Kesko Oyj (KESKOB) Earnings Call Transcript & Summary

Good afternoon. Welcome, everybody, to Kesko's Capital Markets Day. Welcome, especially you who are here at our K-kampus physically. Really nice to see you in person, but also welcome everybody on the other side of the screen. My name is Hanna Jaakkola. I am responsible for Investor Relations at Kesko. Unique trading and retailing company, that is our theme today. Here is the agenda of today. Kesko's uniqueness will be opened up by our top management, starting with our President and CEO, Mikko Helander; and thereafter, our division heads and CFO. Agenda is tight, 2 hours in total. And you have a great opportunity to ask questions here at K-kampus or by using the chat function online. There's a slight delay in the chat function. So please type your question as soon as you come up with one. Questions will be answered after the presentation. Sustainability is always important. And we had a sustainability-focused investor event a couple of months ago. So today, ESG is not a big theme on the agenda, but the matter is always important, and matter is always very topical. But please go to the investor website and watch the Sustainability Hour, very good information. But without further ado, Mikko, the stage is yours.

Yes. Kesko, unique trading and retailing company. Why? Let's start from history. Kesko was founded during the second world war many, many years ago when 4 regional wholesaling companies here in Finland was merged in 1940 immediately after our winter war. Kesko was one of the largest Finnish companies from the start, as, of course, Kesko is also today. Company was established and owned by independent Finnish retailing entrepreneurs and retailing entrepreneurs made a very important strategic decision in 1960 when they decided to list Kesko on Helsinki Stock Exchange. The reason was very simple. Also those times, Kesko was very fast-growing retailing company and fast growth required more capital. Capital was needed urgently to modernize logistic. Capital was needed urgently to open new stores and expand the company those times, especially here in Finland. Kesko is amazing company. Kesko has made a profit every year and paid dividends each year, except for 1967. 1967 Finnish state mixed corporation taxation. And due to that reason, Kesko reported loss '67, but the state made corrective actions already next year, and Kesko received big tax returns. But excluding '67, company has reported every single year a profit. Kesko is definitely real success story in Helsinki Stock Exchange, one of the most popular share in Helsinki. And today, Kesko has nearly 82,000 shareholders. I'm also very pleased to report also today that Kesko has always been real forerunner in implementing new technologies and concepts. Kesko was the company who was first here in Finland to launch self-service stores and hypermarkets. Kesko was one of the first retailing company in Europe who decided to centralize logistics system, as Kesko did already early '60s very successfully. Kesko has been also in Europe among the first companies who started to widely utilize IT technology in own operations. And here in Finland, Kesko was first one who launched also modern DIY stores. Also in European scale, Kesko has been real forerunner in private label business as well as already many, many years ago, Kesko also launched very wide, massive and successful customer loyalty program. Also, as you know, I believe Kesko has also a long tradition in sustainability. We have done very consistent sustainability work since '80s and compared to many other retailing companies already decades, Kesko has put a lot of efforts in the whole value chain from suppliers to end customers to improve sustainability, not just own sustainability, but also sustainability of our suppliers as well as a big effort to support our customers, consumers as well as business customers to improve sustainability in own activities. Sustainability work in Kesko more and more driven by businesses and very happily I can report also today that today's sustainability is a very important part of our business areas. Strategies and business area presidents and business areas are fully responsible for sustainability work in own businesses. And Kesko is only company in the world included every year since 2005 on the Global 100 list of the world's most sustainable companies, amazing thing, but that is the fact. I have many times communicated with our stakeholders, as I do also today that Kesko and K Group is real Finnish success story. Today, Kesko, K Group, we are the leading trading sector company in Northern Europe. Together with our retailing entrepreneurs, we have 45,000 employees. We have daily nearly 2 million customer contacts. We have 3 wonderful core divisions. Kesko's nearly debt-free company, and we have 1,800 stores in 8 Northern European countries, and our retail sales is today already EUR 15.7 billion. As I believe, you know, Kesko since 2015 has had and we have good strategy. Key element of our strategy is growth. And we have put a lot of efforts and we put a lot of effort to maintain profitable growth everywhere where Kesko and K Group operates. To be in good shape to grow, we decided that Kesko has to be well focused and our focus is on grocery trade, building and technical trade as well as on car trade. We have one unified K, meaning that today, Kesko K retailing entrepreneurs, we have very good seamless cooperation. And together with entrepreneurs, we put a lot of efforts every day to improve customer experience as well as we are definitely also today, real forerunner in digitalization, in retailing business, wholesaling business, even European-wide. And as I mentioned, very important part, I would like to say a real key element of our success is sustainability work everywhere in Kesko and K Group. I guarantee you that our success is not a coincidence. Our success is a result of the right strategic choices and their successful execution what we have done already 7, 8 years very systematically, and we will continue. I guarantee you this systematic work. Strong focus on 3 core businesses, massive divestments of non-core businesses, including also Russian operations. Very important element of our success story is that we successfully made big transformation in building materials trade -- in building material trade to be B2B-driven business. Please remember that 2015, nearly 80% of our revenue in building a technical trade came from B2C side. And today, situation is opposite as well as successful expansion to technical trade by acquiring Onninen. Also in grocery trade, we have succeeded to create unique platform partly, thanks to successful acquisition of Suomen Lähikauppa before grocery trade company here in Finland. This acquisition made us also a market leader in neighborhood store business. Digital forerunner, especially in grocery trade. We are very successful grocery trade company partly because we are very successfully utilizing new technology, as Ari will today explain more detail in his presentation as well as we have succeeded since 2015 steadily to grow and increase our revenue and market share in building and technical trade everywhere in Northern Europe. And once again, I underline importance of sustainability in our success story. Good profitability. I believe that I don't need to spend a lot of time to communicate those numbers, very detailed numbers and this picture present very clearly that our strategy works and together with my fellow managers, and together with our employees, we are doing very successful systematic work to follow and implement our growth strategy. 2021 was again a record year, EUR 776 million operating profit. And as I believe you remember, our guidance for this year is that again, our result will be on record high level in range between EUR 790 million, EUR 840 million. One key reason in our success is that we have succeeded to make real transformation in all our businesses. Thanks to those successful transformations. Our grocery trade is today one of the most profitable grocery trade company in Europe, probably the most profitable one. EBIT already nearly EUR 470 million. Building and technical trade, amazing transformation. And today, operating profit very well in line with other best European companies in this industry, EUR 348 million. And thanks to a very successful transformation in car trade. Our profitability is also on a good level in car trade for EUR 45 million. We have growth strategy and guys, I can tell you that I love this picture because I'm in this position to present our impressive EUR 6.1 billion growth in core businesses, retail sales. This is, again, a strong message that we follow very strictly our growth strategy and growth is priority #1 in Kesko's businesses and Kesko's business development. But we have put a huge amount of effort to fully utilize all potential coming from new technologies. We have put a lot of efforts to make Kesko and K Group real forerunner in digitalization. And also due to that reason, I'm very pleased to report today that our sales via digital channel is already EUR 1.7 billion. And sales via those channels is growing very fast in all our businesses, in all our business divisions on B2B side as well as in B2C businesses. Due to all those reasons, what I mentioned, we are meeting well our financial targets. Comparable operating margin over 6%, comparable return on capital employed over 14.5%, and we have underlined over because it means that we don't have in those targets upper limit. But at the same time, I stress with you that we are coming back to financial targets when the political and economic situation becomes more stable. But once again, I repeat that our financial targets, we are meeting very well. And we don't have in those important target upper limits. We are in good position to continue our profitable growth. I will communicate that, but especially my business area presidents will open more detail why we feel so strongly that we are in excellent position to maintain strong growth and that way, support also positive development in -- on a profitability side. Grocery trade outlook. First, we stress that the grocery trade market, we expect will remain stable as the whole, in part supported by price inflation. We are a strong player in all areas of food trade, and Ari will open this again in more detail. But matter of the fact is that we are unique grocery trade company in Europe because we are only one as we believe, who has such a strong position in all different areas of grocery trade as we have in Finnish market. And due to those reasons, operating profit, we expect in grocery trade will remain at a good level despite rising costs. Also in building and technical trade, outlook is positive. Again, I remind you that we are today very strongly B2B-driven building and technical trade company here in Northern Europe. Already over 80% of sales is coming from professional customers. 2023, we expect that the construction market will decrease compared to year 2022. But as Jorma will communicate those numbers in more detail, you will see that we don't expect not at all such a big change compared to year 2022, especially because renovation building and construction, all in all related to the green transition, is expected and are expected to support our growth and success in building a technical trade business. All in all, good profit level is and will be supported by the large scale -- large scale of renovation and I would like to say, especially also strong demand for products related to saving energy and the green transition. And those trends are very strong, not just in the near future, but we believe that those trends are very positive for us and our building and technical trade division even in coming decades. Also in car trade, we have done. I would like to say lot of domestic work -- homework to understand market situation in 2023. And the outlook on market is not very positive. Availability and demand for cars are expected to remain below long-term average in next year. But despite those challenges and difficulties, we expect that our car trade will remain -- and profitability and financial performance will remain at a good level, especially thanks to the transformation and efficiency measures what we have successfully implemented in car trade division. And of course, that will lay a very solid foundation to continue growth and profitability improvements in car trade business also in longer term, when one day business environment, availability and demand will return back to normal. Based on all that, what I communicated, all in all, Kesko's outlook for 2023 is not at all bad. We expect that Kesko's net sales and operating profit will remain at a good level despite those challenges in the operating environment. Last, but definitely not least, I'm very pleased to underline that our strong strategy execution and our right strategic choices will boost success also in the future. This is very strong feeling what we have in Kesko's top management. And I believe that easy for you to understand and share our feeling when you remember that since 2015, we have very systematically and successfully followed our growth strategy. We have had no need to make any big and major changes in our growth strategy. And I can guarantee you that when you remember, how big society we are in K Group, it is very positive today that so long time we have been in position to follow same strategy. Today, 45,000 people in the society, they are very familiar with our strategy. They know very well but they need to do personally to participate implementation of our strategy. And also, we have a lot of statistics to prove that our people are very motivated to work and participate implementation work of our successful growth strategy. In near future, of course, we have on the agenda, many issues and many measures to do. But 3 key priorities are here. First, we have to utilize our exceptionally strong position in all areas of Finnish food trade to maintain in grocery trade, good development in sales as well as in profitability. And once again, I pinpoint based on our exceptionally strong position in all areas of Finnish food trade. That makes us unique company in European grocery trade business. Number two, utmost important, we will continue growth and profitability improvement in our strong building and technical trade division by fully utilizing opportunities in a changing operating environment. And I underline this, but I said fully utilize potential and opportunities because now in current situation, we can see clearly that this situation what we have in Europe -- in Northern Europe that will offer us exciting opportunities even in some occasions to accelerate growth of building and technical trade business. And also we can see a lot of opportunities by improving efficiency in all Kesko operations by taking full advantage of data, technology and better business practices. We have done a huge amount of actions to improve year-by-year efficiency of Kesko, K Group operations. But we can see clearly today still a big potential partly because we are so advanced in new technology, and we are used to utilize new technologies, and we are so keen and so eager to search all opportunities coming from new technologies as well as coming from benchmarking what we are doing very professionally, very systematically, not just globally in our own industry but also globally compared to many, many other companies and industries. But based on that, what I said, strong strategy execution will continue, and we believe strongly that, that will boost our success also in the future. Ladies and gentlemen, that was my part. And now I'm worried that Hanna will make some questions for me.

