KESKO CORPORATION INTERIM REPORT 22.10.2014 AT 09.00 1(33)
Kesko's interim report for the period 1 Jan. to 30 Sep. 2014
Financial performance in brief:
*The Group's net sales for January-September €6,804 million, change -2.2%.
*Operating profit excluding non-recurring items €170.8 million (€172.0 million).
*Earnings per share excluding non-recurring items €1.23 (€1.09).
*Equity ratio 54.2% (52.9%).
*Kesko Group's net sales and operating profit excluding non-recurring items for
the next 12 months are expected to remain at the level of the preceding 12
months.
Key performance indicators
1-9/2014 1-9/2013 7-9/2014 7-9/2013
Net sales, € million 6,804 6,953 2,304 2,374
Operating profit excl. non-recurring
items, € million 170.8 172.0 84.0 83.6
Operating profit, € million 119.7 180.4 63.4 84.1
Profit before tax, € million 118.7 174.4 61.7 81.5
Capital expenditure, € million 150.8 124.9 51.7 35.4
Earnings per share, €, diluted 0.80 1.15 0.41 0.53
Earnings per share excl. non-recurring
items, €, basic 1.23 1.09 0.59 0.53
30.9.2014 30.9.2013
Equity ratio, % 54.2 52.9
Equity per share, € 22.25 22.39
FINANCIAL PERFORMANCE
Net sales and profit for January-September 2014
The Group's net sales for January-September 2014 were €6,804 million, which is
2.2% down on the corresponding period of the previous year (€6,953 million). The
general economic situation and consumer demand remained weak during the
reporting period especially in Finland. In the food trade, net sales decreased
by 1.3%, in the home and speciality goods trade by 9.3% and in the machinery
trade by 12.2%. In the building and home improvement trade, net sales in euros
were at the previous year's level, net sales in local currencies increased by
3.7%. In the car trade, net sales increased by 2.5%. The Group's net sales in
Finland decreased by 2.9% and in the other countries, net sales increased by
1.3% and by 8.2% in local currencies. International operations accounted for
18.8% (18.2%) of net sales.
1-9/2014 Net sales, € Change, % Operating profit Change, €
million excl. non- million
recurring
items, € million
Food trade 3,197 -1.3 155.7 +0.7
Home and speciality
goods trade 923 -9.3 -48.3 -18.4
Building and home
improvement trade 2,013 +0.1 45.8 +19.0
Car and machinery
trade 796 -1.9 27.8 -2.8
Common operations
and eliminations -126 -0.4 -10.2 +0.2
Total 6,804 -2.2 170.8 -1.2
The operating profit excluding non-recurring items for January-September was
€170.8 million (€172.0 million). Despite the decline in net sales, profitability
remained at a good level due to significant cost savings. The profitability of
the building and home improvement trade improved markedly and remained at a good
level in the food trade and in the car and machinery trade. Profit was
negatively impacted by the sales decrease of the home and speciality goods trade
and especially by Anttila's loss-making business. Operating expenses excluding
non-recurring items decreased by €16.8 million (1.3%).
Operating profit was €119.7 million (€180.4 million). The operating profit
includes €-51.1 million (€8.4 million) of non-recurring items. The non-recurring
items include a restructuring provision recognised for the reduction of the
Anttila department store network and an impairment charge on fixed assets
related to the integration of K-citymarket non-food with Anttila, a total of
€43.4 million. In addition, the non-recurring items include a restructuring
provision of €5.3 million related to changes in the retail business of
Byggmakker in Norway. The non-recurring items for the comparative period
included €9.4 million of gains on the disposal of properties.
The Group's profit before tax for January-September was €118.7 million (€174.4
million).
The Group's earnings per share were €0.80 (€1.15). The Group's equity per share
was €22.25 (€22.39).
In January-September, the K-Group's (i.e. Kesko's and the chain stores') retail
and B2B sales (VAT 0%) were €8,472 million, down 1.8% compared to the previous
year. The K-Plussa customer loyalty programme gained 48,052 new households in
January-September. At the end of September, there was 2,271,367 K-Plussa
households and 3.6 million K-Plussa cardholders.
Net sales and profit for July-September 2014
The Group's net sales for July-September 2014 were €2,304 million, which is
2.9% down on the corresponding period of the previous year (€2,374 million). The
decrease in net sales is mainly attributable to the decline in the net sales of
the home and speciality goods trade and the machinery trade. In Finland, net
sales were down 3.2% and 2.0% in the other countries. In the food trade, net
sales decreased by 1.0%. In terms of euros, the net sales performance of the
building and home improvement trade (-1.9%) was impacted by the weakening of the
exchange rate of the Russian rouble, net sales in terms of local currencies were
up 0.1%. International operations accounted for 20.4% (20.2%) of the Group's net
sales.
7-9/2014 Net sales, € Change, % Operating profit Change, €
million excl. non- million
recurring
items, € million
Food trade 1,085 -1.0 56.3 +0.3
Home and speciality
goods trade 323 -8.1 -7.4 -5.2
Building and home
improvement trade 696 -1.9 29.6 +5.7
Car and machinery
trade 240 -7.7 8.7 -1.1
Common operations
and eliminations -40 -6.6 -3.2 +0.8
Total 2,304 -2.9 84.0 +0.4
The operating profit excluding non-recurring items for July-September was €84.0
million (€83.6 million) representing 3.6% (3.5%) of net sales. Profitability was
improved by the good profit performance of the foreign operations of the
building and home improvement trade. As a result of the decline in sales,
profitability weakened in the home and speciality goods trade, especially in
Anttila. Due to enhancement measures, operating expenses excluding non-recurring
items decreased by 1.6%
Operating profit was €63.4 million (€84.1 million). The operating profit
includes €-20.7 million (€0.5 million) of non-recurring items. The item includes
an impairment charge of €17.2 million on fixed assets related to the integration
of K-citymarket non-food with Anttila and a restructuring provision of €5.3
million related to changes in the retail business of Byggmakker in Norway. The
Group's profit before tax for July-September was €61.7 million (€81.5 million).
The Group's earnings per share were €0.41 (€0.53).
In July-September, the K-Group's (i.e. Kesko's and the chain stores') retail and
B2B sales (VAT 0%) were €2,933 million, down 2.6% compared to the previous year.
Finance
In January-September, the cash flow from operating activities was €167.4 million
(€299.3 million). The cash flow from investing activities was €-143.6 million
(€-113.3 million) including a €7.9 million (€16.6 million) amount of proceeds
from the sale of fixed assets.
The Group's liquidity remained at an excellent level in January-September. At
the end of the period, liquid assets totalled €503 million (€537 million).
Interest-bearing liabilities were €500 million (€568 million) and interest-
bearing net debt €-3 million (€31 million) at the end of September. Equity ratio
was 54.2% (52.9%) at the end of the period.
In January-September, the Group's net finance costs were €1.1 million (€5.4
million). They include interest income on cooperative capital from Suomen
Luotto-osuuskunta in the amount of €4.9 million (€4.0 million).
In July-September, the cash flow from operating activities was €133.5 million
(€113.6 million). The cash flow from investing activities was €-51.2 million (€-
33.3 million) including a €1.6 million (€2.6 million) amount of proceeds from
the sale of fixed assets.
In July-September, the Group's net finance costs were €1.8 million (€2.6
million).
Taxes
In January-September, the Group's taxes were €31.2 million (€52.3 million). The
effective tax rate was 26.3% (30.0%).
In July-September, the Group's taxes were €16.2 million (€24.0 million). The
effective tax rate was 26.2% (29.4%).
Capital expenditure
In January-September, the Group's capital expenditure totalled €150.8 million
(€124.9 million), or 2.2% (1.8%) of net sales. Capital expenditure in store
sites was €113.5 million (€92.5 million), in IT €24.2 million (€16.1 million)
and other capital expenditure was €13.1 million (€16.3 million). Capital
expenditure in foreign operations represented 42.3% (42.6%) of total capital
expenditure.
In July-September, the Group's capital expenditure totalled €51.7 million (€35.4
million), or 2.2% (1.5%) of net sales. Capital expenditure in store sites was
€39.1 million (€25.7 million), in IT €8.6 million (€4.0 million) and other
capital expenditure was €4.0 million (€5.7 million). Capital expenditure in
foreign operations represented 41.8% (43.7%) of total capital expenditure.
Kesko's strategic focus areas
The key focus areas in Kesko's business operations are to strengthen sales
growth and the return on capital in all divisions, to exploit business
opportunities in e-commerce and in Russia, and to maintain good solvency and
dividend payment capacity.
Profitability programme
Because of the further weakened economic situation and consumer demand, Kesko
continues to implement the profitability programme with the key objective of
improving the Group's cost-effectiveness. Cost savings will be implemented in
all divisions and across all types of expense. The most significant measures
will be targeted at operations with low profitability.
