Ladies and gentlemen, welcome to Kesko's third quarter 2023 release call. I'm Kesko's CEO, Mikko Helander. I have together with me our business division presidents, Jorma Rauhala, Ari Akseli, and Sami Kiiski, as well as CFO, Jukka Erlund, and Investor Relations, Hanna Jaakkola. Today's headline is: A fine performance in a weak market, and it describes well our third quarter. Now, I will first give an overview of our business performance in the third quarter. After the presentation, we will be happy to take questions both by phone and via chat. Key events in third quarter. In grocery trade, sales were at a good level. In building and technical trade, profit decreased as construction volumes weakened. In car trade, sales and profit grew clearly in all car trade business segments.
In August, we announced that Kesko will acquire a Danish builders merchant, Davidsen, and enter Denmark once the acquisition is completed. During the third quarter, cost efficiency improved, thanks to implemented measures. Also, a good cash flow from operating activities, as efficient working capital management strengthened, cash flow. The net sales totaled EUR 2.9 billion, and it decreased by EUR 61 million. Net sales increased in grocery trade as well as in car trade. Rolling 12 months net sales were nearly EUR 12 billion. Comparable operating profit for third quarter was EUR 208.1 million. It decreased by EUR 34.7 million. Operating margin for the third quarter was 7.1%. Return on capital employed, one of our strategic targets, was 14.1%.
Return on capital employed increased in car trade year-over-year and decreased in building and technical trade, as well as in grocery trade. Our financial position is strong. Cash flow strengthened on the comparison period, thanks to further improvement in working capital management in all divisions. Interest bearing net debt was down on the previous quarter, year-over-year. Net debt increased as a result of investments in store sites and logistics, acquisitions, and growth in working capital. We have succeeded well in further improving cost efficiency. Fixed costs were down by EUR 9 million, despite high inflation. We have cut costs in all divisions and group common operations. There is a 2.6% reduction in personal expenses, despite significant wage inflation. In grocery trade, strong position in Finnish food trade is yielding good results.
Net sales totaled EUR 1.6 billion and grew by EUR 20 million. At the same time, retail sales grew by 3.6%. In grocery trade, comparable operating profit for third quarter was EUR 118.2 million, and it decreased by EUR 15.2 million. Profitability was 7.4%. Grocery trade key topics in third quarter: price continues to be important, but also demand for premium products has started to recover. Campaigns and other marketing efforts worked well. Customer visits and sales in K stores increased. Grocery sales in K stores grew by 3.6%. Loss of market share for food store chains slowed down further. The positive trend continued. Kespro sales were up by 4.7%, clearly exceeding market growth again. The profitability was good in the food service business, and the operating margin was 7.3%.
During third quarter, real estate costs were up due to inflation and made investments. Grocery price inflation stood at 6.7% and continued to slow down during the quarter. K-Citymarket's non-food sales were up by 2%. Growth in consumer online grocery sales strengthened and grew by 15.4%. In building and technical trade, a good result in a bad economic cycle. Net sales decreased by EUR 99.4 million to EUR 1,050 million, as the construction market was down on the comparison period. Comparable operating profit for the building and technical trade division totaled EUR 70 million, and operating margin was 6.6%. In this current operating environment, this is a good result.
Building and technical trade, third quarter key topics for building and home improvement trade: construction activity has clearly decreased in Northern Europe as a result of rising inflation and interest rates, especially in residential building. Despite the weakening market, the profitability was good. Operating profit was at a good level, EUR 27.4 million. Operating margin in the biggest market, Finland, was strong, 8.3%. Market share continued to strengthen further. Net sales for building and home improvement trade was down in all operating countries and in both B2B and B2C trade. Working capital and cost management was successful. Also, credit losses were at a low level. Technical trade, third quarter key topics for technical wholesale. Net sales were down by 0.5%. In comparable terms, net sales were down by 9.4%.