Yes. Thank you, Mikko.

I mean here or...

I guess staying here is good. I have a couple of questions for you. Clear message all comes down to strategy. But what do you see as biggest risks going forward?

I see that all matters which are in our hands, there I don't see risks. We have a good strategy. We have excellent people, but management structure -- and on that side, I don't have concerns. You ask concerns, then all concerns definitely related business environment, war, economy, inflation, interest rates, quite long list. But we should remember that those problems we have had fully already in 2022. And despite all those matters, we are in position to report again all-time best result. And due to that reason, we don't see need to be so worried in Kesko. It is upper side. Coming years and challenges in business environment, as I mentioned, we believe strongly over us also interesting opportunities.

Strong message. And looking forward, what are the main drivers? What do you see?

Main drivers...

For growth?

Yes. No growth, as you mentioned, is priority #1, and of course, growth in our case has to be always a profitable growth. I mentioned already that we have a unique grocery trade division. And in our unique grocery trade business, we have also exceptional strong food service. And food service and eating outside of home is steadily increasing. And when we are in clear market leader in food service business, our market share is approaching already 50% definitely. We can see on that side already in short-term trade opportunities. Entire building a technical trade division, of course, is amazing growth driver. And in building a technical trade, Jorma will open more detail those opportunities. But again, I repeat that all construction-related green transition energy savings are boosting already today our business, and we believe strongly will boost even in coming decades of our business, plus, of course, acquisitions.

Acquisition as well. Very good.

And cost savings. Yes, cost savings. My fellow managers, they are almost laughing because so much we have discussed also about opportunities on that side.

Thank you, Mikko.

Thank you.

And now let's go to the grocery trade. We have our President, Grocery Trade, Ari Akseli, telling us about the uniqueness of the Finnish food trade at Kesko. Thank you.

Good afternoon, everybody, and I will tell you why the Kesko is a unique player in the Finnish grocery trade market. Firstly, the big picture is over here. The grocery trade is naturally based on the Kesko growth strategy. And our focus is in the Finland nationwide from [indiscernible]. We are strong in B2B grocery trade. And at the same time, we are very strong in the food service side -- running by Kesko. We have very advanced sourcing, logistics and IT systems for all operations, and we have a very strong base how to use data to optimize all the time, all the key processes. Here, you can see all of our brands, City Market, hypermarket chain Supermarket and K Market. And never you should forget food service company, Kespro. And the combination of these together is very strong. And we have lots of synergies. And we have used these synergies, but I still see much more potential in the future. And we have the most extensive store network with 1,200 stores all over the Finland. And I really love to show this slide. When you look at the numbers, they never lie. And they tell the story that we have had very solid growth since 2015 in both sides, also the turnover, but at the same time, EBIT margin. And some of my colleagues in Europe, they are wondering, are these numbers really sustainable, how the hell you can do it year after year, keep on improving. And the message is clear, just do it. And now we tell you how we do it. Now let's look at the main reason behind our success story in recent years. Firstly, we are the only grocery trade company in Finland that has independent retailers. And that gives us capabilities to build up store specific business ideas. Many of the other retailers, they have same story everywhere. If you have visited in one of our competitor stores, you have seen them all. But if you have visited in one K store, you have only seen one of them because every one of them are optimized in each and every market by assortments, pricing and so on. In any ways, they are appealing, especially the local customers. And actually building these kind of capabilities is very difficult for the most of the retailers. So we have big advance that we have K retailers and Kesko working together. And other part is that these retailers, they are very quick to add up to the different changes in market. For example, during the COVID times, we were able to scale up e-commerce sales by 1,000% per week comparing to the week -- the year before. Think about 1,000%. You will not find any other retailers in Europe who was capable to do that. And other part is also good for us that retailer model requires less capital from Kesko, as retailers' balance sheets have also -- they are owning these furnitures in the stores and stocks in the stores and so on. So key thing is that each and every store has own business idea based on the data and each store is looking different, depending about the market. This is something that traditional retailers think that this must be a nightmare, so difficult to handle out from point of view of sourcing and building assortments, but we have capabilities to do it. We have most extensive networks of the grocery stores in Finland. We expanded our network in year 2016 when we acquired Suomen Lähikauppa. And I think that if you think about what was the reason behind the success story of the Suomen Lähikauppa store is that we are able to gain more market share and same -- at the same time, big synergies with relatively small investments, only EUR 60 million for the company and EUR 60 million for the renovations. And by that, we get EUR 700 million extra sales and profiting impact was very big. Like I mentioned earlier, data and digitalization are the cornerstones of our success. Kesko has a lot of data. We have collected data from Finnish customers almost like a 3 decades now. And we use this data to benefit our businesses. We are able to build assortments in each and every store to be optimized depending about the customer base of that store. And we are able to do that [indiscernible] marketing and pricing and so on. And we also share this data with our customers, retailers and partners and bring them added value with new tools and new business opportunities. And it seems that we are finding new ways to make money by using this data. A couple of examples. We are selling this data to the suppliers, and we are using this data for the marketing. And we have been opening these marketing channels for the suppliers, and they are very keen to investment in these areas. Here is one of the examples how we promote our partners' business with data. [Presentation]