Kesko seeks more competitive multi-channel home and speciality goods trade
In the home and speciality goods trade and the building and home improvement
trade, the importance of e-commerce and online services has greatly increased
and the improvement of competitiveness necessitates major renewal. In response
to these requirements, Kesko is seeking synergies especially in the production
of online services and the development of concepts. At the same time, a basis to
improve profitability is formed, the organisational structure is evaluated, the
integration of the building and home improvement division with the home and
speciality goods division into the home improvement and speciality goods
division is planned, and K-citymarket chain's non-food part, currently part of
the home and speciality goods division, is planned to be integrated into Kesko
Food to jointly form the grocery trade division starting from 1 January 2015.
The objective is to offer customers multi-channel building, interior decoration
and home and speciality goods stores and services. The aim of the planned
combination of resources is to achieve better customer satisfaction as well as
improved competitiveness and profitability.
In order for a more detailed discussion of the change plans, cooperation
negotiations were started in Kesko's home and speciality goods trade companies
and building and home improvement trade companies in Finland, as well as in
Kesko Food Ltd, Kesko Corporation and K-Plus Oy after the end of the reporting
period. The planned changes would cause significant changes in the
organisational structure and employees' job descriptions, especially in
functions that support sales and purchasing operations. A total of approximately
2,800 people are included in the negotiations and the total reduction need in
the companies is estimated at a maximum of 230 full-time equivalents.
The aim in Kesko Group's reporting is that starting from 1 January 2015, the
reportable segments would be the grocery trade, the home improvement and
speciality goods trade, and the car and machinery trade. Kesko will publish
comparatives according to the new reporting structure in the first quarter of
2015.
Improving Anttila's profitability
In order to improve Anttila's profitability, a decision was made in March to
close eight Anttila department stores and four Kodin1 department stores
operating in leased premises and to implement enhancement measures in the
central units of Anttila Oy and K-citymarket Oy. By the end of the reporting
period, six Anttila department stores had been closed.
Personnel reductions at Anttila department stores, Kodin1 department stores, the
central unit and logistics operations totalled approximately 400 full-time
equivalents. In addition to the renewal of Anttila's operating activities aimed
at improving profitability, the option of selling Anttila Oy is also
investigated.
Net sales targets in Russia
In consequence of the weakening of the Russian business environment and the
rouble, coupled with the availability of Russian store sites suitable for
Kesko's operations, the growth targets for Kesko's Russian operations have been
updated. The total net sales from the Russian operations are expected to exceed
€1 billion in 2017 and the business result is expected to be positive. The
capital expenditure in Russia is anticipated at approximately €100-150 million
annually. The net sales target of the building and home improvement trade for
2017 is set at €500 million (previously €800 million). The objectives set for
the food trade have not been changed; for 2017, the net sales target is €500
million and a positive business result.
Kesko looks into setting up a real estate fund
Kesko is looking into selling some of its store sites to a fund to be set up
with Kesko as one of its major investors. Kesko Group would continue its
operations in the store sites under long-term leases signed in connection with
their sales to the fund.
Kesko's objective is to set up a fund of mainly Kesko-owned store sites and
shopping centres in Finland and Sweden with a maximum fair value of
approximately €750 - 950 million.
Launching the real estate investment fund depends, in addition to investor
interest, on whether it is possible for Kesko to achieve such terms and
conditions in the arrangement that are commercially viable for it, taking the
Group's strong financial position into account. Moreover, starting a real estate
investment fund is subject to the authorisation of the Financial Supervisory
Authority.
The possible fund is expected to be launched in the course of 2014.
Personnel
In January-September, the average number of employees in Kesko Group was 20,024
(19,481) converted into full-time employees. In Finland, the average decrease
was 208 people, while outside Finland, there was an increase of 752 people.
At the end of September 2014, the number of employees was 23,459 (23,203), of
whom 11,726 (12,159) worked in Finland and 11,733 (11,044) outside Finland.
Compared to the end of September 2013, there was a decrease of 433 people in
Finland and an increase of 689 people outside Finland.
In January-September, the Group's staff cost was €452.6 million, showing a 0.7%
increase compared to the previous year. In July-September, staff cost decreased
by 0.6% compared to the previous year and was €138.1 million.
SEGMENT INFORMATION
Seasonal nature of operations
The Group's operating activities are affected by seasonal fluctuations. The net
sales and operating profits of the reportable segments are not earned evenly
throughout the year. Instead, they vary by quarter depending on the
characteristics of each segment.
Food trade
1-9/2014 1-9/2013 7-9/2014 7-9/2013
Net sales, € million 3,197 3,239 1,085 1,095
Operating profit excl. non- recurring
items, € million 155.7 155.0 56.3 56.0
Operating margin excl. non-recurring
items, % 4.9 4.8 5.2 5.1
Capital expenditure,
€ million 72.0 67.9 25.3 24.0
Net sales, € million 1-9/2014 Change, % 7-9/2014 Change, %
Sales to K-food stores 2,391 -2.8 806 -1.8
Kespro 589 -1.8 209 +0.1
K-ruoka, Russia 77 +81.6 26 +30.1
Others 140 +3.2 44 -4.9
Total 3,197 -1.3 1,085 -1.0
January-September 2014
In the food trade, the net sales for January-September were €3,197 million
(€3,239 million), down 1.3%. During the same period, the grocery sales of K-food
stores in Finland decreased by 1.9% (VAT 0%). In the grocery market, retail
prices are estimated to have changed by some +1% compared to the previous year
(VAT 0%, Kesko's own estimate based on the Consumer Price Index of Statistics
Finland), and the total market (VAT 0%) is estimated to have grown in January-
September by some 1% compared to the previous year (Kesko's own estimate). The
rise of consumer prices in the grocery trade has stopped during the reporting
period. The performance of sales and profitability of the food stores in Russia
were as planned despite the slowdown of the Russian economy and the weakening of
the rouble.
In January-September, the operating profit excluding non-recurring items of the
food trade was €155.7 million (€155.0 million), or €0.7 million up on the
previous year. Profitability was improved by savings achieved from enhanced
operations. Operating profit was €151.8 million (€159.7 million). Non-recurring
expenses were €3.9 million (non-recurring income €4.8 million).
The capital expenditure of the food trade in January-September was €72.0 million
(€67.9 million), of which €66.6 million (€60.0 million) in store sites.
July-September 2014
In the food trade, the net sales for July-September were €1,085 million (€1,095
million), down 1.0%.
In July-September, the operating profit excluding non-recurring items of the
food trade was €56.3 million (€56.0 million), or €0.3 million up on the previous
year. Operating profit was €54.4 million (€56.5 million). Non-recurring expenses
were €1.9 million (non-recurring income €0.4 million).
The capital expenditure of the food trade in July-September was €25.3 million
(€24.0 million).
In July-September 2014, one new K-supermarket was opened. Renewals and space
modifications were made in a total of eight stores. In September, the fifth K-
ruoka store in St. Petersburg was opened.
The most significant store sites being built are a K-citymarket in the Puuvilla
shopping centre in Pori and K-supermarkets in Lauttasaari, Helsinki, and in
Hanko, Hollola, Lappeenranta and Uusikaarlepyy. K-market Kreivintori in Raahe is
being expanded into a K-supermarket and K-supermarket Laitila and K-supermarket
Lautturi in Huittinen are being expanded.
Numbers of stores as at 30.9. 2014 2013
K-citymarket 80 80
K-supermarket 220 215
K-market (incl. service station stores) 442 445
K-ruoka, Russia 5 3
Others* 166 178
* incl. online stores
Home and speciality goods trade
1-9/2014 1-9/2013 7-9/2014 7-9/2013
Net sales, € million 923 1,018 323 351
Operating profit excl. non-recurring
items, € million -48.3 -29.9 -7.4 -2.2
Operating margin excl. non-recurring
items, % -5.2 -2.9 -2.3 -0.6
Capital expenditure, € million 12.0 16.8 4.6 3.0
Net sales, € million 1-9/2014 Change, % 7-9/2014 Change, %
K-citymarket,
non-food 411 -5.3 143 -3.9
Anttila 215 -17.2 72 -19.3
Intersport, Finland 125 -8.2 48 -4.1
Intersport, Russia 12 -18.0 4 -7.8
Indoor 130 -4.0 45 -5.9
Musta Pörssi 16 -29.1 5 -5.5
Kenkäkesko 17 -6.8 7 -5.7
Total 923 -9.3 323 -8.1
January-September 2014
In the home and speciality goods trade, the net sales for January-September were
€923 million (€1,018 million), down 9.3%. Consumer demand in the home and
speciality goods trade continued to weaken during the reporting period. Sales
declined especially in the Anttila and Kodin1 department stores. Six Anttila
department stores were closed during the reporting period. Musta Pörssi
concentrates on e-commerce in accordance with its strategy and its sales
performance was impacted by the discontinuation of the store site network. The
sales of online stores were up from the previous year.
