roadshow material q2 2016

1

KESKO’SROADSHOW

JUKKA ERLUNDMAY 2016

• Net sales €8,610m

• Operating profit* €250m

• ROCE* 12.4%

• Personnel 22,000

• Shareholders 40,000

• Market capitalisation €3.8bn (Mar. 31, 2016)

* excl. non-recurring items

2

KESKO Q1/2016ROLLING 12 MO

3

OPERATIONS IN EIGHT COUNTRIES

Norway5% Sweden

2%

Finland81%

Lithuania4%

Latvia1%

Estonia2%

Russia4%

Belarus1%

Retail sales, € million, 2015Finland 8,927Sweden 209Norway 664Estonia 136Latvia 90Lithuania 366Russia 311Belarus 116

• K-Group’s sales €10.8bn

• Operations is eight countries

• Over 1.3 million customer visitsevery day

• Personnel 40,000

FOR SHOPPING TO BE FUN

4

K-GROUP

NET SALES BY DIVISION Q1/2016ROLLING 12 MO

€4,664m€3,172m

€763m

Grocery trade-1.3%

Home improvementand specialitygoods trade+1.9%

Car trade +0.6%

54%37%

9%

5

Comparable change

INVESTING IN STRATEGICGROWTH AREAS

• Grocery trade (Finland, Russia, Kespro)• Increasing the market share in the Finnish grocery

trade• Focus on the development of neighbourhood

retailing

• Building and home improvement trade (Europe)• Increasing building and home improvement trade in

Europe• Increasing B2B sales

• Car trade (Finland, the Baltic countries)

6

Real estatearrangementDivestment of

Anttila

Kesko–Senukaiarrangement in the Baltic countries

Acquisition of Suomen Lähikauppa

Acquisition of Onninen

7

STRATEGY IMPLEMENTATION IS PROGRESSING

One unified Kesko – the customer and quality in everything we do

GROCERY TRADE

8

KESKO GROCERY TRADE

9

Net sales €4,664m

Operating profit* €174m

Operating margin* 3.7%

ROCE* 21.0%K-Group 32.7%S-Group 45.9%Lidl 8.3%Suomen Lähikauppa 6.4%Others 6.7%

Total market €16.6 billion in 2015

Source: Nielsen


Q2/2015-Q1/2016

RETAIL STORES

Sales 2015€ million, VAT 0%

Number of stores at 31.12.2015

Concept

1,505+575 81 Hypermarket

1,716 219 Supermarket

1,189 476 Neighbourhoodstore

106 9 Compact hyper, Russia

Others 122 108 Incl. online store

Total 5,214 893

10

11

STRATEGY PROGRESSING AS PLANNED

• Increasing market share

• Increase and development of neighbourhoodstore network

• Renewal of K-citymarket chain

• Improvement of quality and service levels

• Improvement of price competitiveness and price image

• Best digital services in the trading sector

• Development of retailer business model

12

K-GROUP’S NEIGHBOURHOOD RETAIL SERVICESWILL IMPROVE SIGNIFICANTLY

• K-market chain will be renewed, first stores opened in April

• Siwa and Valintatalo stores converted into K-markets within a year

• Selections will improve and price level decrease, Pirkka products included in selections

• K-retailers to run all stores within two years

• Acquisition of Suomen Lähikauppaenables significant synergies

HOME IMPROVEMENT

AND SPECIALITYGOODS TRADE

13

HOME IMPROVEMENT AND SPECIALITY GOODS TRADE

14

Net sales €3,172m


Operatingmargin* 2.5%

ROCE* 9.9%

Sports trade€186m

Furniture trade€179m

Agricultural and machinery trade Finland €500m

Others€37m

Building and home improvement trade Belarus €116m

Building and home improvement trade

Russia €192m

Building and homeimprovement tradeFinland €794m

Building and homeimprovement tradeScandinavia €627m

Building and home improvement trade Baltics €461m

Agricultural and machinery trade Baltics €115m


2015

Q2/2015-Q1/2016

15

STRATEGIC OBJECTIVES OF THE BUILDING AND HOME IMPROVEMENT TRADE

15

• Kesko #5 in Europe – strong potential for further growth organically orthrough acquisitions

• Providing excellent services from the same store network to the three different customer segments

