Kesko (KESKOB) Q2 2020 earnings summary

Executive summary

• Record Q2 comparable/adjusted operating profit of €155.2m, up from €122.5m, as grocery and building/technical trade growth outweighed weakness in auto and foodservice.

• Rapid COVID-19 response, cost controls and strong cash generation supported an upgraded FY2020 outlook; new climate targets set carbon neutrality by 2025 and zero emissions by 2030.

Financial highlights

• Q2 revenue was €2,814.5m, up 1.2% reported and 2.2% comparable; H1 revenue was €5,355.0m, up 3.3% reported and 3.0% comparable.

• Q2 reported operating profit was €154.1m vs. €119.9m; comparable/adjusted operating profit was €155.2m vs. €122.5m. H1 comparable/adjusted operating profit was €220.3m vs. €179.9m.

• Q2 comparable profit before tax was €135.2m vs. €99.2m; diluted-free basic EPS was €0.24 vs. €0.18. H1 adjusted EPS was €0.32.

• Q2 operating cash flow was €421.8m vs. €271.4m; H1 operating cash flow was €557.4m vs. €428.3m. Prior-year Q2 included €44m of exceptional positive items.

• H1 continuing-operations net income was €131.9m vs. €113.4m; Q2 net income was €105.3m vs. €90.7m.

Outlook and guidance

• FY2020 comparable/adjusted operating profit guidance rose to €430–510m from €400–450m, reflecting stronger-than-expected grocery and building/technical trade sales.

• The guidance range remained wide because the pandemic’s course and economic effects were difficult to predict; foodservice and auto sales remained weak.

• Non-acquisition investments were being adjusted to ~€200m to protect cash flow amid exceptional conditions.