In January-September, the operating profit excluding non-recurring items of the
home and speciality goods trade was €-48.3 million (€-29.9 million), down €18.4
million compared to the previous year. The performance was especially impacted
by the loss increased by the decline in Anttila's sales. The profits of K-
citymarket non-food, Intersport Finland and Indoor remained at a good level
despite sales decline.
The operating profit of the home and speciality goods trade was €-92.1 million
(€-25.5 million). The most significant non-recurring item was the restructuring
provision recognised for the reduction of the Anttila department store network
and an impairment charge on fixed assets related to the integration of K-
citymarket non-food with Anttila, a total of €43.4 million.
The capital expenditure of the home and speciality goods trade in January-
September was €12.0 million (€16.8 million).
July-September 2014
In the home and speciality goods trade, the net sales for July-September were
€323 million (€351 million), down 8.1%. Sales declined especially in the Anttila
and Kodin1 department stores. The decrease in sales was partly attributable to
the closure of six Anttila department stores. The decline in Musta Pörssi's net
sales was impacted by the implemented network changes. The sales of online
stores increased.
In July-September, the operating profit excluding non-recurring items of the
home and speciality goods trade was €-7.4 million (€-2.2 million), down €5.2
million compared to the previous year. The performance was especially impacted
by Anttila's weakened profitability. The operating profit of the home and
speciality goods trade was €-20.0 million (€-2.1 million). The non-recurring
items include a €17.2 million impairment charge on fixed assets related to the
integration of K-citymarket non-food with Anttila.
The capital expenditure of the home and speciality goods trade was €4.6 million
(€3.0 million).
In July-September, the Intersport.fi online store was opened in Finland and an
Intersport store in St. Petersburg. In July-September, five Anttila department
stores, five Musta Pörssi stores, an Intersport store in Itäkeskus, Helsinki (a
new replacement store will open in November 2014), an Andiamo store at the Jumbo
shopping centre, Vantaa and a Kookenkä store in Tapiola, Espoo were closed.
Numbers of stores as at 30.9. 2014 2013
K-citymarket, non-food* 81 81
Anttila department stores* 25 31
Kodin1 department stores for interior decoration and home goods* 13 13
Intersport, Finland* 62 62
Budget Sport* 11 11
Asko and Sotka 87 84
Musta Pörssi* 1 6
Kookenkä* 44 46
Anttila, Baltics* 3 3
Intersport, Russia 19 20
Asko and Sotka, Baltics* 10 10
* incl. online stores
Building and home improvement trade
1-9/2014 1-9/2013 7-9/2014 7-9/2013
Net sales, € million 2,013 2,012 696 710
Operating profit excl. non-recurring
items, € million 45.8 26.8 29.6 23.9
Operating margin excl. non-recurring
items, % 2.3 1.3 4.3 3.4
Capital expenditure,
€ million 43.7 26.4 16.4 4.8
Net sales, € million 1-9/2014 Change, % 7-9/2014 Change, %
Rautakesko, Finland 914 -0.3 288 -4.1
K-rauta, Sweden 152 -5.3 52 -9.4
Byggmakker, Norway 338 -8.6 118 -10.6
K-rauta, Estonia 59 +14.6 23 +10.8
K-rauta, Latvia 40 +2.9 15 -2.1
Senukai, Lithuania 226 +18.3 89 +15.1
K-rauta, Russia 190 -7.8 73 -7.2
OMA, Belarus 97 +22.2 40 +35.2
Total 2,013 +0.1 696 -1.9
January-September 2014
In the building and home improvement trade, the net sales for January-September
were €2,013 million (€2,012 million), up 0.1%. In terms of local currencies, the
net sales growth in the building and home improvement trade was 3.7%.
In Finland, the net sales for January-September were €914 million (€916
million), a decrease of 0.3%. The building and home improvement products
contributed €626 million to the net sales in Finland, an increase of 0.2%. The
agricultural supplies trade contributed €287 million to the net sales, down
1.4%.
The retail sales of the K-rauta and Rautia chains in Finland were down by 0.5%
to €786 million (VAT 0%). The sales of Rautakesko B2B Service increased by
0.6%. The K-Group's sales of building and home improvement products in Finland
decreased by a total of 0.4% and the total market (VAT 0%) is estimated to have
fallen by some 3% (Kesko's own estimate). The retail sales of the K-maatalous
chain were €355 million (VAT 0%), up 1.0%.
In January-September, the net sales from the foreign operations of the building
and home improvement trade were €1,100 million (€1,095 million), an increase of
0.4%. In terms of local currencies, the net sales from foreign operations
increased by 7.1%. In Sweden and Norway, net sales in local currencies were at
the previous year's level. In Russia, net sales in roubles increased by 6.2%.
Foreign operations contributed 54.6% (54.5%) to the net sales of the building
and home improvement trade.
In January-September, the operating profit excluding non-recurring items of the
building and home improvement trade was €45.8 million (€26.8 million), up €19.0
million compared to the previous year. Due to sales increase and enhancement
measures, profit performance was clearly positive. The profit performance
improved especially in foreign operations. The operating profit of the building
and home improvement trade was €42.3 million (€25.9 million). Non-recurring
items include a restructuring provision of €5.3 million related to changes in
the retail business of Byggmakker in Norway.
In January-September, the capital expenditure of the building and home
improvement trade totalled €43.7 million (€26.4 million), of which 73.4% (45.3%)
abroad. Capital expenditure in store sites represented 85.6% of total capital
expenditure.
July-September 2014
In the building and home improvement trade, the net sales for July-September
were €696 million (€710 million), down 1.9%. In terms of local currencies, the
net sales growth in the building and home improvement trade was 0.1%.
In Finland, net sales were €288 million (€301 million), a decrease of 4.1%. The
building and home improvement products contributed €199 million to the net sales
in Finland, a decrease of 4.4%. The agricultural supplies trade contributed €90
million to the net sales, down 3.5%. In July-September, the retail sales of the
K-rauta and Rautia chains in Finland were down by 4.0% to €296 million (VAT
0%). According to Kesko's estimate, the market share of the building and home
improvement trade increased in July-September. The sales of Rautakesko B2B
Service decreased by 3.7%. The retail sales of the K-maatalous chain were €117
million (VAT 0%), up 1.7%.
The net sales from the foreign operations of the building and home improvement
trade were €408 million (€409 million), a decrease of 0.3%. In terms of local
currencies, the net sales from foreign operations increased by 3.2%. In Sweden,
net sales in kronas were down by 3.8%. In Norway, net sales in krones were down
by 6.6%. In Russia, net sales in roubles increased by 3.2%. Foreign operations
contributed 58.6% (57.6%) to the net sales of the building and home improvement
trade.
In July-September, the operating profit excluding non-recurring items of the
building and home improvement trade was €29.6 million (€23.9 million), up €5.7
million compared to the previous year due to sales increase and enhancement
measures. The financial performance of the foreign operations of the building
and home improvement trade improved. Operating profit was €23.5 million (€23.9
million).
The capital expenditure of the building and home improvement trade was €16.4
million (€4.8 million), of which 62.4% (36.3%) abroad.
In September, a replacement building and home improvement store was opened in
St. Petersburg, Russia. In Belarus, the third building and home improvement
store of Minsk was opened in September.
Numbers of stores as at 30.9. 2014 2013
K-rauta* 42 42
Rautia* 97 99
K-maatalous* 81 83
K-rauta, Sweden 20 21
Byggmakker, Norway 86 91
K-rauta, Estonia 8 8
K-rauta, Latvia 8 8
Senukai, Lithuania 19 17
K-rauta, Russia 13 14
OMA, Belarus 11 9
In addition, the stores offer e-commerce services to their customers.
* in 2014, 46 Rautia stores also operated as K-maatalous stores
in 2013, 1 K-rauta store and 47 Rautia stores also operated as K-maatalous
stores
Car and machinery trade
1-9/2014 1-9/2013 7-9/2014 7-9/2013
Net sales, € million 796 811 240 260
Operating profit excl. non-recurring
items, € million 27.8 30.6 8.7 9.8
Operating margin excl. non-recurring
items, % 3.5 3.8 3.6 3.8
Capital expenditure, € million 11.6 11.8 2.2 3.0
Net sales, € million 1-9/2014 Change, % 7-9/2014 Change, %
VV-Auto 583 +2.5 173 +0.4
Konekesko 213 -12.2 68 -23.5
Total 796 -1.9 240 -7.7
January-September 2014
In the car and machinery trade, the net sales for January-September were €796
million (€811 million), down 1.9%.
VV-Auto's net sales for January-September were €583 million (€569 million), an
increase of 2.5%. In January-September, the combined market performance of first
time registered passenger cars and vans was +2.4%.
In January-September, the combined market share of passenger cars and vans
imported by VV-Auto was 20.7% (20.5%). Volkswagen was the market leader in
passenger cars and vans.
