Bilia AB (publ)

During the questions and answers session, participants are able to ask questions by dialing pound five on their telephone keypad. Now I will hand the conference over to IR Carl Frederick-Ewits. Please go ahead.

Thank you very much for the introduction and welcome to Bilja's third quarter result presentation with CEO Per Ravander, CFO Kristina Fransén and I, Carl Fredrik Evertz. We also have our Deputy CEO Stefan Norsson with us today. We're happy to present a solid result with higher order intake for new cars, positive cash flow and a solid financial position. I will come back to the outlook in the end of this presentation. Here's our agenda. Per will start with the current situation in the industry, followed by Q3 numbers. Kristina will go through the financial situation, and I will conclude with our outlook. So let's start, and I'll leave the word to Per.

Thank you, Carl Fredrik. In Sweden, we see signs of better interest in new cars from private customers. In Norway, we see good demand from private customers driven by good campaigns and new taxations of cars from the government. In Western Europe, the demand for private customers remains stable. In the important fleet business, we see a little bit higher activity in all our countries. Most of our brands have strong campaigns, big discounts, attractive private leasing offers, and there is a high supply of cars for the manufacturers. The demand for used cars is on a good level in our countries and we see stable prices for all cars except fully electrical vehicles. At the same time, we know that in end of quarter four in Sweden, we see a lot of electrical vehicles three years old. All brands coming back from customers due to the government incentives was terminated approximately three years ago. In Bilja, the stock of used cars is on a low level in Sweden and on a balanced level in our other countries. There is a good and strong demand in the service business in Norway and Western Europe with good booking times. In Sweden, we see better activities, but still somewhat lower booking times. Part of the explanation is some years of lower new car sales and export of young used cars. The total car market in Sweden 2024 was almost 20% lower compared to an average market the last 10 years. During the last three years, there is a shift in the car population to more older cars. Net turnover was better than last year. We reported an operational earnings of 310 million Swedish crowns with a margin of 3.2% compared to 280 million last year. We had higher profitability in Sweden related to both service and car business. Our operating profit was 284 million compared to 260 million last year and included a profit of 35 million related to divested properties in Sweden. Therefore, earnings per share was 2.07 crowns per share compared to 1.15 crowns last year. On this slide, you can see the quarter three profitability from 2019 to 2025 in each country. And on the left hand side, you can see Sweden and the improvement of 28 million. In the middle, we have Norway, and there you can see some small improvements. On the right hand side, you can see Western Europe delivering slightly lower results due to underlying less new car deliveries. On this waterfall chart, you can see the different business areas. We improved earnings in the new car business and the service business, but dropped a little bit in the used car business. We are moving over to the important service business, representing 72% of the earnings. In all our countries, we see a positive organic growth with an average of 4.1%. One reason is 10% higher deliveries of new cars, impacting our delivery workshops positively. There are the same number of working days in Sweden, Norway and Luxembourg, but one day less in value. We report earnings of 233 million, which was 12 million higher than last year. There are several reasons why we report a higher result. As I mentioned, higher delivery is a new course. Another is in general better activity in our workshop. And a third is higher organic growth. The order intake of new cars adjusted for acquired and divested operation was 20% higher compared to Q3 last year. As I mentioned, we have seen a little bit better activities in all our countries, especially in September. For the car business, we reported a result of 81 million compared to 73 million last year, coming mainly from Sweden. The profitability for cars in Norway and Western Europe was on a slightly lower level. For used cars, we reported earnings of 61 million compared to 96 million last year. In a historical perspective, it's a good level. As I mentioned in the beginning, the stock of used cars is on a low level in Sweden and at the balanced level in Norway and Western Europe. The reason for the lower earnings was price pressure on used fully electrical cars. We have increased our underlying backlog of new cars in 900 units. For many different brands and models, we have really short delivery times. So by that, we think 1,500 new cars is a good level. This means we often can sell and deliver a car in the same quarter. Yes. Kristina, it's your time.

