Kesko Oyj — Earnings Release 2021

Jul 23, 2021

Kesko's half-year financial report for 1 Jan. - 30 June 2021: Another record-result

Kesko's half-year financial report for 1 Jan. - 30 June 2021: Another record-result

FINANCIAL PERFORMANCE IN BRIEF:

4-6/2021

· Group net sales in April-June totalled €2,988.2 million (€2,814.5 million),
an increase of 12.0% in comparable terms, reported net sales up by 6.2%
· The comparable operating profit totalled €219.4 million (€155.2 million), up
by €77.9 million when Kesko Senukai is treated as a joint venture also in the
comparison period (illustrative comparison figures)
· Operating profit totalled €218.1 million (€154.1 million)
· Comparable earnings per share €0.40 (€0.24)
· Reported Group earnings per share €0.41 (€0.24)

1-6/2021

· Group net sales in January-June totalled €5,527.5 million (€5,355.0
million), an increase of 9.1% in comparable terms, reported net sales up by 3.2%
· The comparable operating profit totalled €335.6 million (€220.3 million), up
by €129.4 million when Kesko Senukai is treated as a joint venture also in the
comparison period (illustrative comparison figures)
· Operating profit totalled €333.8 million (€220.0 million)
· Comparable earnings per share €0.60 (€0.32)
· Reported Group earnings per share €0.60 (€0.33)

KEY PERFORMANCE INDICATORS

                     4-6/2021  4-6/2020  1-6/2021  1-6/2020  1-12/2020

Net sales, € million 2,988.2 2,814.5 5,527.5 5,355.0 10,669.2
Operating profit, 219.4 155.2 335.6 220.3 567.8
comparable, € million
Operating margin, 7.3 5.5 6.1 4.1 5.3
comparable, %
Operating profit, € 218.1 154.1 333.8 220.0 600.2
million
Profit before tax, 203.6 135.2 303.2 167.9 481.9
comparable, € million
Profit before tax, € 204.5 136.2 303.7 169.3 527.6
million
Cash flow from 346.6 421.8 501.7 557.4 1,152.4
operating activities, €
million
Capital expenditure, € 82.7 69.1 126.9 168.2 398.4
million

Earnings per share, €, 0.41 0.24 0.60 0.33 1.09
basic and diluted
Earnings per share, 0.40 0.24 0.60 0.32 0.97
comparable, €, basic

                           1-6/2021  1-6/2020  1-12/2020

Return on capital employed, 15.0 10.1 12.0
comparable, %, rolling 12
months
Return on equity, comparable, 24.0 16.7 17.8
%, rolling 12 months

Kesko has reported 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
consolidated as a joint venture also for the comparison periods, as this method
is used in management reporting.

Illustrative Group 4-6/2021* 4-6/2020 1-6/2021* 1-6/2020 1-12/2020
performance
indicators
Net sales, € million 2,988.2 2,572.7 5,527.5 4,928.3 10,242.6
Operating profit, 219.4 141.5 335.6 206.2 553.6
comparable, €
million
Operating margin, 7.3 5.5 6.1 4.2 5.4
comparable, %
Operating profit, € 218.1 140.4 333.8 205.9 540.0
million

* Reported

In this 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 €650-750 million.

The company issued a stock exchange release on 14 June 2021 and raised its
profit guidance. Before, the company estimated that its comparable operating
profit would be in the range of €570-670 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.

Growth in the building and technical trade division has continued better than
anticipated in both B2B trade and B2C trade in all operating countries. The
division is also positively impacted by the continued strengthening of the
market and general rise in prices.

In the grocery trade division, retail sales have developed well while Kespro’s
foodservice business has clearly strengthened compared to the year before. In
the car trade division, growth in sales and improvement in operational
efficiency are proceeding as planned.

Expectations regarding the remainder of the year are more positive than before,
especially in the building and technical trade. The outlook for the remainder of
the year is more positive also in the grocery trade and car trade.

