Kesko Oyj

Dear all, warmly welcome virtually to Helsinki and thank you for tuning in for Kesko's Q1 2026 release call. Strong sales and profit in all divisions is our headline. So good start for the year despite turbulent times. We have the familiar agenda. First President and CEO Jorma Rauhala will give the presentation. After the presentation, we are happy to take questions from you. We have here with us our business division presidents, Ari Akseli for grocery trade, Sami Kiiski for building and technical trade, Johanna Ahli for car trade, as well as CFO Anu Hämmäläinen. The questions can be asked both by phone and via chat function after the presentation. All the materials related to the quarter can be found at our webpage kesko.fi under investors. My name is Hanna Jaakkola. I'm responsible for IR at Kesko. I will be happy to have discussions and answer your follow-up questions after the presentation. But now, without further ado, Jorma, the virtual stage is yours, please.

Thank you, Hanna. Ladies and gentlemen, welcome also on my behalf to this release call. I am Jorma Rauhola, and I am now the pleasure to present Keskos Q1 results. Strong sales and profit in all divisions is our headline. In grocery trade and in building and technical trade, sales and profits improved. In car trade, sales grew, but operating profit declined a bit. But now I will give an overview of our business performance and open up elements behind the result. After the presentation, we are ready for the Q&A. Summary of the first quarter in 26. Kesko's comparable operating profit improved. Net sales grew in all divisions. In grocery trade, K-group stores gained market share. Profitability was strong despite investments. In billing and technical trade, comparable operating profit increased, even though the market remained challenging. In car trade, our market position improved. Sales growth was strong, especially in used cars. Operating profit decreased slightly. The current situation in the Middle East did not have a significant impact on Kesko's operations in Q1, but a prolonged conflict could weaken consumer confidence and purchasing power. Overall, the first quarter performance was in line with our expectations. We repeat our guidance for 2026 and expect the comparable operating profit to amount to 650 to 750 million euros. Net sales in Q1 totaled over 3 billion euros. It was up by 201 million euros. Net sales increased in all businesses. Rolling 12 months, net sales increased to nearly 12.7 billion euros. In Q1, comparable operating profit was 102 million euros. And operating margin was 3.4. Comparable operating profit increased in grocery trade and in building and technical trade and decreased in car trade. Rolling 12 months operating profit was 661.4 million euros and operating margin was 5.2. Return on capital employed was 10.2%. In building and technical trade, return on capital employed was at the same level as in 2025. It decreased in grocery trade and in car trade compared to the year end. Financial position. Cash flow from operating activities was at a good level at 78 million euros. It strengthened significantly, especially thanks to effective working capital management. Capital expenditure totaled 113.5 million euros. I'll open up investments on the next page. Interest-bearing net debt increased year on year as a result of investments in acquisitions, logistics and grocery trade store site network. Net debt to EBITDA was 1.9, well below our maximum target of 2.5. Capital expenditure totaled 113.5 million euros. We continued the investments to strengthen our grocery trade network and to main capex in Q1 with store site net investments. For example, during the quarter, we opened a new hypermarket in Kivistö, Vantaa in Helsinki metropolitan area. Other investments include investments in, for example, the leasing car fleet. Expenses. Expenses increased mainly due to acquisitions. Approximately half of the increase in expenses came from the Danish acquisitions. Despite increased cost, the cost ratio improved. The big topic in the market and media is now the war in Iran. Let's look at the potential impacts of the Middle Eastern conflict on Kesko in the second quarter. It is impossible to estimate further as the situation may change rapidly. In the short term, there are no significant impacts on our businesses. But if the crisis prolongs, it could weaken consumer confidence, purchase power and corporate investments and increase costs. In Q2 for grocery trade, rise in cost of freight, both purchasing freight to the warehouse and delivery freight from the warehouse to the stores and customers. No significant impact on food prices in Q2, but a prolonged situation would have a cost impact on agriculture and the whole food chain. In