Thank you, Per. So financial position. During this quarter, we reported a strong operating cash flow just below 800 million kronor. This reported cash flow did include a received payment of some 300 million kronor related to the divestment of six properties in Sweden that Per mentioned before. After adjusting the reported operating cash flow for these divested facilities, this cash flow amounted to just below 500 million kronor for the third quarter, which is still a strong cash flow and in line with last year's level. The six properties that were divested are used in our Porsche, BMW and Toyota operation in these facilities. are now leased back from the new owner for a period from two to 15 years. For the group, the divested facilities generated a non-taxable profit of 35 million kroner, which also impacted our tax rate for the quarter, going from a normal tax rate of around 22% to a tax rate of 4% only. The divestment of the six properties in Sweden enabled us to finance our acquisition of a Volvo Lastwanger operation with basically no impact on our net debt leverage. As of July 1st, we acquired two companies that perform sales of new and used Volvo trucks and provide related services. The business had in 2024 a turnover of some 1 billion SEK with an operating margin of around 4.5%. The business is conducted through nine facilities in mid-Sweden with around 160 employees and will be branded as Velia Trucks going forward. We do look forward to the cooperation with Volvo Lastmagnan, which is a significant player on the Swedish trucks. During the end of the quarter, we also acquired a Jaguar and Land Rover business that has been conducted by Sandvin AS in one facility in Bergen in Norway. The business had in 2024 a turnover of some 280 million NOK. with an operating margin of around 3.5% and the number of employees was 29 persons. So during the quarter, we did make the second payment of 130 million kronor related to this year's dividend of 5.6 kronor per share in total. The dividend is paid in four installments where the remaining two installments are in October and January. At the end of the third quarter, we had an earning per share of 5.76 kronor versus 5.08 kronor last year. The financial target for the group is to distribute at least 50% of the earnings per share to our shareholders. By the end of the third quarter, we utilized some 600 million kronor of our credit facilities of 2.3 billion SEK. As of the 1st of October, we also repaid a bond loan of 500 million kronor, which we refinanced during the first quarter this year by issuing a new bond amounting to 800 million kronor with a maturity terms of five years. And then finally, our net debt excluding IFRS 16 at the end of the quarter amounted to 2.5 billion kronor. That was about 400 million kronor below the net debt at the end of last year. Our ratio in net debt in relation to EBITDA was then 1.5 times compared to 1.6 times by the end of the second quarter and 1.7 times compared to December last year. By that we have made a reduction and are also then well in line with our financial target to be below a ratio of 2.0 types. So I think that's about the financial position.

Thank you for that. Moving over to Outlook. Our efforts to enhance profitability and operational efficiency remain a top priority while we accelerate this process by introducing an efficiency program. The 150 million savings will be fully implemented during the second half of 2026 with an estimated one-time cost of approximately 25 million SEK. Profitability, cost control and capital allocation remain top priorities throughout the whole organization going forward. Moving over to the car business. For used car sales, we believe the remainder of 2025 may be characterized by some price pressure and higher competition, as many electric cars will come back due to, for example, private lease renewals and the government incentives was terminated approximately three years ago, like Per mentioned earlier. We currently have a low stock of used cars and are well prepared for such a situation. For new car sales, we believe we will continue to see signs of increased activity from private customers. Demand from corporate customers is stable and we see indication of some increased interest also within this segment. In addition, the forecast for new passenger cars registration for 2025 in Sweden is trending higher, now at 280,000. So combined with assessment of a gradually better economic situation and improving forecast for cars, we see cautiously positive development in demand for new passenger cars during the rest of 2025. Then briefly on Bilia Trucks, which is a newly acquired Volvo truck business. Implementation is going according to plan and the company is performing. This is a business we believe strongly in and see a good complement to our existing businesses. In our service business, we expect continued stable demand during the remainder of 2025. In Q3, the service business represented 72% of our operating profit. We see good opportunities to continue developing our service business and through that improve customer satisfaction. Then briefly, finally on consolidation, the rapid tech development of cars, especially the increased integration of electronics and digital systems, has led to a growing need for advanced service expertise. This development benefits Bilja and drives a consolidation of the market. The players with the capacity to meet future service needs strengthen their positions. We continue to evaluate opportunities in attractive business areas and are ready for continued growth. Yet again, a healthy balance sheet is always a priority for us and will continue to be so. This finalizes our third quarter presentations and we can now open up for questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Andreas Lundberg from SEB. Please go ahead.

Good morning. Good morning, everyone. Thanks for taking my question. If I start with good morning, Per, and good morning.

activity here you talked about that some increased activity among private consumers can you perhaps give more color on what you see and perhaps the reasons for why you see it yeah one reason as i mentioned it's coming from from we sell more cars new cars so I often talk about the delivery workshops, so we have had better activity in the delivery workshops. And we see a little bit better in our body and paint shop as well.

Andreas, when we come to sales, we can measure... One example, we measure the floor traffic in all our showrooms, and we can see the activity with customers entering our showrooms is increasing. We can also see when we measure like a credit request, when people ask for offers and business proposals, we can see that that activity is increasing. And I think it's connected to also when you see the offers of private lease for our manufacturers. Today, the prices are attractive and the campaigns are better. So in that perspective, we see the customers increasing their interest. And then we also can see the higher activity in the fleet business. It's more activity among the fleet customers. The thing we have to do and work with, the interest is higher even there.

Can I follow up on the fleet activity? As far as I'm concerned, this has been rather stable for some time. Why do you think you see higher activity among fleet customers?

