Ladies and gentlemen, welcome to our second quarter 2020 release call. I'm Kesko's CEO, Mikko Helander. Together with me, I have our CFO, Jukka Erlund, and Vice President, Investor Relations, Hanna Jaakkola. We published again a record result for second quarter. Profitability improved thanks to fast response to exceptional circumstances and well-functioning strategy. I will first give an overview of our business performance in second quarter, and thereafter, we will be happy to take questions both by phone and via chat. Key events in second quarter. First of all, record result and very strong cash flow. Grocery trade sales grew and profitability improved further. Demand continued to be strong in building and technical trade. Good development continued in K-Rauta and Onninen in Finland, and there was a significant profit improvement in building and home improvement trade in Sweden.
In July, we announced the acquisition of Carlsen Fritzøe Handel, which is a leading building and home improvement trade operator in the Oslo region in Norway. In car trade, the result was positive under difficult circumstances thanks to adjustment measures. New ambitious climate targets were published. We are targeting for carbon neutral K by 2025 and zero emissions by 2030. The net sales for Kesko's continuing operations in second quarter 2020 totaled EUR 2.815 billion. It was up by 1.2%, comparably up by 2.2%. The growth equals EUR 33 million. Rolling 12-month net sales were EUR 10.893 billion. Comparable operating profit for second quarter was EUR 155 million, and it increased by EUR 33 million. It is a record operating profit for second quarter. Profitability was 5.5%, and it increased due to good sales development. Rolling 12-month operating profit exceeded EUR 500 million.
Return on capital employed, one of our strategic targets, improved and was at the level of 10.1%. It improved in the grocery trade and in the building and technical trade. Kesko's financial position is strong. Cash flow from operating activities was EUR 422 million. It strengthened operatively by EUR 195 million. Cash flow for the comparison period contained exceptional positive items related to Kruunuvuoren Satama totaling EUR 44 million. Our liquid assets were EUR 462 million. Interest-bearing net debt, excluding lease liabilities, was EUR 330 million, and the corresponding net debt- to- EBITDA ratio was 0.6x. Now to grocery trade. In grocery trade, we saw that our strategy is successful also under exceptional circumstances like this corona spring and summer. Net sales for the second quarter totaled EUR 1.431 billion and grew comparably by 1.6%. Net sales grew in all K-food store chains.
Comparable operating profit for second quarter was record high, EUR 83 million, and it increased by EUR 4 million. Profitability was 5.8%, and it increased due to good sales development in all K-food store chains and improved operational efficiency. During the last quarter, there was a significant growth in retail sales of food due to the exceptional circumstances. K Group's grocery retail sales increased by 12.3%, which outpaced the market growth rate of 9.5%. Our market share growth continued stronger than before, and sales grew in all K-food store chains. The profitability improved despite the decrease in Kespro's sales. During the coronavirus epidemic, customer visits have been down and average purchase up. The safety of customers and personnel has been emphasized. Demand for online grocery sales has increased strongly, and we have been able to respond to that demand for better than our competitors.
K Group people and successful strategy execution under exceptional circumstances are behind the good result. Core retailers have shown their strength by being agile and responding fast. The K-retailers as well as store and Kesko staff have performed excellently and also ensured safety. We have managed to ensure product availability and deliveries to store under all circumstances. We have also established new services fast, such as offering shopping assistance to people over 70 years and selling restaurant meals in grocery stores. Kespro B2B business declined suddenly, and we successfully adjusted food service operations to the rapid sales decline. We have successfully responded to rapid growth in demand for online grocery sales. During the first half of the year, online grocery sales were EUR 93 million, and it was up by almost 450%. Online accounted now for 4.2% of sales.
Online service store network is now 447 K-food stores, and in second quarter, 176 stores joined the network. Despite the rapid growth, customer satisfaction has remained high at a NPS level of 80. We believe that the growth continues to be strong also after the epidemic. Now to building and technical trade division, where the result was also record high, thanks to systematic strategy execution and good market. Net sales, excluding the specialty goods trade, grew by 8.7% to EUR 1.156 billion. Net sales grew in Finland, Sweden, Norway, the Baltic countries and Belarus. Net sales increased in both B2C and B2B trade. Comparable operating profit, excluding specialty goods trade, increased by EUR 30 million to EUR 76 million. The profitability improved and was 6.5%. In the building and technical trade, comparable operating profit grew in the building and home improvement trade in all operating countries.
