Kesko Oyj (KESKOB) Earnings Call Transcript & Summary

Growth, Strategy, Delivering Results. Welcome to Kesko's fully virtual Capital Markets Day 2020. Today's agenda, we have 2 hours of your full attention. First, our President and CEO, Mikko Helander, will go through today's headline: Growth, Strategy, Delivering Results. Thereafter, the President of building and technical trade division, Deputy CEO, Jorma Rauhala, presents our international business and its potential. President of our largest division, grocery trade, Ari Akseli's headline is: Still Room for Further Profitable Growth in Grocery Trade. Thereafter, we will have a car trade update towards growth and better profitability by Johan Friman, President of car trade division. And last but not least, our CFO, Jukka Erlund, presents Creating Value Through Growth and Efficiency. My name is Hanna Jaakkola, I'm responsible for investor relations at Kesko. Our aim today is to open up the strategic choices and show you why we believe that this good performance will continue. [Operator Instructions] I will ask a couple of questions after each presentation, but there will be a larger Q&A session after all the presentations. Without further ado, Mikko, the stage is yours.

Thank you, Hanna. And once again, it is very, very nice that you are participating this CMD. You are very warmly welcome. Kesko celebrates 80 years anniversary. Let's look first our 80 years anniversary film. [Presentation]

Okay. Company, Kesko, we have great history. But I can tell you very strongly, I feel that we have also a great future. What is Kesko? What is K Group today? Definitely, #1 retailing company in Finland and definitely also a leading retailing company in Northern Europe. We have profitable growth strategy in 3 core divisions. We have 1,800 stores in 8 European countries as well as comprehensive e-commerce business. Every day, more or less 1.9 million customers visit K stores. We have very strong financial position with good dividend capacity. And last but not least, we have been many years recognized as the world's most sustainable grocery trade company. Our strategy works and strategy brings profitable growth. We launched, 2015, our growth strategy. Very important element in our strategy is growth. I underline importance of growth, but also strong focus. We have decided 6 years ago to be strongly focused retailing company, strong focus on grocery trade, building and technical trade as well as in car trade. We operate as One unified K, meaning that Kesko, K retailing entrepreneurs, seamless cooperation. As well as sustainability plays a very important role in K Group's businesses, measures and actions also to stop climate change. We have very strong strategy execution. First, we put lot of efforts to divest heavily our noncore businesses. We collected from divestments EUR 1 billion. But even more important for Kesko and Kesko's future are important successful investments. We have done for the time being EUR 3 billion investments to support and accelerate growth of our core businesses, successful acquisitions, but also successful investments to strengthen our organic growth. We have experienced, I would like to say, amazing transformation from traditional fragmented retailing company into a focused One unified K Group. Company had plenty of different businesses, and we didn't have a very unified identity, not at all from customers' point of view. Today, Kesko, K Group is modern unified company where we fully utilize also synergies between our businesses and between our divisions. And today, consumers, customers, they recognize us much more unified company, and they highly appreciate also our orange K identity. As stated, our strategy performs well in fast-changing operating environment. Typical for this current situation, business environment is definitely globalization, industry consolidation, also retailing industry, sustainability, climate change, everybody of us knows that those things are getting more and more important. Faster and faster technological development is challenging, but also offering great opportunities for the company like Kesko. Multichannel and e-commerce definitely also utmost important. And urbanization and demographic changes in Finland, Nordic -- in Northern Europe as well as everywhere in Europe are very important matters, what we should keep very clear in our mind. Strategy works, and we can see also that very well from our numbers. Kesko's net sales in rolling 12 months exceeded EUR 10 billion. And very proudly, I report that we have succeeded in last 6 years to increase net sales in core businesses over EUR 3 billion. I believe that this is very strong message that we follow and we implement very professionally, very systematically our growth strategy in all 3 divisions. We have steadily improving profitability. Since 2014, we have seen very steady profit improvement everywhere in Kesko, K Group, and we are very pleased to report again, all-time high profitability operating margin in last third quarter was 5%. And we are expecting another all-time record result in 2020. Estimated comparable operating profit for continuing operations will be, this year, in range of EUR 530 million, EUR 570 million. Less than half of the profit growth is coming from pandemic-related issues, meaning that our strategy works also very well under exceptional circumstances. This means also that agility, fast response and well-functioning retailer business model helped us also in current circumstances. Both grocery trade and building and technical trade all in all have benefited from pandemic. But at the same time, I would like to remind again that we have big businesses like foodservice business as well as car trade, which have suffered heavily due to epidemia. I'm so happy to present, again, strong market development in grocery trade. In grocery trade, we have succeeded steadily to increase our market share, and we are approaching 38% market share in Finland. Very impressive is this EUR 1.4 billion. The steady market growth increase means that for time being, we have increased net sales in grocery trade EUR 1.4 billion, but I underline for time being. But also great development in building and technical trade, steadily strengthening market position in Finland. K-rauta already market share approaching 43%. Onninen has been part of the family more than 4 years, and market share also steadily increasing in Onninen businesses. I'm so happy to present total turnaround in Sweden, thanks to successful strategy execution made by our building and technical trade. Great success story, EUR 12.6 million operating profit in last 12 months in Sweden, strong message that our building and technical trade implements very professionally business plan, business strategy also in Swedish market. But also great news from Norway, successful transformation in Norway into a strong retailing company. And also in Norway, we can see from numbers, great development. Operating profit in last 12 months in Norway, EUR 20 million. All this development, real turnaround transformation brings also great results for our shareholders. Value -- shareholder value and return on investment, strong development. At the moment, Kesko's market capitalization is about EUR 8.7 billion. We were EUR 103 billion when we started this journey. But also good return on investment for shareholders, more or less 270% for time being. Yesterday evening, Kesko -- Kesko's Board of Directors had meeting and in yesterday's meeting, the Board set new targets for the company, new financial targets: comparable operating margin, new target is 5.5%; comparable return on capital employed, 12.5%; and interest-bearing net debt divided by EBITDA should remain, in all circumstances, under 2.5. We have great development in our grocery trade division. I would like to underline that we will continue profitable growth in grocery trade by improving further customer experience, meaning that further development of stores by utilizing fully store-specific business ideas in all our grocery stores in Finland still in future, also leading idea when we will maintain this positive development. As well as renewing the store network and further improve e-commerce services everywhere where K operates in Finland in grocery trade is very important also in future. Fully utilize customer data to improve customer loyalty and to enable a seamless omnichannel experience for Finnish consumers, Finnish B2B customers in grocery trade also utmost important. As well as maintaining price competitiveness and price image, we have put lot of efforts. And also, in this field, I feel strongly we have succeeded. But also there, we can see still lot of potential. And growing the foodservice business faster and faster and faster than the market development as we have done 2020 as well as in previous years. That offers also great potential for our grocery business and grocery division. In building and technical trade, I underline that we will continue growth and industry consolidation further. Especially, we put lot of efforts also in the future to consolidate further building and technical trade industry in Northern Europe. We have excellent track records from already completed investments and acquisitions. But also we will continue improvement in profitability, and very clearly, I stress that our objective is unchanged. We are targeting same profitability, but today, best companies in Europe in this industry, building and technical trade business, are reporting. We continue also in building and technical trade all measures and activities further improve customer experience as well as to improve cost efficiency in each country where Kesko operates in building and technical trade business. As well as also in building and technical trade, of course, extremely important to continue all activities and actions further develop digital sales, omnichannel services for B2B and B2C customers. In car trade, we are working towards profitable growth, meaning that we will lift customer experience to a new level also in car trade. We will further develop excellent cooperation between us and Volkswagen Group as the target to have even more seamless cooperation between both companies. We are increasing sales with existing and new products and services as well as we are maximizing the use of new technology in improving customer service and operational efficiency in our car business. As well as we can see a lot of potential in car trade by utilizing even better best practices coming from grocery and building and technical trade businesses. Many times stressed that sustainability plays a very important role in Kesko's strategy. Sustainability drives us in everything, whatever we do, meaning responsible purchasing and sustainable selections for our customers' environment. Whatever we do, environment plays a very important role. Good corporate governance and finance, also a very important element of our sustainability approach. Working community. We cultivate better and better working community everywhere where Kesko and K Group works. We support fully our customers, B2C, B2B customers, sustainable business approach, sustainable lifestyle. And of course, we do utmost to be good corporate cities in all societies where Kesko and K Group operates. I'm so pleased also to report today that Kesko's sustainability efforts, sustainability work is very well recognized also internationally by Dow Jones Sustainability Indices as well as Global 100 and by many, many other highly appreciated bodies. This year, springtime, Kesko Board of Directors set also new sustainability targets. Target setting is crystal clear, zero own emissions by 2030, meaning that first, 2025, K Group will be carbon neutral. 2025-2030 period, we will offset its remaining own emissions. And by 2030, we will reach net-zero emissions. Challenging target setting, but I can confirm that also in this field, we are moving very fast to the right direction. Last, I would like, ladies and gentlemen, to repeat. We continue the execution of our growth strategy without any doubts. It means: in grocery trade, gaining profitable growth and increased market share by improving customer experience everywhere; in building and technical trade, maintaining growth, improving profitability and continuing industry consolidation, especially in Northern Europe; and in car trade, increasing sales by taking customer experience to a new level. One unified K is very important part of our successful transformation, very important element of our success as well as sustainability, all measures to stop climate change. Cultural changes are important part of our renewal story. I can confirm that we will continue measures further develop our company culture, where key words are courage, innovations, agility, and that way, I'm very confident that we will drive growth and renewal also in future. Ladies and gentlemen, thank you. That was my part. And I suppose, Hanna, that now we have time for some questions.

