Welcome to our 2018 Second Quarter Results Call. I'm Kescos president and CEO, Mick Kohrlander. Together with me, I have our CFO, Yuka Ehland, and Vice President, from Schia MLAOS. I will first give an overview of our business performance. And after that, we will be happy to take questions.
Starting with the second quarter highlights. Our net sales were up by 4% and operating profit totaled, 1,000,000. Growth, operatively, excluding divestments was 11, uh,000,000. Performance in all core businesses improved. We announced several acquisitions in Norway to politics and Finland.
The growth strategy erupted in 2015 was defined further during the quarter. Briefly on the numbers. 2nd quarter net sales grew corporately by 4% to almost 1,000,000,000. Operating profit increased from 1,000,000 to 1,000,000, return on capital employed increased to 13.7% and return on equity to 11.7 percent. On group net sales, The second quarter net sales declined by 3% to 1,000,006,731,000,000, significantly impact did by the divestments.
In comparable terms, net sales grew by 4%. Looking at the group's quarterly operating profit, it increased from 1000000 to 1000000. The corresponding margin grew from 3 to 3.3percent2ndquarter2017 in crores 1,000,000 in operating profit from, divestments, taking this into account operating profit improved by 1,000,000. Moving on to return on capital employed our return on capital employed was close to the 40% target level. That said, there is still room for improvement, especially in building and technical trade.
A few comments on our financial position. At the end of 2nd quarter, equity ratio was 46.2%. Liquid assets were almost 4 100 1,000,000 interest bearing net debt to EBITDA ratio was 0.4%. Cash flow from operating activities improved to 1,000,000. Cash flow from investing activities totaled minus 1,000,000.
Our financial position remains very strong, allowing us to develop our business going forward. Next, I will discuss business development by division, first up grocery trade. Market wise overall sector growth was 3.1% being affected by the timing of Easter and warm weather early summer. Price inflation was approximately 2.3% partially impacted by increases in alcohol and tobacco taxes. Second quarter highlights for grocery trade, customer numbers were up in all chains, thanks to successful chain redesign.
Growth was strongest in the neighborhood, market due to the timing of Easter and warm weather early summer. Profitability improved, thanks to net sales growth and synergies, integration of Soma Lahi Capa and transfer of stores to retailers, was successfully completed. CashPro's foodservice operations were strengthened by the acquisitions of Kalato cook Ericsson and Rainy Leah. In comparable terms, growth rate grew 2.9 percent to 1,000,000,000 1,000,000 in the second quarter. Crossery trade, 2nd quarter operating profit increased from 1000000 to 1000000.
The corresponding margin improved from 3.8000000 to 4%. Somelahekaupaz integration and transfer of store to retailers was successfully completed by quarter end. We are very pleased with the acquisition, nearly 1,000,000 worth additional sales were added targeted synergies of 1,000,000 were achieved ahead of schedule. The total divestment, the total investment made amounted to 1,000,000. Thanks to the acquisition, we have achieved a clear leading position in the neighborhood market.
A total of 3.80 stores that were converted to K Markets have now been transferred to retailers by the end of June 2018. During the quarter, Casper's offering was strengthened by acquisitions of Carlatuckoo Ericsson and ready LiHA. The acquisitions will strengthen Gazpro's competitiveness in the fast growing food service wholesale market. Gast Pro will be able to offer restaurant customers a more extensive selection of fish and meat fresh food products. The products will be gradually made available to wider the customer base from autumn onwards utilizing Gazpros efficient logistics.
Next, building and technical trade. Outlook for the market remains favorable, although growth pace is expected to slow down. Strong economics warm weather early summer and the timing of Easter supported the market. 2nd quarter highlights for building a technical trade Net sales and operating profit grew, excluding, to specialty crude trade, sales and profit development was good, especially in Finland and in gas in the Baltics, meanwhile restructuring in Sweden and changes in network and structure in Norway decreased sales. Acquisitions of Scatum and Kipling for bookmarker Chain in Norway of, the online operator or 1A group in politics were announced during the court.
