Kesko roadshow, Chicago

KESKO ROADSHOWCEO MIKKO HELANDER

Q4/2015

• Net sales €8,780m

• Operating profit* €247m

• Personnel 21,812

• Shareholders 38,853

• Market capitalisation €3.1bn (Sep 30, 2015)

* excl. non-recurring items

2

KESKO TODAYROLLING 12 MO

• K-Group’s sales €11.3bn

• Operations is eight countries

• Over 1.3 million customer visits

every day

• Personnel 45,000

FOR SHOPPING TO BE FUN

3

K-GROUP

KESKO NET SALESBY LINE OF BUSINESS 2014

4

Car trade 9%

Agricultural and machinery trade 7%

Sports trade 2%

Furniture trade 2%

Building and home

improvement trade 25%

Kespro 9%Grocery trade

Russia 1%

Grocery trade

Finland 44%

Grocery trade €4,754m

Home improvement and speciality goods trade €3,568m

Car trade €766m

5

KESKO NET SALES BY COUNTRY 2014

Russia 4%

Lithuania 4%

Latvia 1%

Finland 82%

Belarus 1%

Estonia 1%

Sweden 2%

Norway 5%

Over 80% of net sales

comes from Finland

0

2000

4000

6000

8000

10000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Finland Other countries

NET SALES

6

+5.8%

+11.1%+9.3%

+3.3%

-11.9%+3.9%

+7.8% +2.4%-3.8%

€m

-2.6%

-100

0

100

200

300

400

500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Operating profit excl. non-recurring items Non-recurring items

OPERATING PROFIT

7

€m

YEAR-ON-YEAR CHANGE IN FIXED COSTSEXCLUDING NON-RECURRING ITEMS

8

10.3%

7.5% 8.0%

1.2%

-4.0% -4.5% -4.0%-2.0% -1.3%

-1.0% -1.6%-1.9%

-4.4%

-10.6%-8.4%

-15%

-10%

-5%

0%

5%

10%

15%

RETURN ON CAPITAL EMPLOYEDMOVING 12 MO, EXCL. NON-RECURRING ITEMS

9

Group totalHome improvement

and speciality

goods trade

Grocery trade Car trade

%

19.9

6.9

29.0

11.3

0

5

10

15

20

25

30

STRONG FINANCIAL POSITION

10

Liquid assets €858m €503m

Interest bearing net debt €-394m €-3m

Equity ratio 54.2% 54.2%

Q3/2015 Q3/2014

• Cash flow €403 million from real estate arrangement

• Strong cash position enables growth and good dividend yield

EARNINGS / SHARE AND DIVIDEND

11

2009 2010 2011 2012 2013 2014

2.0

0.0

1.0

0.5

1.5 1.40

1.651.50

1.68

1.20

1.47

1.20

1.84

1.30

1.78

0.90

0.71

Dividend

Earnings / share excl. non-recurring items % Effective dividend yield

3.9% 3.7% 4.6% 4.8% 5.2% 5.0%€

12

FINANCIAL TARGETS ANDCAPITAL EXPENDITURE

• Return on capital employed 14%

• Return on equity 12%

• Interest bearing net liabilities / 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.

13

ROCE AND ROEEXCL. NON-RECURRING ITEMS, %

9.6

12.4

14.7

10.2

7.4

14.013.1

9.09.8 9.9

14.0

10.510.0

14.6

8.1

3.8

8.7 8.8

6.97.7 7.6

12.0

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 target

ROCE ROE

13

14

0

50

100

150

200

250

300

350

400

450

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Capital expenditure in store sites Acquisitions Other capital expenditure

average

CAPITAL EXPENDITURE BACK TO NORMALLEVEL

€m

MARKET SITUATION AND

FUTURE OUTLOOK

15

16

Source: Eurostat, excl. motor vehicles and fuels

-2

0

2

4

6

8

10

Estonia

Lithuania

Sweden

Norway

Latvia

Finland

Latest

month

% (

roll

ing

12

mo

)