[Foreign Language] Thank you, Mikko. So I have a couple of questions for you. First of all, what do you see as the biggest risks in the near-term future?

Global economy, economy in EU countries, economy in Finland. You remember that we are big retailing company is a challenge and that includes also risks. I'm not so worried about 2021, but let's start from 2022, '23, those years might be quite challenging for everybody of us.

Thank you. And if you're thinking forward, what are the main growth drivers for Kesko?

Definitely, same growth drivers, what we have had also in the previous years. Our wonderful grocery trade, as I stated, we can see clearly that those same elements which have helped us to make Kesko very strong, very profitable, probably the most profitable grocery trade company in Europe will help us to continue and support us to continue strong profitable growth also in future. In building and technical trade, we can see also great growth potential. We have seen already very strong development, strong growth, very steady profit improvement development in building and technical trade. And we should remember that European market -- still, market in Northern Europe in building and technical trade industry is very fragmented. And of course, it means, for the company like Kesko, great growth opportunities also in future.

Good. Thank you.

Thank you. Thank you, ladies and gentlemen.

And next, Jorma Rauhala talks about the great opportunities in the Northern Europe and, I think, about the fragmented market as well. Jorma, the stage is yours.

Good afternoon. I'm Jorma Rauhala, the President of the building and technical trade and Deputy CEO. A warm welcome also on my behalf to the Kesko Capital Markets Day 2020. In building and technical trade, we are the leading operator in Northern Europe. We serve 3 customer segments: technical professionals, personal builders and consumers. And already, some 70% of our sales comes from B2B trade. Our rolling 12 months operating margin has increased to 4.7%. Our country-specific growth strategy is working and bringing results in all of our operating countries. The strategy has now been tested during the COVID-19 pandemic, and it has worked also under these exceptional circumstances. As the strategy is well functioning and bringing results, the 5 strategic choices made remain unchanged: country focus, with country-specific strategic actions; serving the 3 customer segments according to their unique customer needs; synergies that are to be continuously sought between the countries and within each country; fourth, our strategic target is profitable growth, meaning that we always need to ensure that the basics are in place to ensure continuous organic growth; fifth, our strategy is supported by selected acquisitions to win a chosen country or customer segment. Overall, I'm very satisfied with the developments in each operating country. The COVID-19 pandemic has impacted B2C positively, thanks to a real boom in consumer DIY projects. At the same time, we must remember that 70% of the division's net sales comes from B2B, where the coronavirus pandemic has not supported the market development. All in all, it's been a very strong year. So far, all operating countries are performing strongly. Also our strategic acquisition and their integrations have been successful. Year 2020 has been a strong year in Finland so far. We have had all-time high results for K-rauta and Onninen. Both have been able to win market share considerably. In K-rauta, the building of the store-specific business ideas has continued. We have continued the development of store -- stores, concepts and digital services. For example, a rollout of destination categories and increased the role of all brands, that differentiate us from the market and bring better profit margin. In Onninen, the strong development as part of Kesko has continued. We have successfully acquired new customers, continued the development of digital services and store network and expanded selections in, for example, of solar panels, charging stations and tools. I'm very happy with the development seen in Sweden, which has been a challenging market for us for many years. There has been an excellent profit improvement for K-rauta, while K-Bygg's profit has stayed strong. MIAB has also proven an excellent acquisition, and its profit has continued to be good as part of Kesko. Onninen's profit has also improved well. This means that our profit in Sweden has improved in all areas. Few actions I want to highlight in particular: the shift to a more local focus to bring the operation and decision-making closer to the store level and the customers; strong development of e-comm business; total renewal of logistics model; and also successful acquisition of MIAB and Bygg & Interiör that have impacted the results positively as well as K-Bygg, which has continued on a strong track. We have also seen profit improvement in all units in Norway, especially in Onninen but also in Byggmakker. The acquisition of Carlsen Fritzøe at the end of the summer has been an excellent move, and the company's profit has continued strong as part of Kesko. Main actions have been: significant acquisition of Carlsen Fritzøe and continued integration of businesses; effective streamlining of Onninen -- Onninen's operations. We have increased share of own retailing to some 70% in building and home improvement, meaning that our position has shift from a wholesaler to retailer, which also supports better profitability. From November onwards, our business has been led by our new Country Director, Hilde Kristoffersen. And I'm confident that under her lead, we are able to improve our profitability also in the future. In Poland, business has been able -- in Onninen, business has been able to keep a steady profit level by the consistent strategy execution even despite the COVID-19 pandemic and restrictions related to it. In Poland, we have guaranteed a positive track by strong development of e-comm business, successful rollout of our modern express stores and increasing the level of automatization in our distribution center. In the Baltics, we are clear market leader with Kesko Senukai. All our operations in the Baltic states are well performing and well, and we have a solid and steady track of profitable growth. Onninen has continued on the steady track despite the restriction and challenging market situation. We will continue the development of Onninen in Baltics according to the successful Finnish model. As said, I'm pleased with the fact that all countries performing well. Also, all our operations like purchasing, sales and logistics are efficient and strongly supporting businesses. This is also one of the main reason why we have been able to improve our result on such the wide front. That was about strategy execution. Now let's move on to our further potential for profitable growth. The industry consolidation offers many possibilities for us. In all 8 operating countries in which we operate, the market size is total [ over ] EUR 31 billion, of which we have around 15% market share today. We see strong growth opportunities in the operating markets, and the focus of our growth is to be one of the leading operators in our current countries and in the customer segments we operate. In particular, we seek to grow in the Swedish and Norwegian B2B markets, both in building and technical trade business, where we already have a good existing platform. Overall, in the Building and Technical Trade business, the markets are growing stable but still fragmented, which offers us high potential for consolidation and growth. Moving on. Let's have a look at the operating environment. Our operating environment in Northern Europe is changing rapidly. We are in pole position to benefit from the global megatrends. Urbanization development is still strong and the need for new residential building, especially in growing cities, continues. In all our operating countries, the maintenance backlog and investment debt is still growing, which is a trend that benefits our B2B business as a whole. The whole industry is also experiencing a fast technological development. For example, residential