Meko AB (publ)

Welcome to the MECO Q3 Report 2025 presentation. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. We kindly ask you to mute your phone after having asked your question. I now hand the conference over to the speakers, President and CEO Per Oscarson and CFO Krister Johansson. Please go ahead.

Thank you. Good morning and welcome to MEKO's presentation of our results for the third quarter 2025. I'm here with our CFO Kristi Johansson and together we will walk you through our performance and current position. As you know the first half of this year was marked by slower growth and lower earnings Car owners were cautious following a prolonged economic downturn and unpredictable global environment. This also led to intense competition in Q2. This tougher competition continued into the third quarter. We achieved organic growth of 1% during the period compared with 2% in the same quarter last year. This also means that we moved from negative growth the first half year of 2025 to showing a positive sales trend in Q3. The competitive situation also put pressure on prices, which in turn affected our profitability. Our adjusted EBIT margin improved compared to the second quarter, but decreased compared with the same quarter 2024. And we are responding to this development. Among other things, we continue in the rollout of our new central warehouses, where staffing levels will gradually be reduced. We also continue the cost saving measures announced this summer. So let's take a look at that on the next slide. As you know, we have been working with the initiative Building a Stronger Mirko for some time. This initiative aims to improve our long term probability. By the end of Q2, we had achieved EBIT improvements of 200 million SEK within these initiatives. During the summer, we launched additional cost savings, adding another 100 million SEK through staff reductions. A significant part of these reductions has now been implemented, and during the quarter, another 2% of the workforce has been given notice of termination. However, as always, it will take some time before the effect becomes visible in the P&L. All in all, this means that at the end of Q4, we will have reduced the number of full-time employees by more than 500 compared to Q3 last year. We are also progressing in realizing synergies from our acquisition of Elite in Poland. Four team branches have now been closed as part of the optimization plan. Another key part is improving efficiency through our new central warehouses in connection with the commission of these facilities. We have vacated four out of the six facilities. Let's take a closer look where we stand with these projects moving on to the next slide. The new high tech warehouses are now operational and together they represent a significant upgrade to our logistics capacity. In Norway, Denmark and Finland, we are now handling goods with a high degree of automation. These hubs complemented the already automated warehouse in Sweden and together create a logistics network of very high international standard. The upgrades will naturally lead to several efficiency gains, including the reduction in the number of full-time employees. And as mentioned, we still bear some temporary costs, such as double rents and staffing, but we will gradually start to see the positive effects. And as it's usually the case with major warehouse automation projects, calibration and fine-tuning take time before the full potential is needed. This improved logistics capacity was also a key topic at our Capital Markets Day in September, where we presented several other important initiatives as well. So let's move to slide five. One of the initiatives is an acceleration within exclusive brands. Among other things, we are launching the brand Every Part Matters in seven new markets, meeting the demand from more price sensitive customers. We're also expanding our e-commerce business. The webshop Mexter is launching in Finland and then later in Denmark, making this business present across the Nordics. In addition, we will grow our commercial vehicles business to establish long-term leading position in this segment. These are only examples on how we're focused on increasing growth and improved profitability. I will hand over to Kristin in just a minute, but first I would like to highlight some interesting findings from our newly released mobility barometer on slide six. Even in these turbulent times, the car remains number one for all. As a matter of fact, more people are using the car every day compared to last year. These are a couple of many trends and findings in the new edition of our barometer, the largest study on mobility in the Nordics. And this is the fourth year in a row we're making this report, and I recommend reading it. That said, I hand over to Krister, who will elaborate on the third quarter, starting with our leverage, which has been in focus lately.