Then, let's have more information about Kespro, who is our wholesale company for the foodservice. It is a clear market leader in the Finnish market and its market share is currently 46% and total sales is over EUR 1 billion. Kespro has very wide customer base. Both online sales are very important also for Kespro. And we expect that growth will continue. But if you think about yourself, eating outside is one of the choices of the life. People love to do that. Of course, you'll first start to think about -- only about dining outside. But it's much more important for us, it's lunches, like I will tell to you later on. Let's listen about Kespro's story. It's important to understand that Kespro is only a foodservice player in Finland that can serve customers of all sizes, and as we can see in this video. [Presentation]

You might found out, if people still eat outside, whether it's -- if weather gets difficult. It's most important to understand that 70% of the business is in the lunches. And these lunches are typical lunches that we eat in workplace, restaurants, schools and hospitals, for example. And at the same time, if we look about the customer base of the Kespro, and think about even the COVID time, government shut down many of the restaurants and nightclubs and still Kespro gained market share and was able to make profitable business. Think about that. It's amazing and explains that people are obviously thinking that eating outside means that you go want to restaurant, have a nice dinner. It doesn't really mean only that, actually that market is quite small. It's everything else that matter. Both Kespro and our grocery businesses are very strong online. If you think about the online sales of the consumer business, it's actually higher in the Finland than comparing, for example Norway, it's about double almost. So you -- here, you can see that our consumer online grocery services are best in the business, proven by independent compensation lately. Online food sales have stayed at the level that is clearly higher than before pandemic time. Some 70% of Kespro's sales come from the digital channels. Both the consumer and online business and the online sales to professions are very profitable businesses for us. And that's not very so typical. Often, especially if you think about the grocery online retailers or the customers, it's saying that it's nonprofit. For us, it's profitable business. And it's very important for us to always innovate new things in the online food sales. Most recently, we have started cooperation with Wolt for very fast deliveries. I remember we were in the autumn 2019 in London, and they were saying that they have now new innovation that some of the stores are trying to have fast deliveries, within 1 hour. We first started to think it -- oh, it might be possible in the London City area, more than 10 million people living there. But we started this cooperation in Finland. And now you can have in [indiscernible] average delivery time, [ 26 ] minutes. In Helsinki city area, it's up average now 12 minutes. So we have some capabilities. Let's see and watch video about this collaboration between Wolt and Kespro. [Presentation]

And then to the market and our actions in the market. Here, you can see the development of the market share in the recent years starting from year 2014. Like you can see, if you think about the total market share in the food rate, it's about the same comparing to the last year, 0.5% lower. If you -- and we have been gaining heavily market share in the foodservice side and lost a little bit in the grocery side. And main reason behind this development is very heavy investment of our competitors in the store network. And if you look at the market, what is happening? Key competitors have opened so heavily new stores, which are usually losing the money during the first 5 years. That's very typical. We have been able to say at the same time improve sales efficiency in the existing stores. And we still have a very wide network of the stores. After the pandemic, the demand has moved from the grocery stores back to the foodservice. That's not good for the competitors, but that is actually very good for the Kesko because we have the highest market share in the foodservice side. And if I think about that, what is the most important measure in the long term based on a very wide range of international research is that you have to be able to maximize gross margin per square meter to be efficient and profitable retailer. And we are doing exactly that by using data, and we keep on doing that. And because we are very profitable in the business, we are also able to invest in these new stores where the customers are coming to in the growing areas of the Finland. And that will also help us to gain more market share in the future. And Kespro has also added new services and gained more market share based on that. And if you look about what is happening in the market, the big thing is about inflation and rising prices. And of course, it has challenges for the -- also about the grocery rate. And -- but we have been able to add up these changes. Customers care more about prices and that impact their behavior. And it's very important to give the customers what they want. Some customers want to have only prices. Some are more concerned about quality and services, but most of them would like to have whole package. Focus areas in challenging market. These are the most important things for us right now. We must develop store business ideas all time, and our store owners, they are very motivated to do it. And we have very great tools then to help it. We must improve our price images and we must maintain our quality and selection. And of course, Mikko, we must always improve our efficiency. That's always in our agenda. So let's have a great example about this from Turku on how we can respond to the changes and offer customers different lunches depending upon time. [Presentation]

And it's always very important to look things from point of view of the customers. If you look about the current discussions in the media, it's all about prices. But at the same time, there is more customers who are actually looking about better quality and services. If you think about life, food is one of the important things that bring joy to the lives. Good quality food with the friends and dinners together, they are important part of the lives. And if economy go down, that's something that everybody can afford to have nice dinners and eating with friends. And if you think about total share of the consumptions, food is -- food and drinks are only 12% of that. And the share is about the same than before, about 1 year ago. It doesn't increase. The problem is that the buying power of the consumers are coming down because the rise in energy prices and interest and so on. Our customer data shows that customers now want both good quality and good prices, and we are able to provide them. Actually, in recent research made by Helsinki [indiscernible], the lowest shopping basket was founded from City Market, Helsinki Ruoholahti. Some might think it was a big surprise, but at the same time, this price like the product share side -- share of the total sale is very small. For example, if K menu shares even doubles and it's the price why it's -- we match the prices with [indiscernible]. We don't have any problems to do that because the share is so small. And like you see in the video earlier, we have very high share of the restaurant items. City Market, Turku Kupittaa is maybe the biggest restaurant in Finland. Sales is about restaurant products, EUR 10 million yearly. They are selling [indiscernible] and so on. So we have a very good position for that. But big question is that if you are ready to open, these 2 customers and they start to understand that you have the quality store embarking on under the same roof. What is the reason to go anywhere else? No, no, there is no reason. Customers are different. Some focus more on quality and selection, some to the prices, but 40% of the households are thinking about both quality and prices, and they love campaigns. And campaigns is like heretics of [indiscernible], you really can do campaigns. Here, you can see that focus on improving price image and price and differentiation at the same time. We have big potential increase in the share of the private brands. Currently, they are about 20%, and we also have some very unique restaurant brands extended to that. Like you might know that all our restaurant meals can bode only from K stores as an example. And there is a potential for us. We are also very strong in restaurant quality foods and it has been growing to be bigger than EUR 200 million business. Actually, we start to be -- might be the biggest restaurant, saying, in Finland at the same time in that sense, like [ Johan ] mentioned earlier in the video. And we also have potential that if we are able to increase the share of the private brands, it also differentiates us and also improve our margins at the same time. So to conclude, here, you can see the formula, what makes us so unique and profitable company? But you have to look all about these elements and they are fitting together. And the combination is unique. First of all, you have to find out what the customers want and deliver it. It sounds so easy, but you have to do it every day, any store, for every customers, both cheaper and premium choices. Secondly, sales growth is very critical for us with the biggest cost base via operational leverage. We also need business model that enables growth and agility. And we have that kind of business model. If you think about the retail side, we have store owners who are very agile in any case, to add up to the changes in market. And Kespro says we have very agile foodservice company who is able to adapt for the different needs of different customers. We focus optimizing our store networks and getting more out of existing stores. And that is one of the key reasons why we are so profitable. We need efficient processes, and we are using data to be more and more efficient. At the same time, we are more and more customer focused with every store. We must use data for finding new business opportunities and also improve current business processes. Examples about this is data business, we are selling data, and we are also a marketing company. And I can tell you that from point of view of the retailer, when you see the margins in marketing and data, you are very positively surprised by them comparing to the additional rate. So thank you very much.