Due to various uncertainties, the guidance range for the 2021 comparable
operating profit remains wide. Especially factors such as consumption
predictability, product availability, price inflation and the duration of the
pandemic make estimates for the remainder of the year more difficult.

PRESIDENT AND CEO MIKKO HELANDER:

Kesko posted its best-ever quarter result in Q2. Sales grew and profitability
improved in all divisions. Net sales grew by 12.0% in comparable terms,
totalling €2,988.2 million. The Q2 comparable operating profit totalled €219.4
million, representing a growth of €77.9 million (illustrative comparison
figures). Our growth strategy is working, and sets us up well also for upcoming
years.

The grocery trade division continued to perform strongly in the second quarter.
The division’s net sales grew by 3.2% and its comparable operating profit
totalled €108.6 million. Profitability in grocery trade continued to improve and
sales development was good. In the foodservice business, sales growth was very
strong, underpinned by market recovery, and totalled 38.4%. Online grocery sales
came in below the exceptional levels of the year before. Nonetheless, we believe
online grocery is set to continue to grow in Finland, which is why we decided to
invest in the first automated collection system to be built in a Finnish grocery
store.

In the building and technical trade division, growth continued strong in all
operating countries especially in B2B trade. Activity was high also in B2C
trade. The division’s net sales grew by 17.7% in comparable terms, and its
comparable operating profit rose to €108.4 million. Sales in Finland were strong
and good development continued for both K-Rauta and Onninen. In Norway, we
managed to raise sales and profitability to a whole new level. In Sweden, sales
continued to grow and profitability improve in all businesses. We have been able
to ensure good product availability even though global challenges related to
availability have been apparent in certain product categories.

In the car trade division we saw a clear turnaround in both sales and
profitability. Demand for new cars is returning to a normal level and demand for
used cars is growing. Net sales for the division grew by 50.3%. The good
progress in car trade was attributable not only to growing customer demand but
also to our competitive range, the improved availability of cars compared to the
year before, and measures taken to transform and improve the efficiency of our
operations. We now hold a nearly 50% market share in all-electric cars.

In May, Kesko’s Board of Directors confirmed an updated version of the company’s
strategy, as well as new medium-term financial targets for the company. The main
conclusion of our strategy review process was to continue the execution of our
growth strategy. The results we have achieved act as proof that the strategy is
working and that we have made the right choices. Kesko’s growth strategy centres
on profitable growth in three selected business divisions: grocery trade,
building and technical trade, and car trade. The strategy also emphasises
continuous improvement of customer experience and further development of digital
services, corporate responsibility and sustainability, and operating as ‘one
unified K’.

In the grocery trade, we aim to grow sales and improve profitability further by
offering the best customer experience in the business and differentiating
ourselves from the competition. In the building and technical trade, we continue
to execute our growth strategy through sector consolidation in Northern Europe,
continuously improving our operations in each operating country. Today we
announced the acquisition of Byggarnas Partner, a company serving professional
builders in Sweden. This acquisition further strengths our position in the
Swedish building and home improvement trade market, especially in the Stockholm
area. In the car trade, we aim to raise sales and profitability to a new level
by offering the best customer experience in the car trade sector, transforming
and updating our operations, and collaborating more closely with the Volkswagen
Group.

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%).

The outlook for this year is positive and we expect significant profit
improvement also in 2021. We estimate that Kesko’s comparable operating profit
in 2021 will be in the range of €650-750 million.

Important events

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 estimates that its comparable operating profit in 2021
will be in the range of €650-750 million. Before, the company estimated that the
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 as well as 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%). (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 had 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 today at 11.00
am (EEST) at www.kesko.fi. An English-language audio conference on the results
will be held today at 12.30 pm (EEST). The audio conference login is available
on Kesko's website at www.kesko.fi.

Kesko Corporation's interim report for January-September 2021 will be published
on 29 October 2021. 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.

The complete report is attached to this release (pdf) and is also available at
our website: Kesko reports (https://www.kesko.fi/en/investor/reports-and
-presentations/#event46517)

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

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