CEO comment

We continue to build a stronger MEKO

The second quarter shows the tangible impact of our efforts to build a stronger and more profitable MEKO. We are improving our margins, have strong cash flow and have reduced our debt ratio. In parallel, we continue to grow and are expanding through new acquisitions. Our focus is now to continue in the same direction and to implement additional measures to improve earnings where we can see challenges.

AUGUST 22, 2024

MEKO's business concept is tried-and-tested and has proven stable over time: We satisfy the constant need for mobility using functioning vehicles, regardless of the vehicle's technology and fuel. Through our well-known brands and workshop concepts we help customers in eight countries, making us the industry leader in the independent automotive aftermarket in northern Europe.

We aim to strengthen this position. We will both continue to grow and to become more profitable, with even more energy to invest in the transition and in tomorrow's mobility. As part of this ambition, we launched the 'Building a stronger MEKO' initiative in November 2023, and I am pleased to see that these efforts had a clear impact on the second quarter. In several ways, results are progressing in the right direction, compared with the first quarter and with the year-earlier period.

Continued growth - strongest trend in Scandinavia
Net sales increased 9 percent during the second quarter, and we noted both larger volumes and the effects of our own price adjustments. The performance of the Sweden/Norway, Denmark and Sørensen og Balchen business areas was particularly strong. Market conditions and the macroeconomic situation are more favorable in Scandinavia, primarily in Sweden and Norway. However, the market climate remains weaker in Finland, Poland and the Baltics, where competition remains intense.

Broad measures deliver better margins
We perform a wide range of work to strengthen profitability through activities in all business areas. These include efficiency enhancements, cost reductions and price adjustments as well as investments in a new enterprise system and in additional automated warehouses. Some measures produce rapid results, while others have a positive impact in the longer term. Of particular note in the second quarter were the results of our streamlining measures in Sweden and Norway, where we optimized costs and our logistics network. This led to a clear improvement in our adjusted EBIT for the quarter. The adjusted EBIT margin improved to 7.5 percent, compared with 6.2 percent for the second quarter of 2023.

EBIT was impacted by transaction costs for our strategic acquisition of the spare parts wholesaler Elit Polska and investments in our new enterprise system. The year-earlier period was impacted by non-recurring effects from a major property sale in Finland during the second quarter of 2023, which had a significant improvement on earnings.

Stronger cash flow and lower debt ratio
Cash flow was strong during the quarter, supported by improvements to earnings and working capital. This also had a positive effect on our debt ratio, which fell to 2.5 at the end of the period, compared with 2.7 at the beginning of the year. We are therefore well within our target range of 2.0-3.0, which provides us a solid financial position with greater flexibility.

Further initiatives to strengthen profitability
In other words, we can see that plenty is moving in the right direction. However, this does not mean we have finished work to strengthen long-term profitability. We are now continuing to move in the same direction and implemented several measures in the second quarter, primarily in Finland, where we have noted certain challenges. In April, we decided to automate our Finnish central warehouse to streamline our inventory management In June, further steps were taken to reform the organization and to optimize the customer offering, workflows and the number of employees. We aim to improve our margins and increase our advantage as industry leader.

Advancing positions through acquisitions
We also started strengthening operations in Poland. The acquisition of Elit Polska, which was completed at the end of July, is part of this plan. Elit Polska clearly expands our geographic presence and offers synergy potential in areas such as logistics and distribution. I am also pleased that we are advancing our positions in Estonia in a similar way through the acquisition of Automeister, which owns the country's leading workshop concept, Carstop. This will enable us to increase our market share and achieve important synergies.

MEKO stands firm - with an ambition to always be the most complete partner for everyone that drives, repairs or maintains vehicles. We are now continuing to strengthen our position, where we can leverage a business that remains stable even in more turbulent times.

Pehr Oscarson
President and CEO