Helsinki Apr 29, 2020 (Thomson StreetEvents) — Edited Transcript of Kesko Oyj earnings conference call or presentation Tuesday, April 28, 2020 at 9:00:00am GMT

Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [1]

Ladies and gentlemen, welcome to our Q1 2020 release call. I’m Kesko’s CEO, Mikko Helander. Together with me, I have our CFO, Jukka Erlund; and Vice President, Investor Relations, Hanna Jaakkola.

We published again a record result for first quarter. The impact of COVID-19, coronavirus epidemic was seen from mid-March and onwards. I will first give a brief overview of our business performance in first quarter, and thereafter, I will go through the impact of the corona epidemic to Kesko and K Group. After the presentation, we will be happy to take questions, both by phone and via chat.

Key events in the first quarter. Market shares have strengthened further. The market shares of K-food stores, K-rauta and Onninen are growing. Grocery sales in K-food stores grew by 7.8%. Also, online grocery sales grew significantly. At their highest, our online grocery sales have grown at a pace of over 800% a week.

In technical trade, I would like to highlight the performance of Onninen, strong net sales and profit improvement continued in first quarter. Konekesko divestment was completed in March. The divestment was accurate already in summer 2018. During the period, we acquired a technical wholesale company MIAB, in Sweden.

The impact of corona epidemic was seen in our business operations starting from March, around the 12th and that weekend.

The net sales for Kesko’s continuing operations in first quarter 2020 totaled EUR 2.540 billion. It was up by 5.8%, comparably up by 4%. The growth equals approximately EUR 140 million. Rolling 12 months net sales were EUR 10.860 billion.

Net sales increased in all our 3 divisions. Comparably, it fell in car trade. Net sales grew in all food store chains, and building and technical trade, net sales continued to grow. Onninen’s growth was especially strong. Comparable operating profit for first quarter was EUR 65.1 million, and it increased by EUR 7.6 million. It is a record operating profit for first quarter, which is typically the lowest quarter of the year.

Profitability was 2.6%, and it increased due to good sales development. Rolling 12-month operating profit was nearly EUR 470 million.

Comparable operating profit for continuing operations grew in grocery trade and building and technical trade. Grocery trade grew by EUR 3.6 million. The growth was strongest in the building and technical trade, excluding specialty goods trade. It grew by EUR 5.4 million. Weakened demand pushed the car trade’s comparable operating profit.

Return on capital employed, one of our strategic targets, improved and was at the level of 9.6%. It improved in the grocery trade.

Kesko’s financial position is strong. The operating cash flow improved by EUR 27 million and was EUR 135.7 million. Last year, first quarter was boosted by a return of surplus assets by Kesko pension fund. Our liquid assets were EUR 265.4 million. Interest-bearing net debt, excluding lease liabilities was EUR 482.4 million. And the corresponding net debt-to-EBITDA ratio was 0.9.

Now to the COVID-19 epidemic and to the measures we have taken. The COVID-19 epidemic began to affect our operation significantly from mid-March onwards. Despite ongoing worldwide efforts to stop the epidemic, we must prepare for the possibility that exceptional circumstances will last for some time. In response, we have adjusted our management practices and operations as necessary.

Impacts of the pandemic on the economy depend on the duration and success of containment measures. Finland and Norway have similar COVID-19 strategies. Norway is now lifting the restrictions gradually, while in Finland, we are preparing to ease the restrictions. But the Baltic countries and Poland have had very tight restrictions and now lifting gradually. In Sweden, the cases and mortality is higher than in the other Nordic countries. IMF currently estimates that the negative GDP impact in the region are between 4.6% to 8.6%.

What are the key measures we, as Kesko and K Group, have taken? Number one is to ensure the safety of customers and personnel. We need to ensure the functioning, purchasing and supply chains under all circumstances. And also, we need to grow online sales services fast. It is important to postpone development projects that are not critical. The focus is on dealing with the current situation. To secure the strong financial position and secure cash flow, we are saving in personnel costs over 1,000 people currently laid off. We are also cutting other fixed costs. In 2020, we are cutting cash flow from investing activities to be below EUR 200 million. Also, efficient management of credit risk and amounts due to from customers are critical. One of the key measures is to ensure the availability and sufficiency of financing.