• Consumer customers• Project customers• B2B customers

• A common core for all countries to ensure efficient operations

• Offering the best omni-channel digital services

13.812.1

5.6 4.8 4.33.4 2.6

0

5

10

15

GroupeAdeo

Kingfisher OBI Bauhaus K-groupand

Onninen

Hornbach WolseleyNordic

Net sales, 2014

KESKO AND K-GROUP ONE OF THE LEADERS IN ITS FIELD IN EUROPE

Source: Companies’ annual reports, websites, Baumarktmanager

€bn

165/2015

GROWTH FROM THE BUILDING AND TECHNICAL TRADE

17

B2B SALES ARE GROWING FASTER THANB2C SALES

18

Building and renovation become increasingly technical

Consumers increasingly outsource building to professionals

Growing need for renovation building

Rising standard of living increases the use of services

19

RENOVATION CONSTRUCTION IS INCREASING

inde

x20

10=1

00

Non-residential construction

Infra construction

Residential construction

Renovation construction

Source: Macrobond/The Confederation of Finnish Construction Industries RT (CFCI), Euroconstruct

• B2B customers already account for 40% of the K-Group’s sales

• Acquisition of Onninen increases the percentage to 60%

• B2B sales have long developed better than B2C sales

• Building and renovation become increasingly technical

• Consumers increasingly often outsource building to professionals

20

B2B SALES CONTINUE TO STRENGTHEN

• Onninen’s HEPAC and electrical productgroups expand Kesko’s offering makingit the most comprehensive in the market

• Share of B2B sales rises strongly

• Significant synergies

• Completion of the acquisition is yet to beapproved by competition authorities

21

ACQUISITION OF ONNINEN STRENGTHENS KESKO’S POSITION IN THE TRADE WITH BUILDING PROFESSIONALS AND IN TECHNICAL TRADE

CAR TRADE

22

CAR TRADE

23

Net sales €763m


Operating margin* 3.4%

ROCE* 24.1%

Toyota 11.1%

Volkswagen 10.9%

Skoda 9.7%

Ford 7.9%

Nissan 7.3%

Volvo 7.2%

Opel 5.6%

Audi 5.4%

Seat 1.7%

Others 33.6%* excl. non-recurring items

Q1/2016

Q2/2015-Q1/2016

24

MAXIMISING VALUE CREATION ALSO IN OTHERBUSINESSES

• Important to have the best platform for Kesko’s small and medium sized businesses to succeed in tight competition• Furniture trade (Finland and Estonia)• Agricultural trade (Finland)• Machinery trade (Finland and the Baltic countries)• Shoe trade (Finland)• Sports trade (Finland and Russia)

• All options which improve competitiveness of other businesses and retailer entrepreneurs are possible

FINANCIALS

25

NET SALES BY QUARTERQ1 COMPARABLE NET SALES AT PREVIOUS YEAR’S LEVEL

26

2,500

2,000

1,500

1,000

500

0Q4

2,1662,267

Q3

2,2032,304

Q2

2,2272,371

Q1

2,0132,0822,129

€m201620152014

OPERATING PROFIT EXCL. NON-RECURRING ITEMSBY QUARTER

27

62

84

68

19

59

8276

27 32

0

20

40

60

80

100

Q4Q3Q2Q1

€m20162014 2015

28

FINANCIAL TARGETS ANDCAPITAL EXPENDITURE

• Return on capital employed 14%

• Return on equity 12%

• Interest bearing net debt / EBITDA < 2.5

• Capital expenditure in 2015–2017 approximately €750 million• Excluding possible acquisitions

Dividend policy: Kesko Corporation distributes at least 50% of its earnings per share excluding non-recurring items as dividends, taking however the company's financial position and operating strategy into account.

RETURN ON CAPITAL EMPLOYEDEXCL. NON-RECURRING ITEMS, ROLLING 12 MO

29

14.0 13.1

9.0 9.8 9.911.7 12.4

0

4

8

12

16

2010 2011 2012 2013 2014 2015 Q1 2016

%Target14%

RETURN ON CAPITAL EMPLOYED BY DIVISIONMOVING 12 MO, EXCL. NON-RECURRING ITEMS

30

Group totalHome improvement and specialitygoods trade

Grocery trade Car trade

%

21.0

9.9

24.1

12.4

0

5

10

15

20

25

30

31

050

100150200250300350400450

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital expenditure in store sites Acquisitions Other capital expenditure

average

CAPITAL EXPENDITURE

€m

STRONG FINANCIAL POSITION

32

31.3.2016 31.3.2015

Equity ratio, % 54.8 51.5

Liquid assets, €m 746 506

Cash flow from operating activities, €m -96 -75

Capital expenditure, €m 51 52

EARNINGS / SHARE AND DIVIDEND

33

2010 2011 2012 2013 2014 2015

2.5

2.0

1.5

1.0

0.5

0.0

2.50

1.701.50

1.651.40

1.68

1.201.47

1.20

1.84

1.30

1.78

Dividend (2015 Board’s proposal to the AGM)Earnings / share excl. non-recurring items

