Dear all, warmly welcome virtually to Sunny Helsinki, and thank you for tuning in for Kesko's Q2 2024 release call. Our agenda today is the following: CEO and President Jorma Rauhala will give first the Q2 presentation. We have here together with us our business division presidents, Ari Akseli for Grocery Trade, Sami Kiiski for Building and Technical Trade, and Johanna Ali for Car Trade, as well as CFO Anu Hämäläinen. After Jorma's presentation, it's time for questions both by phone and via chat function. All the materials related to Q2 can be found at our webpage, kesko.fi, under Investors. My name is Hanna Jaakkola. I work as IR Director at Kesko. I will be at your service after the presentation for your questions and discussions. Now, Jorma, the stage is yours. Please.
Thank you, Hanna. Ladies and gentlemen, welcome also on my behalf to this release call. I am Jorma Rauhala, and I have now the pleasure to present Kesko's Q2 results. Today's headline is "Good Performance in a Weak Market," and it describes the second quarter well. Now I will give an overview of our businesses' performance and open up elements behind the results. Key events in the second quarter: net sales and profit decreased as expected. Cash flow from operating activities strengthened. In Grocery Trade, net sales were down and profit at a good level. In Building and Technical Trade, profitability weakened as expected due to the weak construction cycle, but decline was lower than in Q1. In Car Trade, net sales and profit were down. In May, Kesko agreed to acquire the operations of the Autotalo Lohja dealership. In June, we published our updated strategy.
Main strategy pillars are intact, and competitive advantages as well as targets for each division were refined. There were many changes in the company's Group Management Board. Sami Kiiski was appointed as President of Building and Technical Trade, Johanna Ali as President of Car Trade, Anu Hämäläinen as Chief Financial Officer, and Lasse Luukkainen as EVP, Legal and Sustainability. Net sales in Q2 totaled close to EUR 3.1 billion. It was down by EUR 11 million. Net sales increased in Building and Technical Trade as Davidsen acquisition is now included in the figures. Rolling 12 months net sales were over EUR 11.7 billion. In Q2, comparable operating profit was EUR 178.3 million, and operating margin was 5.8%. Comparable operating profit decreased in all three divisions. Rolling 12 months operating profit was EUR 656.3 million, and operating margin was 5.6%. Return on capital employed was 11.8%.
Return on capital employed decreased in all divisions as earnings declined. Financial position: cash flow from operating activities rose clearly to EUR 309 million. Cash flow strengthened on the comparison year thanks to further improvement in working capital management. Interest-bearing net debt increased year-on-year as a result of investments in logistics and in Grocery Trade store site network. Net debt to EBITDA was 1.1. Capital expenditure decreased in Q2 and totaled EUR 128.4 million. We continued investments in grocery store site network. Other investments include Onninen and K-Auto's shared logistics center in Hyvinkää, Finland, where construction is expected to be completed in 2025. Expenses: expenses were up due to Davidsen acquisition and real estate costs, but personnel expenses were at last year's level excluding acquisitions. Fixed costs were EUR 532 million, and cost ratio was 17.2%. It was down compared to last quarter, but up year-on-year.
We have succeeded well in focusing on cost efficiency. Now to Grocery Trade: profitability was at good level. In Q2, net sales totaled EUR 1.6 billion and declined by EUR 28 million. Rolling 12 months net sales totaled EUR 6.3 billion. In Grocery Trade, comparable operating profit for Q2 was EUR 114.5 million, and it was close to last year's level, decreasing only by EUR 3.9 million. Profitability was 7.2%. Rolling 12 months operating profit was EUR 439.5 million, and operating margin was 6.9%. The decrease in comparable operating profit was impacted by an increase in store site costs and a decline in net sales for K-Citymarket's home and specialty goods, so-called non-food. The comparable operating profit for Kesko increased slightly. Key events in Grocery Trade in Q2: in the Grocery Trade division, net sales and operating profit decreased. Operating margin was close to flat year on year.
