Ladies and gentlemen, welcome to our 2017 financial statements release call. I'm Kesko's President and CEO, Mikko Helander. Together with me, I have our CFO, Jukka Erlund, and Vice President, Investor Relations, Kia Aejmelaeus. I will first give an overview of our business performance, and after that, we will be happy to take questions. I will start with the full year highlights. In 2017, we continued on the path of profitable growth. We made good progress in the implementation of our strategy towards becoming a more focused and unified K Group. Our net sales grew in all divisions, and profitability improved compared to the year before. Our strategic focus on the core business has increased pro forma net sales by EUR 1.6 billion and operating profit by EUR 42 million.
The integration of our 2016 acquisitions, Suomen Lähikauppa, Onninen, and AutoCarrera, has proceeded well and has increased net sales by EUR 2.3 billion and operating profit by EUR 40 million. At the same time, and in accordance with our strategy, we have divested several businesses in the specialty goods trade. The divestments made in 2017 and 2016 decreased our net sales by EUR 0.7 billion and increased operating profit by EUR 2 million. The highlights for fourth quarter. Comparable net sales, operating profit, and earnings per share grew. The growth was driven by grocery trade with good sales development and significant improvement in profitability. Briefly on our key performance indicators. Fourth quarter net sales grew comparably by 2.6% to over EUR 2.6 billion. The comparable operating profit increased from EUR 63.3 million to EUR 81 million.
Comparable return on capital employed for the rolling 12 months increased to 12.2% and return on equity to 10.9%. When looking at the full year figures, our net sales were EUR 10,676 million and the comparable net sales growth was 1.8%. The comparable operating profit amounted to EUR 296.7 million and the margin was 2.8%. Looking at 2017 net sales and operating profit by division. Grocery trade represented approximately half of the group's comparable net sales and slightly over 60% of the comparable operating profit. Excluding specialty goods trade, all core businesses saw growth and improved profitability. The net sales and operating profit for the fourth quarter. This slide highlights the strong finish to the year by the grocery trade business. Quarterly sales. Fourth quarter net sales declined 5.3%. In comparable terms, sales grew to 2.6%.
Looking at quarterly operating profit, fourth quarter operating profit increased from EUR 63 million to EUR 81 million. The corresponding margin grew from 2.3%-3.1%. Moving on to the return on capital employed, it was 12.2% for the group. The target level is 14%, so there is still room for improvement, especially in Building and Technical Trade. A few comments about our financial position. At the end of the year, equity ratio was 50.4%, liquid assets were EUR 398 million, and interest bearing net debt, EUR 136 million. The net debt to EBITDA ratio is at 0.3. Cash flow from operating activities in fourth quarter was EUR 116 million, and the cash flow from investing activities was a negative EUR 99 million. Capital expenditure was EUR 117 million.
This includes real estate purchase of EUR 46 million from Kesko Pension Fund, which is to return to Kesko an estimated surplus amount of EUR 58 million in March 2018. Our financial position is strong and allows us good possibilities to develop the business in line with our strategy. I will discuss business development by division starting with grocery trade. Market-wise, we have been happy to note that the importance of quality and selections has continued to increase. Growth in the Finnish economy has supported sector growth. Consumer prices are rising moderately. 2017 was a year of strong and successful transformation. Our strategic choices on service and quality resulted in increased sales and profitability. The successful integration of Suomen Lähikauppa has meant the significant synergy benefits have materialized sooner than anticipated. The extensive redesign of all our chains continued according to plans.
The fourth quarter highlights included growing sales in all chains. Profitability was boosted by synergy benefits. We were also particularly happy with the good performance of K-Citymarket and K-Pro, and the sales of new stores being off to a good start. In the fourth quarter, net sales in grocery trade declined by 1.6%. In comparable terms, growth was 4.5%. For the full year, sales grew comparably 2.4% to EUR 5.282 billion. In fourth quarter, the operating profit in grocery trade increased from EUR 51.9 million to EUR 67 million. The corresponding margin was 4.8%. The full year operating profit increased from EUR 175.9 million to EUR 203.4 million. The corresponding margin was 3.9%. Building and Technical Trade. On the market, the situation in the Nordic and Baltic countries is still good despite slower growth pace. Construction in growth centers continues strong.
The full year highlights include continued focus on our core businesses and the integration of Onninen proceeding well. During the year, changes to store site network burdened profit in the Baltics. Fourth quarter highlights for us. While Onninen sales and profit grew, divestments in specialty goods trade decreased operating profit. Measures to transform operations and increase efficiency in Sweden are ongoing. Net sales in Building and Technical Trade. In the fourth quarter, net sales declined 10.8%. In comparable terms, growth was 2.2%. Sales in specialty goods decreased from EUR 222 million to EUR 80 million, while sales of the core business increased from EUR 899 million to EUR 921 million. For the full year, sales grew comparably 1.1% to EUR 4.486 billion. Comparable growth of the core business was 3.1% to EUR 3.823 billion. Operating profit for the division.
