KESKO

ROADSHOW

CFO JUKKA ERLUND

Q3/2015

KEY FIGURES 2014

2

Net sales

Operating profit*

Equity ratio

Liquid assets

Return on capital employed*

Personnel (FTE)

Shareholders

* excl. non-recurring items

€9,071m

€233m

54.5%

€598m

9.9%

19,976

39,869

• K-Group’s sales €11.3bn

• Over 1.3 million customer visits

every day

• Personnel 45,000

FOR SHOPPING TO BE FUN

3

K-GROUP

KESKO NET SALES

BY LINE OF BUSINESS

2014

4

Car trade 9%

Agricultural and machinery trade 7%

Sports trade 2%

Furniture trade 2%

Building and home

improvement trade 25%

Kespro 9%Grocery trade

Russia 1%

Grocery trade

Finland 44%

Grocery trade €4,754m

Home improvement and speciality goods trade €3,568m

Car trade €766m

5

KESKO NET SALES BY

COUNTRY 2014

Russia 4%

Lithuania 4%

Latvia 1%

Finland 82%

Belarus 1%

Estonia 1%

Sweden 2%

Norway 5%

Over 80% of net sales

comes from Finland

0

2000

4000

6000

8000

10000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Finland Other countries

NET SALES

6

+5.8%

+11.1%+9.3%

+3.3%

-11.9%+3.9%

+7.8% +2.4%-3.8%

€m

-2.6%

-100

0

100

200

300

400

500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Operating profit excl. non-recurring items Non-recurring items

OPERATING PROFIT

7

€m

YEAR-ON-YEAR CHANGE IN FIXED COSTSEXCLUDING NON-RECURRING ITEMS

8

10.3%7.5% 8.0%

1.2%

-4.0%-4.5%-4.0%-2.0% -1.3%-1.0%-1.6%

-1.9%-4.4%

-10.6%-15%

-10%

-5%

0%

5%

10%

15%

RETURN ON CAPITAL EMPLOYEDMOVING 12 MO, EXCL. NON-RECURRING ITEMS

9

Group totalHome improvement

and speciality

goods trade

Grocery trade Car trade

%

20.2

4.9

29.8

10.9

0

5

10

15

20

25

30

STRONG FINANCIAL POSITION

10

Liquid assets €843m €461m

Interest bearing net debt €-359m €78m

Equity ratio 52.2% 52.3%

Q2/2015 Q2/2014

• Cash flow €403 million from real estate arrangement

• Strong cash position enables growth and good dividend yield

EARNINGS / SHARE AND DIVIDEND

11

2009 2010 2011 2012 2013 2014

2.0

0.0

1.0

0.5

1.5 1.40

1.651.50

1.68

1.20

1.47

1.20

1.84

1.30

1.78

0.90

0.71

Dividend

Earnings / share excl. non-recurring items % Effective dividend yield

3.9% 3.7% 4.6% 4.8% 5.2% 5.0%€

12

FINANCIAL TARGETS AND

CAPITAL EXPENDITURE

• Return on capital employed 14%

• Return on equity 12%

• Interest bearing net liabilities / EBITDA < 2.5

• Capital expenditure in 2015–2017 approximately €1 billion

• Excluding possible acquisitions

Dividend policy: Kesko Corporation distributes at least 50% of its earnings

per share excluding non-recurring items as dividends, taking however the

company's financial position and operating strategy into account.

13

ROCE AND ROEEXCL. NON-RECURRING ITEMS, %

9.6

12.4

14.7

10.2

7.4

14.013.1

9.09.8 9.9

14.0

10.510.0

14.6

8.1

3.8

8.7 8.8

6.97.7 7.6

12.0

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 target

ROCE ROE

13

14

0

50

100

150

200

250

300

350

400

450

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Capital expenditure in store sites Acquisitions Other capital expenditure

average

CAPITAL EXPENDITURE BACK TO NORMAL

LEVEL

€m

15

IMPROVING PROFITABILITY

• Profitable growth in three strategic areas

• Divestment of Anttila

• Improving cost efficiency

• Enhanced sourcing operations

• Efficient support functions and synergies in core processes

• The objective is to achieve cost savings of at least €50 million in

fixed costs by the end of 2016

OPERATING

ENVIRONMENT

16

RETAIL TRADE TRENDS IN OPERATING

COUNTRIES

17

Source: Eurostat, excl. motor vehicles and fuels

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

% (

roll

ing

12

mo

)