In K Group, epidemic is well under control. Significant investments have been made in protection and constant efforts to improve safety. COVID-19 testing has begun, and it will be expanded.

In our company, there are currently some 30 confirmed COVID-19 cases. Preparations to safely return back to normal have begun.

Impacts of the corona epidemic varied within grocery trade. We have seen strong sales growth on K-food stores and online, while our B2B operator, Kespro’s sales are down by approximately 50%. Also, sales of home and specialty goods in K-Citymarkets are suffering due to lower customer footfall. Reduced traffic has had a significant negative impact on Neste K service station sales.

On market, there is significant growth in food retail, in general. Hoarding of some product categories was seen in mid-March, such as tissue paper, canned foods, bread and meat. There are fewer customer visits and bigger average purchases. Also, in general, the demand for online sales of groceries have increased. Food service business is down due to the restrictions.

K-ruoka.fi has become the biggest online grocery service in Finland. The highest growth rate was over 800% a week. We have been able to successfully respond a strong a growth in online demand. Our r K-ruoka.fi network is expanding fast. Some 20 new stores have been added to the network every week. Currently, some 360 K-food stores offer online grocery sale services at K-ruoka.fi all over Finland. Despite the strong growth, the customer satisfaction is very high. NPS is 82. Online grocery sales now account for 5% of our retail sales.

For building and technical trade sales, the impact has been moderate so far. B2C trade sales development in building and home improvement has been good in Finland and Sweden. Sales levels have also stayed good in B2B trade. Also, Onninen sales development has been very good so far.

Lithuania, there was a step drop — there was a steep drop in sales due to stores being closed until 16th April from March 16. Leisure trade sales has declined significantly.

On market, the activity on construction sites has continued without major disruptions. Home decoration and renovation have increased, but there are fewer new construction starts. Currently, it is difficult to predict trends in demand in the longer term. It is possible that stimulus measures could accelerate economic turnaround and increase demand.

In car trade, the demand has decreased significantly. New car sales and orders are significantly below normal levels. Also, used car sales also clearly down. On the other hand, servicing and spare part service sales are almost at a normal level. There has been production shutdowns at Volkswagen Group plants, but we have plenty of previously imported cars available for sale. Due to the corona epidemic, we have expanded car pickup and return services.

On market overall, orders for new passenger cars are down by approximately 60% and orders for vans down by 40%. Demand has weakened significantly among both customers and the corporate customers. Also, used car sales also down by — significantly.

Our growth strategy execution continues. But right now, I stress, our focus is on crisis management. Kesko initiates a strategic review concerning business operations in the Baltic countries and Belarus.

Kesko has many different businesses in the Baltic countries and Belarus. The combined net sales is approximately EUR 960 million. The largest part is the building and home improvement and home and specialty goods trade in Estonia, Latvia, Lithuania and Belarus through Kesko Senukai.

Kesko’s ownership varies between businesses. Onninen is our technical wholesale operator in the Baltic countries. We also import SEAT cars in Estonia and Latvia.

The starting point for the strategic review is the market and its size, which is the same size as Finland. The region consists of 4 different countries with different cultures. The economies are growing, and there is further potential for purchasing power growth in all the countries. Currently, economic growth has slowed down and population development is negative in the Baltic countries.

Kesko and UAB R Investicija have different views on how to develop Kesko Senukai. The objectives of this strategic review are the strategic choices in building and home improvement and home and specialty goods trade in technical wholesale and also strategic choices in car trade. Our objective is to strive to establish a common point of view with UAB R Investicija on how to develop and manage Kesko Senukai.

And to the Annual General Meeting. The Annual General Meeting originally convened for 13th March 2020 (sic) [30th March 2020] was held today, 28th April 2020 at 10:30 a.m. On the agenda were, among other things, were the dividend of EUR 2.52 per share. It is in line with the original Board proposal. It will be paid in 2 installments. And the split — and the share split 1:4, their new shares will be issued for each current one in line with the original Board proposal.