RETAIL TRADE TRENDS IN OPERATING COUNTRIESROLLING 12 MO

0

2

4

6

8

10

12

14

16

1/0

0

7/0

0

1/0

1

7/0

1

1/0

2

7/0

2

1/0

3

7/0

3

1/0

4

7/0

4

1/0

5

7/0

5

1/0

6

7/0

6

1/0

7

7/0

7

1/0

8

7/0

8

1/0

9

7/0

9

1/1

0

7/1

0

1/1

1

7/1

1

1/1

2

7/1

2

1/1

3

7/1

3

1/1

4

7/1

4

1/1

5

7/1

5

Expectations for own finances

Expectation, 21st centuryaverage

CONSUMER CONFIDENCE IN FINLAND

17

odotukset omasta taloudesta seuraavan 12 kk:n kuluttua

Source: Statistics Finland

18

BUSINESS ENVIRONMENT

Finland

• In Finland, owing to the decline of consumers’ purchasing power, the trading sector’s performance is expected to remain weak in all product lines, which may be complicated further by actions taken to balance the public finances

Skandinavia and the Baltic countries

• The market is expected to grow

Russia

• Economic situation and consumers’ purchasing power, as well as the outlook have weakened further

Belarus

• Consumers’ purchasing power is expected to strengthen, hyperinflation is expected to ease

FUTURE OUTLOOK 10/2015-9/2016

19

The general economic situation and the expected trend in consumer demand vary in Kesko’s different operating countries. In Finland, owing to the decline of consumers’ purchasing power, the trading sector’s performance is expected to remain weak in all product lines, which may be complicated further by actions taken to balance the public finances. In the Finnish grocery trade, the tough competitive situation is expected to continue. The market performance of the Finnish building and home improvement trade is expected to remain weak. The outlook for the car trade is also uncertain. With respect to foreign countries, the economic situation and consumers’ purchasing power, as well as the outlook in Russia have weakened further. Instead, 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 be lower than 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 operating profit level of the preceding 12 months.

PORTFOLIO STRATEGY

20

INVESTING IN STRATEGICGROWTH AREAS

• Grocery trade (Finland, Russia, Kespro)

• Building and home improvement trade (Europe)

• Car trade (Finland, the Baltic countries)

