Meko AB (publ) (MEKO) Earnings Call Transcript & Summary

[Presentation]

Hi, everyone. Very welcome today to MEKO's Capital Markets Day 2023. Today, we're going to go into detail about MEKO's updated strategy, market and trends and also updated financial targets that was released this morning. And also the transition that we just saw, the electrification is going on, on full speed. So where is MEKO in that process? Again, very welcome, everyone here and also everyone watching this online. Okay. I say also very welcome to you, Pehr Oscarson, the CEO of MEKO.

Thank you. Thank you.

I must start by just asking you kind of a broad question, but I think it's relevant. And a lot of people probably wonder. There's a lot of turbulence in the world right now. High inflation rates, high interest rates. How is MEKO handling the situation?

But I think we handle it very well. And when we look back to last year, maybe the last quarter, we can see that we continue to grow. So we have an organic growth we keep and maintain the market shares, actually increasing [indiscernible] shares in some of the markets. We had a strong cash flow. And also during that time, also been able to invest for the future and be ready for the transition that's coming.

I think it's almost -- exactly 2 years ago since you have the last Capital Markets Day. At that time, you launched a new strategy. It might be a bit tricky to summarize 2 years in a few sentences, but if you try what has happened since then?

A lot has happened really. And what we talked about at that time, it was the strategy which we will come back to later today, slightly updated. But we also have talked about M&A and geographical growth and that was something which we managed to do a good acquisition last year when we acquired Koivunen with operations in Finland and Baltics. So that was something which we -- which is very important for us in order to strengthen the lead which we have in Northern Europe. But then also during these times, as I said before, we have taken a lot of good steps towards the new future I'd to say.

Okay. And as a part of your strategy, you said last time that sustainability was an integral part of everything that you do. Has this changed in any way? Or is it the same?

I think we have increased our efforts, definitely. But first, I would say that MEKO is all about sustainability because we keep the cars on the road. And very often, if it's somewhat modern car, it's better to prolong the life of an existing car instead of producing a new one. So that's one area where we really do a good impact. And then we have also increased our efforts in general, especially around the environment. So we have joined the Science Based Targets initiatives. We have a new sustainability manager, which you will hear later. So we're doing a lot.

Yes, we will talk about the Science Based Targets later on as well. So this morning, you announced adjusted financial targets. Why have you made these adjustments?

It was important to have targets which better reflect in how we will create value for the shareholders. So it's more connected to the strategy and also gives a better view on how we see the future going on.

Okay. We will go into detail about the targets later with the CFO, Åsa Källenius. But just to have a look on the screen there, increasing the lead into the future of mobility. That is kind of a statement with attitude. What does it mean?

But it means that we -- I mean we have a strong position, but we need to strengthen that position. We are the market leader in Northern Europe which we want to continue to be and increase that leadership. It's also to take care about the timeless business model, which we have with a stable demand and by that also utilizing all about the logistics and the network which we have. And then third, of course, to be not only prepared but to lead the transformation into the green transformation, so to say.

Okay, that's it then. So increasing the lead into the future of mobility. What are we going to talk about? So we have a look at the agenda.

Yes. And just to mention who will be joining us, we will have Petra Bendelin, who is the Director of Business Development; Åsa Källenius, CFO; Tobias Narvinger, our COO; and also Louise Wohrne, who is the new Head of Sustainability. But we will start a little bit more where I will explain a little bit more where we are at the moment, then Petra will go more into the market and trends. Åsa will give us an update from the financial road map and [indiscernible] deep dive into the financial targets. And then we -- Petra is back for the strategy update and then we will talk about better operations, and that's how we create efficiency and synergies and that will be done by Tobias. And then we have [ 2 blocks ] with sustainability, both how we lead transformation and also [indiscernible] on what we're actually doing in this area.

Excellent. And then we have the Q&A.

Yes.

Exactly. Okay. Perfect. So thank you very much. So a lot of things to go through. So why don't you start with telling us where MEKO is today?

Yes. I mean MEKO's mission that is to enable mobility. And that we will do regardless technology, and we'll do it in good times and in bad times. There is a stable demand. We have a proven business model by supplying the workshop with spare parts, services and concepts, all that under well-known brands. And as I said, we are clearly #1 in Northern Europe, and there's very few that can compete with our logistics and geographical footprint. And...

Okay. So let's have a look here what is -- you have expanded -- last year, you said you acquired Koivunen and also entered the Baltic countries.

Yes. And we are now in 8 markets -- geographical markets with 70 million people and 35 million cars on the roads. We're operating with 600 branches. Branch for us that is typically a local wholesaler. Sometimes it's also connected to a retail store that sells parts and accessories direct to consumers. And then very important, the 20,000 workshops that are customers to us and especially the 4,000-plus workshops that are affiliated with any of our well-known brands in the market.