As expected, divestments in line with strategy decreased sales and profitability into specialty course trade. Next second quarter, net sales in building a technical trade. Net sales decreased by 8.4 percent to 1,000,002,000,000. The decline was impacted by the specialty course divestments carried out in the first half of twenty seventeen. In comparable terms, net sales increased by 5.4%.
The comparable second quarter operating profit for the building and technical trade was 1,000,000. Excluding special decrease rate result was 1,000,000, improving 1,000,000, meaning that in core business operating margin improved from 2.9to3.1percent. Second quarter comparable operating profit for the building a technical credit was €33,400,000, versus 34,800,000 the year before. As can be seen from the graph, operating profit is impacted negatively primarily due to divestments in specialty courts and the divested Baltic Real Estate. The operative result improved by 1,000,000.
During the quarter, we continued with successful acquisitions and divestments in line with strategy. In Norway, to strengthen the bookmaker chain, we acquired keeping and Scatum, as a result, profitability will improve and share of on retailing in Norway will rise to 40%. The acquired companies have strong market position in the Orsula and Roanheim regions and operating in a total 29 stores. 2017 net sales were 1,000,000 and the operating profit, 1,000,000. The acquired 1A group offers Cascosenoukai a comprehensive e commerce platform to serve the Baltic markets.
The company's 2017 net sales were approximately 1,000,000. The divestment and discontinuation of the Russian operations proceeded according to plans, also the divestment of machinery trading politics and Africa's foreign machinery trade in Finland was agreed. Moving on to car trade. Market wise first time race relations of passenger cars and vans were up by 11.5% in the second quarter. The new worldwide harmonized light vehicle test proceeds or slightly WLTI be emissions testing will be implemented from September onwards.
This may slow down card rate in Europe in the second half of this year. In the second quarter, card rate net sales and operating profit continued to grow. At 19.5%, the market share of our Volkswagen AO reserve and Porsche passenger cars and vans was at a good level. Order book for new cars was plus 5%. We are investing in leasing services and a national wide charging network for electric cars at K Food Store locations.
In the second quarter, card rate net sales grew 4 to 1,000,000. Cartray's 2nd quarter operating profit increased from 1,000,000 to 1,000,000, the corresponding margin grew from 3.2to3.6percent. Slashly a few comments on our outlook. In comparable terms, the sales for continuing operations for the next 12 months are expected to exceed the level of the previous 12 months. The comparable operating profit for continuing operations for the next 12 month period is expected to exceed the level of the preceding 2 months.
However, investments in the expansion of logistics, operations, and in information see and digital services with burden profitability during the period. Thank you for your attention. We will now be happy to
And our first question comes from the line of Maria Wicks from Alkanske Bank.
Sorry about it. I had it on a mute. So I had one follow-up on the after the analyst conference today earlier today. And this is about the the profitability in Cresco, Sanukai operations. And if I look at the the the minority into the the my my the profits contributed to minority shareholders.
I see it's up from 4,000,000 last year to 11,000,000, 11,000,000 in q 2 this year. So a little bit here there that, I mean, where is the where where is that the difference coming from? And then, at the same time, if we could touch touch upon the, the profitability improvement in the Tesco Cenugai operations that you mentioned in the text, but if we could get a little bit of a view on the magnitude, please? Thank you.
Yeah. Maybe shortly. I'll start. So if you look at the sort of, comparable, effect on the earnings per share, so it was, somewhat lower than that one. I think the comparable figures are there.
There was a delta of around $3,000,000 during the second quarter, to the, sort of, profitability, for the non controlling interest. And that's affected by 2 things one of them being the Tesco Sanofi's profitability improvement, which was, around 50% of that effect. And then another effect was also regarding our machinery trade, which is, which is, signed to be sold and, and which we are expecting to take place at the latest in October. And that also affected, we already have their minority and those two sort of, factors where the sort of keys is there. So 3,000,000 change in the profitable level in the without the sort of nonrecurring items.