Konekesko's net sales for January-September were €213 million (€243 million),
down 12.2% compared to the previous year. Net sales in Finland were €131
million, down 7.2%. The net sales from Konekesko's foreign operations were €83
million, down 18.9%. The net sales decline was especially impacted by the weak
market performance of the agricultural machinery trade in Finland and the Baltic
countries.
In January-September, the operating profit excluding non-recurring items of the
car and machinery trade was €27.8 million (€30.6 million), down €2.8 million
compared to the previous year. The adjustment of costs and inventories has been
implemented as planned. Profitability in the car trade remained at a good level
despite the weakened market situation.
The operating profit for January-September was €27.8 million (€30.6 million).
The capital expenditure of the car and machinery trade in January-September was
€11.6 million (€11.8 million).
July-September 2014
In July-September, the net sales of the car and machinery trade were €240
million (€260 million), down 7.7%.
VV-Auto's net sales for July-September were €173 million (€172 million), an
increase of 0.4%. In July-September, the combined market share of passenger cars
and vans imported by VV-Auto was 19.9% (20.2%).
Konekesko's net sales for July-September were €68 million (€88 million), down
23.5% compared to the previous year.
In July-September, the operating profit excluding non-recurring items of the car
and machinery trade was €8.7 million (€9.8 million), down €1.1 million compared
to the previous year. Profitability was weakened by the decrease in sales. The
operating profit for July-September was €8.7 million (€9.8 million).
The capital expenditure of the car and machinery trade in July-September was
€2.2 million (€3.0 million).
Numbers of stores as at 30.9. 2014 2013
VV-Auto, retail trade 10 10
Konekesko 1 1
Changes in the Group composition
No significant changes took place in the Group composition during the reporting
period.
Shares, securities market and Board authorisations
At the end of September 2014, the total number of Kesko Corporation shares was
100,019,752, of which 31,737,007, or 31.7%, were A shares and 68,282,745, or
68.3%, were B shares. At 30 September 2014, Kesko Corporation held 1,004,106 own
B shares as treasury shares. These treasury shares accounted for 1.47% of the
number of B shares and 1.00% of the total number of shares, and 0.26% of votes
carried by all shares of the company. The total number of votes carried by all
shares was 385,652,815. Each A share carries ten (10) votes and each B share one
(1) vote. The company cannot vote with own shares held as treasury shares and no
dividend is paid on them. At the end of September 2014, Kesko Corporation's
share capital was €197,282,584. During the reporting period, there were no
changes in the number of shares.
The price of a Kesko A share quoted on Nasdaq Helsinki was €26.80 at the end of
2013, and €27.50 at the end of September 2014, representing an increase of
2.6%. Correspondingly, the price of a B share was €26.80 at the end of 2013, and
€28.35 at the end of September 2014, representing an increase of 5.8%. In
January-September, the highest A share price was €32.31 and the lowest was
€26.15. The highest B share price was €33.33 and the lowest was €26.15. In
January-September, the Nasdaq Helsinki All-Share index (OMX Helsinki) was up
4.5% and the weighted OMX Helsinki Cap index 4.0%. The Retail Sector Index was
down 1.3%.
At the end of September 2014, the market capitalisation of A shares was €873
million, while that of B shares was €1,907 million, excluding the shares held by
the parent company. The combined market capitalisation of A and B shares was
€2,780 million, an increase of €119 million from the end of 2013. In January-
September 2014, a total of 1.5 (0.8) million A shares were traded on Nasdaq
Helsinki, up 99.0%. The exchange value of A shares was €44 million. The number
of B shares traded was 34.5 (31.4) million, up 10.1%. The exchange value of B
shares was €1,032 million. Nasdaq Helsinki accounted for 66% of Kesko A and B
share trading in January-September 2014. Kesko shares were also traded on
multilateral trading facilities, the most significant of which were BATS Chi-X
with 26% and Turquoise with 7% of the trading (source: Fidessa).
The company operated the 2007 option scheme for management and other key
personnel, under which the share subscription period of 2007C share options ran
from 1 April 2012 to 30 April 2014 (subscription period has expired). The share
options were included on the official list of the Helsinki stock exchange from
the beginning of the share subscription periods. A total of 94,859 2007C share
options were traded during the reporting period at a total value of €1,688,524.
The option scheme has expired and the share subscription periods of the
2007A, 2007B and 2007C share options under the option scheme and their trading
on the official list have ended.
The Board has the authority, granted by the Annual General Meeting of 16 April
2012 and valid until 30 June 2015, to issue a total maximum of 20,000,000 new B
shares. The shares can be issued against payment for subscription by
shareholders in a directed issue in proportion to their existing shareholdings
regardless of whether they consist of A or B shares, or, deviating from the
shareholder's pre-emptive right, in a directed issue, if there is a weighty
financial reason for the company, such as using the shares to develop the
company's capital structure, and financing possible acquisitions, investments or
other arrangements within the scope of the company's business operations. The
amount paid for the shares is recognised in the reserve of invested non-
restricted equity. The authorisation also includes the Board's authority to
decide on the share subscription price, the right to issue shares against non-
cash consideration and the right to make decisions on other matters concerning
share issuances.
In addition, the Board had the authority, granted by the Annual General Meeting
of 8 April 2013 and valid until 30 September 2014, to decide on the acquisition
of a maximum of 500,000 own B shares. Kesko's Board of Directors made the
decision in February 2014 to start acquiring own B shares. The decision to start
acquisition was announced in a stock exchange release on 4 February 2014 and
acquisition was started on 18 February 2014. The maximum amount of own B shares
the Board was authorised to acquire, 500,000, was purchased by 31 March 2014,
and the authorisation is thus fully used. Each purchase of own shares was
announced in a stock exchange release at the end of the day on which the
purchase was made. At 30 September 2014, Kesko Corporation held a total of
1,004,106 own B shares as treasury shares. In addition, the Board has the
authority, valid until 30 June 2017, to decide on the issuance of the maximum of
1,000,000 own B shares held as treasury shares by the company.
On 4 February 2014, the Board decided to grant own B shares held by the company
as treasury shares to persons included in the target group of the 2013 vesting
period, based on the authority to issue own shares granted by the Annual General
Meeting held on 8 April 2013, and the fulfilment of the vesting criteria of the
2013 vesting period of Kesko's three-year share-based compensation plan. The
issuance of a total of 50,520 own B shares, referred to above, was announced in
a stock exchange release on 24 March 2014 and on 25 March 2014. In January-
September, a total of 5,642 shares granted based on the fulfilment of the
vesting criteria of the 2011-2013 vesting periods were returned to the company
in accordance with the terms and conditions of the share-based compensation
plan. The shares returned during the reporting period were announced in a stock
exchange notification on 7 February 2014, 23 May 2014 and 25 July 2014. Further
information on the Board's authorisations is available at www.kesko.fi.
Based on the share-based compensation plan 2014-2016 decided by the Board, a
total of 600,000 own B shares held by the company as treasury shares can be
granted within a period of 3 years based on the fulfilment of the vesting
criteria. The Board will separately decide on the vesting criteria and target
group for each vesting period. The share-based compensation plan was announced
in a stock exchange release on 4 February 2014.
At the end of September 2014, the number of shareholders was 40,549, which is
2,260 less than at the end of 2013. At the end of September, foreign ownership
of all shares was 28%. At the end of September, foreign ownership of B shares
was 40%.
Flagging notifications
Kesko Corporation did not receive flagging notifications during the reporting
period.
Key events during the reporting period
In the home and speciality goods trade and the building and home improvement
trade, the importance of e-commerce and online services has greatly increased
and the improvement of competitiveness necessitates major renewal. In response
to these requirements, Kesko is seeking synergies especially in the production
of online services and the development of concepts. At the same time, the
planned changes will form a basis to improve profitability and the
organisational structure will be evaluated. Also the integration of the building
and home improvement trade with the home and speciality goods trade, as well as
the integration of the non-food part of the K-citymarket chain, currently part
of the home and speciality goods division, into Kesko Food operations, are
planned. (Stock exchange release on 24 September 2014)
Kesko Corporation's Board of Directors has appointed Mikko Helander, Master of
Science (Technology), as Kesko Corporation's Managing Director and Kesko Group's
President and Chief Executive Officer as from 1 January 2015. Mikko Helander (b.
1960) joined Kesko as Executive Vice President and Member of the Group
Management Board on 1 October 2014 and will take up the position of President
and CEO on 1 January 2015. Starting from 1 January 2015, President and CEO Matti
Halmesmäki will continue as a special advisor and in special assignments to be
agreed with Kesko's Board of Directors until 31 May 2015 when he will retire.