A significant part of the decrease in comparable sales came from solar power products. In solar power product sales in the comparison period were exceptionally high due to a fast rise in electricity prices at the same time. Excluding the impact of solar power product sales for technical trade decreased in comparable terms by 5.5%. Operating margin was at a good level, EUR 37.7 million. Operating margin in Onninen's biggest market, Finland, was at a strong level of 8.6%. Also, in technical trade, cost management was successful and credit losses were at a low level. In car trade, another good result in car trade. In car trade, net sales for third quarter grew by EUR 15.2 million and were EUR 311 million.
The comparable operating profit totaled EUR 24.3 million, exactly the same as in the second quarter, and increased by EUR 8 million year-over-year. Operating margin was 7.8%. Car trade key topics in third quarter: new car deliveries increased significantly year-over-year, and especially thanks to that, net sales and operating profit increased. Used car sales grew clearly, and market share in used cars strengthened. Also, service sales developed well. Order book for new cars was still at a good level, but it is coming down. Demand for new cars and orders are clearly below normal levels. We are expanding the K-Lataus electric vehicle charging network. Currently, there are some 1,500 charging points, and utilization rate is high. Sports trade net sales was down by 16.2% due to weakened consumer demand.
In food trade position, Kesko's position is strong and profitability among the best in Europe. Kesko has a strong position in all areas of food trade. This is quite unique and also unlike other operators in Europe. Kesko retail and B2B sales in food trade are over EUR 8 billion, and the market share in total Finnish food trade is 37.3%. If we look at the Finnish grocery store and restaurant market in Finland, it is over EUR 30 billion business in total. Grocery store sales represent some EUR 22 billion, of which 3% online sales. Food service, industry, and restaurant sales are approximately EUR 10 billion. Market size in euro terms is up. It is good to note that volumes declined in the market during the first half, but have now returned to the last year's level.
K Food store network is Finland's most extensive network of grocery stores with 1,200. K Store retail sales were EUR 7.2 billion. Market share is over 35%, and it is up by some three percentage points since 2015. There are some 1.2 million customer visits in the stores every day, and customer flows are increasing. K is the market leader in online grocery, with over 40% market share. Decline in market share is mainly due to the fact that competitors have opened exceptionally many new stores in recent years. Market share decline slowed down further in third quarter. K Store openings will increase from 2024 onwards. There will be several hypermarket openings in Finland, growth centers and also new neighborhood stores across the country.
K-Supermarket Columbus in eastern Helsinki will be converted into a K-Citymarket hypermarket in 2024. A new K-Citymarket will be opened in Kivistö, Vantaa in Helsinki metropolitan area in 2026. Planning and permits for new K-Citymarket stores in Kuopio and Porvoo are close to completion. Also, a bigger grocery store is under planning for Espoo Center in Finland's second biggest city, also Helsinki metropolitan area. In addition to the hypermarkets, there will be nearly 50 grocery store updates and over 10 new stores that will be opened in 2024. Store size, site CapEx is at the long-term average level. Investments in store updates and new stores will total some EUR 200 million-EUR 250 million in 2023, and the same level will continue in upcoming years.
If we look at the food service business in Finland, Kesko is the only operator in the food service business with countrywide network. In addition to the major B2C grocery business, Kesko is the leading operator in Finnish food service business, which is exceptional on a European scale. This gives significant efficiency and synergy benefits in purchasing, logistics, and IT. Food service sales are already over EUR 1.1 billion, of which 70% are now done via digital channels. Our food service operator, Kespro, is a clear market leader with a 46% market share and growing sales. The customer base is wide, and it ranges from private restaurants to public sector operators. Some 70% of sales come from lunch sales, cafeterias, and the public sector.
If we look at grocery store market in Finland, I would like to underline that the foundation for Finnish grocery trade is healthy. All operators ensure good profitability, and there has been only minor changes in market shares since 2010. There are three players in Finnish grocery trade, and the profits generated by these three players, Kesko, S-Group, and Lidl, are at a good European level. This is stable business, as you can see in the graph. There are no significant changes in K Group and S- Group market shares since 2010. Lidl opened first stores in Finland in 2002, and its market share has settled below 10%. The challenging building and technical trade market also presents opportunities. Kesko is a leading operator in B2B, building and technical trade in Northern Europe.
