the spring that it would be withdrawing from the Finnish online grocery market. Sales were also strong in Kespro’s foodservice business, where the 9.8% growth in net sales once again exceeded the market.

In the building and technical trade division, net sales decreased by 10.8% and totalled €1,148.8 million. The division’s comparable operating profit was €72.0 million. Profitability weakened, but still remained at a good level. Profit decreased in both building and home improvement trade and in technical wholesale as construction volumes weakened. Construction activity has clearly decreased in Northern Europe as a result of rising inflation and interest rates, especially in new construction. In technical wholesale, Onninen’s sales were at a good level. In Onninen’s biggest market – Finland – the operating margin remained at a good level of 8.2%. Our market share has continued to strengthen in our biggest markets Finland and Norway.

New car deliveries increased significantly on the comparison period, which caused the net sales and operating profit for the car trade division to increase. Net sales for the division grew by 24.9% in comparable terms, totalling €337.6 million. Sales grew in all car trade business areas. The division’s comparable operating profit was €24.3 million. The order book for new cars remains above normal levels. Sales development was also good in used car sales and services. Weakening demand has seen orders for new cars decrease clearly on the comparison period.

The current operating environment is challenging for companies due to, among other factors, rising inflation and interest rates. Kesko is in good shape to generate profits. We have a good strategy, which focuses on our own strengths. We respond quickly to changes in our operating environment, and have been able to constantly improve our efficiency. Kesko’s strong balance sheet enables investments in growth also in this economic cycle.

Kesko’s outlook for 2023 is positive. Transformation efforts and strategy execution have improved our ability to produce profit. We are specifying our profit guidance, and now estimate that our comparable operating profit in 2023 will be in the range of €680-760 million.

FURTHER INFORMATION, AUDIO CONFERENCE AND WEBCAST

Further information is available from Jukka Erlund, Executive Vice President, Chief Financial Officer, tel.
+358 105 322 113, 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 27 July 2023 at 9.00 am (EET/EEST). The audio conference login is available on Kesko's website at www.kesko.fi. A Finnish-language webcast of the half-year financial report briefing can be viewed at 11.30 am (EET/EEST) at www.kesko.fi.

Kesko's interim report for January-September 2023 will be published on 26 October 2023. 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 2023 Half-year Report. The complete report is attached to this release and also available at www.kesko.fi/en/investor/