And may I still ask, I mean, what was been occurred extraordinary item in the minority interest in Q2?
Yes, there have been some assets which have been sold in Kescosenokai, which have been those sort of nonrecurring items. So it was some of the assets that Kescosenokai group as a whole owned where, and there was the minority part, of course, took the, sort of biggest sharing in that part.
Okay, perfect. No further questions.
Our next question comes from the line of Nicholas Skogman of Handelsbanken.
Yes.
Hello. I have two questions for the moment, please. First of all, looking at the the building and technical trade and excluding the specialty goods and excluding on and on. So the builder's merchant business, if will. Year to date margins are 1.6% versus 2.1% last year.
For H1. If we then adjust this for the Baltic property divestment, so 1,700,000, the margin is 1.8. So it's still down 30 bps. Could you please explain what is what is driving the worsening profitability in the in that part of the business, please?
Yes. Excluding owning and if we look at the sort of, like, the DIY and sort of billings merchant type of, business, Filleant was, did a better, profitability as well as did, Tesco Sanoca in the Baltics And then on contrary in Sweden and Norway, the profitability was, somewhat weaker than last year. So So that change is coming from the Swedish and Norwegian operators and mainly mainly stream from Sweden. So that's the sort of factor behind there.
Okay. And, I know you're taking measures to improve But have you have you seen any improvement towards the end of the quarter or or anything, or is it
Yes. The improvements, yes. The improvements, of course, are underway at the moment, and and we have a new management there. So, so, those are underway there. On the sales side, yes, we do see that, that, some effects have been already visible there, but it's, still sort of having a store side network with 3 stores less than we did, a year ago that, of course, affects somewhat still there.
But, but like I said, we do have seen also positive signs on that side, but it will take some time still to sort of do those initiatives that which are underway there.
Okay, thank you. And your your group costs have been quite a bit lower, so year to date versus last year. Where where what's your best guidance for the full year number?
Well, I would say that last year, we were at the heaviest level with the cost side. So in that sense, definitely, we will come to a lower level this year than we did last year. We did see that already during the first quarter, I would say that 2nd quarter was, even below sort of the normalized level, our net not net cost base during the second quarter was, was quite low. Also, the 3rd quarter, will be, is usually somewhat lower And then on the fourth quarter, it will be closer to the levels that we were during the first quarter. So I would say that each quarter lower than last year, and and this was, even somewhat more during the second quarter.
There have been a number of things affecting it and and and reduced cost basis in different areas and so on. So that's the case.
Okay, so around SEK 30,000,000 then for the full year?
Yes, that's the ballpark there.
Okay. And how about next year's do you expect to keep that stay at this level, sir? I mean, plus minus growth of the business.
Yeah. At least not too far from the current levels. So, so we have done some cost reductions there and some, some other measures as well. And and in that sense, might be a little bit increased, but nothing radical and clearly below the 2017 levels.
Okay. Thank you very much. One question on the on the joint venture. The well-being stores to joint venture the the losses you're making there, do you expect them to to stay for the coming quarters, or do you think your profitability is going to improve quickly.
Heiko joined when, yeah, please remember that we started business. Beginning of this year. And we are still in in very early stage, but at the same time, we can see also from numbers that are not easy, not at all, to start a new business. Key question is that how well we succeed together with Oriola to bring right selection of products to the Heiko stores. And that is a key question.
We are working now very hard together with Ooyala people, to provide, right assortment and let's see later this year how we will succeed.
The clear initiative is to get further growth to the sales side and at the same time, reduce the cost base as well. And like Mick said, changes in the assortment as well.
Okay, perfect. Thank you very much.
And there are no further questions on the telephone lines at this time. Please go ahead speakers.
Okay, ladies and gentlemen. Thank you for your participation. I can say that we have very hot summer day here in Helsinki. Anyhow, I had decided to call to swim. I recommend everybody to do exactly the same.
But I wish, together with my colleagues, very pleasant summer afternoon for everybody. Thank you very much. Bye bye.