The total market is nearly EUR 40 billion. In technical trade, the market size in Northern Europe is some twenty-three billion. Kesko is the market leader in Finland and also in electro technical trade in Norway. We have a strong position in Poland and the Baltics. Other key players in the market are Ahlsell, Dahl, Sonepar, to mention some. In building and home improvement trade, the market size in B2B is some EUR 16 billion in Northern Europe. Kesko is the market leader in Finland. We have a strong position in Norway and Sweden, and we expanding to Denmark via the Davidsen acquisition. Other key players in this business are, among other, Stark Group, Optimera, and Mestergruppen. Cyclical fluctuation are natural for the construction sector.
Down cycle is impacting new residential construction the most, which accounts for 20%-30% of all construction, depending on the country. Decline in other building construction, renovation building, and infrastructure construction is smaller. It is good to remember that urbanization, renovation, and investment debt, infrastructure projects, and the green transition uphold construction in longer term. In general, the turnaround in construction is expected in 2025. K Group is a leading operator in building and technical trade in Northern Europe. Our retail and the B2B sales are some EUR 7 billion after Davidsen acquisition. Our profitability in building and technical trade is at the same level as the best European peers. The right strategic choices are behind the strong position and good profitability.
Choices include focus on B2B trade, expansion to technical trade, growth in Scandinavia, and market consolidation, and country-specific approach to manage the business and strategy implementation. Kesko continues the growth in building and technical trade. Slowdown in economic growth is accelerating the market consolidation. Kesko intends to continue to consolidation to building and technical trade, B2B market in Northern Europe also going forward. Our objective is to be among the leading operators, not only in Finland and Norway, but also in Sweden and Denmark. Growth in technical trade in Poland and the Baltics is also important. The joint venture, Kesko Senukai, a leading operator in building and home improvement trade in the Baltics. Guidance and outlook. Strong performance also in a weaker market, as you can see in the graph, right. Kesko specifies its profit guidance for 2023.
Comparable operating profit in 2023 is estimated to be in the range of EUR 680 million-EUR 730 million. Before, comparable operating profit was estimated to be in the range of EUR 680 million-EUR 760 million. Outlook for 2024. Kesko's operating environment is estimated to remain challenging in 2024. Kesko's operating profit is expected to remain at a good level also in 2024, despite the challenges in the company's operating environment. In grocery trade, B2C trade, and the food service market are expected to remain stable, and inflation is expected to slow down in 2024.
Profitability in grocery trade is estimated to remain good also in 2024. In building and technical trade, the market is expected to continue to decline in 2024. The economic cycle will have the biggest impact on new residential building, while the decline in other building construction, renovation building, and infrastructure construction is expected to be smaller. The cycle is expected to turn in 2025. Profitability in building and technical trade is estimated to fall short of the 2023 level, but to still remain at a reasonably good level in 2024. In car trade, orders for new cars are expected to fall short of the 2023 level. Demand for used cars and services is estimated to stay at a good level.
Profitability in car trade is estimated to decrease from the excellent level of 2023, but to continue to remain at a good level in 2024. Ladies and gentlemen, thank you for your time.
Thank you, Mikko. Now it's time for questions. We will, as usual, take the calls first, and then I will read the chat questions. So you have a possibility to ask questions through the chat function. There's a small delay there, so just be quick on asking your questions on chat function. But now we will turn to the conference call line.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Anna Schumacher from BNP Paribas Exane. Please go ahead.
Hi, team. Thank you for taking my questions today. I have two, if that's okay. So the first one, what factors made you realize that you had to reduce your comparable operating profit range for the year?
Well, matter of the fact is that we are more or less in the middle of downturn, and the slow economy we expect will continue a while. And that's the main reason why we expect that 2024 business environment will remain quite challenging. But at the same time, I see that it is necessary to recognize that despite challenging business environment, we are very confident that we can maintain good profitability also in the middle of those challenges what the market brings to the business.
Okay, great. Thank you. And then the second question is on grocery. So market share momentum has been slightly disappointing in grocery, but I noticed in the release you mentioned that you've increased your campaigns and marketing. Should we expect that this will continue and potentially reduce margins slightly, but ultimately increase sales?