And then the guidance for 2020. The guidance for Kesko Group’s continuing operations is given for year 2020 in comparison with year 2019. Due to the COVID-19 pandemic and global economic uncertainty, the company estimates that its comparable operating profit for continuing operations will amount to EUR 400 million, EUR 450 million in 2020, falling somewhat short of 2019 comparable operating profit of EUR 461.6 million. The company does not issue a guidance regarding net sales.

Thank you. And now, it is time for questions from the conference call lines or via chat, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Fredrik Ivarsson of ABG.

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Fredrik Ivarsson, ABG Sundal Collier Holding ASA, Research Division – Research Analyst [2]

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First one on the CapEx levels. Obviously, you’re cutting CapEx below EUR 200 million, I think, it said in the report. Can you tell us what kind of investments that relates to? And how should we also expect 2021 to develop? Are you sort of pushing investments towards the future or just more canceling them? That’s my first question.

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [3]

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First, I repeat what I stated also in my presentation that, definitely, after pandemia, we will continue implementation of our growth strategy. And definitely, it means also that we will allocate, after pandemia again, our money on investments and allocate more resources on growth. At the moment, when we are in the middle of epidemia, we have decided to curtail investments. But anyhow, I remind that money, what we will spend, will be below EUR 200 million, but it is still a big amount of money. And mainly, those investments, we will make on our store network to modernize stores, to open some new grocery stores, as well as continue also investments on e-com applications on grocery side, building and technical trade business, as well as, we will further develop our IT systems.

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Fredrik Ivarsson, ABG Sundal Collier Holding ASA, Research Division – Research Analyst [4]

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Okay. A question on B&T. And you — I think you touched upon it, but we currently see very strong demand on the B2C side. Are you currently seeing a big shift in the mix of your sales from B2B towards more B2C? And if yes, maybe how much approximately?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [5]

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No. In building and technical trade, as we stated also today, development for time being has been very positive on B2C side as well as in B2B business. We can see that in builder’s merchant, in DIY — on builders’ merchant DIY side, as well as Onninen, what is 100% dedicated on B2B has had also very strong development.

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Fredrik Ivarsson, ABG Sundal Collier Holding ASA, Research Division – Research Analyst [6]

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Right. And last one from me before I jump back in the queue.

On the strong online sales within food retail, can you say anything about how that’s been impacting your and maybe also your franchisees’ profitability?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [7]

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All in all, we are extremely happy that we have succeeded to meet so well fast-growing demand, especially in grocery e-com business. And based on that, we believe that we can maintain strong development also in future.

Part of our success is that we have succeeded very well to combine e-com and store network. That is the beauty of our e-com concept. We will put definitely, also in future, more and more efforts, further develop our grocery e-comm sales. But also, we will look after that we can continue also profit improvements on that side.

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Operator [8]

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And our next question comes from the line of Magnus Råman of Kepler Cheuvreux.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [9]

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I’ll begin to start to tie in on the questions on the online side. You mentioned here that you’re up on a penetration of 5% in April. And you just stated here that you seek to maintain this momentum going forward in the future. Doesn’t that imply that you should be looking for decisions on investments in centralizing the e-commerce deliveries, at least in larger city regions and also to improve that profitability and cost per handle unit that you mentioned? That’s my first one.

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [10]

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All in all, I was going to repeat that we have very strong development in e-com on grocery side. But also, I would like to remind that we are now also fast-growing in e-com business in building and technical trade.

All in all, our beauty in e-com business is that we have 1,800 stores in Finland and in Nordic countries. And our strategy to combine excellent e-com services with our store network works very well. And we believe that this concept offers a lot of opportunities for us in the grocery business as well as in building and technical trade business.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [11]

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All right. So at this point, you see no need, or you see no risk that other Nordic competitors are moving in the way of large sites, centralized investments in their e-commerce delivery to bring down cost per handle unit and improve efficiency and profitability when volumes are growing rapidly?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [12]

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All in all, we have seen competition, and we will definitely see more and more competition. But strongly, we believe that, for example, in Finland, we are in good position, thanks to excellent store network in DIY business, as well as in a grocery trade business. And we launched 2.5, 3 years ago current e-com platform, for example, in grocery business. And when we look at current developments, when we look also our profitability, we can say that we have succeeded very well. And based on this success, we believe strongly that we are in excellent position to further develop e-com services, for example, in Finland.