building construction becomes increasingly technical with several Internet of Things solutions, like automated heating and lighting solutions. This increased standard of living highlights the need for more and more technical competence in the whole value chain. The increased focus on energy and environment efficiency bring us several new opportunities. From new products that enhance sustainable new energy production like solar panels, all the way to sustainable local energy storage solutions. These especially are opportunities that are matched with professional sales competence and new more and more sustainable product portfolio, especially in technical trade. Emission reductions targets and growing electrification of the society as well as growing electric mobility things -- mobility brings us further business opportunities. For example, in building of electric vehicle charging stations. All in all, the industry is growing and becoming more and more technical. And this offers us many possibilities to growth. Let's look at the construction markets into more detail. The total construction market, including labor, in Finland is around EUR 36 billion. And the structure of the market follows almost similar structure in Sweden and in Norway. With our businesses, we operate in all the segments of the construction market. Hence, we are well positioned to benefit from overall developments of the market, but this also buffers us against the development in just one segment. All too often, people look at the indicators related to new residential building. However, new residential building is only around 20% of the market as the construction market is very evenly split between new building and renovation. Our position is especially strong in renovation, which is almost half of the total construction market. In renovation projects, the margin are also more lucrative. At the moment, construction forecast indicates that the need for renovation and maintenance will grow next year in all our biggest operating countries. Also, civil engineering is expected to grow in future. All in all, we are very well positioned to benefit from the overall market development as we deliver products to all sectors. Technical trade, in essence, is volume business where efficient logistics and sales expertise from the industry are crucial for success. This creates a high threshold to enter to technical trade business. And that is also why, for example, a sole e-comm operator fails to meet the customer needs. Our competitive advantage among technical trade professional include comprehensive technical product assortment of 700,000 stock keeping units, many with country and/or industry-specific technical certificates that match the different technical requirements in each operating country or industry. Almost 4,000 suppliers with best-in-class products. Over 1,500 technical trade professionals with project-based sales competence. This is people-to-people business, and the competence of the sales professional is crucial to success. Our professionals ensure the best customer relationship by supporting the customer daily business. Availability, the #1 in importance for technical trade customer, is guaranteed with our effective distribution centers that deliver almost 40,000 orders line a day, of which 50% already happened via automated processes. We have also several customer tailored logistics services that are tightly knit to customers' own process. For example, in Finland, we have almost 200 smaller service warehouses on customer premises, stocked with Onninen products. The strong logistics core is supported by comprehensive store network of 131 Onninen express stores that offer easy pickups to customers from all customer groups. We also consistently develop digital channels with extensive technical information about the products. The considerable part of technical trade products are already sold via electronic channels via webshop, EDI and punchout solution. Already bringing on compound sales almost EUR 400 million. And for example, in Finland, already 20% of the sales comes via digital channels. All in all, technical trade is volume business, where logistics and proportional sales are key to success. The industry will continue to consolidate, and we will continue to be a strong operator in the future as well. In the DIY and professional builders market, typically, materials for renovation and constructions are big and heavy items that need to be delivered to the site quickly. Hence, location near the sites or homes is crucial for the success within this market, regardless if you are e-comm or [indiscernible] and motor operator. Our strong position within these customer groups is a result of a comprehensive network of 331 stores in prime location with vast selection [indiscernible] by pickup and delivery options. We clearly see that our strong competitive advantage comes from the seamless combination of the store network and online services. Customer is able to choose the right channel for him or her. Both channels also support each other. In Finland, around 30% of our customers who visit us online convert to brick-and-mortar customers. On top of the physical store network, our online services are also performing well. Online sales are growing steadily, and there is over 160 million customer visits annually. Only in Finland, we have around 40 million online visitors to K-rauta.fi per year. The services for personal builders are also under constant development. We sell products and services to already some 185,000 personal builder customers. Professional B2B sales we develop in stores by dedicated K-Rauta PRO concept. That is aimed for B2B customers only. And in digital channels, the next step is to open B2B webshop in Finland early next year. On top of that, we also have inspiring destination categories with own brands that support differentiation and higher margin. Already, our own brands have sales around EUR 200 million in 2020. All in all, industry consolidation will continue, and our position will continue to be strong due to existing store network in prime locations and strong digital services. I'm confident that the combination of the store network and online services is the winning combination also in the future. We are strongly on track on what we have promised in the value creation and firmly moving towards to the target to be among the best in Europe. The main actions for continued EBIT improvement are: maintaining the country focus in strategy execution; determined development of basic processes in each country and the synergies between the countries; continued development of digital services and customer experience in all channels; active acquisitions of new customers; and expanding product selections for existing and new customer imitates with good strategic fit. Thank you. And now it's time for your questions.

Thank you, Jorma. So one -- I have 2 questions here for you now. So how have COVID-19 impacted Building and Technical Trade division in this year?

Yes, this year, there has been, I would say, really booming the project for consumers and that means, especially in our case, that in Finland K-rauta, Sweden K-rauta, of course, a little bit K-Bygg in Sweden and Byggmakker in Norway has supported from that boom. But we have same time, remember that 70% of our sales comes from B2B sales, which has not supported by the COVID situation.

Okay. Good. And could you comment -- you mentioned the M&A opportunities in the region. Could you please comment a bit more about that?

I think our strategy is very clear on that. First of all, where we operate -- on those 8 countries, where we operate, on what segments, we want to be one of the leading player. Of course, we know that in Finland, we are quite a big player here, but especially, this means that in Sweden and in Norway, there, we want to be stronger, especially in B2B business. The strategy is quite clear.

Okay. And there are opportunities?

There are huge opportunities.

Very good.

A lot of. Yes.

Thank you.

Thank you. Very well. Now our third presentation, I will welcome Ari Akseli to join to the stage, Still Room for Further Profitable Growth in Grocery Trade. Please?