K-Group's grocery sales were down by 1.1%. Kesko's net sales were down by 1.3%, still again exceeding market growth. K-Citymarket non-food sales were down by 4.3%. Online grocery sales continued on the strong growth trend and grew by 13.5% and were some 4.1% of K-Group's grocery sales. Total grocery market growth was approximately 0.1%. K-Group's sales performance was likely below the market. Price inflation for groceries in Finland stood at 0.1%. Last year, at the same time, it was over 10%. Customer flows continued to grow thanks to campaigns, but average purchase was down. There was a change in Finnish legislation that enabled the sales of beverages with a 5.6%-8% alcohol content in grocery stores and 10th of June. Previously, the limit was 5.5%. These beverages were successfully added to grocery store selection all over Finland.
The impact of the legislative change on Kesko's sales is expected to be around some tens of millions of euros annually. Nearly 450 wine products are now sold in K-Group grocery stores. Approximately 30% of sales are coming from products that are available exclusively in our stores. White wines account for about half of the wine sales. Also, some 100 stronger beer products were added to selections. They now account for a few % of total beer sales. New alcohol products were introduced to stores in a responsible manner, and wine is typically bought as a part of larger food baskets. The possibility to buy strong alcoholic beverages from a grocery store increases customer convenience and benefits especially smaller stores in rural areas. And now to Building and Technical Trade, where the result was in line with expectations in a difficult cycle.
Net sales increased by EUR 55 million- EUR 1.2 billion thanks to Davidsen acquisition. In comparable terms, net sales decreased by 5.4% due to the weak construction cycle. Rolling 12 months net sales was EUR 4.1 billion. Comparable operating profit for the Building and Technical Trade division totaled EUR 56.1 million and operating margin 4.7%. Rolling 12 months operating profit was EUR 173.4 million, and operating margin was 4.1%. The decrease was due to a decline in net sales, which was impacted by the weak construction cycle. Key events in Building and Technical Trade in Q2: construction cycle is still weak in the Nordics, but turnaround can be seen in Poland and the Baltics, where Onninen's sales are growing. Overall, net sales and operating profit development were in line with expectations. Davidsen is included in the figures.
Onninen's operating profit, in particular, was impacted by weaker sales and profitability of solar power products compared to the exceptional levels of Q2 2023. The allocation of fair value related to Davidsen acquisition, mainly related to inventories, had a positive EUR 1.2 million impact affecting comparable operating profit. Write-downs of overdue trade receivables totaled EUR 2 million. Share of result from Kesko Senukai was EUR 6.3 million. There are signs of a pickup in sales in both Building and Home Improvement Trade and Technical Trade. In this picture, we can see K-Rauta's and Onninen's sales development in Finland since 2019. K-Rauta is the market leader in Building and Home Improvement business in Finland and Onninen in Technical Trade. Both have nearly 50% market shares, and these two represent approximately half of the whole Building and Technical Trade division.
In the graph, we can clearly see the consumer COVID boost for K-Auto in Q2 and Q3 2020. Then in 2021, we saw B2B sales increase with high demand and global price increases. The same demand and price increases happened in Onninen too. Turning construction cycle started to affect first K-Auto in 2022, but Onninen was at the time boosted by high demand for alternative energy solutions like solar panels and heat pumps as energy prices increased due to Russia's offensive war to Ukraine. After several quarters of weak cycle, we can now see sales turning, first in K-Auto but also in Onninen. This positive trend has continued also in July. In Car Trade, good performance in a challenging market. In Car Trade, net sales for Q2 decreased by EUR 39 million and were EUR 299 million.
Net sales decreased in new cars and increased in used cars and services. In the comparison period, net sales for new cars increased by the clearing of order books as the availability of cars improved. The comparable operating profit totaled EUR 14.9 million and decreased by EUR 9.5 million year-on-year. Operating margin was 5%. Rolling 12 months operating profit was EUR 70 million, and operating margin was 5.9%. Key events in Car Trade: market demand for new cars was muted. Q2 first registrations in Finland decreased by almost 20%, and market for used cars were up 2.9%. Net sales and profitability were at expected level in a difficult market. New car sales were down, but customer demand for new models is at a good level. In used cars, sales grew significantly, outpacing the market. Good growth continued also in service sales.