Thank you, Ari. Thank you. I have also a few questions for you and very positive message here. So I would like to ask again about the risks. What are you seeing as the biggest risks going forward?

I think the biggest risks for us is that customers are losing their buying power because of the rising prices in energy and interest.

That is the biggest risk?

Yes.

And you explained how we responded in the presentation, right?

Yes.

And people are trading downside, as you explained that K menu price factor has an increase in sales. Are you worried that these people trade down and buy less, maybe expensive brands or...

Yes. First, we have the best customer base in Finland. Our customers, they are looking the best quality and best services. Some of them are also looking at the cheaper choices. But when they change, for example, to the K menus, we also have good margins with them. And the share of them is very small. It doesn't really affect so much to the profitability of us. But of course, we are looking all the time what we have to offer in this time to make our customers happy. And the main message is that you can find under the same roof, the best premium, even the restaurant brands and the lowest prices in the market. How you can compete with that?

You can't. Thank you.

Very good. And next, we will go into the building and technical trade. Jorma Rauhala, Deputy CEO, President of Building and Technical Trade, will tell us about development and outlook of the building and technical trade. Jorma, please.

So good afternoon, everyone. I'm Jorma Rauhala, President of Building and Technical Trade and Deputy CEO. Building and technical trade division has a growth strategy. Our focus is on Northern Europe. In Finland, we focus on growth and market leadership in both technical trade and building and home improvement. That can be divided into builders merchant for professionals, builders and DIY for consumers. In Scandinavian countries, we see growth in technical trade and building and home improvement where our focus is on builders merchant with selective presence in DIY. In Poland and the Baltics, we are strong operators in technical trade. And with Kesko Senukai, we are the leading DIY operator in the Baltics. Currently, building and technical trade division is the leading operator in the Northern Europe. Our retail sales in total is EUR 6.5 billion and the share of B2B is over 80%. Our business can be divided in 2 parts; technical trade that serves technical professionals, and building and home improvement that serves professional builders and consumers. Technical trade is 100% B2B trade as has grown significantly in recent years. Current operating margin is 7.7%. Building and home improvement trade is EUR 2.4 billion business, of which nearly 70% come from sales to professional builders. Our joint venture, Kesko Senukai, has a consumer focus with 70% sale -- of sales to consumers. Building and Technical Trade division has had a strong growth and considerably improving profitability for the last 8 years. Operating margin at the moment is 7.3%. And with that, we are on par with the best European benchmarks. Some of our strategic decision to highlight from the past years are acquisition of Onninen 2019, divestment of Russian operations -- sorry, Onninen was 2016, divestment of Russian operation in 2018 and to acquire nearly 20 companies, especially in Norway and Sweden. It must also be stated that we report Kesko Senukai as a joint venture as of July 2020. All in all, the Building and Technical Trade division has nearly tripled in size as well as improved operating profit, nearly EUR 300 million since 2015. There are several reasons for our strong performance. We have a strong country-specific approach, meaning that we execute our strategic country specifically. You can see good performance from all countries from the last 4 years. Today, all countries are profitable. And all our businesses are profitable. It is also important to recognize that nearly half of the operating profit is now coming from outside of Finland, which is important for us. In Finland, we are a strong market leader in both technical trade with Onninen and building and home improvement trade with K Rauta. Market share in both businesses in Finland has grown considerably over the years. In Sweden, we have made a positive turnaround and have been able to achieve a good position in growing builders merchant market. In Norway, we have a strong market position in both builders merchant as well as in technical trade. In technical trade, our focus is on electricals, where we are the market leader. In Poland and the Baltics, for Onninen, we have a strong position, and we have a very strong profit improvement. With Kesko Senukai, we are the leading operator in Baltics. Let's look at what our country-specific strategy means in practice. Our Country Director for Kesko Norway, Hilde Kristoffersen, tells how we have been able to grow our technical trade in Norway. [Presentation]

Kesko entered new market in 2016 with Onninen, and it has been a perfect fit. Onninen has had a very strong performance as part of Kesko. The sales of Onninen has increased almost EUR 1 billion, and comparable operating profit is 6x bigger than it was in 2016. All in all, Onninen has proven to be a success story for Kesko. And we have had a considerable profit improvement as well as more market share in all countries. Looking more closely to our technical trade customers. The total amount of active customers in technical trade is around 100,000, with around 10% growth in the last 12 months. We have been able to gain market share in technical trade in all our operating countries. Typically, technical trade customers are technical contractors in electrical -- infrastructure cost operators, industry customers or resellers that sell technical trade products. Our customer mix in technical trade is small- and medium-sized or regional operations for 84% of our sales. Typically, customers in this group are, for example, locally operating contractor companies. Nationwide operators form only 16% of our sales in technical trade. Typical Onninen nationwide customers are, for example, national infrastructure service companies or national construction companies. All in all, Onninen customers are mostly small, medium-sized and regional operators that often focus on renovation and also nowadays especially on growing green transition. This is also the reason why we see great growth potential and demand over cycles. Now let's move to our Building and Home Improvement business. Our Country Director for Kesko Sweden, [indiscernible] tells in this following video how we have built a solid footprint in all our business areas, Onninen, K-Bygg and K-Rauta in Sweden and how we have been able to grow, especially in builders' merchant business.

Hey, my name is [indiscernible] and I'm the Country Manager of Kesko in Sweden. We have been moving at a rapid pace in Sweden over the last 4 years, executing our country-specific strategy and now have a solid footprint of all our 3 business brands: Onninen, K-Rauta and K-Bygg. Our main strategic achievements are among others, the acquisition of XL Fresks in 2019. This was a game-changer as we have been able to build a strong platform in the B2B building segment. We have improved our profitability and market position massively with organic growth, acquisitions and successful integrations. With the divestment of unprofitable contractor business at Onninen in 2019 and the acquisition of MIAB in 2020, we have taken a leading position in the infra segment, both within electrical and water and sewage. K-Rauta has had success in the B2B area, focusing on smaller companies, the man in demand aiming towards customers that require a broad product portfolio with an excellent digital shopping experience. As a result, we have more than tripled our size with the Building segment, increased profit over the last 4 years of more than SEK 350 million, and we have a solid strong platform for growth both organically and via M&As. Our focus for the upcoming years will be for Onninen to continue to grow in the infra segment with clear focus on renewable and green energy. For K-Bygg, leveraging the platform we have built with further acquisition and using the strong local entrepreneurship to fuel organic growth. K-Rauta will continue to develop the e-comm business to offer effective customer experience with professional businesses and consumers. We now utilize our Kesko strengths from support functions in Finland to local synergies by having a common logistical center in [indiscernible] for all our 3 brands. Cross-selling of products will enable us to continuously broaden our customer offering. Our main goal is to become the #1 choice in Sweden for professional builders and infra customers, as well as the most attractive employer in the market. Sweden is a big and lucrative market, and we are constantly improving our position in both building and technical trade.