• Good profitability achieved in all strategic growth areas

• Investments in range of €250 million / year, excluding

potential acquisitions

• Also acquisitions are considered in all three strategic

growth areas

21

KEY STRATEGIC OBJECTIVES

22

• Turning the market share in the Finnish grocery trade around

• Increasing the building and home improvement trade in Europe

• Strengthening the market leadership in the Finnish car trade

• The best omni-channel customer experience in the trading sector

• One unified Kesko, harvesting synergies

KESKO TO INVEST IN FINLAND BY ACQUIRING SUOMEN LÄHIKAUPPA

• Kesko has made an agreement to acquire the whole share capital of Suomen

Lähikauppa Oy from the private equity investment firm Triton

• The net sales of Suomen Lähikauppa in 2014 were €999.2 million

• It has 643 Siwa and Valintatalo stores and 4,100 employees

• The transaction price of the debt-free acquisition, structured as a share

purchase, is approximately €60 million

• Kesko estimates that its capital expenditure in 2015-2017 will decrease from

the approximately €1 billion announced in the strategy to €750 million,

excluding possible acquisitions

23

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

24

GROCERY TRADE

25

KESKO GROCERY TRADE KEY FIGURES ROLLING 12 MO

26

Net sales €4,684m

Operating profit* €185m

Operating margin* 4.0%

ROCE* 19.9%

K-Group 33.1%

S-Group 45.7%

Lidl 7.6%

Suomen Lähikauppa 6.8%

Others 6.8%

Total market €16.7 billion

Source: Nielsen


RETAIL STORES

Sales 2014

€ million, VAT 0%

Number of stores at

30.9.2015

Concept

1,505+581 81 Hypermarket

1,725 220 Supermarket

1,216 459Neighbourhood

store

103 8Compact hyper,

Russia

Others 161 136 Incl. online store

Total 5,292 904

27

28

STRATEGIC OBJECTIVES OF THE GROCERY TRADE

• Turning the market share in the Finnish grocery trade around

• Further improving quality and service level

• Investments to improve the K-supermarket and K-market store network

• Customer focused renewal of the K-citymarket concept

• Improving price competitiveness and price image

• Offering leading digital services in grocery

• Developed retailer business model

PIRKKA – A TRUE BRAND

• By far the most valued and best-known store private label in Finland

• Launched in 1986

• Pirkka range comprises more than 2,300 products

• More than 100 of Pirkka products are organic and more than 30 are Fairtrade

products

• Introduced a new PL, K-Menu, in spring 2014

• K-Menu range comprises some 300 products

• Targeting price conscious customers

• Share of PL sales in K-food stores in 2014 some 20%

29

• Organic growth through strong

international cooperation

• Searching for expansion alternatives

in Finland and the neighbouring

areas

• Supporting the service counter

offering of the K-food stores

• Increasing operations and improving

profitability

in the St. Petersburg area

• Active in acquiring store sites

• K-ruoka is the best food store in

the St. Petersburg area

• Identifying new growth possibilities

in the Moscow area and possibly in

other metropolitan cities in Russia

30

INCREASING THEHORECA BUSINESS STRATEGY FOR RUSSIA

HOME IMPROVEMENT AND SPECIALITYGOODS TRADE

31

HOME IMPROVEMENT AND SPECIALITY GOODS TRADEKEY FIGURES ROLLING 12 MO

32

Net sales €3,351m


Operating

margin*1.8%

ROCE* 6.9%

Sports trade€186m

Shoe trade €20

Furniture trade€176m

Agricultural trade€372m

Others€20m

Building and home improvement trade Belarus €125m

Building and home improvement trade

Russia €250m

Building and homeimprovement tradeFinland €785m

Building and homeimprovement tradeScandinavia €625m

Building and home improvement trade Baltics €443m

KonekeskoBaltics €96m

KonekeskoFinland €161m


2014

33

PROFITABLE GROWTH IN BUILDING AND HOME IMPROVEMENT TRADE

33

0

10

20

30

40

50

60

70

2012 2013 2014

Operating profit, € million

0 10 20 30 40

Belarus

N-w and…

Lithuania

Latvia

Estonia

Norway

Sweden

Finland

N-w and central

Russia

Market shares in 2014

13.8412.14

5.594.84

3.39 3.362.61

0

5

10

15 Net sales

THE BIGGEST EUROPEAN DIY ENTERPRISES 2014

Sources: Companies’ annual reports, companies’ webpages, Baumarktmanager

€ BN

34 5/2015

35

300 STORES IN EIGHTCOUNTRIES

Finland€1,190m138 stores

Sweden€197m

20 stores

Norway€671m

82 stores

Russia€250m

13 stores

Belarus€125m

11 stores

Lithuania€317m

19 stores

Latvia€53m

8 stores

Estonia78 M€

8 stores

TOTAL RETAIL SALES€2,881m

36

STRATEGIC OBJECTIVES OF THE BUILDING AND HOME IMPROVEMENT TRADE

36

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

through acquisitions

• Providing excellent services from the same store network to the three

different customer segments

• A common core for all countries to ensure efficient operations

• Offering the best omni-channel digital services

CAR TRADE

37

CAR TRADEKEY FIGURES ROLLING 12 MO

38

Net sales €745m


Operating margin* 3.7%

ROCE* 29.0%

Volkswagen 12.3%

Toyota 11.9%

Skoda 9.2%

Volvo 7.3%

Ford 7.0%

Nissan 6.1%

Audi 6.0%

Kia 5.7%

Seat 1.7%

Others 32.8%* excl. non-recurring items

2014

39

THE CAR TRADE IS ONE OF KESKO’S THREESTRATEGIC GROWTH AREAS

• VV-Auto’s market share in the Finnish passenger car and van trade

has risen from 15% to 21% within ten years

• Throughout recent years, Volkswagen has been the best selling car

brand in Finland and Audi has been number one in its competitive

segment

• VV-Auto’s retail net sales have quadrupled within ten years from 100

million to 400 million

• VV-Auto’s profitability has remained at a good level despite the

difficult market situation

39

40

THE WORLD’S MOST SUSTAINABLE RETAIL OPERATOR

40

In January 2015, Kesko was ranked fifth on ’The Global100 Most Sustainable Corporationsin 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 scoring the

maximum 100 points

At the top of the Nordic Carbon 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

In the Sustainability Yearbook 2015, Kesko was classified into the bronze class

in the Food & Drug Retailers sector

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

43

BASIC INFORMATION

43

• Established in 1940

• Listed on the Helsinki Stock Exchange (Nasdaq Helsinki) in 1960

• 39,000 shareholders

– 28% of all shares owned by non-Finnish

– 41% of B-shares owned by non-Finnish

• Market capitalisation €3.1 billion (Sep 30, 2015)

