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Dear ladies and gentlemen, welcome to our 2018 Third Quarter Results Call. I'm Kesko's President and CEO, Mikko Helander. Together with me, I have our CFO, Jukka Erlund; and Vice President, Investor Relations, Kia Aejmelaeus. I will first give an overview of our business performance, and after that, we will be happy to take questions. Starting with third quarter highlights. Our net sales grew by 3.5%. At EUR 113 million, we reached an all-time best quarterly operating result. Grocery trade continued with strong market share and profit development. Building and technical trade operating profit improved by EUR 7 million. Cash flow from operating activities increased to EUR 131 million. In addition to the net sales and operating profit growth just mentioned, operating margin grew from 3.9% to 4.3%. Earnings per share increased by EUR 0.10 to EUR 0.81. Return on capital employed increased from 12.4% to 13.8% and return on equity from 9.9% to 11.6%. On group net sales. Third quarter net sales were EUR 2,642,000,000. In comparable terms, net sales grew by 3.5%. Looking at the group's quarterly operating profit. It increased by EUR 12 million, from EUR 100.5 to EUR 112.6 million. The corresponding margin grew from 3.9% to 4.3%. Moving on to return on capital employed. At 13.8%, our return on capital employed was close to the 14% targeted level. A few comments on our financial position. At the end of third quarter, equity ratio was 48.5%. Liquid assets were EUR 319 million. Interest-bearing net debt-to-EBITDA ratio was 0.6. Cash flow from operating activities was EUR 130.5 million. Cash flow from investing activities was EUR 59.5 million. Including acquisitions, cash flow from investing activities totaled EUR 216.3 million. Our financial position remains very good, allowing us to develop our business going forward. Next, I will discuss business development by division, starting with grocery trade. In comparable terms, grocery trade grew 6.2% to EUR 1,352,000,000 in the third quarter. Grocery trade third quarter operating profit increased from EUR 59.4 million to EUR 64.7 million. The corresponding margin grew from 4.5% to 4.8%. Market-wise, overall sector growth was 4.3% and within -- the price development was 2.4%. The market has developed well, with increased importance on quality and selections. We see rising demand for good online food sales services. Third quarter highlights for grocery trade, customer numbers, sales and market share all continued strong growth. Online food sales grew by 74%. Also, Kespro continued to perform well in the foodservice market. We continued investments in store sites, digital services and logistics operations. We have enjoyed strong growth in online food sales. Third quarter growth was 74%. We are pleased with a high customer satisfaction level, demonstrated by the Net Promoter Score of 67. We have nearly doubled the number of stores across Finland offering online food sales. Currently, already over 140 stores offer online services. Also, online visitor numbers have doubled compared to a year ago, average purchase 5x higher than in physical stores. Next year, we target sales of over EUR 40 million. Next, building and technical trade. Third quarter net sales in building and technical trade increased from EUR 1,070,000,000 to EUR 1,089,000,000. Excluding specialty goods trade, net sales increased from EUR 953 million to EUR 978 million. The comparable net sales growth was 2.5%. Third quarter operating profit in building and technical trade increased from EUR 40.7 million to EUR 45.9 million. Excluding specialty goods trade, operating profit increased by EUR 7 million from EUR 34.5 million to EUR 41.6 million. Correspondingly, operating margin increased from 3.6% to 4.2%. The market situation for the building and technical trade is expected to remain good, but the growth pace is expected to slow down somewhat. Additionally, renovation building is gaining more ground in the construction market. In our building and technical trade division, K-Rauta in Finland performed well. Onninen's growth and profitability also strengthened further. Performance remained good in Finland and Poland in particular. In Norway, operating profit increased, thanks to the acquisitions made to strengthen the Byggmakker chain. In Sweden, we continued efforts to improve the profitability of K-Rauta and Onninen. Kesko Senukai's strong sales performance continued in the Baltics. We are happy, we are very happy with the development of Onninen. Since the acquisition, net sales have grown by EUR 126 million to nearly EUR 1.6 billion, and EBITDA by EUR 16 million to EUR 55 million. That said, our efforts to improve sales and profitability further will continue in line with strategy. We see good growth prospects in technical wholesale. Next, car trade. In the third quarter, car trade net sales decreased by 5.6% to EUR 200 million, due to the implementation of the new WLTP emission testing. At EUR 7.8 million, car trade operating profit remained on a good level, despite the decrease in net sales. Market-wise, first-time registrations of passenger cars and vans were at least at last year's level into third quarter, up by 5% year-to-date. This reflects that WLTP emissions testing that is causing delays in car deliveries on the market. Measures to prevent rise in car tax are expected from the Finnish government. In the third quarter, the development of our car trade was in line with our expectations. Net sales and operating profit were at a good level, even though the implementation of the new WLTP emissions testing at the beginning of September had a weakening impact on performance in the short term. This year, we have so far enjoyed excellent performance in the Porsche business. Third quarter sales growth was 35%, and profitability strengthened further. Order book for new cars was plus 12%. Launching new mobility services is a cornerstone of car trade strategy. The leasing services for B2B and B2C customers launched this spring are off to a good start, with order book at around 500 cars. There has been good demand for car-sharing services at the K-Supermarket and K-Rauta pilot store locations. We are also building a nationwide charging network for electric cars, with nearly 400 charging points at more than 70 charging stations by the end of 2019. The first 10 charging stations will open during this autumn. Also, our partner, Volkswagen, is heading heavily into future mobility and new electric car models to customers. The new all-electric Audi e-tron was launched recently to the market and will be available at the start of next year. We have already received 100 pre-orders for it. Other notable electric car models to enter the market include Porsche Taycan and Volkswagen ID series.Lastly, a few comments on our outlook. In comparable terms, the net sales for continuing operations for the next 12 months are expected to exceed the level of the previous 12 months. The comparable operating profit for continuing operations for the next 12-month period is expected to exceed the level of the preceding 12 months. However, investments in the expansion of logistics operations and information systems and digital services will burden profitability during the period. Furthermore, in the car trade, profitability is burdened by the shift to WLTP emissions testing, which postpones car delivery at times. Before we end, I would like to highlight that our growth strategy is working well. Since strategy launched in 2015, we have achieved growth in all core divisions, and operating profit has improved by 46%, from EUR 221 million to EUR 322 million. We will continue with our chosen growth strategy and see good value-creation potential for upcoming years. This ends my prepared remarks. Thank you for your attention. We will now be happy to answer any questions you may have.