Q2, for building and technical trade, rise in costs of purchasing frights and delivery frights. Rise in the prices in particular of oil-based products like pipes, cables and insulation products. For car trade during current quarter, rise in fuel prices could have a positive impact on demand for electric cars. Demand may also focus especially on used cars. Now to grocery trade. We gained market share and result was strong. In Q1, net sales totaled nearly 1.6 billion euros and increased by 72 million euros. Sales to the K-food stores changed, increased by 6.2%. Gas per food service business net sales declined by 0.6%. Rolling 12 months net sales totaled over 6.5 billion euros. In grocery trade, comparable operating profit for Q1 was 78.4 million euros, and it increased by 5.6 million euros. Profitability was 5%. Gas price operating profit declined by 1 million euros. Rolling 12 months operating profit was 423.7 million euros, and operating margin was the same as last year, 6.5%. As said, grocery trade net sales increased and comparable operating profit improved. Most of the Easter whole sales took place in March, since the Easter was in early April. Last year, the Easter sales was entirely in April. In Q1, total grocery market grew up by approximately 2.9%. K-group grocery sales were up by 4.4%. K-group grocery stores gained market share in Q1. Customer flows and average purchase continued to grow. Also, customer satisfaction was clearly up in all our grocery store chains. Casper's net sales were down by 0.6%, but Casper gained market share in Q1. K-city market non-food sales were up by 4.4%. Online grocery sales were up by 10.5% and online sales accounted for 4.6% of K-Group's grocery sales. Grocery price inflation in Finland was approximately 1.5%. Price development in K-Group stores was up by only 1%, especially thanks to our price program. Demand for quality products and services increased in our grocery stores. In the grocery trade, long-term strategic investments in quality, price and store site network are delivering results. For the first time since the pandemic, we saw growth in the grocery trade across all three fronts. Sales increased, operating profit improved and market share strengthened. Our target in grocery trade is to strengthen market share while maintaining good profitability, clearly above 6%. Market share development for K Group grocery stores turned in summer 2025 and positive progress has continued in 2026. As you can see in the graph, the market share gain in Q1 was 0.5% each point. All our store chains won over market share in Q1 in their size segments. The good performance is thanks to the investments in quality, price and the store site network. In 2025, the network impact was clearly negative. Network net impact in 2026 is expected to be neutral. Building on a technical trade, sales grew and result improved. In building and technical trade, net sales increased by €114 million to over €1.1 billion. The increase was supported by the Danish acquisitions. Net sales improved in comparable terms by 4.2%. In comparable terms, technical trade net sales increased by 5.3% and building and home improvement trade net sales increased by 3.3%. Rolling 12 months net sales were €4.8 billion. Comparable operating profit for the building and technical trade division totaled 14.5 million euros and operating margin was 1.3. Operating profit increased by 2.8 million euros. Rolling 12 months operating profit was 181.4 million euros and operating margin was 3.8. In technical trade comparable operating profit increased in all operating countries. In building and technical trade, net sales increased and profit improved. Sales margin also improved. Market demand continued to be muted, especially in new residential construction. There is a pickup in construction activity in Finland, for example, in infrastructure construction, industrial projects and data centers. In Finland, in technical trade, Oninen's sales grew and profit improved clearly. Growth was supported by strengthening market share. In building and home improvement trade in Finland, Keerauta's sales grew slightly and profit was at a good level. In Norway, sales for Byggmarker and Oninen were close to last year's levels. Oninen's profit improved while Byggmarker's decreased. In Denmark, Davidson sales increased and profit improved. Exceptionally cold winter impacted negatively Davidson sales in January-February. In Sweden, Quebec sales growth was strong and also profit improved. In Poland and the Baltic countries, Oninen sales growth was strong and profit improved. Retail and P2P sales for K-Rauta and Oninen Finland is shown in this graph. Oninen's Q1 sales increased clearly by 11%, while competitor sales development was negative 1.5%. This