• Share series: A and B – voting rights 10:1

Number of shares

A shares31.7%

B shares68.3%

Voting rights

B shares

18%A shares

82%

44

SHAREHOLDERS

44

The largest registered shareholders

At 9/2015 by number of shares

%

1 K-retailers´ Association 3,816,860 3.82

2 Vähittäiskaupan Takaus Oy 3,491,771 3.49

3 Kruunuvuoren Satama Oy 3,438,885 3.44

4Ilmarinen Mutual Pension Insurance Company 2,050,632 2.05

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 1,084,431 1.08

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

9 Elo Pension Company 896,968 0.90

10 Kesko Oyj 876,455 0.88

%

45

REAL ESTATE ARRANGEMENT COMPLETED

• The joint real estate investment company established by Kesko, AMF

Pensionsförsäkring and Ilmarinen started operating in June

• The combined fair value was €652 million and the properties owned by

Kesko Group companies accounted for €485 million

• Cash flow to Kesko was €403 million

45

46

REAL ESTATE IN 6/2015

46

Owned properties

CountryArea,

1,000 m2

Finland 550

Other Nordic countries 66

Baltic countries and Belarus 113

Russia 179

Total

Carrying amount

908

€1,070m

Leased properties total

1,000 m2 3,008

Classification

Strategic properties 59%

Standard properties 32%

Development properties 8%

Realisation properties 1%

47

OPERATING MARGIN BY DIVISIONEXCL. NON-RECURRING ITEMS

Q1/

2014

Q2/

2014

Q3/

2014

Q4/

2014

Q1/

2015

Q2/

2015

Q3/

2015

Grocery trade 4.1 4.6 5.1 4.9 3.2 3.8 3.8

Home improvementand speciality goods

trade

-4.1 1.0 2.2 0.4 -1.8 3.9 4.2

Car trade 4.6 3.7 3.6 3.0 4.7 3.4 3.5

Total 0.9 2.9 3.6 2.7 1.3 3.4 3.7

TREND IN FOREIGN OWNERSHIP, % (31.12.)

48

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 2013 2014Q3/2015

All shares B share

%

UNEMPLOYMENT RATE

49


RETAIL TRADE, TREND DEVELOPMENT

50

60

70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Turnover Volume indexSource: Statistics Finland

DAILY CONSUMER GOODS TRADE, TRENDDEVELOPMENT

51

60

70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Turnover Volume indexSource: Statistics Finland

GRANTED BUILDING PERMITS, MIL. M3, MOVING ANNUAL TOTAL

52


FIRST REGISTRATIONS OF PASSENGER CARS IN FINLAND

53


54

INTERIM REPORTJANUARY-SEPTEMBER

2015 PRESIDENT AND CEO MIKKO HELANDER

22 OCTOBER 2015

KEY EVENTS IN Q3

• Measures taken to strengthen the competitiveness of the grocery trade have progressed as planned and the division’s profitability remained at a good level

• Market share and profitability of the building and home improvementtrade continued to strengthen