Yeah, absolutely. Absolutely. And we are extremely happy how is performing our grocery trade division in the middle of a challenging business environment. Customer flows have increased. We have succeeded to maintain good profitability. Our profitability is still best in Europe, I believe. And even when we look at future, we are very confident that we can maintain unusual high profitability in a grocery trade business also in future. It based on actions we have completed successfully many measures to satisfy customers, to get the customers to visit more K stores, and definitely we will continue those measures also in future. But Ari, maybe you are more than eager to continue and open more detailed activities, what we have in process.
Yeah. Thank you, Mikko. So the customers are looking value for money and good deals, and we are offering them that. We have been boosting the campaigns and also targeted marketing via Plussa tools. And based on that, we have been able to increase the customer flows, and we have much better market situation currently. I think that's all. Other challenge has been that there has been increases in the, in the rents based on indexes.
Plus, of course, we should remember that our food service business is also performing very well, and profitability in B2B, B2C business is very good, over 7% operating profit.
They are both in high level and Kespro has been gaining market share heavily.
Yes.
Yeah, this is performing well. No, that, that's very clear. Thank you.
The next question comes from Calle Loikkanen from Danske Bank. Please go ahead.
Yes, good morning, everyone, and thank you for taking my question. I had a question about the grocery trade and more specifically about the EBIT margin. The margin decreased quite a lot from the comparison period in Q3.
Can you elaborate a bit more on the reasons for this quite sizable drop? You mentioned rents have increased, but was there something else that impacted the margins this much?
The first reason, remember that last year, third quarter was unbelievable. Operating margin was over 8%. Hey, I repeat, over 8% in grocery trade. And now, economies, as everybody knows, challenging, not just in Finland, but everywhere in Western world. And as we explained already, we have put lot of efforts to implement measures to succeed in tough market situation, and we have succeeded. Of course, it means also that we have spent more money on campaigns, we have spent more money on marketing, and we will continue those activities. But despite those investments, we have succeeded to maintain profitability still over 7%. Ari, do you need to add something more?
I think that was the big picture.
Yeah.
We keep on doing that, and it seems to work very well.
Yes, exactly. And I would like to underline once again that that our operating margin is over 7% in B2C as well as in B2B. In Europe, good grocery trade companies, they report operating margin in range between 3%-4%. Good companies.
Yeah, yeah, absolutely. I mean, your margin is obviously much, much, much better than the others, but you're a better company as well, I guess. How about then going forward in the coming quarters? I mean, should I read this answer that the kind of delta in margins should be a bit smaller in Q4 and the coming quarters?
Mm-hmm
As the comparison for Q3 was very strong?
Yeah. Oh, once again, I repeat what we have stated many times earlier: Kesko is a unique company, also in grocery trade. We don't see anybody else in European grocery trade business who has such a strong position in all fields of grocery trade in one market. As well as we should remember that our market share, 37%, more or less 37% of Finnish food market, is unusually high. When we remember that, we are also in digitalization, in utilization of new technology, definitely one of the most advanced company, at least in Europe. We are in excellent position to maintain good profitability despite the challenges coming from the economy and market. Due to that reason, our outlook for 2024 was very positive.
We are saying that we can maintain good profitability in grocery trade also in next year, despite heavy investments, what we are doing.
Yeah. All right, all right. Thank you. That's helpful. And that's all for me for now. Thank you.
The next question comes from Maria Wikstrom from SEB. Please go ahead.
Yes, so this is Maria Wikström from SEB. So a few questions on my side. Firstly, I'd like to discuss a bit that what's what are the measures you expect or you can take in order to defend the profitability in the building and technical trade as as we clearly noted that there will be a dif- I mean, difficult market condition next also next year?
Yeah, no. The first, I stress that also in building and technical trade in Finland, in Scandinavia, all in all, in Northern Europe, as the market leader, we have very strong position on the market, and it helps, as we can see also from third quarter numbers. Please remember that in the third quarter, despite the very challenging business environment, we reported in Onninen, in Finland, more than 8% operating profit. K-Rauta, builders merchant, player, reported more than 7% operating profit. I see that this is extremely strong message from our building and technical trade division, that business is in a good shape, and despite the very challenging business environment, we are doing an amazing, good job. And that will definitely help us also in next year.
