Interim report January - September 2020

1 July–30 September 2020 

• Net sales declined 1 per cent to SEK 2,863 M (2,879). Organic net sales increased 3 per cent. Net sales was negatively impacted by currency effects of 5 per cent.
• Adjusted EBIT amounted to SEK 270 M (231) and the adjusted EBIT margin was 9 per cent (8).
• EBIT totalled SEK 208 M (191) and the EBIT margin was 7 per cent (7). EBIT was negatively impacted in the quarter by items affecting comparability of SEK 24 M (–).
• Earnings per share, before and after dilution, amounted to SEK 2.18 (1.95).
• Cash flow from operating activities amounted to SEK 521 M (425).
• Net debt was SEK 2,964 M (3,814) at the end of the period, compared with SEK 3,709 M at year-end and SEK 3,299 M at 30 June.
• Covid-19 had a limited impact on the quarter.

1 January–30 September 2020

• Net sales declined 3 per cent to SEK 8,631 M (8,888). Organic net sales declined 1 per cent. Net sales was negatively impacted by currency effects of 3 per cent.
• Adjusted EBIT amounted to SEK 649 M (724) and the adjusted EBIT margin was 7 per cent (8).
• EBIT totalled SEK 478 M (601) and the EBIT margin was 5 per cent (7). EBIT was negatively impacted in the nine-month period by items affecting comparability of SEK 55 M (neg: 5).
• Earnings per share, before and after dilution, amounted to SEK 4.38 (6.34).
• Cash flow from operating activities amounted to SEK 1,252 M (940).
• New bank agreements signed 30 June with adjusted covenants reflecting the financial uncertainty that Mekonomen Group´s markets have had and may have due to Covid-19.
• Covid-19 and data breaches affected the period negatively.

CEO comments

Growth, improved profitability and a favourable position for the future market

Mekonomen Group stands strong, despite uncertain times. The underlying demand for our products and services is robust. Our third quarter was characterized by increased activity and stabilized demand, as the pandemic had limited effects on our operations. We report positive organic growth and improved profitability on the back of a broad range of forceful actions and structural initiatives. At the end of the quarter we have seen uncertainty grow in our markets as the reported Covid-19 infection rates have increased. We are fully focused on mitigating the effects on our operations and to safeguard the health and safety of our employees and customers. Looking further ahead, we see the timeless need for mobility as a great opportunity for our Group.

Stabilized demand and positive organic growth
In the third quarter, demand in our markets stabilized at close to normal levels as official restrictions related to the pandemic were eased and activity levels increased. Organic net sales growth was 3 per cent, while reported growth was burdened by currency effects and ended at a negative 1 per cent. At the end of the quarter we have seen Covid-19 infection rates rebound in most of our markets and restrictions are slowly being reintroduced. We believe that the uncertainty due to the pandemic will continue for some time. Our top priority is to safeguard the health and safety of our employees and our customers, while we are committed to forcefully mitigate the effects on our operations by taking the right actions. The underlying demand for our products and services is robust, as we have seen over time, and we expect a limited impact as long as society in our markets are not closed down.

Forceful actions and cost focus secure improved profitability
Our efforts resulted in a strengthened profitability during the quarter. EBIT increased to 208 MSEK (191) and the EBIT margin to 7 per cent (7), compared to the same quarter last year. EBIT includes items affecting comparability of -24 (-) MSEK related to structural initiatives. These include costs related to the closure our Eskilstuna warehouse as well as continued closure of unprofitable stores and workshops. Adjusted EBIT improved to compared with the year-earlier quarter. Our efficiency improvements and structural cost saving actions had a positive effect on profitability. The gross margin was stable at 45.2 (45.3) per cent, where earlier currency related price increases in most of our markets compensated for negative mix effects and currency headwind and thus higher purchasing prices in the quarter. The ongoing claims settlement process regarding the data breach has not resulted in any reimbursement during the third quarter. 

Strong cash flow and solid financial position 
An important focus area this year has been to strengthen our cash flow and reducing our working capital. These activities have resulted in a strong cash flow in the third quarter. Our net debt decreased at the end of September and our net debt/EBITDA dropped to 3.3 times. A part of this is related to government aided tax deferrals in many of our markets during the second quarter. We have also continued to evaluate the investments we make even more carefully. At the end of the second quarter, we negotiated new financing terms with new covenants. Thanks to our performance in the quarter, following our cost savings and improved underlying operations, we have a solid financial position with available cash and a healthy distance to our covenants.Well positioned for the future market

Looking back, we have been an enabler of mobility for almost fifty years – and I am convinced we have an important role to play for many years to come. Society will inevitable be normalized and continue to evolve. This include new and greener technology in vehicles, new consumer behaviour, and an increased overall focus on sustainability. We have a leading position within our footprint, which we will build on to further strengthen our operations to a more sustainable and even stronger company for the future. As an example of this, I would like to mention that Xpeng, the Chinese challenger in the electric car market, has chosen to cooperate with us in the Norwegian market. We are well prepared for new and emerging competition through our digital capabilities, our strong concepts and our synergies from working as a Group. I am very glad to have witnessed the energy and commitment amongst our employees during these special
times. It is also encouraging that Mekonomen Group has been recognized as Sweden's most gender equal company by Allbright Foundation, which I see as a strength and a prerequisite for the future.

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 contactperson set out above, on 6 November 2020 at 07:30.

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