Growth in K-Auto's EV charging proceeded according to plans. There are over 1,700 charging points located on K-stores' parking lots, creating also customer flows to the stores. 679 of the charging points are fast charging. In Sports Trade, net sales decreased but market share strengthened. Now let's move to some key highlights to summarize the businesses. In Grocery Trade, consumer confidence in Finland is still weak, but it has improved in recent months. Consumption is polarized. Price is still important, but quality and convenience are important too. The development of our store site network continues. There will be seven new store openings in the second half of 2024 and 23 stores updated. Our position is strong in all areas of food trade. In Building and Technical Trade, the market is showing signs of picking up in all operating countries, but the cycle is still weak.
We will continue the execution of country-specific strategies. Inventories are today at the healthier level in both Building and Home Improvement Trade and Technical Trade. In Car Trade, the business portfolio is balanced. New car sales are muted, but new models are expected to support sales. New models include, for example, Audi Q6 e-tron, Porsche Macan, a new Volkswagen ID.7 Tourer, and Volkswagen Passat. Strong sales growth is expected to continue in used cars and services. Guidance and outlook. Outlook: there are actually no changes to the outlook compared to what we said in January and in Q1. The big picture is that in Grocery Trade, B2C Trade, and the food service market are expected to remain stable. In Building and Technical Trade, the market is expected to continue the decline in 2024. The cycle is expected to turn in 2025.
In Car Trade, new car sales are expected to fall short of the level, 2023 level. Sales of used cars and services are expected to grow. Profit guidance for 2024: Kesko's operating environment is estimated to remain challenging in 2024. Kesko's net sales and operating profit are estimated to remain at a good level in 2024 despite the challenges in the company's operating environment. Kesko estimates that its comparable operating profit in 2024 will amount to EUR 620 million-EUR 680 million. Previously, the comparable operating profit was estimated to amount to EUR 620 million-EUR 700 million. The profit guidance specification is based on development in the first year half and on updated estimates regarding development in Building and Technical Trade and Car Trade in the latter half of the year. In June, we published our updated growth strategy for 2024-2026. I'll go through the key slides now.
Kesko's growth strategy in one page. This is my most important slide and the way I lead Kesko. The leading and most attractive trading sector growth company in Northern Europe. This is our vision. Strategic targets: delivering profitable growth, strengthening market position in all businesses and all countries, building focused B2B and B2C business portfolio, increasing customer value. Competitive advantage, operational excellence. This is very important, critical, and also very difficult. It includes our daily processes, store concepts, assortment and pricing management, product availability, delivery accuracy, and so on. But these are the most important for our customers. Omnichannel customer experience for physical stores and digital services, and customers make the choice. Key retail model is important in the grocery, B2C business, and K-Auto and Intersport. Commercial spirit in all our businesses.
Forerunner in sustainability is important, not only, for example, in fighting the climate change, but it is important for our customers too. We focus on three businesses: Grocery Trade, Building and Technical Trade, and Car Trade. Our purpose is to strive for better trade every day, customer and quality in everything we do. The way we work in Kesko is to operate directly, openly, and honestly, creating trust. In Grocery Trade, our aim is to gain market share. Key actions: strengthening store-specific business ideas, focusing on strengthening chosen competitive advantage, and raising the quality level of stores. Developing store site network, targeted investments into store site network, focusing on growth centers, improving price competitiveness, strengthening price competitiveness, and improving price image. Continuing good development in Kespro, further strengthening Kespro's market leading position. Store site and price investments will have a slight impact on Grocery Trade profitability in upcoming years.
However, EV development will be stable and profitability clearly above 6% despite investments during the strategy period. In Building and Technical Trade, we are focusing on securing profitability. Key actions: in Finland, continuing growth and winning over market share. In Sweden and Norway, stabilizing and improving business performance and integration of acquired companies. In Denmark, finalizing the integration of Davidsen and improving performance through growth. Growth through acquisition, M&A to boost profitable growth in Northern Europe. Our long-term target of 6%-8% operating margin is still valid. In Car Trade, focus is on outperforming the market in all businesses. Key actions: continuing with growth strategy execution, major turnaround, and continuous development establishes a robust foundation for the next strategy period. Maintaining the balanced business portfolio, new cars, used cars, and services. Cooperation with the Volkswagen Group, continuing the good cooperation with the Volkswagen Group and Porsche.
