Pörssi-ilta 13.3.2025 / Keskon pääjohtaja Jorma Rauhala

Thank you. Good early evening to everyone, and it's wonderful that I have been able to present Kesko's growth strategy at this forum.

Kesko's updated strategy targets growth. Here are some key figures: we have three business areas: grocery trade, building and technical trade, and car trade. Total about 12 billion euros. Grocery is the largest, operating in Finland. Building and technical trade is a growing international business, now in eight countries. Car trade includes sports trade. Operating profits last year: grocery 6.9%, building and technical 3.9%, car trade 5.7%. All declined, but compared to competitors we are satisfied, especially given historically weak markets. Last spring we updated our growth strategy, not the portfolio. We clarified competitive advantages. Vision is to be the leading and attractive retail growth company in Northern Europe. Strategic objectives: ensure profitable growth, strengthen market positions in all businesses and countries. About 40% of sales come from B2B. Key competitive edge: quality and efficiency. In grocery, we aim to gain market share profitably through store-specific business ideas, network development with significant investments, and improving price competitiveness. We also strengthen Gespro. Profitability remains clearly above 6%. Investments focus on growth centers. Last year we renewed 44 and opened 15 new stores. New Citymarkets in several cities. In building and technical trade, we focus on profitability and cash flow. In Finland, K-Rauta and Onninen are very strong. In Sweden and Norway, we integrate acquisitions. In Denmark, we are building a strong position. Long-term target 6-8% operating profit. The market has been historically weak, but we see signs of recovery. In car trade, about half is new cars with Volkswagen and Porsche Group; used cars and services are significant. Kesko is the market leader in sports trade in Finland. Sustainability: Kesko is the best in its industry in Europe in Dow Jones index and the most sustainable grocery company globally. Dividend proposal 90 cents, 60-100% of comparable EPS. Why invest? Stable operator with strong market positions, good dividend yield, performance in tough markets, profit improvement potential, sustainable growth strategy.

Yes, as we see, during the exceptionally good years 2021-2022, we achieved an operating profit of over 7%, which is a very strong level. Then we came down to that 3.9%. But now it seems, as I showed with K-Rauta and Onninen sales, that the worst is behind us. This week there has been a lot of housing transactions, which means renovation for us, which is half of our business. The first half of the year may not yet show strong growth, but the comparison figures have been declining for two years, so I believe in positive development. In Finland, 35,000 new homes are needed annually, now the level is below 20,000, so growth is coming. In Denmark, growth has already started. Two very strong years, two weaker years, and now we are moving towards better.

Yes, that was why we decided to do this. Onninen had grown well, and we were running out of space. We had four to five external warehouses. We decided on this significant investment. The timing was perfect: volumes had fallen slightly, we could operate with the old warehouse, and construction costs were cheaper. In the autumn, we will get it into use, and it will bring efficiency, certainty, and support strong growth to our logistics. Onninen's business is technical wholesale, and the digitalization of construction and the green transition will grow the sector. The new warehouse supports that.

Yes, they are in the sights every day, it's part of this job. The strategy is clear: we seek acquisitions in the construction and building technology sector, and outside Finland. The number one wish is to find good targets in Sweden, because our market position there is not so strong. We are about fifth in the hardware store market, and with Onninen in technical wholesale only in small electrical infrastructure projects. There is room for growth. In Denmark, we are well represented in hardware stores, but technical wholesale is missing. In Norway, we are leaders in the electrical side, but the heating and plumbing side is missing. We work on it constantly, but acquisitions are hard to predict. It is a key strategic objective.

Well, I would say perhaps that tariffs or similar do not affect directly, but indirectly they can affect our industrial customers. But it is more about consumer confidence. If we think about Finland, inflation has come down, food price inflation is nearly zero, interest rates have fallen, consumer purchasing power has increased. The fundamentals are in place, now it's about consumer confidence: when will they decide to buy a new car, renovate an apartment or move. Every morning's news affects that confidence, so it has a significant indirect effect.

Well, no, of course not surprising in that sense. Having worked at the company for over 30 years, these two large business divisions were familiar; I was the head of the construction and building technology division for six years, and before that the head of the grocery trade division for five years. The job description changes, investor meetings have become significant, but no surprises. We agreed with the board a year ago that we would not start thinking about a portfolio strategy, but rather clarify the current strategies. No surprises, but a very interesting and pleasant year.

Yes, good question. We raised this for review a couple of years ago. In fact, we sell to Ukraine every day. In Poland, we have Onninen's business, we are number two in the market. We opened Ukrainian-language websites and an online store about a year ago. We have a central warehouse through which we deliver to Ukraine. It's still small, not big numbers, but we are prepared that it may require more logistics capacity. The idea is to operate via Poland. If and when the reconstruction of Ukraine begins, it will affect the price and availability of building materials, but I believe we have more opportunities than threats.

Yes, it is exactly like that. In Finland, in the grocery trade, we have decided that we are in Finland, we seek organic growth. Acquisitions are not possible in grocery trade. In hardware and technical wholesale, we have a very strong market position, and we seek growth in all business areas. Faster growth is sought through acquisitions. In the grocery trade, growth is sought through the network, quality and price. Abroad, existing businesses must be improved every day, but faster growth is achieved through acquisitions, as in Denmark, where in a year and a half we will become the number two in the market with sales of over 800 million euros. Organic growth would be too slow.

Yes, it is true that Kesko's retailers' choice, one could say, for decades has been quality. We start from the premise that Kesko's K-grocery stores are the best in quality. At the same time, these price differences are ultimately not very large, and the consumer can influence a lot by how they utilize offers and personalized offers. But we aim for the combination that we are the best in quality and the most suitable store for that customer group. We seek market share through network growth, and we must also be alert on price. The consumer must feel that it is right to choose our store. The price level is not far from competitors, but we have services like a fish counter. That is the core of the store-specific business idea: each retailer can do it according to their customers' wishes. I believe in that.

Well, as said, yes, it is not a matter for management. In my opinion, it is quite good that it is 60-100% of the comparable earnings per share, and we have adhered well to that. It varies with the result. I think the policy is good, and shareholders have clearly been satisfied.

That we operate in these three business areas, and we have a very strong position in all of them. And that if we think about the past year, two of our business areas have had even historically weak years, and even in the grocery trade the market has been price-driven, which has not always been the best situation for us. The assumption is that the situation will improve. We have performed that well even with quite weak markets. Therefore, I see Kesko's future quite positively.