Interim report January - March 2023

16 May 2023 07:30

A robust core business – and strategic advances

January 1 - March 31, 2023

  • Net sales increased 26 percent to SEK 3,973 M (3,155). Adjusted for the acquisition of Koivunen, net sales increased 11 percent. Organic growth was 6 percent.
  • Net sales were positively impacted by 2 percent due to currency effects.
  • EBIT amounted to SEK 200 M (190) and the EBIT margin was 4.9 percent (5.9). EBIT was not impacted by any items affecting comparability during the quarter nor during the year-earlier period.
  • Adjusted EBIT amounted to SEK 227 M (225) and the adjusted EBIT margin was 5.6 percent (7.0).
  • Earnings per share, before and after dilution, amounted to SEK 1.43 (2.11).
  • Cash flow from operating activities amounted to SEK 27 M (-138).
  • Net debt was SEK 3,778 M (2,588) at the end of the period, compared with SEK 3,558 M at December 31, 2022.
  • The uncertain global situation impacted sales and profitability in the quarter in several of the Group’s markets.
  • As of the third quarter of 2022, the Group reports according to five business areas: Denmark, Finland, Poland/the Baltics, Sweden/Norway and Sørensen og Balchen (Norway). Comparative figures have been restated.
  • MEKO presented adjusted financial targets and priorities in conjunction with its capital markets day on March 21, 2023, to strengthen its leading position.

CEO comments

The year’s first quarter again highlighted the resilience of MEKO’s business. Sales reached a new record-high level, earnings improved and we implemented strategically important initiatives. This took place at the same time as macro-environmental factors impacted us in the form of rising prices and regional market challenges. In line with our strategy, we are working broadly and systematically to further improve profitability.

Highest sales ever
MEKO’s strategy is based on a timeless vision and a tried-and-tested business model. The business stands firm through economic cycles, and also during historical shifts as technology evolves. And this is where we find ourselves at present. The macroeconomic situation and its effects are somewhat challenging at the same time as combustion engines are being increasingly replaced by greener alternatives – a necessary historical transition that we are leveraging in all of our markets.

In this situation, we look back on a quarter that clearly shows the strength of our strategy. As a result of the acquisition of Koivunen in 2022, we are now the clear market leader in Northern Europe within the independent car aftermarket. This also means that we reach a new highest level for sales during a single quarter. Net sales increased 26 percent to SEK 3,973 M, despite the late spring, when spring normally leads to an increase in sales. Organic growth was 6.3 percent, with increases noted in all business areas, with the exception of Sørensen og Balchen (Norway), which has greater exposure to the retail trade.

Continued positive development in several markets - more challenging in Denmark and Norway
We are, however, not unaffected by macro-economic factors. We have felt the effects of rising purchase prices, as well as some intensive regional competition and unfavorable currency effects. Meanwhile, the situation has varied between our markets.

In Denmark, the situation improved compared with the preceding quarter, even if the market environment remains challenging. In Norway, thetrend was primarily affected by a cautious approach among consumers, which first and foremost is impacting the retail trade segment, combined with a weak NOK. In Finland, the market trend was stable, and in Poland and the Baltics the favorable trend we have seen for an extended period has continued. Sweden also demonstrated a sustained positive market trend with strong organic growth.

Improved earnings – and more initiatives to increase profitability
Overall, earnings increased for the quarter. EBIT amounted to SEK 200 M (190) and adjusted EBIT to SEK 227 M (225).

In line with our strategy, we are working broadly to further improve profitability. We are adjusting prices, which is having an effect but with a certain delay. We have further successfully implemented the announced optimization of the branch network in Norway, which will reduce our costs over time. We are also  intensifying our efforts to streamline operations in Meca/Mekonomen and in Denmark. This is, among other things, done through merging of bransches, closure of unprofitable bransches and tuning of staff.

Stable financial position – and adjusted targets to increase profitability
I am satisfied with MEKO’s stable financial position. Cash flow from operating activities amounted to SEK 27 M (-138), mainly due to improved working capital. Net debt amounted to SEK 3,778 M at the end of the quarter, and net debt relative to EBITDA was 3.52. As previously communicated, our objective is to reduce our debt/equity ratio during the year, in order to reach the goal of a debt ratio between 2.0 and 3.0 times.

The debt/equity target was left unchanged when we reviewed our financial targets during the quarter. The new targets were presented in more detail during our well-attended capital markets day in March. At the event, we set out in detail how MEKO is continuously strengthening its position and investing in tomorrow’s mobility. The overall goal is to increase MEKO’s value generation.

Robust initiatives – and a green milestone
I would also like to highlight some of the strategically important initiatives that we carried out at the beginning of the year. We increased pace of commercial activity within the Tunga Fordon concept, which is now being established in Denmark. This concept already exists in Sweden, Norway and Finland and we believe there is significant potential going forward. In Sweden, an important launch took place in car glass. And we also reached a milestone in our internal sustainability agenda. MEKO has now joined the Science Based Targets initiative, an international framework for companies that adopt science-based climate targets to limit global warming. This is just the beginning of a more ambitious sustainability program.

All of this is completely in line with our ambition. MEKO is to be industry leader in northern Europe – in all respects.

Pehr Oscarson
President and CEO

This information is such information that MEKO 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 on May 16, 2023 at 07:30 CEST. The interim report is published in Swedish and English. The Swedish version is the original version and has been translated into English.

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