Sports Trade, continuing as a strong market leader in Sports Trade. Solid EV development and number one brand awareness and preference. The team to lead the strategy is our Group Management Board. There have been five changes in the management team this spring. New presidents for Building and Technical Trade and Car Trade. New CEO, CFO, as well as new position for Legal Counsel, including responsibility for sustainability. I am happy to have this professional and ambitious team in place. Well, this was my presentation from my behalf. I guess it's time for questions now.
Thank you, Jorma, for your presentation. Now it's time for questions. Let's go first to the conference call line. Do we have any questions coming from the conference call line? Please.
If you wish to ask a question, please dial key five on your telephone keypad to enter the queue.
If you wish to withdraw your question, please dial key six on your telephone keypad. The next question comes from Fredrik Ivarsson from ABG Sundal Collier. Please go ahead.
Thank you. Thanks for the presentations and taking my questions. I have three, at least. The first one, I think you mentioned the margin in BTT was sort of boosted by higher gross margins of solar power products. And in that sense, what does the comparison figure look like? Because I think I remember you saying in Q3 last year that these sort of products already started to decline. So can you give some color on the comparable figures in terms of those products, please?
Thank you for your question. Actually, we opened up the solar panels in Q1 this year and gave quite a bit of flavor then.
And then we described that the majority of the margin came in the beginning of the year in the Q1 and Q2. So the comparison figures were quite high last quarter. Any Jorma?
Yes, I agree. That was, if I remember by heart, it was something like first quarter and second quarter was something like more than 80%, maybe 85% last year, what we said about solar panels. So last year, 2023, second half of the year was very weak when it comes to solar panels. And now the situation is much better. The solar panels that we are selling now are kind of new inventories and gross margin is okay. So I would say that this problem has now solved.
Okay, good. Very clear. And then in terms of the June figures you reported a couple of weeks ago, which I guess were on the soft side, -8% comp sales in grocery and -14% in BTT. Can you give us some color on these figures? And I guess it's difficult to quantify, but was it due to poor weather? It was quite cold and rainy, for instance. Did that impact grocery at all and BTT for that matter?
I can start so that, of course, the sales days, we have 2 or even 3 sales days less. That was definitely the most important reason behind that. But maybe Ari, you can comment about grocery business and Sami BTT.
Yes, we have this. Maybe some of the areas was depending about the weather. Weather was excellent in May. We had excellent sales in May, but it's not so good in June.
It affected especially the barbecue and ice cream sectors. These are the main reasons. In Building and Technical Trade, it was pretty much what we expected in June. There was, of course, less days, sales days, and so on, but it was pretty much what we expected.
Okay, thank you. Last one from my side. On the store site investments and price investments, that's going to impact grocery margins. Can you give us something more than this? Are we talking tens of basis points or more?
Yes, I can start at. Of course, we published our updated strategy at the beginning of June, and those will be the actions what we will do in our strategy period in grocery division. Of course, those actions, of course, we have increased already some investment in store site network, but we will increase those investments.
And also those investments, which will we do in pricing and quality, those are not yet done. But what we said when we published our strategy was that we believe that in grocery and also in future, we will do clearly about 6% margin.
Okay, fair enough. That's all my questions. Thanks so much.
Any further questions on the conference call line?
The next question comes from Miika I hamäki from DNB Markets. Please go ahead.
Hi, it's Miika from DNB. Thanks for taking my question. Firstly, grocery sales lacked roughly 1%, and the gap didn't narrow sequentially. So are you currently satisfied with the level of investment in prices, or do you feel that you need to further increase campaigning?
Maybe Ari, you can take this one, but I refer our updated strategy, and of course, those actions we haven't started yet, but if you want to add something.