(Stock exchange release on 28 May 2014 and 19 September)
As a result of the cooperation negotiations to improve Anttila's profitability,
the decision was made to close eight Anttila department stores operating in
leased premises. The department stores to be closed have a total of some 210
employees. In addition, 25 full-time equivalents will be reduced in other
Anttila department stores. Cooperation negotiations were also started in the
Kodin1 chain and after their completion, the decision was made to close four
Kodin1 department stores in the Kodin1 department store chain. Cooperation
negotiations were also started in the central units of Anttila Oy and K-
citymarket Oy. (Stock exchange release on 31 March 2014)
Kestra Kiinteistöpalvelut Oy, a subsidiary of Kesko Corporation, announced that
it would not participate in further financing of Fennovoima Ltd's Hanhikivi 1
nuclear power project due to the related financial, contractual and schedule
uncertainties. (Stock exchange release on 27 March 2014)
Events after the reporting period
Cooperation negotiations concerning the planned changes in Kesko's home and
speciality goods trade, building and home improvement trade and food trade
started. A total of approximately 2,800 people are included in the negotiations
and the total reduction need in the companies is estimated at a maximum of 230
full-time equivalents. The impacts of the planned changes on personnel will be
specified for the companies in more detail as the planning and the negotiations
progress. (Stock exchange release on 7 October 2014)
Resolutions of the 2014 Annual General Meeting and decisions of the Board's
organisational meeting
Kesko Corporation's Annual General Meeting, held on 7 April 2014, adopted the
financial statements for 2013 and discharged the Board members and the Managing
Director from liability. The General Meeting also resolved, as proposed by the
Board, to distribute €1.40 per share as dividends, or a total of
€138,484,759.00. The dividend pay date was 17 April 2014. The General Meeting
resolved that the number of Board members be unchanged at seven. In addition,
the General Meeting resolved to leave the Board members' fees and the basis for
reimbursement of expenses unchanged. The term of office of each of the seven (7)
Board members elected by the Annual General Meeting on 16 April 2012, namely Esa
Kiiskinen (Ch.), Seppo Paatelainen (Deputy Ch.), Ilpo Kokkila, Tomi Korpisaari,
Maarit Näkyvä, Toni Pokela and Virpi Tuunainen, will expire at the close of the
2015 Annual General Meeting in accordance with Kesko's Articles of Association.
The General Meeting elected PricewaterhouseCoopers Oy as the company's auditor,
with APA Johan Kronberg as the auditor with principal responsibility. The
General Meeting also approved the Board's proposal that it be authorised to
decide on donations in a total maximum of €300,000 for charitable or
corresponding purposes until the Annual General Meeting to be held in 2015.
The organisational meeting of the company's Board of Directors, held after the
Annual General Meeting, decided to keep the compositions of the Audit Committee
and the Remuneration Committee unchanged.
The resolutions of the Annual General Meeting and the decisions of the Board's
organisational meeting were announced in more detail in stock exchange releases
on 7 April 2014.
Responsibility
In September, Kesko was included in the Dow Jones Sustainability Indices DJSI
World and DJSI Europe for the 12th time. Kesko obtained its highest scores in
risk and crisis management, codes of conduct and supply chain management.
The target of the Youth Guarantee in the K-Group programme, to employ 1,000
young people by the end of 2014, was achieved six months ahead of the deadline.
By the end of August, 1,500 young people had found employment in Kesko and K-
stores with the help of the Youth Guarantee.
The Rehabilitation Foundation and Kesko are implementing a joint project for
supporting working ability and learning at the beginning of career. One of its
aims is to identify learning difficulties and increase awareness of them.
K-food stores introduced a bottle return raffle from which proceeds are directed
to the Mannerheim League for Child Welfare or the Association of Friends of the
University Children's hospitals every six months. The objective is to extend the
raffle to some 260 K-food stores this year.
Risk management
Kesko Group has an established and comprehensive risk management process. Risks
and their management responses are regularly assessed within the Group and
reported to the Group management. Kesko's risk management and risks associated
with business operations are described in more detail on Kesko's website in the
Corporate Governance section.
The most significant near-future risks in Kesko's business operations are
associated with the general development of the economic situation and consumer
confidence, as well as their impact on Kesko's sales and profit. Because of the
continuing crisis in Ukraine, the country risks of Russia remain at a higher
level than before. In other respects, no material change is estimated to have
taken place in 2014 in the risks described in the report by the Board of
Directors and financial statements for 2013 and the risks described on Kesko's
website.
The risks and uncertainties related to economic development are described in the
section future outlook of this release.
Future outlook
Estimates of the future outlook for Kesko Group's net sales and operating profit
excluding non-recurring items are given for the 12 months following the
reporting period (10/2014-9/2015) in comparison with the 12 months preceding the
reporting period (10/2013-9/2014).
Future prospects for the general economic situation and consumer demand continue
to be characterised by significant uncertainty. Due to the weakened economic
situation and the decline in consumers' purchasing power, demand in the trading
sector is expected to remain weak.
Kesko Group's net sales and operating profit excluding non-recurring items for
the next 12 months are expected to remain at the level of the preceding 12
months.
Helsinki, 21 October 2014
Kesko Corporation
Board of Directors
The information in the interim report release is unaudited.
Further information is available from Jukka Erlund, Senior Vice President, Chief
Financial Officer, telephone +358 105 322 113 and Eva Kaukinen, Vice President,
Group Controller, telephone +358 105 322 338. A Finnish-language webcast from
the media and analyst briefing on the interim report can be accessed at
www.kesko.fi at 11.00. An English-language web conference on the interim report
will be held today at 14:30 (Finnish time). The web conference login is
available at www.kesko.fi.
Kesko Corporation's financial statements for 2014 will be released on 10
February 2015. In addition, Kesko Group's sales figures are published each
month. News releases and other company information are available on Kesko's
website at www.kesko.fi.
KESKO CORPORATION
Merja Haverinen
Vice President, Group Communications
ATTACHMENTS: TABLES SECTION
Accounting policies
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Group's performance indicators
Net sales by segment
Operating profit by segment
Operating profit excl. non-recurring items by segment
Operating margin excl. non-recurring items by segment
Capital employed by segment
Return on capital employed excl. non-recurring items by segment
Capital expenditure by segment
Segment information by quarter
Change in tangible and intangible assets
Related party transactions
Fair value hierarchy of financial assets and liabilities
Personnel average and at the end of the reporting period
Group's commitments
Calculation of performance indicators
K-Group's retail and B2B sales
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
Main news media
www.kesko.fi
TABLES SECTION:
Accounting policies
This interim report has been prepared in accordance with the IAS 34 standard.
The interim report has been prepared in accordance with the same accounting
principles as the annual financial statements for 2013, with the exception of
the following changes due to the adoption of new and revised IFRS standards and
IFRIC interpretations:
-IFRS 10 Consolidated financial statements
-IFRS 11 Joint arrangements
-IFRS 12 Disclosure of interests in other entities
The above amendments to standards and interpretations do not have a material
impact on the reported income statement and the statement of financial position.
The amendment will have an impact on the notes to the financial statements.