Thank you very much, and good afternoon. I think the big question is the name of the presentation. Still Room for Further Profitable Growth in Grocery Trade. I know this is one of the questions you are wondering. Is there still room for growth in the grocery trade? Yes, there is. And I will show you why and how. First, short presentation, who we are. K Group is the second biggest operator in grocery trade field, with a market share, 37.6%. Our market share has been increasing during the recent years by 1.5%. Our K-food Store business is based on the retailer entrepreneurship. That's very unique business model. We have some 1,250 K-food stores in Finland, with some 1.7 million customer visits every day, including our digital channels. These are huge numbers. And here, you can see what are the choices of our strategy. And it's walking and yielding results. So we will continue with the firm execution of our growth strategy. What we want to do is to increase sales and profitability with customer-oriented approach. If we think about Finnish grocery market, we have most customer-oriented and inspiring food stores with store specific business ideas. We have developed and invested in the store networks significantly in recent years. Later on in my presentation, I will give you more detailed information about the store network investments. At the moment, we are the forerunner in trading sector digitalization in Finland. Especially this year, we have expanded the online sales network and increased sales by big numbers. With our customer data from 3.5 million loyalty card K-Plussa customers, we are able to develop and lead our business with data. And when you think about retail business, it's all about details, how we can improve all of the details. It's based on data. While we are the quality leader and have the most inspiring food stores in Finnish grocery market, we see as important to maintain our price level and improve our price image. Our biggest advantage, if comparing to our competitors, is our unique business model based on retailer entrepreneurship. I will point on later on some of the advantages it's giving to us. Due to COVID-19 epidemic, it has been bumpy weather in Finnish foodservice market, but we still believe that eating out is a growing trend in the future and we have been able to gain market share during these difficult times. Our market share is now growing in all segments from small neighborhood stores to hypermarkets. These cumulative growth rates from beginning of the year until the end of October. This year, our total market share has grown 0.3% (sic) [ 1.3% ]. In the neighborhood segment the growth has been 3.3%. And this is very impressive that in all the categories we have been able to gain market share. And this is -- I think that if you look about the -- what is in the long term most important factors when you improve the profitability of [indiscernible] company is that you are able to sale more with the same stores. When analyzing our performance, I want to highlight that we have managed to improve significantly our sales per square meter in our stores. On the left, you can see how retail sales has grown over 12% from 2016 to 2019. At the same time, the number of stores has decreased over 14%. As a result, the sales per square meter has grown by 10%. This means that we have been able to generate organic growth in the store. And actually, we are the only player in the market who has been able to do that. And so it's naturally very profitable when you manage to do so. It's the most important factor in retail business in the long term based on many international results. As you know, it's not cheap to build new stores. And usually, it takes 3 to 5 years to make them profitable and up and running. Getting more out of the existing margin is much more profitable way. And that's the reason why we have been investing how to do it. There has been a lot of writings how COVID-19 has boosted grocery trade and common understands has been that grocery trade has only benefited from the COVID situation. But actually, the impacts are different in different businesses. It's obvious that food stores, say, food store retail sales in K-food stores have grown by big numbers as people have stayed at home. Also, the demand for online shopping has expanded, and we were able to respond that fast growth in online grocery demand. We have now 450 stores offering online services. That's more than 200 comparing to the last year. Also this year has opened opportunities for us. We have established new services, such an offer in shopping health for people over 70 years and selling restaurants meals in grocery stores. But at the same time, handling the situation caused us many, many costs. For instance, in logistics. And therefore, it has been essential for us to make some profit improvements. And we have success in doing so. The foodservice provider, Kespro, sales decreased heavily and bring time due to COVID restrictions on restaurants and events. You will hear more about Kespro later on. There is certain rules about retail business based on my 30 years experience. One of them is that the key to sales increase is increased customer satisfaction. Find out what the customer want and deliver it. It sounds so easy, but if you think about, we have about 400 million customers visiting our stores. And every of them have individual needs with [indiscernible] all day. That needs to have some kind of data how to do it. So we have measured our customer satisfaction system [indiscernible] from 2017, and we have managed to raise customer satisfaction significantly. Thanks to store specific business ideas based on customer data, our customers are more satisfied than ever. If I look about these numbers and somebody would show them to me about 3 or 4 years ago, I think that keep on dreaming, it's not possible to get this kind of level in the stores. These figures show that -- show Net Promoter Scores from our physical stores. Customer satisfaction is actually highest at the K-ruoka grocery online store, NPS being there more than 80. In the next video, our Chief Digital Officer, Anni Ronkainen, tells more about customer experience in online channels. [Presentation]

Good customer experience is very crucial for business success, both online and offline. It's a known fact that a great customer experience generates loyalty and loyalty generates better business results. When people [indiscernible] digital services, it's super important to focus on customer experience. When our customers enter to our sites or web services, we have only 3 to 5 seconds time to charm them. If the customer experience is bad, the customer leaves for the competitor with one click. Today's customers are really demanding. They are using global top-notch services like Google Search or global e-commerce like Amazon or on-demand services like Spotify or Netflix. And they are comparing the user experience to those sites. And that's why we really need to set the bar high. And it's good to remember that customer experience, it's not a project, it's a journey.

In these slides, you'll see the reason why we focus improving customer experience. There is very strong correlation between sales growth and customer experience. We have 375 stores where NPS is over 71, and 384 stores where NPS is over 61. Those stores have managed to perform better than margin. Store underperformed the market need to focus improving customer satisfaction. So there is still a lot of potential to grow both sales and profitability simply by focusing customer experience. So find out what the customers want and deliver it. One important part of maintaining and improving the good development to make sure our store network is up to date, we have invested nearly EUR 1 billion during the last 4, 5 years in our K-food store network. The biggest part when integrating Suomen Lähikauppa store network to be part of the big beautiful K Family. In '20 -- in next year, we are planning to invest about EUR 120 million to the store net book. New stores are mainly supermarkets and neighborhood stores in the grow areas and cities. 100 renewals in the pipeline as well. And we have excellent track record about renewing the stores. In some case, the numbers are actually amazing. The hunger for growth comes from our unique K-retailer business model. The K-retailer entrepreneurs are very driven to be successful, and their success is our success, and it also means higher earnings for Kesko. Store specific business idea responds to the specific local needs of each area, and it's based on the customer data. I want to highlight that roughly 50% of the stores have fully adopted the customer specific business idea, and there is still a lot of potential with other 50%. Here is a great example how we can do it more efficient way or how we can help our store owners to do it much more efficient. New database tools support store specific business idea and speed up growth. We use database tools that help us create a more efficient way to how to build, tailor its store specific selections and optimizing pricing in the store level. To get the idea of that, if we are able to [ SaaS ] at our shopping basket by 1 year and we have about 400 million customer visits, it means EUR 400 million extra sales. That's not the promise. We -- the tool are easy, one click solution for recommendations and decisions for the store selections. As an example, in average, by choosing a product recommended by our handheld selection tool, sales is about 4x higher than sales from the products tools recommends taken out of the selection. And if you think about that, we have already done this kind of decision in the stores almost like a 600,000, and it's happening all the time. We are the Finnish market leader in online grocery sales. Sales of our online [indiscernible] store grew during this year by 400%, and our market share is now over 55%. Our focus is to continue the development of online sales and its profitability and also deepen the store-specific business idea also in online. We have and will further develop easy-to-use tools for managing online products, information and selections. Not to forget, we are improving efficiency in collection and logistic operating models. Here is one more important element in our profitability improvements, and improvements potential is our own brands that counts about 20% of our sales. Own brands are important also in better differentiation and price image. We offer today more than 3,000 products and over 1,000 of them made in Finland, which is important for our customers. Compared internationally, the share of own brands products are still low. I think that general European level is between 25% to 40%. So there is a lot of potential. There is still untapped potential in premium category, which has grown the most during this year. Year-to-date development, almost 20%. Traditionally, the focus has been in the mid-range private label products like the Pirkka. We are also putting focus developing further our price fighter brand, which is K-Menu. And here is something very beautiful, good food coming from the stores. How we have gained new customers? One of the key elements it [ stays on the cases ], the products only from K-stores are indeed bringing new customers. They bring better margins and it's the way to differentiate our source. The selection differentiation supports store specific business idea and margins. Products that set us apart from the competitors raise average shopping basket and leads to more commitment, existing and new customers. For example, if you think about this Classic Pizza. The price level is about EUR 8. And it's so good. And if you taste one time, you'll come back. And comparing to the traditional frozen pizzas, which prices are between EUR 3 to EUR 4, it means that sales has actually doubled and customers are happy. In recent years, new products related to restaurant brands have been successful, and the range is expanded. Here is a couple of examples: Naughty BRGR, Hook, Jim Lim by Farang and so on. And good example how only from K store products can interest and even become topic conversation is taste of [indiscernible] meals. From beginning, they were a huge success and also made headlines internationally in 56 countries. Wow. And from food stores to foodservice. This year has been difficult for the foodservice market. We believe that the strong growth trend in the foodservice market will come back after COVID-19. The picture tells the story. But also -- we also have video where Mika Halmesmäki, Director responsible for Kespro's foodservice, will open up the past year and future plans. [Presentation]

Kespro is a leading foodservice wholesaler and forerunner in Finland. Our market share in Finnish foodservice is about 42% in the wholesale segment. And as we know, wholesalers represent only 50% of total foodservice market. So the potential to grow is very weak. Our net sales have come down compared to last year, and this year has been challenging. We have still managed to grow our market share even to 47%. Eating out is a global megatrend that will continue to grow despite the epidemic. We have seen this also in Finland, where the potential growth is very big. In the future, our customer needs will be more unique. In the future, Kespro will be a service platform that enables each customer to choose the services they need more individually. No more preset services for everyone offered by the same way. At the same time, the customer gets everything they need from one wholesaler, one-stop shopping model. Our ability to offer individual service has a big potential, and we want to be a first player on the market to offer 100% service experience to our customer.