The acquisitions carried out in Norway and Sweden in 2018, 2020 accounted for EUR 12 million of the comparable operating profit. Onninen's comparable operating profit clearly strengthened in Finland, Sweden and Norway and in the Baltic countries and Poland it was at the previous year's level. B2B trade has continued strong in both building and home improvement trade and technical wholesale. B2C demand across Northern Europe has been surprisingly high, but it is still difficult to estimate how demand will develop in the second half. During the quarter, the demand in the leisure trade weakened heavily at the beginning of the epidemic, but the recovery has been fast since May. Our net sales grew forcefully and profit rose to a new level. B2B trade continued to be strong in both building and home improvement stores and Onninen also B2C sales grew clearly more than anticipated.
We strive to accelerate growth also via new acquisitions. In the Baltic countries and Belarus, Kesko Senukai sales and profitability recovered quickly from the problems caused by the coronavirus epidemic. Strong development has continued in K-Rauta and Onninen in Finland and good sales development has accelerated market share growth. B2B trade has continued stronger than anticipated. Onninen's profitability improved further, thanks to good product availability, among other things. K-Rauta's B2C trade has developed better than anticipated during the exceptional circumstances. Extended opening hours for K-Rauta have improved service and increased sales. Also, online sales have increased by some 100%, supporting sales in physical stores. Strong strategy execution and strong market demand in Sweden has led to significant improvement in profitability. Profit exceeded EUR 10 million. K-Rauta's net sales growth 17.1% comparatively in K-Bygg growth has also been strong. K-Bygg sales and profitability has developed well as part of Kesko.
We have taken significant measures to improve K-Rauta's profitability and that work will continue. During the quarter, technical wholesale company MIAB was acquired in Sweden and we Sweden as an important growth area also going forward. In July, we announced the acquisition of Carlsen Fritzøe Handel, which is a leading building and home improvement trade operator in the Oslo region in Norway. Carlsen Fritzøe has 25 stores and highly complement the Byggmakker store network. The company's net sales totaled some EUR 201 million and EBITDA EUR 13.3 million. Debt-free transaction price is some EUR 142 million and the objective is to complete the acquisition in August, September. Once the transaction has been completed, Kesko will be a leading building and technical trade operator in Norway, with retail sales of nearly EUR 100 million. The growth potential in Norway is significant also going forward. To car trade.
Car trade managed a positive result under difficult circumstances. Net sales in the car trade decreased by 9.4%, in comparable terms by 21.5% to EUR 192 million. Comparable operating profit was EUR 3.8 million. It decreased by EUR 1.2 million. Profitability was 2%. Our new car sales and orders were below normal levels. Car sales improved clearly in June. In June, Volkswagen was the market leader. Market share of brands represented by K Group rose to 17.8% in second quarter and to 18.5% in June. In general, car industry has been struggling globally due to the coronavirus epidemic and tightened emission limits. Orders for new passenger cars in Finland were down by more than 40%. Orders for vans were down by nearly 20%. Decline in demand for servicing, repairs and spare parts services and used cars have been more moderate.
There were signs of recovery in the car industry towards the end of second quarter. Our car trade is based on the strategic partnership with the world's largest car manufacturer, Volkswagen Group, since 1977. This year, we celebrated Volkswagen 70 years in Finland. Today, more than 347,000 Volkswagen vehicles drive around the roads of Finland. Now an update on the strategic review of operations in Baltic countries and Belarus we announced when publishing the first quarter results. As we announced in April, Kesko and UAB are investors here, have different views on how to develop Kesko Senukai. We have strived to resolve significant differences of opinion with the other owner on how Kesko Senukai should be developed and managed. Kesko has proposed to the other owner negotiations to change Kesko Senukai's ownership structure.
Alternatives include, for example, splitting the company, Kesko acquiring the whole company or Kesko selling its stake. If the negotiations do not lead to a satisfactory result, Kesko will seek to ensure appropriate management of the company in accordance with the partnership agreement by legal means, if necessary. Kesko is currently examining conditions for subsidiary consolidation of Kesko Senukai in Kesko's consolidated financial statements. Kesko has majority holding, voting power and majority of board members in Kesko Senukai. Due to disagreements concerning the management and control of the company, Kesko is examining conditions for subsidiary consolidation of Kesko Senukai. Potential lack of control would mean the company would be consolidated as an associate. An associate would be presented on one line in the income statement and balance sheet as opposed to line by line presentation for a subsidiary.