Yes, we will invest into the prices, but we will use more data. So it's more concentrating how we use the customer loyalty card data to offer best offers for the best customers. And by doing this, we try to increase the average shopping basket because we have been able to increase already the number of visitors in stores.
That's clear. And then secondly, how much was Building and Technical Trade profitability in Finland?
Building and Technical Trade profitability in Finland.
Let's see. We don't actually publish the figures by country, so you have to assume from the figures we give. So we don't have the exact number.
We can see that the DIY, Building and Home Improvement side was quite strong. What comes to whole division, it was only, was it EUR 3 million decrease compared to last year.
Technical Trade was the bigger issue because of those solar panels, mainly in Finland and Norway, I would say so.
That's correct.
Okay. And maybe lastly, any losses in any of the operating countries is margin positive in BTT in all countries?
Like I said, we don't publish those one, but I would say that yes, we are on the positive side in all countries. Sami, do you?
Yes. Yes. Yes. Yes. That's true. Yes. Now, of course, we have disclosed the Onninen Finland numbers there, and that is in the report also, so result-wise. But all the countries are.
That I found. Well, thank you.
Any further? One more coming from the conference call line, please.
The next question comes from Anna Schumacher from BNP Paribas Exane. Please go ahead.
Just take my questions. I have a couple. So the first one is on grocery and a bit of a carry-on from Miika's question. So a likable decline of 1.7% suggests that you've lost volumes in the quarter, and industry data is suggesting the volumes are actually returning to Finland. So why is it that you're losing volumes, and what levers will you pull in the future to have those volumes return to yourselves?
So grocery and volume, maybe Ari, you can comment this one.
I think the main reason why we are losing the volumes comparing to the market, it was something that we actually expected to level. And the main reason for that is that our main competitor has been opening 14 new hypermarkets during the recent years, and we haven't opened any. Now we are concentrating to the investment in the growing areas of Finland and in the bigger store sites.
This is one of the key issues. And if you think about the profitability side, typically the hypermarkets are the most profitable part of the business. So in the long term, that will bring more profit for the company. And secondly, we need to invest more to the prices, but we keep on the same time this clearly profitability target more than 6%. So we need to use more data, how to optimize these price increments. And we are putting more effort for the best customers, how to offer more to the best customers to increase average shopping baskets.
Okay, understood. And so where you compete with your main customer and they haven't opened a new hyper, are you not losing volume there? It's only in these new sites.
I think the main reason is these new store sites, because if you look about what is happening in the market, the biggest changes in the markets are in the hypermarket segments.
Okay. Okay, thank you. Then I had the question. So on your working capital, so you've significantly improved your working capital again in the quarter, which looks to be driven by other non-interest-bearing liabilities and accrued liabilities. Can you give us a little bit more color on what they are and what measures you've taken to improve them?
Maybe Anu, you can take this one.
Yes, thank you, Anna. The thing is that if you look at our cash flow, we have been doing quite good effort or putting effort to inventory management, actually. So our inventory turnover has been improving when we sort of internally look at it.
And on top of that, of course, there is a change in our, especially on accounts payable, which has been like on a lower side last year than what this year compared to the year end. So as such, the accounts payable have been putting also a lot more pluses to our cash flow compared to last year. So I would say that these two are the things. And as you saw, or I think that it was also published in these slides that our accounts payable, we have been writing off only EUR 2 million and on group level, EUR 3 million on that side. So it's a very small amount there. So I would say that the main reasons are really the inventories as well as the increase on our accounts payable side.
Okay, understood. That's clear. Thank you. And then maybe just one final question.
So you commented on the change in legislation, which means you can now sell alcohol up to 8%. Are you able to share what uplift you've seen in sales due to this change in legislation and what you might expect for going forward for the year?
So alcohol and wine questions, maybe. Ari, you can take this one.
Yeah. I think the sales have been pretty much what we expected with the alcohol sales, maybe a little bit on the positive side. And I think that especially the sales in the rural areas with the smaller stores have positive impact, especially for these stores, because now customers don't really have any reasons to go to a different city and then they do all the shopping from bigger stores over there. And I think that the customer feedback from these new wines has been quite positive.