Dear audience, I would like to summarize why Kesko's Grocery Trade has still a lot of growth potential. Like Mika said earlier, Kespro has been gaining market share all of this year. And I think that it will recover the market and then Kespro is in very strong position to gaining more sales. And utilizing our fair function and store specific business areas in all stores is opening big opportunities, utilizing even more deeply new data tools in all stores. Thirdly, developing in-store food force. These great examples about sushi, pizza, hamburgers and so on. And developing and improving the efficiency of online sales. In addition, we are planning to make significant investments in digitalization and developing a renewable store network. Thank you very much, and now it's time for questions.

Thank you, Ari. I got a comment from online that this guy is amazing. Okay. Sorry with that. So -- but I have 2 questions for you as well. What do you see as the biggest obstacles for further profitable growth going forward?

If you look about the past of the Kesko history, there used to be different ideas of the independent store owners, entrepreneurs and Kesko, what will be the future plans and choices. But nowadays, we are like a big part of the same K Family, unintegrated K Group. So nowadays, actually, there is great opportunities to develop new ideas and -- to the developing the store level. So it's much more like that how we prioritize things because it's limited number of things that we can bring to the stores. And we have to think about prioritizing all the projects and ideas. But at the same time, that's also one of our benefits because we have independent store owners. They can develop something in new areas, and we can look at it and say, okay, it's going up. That's good. Maybe we can benchmark and spread it all over the [indiscernible].

Okay. Thank you. And then one more time, could you please crystallize where do you see the biggest potential in grocery trade?

I think it's in here in this slide that -- #1 is store specific business ideas. As I told earlier, about 50% of the stores are now executing it. So there's other 50%, which is still trying to do. And even some of the stores has been developing the sales like a double during the last 3 years, they are still growing. So we can see that there is huge potential. Secondly, our new database tools. They are so promising and results are looking really good. How we get every stores to use them in every day, in every decision-making. And that way, customers, will really see that our selections are exactly right for me. And the pricing level is exactly right. Thirdly, differentiation in selections. These kind of Naughty BRGRs. If you think about that normal hamburgers you can buy from grocery stores. They are like a 3 for EUR 1 and nobody really don't like them. Then you have Naughty BRGR and everybody like about that.

Thank you very much. I'll come back to more questions on grocery trade after the -- Jukka's and Johan's presentations.

And now it's time for our third division, Car Trade, Johan Friman, please, the stage is yours.

So good afternoon to all of you. As the heading is saying, Towards Growth and Better Profitability. As you all know, this has been a very challenging year for the car industry globally, in Europe, but also in Finland. Anyhow, our rolling operating profit will be or is at just about EUR 26 million at the moment. So I think all in all, we have -- because of different things that we did in the spring managed to achieve in the end good results. We have a very strong product or brand portfolio with all the Volkswagen Group brands, except one at the moment, and we are believing that this will bring us to more success in the future. On this slide, I want to share to you that we are optimistic about the future. We see a large growth and profit potential in the market. So this picture is actually showing how the EBIT pool in 2019 in the Finnish car industry was composed. So you see the blue part where we have already today a strong position. But then in the remaining parts, the orange, the light orange and the even lighter orange. So in used car trade, in after sales and in financing and leasing, there's a lot of EBIT potential for us for the years to come. We have decided to focus on the following topics. We need -- we want to focus our business to Finland. We are very happy that we are the chosen partner from the Volkswagen Group in Finland, Volkswagen being the biggest car manufacturer in the world. And then we are also confident since we have last year made acquisitions to enlarge our dealer network and now when the market is estimated, actually, yesterday, we got the new official forecast for 2021. And the estimation is that the market will grow with some 10% next year. Our priorities for the coming years, as my colleagues have been also saying before me today, we want to make a step change in customer experience. We want to put Kesko's Car Trade into a new unique level that has not been seen before in Finland. We also believe that we can strengthen our foundation and especially, with the large network, we have all the possibilities to sell much more from our premises than what we have been doing so far. New cars, used cars, aftersales, et cetera. Then also the synergies coming from the K Group is very important for us in the future. And as said, being the partner with Volkswagen Group offers us fantastic opportunities for the future. Better customer experience. And here, I would like to use the sentence, from good to great. We want to put our targets to a totally new level in Finland in the future, really finding out which are the pain points in the customer journey at the moment. Whatever channel is used: showroom, online, et cetera. And this, we will do also through a cultural change in our Car Trade. I said before, we have a large own retail network and through this network, we are definitely planning to sell much more used cars in the future as what we have been doing today. We also believe that we have unique opportunities in the aftersales business for all the car fleets, also in accident management, but also for brands that are not our brands at the moment. And then thirdly, becoming the clear market leader in electric cars. Actually, I just got today the information that in November, Volkswagen passenger cars in Finland had a market share in electric cars of 35.4%. So we are really taking market shares in that segment. Then, of course, we want to grow also through new products and services. The Volkswagen Group is presenting at the moment a wide range of new models, both in '21 and after. And especially, we believe that all the new full electric cars and plug-in hybrid cars that are coming from our different brands will actually support us in getting better market shares. We know at the moment in Finland that the plug-in hybrids have already passed diesel cars in new car sales. And this development is now continuing. We have also been very successful with our own leasing company. We passed 3,000 cars a few weeks ago, and we believe that this good development will continue also next year. And then also, 2 years ago, Kesko decided to start investing in charging facilities in combination with our food stores and DIY stores. This has also been very good for the business, I think both for Ari's business, but then also for the car business. And this is something that we will continue. Finally, I think I said already that the partnership with the Volkswagen Group will actually be a very important driver for our market share growth in the future. Volkswagen Group is investing heavily into electric cars in the coming years. Actually, officially said, close to EUR 50 billion by the end of 2025. The Volkswagen Group is also financially very strong and in a good position to further develop their products. And now, I guess I will also get some questions.

Yes, you will. [Foreign Language]

[Foreign Language]

Yes, we can go back to English. And so I had a couple of questions, like I said. Consumers' interests are -- have been shifting in this year towards used cars. What does that mean for the entire industry and for us?

Well, I believe that this is really a kind of a corona effect because when we look at the figures in Finland -- actually, the used car sales this year, January, November, has increased only with 0.5%. So I mean, also, the used car business was hardly hit in March, April, May. Of course, now after the summer, it has been a kind of booming because we know that people, they feel much safer in their own cars. But at the same time, we have to remember that new car sales has suffered because of the corona, because of the fact that the factories were shut down for 2 to 3 months in the spring. So I mean I strongly believe, and as just said, I mean, the market is estimated to grow with more than 10% next year, that also new car sales will start booming again.

Okay. And then one question we quite often get from the investing -- visiting investors, what kind of synergies do you expect to find with Kesko's other divisions?

I look at the clock and I only have 1.5 minute left.

You have time. We have time.

I'll try to be quick. I think we have -- there's still a huge potential that we haven't used. But still mentioning a few. I think this K Charging has been a very good cooperation between the 2 other divisions and the Car Trade. And that's really helping the 3 of us. Then we have also been doing like cross-selling. So I mean, of course, the 2 other divisions, they have also their own partners and customers that are -- some of them are very big. And we have managed to sell cars to those also. And then as a new actually pilot thing, we are now planning next year to start in the country side next or actually in the hyper -- sorry, hypermarkets in the country side to have smaller showrooms, like pop-up showrooms, maybe showing 1 or 2 cars in areas where we are not with our own car retail.

Good. Thank you.