We expect that 2025 business environment start to normalize. 2024 definitely will be still challenging, but it does not mean that we are not in position to report reasonable numbers and profit in building and technical trade, thanks to our strong position, thanks to well-performing daily operations. But maybe Jorma, you are, you are eager to open more detailed activities what you have on pipeline.
Yes. Thank you. Yes, as Mikko mentioned, the market has been a little bit challenging this year, and most probably also next year, but also there can be some differences between countries. And we have to remember that more than 50% of our business comes abroad. But about those measures, what we are doing and what we will do, I would mention three of them. Of course, customer work, we have to be very active with current and potential customers, and in most markets we have gained market shares, and we will continue with that path. Also, it's very important to keep our cross-margin in a good level. And the third one is cut costs, and we have managed quite nicely last quarter and a quarter before that one.
We will continue with that one, and cut costs, cutting also. So those will be, we will continue to implement our strategy, but we highlight on those three topics.
Thank you. And then, the other question coming to the grocery trade profitability, and you say that you expect that to remain on a good level next year. Just a little bit like if we talk about the components, and you will have some new hypermarket openings in the coming years. And if you would help us to understand that how should we look at the, like, the impact of the hypermarket expansion, I mean, on the profitability? And then also that, I mean, now, if you need to invest more in new offers, how that will impact on the profitability. As, I mean, such a good profitability is kind of relative, I mean, compared to your own history or what we observe in the market.
If we could get a little bit more tools to work around the-
Mm-hmm
the profitability on the grocery trade, for the coming years, please.
Yeah, yeah. Yeah, Maria, exactly. Our priority is very clear. Priority number one in all businesses is a good profitability, and definitely that is one reason why we are reporting such a good numbers quarter after quarter, as well as we are reporting good numbers despite the challenging business environment. When we look our grocery trade, we follow our strategy as we have done already many years. All investments, what we are doing, what we will do are 100% in line our long-term business plans. Meaning that, also investments on hypermarkets, investments on renovation of existing stores are not unusual, planned already long time ago. Permits always big challenge also in Finland, and, in the previous years, we have had little bit less investments because we have had some challenges to get permits.
Because our priority number one on that side is to build new stores, especially to the metropolitan areas. But now looks very positive because we have received those permits, and we are very confident that we will get also new permits, and that will open window to make a new, also massive store openings. But once again, I repeat that all those investments are planned and in line with our long-term strategy.
And then finally, when we talk about the cycle, I mean, if we, if we. I think this is more a question on the building and technical trade, that what would be the indicators that, I mean, you are following in order to see that where we are going in the cycle? And if now, I mean, it looks like that it will improve in 2025, but what, what I mean, what would be something for, I mean, for an analyst, and what you would be looking at, I mean, when you determine that now we actually see the bottom and we start growing again?
Yeah, and of course, we review continuously estimates and comments coming from different estimation bodies, economists. But always at the end of the day, we take our own outlook, as we have done also today. And my understanding is that we might be a little bit more pessimistic than many independent estimation houses, but I see that we are also very realistic. Once again, I repeat that we are very confident that the economy will turn. We are very confident that construction activities will turn sooner or later, we expect latest 2025. Of course, it is possible that we will see some kind of a turning point already next year. Hopefully, that will happen.
But despite those speculations, once again, I repeat that we are very confident that our building and technical trade can report reasonable profit figures, numbers also next year, when we are in the middle of a weak economy. And of course, our expectation is that when construction activities will increase in Northern Europe in future, Kesko is in a amazing good position to report wonderful numbers and, at the same time, continue expansion of our building and technical trade operations and further consolidate the market in Northern Europe.
Thank you very much. I don't have more questions at this stage.
The next question comes from Svante Krokfors from Nordea. Please go ahead.
Yes, good morning. Svante Krokfors from Nordea. Couple of questions. First one on the grocery trade and food service. You have clearly taken market share during the past years quite significantly. And could you tell a bit about the competitive landscape there? And do you think you will be able to continue to take market share on that side?