€€

34

REAL ESTATE IN 2015

34

Owned properties

Country Area, 1,000 m2

Finland 540

Other Nordic countries 66

Baltic countries and Belarus 109

Russia 191

TotalCarrying amount

906€1,107m

Leased properties total1,000 m2 2,951

Classification

Strategic properties 64%

Standard properties 26%

Development properties 9%

Realisation properties 1%

35

SHAREHOLDERS 3/2016

The largest registeredshareholders by number of shares

Foreign ownership of B shares 39%

1 K-retailers´ Association 3,899,938 3.90

2 Vähittäiskaupan Takaus Oy 3,491,771 3.49

3 Kruunuvuoren Satama Oy 3,438,885 3.44

4Ilmarinen Mutual Pension Insurance Company 2,800,632 2.80

5 Valluga-sijoitus Oy 1,340,439 1.34

6Varma Mutual Pension Insurance Company 1,130,986 1.13

7Foundation for Vocational Training in the Retail Trade 1,122,832 1.12

8 Oy The English Tearoom Ab 1,000,000 1.00

9 The State Pension Fund 950,000 0.95

10 Elo Pension Company 896,968 0.90

%

MARKET SITUATION AND

OUTLOOK

36

0

2

4

6

8

10

12

14

16

1/00

7/00

1/01

7/01

1/02

7/02

1/03

7/03

1/04

7/04

1/05

7/05

1/06

7/06

1/07

7/07

1/08

7/08

1/09

7/09

1/10

7/10

1/11

7/11

1/12

7/12

1/13

7/13

1/14

7/14

1/15

7/15

1/16

Expectations for own finances

Expectation, 21st centuryaverage

CONSUMER CONFIDENCE IN FINLAND

37

odotukset omasta taloudesta seuraavan 12 kk:n kuluttua

Source: Statistics Finland

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

1/20

132/

2013

3/20

134/

2013

5/20

136/

2013

7/20

138/

2013

9/20

1310

/201

311

/201

312

/201

31/

2014

2/20

143/

2014

4/20

145/

2014

6/20

147/

2014

8/20

149/

2014

10/2

014

11/2

014

12/2

014

1/20

152/

2015

3/20

154/

2015

5/20

156/

2015

7/20

158/

2015

9/20

1510

/201

511

/201

512

/201

51/

2016

2/20

16la

test

mon

th

Estonia

Sweden

Lithuania

Latvia

Norway

Finland

38

RETAIL TRADE TRENDS IN OPERATING COUNTRIESROLLING 12 MO

Latestmonth

Source: Eurostat, excl. motor vehicles and fuels

% (r

ollin

g12

mo)

OUTLOOK

39

Estimates for the outlook of Kesko Group's net sales and operating profit excluding non-recurring items are given for the 12-month period following the reporting period (4/2016-3/2017) in comparison with the 12 months preceding the end of the reporting period (4/2015-3/2016).

The general economic situation and the expected trend in consumer demand vary in Kesko’s different operating countries. In Finland, owing to the weak trend in consumers’ purchasing power, the trading sector’s performance is expected to remain modest, which may be complicated further by actions taken to balance the public finances. In the Finnish grocery trade, intense competition is expected to continue. The markets for the Finnish building and home improvement trade and for the car trade are expected to improve slightly. With respect to foreign countries, the economic situation and consumers’ purchasing power, as well as the outlook in Russia are still weak. In Sweden and Norway and the Baltic countries, the market is expected to grow.

Kesko Group's net sales for the next 12 months are expected to exceed the level of the preceding 12 months. The operating profit excluding non-recurring items for the next 12-month period is expected to equal the level of the preceding 12 months. The outlook does not take account of the acquisition of Onninen, in respect of which estimates will be given in connection with its completion.

40

THE WORLD’S MOST SUSTAINABLE RETAIL OPERATOR

Davos, January 2015 and 2016:’The Global 100 Most SustainableCorporations in the World’ list.