Thank you.

And now we have the last presentation. Our CFO, Jukka Erlund, will talk about the growth and efficiency.

Good afternoon, ladies and gentlemen, on my behalf as well. My name is Jukka Erlund, CFO in Kesko Corporation. And I have a pleasure to present my presentation regarding the financials with the topic, Creating Value Through Growth and Efficiency. Let's start with the financial KPIs. We've had a solid growth in pretty much all fronts. The top line has grown around 3% during 2019 and 2020. And at the same time, our operating margin has improved from 4.1% to 5%, which was the previous target for that one. The same goes for the return on capital employed. We have improved that to 11%, which was also the previous target for that one. And I'm also especially happy with the cash flow generation. Cash flow from the operating activities has increased from EUR 750 million to more than EUR 1.1 billion, which is up by some 50%. And at the same time, also the net debt-to-EBITDA has remained at a very healthy level at 0.5, excluding the IFRS 16 liabilities. And we are targeting for further improvement in the financials. As you know, yesterday evening, we set our new targets for the profitability side. Operating profit EBIT margin, the new target is 5.5%. So 0.5% up from the level that we reached in September. And then for the return on capital employed, the new target is 12.5%, and that was increased from the 11% by 1.5%. And as we have heard today, the target is to find more growth. We have a growth strategy, but at the same time, we also have initiatives to improve our gross margin and cost efficiency as well. The net debt-to-EBITDA target was kept at the same level as previously saw at a maximum of 2.5. Then looking at the operating profit a bit more in detail. We have comparative illustrative numbers here for 2018. And for the last 12 months ending in September 2020, we can see that our profitability has been lifted up by more than EUR 100 million. Around 2/3 from that, that is EUR 66 million, has come from growth. But in addition to the growth and growth strategy, like I said, we have also had initiatives to improve our gross margin and cost efficiency. And we can see that also EUR 14 million is coming from the gross margin side and then EUR 13 million from the operational efficiency, OpEx efficiency. In addition to those, also EUR 17 million is coming from the acquisitions during 2019 and 2020, mainly from the acquisitions that we've done in Building and Technical Trade in Sweden and Norway. So all together, a bit more than EUR 100 million and on the margin side from 4.1% to 5.0% margin. Then a few words regarding our costs. We target to further reducing our unit costs, especially in the new normal. This has been truly an eye opener for us as well this year. And the way how we think about our processes, how we are organized, how we use technology, et cetera, is definitely something that we will be working on for the coming months and years. As you can see from the right-hand side, our cost ratio went up a bit during the first half of 2019, mainly due to the fact that our sales in Car Trade went down somewhat. But ever since then, the cost ratio has been going down, and we target for further improvement on that one. And if you look at the left-hand side of the page, you can find that our cost base is EUR 1.7 billion. So there's quite a bit of potential to further improve our cost efficiency. Around 40% of our cost base is personnel expenses, which means that around EUR 700 million are our personnel expenses, and like I said earlier, we definitely target to find new ways of working, new ways of having more standardized processes, new ways of utilizing technology, et cetera. But the other cost categories are also highly important. IT costs, marketing expenses and property maintenance, for example, we definitely have targets to be more efficient in those areas as well. Looking at our CapEx. As you can see, our CapEx during the last 3, 4 years has been somewhere there between EUR 250 million and EUR 300 million. And for the upcoming years, our CapEx plans are between EUR 200 million and EUR 300 million. When it comes to the store side CapEx, the focus is more on renewals, like Ari said, today, for example. So we definitely want to offer the best possible customer experience in the stores, and we've been very happy with the CapEx -- capital expenditure that we have been doing during the past years in that relation. Obviously, we will still be opening up also new stores, but they're focus more on the renewals. Then technology is highly important part of our strategy execution, and we are investing heavily to the technology, automation, et cetera. Two things. First of all, to improve our customer experience, not just online but also in-store technology. And then the other side is the efficiency part. So how to run our processes with higher automation, for example. Also worth mentioning, like Johan said, we have been investing to our leasing fleet. So we will continue on that one and invest to the leasing fleet also going forward. And regarding acquisitions, we definitely target for further acquisitions also, especially in the Nordic market and Building and Technical Trade especially in order to boost our market shares in order to get the scale effects and utilize the synergies like we have done in our past transactions. We continue the measures to improve our cash flow generation. As you can see, our cash flow generation from operating activities was around EUR 750 million during year 2018. And the last 12 months, like I said, we've been at a bit more than EUR 1.1 billion, which means that that's up by 50%. There's 2 important areas. The first one is, obviously, improving the profitability side. As we've been hearing today, we have a very clear growth strategy and strategic initiatives to boost our growth, but we also focus on improving our gross margin and our cost efficiency. Like I said, for example, through increased automation and more efficient processes and organizations. And thirdly, I would mention realizing the synergies from our past acquisitions and the potential future ones. But also highly important areas. The net working capital. We've been quite successful, releasing cash from our net working capital side both inventories and receivables, but especially from the payables side, for example, using the supply chain finance programs. And lastly, obviously, we want to prioritize our CapEx and be really good on the capital allocation, to put capital where it really makes the best returns. Balance sheet. We have a good strong balance sheet, which definitely enables us -- our strategy execution. Like I said earlier, our net debt-to-EBITDA level, without the IFRS 16 effect, is currently at 0.5, and the maximum target is at 2.5. So that basically means that our additional net debt buy power is more than EUR 1 billion. And for us, this enables both our organic investments as well as potential acquisitions in line with our strategy, but also a good dividend for our shareholders according to our dividend policy. Looking at the ownership base. As you can see, during the last 4 years, the international owners proportion has increased a bit more than 10% from the Kesko B share. And at the same time, the domestic household owners proportion has come down slightly. But it's worth mentioning that at the same time also, the number of the registered Finnish owners has increased quite a bit, actually more than 30% to almost 55,000 shareholders. And I'm happy to say that we are one of the favorites among the female investors as well. And last but not least, about dividend. We have a solid dividend track record. As you know, our dividend policy states that we aim to distribute a steadily growing dividend of some 60% to 100% from our comparable earnings per share, taking into account company's pilot position and strategy. And that's exactly what we've been doing throughout the past years. And this is also our aim for the future to be able to deliver this kind of dividend. Thank you. This was about the financials. And maybe, Hanna, you have some questions.

Yes, I do. I do. I have a first couple of questions before the Q&A session. So you talk about the cost reductions there. How much of that is sustainable going forward?

Well, if you think about this year's cost, obviously, there are some costs that during the lockdown period and have been pretty much frozen and so on, certain temporary layoff type of cost reductions and so on, which we are not maintaining, obviously, because we want to run the business according to our strategy and so on. But a lot of the cost savings actually are something that we are targeting in the future as well. And like I said earlier, definitely the target is to -- in this new normal situation, to look at how we are organized, how we run our operations, how we run our processes, how can we standardize them and especially utilize the technology. We have invested quite a bit, new technology as well, we have heard earlier the ERP systems, et cetera, but also lately bought a lot of different kind of new technologies like software robotics and process mining, et cetera. And definitely want to be more efficient in our process going further as well. So there's quite a bit of potential, yes.

Very good. And then the cash flow generation, the graph looked really nice. If going forward, is there still room for further improvement? And if so, how?

Well definitely, we target to have a good cash flow generation. Like I said earlier, the main key drivers are definitely improving profitability. So that's what we are targeting for. And yesterday, we set our new targets for that one, so that's definitely the one part. And the other part is still the net working capital. We still have a lot of potential in that one to free up some cash flow from the net working capital as well. So we'll continue that one, for example, supplier chain finance programs, et cetera.

Very good. Thank you. And now let's have the Q&A. So I ask all the gentlemen to join Jukka and myself to the stage. There's plenty of good questions coming from the chat. Please note that there's a small delay when sending the questions, so I don't see them immediately. But it's good to get a lot of good questions. Good. Thank you all for the great presentations.