Yes, yes. We believe that we can, especially because all in all, in grocery trade, we have unusually strong market position in Finland, in B2C, in B2B, as well as in online business. And thanks to that unusually strong position, thanks to new technology, where we are definitely one of the most advanced grocery trade companies, not just in Europe, but also globally, that helps us further strengthen our business and position in the Finnish market. When we look at food service, we are the only one in Finland who can offer nationwide services. We are the only one who has nationwide service networks, very efficient logistics, and we are the only one who can satisfy public sector customers, private customers everywhere in Finland.
And that helps us, I believe, strongly, increase further our market share and business in food service. As well as our position is unusual in B2C business, 1,200 K stores. Nobody has such a wide store network as we have, as well as we are market leader also in online business, also in B2C. We are in unique position, and that helps us to succeed also in future.
Thank you. And on the online grocery side, do you have any updates on the concept that you introduced in Ruoholahti? How has that developed, and how is the expansion of that looking?
Amazing, amazing development. System works now very well, and when Oda, Oda, left Finland, we have succeeded to harvest heavily from Helsinki metropolitan area, Oda's customers, and that has dramatically increased also utilization rate of Ruoholahti system. We are today even more confident that multi-fulfillment center technology, combined to existing stores, is a winning concept. Especially also because it works very well, but it helps us also to make money in online business. We are extremely happy and satisfied and very confident that also in online business we are on the right track. But, Ari, maybe you can open even more detailed, how is performing this Ruoholahti setup.
Yes, the setup is working very well. We have to be very happy with the results because we have been able to scale it up very fast, and there is still a lot of potential in Ruoholahti. Even we have doubled the same during the recent months in that location. Now we have the blueprint of the concept, so whenever we make decisions, we have all the integration for the IT systems, SAP, and so on ready. It's very easy to copy that co-concept everywhere. We have been also very happy that big international players coming from UK and United States have visited there, and they have been giving very positive concept at how the hell you have invented this and put it in action in such an efficient way.
You should start to sell tickets.
Yeah, that might be. And it's very cost-efficient model.
Mm.
That's the big thing, that if you compare it for some other technology, it's much cheaper and very easy to put in new locations-
Mm.
with a lower cost.
Mm-hmm.
Thank you. That's very helpful insights. Then perhaps a question to Jorma on the BTT side. What kind of visibility do you have currently? And also perhaps a follow-up on that, how do you see that the renovation market has developed now, given, I guess, the biggest negative impact factor there is the high interest rate and the situation of both private and institutional investors owning real estate?
Well, to be honest, this forecast is so difficult, as we know from this year, for example, the forecast all in all, Finnish construction business to decrease 3.5% this year. On summertime, they forecast it 5.5, and now it's 10%, so very difficult to forecast on what comes to, for example, next year. But it's important to remember that, when we'll divide, for example, Finnish construction business, it's worth of 41 billion EUR. And one part is this new residential buildings. The share of that is 21%, and they forecast and also we forecast that it will decrease also somewhat next year. And then the second part is non-residential new buildings. The share of that is 24%.
On that area, they are forecasting that it could even increase next year. Then come to renovation, especially what you asked, the share is 37%. And forecast for next year, and also we believe kind of flat, it would be kind of flat. And then the fourth part is 18% when it comes to civil engineering, and a little bit decrease there. But as you can see that there most probably will be differences between those categories and between our countries. So it's quite difficult to forecast. But all in all, we have summarized our forecast, what we have mentioned.
It may be necessary to remind that, in many of those segments, we have seen already big drop.
Yes, that's true, and what comes, we know that, for example, consumer business start to decrease already two years ago. And then building and home improvement sector, B2B sector, start to decrease one year ago. And our technical trade started to decrease, six months ago. So the comparison figures start to be also lower.
Mm-hmm. And despite heavily dropped volumes,
Yeah
we reported in the third quarter almost EUR 70 million operating profit.
Yes.
Okay, thank you. That's all from me.
The next question comes from Miika Ihamäki from DNB Markets. Please go ahead.
Hello, it's Miika. Thanks for taking my question. Just, can I get a little bit more color on your market share, organic development in your key countries, in building and technical trade?
