Interim report January - March 2022

11 May 2022 07:30

Strong quarter despite uncertain business environment
 

January 1–March 31, 2022

• Net sales increased 5 percent to SEK 3,155 M (3,001). Organic growth was 0 percent.
• Adjusted EBIT amounted to SEK 225 M (224) and the adjusted EBIT margin was 7 percent (7).
• EBIT totaled SEK 190 M (186) and the EBIT margin was 6 percent (6). EBIT was not impacted by any items affecting comparability during the quarter or during the year-earlier period.
• Earnings per share, before and after dilution, amounted to SEK 2.11 (1.85).
• Cash flow from operating activities amounted to a negative SEK 138 M (pos: 179).
• Net debt was SEK 2,588 M (2,733) at the end of the period, compared with SEK 2,264 M at December 31, 2021.
• Restrictions related to covid-19 impacted the quarter and the comparative period, but to a varying extent in the different business areas.
• The uncertain world situation had no substantial impact on sales during the quarter, but did have a negative effect on cash flow due to the build up of buffer inventory to offset the impact of disruptions in the supply chain.

CEO comments

I am pleased to confirm that Mekonomen Group is standing strong, despite the uncertainties in our business environment. The first three months followed our clear plan toward increased profitability. We have never before presented such a strong result for a first quarter. We achieved this despite the cautious market situation in the wake of covid-19 and the effects of Russia’s invasion of Ukraine. Looking ahead, I am optimistic. Mekonomen Group has great opportunities to further strengthen its position through investments to increase availability for our customers. Overall, we expect underlying demand for our products and services to remain favorable.

Aggressive steps in cautious markets
The first quarter was turbulent in our business environment. January and a large portion of February were marked by generally high sickness rates in society due to the spread of covid-19, which led to a clear but temporary loss of sales and extra costs even for our Group. Russia’s invasion of Ukraine in February has resulted in a humanitarian crisis with many other knock-on effects such as problems with sourcing of materials and increased prices. Taken as a whole, this led to a cautious market development in most of our markets during the quarter. In this situation, we acted aggressively and strategically to ensure continued sales growth. Thanks to our significant purchasing power, we effectively built up our inventory in order to secure future availability. Overall, we were able to increase net sales by 5 percent to SEK 3,155 M (3,001). Consequently, we achieved the highest ever first-quarter figures in Mekonomen Group’s history. Organic growth for the Group was flat, where Inter-Team in Poland stands out favorably with organic growth of a full 14 percent. Mild weather and covid-19 affected the organic growth in the Nordic countries.

Continued positive profitability trend with high gross margin
We continued to improve profitability despite higher costs for the temporary increase in sickness absence and rising prices for transport and energy. EBIT rose to SEK 190 M (186) and the EBIT margin to 6 percent (6). No items affecting comparability were reported for the quarter. Adjusted EBIT amounted to SEK 225 M (224) and the adjusted EBIT margin was 7 percent (7). It was particularly gratifying that the gross margin rose to 46.1 percent (44.7), largely thanks to previously implemented price adjustments and favorable currency fluctuations. Cost rises from the overall increase in inflationary pressure had a marginal impact. We will continue to carefully monitor developments and will act as needed to defend our margins.

Strong financial position enables continued growth and higher market shares
Our financial position is robust, which provides us with both flexibility and resilience. Net debt amounted to SEK 2,588 M (2,733) and net debt/EBITDA excluding the effects of IFRS 16 to 2.2 times (2.3). This is in the lower part of our target range. Cash flow from operating activities was negative for the quarter, due to our strategic decision to strengthen our inventory levels of attractive components and spare parts of approximately SEK 127 M in the quarter and SEK 381 M since last year. We can see major opportunities to increase sales and market shares going forward through responsible investment in increased availability for our customers.

Increased availability for our customers
We know that availability is important for our customers and therefore for our success. This is not simply a question of having the right things in stock at the right price and location. After the end of the quarter, we acquired 20.5 percent of the Swedish service company Omnicar Holding AB, which offers mobile car service and digital sales of electric cars. Mobile workshop services is a rapidly expanding trend that is appreciated by both companies and private individuals. The offering is currently available in Denmark with expansion planned into Sweden and Norway. Concurrently, one of our greatest strengths is highly
efficient logistics. We are continuing our investment in regional warehouses in Poland and a new automated central warehouse in Denmark, in combination with the continued broadening of the range of spare parts for electric cars and heavy vehicles.

New name as the journey continues
49 years have passed since the company was founded, leading to a journey that has now expanded into a northern European Group with operations in Sweden, Norway, Denmark, Finland and Poland. Today, Mekonomen Group has many established brands, covering various wishes and needs. Above all, we are leading in purchasing and logistics, and have a proven ability to extract synergies as we create long-term, sustainable growth and profitability. Our vision is to enable mobility – today and in the future This successful journey will continue, and the Board has proposed an adjustment to the Group name, in order to clearly reflect the breadth of its operations. This name is Meko. The Meko name is, of course, familiar, and builds on the tradition of the established Mekonomen brand. However, the Meko name also shows that the Group is much more than a single, albeit important, brand. Mekonomen Group is therefore changing name to Meko, if the General Meeting approves the proposal. The other brands will remain, and the journey pushes ahead – toward greater
growth and profitability.

Pehr Oscarson
President and CEO

This information is such information that Mekonomen AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, at 7:30 a.m CET on May 11, 2022

The interim report is published in Swedish and English. The Swedish version is the original version and has been translated into English.