Estonia

Lithuania

Sweden

Norway

Latvia

Finland

0

2

4

6

8

10

12

14

16

1/0

0

7/0

0

1/0

1

7/0

1

1/0

2

7/0

2

1/0

3

7/0

3

1/0

4

7/0

4

1/0

5

7/0

5

1/0

6

7/0

6

1/0

7

7/0

7

1/0

8

7/0

8

1/0

9

7/0

9

1/1

0

7/1

0

1/1

1

7/1

1

1/1

2

7/1

2

1/1

3

7/1

3

1/1

4

7/1

4

1/1

5

7/1

5

Expectations for own finances

Expectation, 21st centuryaverage

CONSUMER CONFIDENCE IN FINLAND

18

odotukset omasta taloudesta seuraavan 12 kk:n kuluttua

Lähde: TilastokeskusSource: Statistics Finland

19

BUSINESS ENVIRONMENT SLOWLY RECOVERING

Finland

• Decline of purchasing power will level off, but is not expected to improve significantly in the next few years

Skandinavia and the Baltic countries

• Steady economic growth is expected to continue

Belarus

• Consumers’ purchasing power is expected to strengthen, hyperinflation is expected to ease

20

OPPORTUNITIES AND RISKS IN RUSSIA

• The world’s richest country in terms of raw

material reserves

• Around 150 million consumers and 13

metropolitan cities

• As yet, political and economical risks are

greater than normal

• The economy has potential for strong growth

as soon as the political situation is normalised

21

RETAIL SALES IN RUSSIA, 2000-2014

Source: PMR Online

0

5000

10000

15000

20000

25000

30000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Non-food products Food, beverages and tobacco

RUB, bn

PORTFOLIO

STRATEGY

22

INVESTING IN STRATEGIC

GROWTH AREAS

• Grocery trade (Finland, Russia, Kespro)

• Building and home improvement trade (Europe)

• Car trade (Finland, the Baltic countries)

• Good profitability achieved in all strategic growth areas

• Investments in range of €300 million / year, excluding

potential acquisitions

• Also acquisitions are considered in all three strategic

growth areas

23

KEY STRATEGIC OBJECTIVES

24

• Turning the market share in the Finnish grocery trade around

• Increasing the building and home improvement trade in Europe

• Strengthening the market leadership in the Finnish car trade

• The best omni-channel customer experience in the trading sector

• One unified Kesko, harvesting synergies

25

MAXIMISING VALUE CREATION ALSO IN OTHER

BUSINESSES

• Important to have the best platform for Kesko’s small and medium sized businesses to succeed in tight competition

• Furniture trade (Finland and Estonia)

• Agricultural trade (Finland)

• Machinery trade (Finland and the Baltic countries)

• Shoe trade (Finland)

• Sports trade (Finland and Russia)

• All options which improve competitiveness of other businesses and retailer entrepreneurs are possible

