Kesko (KESKOB) Investor Update summary

Strategic progress and market environment

• Growth strategy execution continues across all divisions, focusing on market share gains and maintaining strong profitability in grocery, building and technical trade, and car trade.

• Investments remain high, with €200–€250 million annually in grocery store network and significant acquisitions, especially in Sweden and Denmark, to build scale and support international expansion.

• Consumer confidence remains low but shows early signs of improvement; grocery sales and market share are rising, especially in fresh and ready-made products.

• Building and technical trade profitability is resilient despite weak construction markets, with integration of recent acquisitions ongoing and long-term margin targets reaffirmed.

• Car trade outperforms the market, driven by strong new and used car sales, expansion in service offerings, and a focus on electric vehicles.

Operational efficiency and financial management

• Operational efficiency is a key focus, with cost increases mainly from personnel and depreciation, and IT investments shifting toward SaaS and in-house development.

• Cash flow from operations remains robust at €1,152m, with initiatives to optimize working capital and prioritize disciplined capital expenditure.

• Net debt to EBITDA stands at 1.8, well below the 2.5 target, providing flexibility for future investments and acquisitions.

• Dividend policy remains at 60%–100% of earnings, with recent payout at 81% and a history of steady growth; future dividends will balance investment needs and shareholder returns.

• Operational efficiency initiatives have kept OPEX ratios stable and improved productivity.

Sustainability and digitalization

• Updated sustainability strategy is integrated into business operations and incentive systems, targeting emissions reductions across the value chain.

• Investments in energy-efficient stores, logistics, digitalization, and AI are central to driving productivity and customer experience.

• Electrification of transportation and energy-efficient logistics centres support emission reduction targets.