Our customers in Building and Home Improvement are professional builders and consumers. The total amount of active professional builder customers is around 125,000 and most of the professional builders are focused on renovation. In total, professional builders form almost 70% of our sales in Building and Home Improvement. Professional builders, the majority are small and medium-sized or regional operations. Typical customers in this group are locally operating small building and renovation companies. Nationwide contractors form only 7% of Building and Home Improvement sales. Typically, this kind of customers are nationwide construction companies or big facility services companies. Consumer customers form around 30% of our sales. Of these, more than half are so-called project customers who see product for a whole home renovation project, like kitchen or bathroom renovation. Less than half of consumer customers come to the stores to occasional needs to purchase a bag of soil or garden tool. Moving on to operating environment and our strong growth drivers. The latest analysis from Euroconstruct estimate that the total construction market is expected to decrease somewhat. This analysis is construction market volume and includes all areas of construction, also renovation and infrastructure. Forecast, you don't see any drastic decline, more of a normalization of the trend to a good level. About renovation, the share of renovation is more than half of our division sales. And Euroconstruct estimates that renovation will grow in all Kesko's countries. Overall, the share of renovation is larger in our business than in the market in general, which is why we see that overall trend is more positive for our business. All our businesses in the building and technical trade benefit from the global megatrends of green transition, meaning solution to cut emissions and new solutions for producing and storing energy. And growing renovation depth in buildings and in infrastructure as well as the growing need for energy saving solution like insulation or water saving products. The overall importance of these megatrends is growing in the market, and all of these trends generate demand over short-term cycles. When looking at Kesko building and technical trade, the green transition is already visible. Of our total sales, the products to promote green transition and energy savings have been 36% of our total sales and has been growing very strongly. Our products in this category include solution to cut emissions and improve energy efficiency like solar panels, pumps and EV chargers as well as wind power and infra construction products or water saving products and LED lighting. At the same time, conventional building and technical trade products is about 60% of our sales with quite steady growth development. Last, home, garden and seasonal products are only around 4% of sales and slightly declining. And I think this 4% is quite often what people see, for example, in Finland, what K-Rauta is, but it's only 4% for our whole division sales. Taking the global megatrends into account, we are convinced that demand for green transition and energy savings products will continue to grow. We also see growth via acquisitions. In technical trade, the total market in our focus area in Northern Europe is EUR 22 billion. In Finland, we are a strong market leader with 44% market share, which we have been able to grow profitably. In technical trade, we see most growth opportunities in Norway, Sweden, Denmark and Poland. In Building and Home Improvement, we have made several successful acquisitions to grow especially in builders' merchant segment. There are still several growth opportunities in the Northern Europe market as the total market potential is EUR 24 billion in Building and Home Improvement. Currently, in Finland, we are the strong market leader, and our market share has strengthened steadily. In Building and Home Improvement trade, we see many growth opportunities in Norway, Sweden, in Denmark in builders' merchant business. Then what is our agenda now in our management? We are in good position to continue to execute our growth strategy. Our main focus areas going forward are: active sales work and sales management to win market share. This is B2B sales, B2B business is business with people. And it's amount of customer contacts, it's the quality of customer contacts and it's directs of customer contacts. And we have improved very much on that area, and that's maybe the most important way to gain market share. Then ongoing margin management. We have had a good track on gross margin management during the turbulent times as we have been able to shift the growing prices to our customer prices successfully. Third, ensuring strong profitability through operational efficiency. Fourth, utilizing digitalization in sales and improving the efficiency of our own operations. And continued acquisition, especially in Scandinavia, focusing especially to builders' merchant business and technical trade. Thank you.

Thank you.

Thank you.

And questions, of course. Investors are worried about the cycle in building. Are you worried about it?

No, I'm not worried. If you look a couple of years back 2020, it was kind of COVID-related booming consumer business. That was 2020. And 2021, it was quite a nice increase in construction business in B2B business also supported price increases, which has continued this year. So quite good strong years. How I look next year? We see that there are some decrease in total construction volume, some decrease. But as I mentioned, the share of renovation is quite high in our business and renovation is still growing in every countries. And also, this green transition and energy savings is not the trend. It will continue and that will support also our business. So I'm not worried.

You're not worried. Okay. And about green transition. You showed us that it was 36% of the business already looking back. Is it really profit-generating business that supports us over cycle? How do you see that?

Yes, it really is and it's a little bit surprise to me that how high this share is when we are looking all of those products that we are selling to those kind of business. And it's not only, for example, solar panels. It's not only solar panels. It's all those mounting systems what you need. It's those inverters. It's those storage systems, everything worked around, for example, solar panels. Car charging, wind power, whatever. And definitely, that business will -- growth will accelerate. And it's a very big part of our business.

Thank you.

Thank you.

And then we move on to the car trade. Our next speaker is Matti Virtanen, Head of Car Trade. Ongoing transformation in car trade is your topic. Please.

Yes. Good afternoon. And what an interesting topic for the car trade. And I would really during this 10 minutes, 15 minutes, talk a little bit more about what we have been doing lately in the car trade division and how we respond to the changing market. But just a few words about the strategy. It's naturally linked very well to the Kesko strategy overall. We are operating in new cars heavily naturally, lately been growing quite nicely in the used car business. And then we have a very broad portfolio of services in multiple areas where the biggest growth currently is in the K charging network, which is the #1 network in Finland charging the electric cars. We have been lately focusing on fundamentally 3 priorities. Customer experience, #1, we've done a lot of efforts there. Digitalization the car trade industry and the car trade that we do and also being very active in the sustainability area, naturally focusing on the environmental issues, but also to the car safety, which are the 2 heads we are focusing on the car trade. Just a few words about our business. We are -- last 12 months revenue is almost EUR 900 million, naturally impacted significantly of the supply issues that have been going on more than 16 months now in the car industry and especially Volkswagen brand that we have operated long time together with -- has been one of the most affected by the supply issues. But still, we are a market leader in the new cars, 17% market share when we count together all the brands we are selling. And as mentioned, we are growing pretty fast in the used car business, which has been the focus for our development lately. And we are operating margins on the 5% level of revenue, which is really high if you compare many of the Nordic players in this respect. And what is good thing is that we are profitable in all of the businesses we operate. Typically, many of the car operators are not so profitable in the new cars and then doing the profits in the so-called aftersales services. We don't. We focus on all of the businesses to be profitable because that gives us the balance to respond to even harder market conditions if they happen to be. And one very important thing we started was the K Auto brand we operated previously in more than 30 different brands and now we operate under one K Auto brand. The car industry is in an extremely interesting situation currently. There are multiple megatrends going at the same time. And I'm sure you are aware of some of them, especially the electrification of cars that has been in the public a lot. But it's not the only one. There are many issues related to new distribution models, new competition entering, the Chinese coming very actively to the marketplace and the digitalization is becoming a norm in buying cars. So most of the people that come to visit the stores have really good idea what they're going to buy when they arrive in the stores. And of course, the economy, we know has a major impact on the market overall due to the fact of inflation, also the uncertainty that's come, combined with the fuel revolution that's going on and with the market situation overall. But we saw parts of this coming already 2 years ago. We saw the electrification happening very actively, and we saw a lot of things going on. And we felt that we got to be changing our operation. And we started the transformation program at Kesko K Auto almost 2 years ago with a very, very big focus almost everything we do in the car division. And just to give you an idea, we had almost 300 people working full-time the transformation program 12 months ago. When we looked at the cost structure, we looked at the organization structure, we established a new management model, we reshaped our pricing, our discount practices, we spend a lot of investment on the digitalization aspect of it. And we formed a fully dedicated used car business division, which is doing the business in the dynamics that the market allows. And then, of course, we adapted the K Auto brand, which is becoming one of the most known brands, in fact, in Finland at this point of time. So in spite of the very, very challenging market situation, we kept the profitability level very good. If -- just some facts about the market in Finland, the new car registrations went down 19% this year. The new orders have been going down compared to last year 20 weeks in a row in total, roughly 6% down the orders compared to the last year. Even in used car sales, which typically has been over the years a very, very stable business, the market is going 11% down. The only thing that is growing currently in the car trade is the charging points, 33% charging points up. We, in the K Charge, we are growing almost 200% in the charging transactions, which is the area we are going to invest also next year quite significantly. So in spite of this, we have been able to keep our profitability good. If you can see from this picture, since 2017, the car trade division has gone down more or less on the profitability. Last year, we did 60 years record year with EUR 52 million operating profit with 5.1% of revenue. And naturally, that would have continued, we expect. So if the supply would have been normal or at least nearby normal, and even though we have gone down in the revenue due to those facts, we have been able to keep a good 5% operating profit. And that shows that the fundamental health of the division is in a good shape because immediately, when the supply comes, we expect the profits to follow. So nice trend in this respect. And naturally, many of the activities we are doing is not only focusing on improving the probability but also trying to get the top line growing. And top line, there are many things we will be looking at -- we are looking at this point of time, but one opportunity is definitely this picture. It's a little bit busy picture, but it's tried to explain how fast the electrification of cars has happened over the last 3 years. The blue and the yellow describe the full electric or hybrids parts of the total supply and registration of the cars. And you can see more than 50% is already there. Even though the electrification of the cars is very fast, and we are #1 in Finland in the electric cars in Finland with our very nice broad portfolio for the electric cars, still, the combustion engine part is going to be there for a long period of time, simply because of the fact that even though the electrification is happening, there's a lot of demand still for combustion engines. And lately, especially when the electricity price has gone up, we have seen the demand coming back to the diesel cars and the benzene cars. So this is a constant change, and we believe that, with those transformation we have done, we are ready of taking the opportunity of this transition as well. So where we are going to focus for the future? We have now a very balanced portfolio of businesses. So all the businesses are profit. So as we grow, the profit grows. We keep on investing on the digitalization. For instance, we have been spending quite a lot of efforts to the analytics tools of driving our business in terms of pricing or in terms of inventory management, the used car business is significant investments there, and we keep on doing that. And we are also planning to keep on growing the used car business, making sure that we are present in all of Finland. And that's going to be the next year's significant focus on together with finding new businesses. So we are not operating -- even though we are #1 in Finland, we are not operating all aspects of the car business in Finland. Take example, for instance, spare parts business, the nonbranded spare part business is 55% of the total market in spare parts, we are not deeply involved in that kind of activity. So we are looking at all of these areas very, very carefully. And we'll keep our cost base correct as the cost base is going to be one of the key competitive advantages that we keep on having after our transition. So I think we are in a K Auto -- Keskos car trade division really ready for heavy market conditions. We have shown it over the last quarter's numbers. And immediately, when the supply starts to be better and the market gets more normal, I think we are well prepared to really take advantage of it. So thank you from my side.