Especially the sale of the white wine has been more than 50%. I think it's looking quite promising. Of course, we are looking for the future because we like to be one of these European countries which are allowed to sell alcohol under 15%.
Okay, that's all understood. Thank you. Thanks, everyone.
Thank you so much, Anna. Now I will go to the chat function and ask some questions I have received. We have received. So Svante Krokfors from Nordea is asking, your profitability in grocery trade is holding up well despite weakish top line. What are the main reasons on cost efficiency side, cost and efficiency side?
Ari, you can take this.
The overall cost efficiency has been very under control, despite the growth in sales in the past years.
And one of the reasons is that we have been using more and more data and AI how to optimize investments in the marketing, pricing, and how we are able to improve the sales per square meters in the stores. So the use of data in wide base and very, very efficient cost control system in our division.
Very good. Thanks. This question was already a little bit answered, but I ask it anyways. What are your working capital management efforts that boosted strong cash flow in the quarter? So if you want to elaborate something on the working capital management side. I think I know what you're asking. I know what kind of answer you already. Or do you have anything to add?
Well, like I said, we are still going to put effort to our inventory management.
So doing that and, of course, checking out, doing these kind of, well, I think that is the main reason really here.
Yeah, very good. The EUR 20 million decline in 2024 EBIT guidance high end, is it more BTT or Car Trade?
Yes. What comes to our EBIT guidance, typically we give a wider range speaking of the year. And then during the year when the visibility increases and also the results accumulate, then we narrow the range. So I would say that there is no drama behind that. So we have mentioned those two divisions and I don't have so specific figures, but if I would mention maybe, for example, that new cars market is softer than we expected. Maybe this is one reason, but we don't have so exact figures.
Yes, very good.
Then Arttu Heikura, Inderes, is asking, grocery trade market in both businesses was quite weak. How do you see the reasons for weak market development during the quarter and what is your expectations for H2? This is somewhat answered in our guidance, but you want to say something?
Ari, do you have anything to add on that?
I think we said it already in the guidance, but the main reason is that customers' buying power is still very low and they are worried.
Yeah, that was mentioned too. Yeah, that's true. Grocery trade's average purchase was down. Does this stem from decrease in price points or in volumes? Does it come from?
Yeah, the main reason is that customers are now looking for better prices. They go picking up campaigns from different stores and try to optimize the use of the money.
Very good.
Has the price campaigns in grocery trade impacted your gross margins?
It has had a light impact to the gross margins, especially because we have been doing more campaigns and with better price points.
Yeah. We already discussed the wine sales, but is there anything to elaborate at the start of the 8% wine sales? At least it was a success logistically how we distributed all the wines to the stores all over Finland in a couple of days.
Yes, I think that was the good flavor for that because we got the final approval from the governments on Friday and we started business on Monday.
That's quite an efficient start. Yeah. Yeah, it was discussed in the presentation already earlier. Could you elaborate the market share development in building and technical trade?
Sami, you can take this one.
Yeah, thank you. Good question.
It's deeper per market, of course. Also in that respect that we don't have the latest numbers. Finland we have, but from abroad, the latest numbers are normally coming or next ones are coming during August. But what we can see in Finland is that the core out are still gaining the market share and that we are very happy. Then online and a little bit losing first six months of the year, losing the market share just slightly. But that is also what we expected because of the product mix, but also the mix of our customers and the segments.
If I remember right, that we gained market share in the HEPAC side and we lost some in the electric side and mainly because of those solar panels.
Exactly. That was the case. So HEPAC, we are still very strong. Yeah, that's true.
And that's the thing. And then when we go to different countries, just to say it shortly, it differs, but we can see that the market starts to recover a little bit more now from the consumer business side. And of course, we are strong in the B2B side and that also a little bit affecting. But we are in line there also abroad. At least because what I remember from Poland and Baltics, there we gained market share.
And I would say that in Norway, Byggmakker quite in line what comes to markets, maybe a little bit losing there and online in Norway is okay. But mainly gaining market share, but in some areas a little bit losing.
Good. How was the sales of solar panels products in H223? But I would like to refer to Q1 presentation where we opened it up quite well.