No, but I think as Per mentioned, we can see that the interest rate is going down. I think the customers now, they have been like saving up a little bit. So now the time it's a pent up demand for cars, new cars among private consumers because they have been waiting.

And the best market for us The last quarter is Norway. We are coming from low figures last year, but we sell a lot of the new cars in the Norwegian market. And one reason is they will change the taxation of the government next year. Today you have VAT, 500,000 Norwegian crowns, you have to pay VAT. And the government now, they say that next year 300,000 will be the cost for the customer, 50,000 Norwegian crowns. And the year after that, they will reduce to zero, to 75,000 crowns. So what we can see now, we can see a better activity in the Norwegian market from both fleet business and private consumers. So, yeah, we think it can be really good in Q4 and the next year for order intake in the Norwegian market.

Thank you. If I shift here to the service operation, you start with a talk a little bit about TD. You have seen some pressure on the profitability here in the last, call it two, three years. The reasons behind that, what you're doing to improve it, and perhaps also the difference between the second and the third quarter. I recall Q2 was a little bit tough, especially on the Swedish side.

Thank you. It was Sweden, and we had low booking times. And it was not only VIA, it was a market phenomenon, you can say. And what we try to do now, work with the older stock of When I say older, often the customer, they are really loyal to us, the first and the second owner of the car. But when the car is seven, eight, nine, ten years old, sometimes we miss them to an independent workshop. We try to work harder with them. And as Stefan mentioned, the interest rate is lower. Maybe some of the customers, they had a moment like wait and see. So we see a little bit better activities. As I mentioned, when we sell more new cars, we have more to do in our workshop as well.

Andreas, one thing, when we see the result in office sales, You can see, like, when we measure it, when you take it in SEC, from 2014 to this year, for the first nine months, it's actually the second best result we have. Only 2021 was higher when you talk about SEC. So it's actually, I would say, a strong result in the office age business. And we continue with efficiency and the efficiency program and try to do it step by step.

Profitability has come down, right? Even though maybe the third quarter was a decent one. Yeah.

All right.

Okay, cool. And then on the efficiency program you mentioned, could you give more flavor on this? Where are you looking to be more efficient? What does it mean for the BILJA organization?

I think it covers all aspects of the group, right? So it's to do what we do in a better way, to do it more efficient. I think we also talked a bit about this on the capital market day we had.

So it will involve most of the operations we have, but it will not involve the sort of production people in that sense. So it will be implemented fully by the second half of 2026. And there will be some one-time expenses that will be taken in the fourth quarter.

Is this mainly labor or are there other savings you think you can make?

yeah i mean the the majority refer to to people cost them but it will of course be handed in as a smart way as possible and there will be sort of taken in in a natural way to the extent possible yeah and it can be consultants in in our it subsidiary companies one It's all about minimal consultancy but also to consider when people are leaving to not make replacements and so there is different aspects of it.

And lastly on the used car business and you talk about an increased supply mainly coming from EVs in the fourth quarter. I mean what do you think are the implications and also for the residual values also considering that you most likely value your cars multiple times a year?

What we do, as you mentioned, Andreas, that is of course that we make an assessment of the expected market value for all the cars where we have a residual value. And we do that on a monthly basis. And also here we have, of course, done our very best estimate. for the market value when they are in return. And that also means that we have taken a little bit more cautiousness into that valuation we have done for those cars.

So we think we have control over the residual value for the car is coming back in the end of 2024. But all brands will, it is sort of a piece in Sweden because of the incentives three years ago from the government. So what happened in the market because all our competitors, they have residual values and the financial companies as well. So we don't know what will happen with the peak. Therefore, we talk about it.

But I think also, Andreas, Stefan, we have prepared for the situation. So we have, like as Per mentioned, really low used car stock in the Swedish market. So we are well prepared. So from the beginning of this year, we have worked to reduce the stock of used cars. And it's a quite big change from the last, how do you say, year end. So we are well prepared now when the calls are coming because the stocks in the Swedish market is low now for us.

Yeah. Cool. Sounds good. Thank you so much.

Thank you.

Thank you, Amir.

The next question comes from Mats Liss from Kepler Shuvru. Please go ahead.

Yeah. Hi. Thank you. A couple of questions. First, I'm in Sweden. Fourth quarter is normally seasonally strong there for service. And then again, you mentioned this EV, well, coming back a lot of EVs there. And should we expect this to be balanced seasonally stronger fourth quarter or is it marginal balance? impact since you have prepared for this return of Ibis.

We never give forecast but if sort of a guideline to use. So I guess it will be a pressure of fully electrical cars, but Stefan mentioned we are prepared for it and we can survive and wait a little bit. So we don't have big discounts for EV cars in quarter four. So we sell them so fast so we can wait and see in quarter one with some of the EV cars. And it's only in Sweden. But in the other end, we think we will deliver more new cars in the Norwegian market. As I mentioned, there will be the changing of taxation for the government. So there we see... some signs that it will be a good new car market in the end of quarter four. So maybe it's a sort of a balance between a bit drop in Sweden, but maybe in better in Norway, where we talk new and used cars.