Thanks, Per. So leverage is always an area of interest, but in this quarter more so than usual. And the reason is lower profitability, which has coincided with a period of heavy investment. This has put significant pressure on leverage, which increased from 2.7 in Q2 to 3.6 in Q3. Now of this increase, no part related to an increase in net debt. And the increase is instead driven by two other factors of roughly equal size. To start, we see a lower underlying EBITDA gradually working its way into the rolling 12-month average used in the leverage calculation. Secondly, since we report leverage based on unadjusted EBITDA, items affecting comparability also matter. And as mentioned in the Q2 call, Q3 2024 included positive items affecting comparability And that quarter is now replaced, if you will, by a new one with negative items affecting comparability. So this effect alone corresponded to a 0.6 increase in leverage. Now, 3.6 is high, both in relation to our targets and in relation to our financing agreements. And against that background, we have during Q3 agreed with our banks on certain amendments to the terms. And we have also, with the final steps being taken here in October, secured a one-time waiver from the bondholders through a so-called written procedure. And this change, which received strong support by the bondholders is important because it enables us to execute the second tranche of the dividend decided upon by the AGM back in May, 2025. So that payment, of circa 110 million SEK will be done here in a few days. Looking at leverage in the longer perspective on page eight, one can see this has varied a bit throughout the years. We've seen periods of elevated leverage followed by phases of recovery. And it's important here to reiterate that we remain committed to our leverage target. And getting back to the two to three range is a priority. We're taking actions for that to happen. One area of focus is working capital. And although this helped in Q3, one should not expect much support in the near term, as the fourth quarter is often seasonally weak. Another area is investment, seen on the next page, page nine. So in Q3, we see the investment rate coming down as we said it would. And this applies to CapEx as illustrated in the graph. But the slowdown also applies to other investments such as M&A, which we've not done any, and to the ERP project where we are now entering a less intense phase. So with those initial comments related to leverage, let's move on to profitability on page 10. Here, we saw a slight uptick from Q2, but we're still operating at levels far below last year. So on a positive note, organic growth improved from minus 5% in Q2 to plus 1% in Q3, and cash flow from operations remained healthy. On the more challenging side, Competition, as Per mentioned, remained ever-present, which affected gross margins, as I will come back to on a later page. Project-related activity was still intense in Q3, and this can be seen in the elevated level of items affecting comparability, which include temporary staff involved in moving goods to the new warehouses. Some of this carries over into Q4. where we have now consolidated Søren Sønderbergens warehouse operations into the new facility outside Oslo. And it's perhaps worth here reiterating how infrequent these kind of costs are. So our old facilities in Denmark and Norway had all been in operation for on average 20 years. And we look at these new investments with similar horizons, so not a very frequent event for sure. Moving to gross margin on page 11, we've already commented on competition, which was particularly noticeable in Denmark and Poland. It's also so that growing in a lower margin market like Poland dilutes the consolidated level. And this country makes effect amount to circa 1% percentage point. And this effect should be less noticeable going into Q4 because now the comparables fully reflect the acquisition of Elite. Moving on and comparing adjusted EBIT with the year earlier, two areas stand out. So firstly, Sweden and Norway. Here, it's a combination of disappointing top line and higher fixed cost relating to the automated warehouse in Norway. Secondly, Poland and here it's price pressure, which has been strong and the integration of Elite, which is not yet complete. If we instead compare to Q2 on the next page, the picture looks a little bit different. So what is noticeable here is instead an improvement in Finland. It is, one should admit, from a low level, but still worth commenting. So let's start the business area by business area review with Finland on page 14. We are, as you can see, back in positive EBIT. Organic growth of 6% helps, even though that has come with a different mix. Operationally, there are some good signs. And to exemplify, order lines per worked hour in the central warehouse is up 50% within 2025. And in fact, the actions that we've taken in Finland, which include automation and cost cutting, it is basically the same medicine as elsewhere. But the difference is that we've come further in Finland because we started earlier. So let's move to Denmark on page 15. Here we saw organic growth of 1%. Although measured in Swedish SEAC, revenue was still down 2%. I already mentioned competition, which has led to lower gross margin in Q3. Looking ahead into Q4, the focus is to get into smooth operation in the central warehouse following the move. and we are not quite there yet. Moving to Poland and the Baltics on page 16. On the positive side, we see organic growth of 9%, but this has, however, come at lower margins. Operationally speaking, it's worth making a distinction between Poland and the Baltics in 2025. So in the Baltics, we have been operating in a steady state, generating decent profitability. In Poland, on the other hand, it's been everything but steady state. We've implemented several structural changes, which are indeed good for the long term, but there's no denying that they have affected operations in 2025. In Sweden, Norway, on page 17, top-line development remained muted. EBIT margins still exceed 10%. But clearly, we are zoomed in on actions to improve traction in the market. In Norway, the new central warehouse is operational, and in Q3, there have been A lot of focus on getting ready for Sørensen & Balskén to move in, which happened here in the beginning of Q4. This leads over to the last business area on page 18. Sørensen & Balskén, another strong quarter delivering adjusted EBIT of 44 million SEK. Q3 is also the last quarter where Sørensen & Balskén operate with its own independent warehouse. And the Q4 will be a transition quarter towards a model where we instead split the cost of the new central warehouse across the two business areas in Norway. There are no new costs for the group, but for the business areas, they will carry a larger part of the cost, affecting comparability with earlier quarters. So with that, I would like to point out that we are also now vacating quite a few of the buildings that we have used. The period of double rent is coming to an end. And in total, if you count the external locations, we are now out of five out of eight, counting also external locations. So still a little bit to go, but almost there. So with that, I'd like to hand back over to Pat.