Consolidated income
statement (€ million),
condensed
1-9/ 1-9/ Change,% 7-9/ 7-9/ Change,% 1-12/
2014 2013 2014 2013 2013
Net sales 6,804 6,953 -2.2 2,304 2,374 -2.9 9,315
Cost of goods sold -5,884 -6,020 -2.3 -1,989 -2,055 -3.2 -8,034
Gross profit 919 933 -1.5 315 318 -1.0 1,281
Other operating income 531 549 -3.3 180 182 -1.4 734
Staff cost -453 -449 0.7 -138 -139 -0.6 -611
Depreciation and impairment
charges -133 -114 17.0 -56 -37 50.4 -153
Other operating expenses -745 -738 0.8 -237 -240 -1.3 -1,003
Operating profit 120 180 -33.6 63 84 -24.7 248
Interest income and other
finance income 11 15 -21.1 2 4 -40.7 20
Interest expense and other
finance costs -12 -15 -21.9 -4 -5 -15.0 -20
Exchange differences -1 -5 -86.7 0 -2 -84.2 -6
Share of results of equity
accounted investments 0 -1 (..) 0 0 (..) 0
Profit before tax 119 174 -32.0 62 81 -24.2 242
Income tax -31 -52 -40.4 -16 -24 -32.6 -58
Net profit for the period 87 122 -28.4 46 57 -20.8 185
Attributable to
Owners of the parent 79 114 -30.1 40 53 -23.3 173
Non-controlling
interests 8 8 -5.0 5 5 6.1 12
Earnings per share (€)
for profit attributable to
equity holders of the
parent
Basic 0.80 1.15 -30.5 0.41 0.53 -23.7 1.75
Diluted 0.80 1.15 -30.3 0.41 0.53 -23.5 1.75
Consolidated statement
of comprehensive income (€
million)
1-9/ 1-9/ Change,% 7-9/ 7-9/ Change,% 1-12/
2014 2013 2014 2013 2013
Net profit for the period 87 122 -28.4 46 57 -20.8 185
Items that will not be
reclassified subsequently
to profit or loss
Actuarial gains/losses -2 6 (..) 0 6 (..) 12
Items that may be
reclassified subsequently
to profit or loss
Exchange differences on
translating foreign
operations -8 -8 -5.3 -2 -2 1.4 -14
Adjustment for
hyperinflation 4 1 (..) 1 -1 (..) 3
Cash flow hedge revaluation 1 -1 (..) 1 2 -37.7 -4
Revaluation of available-
for-sale financial assets -3 -3 -17.3 0 1 (..) -5
Other items 0 0 -3.2 - - - 0
Total other comprehensive
income for the period, net
of tax -8 -6 21.2 0 6 -99.3 -8
Total comprehensive income
for the period 80 116 -31.0 46 63 -27.7 177
Attributable to
Owners of the parent 69 108 -35.4 39 59 -34.5 166
Non-controlling
interests 11 8 25.8 7 4 78.9 11
(..) Change over 100%
Consolidated statement of financial
position (€ million), condensed
30.9.2014 30.9.2013 Change, % 31.12.2013
ASSETS
Non-current assets
Tangible assets 1,666 1,661 0.4 1,651
Intangible assets 180 187 -3.3 189
Equity accounted investments and other
financial assets 106 105 0.7 104
Loans and receivables 13 83 -84.3 15
Pension assets 170 163 4.1 170
Total 2,135 2,198 -2.9 2,131
Current assets
Inventories 803 776 3.4 797
Trade receivables 655 700 -6.4 617
Other receivables 149 160 -6.9 136
Financial assets at fair value
through profit or loss 203 174 16.7 171
Available-for-sale financial assets 225 260 -13.6 398
Cash and cash equivalents 75 103 -27.1 112
Total 2,110 2,173 -2.9 2,231
Non-current assets held for sale 1 1 - 1
Total assets 4,246 4,372 -2.9 4,362
30.9.2014 30.9.2013 Change, % 31.12.2013
EQUITY AND LIABILITIES
Equity 2,203 2,218 -0.7 2,279
Non-controlling interests 79 70 11.7 73
Total equity 2,282 2,289 -0.3 2,352
Non-current liabilities
Interest-bearing liabilities 345 358 -3.5 355
Non-interest-bearing liabilities 6 9 -30.8 10
Deferred tax liabilities 67 84 -20.5 68
Pension obligations 2 2 12.1 2
Provisions 27 20 35.0 17
Total 447 472 -5.4 452
Current liabilities
Interest-bearing liabilities 155 210 -26.3 199
Trade payables 891 911 -2.3 825
Other non-interest-bearing liabilities 423 454 -6.7 494
Provisions 48 35 35.7 38
Total 1,517 1,611 -5.8 1,557
Total equity and liabilities 4,246 4,372 -2.9 4,362
Consolidated statement of changes in equity (€ million)
Share Res- Cur- Re- Trea- Re- Non- Total
capi- erves rency valu- sury tained cont-
tal trans- ation sha-res earn- rol-
lation reser-ve ings ling
differ- inte-
ences rests
Balance at
1.1.2013 197 442 -2 10 -19 1,578 67 2,272
Shares
subscribed
with options 18 18
Treasury shares
Share-based
payments 2 0 2
Dividends -118 -5 -122
Other
changes 0 3 3
Net profit for
the period 114 8 122
Other comprehen-
sive income
Items that will
not be
reclassified
subsequently to
profit or loss
Actuarial
gains/losses 7 7
Items that may
be reclassified
subsequently to
profit or loss
Exchange
differences
on translating
foreign
operations 0 -7 -1 -8
Adjustment for
hyperinflation 0 1 1
Cash flow
hedge
revaluation -1 -1
Revaluation of
available- for-
sale financial
assets -3 -3
Others 0 0
Tax relating to
other comprehen-
sive income 0 -2 -2
Total other
comprehen-sive
income 0 -7 -4 6 0 -6
Balance at
30.9.2013 197 460 -10 6 -18 1,583 70 2,289
Balance at
1.1.2014 197 461 -13 1 -18 1,651 73 2,352
Shares
subscribed
with options 2 2
Treasury shares -16 -16
Share-based
payments 2 2
Dividends -138 -5 -143
Other
changes 0 0 5 5
Net profit for
the period 79 8 87
Other comprehen-
sive income
Items that will
not be
reclassified
subsequently to
profit or loss
Actuarial
gains/losses -3 -3
Items that may
be reclassified
subsequently to
profit or loss
Exchange
differences
on translating
foreign
operations 0 -7 0 -1 -8
Adjustment for
hyperinflation 0 4 4
Cash flow
hedge
revaluation 2 2
Revaluation of
available- for-
sale financial
assets -3 -3
Others 0 0
Tax relating to
other comprehen-
sive income -1 1 0
Total other
comprehen-sive
income 0 -7 -2 -2 2 -8
Balance at
30.9.2014 197 463 -20 0 -32 1,595 79 2,282
Consolidated statement of cash flows (€ million), condensed
1-9/ 1-9/ Change,% 7-9/ 7-9/ Change,% 1-12/
2014 2013 2014 2013 2013
Cash flows from operating activities
Profit before tax 119 174 -32.0 62 81 -24.2 242
Planned depreciation 113 112 0.2 37 37 -2.4 152
Finance income and costs 1 5 -79.0 2 3 -31.5 6
Other adjustments 34 -2 (..) 16 2 (..) 8
Change in working capital
Current non-interest-bearing
operating receivables,
increase (-)/decrease (+) -44 -5 (..) 94 112 -15.6 89
Inventories,
increase (-)/decrease (+) -12 29 (..) 23 29 -19.6 3
Current non-interest-bearing
liabilities, increase (+)/
decrease(-) 6 47 -86.7 -78 -123 -36.2 -1
Financial items and tax -50 -61 -18.5 -21 -28 -24.1 -85
Net cash from operating activities 167 299 -44.1 134 114 17.5 414
Cash flows from investing activities
Investing activities -151 -130 16.0 -53 -36 45.9 -174
Sales of fixed assets 8 17 -52.6 2 3 -39.2 22
Increase in non-current receivables -1 0 (..) 0 0 -56.7 0
Net cash used in investing
activities -144 -113 26.7 -51 -33 53.6 -152
Cash flows from financing activities
Interest-bearing liabilities,
increase (+)/decrease (-) -50 -36 38.4 -37 -17 (..) -47
Current interest-bearing
receivables, increase (-)/
decrease (+) -1 0 (..) 1 -2 (..) 78
Dividends paid -142 -122 16.2 -4 -5 -16.5 -122
Equity increase 2 18 -88.0 - 2 (..) 20
Acquisition of own shares -16 - - - - - -
Short-term money market investments,
increase (-)/ decrease (+) -36 -62 -42.6 -49 -62 -20.2 -91
Other items 6 3 74.1 1 4 -69.1 5
Net cash used in financing
activities -236 -199 19.1 -89 -78 13.1 -159
Change in cash and cash equivalents -213 -13 (..) -6 2 (..) 103
Cash and cash
equivalents and current
portion of available-for-sale
financial assets at 1 Jan. 453 352 28.7 246 337 -27.0 352
Currency translation difference
adjustment and revaluation -1 -1 -4.4 0 0 -34.4 -2
Cash and cash
equivalents and current
portion of available-for-sale
financial assets at 30 Sep. 239 338 -29.3 239 338 -29.3 453
(..) Change over 100%
Group's performance indicators
1-9/2014 1-9/2013 Change, pp 1-12/2013
Return on capital employed, % 6.7 9.8 -3.0 10.2
Return on capital employed, %,
moving 12 mo 7.9 9.3 -1.4 10.2
Return on capital employed, excl.
non-recurring items, % 9.6 9.3 0.3 9.8
Return on capital employed excl.
non-recurring items, %, moving 12
mo 10.0 9.7 0.3 9.8
Return on equity, % 5.0 7.1 -2.1 8.0
Return on equity, %, moving 12 mo 6.6 6.5 0.1 8.0
Return on equity, excl. non-
recurring items, % 7.5 6.8 0.7 7.7
Return on equity excl. non-
recurring items, %, moving 12 mo 8.4 7.1 1.3 7.7
Equity ratio, % 54.2 52.9 1.3 54.5
Gearing, % -0.1 1.4 -1.5 -5.4
Change, %
Capital expenditure, € million 150.8 124.9 20.7 171.5
Capital expenditure, % of net sales 2.2 1.8 23.4 1.8
Earnings per share, basic, € 0.80 1.15 -30.5 1.75
Earnings per share, diluted, € 0.80 1.15 -30.3 1.75
Earnings per share excl. non-
recurring items, basic, € 1.23 1.09 12.8 1.68
Cash flow from operating
activities,
€ million 167 299 -44.1 414
Cash flow from investing
activities,
€ million -144 -113 26.7 -152
Equity per share, € 22.25 22.39 -0.6 22.96
Interest-bearing net debt -3 31 (..) -126
Diluted number of shares, average
for the reporting period 99,264 99,013 0.3 99,136
Personnel, average 20,024 19,481 2.8 19,489
Group's performance 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
indicators 2013 2013 2013 2013 2014 2014 2014
by quarter
Net sales, € million 2,159 2,420 2,374 2,362 2,129 2,371 2,304
Change in net sales, % -6.9 -1.6 -3.1 -3.9 -1.4 -2.1 -2.9
Operating profit, €
million 19.2 77.0 84.1 68.0 -13.0 69.4 63.4
Operating margin, % 0.9 3.2 3.5 2.9 -0.6 2.9 2.7
Operating profit excl.