In fourth quarter, the operating profit increased from EUR 14.4 million to EUR 14.6 million. Operating profit in specialty goods decreased from EUR 2 million to EUR 0.3 million, while operating profit of the core business increased from EUR 12.4 million to EUR 14.3 million. The full year operating profit decreased from EUR 97.9 million to EUR 95.8 million. Operating profit of the core business increased from EUR 72.5 million to EUR 79.5 million. In Building and Technical Trade, we are taking a stronger country-specific approach to accelerate sales. As business is increasingly being done on a country-by-country basis, we can better take into account the local market needs and customer wishes. At the same time, we pursue stronger synergies, for example, by increasing the sales of our own brands and by intensifying our sourcing efforts.
Improving our profitability further and raising it to the level of the best European operators is one of our main goals for upcoming years. Moving on to car trade. With the market first-time registrations declined slightly on the back of the tax debate. Scrapping premiums and economic growth is expected to increase the registrations in 2018. The full year highlights: Our market share was 18.6%. The acquired Porsche business has been performing very well as part of Kesko. Fourth quarter highlights: Sales and profitability remained at a good level. Changes in taxation mean some sales were moved over to 2018. Order books strengthened and rose 20%. In fourth quarter, our net sales in car trade decreased from EUR 221 million to EUR 218 million. Growth was -1.4% and in comparable terms, -5.3%.
For the full year, sales grew comparably 1% to EUR 909 million. Comparable operating profit declined from EUR 7.5 million to EUR 6.7 million in fourth quarter. The corresponding margin was 3.1%. The full year comparable operating profit increased from EUR 29.5 million to EUR 33.1 million, and the profit margin grew from 3.5% to 3.6%. Let's discuss our outlook. In comparable terms, our net sales over the next 12 months are expected to exceed the level of the previous 12 months. However, due to divestments and restructuring, the group's net sales for the next 12 months are expected to fall below the level of the previous 12 months. The comparable operating profit for the next 12-month period is expected to exceed that of the previous 12 months. However, investments in store openings and redesigns in the expansion of logistics operations and in digital services will burden profitability during the period.
Comparable earnings per share were EUR 2.28 in 2017. The board's proposal for dividend is EUR 2.20 per share. This slide presents Kesko's Group Management Board as of 1st January 2018. Towards the end of last year, we made some notable changes to the company's upper management. Jorma Rauhala, who had successfully been heading the Grocery Trade Division, was appointed President of the Building and Technical Trade Division and Deputy to the President and CEO. Ari Akseli, who was previously in charge of commerce in the Grocery Trade Division, was appointed as President of the Division. Mika Majoinen, who has had a long career within the company, was appointed Kesko's Group General Counsel. Reporting to me are recently appointed Karoliina Partanen, Senior Vice President, Communications and Identity, and Eeva Salmenpohja, Vice President, Public Affairs, as well as Pasi Mäkinen, Chief Audit and Risk Officer.
Lastly, I would like to finish highlighting our long-term commitment to corporate responsibility. This January, Kesko was ranked again as the most sustainable trading sector company in the world on the Global 100 list. In the end of last year, we were included in the Dow Jones Sustainability Indices. We highly value these recognitions and will continue our determined work towards a better society and better environment. This ends my prepared remarks. Thank you for your attention. We will now be happy to answer any questions you may have.
Ladies and gentlemen, if you wish to ask a question via the telephone, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, it's star one to ask a question via the telephone. We'll pause for a moment to allow everyone an opportunity to signal for questions. Our first telephone question comes from Niklas Björkman from Handelsbanken. Please go ahead.
Yes. Hi. Thank you for taking my questions. First of all, it looks like there was a very big swing in the profitability coming from Suomen Lähikauppa. Now you made a loss of EUR 4.1 million last Q4, and now you make a profit of EUR 3.7 million. What is driving this big swing?
Yes. Thank you for your question. We are extremely happy with the Suomen Lähikauppa acquisition. Also very pleased how successfully we integrated Suomen Lähikauppa. Our decision, our choice to make fast integration was definitely right decision. Now we have in larger scale completed integration. We can see a lot of synergies rolling in. At the same time, we have recognized that our very extensive neighborhood store network in Finland, actually, we have more or less 60% market share in neighborhood store sector, supports also very strongly our hypermarkets and our medium size stores. This combination is very competitive. Results we can see already in fourth quarter numbers.