[Operator Instructions] Our first question comes from the line of Fredrik Ivarsson from Kepler Cheuvreux.
First, a question on Onninen, which have obviously shown a quite impressive improvement. I think the operating profit is up some EUR 15 million, EUR 16 million during the last 12 months. And I'm just curious, how much of that improvement is more organic? And how much is more related to synergies being captured? That's my first question. And the second one is related to online. Just curious on what you assume for next year because you mentioned a 75% growth pace at the moment. Do you think that we could see a similar or even higher growth pace next year? Or do you assume that it's going to come down closer to, say, 50% or so?
Yes, thank you. Thank you for your good questions. First, about Onninen, we have a very strong development in Onninen, especially in Finland. We are also very happy with Onninen in Poland. We have succeeded to make a real turnaround in Poland, and we can see clearly that the positive trend will continue. We are doing our utmost to support our colleagues in Onninen to maintain strong organic growth everywhere where Onninen operates. Synergies, we have gained synergies, but both very important. When we look Onninen's improving financial performance, synergies; but especially, I see that the organic growth, growing sales figures, growing market share are supporting Onninen's profitability. About online, as mentioned, we are very happy with our grocery online services, and our strong belief is that we will even accelerate growth in online sales. We are now opening steadily the online services at the K stores, and that will help, we believe, strongly to accelerate our growth also on that side.
Very clear. Just a short a follow-up on the Onninen-related question because you are targeting EUR 25 million to EUR 30 million in synergies by 2020. And I'm just curious, how much of that is sort of left?
Maybe on that side, we have some delays, but at the same time, we have succeeded to accelerate growth and we have succeeded to increase sales. But anyhow, we are still very optimistic that we have those synergies. But we have put more efforts and we have given higher priority to increase sales and market share in Onninen business, and we are happy that synergies are coming in a little bit slower. But the synergies and synergy targets are still valid, what we have communicated also earlier.
Okay. Very clear. And one last, maybe on the grocery side because we've seen, obviously, oil prices coming up quite significantly, and I would expect fuel prices to increase on your side. Can you confirm that you actually see that in the supply chain organization? Or what should we expect on that sort of side?
Sorry, could you repeat? On supply...
Yes. So more related to fuel prices, and I would expect your costs to come up slightly there. And obviously, fuel prices is a significant share of your OpEx on the grocery trade. So I'm just curious on what you see on that side and what to expect going forward.
We have mentioned first time look, I suppose, already 1.5 years ago, that it has been a temporary situation when food prices declined in Finland. And now we are back to normal, and we believe that the price -- trend of increasing prices will continue all in all. Of course, we should remember that 2.4% price increase, what we reported in Finnish grocery market, includes also quite much tax increases, alcohol tax, taxes of cigarettes increased, and that has certain quite big impact. But anyhow, we have seen, we have heard that everywhere summer was very dry and that has definitely certain impact also on our business. But we are just now in the middle of price negotiations with the industry, and we are very confident that in good cooperation with the industry, food industry, our suppliers, we will manage successfully also those issues.
Sorry, Mikko. My question was actually related to fuel prices and not food prices. So what do you see on that side and what to expect going forward, please?
No -- that is a very small issue in our business. No material impact on our numbers and our businesses.
Our next question comes from the line of Nicklas Skogman from Handelsbanken.
Maybe I could just jump on to Fredrik's question there. So the reason it's not an issue for you guys, the increase in fuel prices, is that because you pass that on very quickly to the retailers? Or -- how come it's not an issue?
Yes, Jukka Erlund here. So we have a business model where, like Mikko said, it's not really a big profitability issue for us. So I'll sort of repeat what Mikko said, so in our profitability side, it's -- it doesn't play a big role.