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [13]

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Maybe to add up a little bit on that one, that we’ve been adding some 20 stores per week to increase the capacity that the customers are asking for. So in that sense, our sort of scalability of the e-commerce platform is still something that we can increase. So that has worked really well during these times.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [14]

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Yes. But, perhaps, when you add new stores that fulfill e-com services, the profitability dynamics will not — you will not leverage that volume increase, profitability-wise, perhaps. But I appreciate your answer.

Anyhow, I have a second one on the weaker sales on the home and specialty goods in K-Citymarkets. I guess you hit your nonfood sales. The setback that you witnessed in the second half of March, has that continued in April at the same pace? Or has it deteriorated further? Or can you say anything there?

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [15]

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Could you please repeat the question? Sorry, the line is not so good here.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [16]

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Sorry. Yes, I hear you in echo as well. The question relates to the home and specialty goods sales that has weakened in K-Citymarkets over the second half of March. If you can comment on how that has progressed throughout April, if the weakness has been sort of at a stable level, or if it has deteriorated further in April?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [17]

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Yes. Thank you. We will publish our April sales figures very soon. We are now end of April and normally, second week of the next month, we’ll publish previous month sales figures. But all in all, I can repeat what I mentioned already in my presentation that specialty culture trade has suffered due to epidemia. And we believe that this trend will continue, at least, for the time being.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [18]

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All right. Just a final one for me on the car trade side here. You mentioned significantly weaker sales of both new and used cars. However, the aftermarket of the spare parts and servicing is holding up well, as I get it. Do you have a view here for how long time the aftermarket sales can be sort of disconnected from new sales? Could that be the case for over several years? Or do you see that the weak sales will spill over in the aftermarket at some point?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [19]

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Of course, not easy question, but we should remember that climate warming is a big challenge. And for example, in Finland, we have one of the oldest car — one of the oldest cars in Finland, meaning that also, in Finland, we have big pressure to modernize cars, have more modern cars, which have less emissions. And based on that, we believe strongly that in future, we will see also positive development in car sales. But of course, now it depends on how long we’ll continue this epidemia, as well as how badly this epidemia hurts economy in Finland and, overall, in Europe.

Also, I would like to remind that thanks to wonderful partnership between us and Volkswagen Group, we can offer excellent cars, all brands what we represent, have also very modern electric cars. And when economy starts to improve, we are in excellent position also to offer Finnish consumers and companies, new cars.

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [20]

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Maybe just to add up a little bit on that one. So obviously, in the long term, there is a correlation between the new car sales and after sales, and that’s obviously one of the key reasons why we have a good and high market share, but we also want to maintain that one in order to keep also the aftersales business at a good level. So obviously, we have quite a bit of efforts in order to sell new cars as well in order to sort of secure the long-term profitability without the sales.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [21]

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I read that as a discounting pressure in the market at the moment.

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Operator [22]

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And our next question comes from the line of Nicklas Skogman of Handelsbanken Banking Capital Markets.

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Nicklas Skogman, Handelsbanken Capital Markets AB, Research Division – Research Analyst [23]

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Yes, I assume there were some hoarding effects seen in March. Do you have any estimate for sort of the 2-week impact from hoarding that you saw in March — sorry, within the grocery — within the food retail business?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [24]

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Yes. As you mentioned, some hoarding was in March. In April, not anymore so much. Of course, it had some positive impact. But at the same time, of course, we should remember that in foodservice business in Kespro, sales declined very dramatically. And that decline had definitely much bigger negative impact on our grocery business.

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Nicklas Skogman, Handelsbanken Capital Markets AB, Research Division – Research Analyst [25]

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Yes, of course. But are you seeing — I guess, what I’m getting at is, are you seeing a continued elevated volume demand in your food retail business also in April?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [26]

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I can confirm that we are doing still very well in our grocery division despite this epidemia. And also, I would like to remind that, again, in first quarter, we gained market share in grocery business.

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [27]

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It’s quite clear that people have to eat somehow. So when the restaurants are closed and schools are closed and workplaces are many times closed, then that affects positively on the food retailing, obviously.

