Kesko Oyj — Earnings Release 2020

May 27, 2021

Kesko continues the implementation of its successful growth strategy, updates financial targets

Kesko continues the implementation of its successful growth strategy, updates financial targets

The Board of Directors of Kesko Corporation has confirmed an updated version of
the company’s strategy, and has set new medium-term financial targets for the
company. The 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%).

“Kesko is one of the leading retail companies in Northern Europe. Our growth
strategy, first established in 2015, has proven effective, and its successful
execution has seen the company’s net sales grow and profitability improve
significantly. This has also translated into considerable growth in the
company’s shareholder value. We will continue to execute the growth strategy in
our three business divisions, taking targeted division-specific actions based on
our strategy process this spring to ensure further growth in sales and
profitability. Continuous improvement of customer experience, further
development of digital services, and corporate responsibility and sustainability
will become even more central to our strategy than before,” says Mikko Helander,
Kesko’s President and CEO.

“Today, K Group operates in eight countries. K Group is formed by Kesko and
independent retailer entrepreneurs in Finland. The retailer entrepreneurs lend
us a significant competitive advantage, and we employ the retailer business
model whenever it serves us in terms of that,” says Helander.

In the grocery trade division, Kesko will strive to maintain its position as the
most customer-oriented and profitable grocery retailer in Finland and the market
leader in online grocery trade. The growth strategy is based on store-specific
business ideas, extensive utilisation of data and strong digital capabilities,
combined with efficient processes. The division aims to further strengthen its
market-leading position in Finnish foodservice.

In the building and technical trade division, Kesko will continue to strengthen
its leading position in Northern Europe. The business division serves
professional builders and technical wholesale customers as well as consumers. It
strives to offer them a seamless customer experience in physical stores and
digital channels. The division will continue to execute country-specific growth
strategies, seeking growth both organically and via acquisitions.

In the car trade division, Kesko aims to offer the best customer experience on
the market and to strengthen its market position. The division’s growth strategy
is based on strong collaboration with the world’s biggest car manufacturer the
Volkswagen Group, more extensive utilisation of digitalisation, improved
operational efficiency, and growing the sales of used cars and services.

“Corporate responsibility and sustainability have been at the core of Kesko’s
operations for decades, and Kesko has been ranked as the most sustainable
grocery trade company in the world multiple times in the Global 100 ranking. We
will engage even more forcefully in corporate responsibility work in each
business, with the objective of enabling sustainable lifestyles for our
customers,” says Helander.

Kesko’s new financial targets

The new medium-term financial targets for profitability, as approved by Kesko’s
Board of Directors, are a comparable operating margin of over 6.0% and a
comparable return on capital employed of over 14.5%. 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. Kesko Group’s previous financial targets were a
comparable operating margin of 5.5%, a comparable return on capital employed of
12.5%, and interest-bearing net debt/EBITDA of less than 2.5 excluding the
impact of IFRS 16.

Indicator Target Previous Level achieved in 2020
target
Operating margin, comparable, over 5.5 5.3
% 6.0
Return on capital employed, over 12.5 12.0
comparable, % 14.5
Interest-bearing net at at 0.4
debt/EBITDA, excluding IFRS maximum maximum
16 impact 2.5 2.5

Further information:

Mikko Helander, President and CEO, Kesko Corporation, tel. +358 105 322 301
Jukka Erlund, EVP, Chief Financial Officer, Kesko Corporation, tel. +358 105
322 113
Karoliina Partanen, EVP, Communications, Kesko Corporation, tel. +358 105
320 744

Kesko Corporation

DISTRIBUTION

Nasdaq Helsinki Ltd
Main news media
www.kesko.fi

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