Kesko Oyj — Earnings Release 2021

Oct 29, 2021

Kesko's interim report for 1 Jan.- 30 Sept. 2021: The best result in Kesko’s history

Kesko's interim report for 1 Jan.- 30 Sept. 2021: The best result in Kesko’s history

FINANCIAL PERFORMANCE IN BRIEF:

7-9/2021

· Group net sales in July-September totalled €2,902.4 million (€2,651.9
million), an increase of 7.8% in comparable terms, reported net sales grew by
9.4%
· Comparable operating profit totalled €236.4 million (€181.8 million), up by
€54.5 million
· Operating profit totalled €236.5 million (€224.6 million)
· Comparable earnings per share €0.43 (€0.33)
· Reported Group earnings per share €0.43 (€0.48)

1-9/2021

· Group net sales in January-September totalled €8,429.9 million (€8,006.9
million), an increase of 8.6% in comparable terms, reported net sales grew by
5.3%
· Comparable operating profit totalled €572.0 million (€402.1 million), up by
€184.0 million when Kesko Senukai is treated as a joint venture also for the
comparison period (illustrative comparison figures)
· Operating profit totalled €570.3 million (€444.6 million)
· Comparable earnings per share €1.03 (€0.66)
· Reported Group earnings per share €1.03 (€0.81)

KEY PERFORMANCE INDICATORS

                     7-9/2021  7-9/2020  1-9/2021  1-9/2020  1-12/2020

Net sales, € million 2,902.4 2,651.9 8,429.9 8,006.9 10,669.2
Operating profit, 236.4 181.8 572.0 402.1 567.8
comparable, € million
Operating margin, 8.1 6.9 6.8 5.0 5.3
comparable, %
Operating profit, € 236.5 224.6 570.3 444.6 600.2
million
Profit before tax, 219.3 163.6 522.5 331.5 481.9
comparable, € million
Profit before tax, € 220.0 220.0 523.7 389.3 527.6
million
Cash flow from 381.2 286.6 882.8 844.0 1,152.4
operating activities, €
million
Capital expenditure, € 69.1 174.8 196.0 342.9 398.4
million

Earnings per share, €, 0.43 0.48 1.03 0.81 1.09
basic and diluted
Earnings per share, 0.43 0.33 1.03 0.66 0.97
comparable, €, basic

                           1-9/2021  1-9/2020  1-12/2020

Return on capital employed, 16.3 11.0 12.0
comparable, %, rolling 12
months
Return on equity, comparable, 24.3 17.3 17.8
%, rolling 12 months

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

Illustrative Group 7-9/2021* 7-9/2020 1-9/2021* 1-9/2020 1-12/2020
performance
indicators
Net sales, € million 2,902.4 2,651.9 8,429.9 7,580.2 10,242.6
Operating profit, 236.4 181.8 572.0 388.0 553.6
comparable, €
million
Operating margin, 8.1 6.9 6.8 5.1 5.4
comparable, %
Operating profit, € 236.5 176.9 570.3 382.8 540.0
million

* Reported

In this interim report, the comparable change % in net sales has been calculated
in local currencies and excluding the impact of Kesko Senukai and the
acquisitions and divestments completed in 2020 and 2021. 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 comparison periods as if Kesko Senukai had been
consolidated as a joint venture.

OUTLOOK AND GUIDANCE FOR 2021

Kesko Group’s outlook is given for the year 2021, in comparison with the year
2020.

Kesko estimates that its comparable operating profit in 2021 will be in the
range of €740 – 800 million.

The company issued a stock exchange release on 14 October 2021 and raised its
profit guidance. Before, the company estimated that the comparable operating
profit would be in the range of €650 – 750 million. In 2020, Kesko’s
illustrative comparable operating profit totalled €554 million.

The guidance upgrade was based on better-than-anticipated sales growth and
profit development especially in the building and technical trade division, and
the division’s more positive outlook for the remainder of the year.

In the building and technical trade division, growth in B2B trade has continued
stronger than anticipated in all operating countries. The growth has been
underpinned by stronger-than-anticipated volume development in the construction
market and continued rise in raw material prices. Raw material prices have risen
the most in building materials such as wood products, metals and plastic
products. Expectations regarding the remainder of the year are more positive
than before, especially in the building and technical trade division.

In the grocery trade division, retail sales have developed well while Kespro’s
foodservice business has strengthened compared to the year before.

In the car trade division, sales margin growth and cost adjustments have
supported profitability, but availability issues caused by component shortages
may weaken profitability in the fourth quarter.

The company has managed to improve its cost ratio in all divisions by further
increasing operational efficiency.

Estimates for the remainder of the year are made more difficult by the
continuing pandemic and challenges in predicting customer behaviour. Estimates
are also made more difficult by uncertainties regarding the availability of
goods and price inflation.

PRESIDENT AND CEO MIKKO HELANDER:

Kesko posted its best-ever result in Q3. Sales grew and profitability improved
in all divisions. Net sales grew by 7.8% in comparable terms, totalling €2,902.4
million. Our comparable operating profit totalled €236.4 million, representing
an increase of €54.5 million. The grocery trade division and the building and
technical trade division both recorded their all-time best profitability. Profit
for the car trade division improved markedly. Profitability in both grocery
trade and building and technical trade has risen to the level of the best
European operators. The strong growth is based on the successful execution of
our growth strategy and a favourable market situation.

