Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kesko Oyj (KKOYF, Financial) reported a significant turnaround in its building and technical trade division, marking the first positive result in eight quarters.
- The company announced strategic acquisitions in Denmark, which are expected to increase its market share in the Danish building and home improvement sector to approximately 20%.
- Kesko Oyj successfully issued a EUR300 million green bond, demonstrating its commitment to sustainable financing.
- The grocery trade division showed stable performance with a slight increase in comparable operating profit, supported by a 13.9% rise in online grocery sales.
- Kesko Oyj's financial position remains strong, with a net debt to EBITDA ratio of 1.2, well below the maximum target of 2.5.
Negative Points
- Comparable operating profit decreased in the car trade division, reflecting challenges in the new car market.
- Return on capital employed decreased across all divisions compared to the previous year, indicating a decline in earnings.
- Cash flow from operating activities was impacted by increased working capital and calendar effects, leading to a lower cash flow in Q3.
- The construction cycle remains weak, affecting sales in the building and technical trade division despite recent improvements.
- Market share losses in the grocery trade division were noted, with a need for strategic price investments to regain competitiveness.
Q & A Highlights
Q: Have the three acquisitions in Denmark been included in the 2025 guidance, and what consumer environment is expected for 2025?
A: The acquisitions in Denmark are not included in the 2025 guidance. The building and construction market is expected to recover from historically low levels, with improvements anticipated in all operating countries. The car trade is expected to remain stable, and the grocery market is projected to be stable, with no significant negative signs.
Q: What is the expected timeline for the grocery trade market share to stabilize or grow?
A: The market share is expected to stabilize or grow during the current strategy period, which extends to 2026. The strategy includes investments in pricing and store network development, with effects anticipated to become visible from early 2025 onwards.
Q: How will Kesko manage the impact of price investments on grocery trade profitability while maintaining margins above 6%?
A: Price investments are expected to increase sales, and new income streams from data and media businesses will help offset any negative impacts on profitability. The company uses data-driven targeted offers to manage pricing effectively.
Q: Can you elaborate on the issues faced in Elektroskandia and Byggmakker, and what measures have been taken?
A: The Elektroskandia integration faced logistical delays, particularly in shipments and handling split orders. These issues are being addressed. In Byggmakker, the focus is on B2B trade, and while there are challenges in the consumer market, the company is well-positioned in Norway.
Q: What is the outlook for food price inflation, and how is the competitive situation in the grocery market?
A: Food price inflation is expected to remain stable. The grocery market is competitive and price-driven, with customers seeking better offers. However, there is also a trend towards convenience and quality, with increased use of fast deliveries and ready meals.
Q: Why are price investments in grocery trade not being implemented in Q4, and what is the strategy behind the timing?
A: Some price investments have been made in Q3 and will continue in Q4, but the main program is planned for early 2025 to ensure a well-coordinated and sustainable approach involving store owners and suppliers.
Q: How has the market share developed in building and technical trade across different regions?
A: In Finland, K-Rauta has gained market share, while Onninen has seen mixed results across product categories. In Sweden, K-Bygg has gained market share, while in Norway, Byggmakker and Onninen have lost some market share. In Poland and the Baltic region, market share has been gained.
Q: Has the trend of recovering sales in building and technical trade continued into October?
A: Yes, the positive trend in sales recovery has continued into October without any surprises.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