A change in the method of consolidation would not affect the group's comparable result, EPS or Kesko's dividend distribution. The change would also not have a material impact on the group's comparable operating profit or equity. Guidance for 2020. Outlook for Kesko's group's continuing operations is given for years 2020 in comparison with year 2019. Kesko estimates that the comparable operating profit for continuing operations will be in the range of EUR 430 million-EUR 510 million in 2020. Before the company estimated that comparable operating profit for continuing operations would be in the range of EUR 400 million-EUR 450 million. Thank you. Now it is time for questions from the conference call lines or via chat, please.
Thank you. If you do wish to ask an audio question, you may do so by pressing zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Again, it's zero one on your telephone keypad if you wish to ask a question. Our first question comes from Fredrik Ivarsson, ABG. The floor is now open to you.
Thank you. A few questions from me, if I may. First one on Kespro. That improved quite a bit in June. Curious if you could say anything about the sequential improvement seen over the last three weeks or so. Do you expect July to be better than June? Also maybe if you could say anything about the profitability in Kespro, given that sales was down almost 40%.
Yeah, first we can confirm that Kespro's business has developed also well after the second quarter. We can see clearly that the food service market is recovering and Kespro is also still gaining market share. All in all, we must be happy how we succeeded with Kespro in the second quarter when the market dropped heavily. Despite that very difficult situation, Kespro remained slightly positive even in those difficult circumstances. That is also clear message that our food service company is very well managed. Plus also, we should remember that we gained during the second quarter also heavily market share from competition.
Thanks. Anything on profitability within Kespro?
As I said, Kespro's profitability of course dropped heavily during the second quarter, but it was slightly positive despite those difficulties. Now, of course, when sales is coming back and market is recovering, we are expecting also very good development in profitability.
Perfect. One question on the building and technical trade. Curious to hear if you've made any strategic shift in the short term to cope with the high demand for B2C. You mentioned, for instance, longer opening hours, but have you made maybe any other shift product -wise, price -wise, campaign, et cetera?
No need for any shift. We have growth strategy also in building and technical trade. We have very professionally implemented our growth strategy since 2015. Today we can see clearly that our strategy also in building and technical trade works very well. Of course, we are very happy that we are gaining even faster now market share in Finland on Onninen side as well as in K-Rauta. Of course, we are very happy that now also our strategy works very well in Sweden. Our people also in Sweden, they do extremely good job in the implementation of the strategy as well as now also development in Norway is very strong. Outlook in building and technical trade is very promising and I guarantee that we do our utmost to accelerate further our growth in Northern Europe in building and technical trade business.
Maybe to add a little bit to Mikko's comments on the tactical side, like you mentioned, opening hours have been extended and also the product availability has been really good so our supply chain has been working well for the customers and also we have focused quite a bit on the e-commerce side to really serve the customers well, especially in the beginning of the COVID-19 impact. A lot of customers we noticed the traffic in the stores and so on. We wanted to be good on the e-commerce online side as well. Just to add up a little.
Both are very important for us, B2B and B2C. Of course, today's numbers prove that now we have succeeded also to improve our B2C segment.
Perfect. That's helpful. One short follow-up on that topic. How should we think about profitability or margins in B2C versus B2B? Is there any difference there that we should bear in mind?
No major difference. Of course, it depends on do we discuss about situation in Finland or Sweden or Norway or in Baltic countries, but no huge difference. We should remember that prices are better in B2C segment, but we need also more workforce on that side compared to sales that we do in B2B segment. Both are very good business for us and it seems that our strategy works extremely well nowadays in B2B as well as in B2C segment.
Okay, perfect. That's all for me. Thanks.
Thank you. Just as a reminder, if you do wish to ask a question, you may do so by pressing zero one on your telephone keypad. Our next question comes from Magnus Råman, Kepler Cheuvreux. The floor is now open to you.
Thank you. First I'd like to ask about state support money. Did you make any aggregated calculation of the amount of state support that you received in Q2? If you made calculations on total savings on staff cost from temporary state support, please.
Of course we have made calculations, first I would like to underline that record high result, record high sales figures especially are coming from our growth strategy and right strategic choices and excellent implementation of the strategy in those countries where we operate, and especially coming from strong development in grocery trade as well as in building and technical trade. Of course, second quarter was very exceptional due to epidemic and we can also say that very quickly we succeeded to make needed measures, implement needed measures to manage this difficult situation and we succeeded also to curtail our operational expenses and that has, of course also positive impact on our numbers. Jukka, do you want to add something?