25

26

REAL ESTATE ARRANGEMENT COMPLETED

• The joint real estate investment company established by Kesko, AMF

Pensionsförsäkring and Ilmarinen started operating in June

• The combined fair value was €652 million and the properties owned by

Kesko Group companies accounted for €485 million

• Cash flow to Kesko was €403 million

26

27

GROCERY TRADE

KESKO GROCERY TRADE KEY FIGURES IN 2014

28

Kespro 17%

Grocery trade

Finland 81%

Grocery trade

Russia 2%Net sales €4,754m

Operating profit €223m

Operating margin 4.7%

ROCE 22.2%

29

KESKO – QUALITY LEADER IN GROCERY

• High market share of 33% in Finland

• New customer focused strategy clearly differentiates

Kesko in the market

• already improving market share development

• Steady and strong operating profit and cash flow

• Successful business concept in Russia

• Kesko is the most responsible food retailer in the world

29

30

STRATEGIC OBJECTIVES OF THE GROCERY

TRADE

• Turning the market share in the Finnish grocery trade around

• Further improving quality and service level

• Investments to improve the K-supermarket and K-market store network

• Customer focused renewal of the K-citymarket concept

• Improving price competitiveness and price image

• Offering leading digital services in grocery

• Developed retailer business model

STRATEGY FOR RUSSIA

• Increasing operations and improving profitability

in the St. Petersburg area

• Active in acquiring store sites

• K-ruoka is the best food store in the St. Petersburg area

• Identifying new growth possibilities in the Moscow area

and possibly in other metropolitan cities in Russia

31

32

INCREASING THE

HORECA BUSINESS

• Organic growth through strong international cooperation

• Differentiating the selection with private label products

• Supporting the service counter offering of the K-food stores

• Searching for expansion alternatives in Finland and the

neighbouring areas

HOME IMPROVEMENT

AND SPECIALITY

GOODS TRADE

33

HOME IMPROVEMENT AND

SPECIALITY GOODS TRADE

2014, EXCL. ANTTILA

34

Net sales €3,245m

Operating profit €64m

Operating

margin2.0%

ROCE 7.4%

Sports trade€186m

Shoe trade €20

Furniture trade€176m

Agricultural trade€372m

Others€20m

Building and home improvement trade Belarus €125m

Building and home improvement trade

Russia €250m

Building and homeimprovement tradeFinland €785m

Building and homeimprovement tradeScandinavia €625m

Building and home improvement trade Baltics €443m

KonekeskoBaltics €96m

KonekeskoFinland €161m

35

PROFITABLE GROWTH IN BUILDING AND HOME

IMPROVEMENT TRADE

• Market share in Finland over 40%

• Market #1 or #2 in Finland,

Norway, Estonia, Latvia, Lithuania

and Belarus

• Eight consecutive quarters of

improving profitability

• Strong position in B-2-B trade –

#1 in Finland, Norway and Estonia

35

0

10

20

30

40

50

60

70

2012 2013 2014

Operating profit, € million

36

300 STORES IN EIGHT

COUNTRIESFinland€1,190m138 stores

Sweden€197m

20 stores

Norway€671m

82 stores

Russia€250m

13 stores

Belarus€125m

11 stores

Lithuania€317m

19 stores

Latvia€53m

8 stores

Estonia78 M€

8 stores

TOTAL RETAIL SALES

€2,881m

37

STRATEGIC OBJECTIVES OF THE BUILDING AND

HOME IMPROVEMENT TRADE

37

• Kesko #5 in Europe – strong potential for further growth organically or

through acquisitions

• Providing excellent services from the same store network to the three

different customer segments

• A common core for all countries to ensure efficient operations

• Offering the best omni-channel digital services