Then about service then, I mean, I know, well, previous quarters and second quarter, you mentioned that, well, car owners were a bit cautious in handing in their cars to the paint and body shop. They didn't want to be too aggressive on paying for those kinds of measures. I have this sort of ease now. So you see that there is a pent up demand for paint and body shop works as well in your...

We think it's a little bit better when we look at the booking times in the different body and paint shops now. So the reason in quarter two, maybe it was too costly for the customer to pay because often they have a sort of, what you say in English, they have to pay some cash to... when they have the insurance company and some can be quite high. So we see better activities in the body and paint shop. So I guess the customer thought it was too expensive for a while, but now they have to do it. I've talked to me with so many colleagues and competitors in the car industry and nobody could say it's only this problem we have had because it was the same for all at that time. But now we sleep a bit better again. Because if you look at the motorways, it's happened a lot of accidents every day. So it must be a lot of job in our body and paint jobs.

Yes, thank you. And then you mentioned, I mean, the cars become more high tech sort of, and you also mentioned that you try to keep the cars in your service shops for longer, second and third owner there. Does this mean that you gain market share? I mean, or would you say that you are sort of keeping your position there?

It's not easy to measure in the service business because you don't have official figures for that. But what we can measure in each workshop, we can see how many cars we have into the workshop from zero to three years old and for four and six years old and older than that. And then we can see and measure in each workshop and we can see more cars all the cars into our workshop because we try to be attractive with different campaigns and so on.

When you extend these service offers, do you use brand specific spare products or could you offer

it's brand specific parts anyhow and as we mentioned before but we are like working more with also our vehicle dismantling where we renovate spare parts we are the we starting to also offers slowly now but the renovated part but it's brand specific parts with warranty So that's no change. But then we look into how can we do, how to say, have a special pricing for the older segment. So that's what we're working with.

But we don't like a multi-brand strategy in our workshop. So specific for each brand. So if you see we have a showroom for Volvo, there we repair and have service for Volvo.

Great and finally just about your truck operation now growing in importance gradually I guess but will this sort of be more of a Swedish operation or are you sort of addressing Volvo truck brands in other countries as well?

The easiest way for us is to grow in Sweden first. And when we are fully in Sweden, we maybe can go to Norway or Finland in the future. But now we integrate the business into BILIA. And we have full respect for the business because the service business is much bigger. If we say often that when we talk about the turnover is of the total turnover is 20 to 25 percent. But here is 40 percent. So it's a really big service business. So if you receive some step for growth, it will be in Sweden.

Okay, great. Thanks. Thank you.

The next question comes from Alexander Siljestrom from Pareto Securities. Please go ahead.

Good morning, guys. So a couple of follow-ups from me. Wondering if you can talk about how you see the lowered VAT exemption in Norway for EVs impacting demand in 2026.

No, I didn't follow. Could you please repeat that?

The lower tax rate.

Yeah, the VAT exemption, lower the VAT exemption in Norway, how will that impact demand in 2026?

Yeah, if you start in the past, it was free from VAT, fully electrical vehicles. A couple of years ago, the government took a decision. So today you have to pay VAT over 500,000 Norwegian crowns. And now they take a decision for next year, 300,000. So, what we think, and our managing director in Norway, say to us, it will be a race now with a lot of order intake, because you save 50,000 crowns each car from now to the end of this year. And then the government say, 1st of January, 2027, there is no incentive when we are talking VLT. So next year the customer will save 75,000 car each car. So what we think we will have a really good order intake this year and next year.

Okay, that's very helpful. And then maybe just on the cost savings program. if you can expand a bit on the on the facing do you expect some positive impact in h1 and then reaching a full run rate in h2 or how is that looking yeah there will be some some positive effects also during the the first half of the year that's right but it will be fully implemented in the second half cool and then maybe just a last one from me on on the used EVs here in Sweden. And obviously a drag on Q4, but do you expect this to be a drag into Q1 and Q2 as well? Or could it be over post Q4?

We think it will come back course also in the Q1 next year.

But you have the peak now in... Q4. And we don't have so many residual values in our books, but different, for example, BMW Financial Services and Volkswagen Financial Services, they will have a huge amount of fully electrical vehicles in the end of this year. But for us, it's limited the amount we will get back. But the peak is quarter four.

Okay. That's very clear. That's all from me. Thank you very much.

Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you for that, and thank you for listening. And if any further questions, just give us a call or send us an email. Thank you very much. Thank you. Thank you. Bye-bye.

Thank you. Bye-bye.