I'm just worried about your schedule, we have so many questions that we might be here till evening.

We have a half an hour. We have a half an hour.

Okay. We don't need to answer all questions.

Well, let's see. Let's see. So now first, about the financial target. There's a question about what is the primary source driving the targeted increase of return on capital employed to 12.5%? What kind of assumptions does this include on sales growth as well as capital expenditure?

As Jukka mentioned already, business itself and especially, of course, strong positive development coming from grocery trade, coming from building and technical trade, of course, in car trade, as Johan explained very well, we have still plenty of potential. But extremely important that we continue very systematic, very professional implementation of our credit growth strategy, especially in those 2 biggest divisions.

Good. And your financial targets or our financial targets, talk about medium term, is that 2 to 3 years or what?

Well, yes, yes. We have -- medium term means medium term. It is not long term. And I feel that 2, 3 years is quite short, but 5 years is quite long. Maybe somewhere between that.

Fair enough, fair enough. And you mentioned that half of the -- actually, it's less than half of the 2020 profit growth stems from positive COVID-19 effects. Would you mind sharing the estimates COVID impact on revenues, meaning net sales?

No. No, we don't because we don't know. It is, -- believe me, it is not at all easy to understand those impacts. Jukka, our finance people, our businesses, they have made already great job when they have studied very carefully those impacts. And when we report that less than half, it means less than half. It means at the same time that without the COVID impact, we would be in, again, good position to further improve our profitability. And that is very strong message that our growth strategy works and our guys, they do excellent work everywhere in Kesko K Group on that side.

And then about the 2020 COVID-19 impact again linked to staycation boom, how much of billing and technical trade EBIT is linked to this staycation? So the split between the impact less than half.

No. Biggest positive impact coming from building and technical trade, as Johan -- Jorma already explained. But at the same time, as we presented already in grocery, especially in grocery chains, we have very positive impact coming from COVID. But at the same time, very badly, COVID hit our wonderful food service Kespro business. And again, I remind that the car trade suffered heavily due to COVID.

Correct. And Kesko has growth strategy. Does -- how does acquisitions fit into the picture? It seems acquisitive track is over in food trade. So where will the acquisition be directed in the future?

No. Without any doubts, we put more and more efforts to consolidate further building and technical trade industry in Northern Europe. Jorma explained that very well. And also, I repeat that we can see still a lot of potential especially in consolidation of Swedish, Norwegian, Northern European in building and technical trade. And especially, we are targeting companies who has a very strong B2B presence and position on markets. But I remind, we have definitely wonderful growth potential also organically in grocery trade as well as in building and technical trade. And again, I repeat that in car trade, we can see definitely big potential to raise our profitability to the new level.

Good, thanks. About acquisitions. Do you have -- you talked about having several potential targets, do you have something in particular now as we speak?

No. As was mentioned, we have several -- we are working very systematically. Our people are searching continuously those interesting targets. And I remind that we have completed and we have integrated successfully plenty of those acquired companies. And I repeat, we can see plenty of potential, also near-term potential, especially in consolidation of building and technical trade in Northern Europe.

And again, building and technical trade. In DIY market, it has been very strong in most countries due to the pandemic. What are your market expectations when looking into 2021?

No. All in all, we are expecting that this pandemia, unfortunately, will continue, is not over very soon. We are estimating that 2021 is similar than 2020. Hopefully, in the second half we will see that the pandemia is over and life and living will get slowly back to normal, but more back to normal we are expecting life is, globally, may be starting from 2020.

In building and technical trade, 70% of sales is B2C, what is the EBIT distribution between B2B and B2C? So sales and EBIT.

Both are very strong at the moment, both are steadily improving profitability. But maybe Jorma, you can open a little bit more these divisions.

I think it's not B2B or B2C question because, for example, in Finland K-rauta is split 50-50 to B2B, B2C and I'd say it's doing very well. Then we can take also Onninen in Finland, 100% B2B, doing excellent EBIT that then, for example, in Sweden, K-rauta, mostly consumer business, but not doing so well. So it's mostly a question about what is our situation in that business, in that company, not B2B, not B2C question.

Good. The biggest challenge has been turning around Sweden in the past few years and Sweden is now back in black figures. What are the next focus areas? Secondly, how much online is from billing and technical trade sales?

Jorma explained already in his presentation that in all operating countries in building and technical trade, we have still plenty of room for profit improvements, but also plenty of room for growth, organic growth as well as growth based on acquisitions. And of course, wonderful that today, we are in position, that we have so strong foundation in Sweden, Norway. Traditionally, we have been very strong. Our operational financial performance has been already a long time strong in Finland, but now it is very strong everywhere. And of course, it means that we are now much, much better prepared to expand our building and technical trade everywhere in Northern Europe.

In building and technical trade, what do you estimate the share of renovations of the division sales to be?

Jorma, maybe you can open that.

I think it's impossible to say because our customers, mostly we have those small and medium-sized construction companies. And of course, they are doing both, they are doing renovation and new buildings. But that's why we are saying that our part is quite high in renovation is that our main customers are those small and medium-sized. And normally, those big construction companies are making those very big new buildings.

Fair enough. And we see that most peers are investing into automatization. I think this is grocery trade question. Given the accelerated growth within online on the track of COVID-19, is there something that we are looking into, the automation?

Investing on what?

Automatization.

Yes, yes. Yes, very important, very important. And also on that side, we are working. Ari, maybe you can open a little bit more, but not too much.

Okay. So we are happy with the current business model, actually, and most important, that customers are happy. But of course, we are seeking out what is the newer development in the area and we are looking all the possible way how to make logistics and collection more efficiently. And I think that we need to do some investment, but not too big.

How much do you expect online sales to increase during upcoming years? And how you aim to maintain the profitability level with higher online sales?

I suppose in grocery?

Grocery, I guess so.

No. As I mentioned, the pandemia probably will disturb our life more or less or next year or at least first half and some problems coming also to the second half. And based on that, we are expecting that this, let's call, amazing growth in e-comm will continue. This year, we are in 400% and next year, Ari, what is your guess?

We are -- we like nowadays like a 3-ticket number. So maybe more than 100%.

I strongly support your idea.

Very good. I guess this is for grocery but also for building and technical trade. Can you still increase the share of private labels? If yes, how high can it go in 5 -- 3 to 5 years?

Yes. The answer is yes. Definitely, there is big potential. Jorma, please?

Yes. Our industry in Finland, we have quite high share in private label, but also here, we can increase a lot of them. But especially in Sweden and Norway, we have huge potential. And I think that we will gain a lot of better margin in the coming years from that area.

Any comment from grocery trade side on private labels?

We are aiming to increase the share of the private label and I think there is big potential in the future, but it's up to customers. Visa set the table and they make the final choice. But I think the offering is getting better and better every day.

Yes. And Ari we can, again, remind people that, for example, this premium private label, Pirkka Finnish, Pirkka Parhaat, amazing development, very strong growth, highly-appreciated, high-quality products by consumers. And of course, also from our business point of view, profitability point of view, also very, very nice product category.

Yes. The growth has been more than 20% and they're actually bringing more customers to us and customers are very satisfied with the quality of the product side and we think there is big potential in the future.

Yes, they are delicious. Grocery trade, can you still improve sales per square meter despite the recent leap?

Yes. Definitely.

Yes. We have many tools how to do it and actually, we are sharing the costs with our store owners nowadays. And it has been very impressive to see how fast we have been able to do it because the numbers are so big.

And it works very well. And there is, as Ari explained, still a lot of room for improvements and the formula works very well. Increased sales and reduced square meters, that means very strong development also on profitability side.

How far are you in the journey of leveraging benefits of existing network through internal efforts like store-specific business ideas, NPS, halfway or further? How would you describe the competitive environment?