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Nicklas Skogman, Handelsbanken Capital Markets AB, Research Division – Research Analyst [28]

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Yes. Got that. And then a question on this strategic review in the — for the Baltics and the Belarusian business. What are the possible outcomes from this review?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [29]

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Definitely, one very important outcome of this review is that we will have more clear picture how those countries and economies will develop in future. And based on that, definitely, we will have even sharper strategy how businesses will be further developed in Baltic countries and Belarus.

I would like to remind that we have succeeded to implement very successfully also, our growth strategy in those countries, but our business portfolio is quite fragmented. We have DIY home improvement business in all 4 countries. At the same time, we have separate technical trade business in those countries or in the Baltic countries, and also, we have small-scale car trade business in Lithuania, in Latvia and Estonia.

Also, due to those reasons, we feel very strongly that it is now perfect timing to clarify our strategy in that part of Europe as well, as I remind that in Kesko Senukai, we have also some different opinions between Kesko and minority shareholder, how the company should be further developed. Also, that will be definitely clarified in this review.

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Nicklas Skogman, Handelsbanken Capital Markets AB, Research Division – Research Analyst [30]

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Okay. When do you expect this revenue to be — to conclude?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [31]

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I don’t have any time schedule. I have learned that when you start a strategic exercise, strategic review, it is better that you don’t hurry. And we should also remember that businesses are running, all in all, very well in Baltic countries. Of course, the epidemia has disturbed. But all in all, our position is very strong, and we don’t see any need to hurry in this review.

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Nicklas Skogman, Handelsbanken Capital Markets AB, Research Division – Research Analyst [32]

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Okay. And how have the Lithuanian stores performed since they reopened on April 16?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [33]

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Stores are open, and we are extremely happy that we are now getting also back to normally in Lithuania, and business continues as planned.

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Operator [34]

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Our next question comes from the line of Fredrik Ivarsson of ABG.

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Fredrik Ivarsson, ABG Sundal Collier Holding ASA, Research Division – Research Analyst [35]

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A few more questions from me. On K-rauta in Sweden, you saw sort of flattish sales in the quarter while, I think, some of your competitors have been reporting 20% sales growth in the quarter. How should we view this? And also, can you say anything about the timing over the quarter? In particular, what did you see over the last 2, 3 weeks? That’s my first question.

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [36]

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All in all, we are also very happy with our Swedish operations, thanks to heavy measures, what we have implemented, K-rauta is now performing better and better. Of course, we should remember that still, there are, in a process, some corrective actions. But all in all, also K-rauta Sweden has had much better progress and performance in this year, but in many years earlier.

Also, we are very happy, our acquisition, [K-Bygg], performing also very well, very strong development as well as Onninen technical trade in Sweden.

Also, I would like to underline our happiness with the management we have today on place in Sweden, very strong, very capable, very professional management. And they are developing and managing our Swedish operations very well. Based on that, we are expecting also positive development in future.

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Fredrik Ivarsson, ABG Sundal Collier Holding ASA, Research Division – Research Analyst [37]

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Okay. And then one question on the cost adjustments. You’re making adjustments to cost, apart from the temporary layoffs as well. Can you do some or give some further insight on what kind of costs you’re targeting and maybe also quantify it?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [38]

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Yes. As I mentioned in my presentation very quickly, when epidemia hit us and countries where we operate, we started very extensive measures. And thanks to those measures, situation, all in all, is now very well under control. But Jukka, please, you can open more those measures.

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [39]

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Yes. Maybe just to tell that, obviously, when the — when in certain businesses, the sales decreased, obviously, we have needed to respond to that one and with personnel layoffs and reducing cost by that way. But obviously, during these times, when the focus is totally on the overall cash-generating and cash flows, obviously, we have gone all the sort of cost — other cost lines through as well and some are short term, some are a bit longer-term, things that we are currently doing. We have gone through all the projects and so on and prioritized those and made some cuts there. And like I said earlier, capital expenditure has been reduced substantially as well and so on. So it’s pretty much looking at the cash, all cost elements and cost lines and doing that work. That’s pretty much what we’re doing.