38

CAR TRADE

38

CAR TRADE 2014

39

Net sales €766m

Operating profit €29m

Operating margin 3.8%

ROCE 30.1%

Volkswagen 12.3%

Toyota 11.9%

Skoda 9.2%

Volvo 7.3%

Ford 7.0%

Nissan 6.1%

Audi 6.0%

Kia 5.7%

Seat 1.7%

Others 32.8%

Market Share in 2014

40

THE CAR TRADE IS ONE OF KESKO’S THREE

STRATEGIC GROWTH AREAS

• VV-Auto’s market share in the Finnish passenger car and van trade

has risen from 15% to 21% within ten years

• Throughout recent years, Volkswagen has been the best selling car

brand in Finland and Audi has been number one in its competitive

segment

• VV-Auto’s retail net sales have quadrupled within ten years from 100

million to 400 million

• VV-Auto’s profitability has remained at a good level despite the

difficult market situation

40

4141

STRATEGIC OBJECTIVES OF THE CAR

TRADE

• Co-operation with Volkswagen AG: Volkswagen aims to be the biggest car

manufacturer by 2018. Volkswagen is the biggest R&D investor in the world

• VV-Auto will focus on Volkswagen Group's car brands

• Sales growth and growing market share in Finland and in the Baltics

• Increasing retail sales by investing in new sales and service channels

• Developing customer loyalty with new finance and service models

• The best omnichannel customer experience in car trade

42

THE WORLD’S

MOST

SUSTAINABLE

RETAIL OPERATOR

42

KESKO IS THE MOST RESPONSIBLE FOOD AND

STAPLES RETAILER IN THE WORLD

43

In ’The Global 100 Most Sustainable Corporations in the World’ list since 2005

In the Sustainability Yearbook 2015, Kesko was classified into the bronze class

in the Food & Drug Retailers sector

Included in the FTSE4Good index focusing on responsible investment since

2009

Included in the Dow Jones sustainability indexes DJSI World and DJSI Europe

2003-2014

At the top of the Nordic Carbon Disclosure Leadership climate index in 2011-

2014

45

BASIC INFORMATION

45

• Established in 1940

• Listed on the Helsinki Stock Exchange (Nasdaq Helsinki) in 1960

• 40,000 shareholders

– 28% of all shares owned by non-Finnish

– 40% of B-shares owned by non-Finnish

• Market capitalisation €3.0 billion (June 30, 2015)

• Share series: A and B – voting rights 10:1

Number of shares

A shares31.7%

B shares68.3%

Voting rights

B shares

18%A shares

82%

46

SHAREHOLDERS

46

The largest registered shareholders

At 6/2015 by number of shares

%

1 K-retailers´ Association 3,793,012 3.79

2 Vähittäiskaupan Takaus Oy 3,491,771 3.49

3 Kruunuvuoren Satama Oy 3,438,885 3.44

4Ilmarinen Mutual Pension Insurance Company 2,050,632 2.05

5 Valluga-sijoitus Oy 1,340,439 1.34

6Varma Mutual Pension Insurance Company 1,130,986 1.13

7Foundation for Vocational Training in the Retail Trade 1,080,643 1.08

8 Oy The English Tearoom Ab 1,000,000 1.00

9 Elo Pension Company 896,968 0.90

10 Kesko Oyj 876,054 0.88

%

47

REAL ESTATE IN 2014

47

Owned properties

CountryArea,

1,000 m2

Finland 770

Other Nordic countries 117

Baltic countries and Belarus 113

Russia 164

Total

Carrying amount

1,164

€1,430 M

Leased properties total

1,000 m2 2,958

Classification

Strategic properties 53%

Standard properties 43%

Development properties 4%

Realisation properties 0%

48

OPERATING MARGIN EXCL. NON-RECURRING

ITEMS BY DIVISION

48

1-3/2014

4-6/2014

7-9/2014

10-12/2014

1-3/2015

4-6/2015

Grocery 4.1 4.6 5.1 4.9 3.2 3.8

Home improvement and speciality goods

-4.1 0.6 2.1 0.9 -1.6 3.8

Car and machinery 3.0 3.8 3.6 0.8 2.7 4.0

Total 0.9 2.9 3.6 2.7 1.3 3.4

TREND IN FOREIGN OWNERSHIP, % (31.12.)