non- recurring items, €
million 18.6 69.8 83.6 66.8 19.1 67.6 84.0
Operating margin
excl. non-recurring
items, % 0.9 2.9 3.5 2.8 0.9 2.9 3.6
Finance income/costs,
€ million -3.3 0.4 -2.6 -0.4 -1.6 2.2 -1.8
Profit before tax, €
million 15.8 77.2 81.5 67.9 -14.4 71.4 61.7
Profit before tax, % 0.7 3.2 3.4 2.9 -0.7 3.0 2.7
Return on capital
employed, % 3.1 12.3 14.2 11.5 -2.2 11.5 10.9
Return on capital
employed, excl. non-
recurring items, % 3.0 11.1 14.1 11.3 3.2 11.2 14.4
Return on equity, % 1.9 9.5 10.2 10.8 -2.0 9.4 8.1
Return on equity, excl.
non-recurring items, % 1.8 8.6 10.1 10.6 2.3 9.1 11.3
Equity ratio, % 51.7 50.5 52.9 54.5 53.2 52.3 54.2
Capital expenditure,
€ million 41.5 48.1 35.4 46.6 43.4 55.7 51.7
Earnings per share,
diluted, € 0.11 0.50 0.53 0.60 -0.11 0.51 0.41
Equity per share, € 22.62 21.79 22.39 22.96 22.83 21.86 22.25
Segment information
Net sales by segment 1-9/ 1-9/ Change 7-9/ 7-9/ Change 1-12/
(€ million) 2014 2013 % 2014 2013 % 2013
Food trade, Finland 3,120 3,197 -2.4 1,059 1,076 -1.5 4,316
Food trade, other countries* 77 42 81.6 26 20 30.1 71
Food trade total 3,197 3,239 -1.3 1,085 1,095 -1.0 4,387
- of which intersegment trade 127 127 0.0 41 44 -5.6 172
Home and speciality goods trade,
Finland 901 993 -9.3 316 344 -8.1 1,424
Home and speciality goods trade,
other countries* 22 25 -11.0 7 7 -6.1 33
Home and speciality goods trade
total 923 1,018 -9.3 323 351 -8.1 1,457
- of which intersegment trade 10 12 -11.8 4 4 -2.3 17
Building and home improvement trade,
Finland 914 916 -0.3 288 301 -4.1 1,173
Building and home improvement trade,
other countries* 1,100 1,095 0.4 408 409 -0.3 1,435
Building and home improvement trade
total 2,013 2,012 0.1 696 710 -1.9 2,607
- of which intersegment trade 0 0 -33.0 0 0 44.1 -1
Car and machinery trade, Finland 713 709 0.6 212 218 -2.8 921
Car and machinery trade, other
countries* 82 102 -19.2 29 43 -32.8 116
Car and machinery trade
total 796 811 -1.9 240 260 -7.7 1,037
- of which intersegment trade 1 1 -34.3 0 0 -84.5 1
Common operations and
eliminations -126 -126 -0.4 -40 -43 -6.6 -173
Finland total 5,523 5,689 -2.9 1,835 1,895 -3.2 7,661
Other countries total* 1,281 1,264 1.3 469 479 -2.0 1,654
Group total 6,804 6,953 -2.2 2,304 2,374 -2.9 9,315
* Net sales in countries other than Finland
Operating profit by segment (€ 1-9/ 1-9/ 7-9/ 7-9/ 1-12/
million) 2014 2013 Change 2014 2013 Change 2013
Food trade 151.8 159.7 -7.9 54.4 56.5 -2.1 208.0
Home and speciality goods trade -92.1 -25.5 -66.6 -20.0 -2.1 -17.9 -2.1
Building and home improvement trade 42.3 25.9 16.5 23.5 23.9 -0.4 24.8
Car and machinery trade 27.8 30.6 -2.8 8.7 9.8 -1.1 33.9
Common operations and eliminations -10.2 -10.4 0.2 -3.2 -4.0 0.8 -16.3
Group total 119.7 180.4 -60.7 63.4 84.1 -20.8 248.4
Operating profit excl.
non-recurring items 1-9/ 1-9/ 7-9/ 7-9/ 1-12/
by segment (€ million) 2014 2013 Change 2014 2013 Change 2013
Food trade 155.7 155.0 0.7 56.3 56.0 0.3 203.3
Home and speciality goods trade -48.3 -29.9 -18.4 -7.4 -2.2 -5.2 -8.3
Building and home improvement trade 45.8 26.8 19.0 29.6 23.9 5.7 25.7
Car and machinery trade 27.8 30.6 -2.8 8.7 9.8 -1.1 33.9
Common operations and eliminations -10.2 -10.4 0.2 -3.2 -4.0 0.8 -15.8
Group total 170.8 172.0 -1.2 84.0 83.6 0.4 238.8
Operating margin
excl. non-recurring 1-9/ 1-9/ 7-9/ 7-9/ 1-12/ Moving 12 mo
items by segment , % 2014 2013 Changepp 2014 2013 Change pp 2013 9/2014
Food trade 4.9 4.8 0.1 5.2 5.1 0.1 4.6 4.7
Home and speciality
goods trade -5.2 -2.9 -2.3 -2.3 -0.6 -1.7 -0.6 -2.0
Building and home
improvement trade 2.3 1.3 0.9 4.3 3.4 0.9 1.0 1.7
Car and machinery
trade 3.5 3.8 -0.3 3.6 3.8 -0.2 3.3 3.0
Group total 2.5 2.5 0.0 3.6 3.5 0.1 2.6 2.6
Capital employed by
segment, cumulative 1-9/ 1-9/ 7-9/ 7-9/ 1-12/ Moving 12 mo
average (€ million) 2014 2013 Change 2014 2013 Change 2013 9/2014
Food trade 775 833 -57 768 811 -43 821 782
Home and speciality
goods trade 399 459 -60 395 424 -28 445 403
Building and home
improvement trade 721 745 -24 722 712 10 732 714
Car and machinery trade 159 157 2 145 144 1 161 161
Common operations and
eliminations 311 268 44 303 284 19 278 313
Group total 2,366 2,461 -96 2,332 2,374 -41 2,438 2,373
Return on capital Moving 12 mo
employed excl. non- 1-9/ 1-9/ Change pp 7-9/ 7-9/ Change pp 1-12/ 9/2014
recurring items 2014 2013 2014 2013 2013
by segment, %
Food trade 26.8 24.8 2.0 29.3 27.7 1.7 24.8 26.1
Home and speciality
goods trade -16.2 -8.7 -7.5 -7.5 -2.0 -5.4 -1.9 -6.6
Building and home
improvement trade 8.5 4.8 3.7 16.4 13.4 3.0 3.5 6.3
Car and machinery
trade 23.4 26.0 -2.7 24.0 27.2 -3.3 21.1 19.3
Group total 9.6 9.3 0.3 14.4 14.1 0.3 9.8 10.0
Capital expenditure 1-9/ 1-9/ 7-9/ 7-9/ 1-12/
by segment (€ million) 2014 2013 Change 2014 2013 Change 2013
Food trade 72 68 4 25 24 1 92
Home and speciality goods trade 12 17 -5 5 3 2 23
Building and home improvement trade 44 26 17 16 5 12 38
Car and machinery trade 12 12 0 2 3 -1 15
Common operations and eliminations 11 2 9 3 1 3 4
Group total 151 125 26 52 35 16 171
Segment information by quarter
Net sales by segment 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
(€ million) 2013 2013 2013 2013 2014 2014 2014
Food trade 1,045 1,099 1,095 1,148 1,007 1,106 1,085
Home and speciality goods trade 345 322 351 439 312 288 323
Building and home improvement trade 562 740 710 596 581 736 696
Car and machinery trade 249 301 260 226 272 283 240
Common operations and
eliminations -42 -41 -43 -46 -44 -42 -40
Group total 2,159 2,420 2,374 2,362 2,129 2,371 2,304
Operating profit by segment (€ million) 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
2013 2013 2013 2013 2014 2014 2014
Food trade 48.2 55.1 56.5 48.3 45.4 52.0 54.4
Home and speciality goods trade -17.7 -5.6 -2.1 23.3 -54.5 -17.6 -20.0
Building and home improvement trade -16.1 18.0 23.9 -1.0 -9.7 28.6 23.5
Car and machinery trade 7.8 13.0 9.8 3.3 8.2 10.9 8.7
Common operations and
eliminations -3.0 -3.4 -4.0 -5.9 -2.5 -4.5 -3.2
Group total 19.2 77.0 84.1 68.0 -13.0 69.4 63.4
Operating profit excl.