Yeah, yes. Building and technical trade in Finland, we have gained both Onninen and K-Rauta has gained market share this year, quite clearly, so quite many years now. And then and in Norway, Byggmakker, what comes to B2B side, we are exact on the same level as market. In Sweden, we have lost a little bit, not so much, a little bit in building a home improvement. And in Baltics and Poland, we have gained market share. So mostly of our countries, we have gained market share. And definitely the biggest market, Finland, we have gained quite, quite a lot of market share.
Okay, K-Rauta's market share, more or less 46%.
Yeah, even more, even more, yes.
Even more, and Onninen in Finland also clearly over 40%.
Yes.
Yeah.
Okay, thank you.
Thank you for the lively questions from the conference call line. I have couple from the chat function. Arttu Heikura from Inderes is asking, "In Q2 report, market outlook for food service business implied growth in 2023, but now in Q3 report, the expectation of growth was downgraded to stable development in 2024. What are the drivers in the change of the Kespro's outlook?
Kespro's outlook, no. All in all, I repeat what we stated already, that outlook for 2024, when we discuss about the market outlook, is pessimistic because economy is weak, not just in Finland, but everywhere in Western Europe. And of course, that weak economy has, of course, also impact on food service business, but not such a massive, massive impact because so big share of our food service business related to public sector, related to the restaurants which serve lunches and not just fine dining places. I don't see, I don't feel that our outlook is such a negative in food service. But, but, Jukka, do we have stated-
No, we haven't really changed that outlook-
Exactly
and it's the first time we talk about 2024, actually this time. And the market overall is expected to remain stable, but that doesn't mean that it couldn't grow on the top line side.
Exactly.
Inflation is still there, and so on, and we have-
But when market is stable, in the middle of those challenges, what everybody has-
Yeah
in economy, I would like to say that our outlook is very positive.
Yeah.
Ari?
Yes, and I think the biggest challenge is generally the buying power of the consumers.
Mm.
But at the same time, megatrends are supporting eating outside the homes. Especially younger people, they seems to eat all the time, and the share of this lunches in Kespro sales is about 70%.
Mm.
Also, we are offering new services for the customers of Kespro, and that is boosting sales-
Mm
in the coming years.
Of course, it helps that steadily we are gaining market share.
Yes, that's most important factor.
Very good. And then, he continues: "Could you give me some light on the new car orders or the backlog? Is it enough to boost Q4 new car sales?
As we have reported today, our new cars order backlog is very close to normal level.
Mm.
It was unusual peak, this backlog, a long time. And now, Sami, we are very close to normal situation. But as we have reported, backlog will decrease if order inflows will remain on unusual low level. But, Sami, would you like to open more detailed?
Yeah. Thank you, and good morning. Yeah, Q4 order book still good, normal level, coming down as Mikko mentioned.
But, yeah, of course, depending on the deliveries from the factories and also the delivery dates of our customers, we believe that we can generate good sales during quarter four also.
Mm-hmm. Exactly.
Very good. And there are some questions about the grocery trade margin in Q3, but we have discussed it quite thoroughly.
Mm-hmm.
So I'll jump that over. If any further questions, please come back to me after the call. But one more here. Kesko expects B2B building and technical trade market to turn in 2025. Could you elaborate your expectations of how each building and technical trade division could perform in 2024? Builders merchant will face quite low comparison figures in 2024.
Oh, when economy and construction activities were more or less close to normal, we reported operating profit clearly over 7% in building and technical trade division, meaning that we were also at that time among the best players in Europe. And Jorma and his people, they are steadily improving and developing operating activities, improving cost efficiency, utilizing more and more new technologies, as well as harvesting synergies related acquired companies. Meaning that we are in excellent position to report amazing numbers and figures in future when demand will get sooner or later back to normal. Or Jorma, would you like to add something?
I think I was already opened that question also. Now we see the different customer segment next year.
Yeah, exactly.
Very good. In that case, I would like to thank you all for the very lively discussion and good questions, and have a beautiful autumn day. Any last comments, Mikko?
No. You stated very well. Thank you for everybody. Have a nice day.
Have a nice day.