Strong development continued in food trade. Our strength there lies in our
extensive network of well-placed stores combined with efficient online grocery
operations and our foodservice business, as well as our well-functioning
retailer business model. Our strategic goal is to constantly improve customer
experiences. Sales grew in all our grocery store chains. The division’s
comparable operating profit totalled €122.2 million. Online grocery sales grew
by 17.3% despite the strong comparison figures. Our market share in food trade
grew. K Group’s grocery sales grew by 3.3% and net sales for Kespro’s
foodservice business by 8.9%.

In the building and technical trade division, growth continued strong in all
operating countries, driven by B2B trade. The successful execution of country
-specific strategies and strong demand resulted in a record third quarter.
Strong development continued for Onninen and K-Rauta in Finland. Sales and
profitability development was good also in Norway and Sweden both in building
and home improvement trade and technical trade. Profitability was also supported
by the changes made in recent years and the acquisitions completed and their
successful integration. The division’s net sales grew by 14.6% in comparable
terms, and its comparable operating profit rose to €104.5 million. The growth
has been underpinned by strong construction market performance and the continued
rise in raw material prices.

Our transformation process in the car trade division is proceeding well and
yielding results. The division’s net sales grew by 6.7%, and its comparable
operating profit rose to €18.2 million. The division’s profitability was
underpinned by sales margin growth and cost adjustment measures. Demand was
strong for both new and used cars, although availability issues related to
component shortages have slowed down new car deliveries and hindered used car
availability. The planned exemption of all-electric vehicles from car tax in
Finland as of 1 October impacted the timing of car deliveries.

The importance of sustainability continues to grow. Concrete efforts to stop
climate change will be in the forefront in upcoming years. In mitigating climate
change, the role of the trading sector extends clearly beyond reducing emissions
from its own operations. In all our business divisions, we provide our customers
with information on their choices and encourage them to adopt more sustainable
lifestyles. We also challenge our suppliers and the whole supply chain to cut
emissions and set their own tangible emission reduction targets.

The Nordic countries are among the most stable and well-functioning societies
globally. Good overall economic development is estimated to continue in our
operating countries. Household savings have grown and people have money to
spend. Domestic demand is expected to continue to stay high. The so-called green
transition will also increase public and private investment and offer growth
opportunities for all our divisions.

We will continue the execution of our growth strategy. Our strong food trade
operations form a foundation for ongoing profitable growth in the grocery trade
division. Our grocery stores together with Kespro’s foodservice business form a
strong, unique combination. In the building and technical trade division, our
strong country-specific actions will support growth. Over 75% of the division’s
net sales now come from B2B trade and demand in B2B trade is growing forcefully.
In the car trade division, wider sector transformation and our own
transformation efforts support sales growth. We will continue our efforts to
grow our sales and improve profitability. The results we have achieved act as
proof that our strategy is working and we have made the right choices.

Important events

POSITIVE PROFIT WARNING ON 14 OCTOBER 2021

Kesko raised its profit guidance for 2021 on 14 October 2021. Kesko estimates
that its comparable operating profit in 2021 will be in the range of €740-800
million. Before, the company estimated that the comparable operating profit
would be in the range of €650-750 million. The guidance upgrade was based on
better-than-anticipated sales growth and profit development especially in the
building and technical trade division, and the division’s more positive outlook
for the remainder of the year. In 2020, Kesko’s illustrative comparable
operating profit totalled €554 million. (Stock exchange release 14.10.2021)

POSITIVE PROFIT WARNING ON 14 JUNE 2021

Kesko issued a positive profit warning based in particular on stronger-than
-anticipated development in building and technical trade, and raised its profit
guidance for 2021. Kesko estimated that its comparable operating profit in 2021
would be in the range of €650-750 million. Before, the company estimated that
its comparable operating profit would be in the range of €570-670 million.
(Stock exchange release 14.6.2021)

Updated strategy and new financial targets

The Board of Directors of Kesko Corporation confirmed an updated version of the
company’s strategy and new medium-term financial targets for the company.
Kesko’s growth strategy centres on profitable growth in three selected business
divisions: grocery trade, building and technical trade, and car trade. The new
medium-term financial targets for profitability are a comparable operating
margin of over 6.0% (previously 5.5%) and a comparable return on capital
employed of over 14.5% (previously 12.5%). As for financial position, the Group
continues to target a maximum interest-bearing net debt/EBITDA of 2.5, excluding
the impact of IFRS 16. (Stock exchange release 27.5.2021)

Positive profit warning on 15 April 2021

Kesko raised its guidance for its comparable operating profit in 2021,
estimating that its comparable operating profit in 2021 would be in the range of
€570-670 million. Before, the company estimated that the comparable operating
profit would be in the range of €520-620 million. The guidance upgrade was based
on better-than-anticipated sales development in all divisions and a more
positive outlook for the remainder of the year. The illustrative comparable
operating profit in 2020 was €554 million. (Stock exchange release 15.4.2021)

FURTHER INFORMATION
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.

WEBCAST AND AUDIO CONFERENCE
A Finnish-language webcast of the results briefing can be viewed on 29 October
2021 at 11.00 am (EET/EST) at www.kesko.fi. An English-language audio conference
on the interim report briefing will be held at 12.30 pm (EET/EST). The audio
conference login is available on Kesko's website at www.kesko.fi.

Kesko Corporation’s 2021 January-December financial statements release will be
published on 3 February 2022. 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.

DISTRIBUTION
Nasdaq Helsinki Ltd
Main news media
www.kesko.fi

The complete interim report is attached to this release (pdf) and is also
available at our website (https://www.kesko.fi/en/investor/reports-and
-presentations/#event47375)

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