• New cars have continued to sell well despite Volkswagen’s emissionsissue

• Balance sheet very strong, liquid assets €858 million

55

Q3 NET SALES GROWTH +1.2%IN LOCAL CURRENCIES EXCL. ANTTILA

56

4,000

5,000

7,000

3,000

6,000

2,000

1,000

0

Q1-Q3/2015

6,513

Q1-Q3/2014

6,804

Q3/2015

2,203

Q3/2014

2,304

€m

Reported net sales, €, incl. Anttila

Q3 NET SALES BY DIVISION

€1,171m

€857m

€170m

Grocery trade

-0.6%Home

improvement

and specialitygoods trade

+4.5%

Car trade -2.6%

53%

39%

8%

57

Comparable change

OPERATING PROFITEXCL. NON-RECURRING ITEMS

58

0

50

100

150

200

Q3/2015

82.5

Q3/2014

84.0

Q1-Q3/2015

185.3

Q1-Q3/2014

170.8

€m

STEADY PROFIT PERFORMANCE CONTINUESOPERATING PROFIT EXCL. NON-RECURRING ITEMS

59

0

20

40

60

80

100

Q3/2014

84.0

Q2/2014

67.6

Q1/2014

19.1

Q4/2013

66.8

Q3/2013

83.6

Q2/2013

69.8

Q1/2013 Q3/2015

82.5

Q2/2015

76.4

Q1/2015

26.5

Q4/2014

61.9

18.6

€m

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

60

0

2

4

6

8

10

12

Q3/2015

11.3

Q2/2015

10.9

Q1/2015

10.2

Q4/2014

9.9

Q3/2014

10.0

Q2/2014

9.9

Q1/2014

9.9

Q4/2013

9.8

Q3/2013

9.7

Q2/2013

9.3

Q1/2013

8.8

%

CASH FLOW AFTER CAPITAL EXPENDITURE

61

600

100

200

0

-100

-200Q3/2015

39.3

Q2/2015

541.1

Q1/2015

-139.3

Q4/2014

98.6

Q3/2014

82.4

Q2/2014

79.9

Q1/2014

-138.5

Q4/2013

75.8

Q3/2013

80.3

Q2/2013

206.1

Q1/2013

-100.5

€m

FINANCIAL POSITION

62

30.9.2015 30.9.2014

Equity ratio, % 54.2 54.2

Liquid assets, €m 858 503

Interest-bearing net liabilities, €m -394 -3

Capital expenditure, €m 152 151

Return on capital employed*, % 11.3 10.0

Return on equity*, % 8.0 8.4

* Excl. non-recurring items, rolling 12 mo

GROCERY TRADE

63

NET SALES

64

3,500

2,500

3,000

2,000

1,500

1,000

500

0

Q1-Q3/2015

3,424

Q1-Q3/2014

3,494

Q3/2015

1,171

Q3/2014

1,190

€m

OPERATING PROFIT EXCL. NON-RECURRINGITEMS

65

0

20

40

60

80

100

120

140

160

180

Q1-Q3/2015

123.0

Q1-Q3/2014

161.0

Q3/2015

44.8

Q3/2014

60.3

€m

GROCERY TRADE IN Q3• Measures taken to strengthen the competitiveness of the grocery

trade have progressed as planned and the division’s profitability

remained at a good level.

• Price level in Finnish grocery trade has fallen by around 1%

• The K-Group responds to changes in the competitive

environment both by renewing store concepts in line with

strategy and improving its operational efficiency

• Effect of the real estate arrangement completed in June on

the operating profit excluding non-recurring items was €-3.3

million.

• Sales in Russia were down by 2.5% in euros and up by 42% in

roubles

• Kespro’s market share increased and profitability remained at a

good level

66

HOME IMPROVEMENTAND SPECIALITYGOODS TRADE

67

Q3 NET SALES GROWTH +4.5%IN LOCAL CURRENCIES EXCL. ANTTILA

68

857942

3,000

2,500

2,000

1,500

1,000

500

0

Q1-Q3/2015

2,514

Q1-Q3/2014

2,731

Q3/2015Q3/2014

€m

Reported net sales, €, incl. Anttila

OPERATING PROFIT EXCL. NON-RECURRING ITEMS CONTINUED TO INCREASE IN Q3

69

-20

0

20

40

60

Q1-Q3/2015

56.1

Q1-Q3/2014

-3.3

Q3/2015

35.8

Q3/2014

20.6

€m

HOME IMPROVEMENT AND SPECIALITY GOODS TRADE IN Q3

• Building and home improvement trade

• Market share is estimated to have grown in Finland, Norway,

the Baltics and Russia

• Operating profit has improved in ten successive quarters

• Net sales and profitability strengthened in the agricultural and machinery

trade

• In the leisure trade, Budget Sport’s sales increased markedly

• Asko’s sales performance +8%

70

CAR TRADE

71

NET SALES

72

571592

170175

0

200

400

600

Q3/2015Q3/2014 Q1-Q3/2014 Q1-Q3/2015

€m

OPERATING PROFITEXCL. NON-RECURRING ITEMS

73

0

10

20

30

Q1-Q3/2015

22.3

Q1-Q3/2014

23.8

Q3/2015

6.0

Q3/2014

6.3

€m

ORDER BACKLOG AT END OF SEPTEMBER HIGHER THAN THE YEAR BEFORE

74

0

1000

2000

3000

4000

5000

6000

7000

0

1000

2000

3000

4000

5000

6000

70000

1/1

3

02

/13

03

/13

04

/13

05

/13

06

/13

07

/13

08

/13

09

/13

10

/13

11

/13

12

/13

01

/14

02

/14

03

/14

04

/14

05

/14

06

/14

07

/14

08

/14

09

/14

10

/14

11

/14

12

/14

1/1

5

2/1

5

3/1

5

4/1

5

5/1

5

6/1

5

7/1

5

8/1

5

9/1

5

Backlog of customer orders (pcs) Rolling 12 mo average (pcs)

75

CONTACT INFORMATION

75

[email protected]

www.kesko.fi/investors

Twitter.com/Kesko_IR

Kesko roadshow, Chicago

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