Thank you, Matti. I won't ask about risks because you explained them quite thoroughly. But could you please elaborate what is happening in the competitive environment in car trade in Finland?

Yes, this is also a very interesting sector at this point of time. We see new competition coming from China side. Today's electric car is fundamentally computer that is running on 4 wheels having an electric engine. So software, electric capabilities from the China side is definitely there. Also, from the U.S. side, Tesla, Rivian, those kind of suppliers are also entering the European market. And what is important with them is that they're also changing the distribution model. They're going very direct model with a deep digital presence. And with our changes, we are really prepared for that kind of change and prepared for that kind of competition. But it's really, really coming from multiple sources, not even forgetting, of course, our traditional competition, which is doing -- trying to do the same.

Excellent. And how about the synergies between Kesko's other divisions? What do you see there?

We have multiple synergies. This K Charging network is a great example of it. We have together with Ari and also Jorma actively working on the locations where we put the K Charging points, and that has proven to be very successful. We have also some areas like car washing that we are not really heavily investing on, which could be synergy areas. And also, the car parts or usages that we use in the car, we could also use our distribution channel to sell those. So there are multiple opportunities in this respect as well to grow our business.

Thank you.

Thank you.

And then we go deeper into the numbers, growth and efficiency in a changing operating environment. Chief Financial Officer, Jukka Erlund, please.

Thank you. Good afternoon, ladies and gentlemen, on my behalf as well. So let's dig deeper on the financials first, financial KPIs. Looking a bit backwards, so all the financial KPIs have performed quite nicely during the last 4 years. As you can see, the net sales has grown from below EUR 10 billion to more than EUR 11.5 billion during the last 3 years. Gross margin also improved from less than 13.5% to close to 15%. And also, the operational efficiency has developed quite nicely as well coming from a bit more than 17% to closer to 16.5%. So good performance on P&L side, including also the profitability. So EBIT margin gone up from a bit more than 4% to above 7%. And also, the return on capital employed has gone up from -- pretty much doubled actually from below 10% to close to 18%. And also, the net working capital efficiency has improved during the last years. So in that sense, good progress on that side as well. So the value creation has been coming from pretty much all the levers on P&L side and the balance sheet side as well. Another way to look at this profitability improvement is shown here. So from 2019, our operating profit with illustrated EBIT around EUR 430 million has almost doubled to EUR 826 million. Growth has been obviously the biggest driver on our improving profitability, around EUR 140 million. Gross margin also has improved substantially during the last year, so close to EUR 100 million coming from that side. Operational efficiency has also contributed around EUR 100 million. This is, of course, relative OpEx. So of course, one can say that the relative OpEx has also improved due to the growth in our net sales. So I would say that the growth is the biggest driver in our improving profitability. But also the acquisitions have been highly important, so close to EUR 50 million improvement from that side. We are investing in growth. We have a very clear growth strategy, both organic growth and inorganic growth strategy. And we have invested heavily during the last years. In upcoming years, we don't expect any major changes in the capital expenditure going forward, so we continue investments to the store sites. The focus is still on renewals mostly. We'll open some new stores, but the focus is in the renewals. We're also investing currently to logistical capability, distribution centers, starting with Onninen Distribution Center, close to EUR 300 million investment, going quite evenly to years '23, '24, '25 and starting with that one, both Onninen and car trade. Technology. We have done there substantial investments during the last years. We continue on that side as well, maybe streamline a bit the portfolio going forward, but still continue on that side because e-commerce and digital capabilities are in the core -- in the heart of our strategy. And then in car trade, we continue our investments to the leasing fleet and EV charging network, like Matti said. And we, of course, target also acquisitions in order to boost our growth strategies. And I think our balance sheet enables these investments quite nicely. As said earlier, operational efficiency is highly important during this time. So as you can see from the left side there, our operational -- operating expenses are close to EUR 2 billion. So there's quite a bit of areas where we can further improve our efficiency. Personnel expenses are, of course, a clear majority, around 40% of the OpEx, but also marketing expenses and property expenses are around 10% from the net sales and IT cost around 6%. So the focus areas here are, I would say, 4 different areas. Organizational efficiency is highly important. We've done a lot in order to reengineer our processes and use automation during the last years. We'll continue on that side. Indirect sourcing is highly important. As you can see, a lot of our cost of services that we are buying from other companies and so on, so really pushing there more efficiencies. And of course, things to mitigate cost inflation, which is, of course, fairly high during these times. So really prioritizing our projects, prioritizing the things that we do and that way sort of also reducing our spend. But as you can see, the cost ratio has developed quite well during the last 3 years due to these measures that we've been doing. Electricity prices have risen quite a bit during this year. For us, it's around EUR 35 million question last year. And prices, of course, have gone up during this year substantially. The good thing for us is that we have hedged quite a big part of these expenses, around 50% to 80% of our electricity consumption, of course, coming down from that 80% towards the end of this period of 2025. And as you know, we consume close to 1% of the electricity that is consumed in Finland, so we are fairly big in this area. Like I said, from the sourcing, we have hedged a substantial part going forward. But of course, now the focus is more on how to reduce the electricity consumption. Currently, we are around level of minus 5% in our consumption. And we, of course, target to get some more savings going forward, especially towards the winter time. Then a few words about the cash flow. As you can see, we have had a very good cash flow during the last couple of years. In 2020 and 2021, our cash flow was boosted by EBITDA because we built our supplier finance program during those times. So close to EUR 500 million supplier finance program. Now that effect is a little bit smaller, so that is visible in the numbers as well. So the key initiatives here, of course, maintaining a good profitability going forward, really improving our working capital efficiency. Inventories are one of the focus areas. I think our inventories are in a good shape. Also, our sales receivables are in a good shape, but focusing on this side. And then, of course, prioritizing the capital expenditure and projects and so on. So where to spend money, where to not. But overall, I think we have succeeded quite well in our cash flow generation. The balance sheet, like I said, is strong. Net debt to EBITDA, excluding the IFRS 16, these liabilities is close to 0. So in that sense, we have a lot of firepower in our balance sheet to further invest to our operations, both normal CapEx, but also potential acquisitions. So the balance sheet doesn't limit us too much, so we'll continue with organic investments and acquisitions in line with the strategy. And also, the balance sheet enables us to be a good dividend payer as well. And dividend, we have a very clear dividend policy. The aim is to distribute a steadily growing dividend of some 60% to 100% from the earnings per share, excluding from the comparable earnings per share. And in this regard, we'll come back in the early February. And the idea is, of course, to continue with the policy. Good. This in a nutshell from the numbers. So thank you on my behalf as well.