Okay, perfect. And then if -- maybe you could give an update on -- I mean, I know it's still early days for the B&T action plan that you presented at the CMD. But could you maybe give an update on sort of the actions taken and any success stories or any issues that you have encountered so far?
Yes. So obviously, the new management started at the end of last year, and in that sense, we have built now the strategy for all countries for all segments. And like said in the report, we are happy how the, for example, Onninen, performed overall. We are happy how -- finished DIY building, the -- our sort of builders merchant and DIY business developed as well. Onninen turnaround is succeeding there as well. That's a good sort of side as well. Kesko Senukai in the Baltic countries has really turned around also; operations, especially in Latvia. So overall, we are happy how the new, more country-specific driven strategy is implemented. And in a lot of markets, things are developing well. Also, in Norway, the new acquisitions that we made there have been fruitful, and we are happy with their integration and so on. So like said in the report, there's plenty of issues that we are very happy with.
Okay. And in Sweden, is there any change for the better or worse?
In Sweden, hard work continues, but also, as Jukka mentioned, we have -- everywhere, country-specific strategies have been made now on very detailed level, approved by us. And in many countries, including also Sweden, we have on place a new management, very skilled, very professional guys. For example, in Sweden, Endre Espeseth did excellent job earlier in Norway, did very successful turnaround in Poland and now he has been, about 6 months, the country head in Sweden. And he has also appointed very skilled managers to the Swedish management team. And Jorma Rauhala, Group Divisional President, personally support and reports to Jorma. And they have in process hundreds of measures on K-Rauta, Onninen side to improve commercial as well as financial performance in our Swedish operations. But as I said, hard work continues.
Yes, and the initiatives, they really are -- like Mikko said, we have a lot of initiatives up and running at the moment and covering all the -- both the stores, assortment, logistics and so on. And so just implementing that one.
All right, perfect. There's been a bit of M&A activity in Sweden recently on the builders merchant side. Is that anything you're following closely? Or are you focused on turning -- doing it DIY, doing it yourself or no?
No. I can confirm that everywhere in northern Europe in building and technical trade, we follow carefully M&A opportunities, including also Sweden. And of course, we should remember that the Swedish building and technical trade business is still quite fragmented, offering exciting, interesting opportunities for us. But at the same time, once again, I repeat that we put now a lot of efforts to have more solid platform in Sweden, further develop Swedish businesses from that solid foundation. Jorma, Endre and Endre's team, as we said, they are doing now hard work, and we are very confident that the business is now moving to the right direction.
Okay, perfect. And then lastly, on your guidance, you've had the line with -- you expect growth in comparable profits, but that costs for various things, including logistics, projects will weigh on the numbers. You've had that line in there for a while now. I was just wondering, have we already seen these costs weighing on profits? Or is it more something that's going to be visible further down the line?
Now I can start and Jukka can maybe open more those numbers after me. But again, I remind that we have growth strategy since 2015. We have had a growth strategy, meaning that we put a lot of efforts to accelerate growth in all our core businesses. And it means that based on our strategy guidelines, we strongly develop and we invest also money on our 3 core businesses and we can see strong development and improving profitability. But it means, also, that we are not at all maximizing our profitability in short term. We invest heavily also on future, and that way, we believe that we can maintain strong growth also in the coming years.
Yes, and maybe just to give a little bit more flavor as well. As you remember, we also mentioned about the store renewals and so on earlier on and have sort of dropped that side from the guidance earlier because they have been in the comparatives already. But what we have in there now is the logistics. That's something that we have just increased our capacity there because our volumes have grown, and there are certain costs coming from that side with the new expanded logistics. When it comes to the IT systems and digital capabilities, there we have had, of course, those investments already in the comparative figures as well. But at this point, we have increased somewhat the levels in order to be really competitive on the e-commerce side, on the mobile apps as well as in other sort of IT side. And there, the sort of depreciation times are somewhat shorter than in the stores, obviously. So when we when we have grown those investments, it somewhat affects the profitability as well. So I guess that's pretty much regarding those 2 issues.
Our next question comes from the line of Harri Paakkola from Nordea.
So a question regarding the building and technical trade and the market outlook. You said it's slowing down. Do you think the renovation will compensate for the slowdown in the new build? How do you see that market going?
Yes. First, to be precise, we are saying that growth -- we believe that growth will slow down but market will remain still very strong. And you are right, it is our impression, our feeling that on construction side, we will see a little bit less activities but more activities on renovation side. We should remember that more or less everywhere in northern Europe, human resources, amount of professionals, is limited. And today should even renovate quicker and fast properties in northern European countries. But as I said, professionals -- amount of professionals is limited, and when we will see less construction activities, that will free capacity and professionals to the renovation sites.
[Operator Instructions] As there are no further questions at this time, I'll hand the call back to the speakers.
Okay, guys. Thank you very much for your attention, for your active participation. Jukka, Kia, myself, we wish you a very pleasant afternoon, nice evening. Thank you. Bye-bye.
Thank you.
Thank you. Bye-bye.