non-recurring items 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
by segment (€ million) 2013 2013 2013 2013 2014 2014 2014
Food trade 48.2 50.8 56.0 48.3 46.5 52.9 56.3
Home and speciality goods trade -17.8 -10.0 -2.2 21.6 -22.7 -18.3 -7.4
Building and home improvement trade -16.6 19.5 23.9 -1.1 -10.4 26.6 29.6
Car and machinery trade 7.8 13.0 9.8 3.3 8.2 10.9 8.7
Common operations and
eliminations -3.0 -3.4 -4.0 -5.4 -2.5 -4.5 -3.2
Group total 18.6 69.8 83.6 66.8 19.1 67.6 84.0
Operating margin excl.
non-recurring items 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
by segment, % 2013 2013 2013 2013 2014 2014 2014
Food trade 4.6 4.6 5.1 4.2 4.6 4.8 5.2
Home and speciality goods trade -5.2 -3.1 -0.6 4.9 -7.3 -6.3 -2.3
Building and home improvement trade -3.0 2.6 3.4 -0.2 -1.8 3.6 4.3
Car and machinery trade 3.1 4.3 3.8 1.5 3.0 3.8 3.6
Group total 0.9 2.9 3.5 2.8 0.9 2.9 3.6
Change in tangible and intangible assets (€ million)
30.9.2014 30.9.2013
Opening net carrying amount 1,840 1,870
Depreciation, amortisation and impairment -133 -114
Investments in tangible and intangible assets 160 127
Disposals -14 -22
Currency translation differences -6 -13
Closing net carrying amount 1,847 1,847
Related party transactions (€ million)
The Group's related parties include its key management (the Board of Directors,
the Managing Director and the Group Management Board) and companies controlled
by them, the Group's subsidiaries, associates as well as Kesko Pension Fund.
The following transactions were carried out with related parties:
1-9/2014 1-9/2013
Sales of goods and services 59 56
Purchases of goods and services 17 15
Other operating income 9 8
Other operating expenses 23 20
Finance costs 0 0
30.9.2014 30.9.2013
Receivables 10 10
Liabilities 20 19
Fair value hierarchy of financial assets and liabilities (€ million)
Level Level 2 Level 3 30.9.2014
1
Financial assets at fair value through profit or
loss 14.4 188.8 203.2
Derivative financial instruments at fair value
through profit or loss
Derivative financial assets 6.9 6.9
Derivative financial liabilities 10.9 10.9
Available-for-sale financial assets 60.6 164.0 13.1 237.7
Fair value hierarchy of financial assets and liabilities (€ million)
Level Level 2 Level 3 30.9.2013
1
Financial assets at fair value through profit or
loss 14.1 160.0 174.1
Derivative financial instruments at fair value
through profit or loss
Derivative financial assets 3.8 3.8
Derivative financial liabilities 16.3 16.3
Available-for-sale financial assets 24.9 235.0 6.4 266.2
Level 1 instruments are traded in active markets and their fair values are
directly based on quoted market prices. The fair values of level 2 instruments
are derived from market data. The fair values of level 3 instruments are not
based on observable market data.
Personnel, average and as at 30.9.
Personnel average by
segment 1-9/2014 1-9/2013 Change
Food trade 3,453 3,118 335
Home and speciality goods trade 5,535 5,771 -237
Building and home improvement trade 9,345 8,896 449
Car and machinery trade 1,253 1,257 -4
Common operations 438 439 -1
Group total 20,024 19,481 543
Personnel at 30.9.*
by segment 2014 2013 Change
Food trade 3,782 3,505 277
Home and speciality goods trade 7,431 7,812 -381
Building and home improvement trade 10,522 10,118 404
Car and machinery trade 1,252 1,280 -28
Common operations 472 488 -16
Group total 23,459 23,203 256
* total number incl. part-time employees
Group's commitments (€ million)
30.9.2014 30.9.2013 Change %
Own commitments 203 191 6.3
For associates 65 65 -
For others 12 11 4.4
Lease liabilities for machinery and equipment 25 25 0.9
Lease liabilities for real estate 2,214 2,372 -6.7
Liabilities arising from derivative instruments
(€ million)
Fair value
Values of underlying instruments at 30.9. 30.9.2014 30.9.2013 30.9.2014
Interest rate derivatives
Interest rate swaps 101 202 -0.78
Currency derivatives
Forward and future contracts 375 245 3.65
Option agreements 9 3
Currency swaps 50 100 -2.53
Commodity derivatives
Electricity derivatives 26 41 -4.29
Calculation of performance indicators
Return on capital employed*, % Operating profit x 100 / (Non-
current assets + Inventories +
Receivables + Other current assets -
Non-interest-bearing liabilities) on
average for the reporting period
Operating profit for prior 12 months
x 100 / (Non-current assets +
Return on capital employed, %, moving Inventories + Receivables + Other
12 mo current assets - Non-interest-
bearing liabilities) on average for
12 months
Operating profit excl. non-recurring
items x 100 / (Non-current assets +
Return on capital employed Inventories + Receivables + Other
excl. non-recurring items*, % current assets - Non-interest-
bearing liabilities) on average for
the reporting period
Operating profit excl. non-recurring
items for prior 12 months x 100 /
Return on capital employed excl. non- (Non-current assets + Inventories +
recurring items, %, moving 12 months Receivables + Other current assets -
Non-interest-bearing liabilities) on
average for 12 months
(Profit/loss before tax - Income
Return on equity*, % tax) x 100 /
Shareholders' equity
(Profit/loss for prior 12 months
Return on equity, %, moving 12 months before tax - Income tax for prior
12 months) x100 / Shareholders'
equity
(Profit/loss adjusted for non-
Return on equity excl. recurring items before tax -
non-recurring items*, % Income tax adjusted for the tax
effect of non-recurring items) x
100 / Shareholders' equity
(Profit/loss for prior 12 months
adjusted for non-recurring items
Return on equity excl. non-recurring before tax - Income tax for prior
items, %, moving 12 months 12 months adjusted for the tax
effect of non-recurring items) x
100 / Shareholders' equity
Shareholders' equity x 100 /
Equity ratio, % (Balance sheet total - Prepayments
received)
(Profit/loss - Non-controlling
Earnings/share, diluted interests) /
Average diluted number of shares
(Profit/loss - Non-controlling
Earnings/share, basic interests) /
Average number of shares
Earnings/share excl. (Profit/loss adjusted for non-
non-recurring items, recurring items - Non-controlling
basic interests) / Average number of
shares
Equity attributable to equity
Equity/share holders of the parent /
Basic number of shares at the
balance sheet date
Interest-bearing net debt x 100 /
Gearing, % Shareholders' equity
Interest-bearing liabilities - Money
Interest-bearing net debt market investments - Cash and cash
equivalents
* Indicators for return on capital have been annualised.
K-Group's retail and B2B sales, VAT 0% (preliminary data):
1.1.-30.9.2014 1.7.-30.9.2014
K-Group's retail and € million Change,% € million Change,%
B2B sales
K-Group's food trade
K-food stores, Finland 3,420 -2.2 1,164 -1.3
Kespro 582 -1.9 206 0.1
K-ruoka, Russia 77 81.9 26 30.3
Food trade total 4,081 -1.2 1,397 -0.7
K-Group's home and speciality goods trade
Home and speciality goods stores, Finland 986 -9.0 334 -8.8
Home and speciality goods stores, other
countries 21 -9.4 7 -5.0
Home and speciality goods trade total 1,008 -9.1 341 -8.8
K-Group's building and home improvement
trade
K-rauta and Rautia 786 -0.5 296 -4.0
Rautakesko B2B Service 141 0.6 50 -3.7
K-maatalous 355 1.0 117 1.7
Finland total 1,282 0.0 464 -2.6
Building and home improvement stores,
other Nordic countries 668 -6.4 244 -9.5
Building and home improvement stores,
Baltic countries 328 16.0 128 12.3
Building and home improvement stores,
other countries 287 0.6 113 4.5
Building and home improvement trade total 2,565 0.1 948 -2.0
K-Group's car and
machinery trade
VV-Autotalot 295 2.3 95 2.8
VV-Auto, import 305 3.8 82 -0.8
Konekesko, Finland 131 -7.0 39 -14.2
Finland total 730 1.1 216 -2.1
Konekesko, other countries 87 -17.3 31 -30.6
Car and machinery trade
total 817 -1.2 247 -6.8
Finland total 7,005 -2.4 2,385 -2.6
Other countries total 1,467 1.1 547 -2.6
Retail and B2B sales
total 8,472 -1.8 2,933 -2.6
[HUG#1864690]