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Fredrik Ivarsson, ABG Sundal Collier Holding ASA, Research Division – Research Analyst [40]

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And those projects, what kind of projects are you talking about here?

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [41]

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Well, during these times, again, when you really have to focus on all the processes working well, continuous and that kind of things and cash flows and really focusing on that side, obviously, there’s a lot of development projects that then you have to think about that, how to postpone them and so on. So it — that’s really the thing, that there are good projects, which we’ll do later on and so on. But currently, we obviously have to focus that our supply chain and systems and everything works well so that we can serve our customers in the stores.

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Operator [42]

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Our next question comes from Svante Krokfors of Nordea.

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Svante Krokfors, Nordea Markets, Research Division – Analyst [43]

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I only have one left, and it’s regarding the food service business that you say that the decline is 50% in the last week. Should that be taken as an implied guidance for the coming months as long as the restaurants remain closed? Or do you see there’s a delta in either direction from that? And can you also elaborate a bit on the margin impact from the decline.

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [44]

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We have — all in all, we have positive news in Finland. Epidemia is very well under control in Finland, thanks to also right measures implemented by the Finnish government. And of course, today, we don’t know yet, but if epidemia and if we will have — and if this positive development will continue in the coming days and weeks, it is possible that restrictions, some restrictions and limitations will be canceled. And that might open slowly, also restaurants. And of course, that would be good news for us.

All in all, development in foodservice business, we believe, will go to the right direction. And coming weeks, we’ll give, definitely, as more information. But all in all, in the second quarter, we are optimistic compared to development, what we experienced especially, in the second half of March.

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Svante Krokfors, Nordea Markets, Research Division – Analyst [45]

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Okay, and then a follow-up. In which categories within foodservice have you seen least impact? Where is the business holding up well?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [46]

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No, especially public customers, still many schools and institutional customers and customers owned by the state and communities are still in operation, and we are also main supplier for those customers. And that is maintaining, also, Kespro’s business pretty well. But once again, I repeat that at the moment, we are more and more optimistic, thanks to the positive development in epidemia in Finland. And based on that, might be possible that restaurants will be slowly opened also in Finland in May.

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Operator [47]

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And our next question comes from the line of Magnus Råman at Kepler Cheuvreux.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [48]

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I have 2 more questions. Firstly, on your work to secure the supply of goods, I’m thinking about the grocery trade, primarily. What type of goods are most affected? And are there any categories that are being — that’s sort of empty that you cannot find alternative sourcing routes or so forth?

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [49]

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Well, I could answer that one. So overall, our supply chain has worked well and we have a good availability of our products, overall. So no major problems for us.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [50]

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But you write in the report that you’ve been working hard to secure the supply of goods. And what we hear from other retailers is that there is a problem in certain categories on the supply. So I just wanted to check, when you look forward now, when you plan your purchases, if there’s any extraordinary action that you needed to take to secure supply of goods? So if you can give any — provide any comments or color of which type of goods that there might be constraints in the supply.

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [51]

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Yes. Well, like I said, we don’t have any major problems with our sort of assortment at the moment. Just some products at some time, but nothing big problems there.

Obviously, we have done a lot in our supply chain to secure that one and a lot of work there and so on and preparations. But like I said, altogether, the selection is good and we can serve our customers well.

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Magnus Råman, Kepler Cheuvreux, Research Division – Equity Research Analyst [52]

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Okay. And then on the cost structure again, or the costs and your — well, there’s been questions about this previously, but perhaps I can put it this way. Has there been any discussions on rents — on rental terms or actual rent levels at this stage?

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Mikko Helander, Kesko Oyj – Chairman of the Group Management Board, President, CEO & MD [53]

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Yes. We have had…

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Jukka Erlund, Kesko Oyj – CFO, Executive VP & Member of Group Management Board [54]

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So it’s very clear that we are looking for cost savings in all areas.

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Operator [55]

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(Operator Instructions)

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Hanna Jaakkola, Kesko Oyj – VP of IR [56]

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Okay. Thank you so much for the active discussion. And if you have any further questions, don’t hesitate contacting me. And keep safe and have a great rest of the week. Thank you.