49

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 2013 2014Q2/2015

All shares B share

%

UNEMPLOYMENT RATE

50

Source: Statistics Finland

RETAIL TRADE, TREND DEVELOPMENT

51

60

70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Turnover Volume index

DAILY CONSUMER GOODS TRADE, TREND

DEVELOPMENT

52

60

70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Turnover Volume index

GRANTED PERMITS AND STARTED BUILDINGS,

MIL. M3, MOVING ANNUAL TOTAL

53

Source: Statistics Finland

*) The data is based on estimation

NEW REGISTRATIONS OF PASSENGER CARS IN

FINLAND

54

Source: Statistics Finland

5555

INTERIM REPORT

JANUARY-JUNE

2015

KEY EVENTS IN Q2

• K-food stores’ market share is estimated to have increased

• Profitability of the home improvement and speciality goods trade continued to

improve

• Real estate arrangement was completed as planned,

positive cash flow effect €403 million

• Liquid assets rose to €843 million, Kesko has a very strong financial position

• New strategy was published

56

FINANCIAL PERFORMANCE

57

Q2/2015

Q2/2014

H1/2015

H1/2014

Net sales, €m 2,227 2,371 4,310 4,499

Operating profit, €m 176 69 72 56

Operating profit excl. non-recurring

items, €m76 68 103 87

Operating margin excl. non-recurring

items, %3.4 2.9 2.4 1.9

Net profit for the period, €m 153 54 42 42

Net profit for the period excl. non-

recurring items, €m58 52 75 66

NET SALES IN LOCAL CURRENCIES

EXCL. ANTTILA IN Q2 -2.2% AND H1 -0.8%TOTAL CHANGE FOR Q2 -6.0% AND FOR H1 -4.2%

58

5,000

4,000

3,000

2,000

1,000

0

H1/2015

4,310

H1/2014

4,499

Q2/2015

2,227

Q2/2014

2,371

€m

Reported net sales, €, incl. Anttila

Q2 NET SALES BY DIVISION

€1,149m

€797m

€277m

Grocery trade

Home improvementand specialitygoods trade

Car and machinerytrade

52%

36%

12%

59

OPERATING PROFIT EXCL. NON-RECURRING

ITEMS IMPROVED IN Q2 AND H1

60

0

20

40

60

80

100

120

H1/2015

102.9

H1/2014

86.7

Q2/2015

76.4

Q2/2014

67.6

€m

STEADY PROFIT PERFORMANCE CONTINUESOPERATING PROFIT EXCL. NON-RECURRING ITEMS

61

0

20

40

60

80

100

Q2/2015

76.4

Q1/2015

26.5

Q4/2014

61.9

Q3/2014

84.0

Q2/2014

67.6

Q1/2014

19.1

Q4/2013

66.8

Q3/2013

83.6

Q2/2013

69.8

Q1/2013

18.6

€m

RETURN ON CAPITAL EMPLOYED INCREASESEXCL. NON-RECURRING ITEMS, ROLLING 12 MO

62

0

2

4

6

8

10

12

Q2/2015

10.9

Q1/2015

10.2

Q4/2014

9.9

Q3/2014

10.0

Q2/2014

9.9

Q1/2014

9.9

Q4/2013

9.8

Q3/2013

9.7

Q2/2013

9.3

Q1/2013

8.8

%

STRONG CASH FLOW ALSO WITHOUT

REAL ESTATE ARRANGEMENT

63

-200

-100

0

100

200

300

400

500

600

Q2/2015

541.1

Q1/2015

-139.3

Q4/2014

98.6

Q3/2014

82.4

Q2/2014

79.9

Q1/2014

-138.5

Q4/2013

75.8

Q3/2013

80.3

Q2/2013

206.1

Q1/2013

-100.5

€m

Cash flow after capital expenditure

FINANCIAL POSITION

64

30.6.2015 30.6.2014

Equity ratio, % 52.2 52.3

Liquid assets, €m 843 461

Interest-bearing net liabilities, €m -359 78

Capital expenditure, €m 110 99

Return on capital employed*, % 10.9 9.9

Return on equity*, % 8.4 8.3

* Excl. non-recurring items, rolling 12 mo

GROCERY TRADE

65

NET SALES FOR Q2 AND H1

66

2,500

2,000

1,500

1,000

500

0

2,252

H1/2014

2,304

Q2/2015

1,149

Q2/2014

1,202

H1/2015

€m

OPERATING PROFIT EXCL. NON-RECURRING

ITEMS FOR Q2 AND H1

67

0

20

40

60

80

100

120

H1/2015

78.2

H1/2014

100.7

Q2/2015

43.3

Q2/2014

55.3

€m

GROCERY TRADE IN Q2

• K-food stores’ market share in

Finland is estimated to have

increased

• Profitability improved to 3.8% from

the first months of the year

(Q1: 3.2%)