Very good question and I can tell you that this is some kind of a topic that we have on the table continuously when we discuss about the future. Anyhow, we can confirm that this shop will end never. We can always improve further customer satisfaction, customer experience. But I must remind you that it is amazing turnaround, what we have seen, how well our people, Kesko people, retailing entrepreneurs have succeeded to improve customer experience. And as Ari very well presented that all stores where we have seen this turnaround, sales development is amazing. But there is a lot of potential. Ari, maybe you want to open a little bit more.

Maybe the rough estimate could be that about 50% at this current situation. 50% is potential part. Thinking about what it can mean in real life, for example, like our city market Pirkka. There was a renovation 3 years ago and now the sales is doubled, same-store, same location, big hypermarket. But double the sales.

Järvenpää, big grocery store in the [ Nord ], how much they have?

Järvenpää, yes. Perhaps almost double the sales?

Almost double? Yes.

Yes. And the best store in the [ Nord ].

Yes.

Good. What is the share of electric vehicles currently? I think in the market, in general, where it will be -- where will it be in 2030?

2030?

If we have a crystal ball.

Okay. Let Johan to tell this secret.

Maybe we start with 2025. Volkswagen Group estimates that in 2025, the share of plug-in hybrids and full electric cars will be around 50%. So then 5 years from that, I don't know, I mean, of course, it's impossible to say, but my guess would be 70%, 80%.

And what areas should we succeed in order to get the car business into the right track?

I see that most important is customer experience as very, very strongly and many times stated by Johan and myself that we have definitely also in car trade big potential when we lift the customer experience to the new level. And it's not a secret that car industry, all in all globally, has not yet done such a great sum to improve customer experience. And our target setting -- in our target settings, priority #1 in car trade is now to make this big jump and we are progressing.

And one more car trade question here. What kind of growth are you expecting from leasing activities within car trade?

Johan, you can -- please tell first this development we started 2 years ago and a great development, but of course, very interesting for audiences to understand their future potential.

So as Mikko said, we started 2 years ago from scratch and now we are up like just about 3,000 cars at the moment. I think one segment that we see that is increasing very rapidly is private leasing. So instead of buying the car, private consumers want to lease the car and I think that will continue in the future. I said in my presentation that the market growth for next year is estimated to be around 10%. I think our leasing company will grow much quicker than what the market will grow.

Thank you. Then Kesko has on 17th of September 2020 announced that it no longer exercises the type of control, referred to it IFRS 10, over Kesko Senukai and has therefore classified Kesko Senukai as a joint venture from 1st of July 2020 onwards. What has changed in the ownership or management of Kesko Senukai during 2020 that has caused such reclassification?

Yes. No. What has changed? The change is that Kesko and co-owner of Kesko Senukai, we don't share any more same future vision. And due to that reason, starting from this year, we have been in negotiations how Kesko Senukai should be managed and further developed and those discussions continue. Good news is that also Kesko Senukai is, from operational point of view, financial point of view, very well performing, growing, taking market share. Profitability, also very, very good, meaning that day-by-day businesses are well-managed also in Kesko Senukai. And as I said, we continue negotiations. And one day, I don't know yet when, but one day we will reach resolution somehow and we will fix those problems between us and our co-owner.

Thank you. Then detailed questions. What is the norm?

We are also very eager to hear.

I think we have given fairly enough guidance already today and yesterday evening when it comes to our financials. So the most important thing is that we have a growth strategy, we have a return on capital employed target of 12.5% and we have a 5.5% operating margin target and we have said that we will have a CapEx of EUR 200 million to EUR 300 million. So that pretty much tells about the picture and I've said earlier today that we have some potential more when it comes to the net working capital and so-and-so. Those are the areas where we work in and sort of frames in a way.

Now Jukka promised that on your behalf.

Good. How much you have benefited from temporary reduced employee retirement payments, so-called TyEL, in 2020?

Jukka, do you remember?

During this year, so we had certain businesses where we had a quite challenging situation during the lockdown, especially in the food service business, for example, and also partially in car trade, for example, and so-and-so then we had those temporary layoffs. But now when the business is up and running and so-and-so, so much less in a way.

Much less. How much is the profit to come from acquisition synergies? What criteria is used in allocating capital?

It varies. It depends on acquisition. But all in all, we have gained synergies more or less as planned. But most important is that we have succeeded to acquire good companies, good businesses, very important that we have allocated investments businesses where we can grow, where we can become even stronger and businesses where we can compete against best other European players. And this strategy works and I guarantee that we will continue on this track. And based on that, we can expect also good success in future acquisitions.

And can you elaborate on the risks for potentially weaker global economy that you see in 2022, '23 and does your updated midterm financial targets with the expected operating profit margins of 5.5% include such effects?

We see that -- thanks to this turnaround, thanks to our well-performing growth strategy, thanks to very strong financial position, what Kesko has, those challenges and issues coming from a slow economy, those things offer us great opportunities because Kesko is, today, in so good shape that when sooner or later, we will face in Europe those challenges coming from weak economy, we are in good position, fully benefited that situation.

Thanks. And then for your building and technical trade divisions, what market growth are you expecting next year weighted by your different exposures? You should give details.

Yes. No, again, I remind that we are expecting that 2021 will be quite similar year compared to year 2020, especially in grocery as well as in building and technical trade. We are expecting that 2021 will be better year for car trade, no big change in short term but in building and technical trade, we are not expecting any more growth next year.

What are the biggest changes to strategy, way of working or consumer behavior due to COVID that you expect to stick even after returning to the new normal?

Good but very difficult question. Who knows what will be the new normal, who knows how long this pandemia will last and who knows how badly this pandemia will hurt global economy, our economy here in Northern Europe. But we are optimistic because, again, I repeat that Kesko K Group is in utmost good shape and I'm very confident that whatever we will see in future, we will succeed. Thanks to our well-performing strategy, thanks to excellent 43,000 employees who are working every day in K Group. We are a unique retailing company even in European scale. Our grocery trade is probably the most profitable grocery trade company in Europe. Our building and technical trade is moving fast and going towards among the best European players. And all that means, that compared to many other companies, we are extremely well-prepared to face whatever will happen in the market.

Good. A couple of questions still. Time goes quite fast. Here's a question about private labels in Finland. What is the key reason that Finnish private labels' shares lag compared to broader Europe but even Sweden? This is a growth rate question.

Ari, please?

I think it's up to in the past. The offering wasn't good enough because we didn't have good selection in the premium category. And now when we offer in that, we can see that share is getting higher and higher because there was nobody playing in that area and actually, that's the grow area.

And of course, for us, this is, again, a great opportunity, as Ari explained also in his presentation, because the matter of the fact is that, clearly, the best well-known and strongest private labels in Finland are owned and operated by Kesko.

Yes.

ESG question, what are the biggest positive change that you are making in E, S or G? Environmental, social and governance.

No. When we discussed from sustainability, corporate responsibilities, I would like to underline importance of transparency. And whatever you do as the leading retailing company, you should keep very clear in your mind that all your operations, all cooperation between you and your partners has to be transparent. And we have put a lot of efforts in Kesko to make all our operations very transparent and this is definitely main reason why we are so highly appreciated and our sustainability work is also well-recognized globally.

Thank you. And the last question here is any special dividend expected to celebrate that 80th anniversary?

Very difficult question. Due to that reason, we have CFO here.

We have a solid or very clear dividend policy, so I think that's important.

Very good.

Very good answer.

Thank you, gentlemen, and thank you, audience, for the great number of questions. There are also videos online, extra videos for you to see a little bit more about our business and, for example, this store-specific business idea.

Thank you. Thank you. And thank you, Hanna, for organizing this nice occasion. And guys, stay well. Thank you very much.

Stay well. Thank you.