is a great achievement and proof of active sales work in this muted market. In Onina Finland also prices increased for the first time since June 2023. In Q1 prices increased by 0.3%. K-rata sales decreased by 1.4% in Q1 and competitor sales decreased by 0.6%. Good to note that in comparison period sales development was strong. In car trade, good sales development was driven by used cars. In car trade, net sales for Q1 increased by 17 million euros to 331 million euros. Net sales increased in used cars, services and sports trade, but decreased in new cars. Rolling 12 months net sales were nearly 1.4 billion euros. The comparable operating profit totaled 16.1 million euros and decreased by 1.8 million euros year on year. Operating margin was 4.9. Rolling 12 months operating profit was 81.3 million euros and operating margin was 5.9. In car trade, net sales increased, comparable operating profit decreased due to the increase in the share of used car sales. In used cars, sales margins are lower than in new cars. Market demand for new cars continues to be muted. Q1 first registration of passenger cars and vans increased by 0.1%. First registration of brands represented by Kesko increased by 1.5% in Q1. The order book for new cars has strengthened clearly, especially in March, and the current order book is expected to convert into sales over the next six months. Used car sales from dealerships were up by 1.1% in Finland. Used car sales in kei-auto were up by 18%. Also, services in car trade increased. In sports trade, net sales and comparable operating profit increased, also market share grew stronger. To highlight some of the latest new electric car models from Kei Auto. This brings new launches include the Cupra Raval and Volkswagen ID Polo. Cars in these lower price segments have been long awaited as they open up an entirely new price category for us. Sales of ID Polo begin today. And now, profit guidance and outlook. Profit guidance stays intact. Kesko Group's profit guidance is given for the year 2026 in comparison with the year 2025. Kiesko's operating environment is estimated to improve in 2026, but to still remain somewhat challenging. Kiesko's comparable operating profit is estimated to improve in 2026. Kesko estimates that its 2026 comparable operating profit will amount to 650-750 million euros. Key incentives impacting Kesko's outlook are developments in consumer confidence and investment appetites, as well as geopolitical crises and tensions. The operating environment for Kesko is estimated to improve in 2026 in all divisions and all operating countries. Kesko's net sales and comparable operating profit are also estimated to improve in 2026 in all divisions and all operating countries. In grocery trade, B2C trade is estimated to pick up and the food service business to remain stable. In 2026, the comparable operating profit margin for the grocery trade division is estimated to stay clearly above 6%, despite the investments in price and the store site network. The comparable operating profit for the grocery trade division is estimated to improve in 2026 compared to 2025. In building and technical trade, the cycle is expected to improve moderately in 2026 from an exceptionally low level. The comparable operating result for the building and technical trade division is estimated to improve in 2026 compared to 2025 in all Kesko operating countries. In the car trade market, new car sales are expected to remain muted compared to long-term levels, but to nonetheless grow compared to 2025. The comparable operating profit for Kesko's car trade division is estimated to improve in 2026 compared to 2025. To summarize the first quarter and the presentations. Kesko's net sales grew and profit improved, an excellent performance in a turbulent operating environment. Strategic actions are yielding results in grocery trade. Growth seen on all fronts for the first time since the pandemic. Net sales increased, profit improved, and market share grew. In billing and technical trade, net sales and comparable operating profit improved in all operating countries except Norway. Good sales development in car trade, driven by used car sales, strong order book in new cars, an excellent quarter for sports trade. We estimate that Keskos operating environment, net sales and comparable operating profit will improve in 2026 despite global turbulence. Thank you. This was my presentation, iQuest. It's time for questions now.

Thank you, Jorma, for your presentation. And now it's time for questions. We will first turn to the conference call line, but you can also pose questions using the chat function. And there's a slight delay, so please type your question as soon as it's popped up into your mind. But now, conference call line, please.