Well, just on the state support side, that doesn't impact our numbers. For us the most important thing has been during the second quarter that we have been able to keep our stores open and the situation in the countries where we operate is stable that has generated our profitability and not any kind of state sort of support type of things.
I don't even remember any state support.
No.
Not in Finland.
Nothing major, at least. That's very clear.
Maybe some EUR 100,000 max.
Right. I was not thinking state support for turnover support. I was thinking about temporary regulations on temporary staff leave or staff leave, if there's been any difference there. In Sweden it has definitely, nothing in Finland on that front either?
No, of course, we should remember that in Finland we have this option to make statutory lay-offs and that is, of course, a big benefit for Finnish companies and Finnish economy. We should remember that expenses related to the statutory lay-offs mainly are financed and paid by the companies. It is some kind of insurance, and we have insurance fees what we have to pay from every employee. I don't call that, not at all, as state support. It is some kind of insurance, and of course, when we have made statutory lay-offs in Finland, our employees, they have been entitled to collect money from that insurance.
All right. Just to understand broad-based or on an overview basis how you resonate when you speak about the full- year guidance and the elevated uncertainty that you see representing the wide guidance that you provided. That does not relate mainly to cost savings potentially getting pulled away if various state programs will be removed. It rather relates to elevated uncertainty when it comes to top -line generation in, for example, building and technical in the coming quarters. Is that correct?
Absolutely. Of course, we should remember that grocery trade has always very big impact on Kesko's numbers and Kesko's performance and outlook in grocery trade is still very positive. We should remember that already quite long time we have every month gained market share from competition also due to that reason. Also, of course, because food service business is now recovering, we are very optimistic related grocery trade. Biggest question mark is the market in building and technical trade in Finland and also other Northern European countries. I can confirm that also third quarter, we have started very strongly, every country where we operate and at least at the moment, we don't see clouds in building and technical trade. Again, I underline that let's see autumn, fourth quarter outlook is still very limited.
That's clear. I have a final one on the car trade division that you mentioned here turned positive growth at the end of Q2. Do you see pent-up demand being a factor here being released, and should we expect this to have a material effect on sales growth in the car trade business in Q3?
Yeah, that is also our expectation and once again, I confirm that we saw in June already strong recovery in car sales and this positive trend has continued also in July.
Right. Thank you very much.
Thank you. Our next question comes from Nicklas Skogman, Handelsbanken. The floor is now open to you.
Yes, hi, it's Nicklas Skogman from Handelsbanken. I have a question on the Baltics. It seems like despite your dispute with the other owners in the Baltics, the performance there definitely seems to have picked up. Are the drivers of the improved performance similar to the ones we've seen in the Nordics, or has there been any change to the market recently?
No, absolutely very much same reasons and very similar situation in Baltic countries, what we have in Finland, Sweden, Norway. Of course, we should remember that more or less 50% of revenue in Kesko Senukai is coming from Lithuania and Lithuania Senukai concept is not building and technical DIY concept. It is mixture of DIY and department store concept. It works in Lithuania very well, but it is quite different compared to our concepts in other Northern European countries. It works also very well in Lithuania in current situation.
Maybe also good to remember that the stores were closed in Lithuania from the mid-March until mid-April. Obviously that had some effect on the quarterly numbers Q1, Q2. Good to remember.
Okay.
Despite those different opinions between us and Rakauskas family, important to remind that business itself is running as planned and no issues on that side.
It definitely seems to be the case. I was wondering on this dispute, as a majority owner and having the voting power and so on, do you have any clauses in the contract that allows you to buy out the partner for a predetermined sum or no?
Yes, we don't open shareholders agreement. That is forbidden. Parties have agreed that those clauses of the agreement we don't open, and we don't make public. When you remember our today's message that we have proposed negotiations. No, it means that we need to negotiate to agree this ownership structure.
Yep. All right. Thank you.
Thank you. There appears to be no further questions, so I will hand back to the speakers for any other remarks.
I don't see any questions in the chat either, so I think we are kind of done this time. If you have any further questions, don't hesitate me after the call. Any final comments, gentlemen?
Yeah. Thank you. Again, thank you very much for your active participation and together with Jukka, Hanna I wish very pleasant summer afternoon and evening. Thank you. Bye-bye.