So only 13% and 4% of the margin, gross margin came from solar panels of the whole in 2023. But you can look at the presentation, you can find it online. I'll go to the next one. How Davidsen has developed under Kesko. Did its sales and operating profits decrease compared to the group development? So development.
Sami, you can continue, but I would say that all in all, Davidsen has been a very good acquisition and the performance has been, I would say, exactly what we expected. Maybe the market has been a little bit softer than we expected as maybe all markets, but Sami, you can add this.
Exactly. You said it already in the right way that only the market has been a little bit softer than what we and also the forecast was showing early in the year.
But other than that, we have been very happy of how Davidsen is performing and also how the management is executing the strategy there.
Yes. One question. How has your assumptions regarding the guidance changed from the guidance that was introduced in Q4 2023? So when we released our full year results. And here I would like to say that we already commented that in Q1 and we then said that the weaker than anticipated outlook for construction was then seen in Q1. Anything else to add? No, we have opened it up in the slides. Then do you want to give some color on grocery trade margin sacrifice in coming years, magnitude and sources, price investments, store investments, and timing? Again, around this comment on clearly above 6% EBIT.
Ari, do you have anything to add or?
I think that we have already opened it as much as we could now.
I do agree. Your comparable EBIT is down 17% year-on-year in first half. The midpoint of your updated guidance range implies that a 1.7% decline. What is driving the improvement that is baked into the guidance? So since the sales decreased quite a bit in the first quarter.
Yes, I would say that Building and Technical Trade is, of course, the biggest reason and what we have said that we believe that the next year will be stronger. And of course, the change most probably what happened in first of January. Of course, as we have said now that the market started to pick up a little bit and we have already those evidence of that already in Poland and Baltics.
Sales are now in black figures and also we can see in other countries that every day when we look every morning when I look at our sales from yesterday's sales, there are more and more days that there are several units that are now positive increase. So Building and Technical Trade started to improve and I would say that this is the most important reason.
Thank you. And we commented on the presentation that new car sales were down, but the customer demand for new models was at a good level. Would you, Johanna, like to elaborate a bit about the new models and customer demand for that?
Yeah, of course, this is product business and new products are always really important in the Car Trade.
In our portfolio, there are now many new great products and we can see that the customer demand is really focused on new products in the market. Like it was mentioned by your main presentation, there are new models in each of our brands. Maybe just to repeat and comment that in Volkswagen, for example, ID.7 is having great demand in Porsche Macan as well, bringing quite a new kind of product for Porsche business in Finland. Then Audi Q6 e-tron has also created a nice demand in the market and surprised us positively.
Very good. Thank you. How much synergies do you expect to receive for the next four quarters from Elektroskandia is the next question. We haven't opened up Elektroskandia synergies, but any comments on that?
It's always very difficult to say exact figures about synergies because we have now integrated two companies totally. So now one organization, now one customer agreement, one supplier agreement. We have integrated everything, but it's not so easy to give any exact figures. But we will get synergies and now the integration has completed. It was very challenging IT exercise what we done, especially in IT side, but it was done now in the end of June and I think we are ready now to gain synergies. Or Sami, do you have something to add?
Yeah, integration still a little bit on, but yes, particularly in IT and ERP, of course, we believe that there's already some synergies. And then, of course, like Jorma said, from the purchases and supplier side, and also then, of course, the products, know how we can serve our customers even better.
There's also synergies, but we don't give any exact numbers out like I said already.
Very good. I think that was the end of our Q&A session. I would like to thank all the active participants for your questions. And if you have any further questions, I will be at your service. Don't hesitate calling. Any last comments, Jorma, to the audience?
Last comment. So as we stated, we market specially, I would say that in building and technical trade, in car trade, but good results what we made. And I look, I would say it's quite positive what comes to the future and what we, for example, in our presentation was this kind of change, what is happening now in building and technical trade.
I have to say that, of course, this is what we have expected also, but now it's good to see those changes, what is happening now. So I look very trust the future, what we see now.
Very good.
Yes, thank you.
Thank you.