Thank you, Jukka. Only one question before we start the Q&A session here. So from your point of view, what are the biggest risks?

Well, I think like Mikko said earlier, it's really about the macro and sort of external environment and so on. So I think our operations are in good hands. But of course, I look a lot how the inflation goes, how that affects consumer behavior and purchasing power also.

Very good. Thank you. Then I would like to ask the gentlemen to join me here at the stage. And let's start the Q&A session.

Maybe I will -- you can all come, please. I'm sure you all get questions. Very good. So if I ask one question here from the chat function, and then we can turn to the audience. Please remember to use the microphone when asking question here on the stage. But first, how much visibility does Kesko have on its 2023 figures? Does the quite positive outlook rely on the market being solid or Kesko's own internal measures?

I'll repeat what I said earlier. I remind you that 2022, all in all, has been already extremely challenging year. COVID is not yet over, but the impact coming from COVID is much less what the impact was during previous years. But then started this awful war in Ukraine, energy price inflation, higher interest rates. And despite all those challenges, we have succeeded, I would like to say, very well again. And I believe that we have good reasons to expect that business environment in 2023 might not be so challenging as business environment has been during this year. But of course, nobody knows, but we have at least good reasons to be little bit optimistic due to those reasons that I mentioned. And I mentioned this because I have a strong feeling that many people have forgot or have not realized how challenging this year has been and is still.

Good. Thank you. Any questions from the audience at this point? There's one question.

[indiscernible] from SEB. A few questions. And maybe starting first with the M&A as I think quite a few of the division or maybe mostly on the B&T, you were talking about the potential to expand in the technical trade. So thinking about the pipeline that you have, how has that developed now in very challenging year of 2020? Do you think the pipeline has grown? Or has it -- has the number of targets actually gone down? Or how do you see the potential to actually execute on this M&A strategy in the upcoming year?

Especially starting from last summer, we can see more and more activities, and market is now moving. And we're in Scandinavia, we can now see and recognize interesting and potential targets. And the reason I believe is very simple, many companies have reported good numbers. But at the same time, they have recognized that the business environment is getting more challenging. But once again, I repeat that we can see more activities also on that side.

Okay. And then specifically, I mean, you published the geographical profitability of the different countries in B&T and it looks like the last 12 months, the biggest profit lift is coming from the Poland and Baltics versus the other markets have remained relatively flat. So can you discuss a little bit more that what has happened this year in Poland and Baltics in B&T?

Maybe I can start, and Jorma can continue. But in Poland, we can see in Onninen business, big potential in Poland, especially because Onninen has succeeded also very well in Polish market and we have succeeded to increase our business activities in Poland very well. At the same time, we have also succeeded to improve dramatically Onninen's financial performance in Onninen, meaning that we have now also in Poland excellent platform to expand further our technical trade. And of course, Poland is highly interesting also due to that simple reason that neighbors are also very interesting. Huge German market is beside of Poland, of course. One day when war is over in Ukraine, Poland, we believe, offers us also a great platform to participate a huge rebuild of Ukraine. There are many, many reasons why we are very keen to investigate different options to expand our technical trade business in Poland. Baltics, of course, Baltics is also interesting, especially because we have such a strong position already today in Baltics, but the Baltic market is very small, especially compared to Poland. But Jorma, you can continue.

Yes, maybe I can a little bit. When we're looking at those numbers and good performance in Poland and Baltic, I think one reason is that we're having those in our division of businesses, technical trade, business merchant and DIY and in Baltics, Onninen, and in Poland, it's only technical trade. And technical trade has been the strongest the business this year. I think this is one main reason.

And then final question from my side. I think this is more on Ari Akseli. When you discussed the food -- profitability of food online, and you said that it's a profitable business for you, just to make sure that I understand what you account for that, so is that -- you now talk about Kesko's profitability so basically the picking is not included in the profitability or is that -- how do you define the profitability in the food online?

From point of view of Kesko it's profitable. But from point of view of also the store it's profitable because it seems that if customers are using our e-commerce services, they will be more loyal as the total customers. So you get extra sales also from the physical stores. And if you combine all that together, it's profitable also from point of view of the stores.

Very good. Then I'll take a couple of questions from the chat here. In the grocery business, did you experience any change in the customer behavior which has been the case in many Nordic peers?

So Ari opened already that, but I think Ari is ready to open a little bit more. Please?

Yes. We can see that changes during the COVID years. Maybe the biggest change was the share of the ready meals has been increasing during the COVID times, and it keeps on increasing still. And now the customers are still looking more about campaigns. Campaigns has become more important to the customers because they are looking value for money, especially we can see this with very known campaign items like salmon and coffee packages and so on in the market. And also, we can see that customers are using more private labels, especially share of private labels like price-wise is increasing. And -- but at the same time, customers are looking value for money. It actually means that they are looking also premium. Premium is appealing some of the customers. And we still see very good sales increase with the restaurant meals in the stores.

I can maybe continue a similar type of question is that our Swedish peer has also independent retailers that adapt to the local market requirements, yet it has been affected by the customer trading down due to inflationary pressures. Are you not at all worried that similar reaction among the Finnish customers?

I would like to say that we are not worried because we are working with tough matters as Ari has presented today. Okay ICA. ICA, we have a lot of synergies, but at the same time, very important to remember that we are not same, we are actually quite different than grocery trade companies. And we have a unique position in Finland, different position as ICA has in Sweden. And of course, we should remember that ICA is also not any more listed and especially important to remember that they don't have food service. They divested about 10 years ago food service business. But at the same time, Kesko has succeeded very strongly to develop and strengthen position in fast-growing food service market, and that creates this unique setup what we have in grocery trade.

There's a question about the market share in grocery trade. How can the trend be turned for the grocery stores as a whole?

I see that Ari presented already very well that we have succeeded to increase our total market share dramatically. And we have succeeded also even in a quite challenging circumstances to stabilize very well our total market share. And important to remember that we are not at all maximizing market share. We know plenty of measures to maximize our market share. But that is not on the agenda. Our agenda is also to be among the best and most profitable grocery trade companies in Europe. And then it means that it is a combination of those measures that Ari, I would like to say, very well presented. And we are doing our utmost to stabilize also further our market share, but at the same time to maintain and hopefully even further improve also profitability. It is a combination of all those things. And it is not coincidence that Kesko is the most profitable grocery trade company in Europe. We discussed already about ICA. ICA is a great company. They have in consumer business bigger market share in Sweden that Kesko has, but Kesko's profitability is much better that ICA has. And ICA is a great company. I don't claim that ICA is not a great company, but I would like to say -- I want to say that especially because I hope that all that helps you to understand that we are a different player. Ari, do you want to add or take away something?