Maybe just to add up a little bit. The sales growth has been good throughout the year with the renewed stores. Also the synergies are something that we have been able to realize both in the sourcing side as well as in the OpEx side. Let's also remember that during 2016 last quarter and also 2017 first quarter, we also were in the middle of transforming the store site network. It was a very heavy load at that point. It really comes from both parts. Now we have a stable store site network. There's still around 150 stores that are, or that will be put to the retailers by the end of first half of this year. Otherwise the store rollouts have been done and renewed. Now we can focus on the commercial side.
Maybe we can.
Okay
remind that our decision made by us 2015 that good K-retailing entrepreneurs can have more than one store was definitely right decision. We are very pleased to report that today already more than 500 stores are part of that multi-store concept and that decision and this development supports also very strongly our grocery trade development.
All right. Thank you. In the B&T division, are you able to give a run through of the market situation in your different key countries, both in terms of the B2B side, but also the B2C side, just like the demand situation?
Market situation is good. Building, construction activities, renovation activities are steadily increasing everywhere in Northern Europe, which is our domestic market, that offers us also a lot of opportunities to further develop, increase our sales, and further improve our financial performance in Building and Technical Trade Division.
Lastly then perhaps, these investments you're making that you mention in regards to the guidance, which will burden your growth next year? Could you say a bit more about these initiatives, the digital initiatives and so on?
Yes, of course. You mentioned that burden. I feel that is too strong word to describe situation. We can see that we can further improve our profitability, but at the same time, we would like to remind that we very strongly develop all our core businesses. We speed up development of digital services and those investments in short term will have also some slight negative impact. Jukka, you could open little bit more detailed those impacts.
Yeah. Just to be sure that everybody understands, the areas are really the store site sort of renewals, which we have already started earlier, but are still sort of in the middle of the process. We will finish the store site renewals by the end of 2019. In that sense, there are still quite a few of renewals during this year, it's really targeted for long-term sales growth. In that sense, that is a sort of short-term effect. On the logistical side, we are expanding our central warehouse in our grocery trade divisions central warehouse due to the fact that we acquired Suomen Lähikauppa and the volume has been good, so we definitely needed more capacity in order to have a good logistical flow. The last one is the IT and digital capabilities.
Naturally in the retailing environment, we have to invest to this part in order to really be competitive and customer oriented in both in the store site channel as well as in the digital channel. When it comes to the sort of quantifying it, most likely we are in the double-digit figures on the impact side, so roughly from EUR 10 million-EUR 20 million coming from the investments that are sort of short-term type of investments that are needed in order to really improve even further our competitiveness.
Okay. Thank you very much.
Once again, to ask a question via the telephone, it's star one on your telephone keypad. There are no further questions in the telephone queue at this time.
There's a couple of questions from the online. Do we expect any costs related to structural changes in 2018? It is true that last year we did a lot of changes in our portfolio and there was these one-off items going further. It, of course, depends how the portfolio develops and so on, but nothing I could inform at this point which would be relevant in a way. There is a question regarding the profitability regarding common functions and that there has been some volatility and whether we can give some sort of flavor on that side. During last year, we were around EUR 35 million, EUR 36 million, and I can say that we don't expect changes on this level. We did include last year some investments, especially to the digital side and so on.
Overall, the level should be pretty much the same as it was in 2017. There's also a question regarding CapEx for 2018, which we have earlier also commented that it's most likely that we will go below EUR 200 million in the store site CapEx, and that seems to be the case going further. We are, in addition to these store site CapEx, also investing to new services, especially in our car trade as well as in our IT and digital capabilities, which will increase our CapEx on those sides. That means that we most likely go above EUR 200 million due to these car trade CapEx, as well as the ICT and digital CapEx. The IT and digital CapEx also have a shorter depreciation time, so that's one of the reasons why it also affects somewhat of our operating profit.
There's one question regarding the IFRS 16 implementation and impact. Well, clearly it has an impact on our balance sheet, so that's very clear. For us, it's very important and the key KPI going further is obviously even more the cash flow generation, and we have been focusing on that one a lot, and in that sense, we will continue that work. That's pretty much what I have to say at this point.
Operator, do you have any questions?
No further questions in the telephone queue, madam.
Okay, guys. Thank you. Now came new one. Jukka, could you-
Do you feel comfortable with current 2018 EBITDA consensus of EUR 480 million? I think we have commented what we have to say regarding our outlook. Like I said, we expect the operating profit to improve. At the same time, we will also highlight it that we are doing investments to the future, which somewhat impact our operating profit growth as well. In that sense, I think during this call we have pretty much opened what we have to say on the outlook side.
I would also like to add at this point that we have received questions on potential capital markets day. Yes, we can confirm that that is under plans. We have planned that for June. Please stay tuned. We hope to reach out on that to you shortly or come back to you on that shortly. Thank you.
Okay, guys. Thank you very much for your participation. Together with Jukka, Kia, I wish you pleasant evening. We try to survive here in Helsinki. We have real snow storm finally in Helsinki city. Once again, thank you very much for your participation. Bye-bye.