KESKO IS THE MOST RESPONSIBLE FOOD AND STAPLES RETAILER IN THE WORLD

41

In 2015, Kesko rose to CDP’s Climate A List for the first time

At the top of the Nordic Climate Disclosure Leadership climate index since 2011. In 2015, Kesko was awarded the full 100 points

In ’The Global 100 Most Sustainable Corporations in the World’ list since 2005

Included in the FTSE4Good index since 2009

Included in the STOXX Global ESG Leaders index family since 2011

Included in the Dow Jones sustainability indexes DJSI World and DJSI Europe 2003-2014

Q1 REPORT

42

Q1 HIGHLIGHTS

43

• Kesko’s net sales stable, comparable change +0.2%

• Profitability improved, operating profit excluding non-recurring items€32.3 million (€26.5 million)

• Return on capital employed continued to improve to 12.4% (10.2%)

• Good profitability of the grocery trade, acquisition of Suomen Lähikauppa willsignificantly increase net sales

• Profitability of the building and home improvement trade continued to improve, strong growth in B2B sales

• Kesko entered into an agreement to acquire Onninen which will significantlystrengthen Kesko’s building and technical trade

• Sales of the car trade increased markedly, profitability at a good level

KEY PERFORMANCE INDICATORS

44

Q1/2016 Q1/2015

Net sales, €m 2,013 2,082

Operating profit*, €m 32.3 26.5

Operating margin*, % 1.6 1.3

Profit before tax, €m 35.7 -103.7

Earnings per share*, € 0.26 0.19

Return on capital employed*, %, rolling 12 mo 12.4 10.2

Return on equity*, %, rolling 12 mo 8.7 7.9

*excl. non-recurring items

NET SALES BY DIVISION Q1/2016

€1,094m€695m

€225m

Grocery trade–0.5%54%

35%

11%

45

Car trade +7.1%

Home improvementand speciality goodstrade –0.4%

Comparable change

GROCERY TRADE

46

GROCERY TRADE, Q1

47

• K-food stores’ retail sales at the previous year’s level, up 0.1%• Strengthening of quality and price competitiveness continued in

accordance with strategy

• Change in the grocery market prices around -1.5%

• Despite intense price competition, profitability at a good level

• Renewal of Kesko’s neighbourhood retail services has started• All K-markets will be renewed• Siwa and Valintatalo stores acquired from Suomen Lähikauppa will be

converted into K-markets

• The first renewed Neste K service station opened in Tampere• Objective is a network of nearly 100 stations extending across the

country

NET SALESQ1 COMPARABLE CHANGE –0.5%

48

500

0

1,500

1,000

Q1/2016

1,094

Q1/2015

1,103

€m

OPERATING PROFITEXCL. NON-RECURRING ITEMS

49

0

25

50

Q1/2016

31.3

Q1/2015

34.9

€m

HOME IMPROVEMENT

AND SPECIALITYGOODS TRADE

50

HOME IMPROVEMENT AND SPECIALITY GOODSTRADE, Q1

51

• Sales growth of B2B trade strengthened

• Improvement of profitability continued• Good performance in the building and home improvement trade

outside Finland and in the agricultural and machinery trade• Divestment of Anttila in March 2015

• Market share of the building and home improvement trade strengthenedespecially in Finland

• Acquisition of Onninen will significantly strengthen Kesko’s building and technical trade• Completion of acquisition expected in H1/2016• Acquisition is subject to EU Commission’s approval, FCCA’s

approval was obtained in April

• Kesko Senukai’s objective is growth in the Baltic countries and Belarus

NET SALESQ1 IN LOCAL CURRENCIES EXCL. ANTTILA -0.4%

52

695773

1,000

500

0Q1/2016Q1/2015

€m

Reported net sales, €, incl. Anttila


53

-20

-10

0

10

-14.2

Q1/2016Q1/2015

0.3

€m

CAR TRADE

54

CAR TRADE, Q1

55

• Total car trade market performance in January-March was strong

• VV-Auto’s net sales growth +7.1%• Combined market share of passenger cars and vans in January-March

18.5% (18.8%)

• Profitability remained at a good level, operating profit €9.4 million(€9.8 million)

NET SALESQ1 +7.1%

56

225210

0

100

200

300

Q1/2016Q1/2015

€m


57

0

5

10

Q1/2016

9.8 9.4

Q1/2015

€m

59

CONTACT INFORMATION

[email protected]

www.kesko.fi/investor

Twitter.com/Kesko_IR