I totally agree.

So there was a question, I guess. Please.

[indiscernible] from Nordea. Couple of questions. First one, could you be more specific on the guidance for next year? I mean, you talk about profitability remaining at the good level, both on the group level and on divisional level. Should we -- you're now trending at around 7%. So should we assume that the over 6%, your medium-term target, is the minimum?

It is not guidance. It is outlook. And I repeat, good level, good is good.

Then regarding the online grocery competitive landscape, could you elaborate a bit on how you look at the competitive situation there? What are your strengths and weaknesses compared to competition in that field? I mean, competition is going to centralize distribution where you perhaps have a bit more store-based distribution. So would you like to elaborate a bit on that?

In grocery business, you mean?

Grocery, yes.

Yes, yes. Again, definitely, Ari will continue after my few words, but we have made very carefully our homeworks also related to online business in grocery business. And it is not coincidence that we have this current strategy. Develop online business, both on B2B and B2C side. And on the B2C side, develop based on our amazing store network nationwide and combine world-class online services, fully utilizing logistic store networks and that way expand online services for consumers, but at the same time, keep business profitable. It is -- my understanding is that just few companies in Europe, grocery trade companies, who are succeeding to expand online businesses, but at the same time report also positive numbers and black numbers in online business as Kesko does. But at the same time, when we discuss about online, we should remember that we have amazing online business in Kespro. As Ari mentioned, already 70% of Kespro's EUR 1 billion annual sales is coming from online. And that is an amazing achievement and, of course, also one reason why also Kespro's business is so profitable. Ari, please continue. And you can, of course, open a little bit more those strategic reasons we have behind our decisions.

Yes. Just a few things to add. Number one is that retail in online and also in the stores in the grocery is low-margin business. The most important fundamental is the buying power, what is the buying power you have behind for buying this merchandise. And if you think about the poor players, they don't have this buying power. So basically, they don't also have private brands, and that means that they are very -- in very challenging position at the start. And secondly, when you have nationwide store network all over Finland, it actually means that delivery distances are smaller, and that makes that you save money in there. And at the same time, when you are able to find customers who are using all the channels, they are using physical stores and also online services, they are more profitable to you. And thirdly, when you are looking about the average shopping basket in online business for us, in K-Rauta it's EUR 130. It's actually 5x higher than physical stores. And if you look about good international benchmarks, they are about EUR 50. So actually, if you have very low shopping basket and you have low margins, there is no business for you. That's for sure. You have all the costs, but no business case. And that's the reason why, actually, if you look about these poor online e-commerce players and you look at the numbers, where is the profit? There is no profit.

A lot of studies and calculations. We have not learned how the hell you can make in grocery business B2C online business profitable based on direct business concept. We have not learned that formula. And that's the reason why we follow our current strategy to combine services with our store network. And already, as Ari mentioned, we can make money with the online business.

I will continue from the chat. Now there is a question. How do you see the impact of the industrials downturn next year on Onninen? Do you see any change in ability to pass cost inflation to customers?

Ari, you can continue, but the outlook is very positive, especially thanks for clean transition and energy savings, but please, Jorma, continue.

I fully agree what you say. That situation is that if you are looking at all of those 3 of our main businesses in our division, of course, this technical trade is most positive one how we look next year because of this green transition, energy savings especially and, of course, the share of renovation is high. So positive views.

And let's say also this way that we are sometime or can we say, quite often little bit confused because we learn quite often that people are worried about near future also in our case because people are worried, especially because B2C business has declined. And people are worried that consumers' readiness to spend money on home improvement is declining as we have seen. But matter of the fact is, as Jorma very well presented, that consumers, people who visit once or twice per year at the DIY stores, they represent minor part of our business. And also, based on that, I believe, very important to remember, that Kesko is very different building and technical trade company compared to many, many other Northern European and European companies. Our peers mainly are DIY and B2C-driven. Kesko is not and will not become because our strategy since 2015 has been crystal clear. Put all efforts to make Kesko big leading B2B supplier as we have done. And due to that reason, we are today in wonderful position because these consumer businesses and decline on consumer side does not hurt Kesko as we have seen that the decline has hurt many, many other European companies who are strongly dedicated to serve consumers.

Very good. It is already over 4:00, but I will ask couple of more questions from the chat function mainly. There's a question about technical trade. How much of the successful profitable growth is like-for-like basis? And how much is new product categories like EV chargers, energy saving products and so on?

Jorma knows.

It is so. If you ask me the question, of course, I don't have exact figures, but what I thought about the share of those energy savings and green transition-related products, the share is something like 30%, 36%, but I don't know if there are so many new products in our categories. So of course, there are some. But the demand is so high now with green transition. But of course, we have sold those solar products also earlier for example, now the demand is so high. I think that's the question.

Very good. Question about M&A is, how much firepower do you have? And are you interested in expanding to new geographical areas?

Jukka promised that over EUR 1.5 billion. Do we say that also that we don't have upper limit? Maybe we have.

Maybe we have.

Very good. And then how much is the market share of used cars for Kesko?

We are roughly on the fourth position now based on the latest information we have from last year with around 7% to 8% market share on the used cars. But currently, we are growing much faster than the market, much faster with the focus that we have seen. So it will be interesting to see how that develops now over the next months to come, but that's fundamentally on the level of 7% to 8% from last year.

And growing very fast and much bigger market, the new car business.

Absolutely, yes. This is important to say, which I forgot to mention is that the used car business is from the number of units, roughly 6 to 7x the new cars business. And on the value of money, roughly about 3x the market. We have been underrepresented compared to the new cars business in this sector, and that's why we are growing there.

Very good. I heard that there was one question here. Please.

[indiscernible] from Nordea. One quick question actually to Jorma. I think we have heard about grocery inflation, that it's likely to continue. But how about in the BTT looking for the next year? I think raw material prices have peaked and maybe also construction materials are trending down. So how do you see the full year next year on inflation? Or is there actually a possibility for deflation on this side?

When we are looking at those prices, we know that price increases started in first quarter 2021, and they have continued since then in every quarter. What I can say now, of course, we don't know, but we know the first quarter because we have also informed our customers. And there will still be, of course, both price increases and decreases, but price index is positive what comes if we are comparing quarter 1 -- this year quarter 1, so still increasing as an average, at least first quarter.

Very good. Then I will ask the final question. There's a lot of questions. I will come back to you, you who I recognize from the 2 names here and answer your questions privately. But here's one question. Your operating margin for decades prior to 2017 was in the range of 1.5%, 3.5%. And now when -- from the 2018 until today, the margin has increased to almost 7%. Is this the new high level sustainable? And if so, why?

I don't want to call into the details, but I'd remind that we made absolutely many right strategic choices when Kesko's growth strategy was developed and launched in 2015. And we have very systematically now already more than 7 years followed and implemented the strategy. And together with my fellow managers, I underline that it is not coincidence that year after year we are growing and we are improving profitability, especially because we have privilege to work with same strategy. We have not seen no need to make major changes. And once again, I remind, when we have such a big company, not just all those people who are working in Kesko, but also our retailing entrepreneurs and employees of retailers, and when everybody is now well in line with our strategy and even well motivated year after year to follow strategy, we can see such good numbers and development. And based on that, I don't see reasons why we can't maintain this great development also in future as well as easy to say that also today we don't see need to make major changes to our growth strategy.

This was a good conclusion.

Hopefully so.

So I would like to thank you all on the other side of the screen and all who are here.

Thank you.

Thank you.