Release Date: July 23, 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 strong cash flow from operating activities, reaching EUR309 million, thanks to improved working capital management.
- The company successfully integrated the Davidsen acquisition, contributing positively to net sales in the building and technical trade division.
- Online grocery sales continued to grow robustly, increasing by 13.5% and accounting for 4.1% of K Group's grocery sales.
- Kesko Oyj (KKOYF) expanded its grocery store offerings by adding nearly 450 wine products and 100 stronger beer products, enhancing customer convenience.
- The company maintained a strong financial position with a net debt to EBITDA ratio of 1.1, despite increased investments in logistics and grocery trade store networks.
Negative Points
- Net sales and profit decreased across all divisions, with a notable decline in the car trade division due to weak market demand for new cars.
- The building and technical trade division faced profitability challenges due to a weak construction cycle, although the decline was slower than in Q1.
- Grocery trade net sales were down, impacted by increased store site costs and a decline in non-food sales at K-Citymarkets.
- Kesko Oyj (KKOYF) experienced a decrease in return on capital employed across all divisions as earnings declined.
- The company's guidance for 2024 was adjusted, with the high end of the comparable operating profit range reduced from EUR700 million to EUR680 million, reflecting ongoing market challenges.
Q & A Highlights
Q: Can you provide more details on the impact of solar power products on the Building and Technical Trade (BTT) division's margins?
A: Hanna Jaakkola, Vice President - Investor Relations, explained that the majority of the margin from solar panels came in Q1 and Q2 of the previous year. Jorma Rauhala, CEO, added that over 80% of the margin was realized in the first half of 2023, and the situation has improved with new inventories and stable gross margins.
Q: The June figures showed a decline in sales for grocery and BTT. Was this due to poor weather?
A: Jorma Rauhala noted that fewer sales days were a significant factor. Ari Akseli, President of Grocery Trade, mentioned that excellent weather in May boosted sales, but poor weather in June affected sectors like barbecue and ice cream. Sami Kiiski, President of BTT, stated that the results were as expected, considering fewer sales days.
Q: How will store site and price investments impact grocery margins?
A: Jorma Rauhala stated that while investments in store site networks and pricing are planned, they have not yet been implemented. The company expects to maintain a margin above 6% in the grocery division despite these investments.
Q: Are you satisfied with the current level of investment in grocery prices, or is there a need to increase campaigning?
A: Ari Akseli mentioned that they plan to invest in prices using customer loyalty data to offer better deals to top customers, aiming to increase the average shopping basket size.
Q: What are the main reasons for the weak market development in grocery trade, and what are your expectations for the second half of the year?
A: Ari Akseli noted that consumer buying power remains low, and customers are cautious. The company expects the market to remain challenging, as reflected in their guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
