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Introduction & Market Context
Mekonomen AB (STO:MEKO) presented its Q1 2025 financial results on May 15, 2025, reporting improved EBIT despite facing challenging market conditions across its operating regions. The automotive aftermarket specialist achieved a 10% increase in operating profit while navigating a cautious market environment characterized by slightly negative organic growth.
The company’s stock has been on a volatile path recently, with the price currently at 127 SEK, down 1.4% from its previous close. This follows a significant drop after the Q4 2024 results when the stock fell 5.31% despite record annual performance, suggesting continued investor caution about market conditions.
Quarterly Performance Highlights
Mekonomen reported total growth of 6% for Q1 2025, reaching net sales of SEK 4,562 million compared to SEK 4,320 million in Q1 2024. However, organic growth was slightly negative at -1%, reflecting the cautious market environment and milder winter conditions that affected seasonal product sales.
The company’s operating profit (EBIT) increased by 10% to SEK 161 million, up from SEK 146 million in the same period last year. Adjusted EBIT rose by 3% to SEK 231 million, though the adjusted EBIT margin decreased slightly to 4.9% from 5.1% in Q1 2024.
As shown in the following comprehensive financial overview from the presentation:
Earnings per share decreased by 8% to SEK 0.85, down from SEK 0.92 in Q1 2024. Cash flow from operating activities saw a significant decline to SEK -122 million, compared to SEK 285 million in the same period last year, representing a 143% decrease.
Detailed Financial Analysis
Mekonomen maintained a stable gross margin at 42.8% in Q1 2025, nearly unchanged from 42.9% in Q1 2024. This stability was achieved through price adjustments and improved procurement practices, despite facing price competition, particularly in Poland.
The following chart illustrates the components affecting the gross margin development:
The company’s profitability improvements were primarily driven by positive developments in Sweden/Norway and Denmark, which offset challenges in Finland, Poland/the Baltics, and Sørensen og Balchen. This regional variation is clearly demonstrated in the adjusted EBIT bridge:
Mekonomen maintains a strong financial position with net debt of SEK 3,013 million and a leverage ratio of 2.4 times EBITDA (excluding IFRS 16), well within the company’s target range of 2.0-3.0 times. This financial stability provides flexibility for potential future acquisitions and investments.
Strategic Initiatives
Mekonomen highlighted several strategic initiatives aimed at driving long-term organic growth. A key partnership with Goodyear was announced, targeting a more than 30% increase in tire sales by the end of 2026. Currently, the company sells approximately 750,000 tires annually, indicating significant growth potential in this segment.
The company is also expanding into the commercial vehicles segment, establishing a new division led by Nils Hollmann, an experienced leader in the commercial vehicle sector. This division will focus on buses, trucks, and light commercial vehicles, leveraging Mekonomen’s extensive network to ensure high parts availability for both workshops and operators.
Another strategic partnership announced was with General Motors (NYSE:GM), covering Cadillac’s newly launched electric vehicles in Sweden. Mekonomen was selected for this partnership due to its extensive network, wide range of EV spare parts, and specialized vehicle technicians, positioning the company well in the growing electric vehicle service market.
Regional Performance
Mekonomen’s performance varied significantly across its operating regions:
Sweden/Norway (36% of net sales) saw a 3% decrease in net sales to SEK 1,653 million, with organic growth of -2%. Despite this, adjusted EBIT improved by 8% to SEK 143 million, with the adjusted EBIT margin increasing to 8.3% from 7.6% in Q1 2024, driven by ongoing efficiency measures.
Denmark (23% of net sales) reported a 4% decrease in net sales to SEK 1,064 million, with organic growth of -5%. However, adjusted EBIT improved by 16% to SEK 77 million, with the margin increasing to 7.3% from 6.0%, supported by improved gross margin and lower operating expenses.
Poland/the Baltics (28% of net sales) achieved strong reported growth of 43% to SEK 1,269 million, primarily driven by the acquisition of Elit Polska. Organic growth was positive at 9%, but adjusted EBIT decreased by 8% to SEK 22 million, with the margin declining to 1.7% from 2.7%, affected by integration costs and increased personnel expenses due to higher minimum wages in Poland.
Finland (7% of net sales) faced the most significant challenges, with net sales decreasing by 9% to SEK 330 million and adjusted EBIT declining by 30% to SEK -22 million. The performance was hampered by a cautious market and an unusually mild winter.
Sørensen og Balchen (5% of net sales) reported a 1% decrease in net sales to SEK 244 million, with adjusted EBIT declining by 9% to SEK 35 million. Despite this, it maintained a healthy adjusted EBIT margin of 14.1%.
The company’s extensive market presence is illustrated in the following group footprint overview:
Forward-Looking Statements
Mekonomen’s warehouse automation projects in Oslo, Odense, and Helsinki are progressing according to plan, with full operations expected across all sites by autumn 2025. The company anticipates that these projects will significantly elevate its logistics capabilities, unlocking new growth opportunities.
The company published its Annual and Sustainability Report for 2024 in March, featuring expanded sustainability reporting with increased transparency compared to previous editions. The reporting is aligned with upcoming Corporate Sustainability Reporting Directive (CSRD) requirements to ensure compliance.
Looking ahead, Mekonomen is focusing on several initiatives for long-term organic growth while maintaining strong cost control. The company’s strategic partnerships, expansion into commercial vehicles, and warehouse automation projects are expected to drive future growth despite the current cautious market environment.
Mekonomen’s long-term financial targets remain unchanged: annual sales growth of at least 5%, annual adjusted EBIT growth of at least 10%, net debt/EBITDA in the range of 2.0-3.0 times, and dividends corresponding to 50% of profit after tax.
Full presentation:
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