• Sales in Russia increased by

36% in roubles

• Kespro’s market share increased

and profitability remained at a good

level

68

MARKET SHARE IS ESTIMATED TO HAVE

INCREASED SINCE APRIL, NO SIGNIFICANT

CHANGE IN THE LONG TERM

33.4 33.9 33.7 34.2 35.0 35.3 34.7 34.0 33.1

0

10

20

30

40

2006 2007 2008 2009 2010 2011 2012 2013 2014

69

%

K-GROUP’S PERFORMANCE IN THE GROCERY

TRADE HAS BEEN GOOD

• Exceptional operating environment,

consumers’ purchasing power has declined

for three years

• Due to intense competition and consumers’

decreased purchasing power, food prices

have fallen by 1% in 2015

• K-Group has succeeded by investing in

both price and quality

• As the economic cycle turns, the K-Group

will have even better preconditions for

success

70

HOME IMPROVEMENT

AND SPECIALITY

GOODS TRADE

71

NET SALES IN LOCAL CURRENCIES

EXCL. ANTTILA IN Q2 +0.1% AND H1 +1.0%TOTAL CHANGE FOR Q2 -10.4% AND FOR H1 -8.0%

72

797890

2,000

1,500

1,000

500

0

H1/2015

1,519

H1/2014

1,651

Q2/2015Q2/2014

€m

Reported net sales, €, incl. Anttila

OPERATING PROFIT EXCL. NON-RECURRING

ITEMS IMPROVED CLEARLY IN Q2 AND H1

73

-40

-20

0

20

40

H1/2015

18.7

H1/2014

-25.6

Q2/2015

30.1

Q2/2014

5.8

€m

HOME IMPROVEMENT AND

SPECIALITY GOODS TRADE

IN Q2

• Building and home improvement trade

• Market share is estimated to have

increased in Finland, Sweden, the

Baltics and Russia

• Operating profit has improved for nine

consecutive quarters

• Best profit improvement was seen in

Sweden

• In the speciality goods trade, K-maatalous

improved its result in a difficult operating

environment

74

CAR AND

MACHINERY TRADE

75

NET SALES FOR Q2 AND H1

76

538556

277283

0

200

400

600

Q2/2015Q2/2014 H1/2014 H1/2015

€m

OPERATING PROFIT EXCL. NON-RECURRING

ITEMS FOR Q2 AND H1

77

0

10

20

H1/2015

17.9

H1/2014

19.1

Q2/2015

11.0

Q2/2014

10.9

€m

CAR AND MACHINERY TRADE

IN Q2

• Profitability remained at a good level

despite the challenging operating

environment

• Uncertainty related to car taxation

has been removed

• Volkswagen continues as the market

leader

• Net sales growth of the machinery

trade 3.4%, profitability improved

• Yamarin boats had good sales

performance

78

FUTURE OUTLOOK

79

Estimates of the future outlook for Kesko Group's net sales and operating profit

excluding non-recurring items are given for the 12 months following the reporting

period (7/2015-6/2016) in comparison with the 12 months preceding the

reporting period (7/2014-6/2015).

The general economic situation and the expected trend in consumer demand

vary in Kesko’s different operating countries. In Finland, the trading sector’s

performance is expected to remain weak and the tough competitive situation is

expected to continue. In Sweden, Norway and the Baltic countries, the growth in

demand in the trading sector is expected to continue. In Russia, the economic

situation and consumers’ purchasing power are estimated to remain weak.

Kesko Group's net sales for the next 12 months are expected to be lower than

the level of the preceding 12 months and the operating profit excluding non-

recurring items for the next 12 months is expected to exceed the level of the

preceding 12 months.

THE TRAIN KEEPS RUNNING…

• Loss-making department store trade Anttila’s divestment

• Profitability problems in the building and home improvement trade in Sweden

and Norway clear profitability improvement

• Real estate arrangement incomplete real estate arrangement completed

• Declining food trade market share market share is estimated to have

increased

• Strategy new focused strategy

80

81

CONTACT INFORMATION

81

IR@kesko.fi

www.kesko.fi/investors

Twitter.com/Kesko_IR