Okay. So you talk a lot about availability, what is the benefit with all the brands and all the availability?

It's all about the car owner because we need to have different brands in order to find the right concept for the right kind of a car owner. I mean car owner could be a company, a private person, it could be a leasing company, rental company and so on. So different brands, different locations. It's important to be very close to the customers. And also, the availability for us is very much to support the workshop during the day or often overnight to be able to actually service and repair the car during the same day because we, as a car owner, we don't want to keep it there for the night. So that's why the local availability through these 600 branches is extremely important in this industry.

So how would you define MEKO? Is it more like a business to business or business to consumer? You talk about the car owners. So how do you...

But it is a business to business, 90%. We have approximately 10% of the revenue, which are, so to say, where we sell directly to private persons, retail kind of business that's only done in Sweden and Norway and through some of the brands. But again, 90% is business to business where the customer is a workshop, but we view that with a very strong end customer insight. So we do a lot of research and work to actually understand the car owners' need because that's how we then develop the concept for the workshops in order to be -- so they can be successful on that local market.

Okay. So we have expanded the last couple of years, 5 years or many more, yes, but looking from 2018, you acquired Inter-Team; and now last year, Koivunen. What is the point of expanding geographically? What do you want to achieve?

There's several reasons. First of all, I will mention the purchasing power. We can do a lot of synergies because we are a big buyer. Here, we also work together with the LKQ which is the largest shareholder of MEKO. So when we negotiate with the suppliers, we're very strong in that. So purchasing power is important, where it's also to be able to share synergies and resources for development could be, for example, digital solutions, online booking systems and so on that we can utilize in several markets. And by that been able to put the resources into it and also share the cost of it, of course. Then also, it's also a matter of sharing the risk in somewhat because there is quite big difference in these geographical markets. We know, for example, that Norway is very early in the electrical car. We know that Poland and the Baltics has very different economies, still growing economies. So being in several markets also [ spread ] the risk.

Okay. So we have a look at the distribution [ on ] net sales. If we can have the next slide, please. We can see here that it's quite evenly distributed. But in this market, also quite tough competition. How do you handle this?

Yes. It is, I would say, the main competition or how we like to compete is with having the strong concepts, so that the workshop chooses to be with our concepts because we can deliver the right training and the right support of parts, the right tools and equipment and so on. But it's also about what I mentioned [ about ] the local availability to always have the parts which the workshop needs that would be the [ true ] most important way of compete.

Okay. So you compete in the markets, you grow the present business, but you also, as we see you invest for the future of mobility, creating new revenue stream. How important is that for MEKO at the moment?

It is important because there is a transition going on. Even if it goes slow, again, we have 35 million cars until all those are completely electric or what they will be in the future, where I don't think that battery, electrical end solution. That will probably be more development in the future. But to widen our offers, services and look a little bit on the side, but it's also important in order to be on more places. And I think that we have also -- we have brands, we have logistics. We have a lot of things which can utilize on doing other things as well.

Okay. So I know that you get this question from time to time, but I will still ask it. There are fewer spare parts in electric car compared to a traditional car. Isn't that going to affect the business in the long run?

It will affect the business on those parts, which don't exist on the EV. So that's right. But it's still a little bit early to say because, I mean, the average car of combustion engine cars is 11, 12 years, and we have very few electric cars that have lived so long. But of course, there is other components in electrical cars, but we also see other things that needs to be replaced earlier and more expensive in EVs. There is a very expensive jobs on brakes, steering components, tires and so on. So there will be another mix. And that's why it's so important for us to develop our assortment all the time to adjust for that. Looking for -- on the life span of electrical car, we believe that it will be approximately the same aftermarket value.

Okay. The same -- okay. Thank you very much. Very interesting part. So to know the truth about the future or to get a glance on the future, it's important to know what is happening here now. So I say thank you to you, Pehr, and welcome Petra Bendelin. You will talk more about markets and trends. Okay. Great. So what can we say in general about the trends that are affecting MEKO at the moment?

MEKO has a stable business model and the need for mobility is timeless. But of course, we need to monitor the trends going on out there, and we see both challenges and opportunities, of course. I would say, in general, that we are affected very much of the same trends that are going on out there. We see a shift from buying products and onetime services to buying subscription-based services. We have a high speed in technology development, combined with the increased focus on circularity. And we also see a shift in the consumer behavior. They are demanding convenience, availability, transparency in a whole new way.

Okay. So quite substantial changes. Are there any of these trends that are -- stands out in a way in terms of challenges or opportunities?

I would say, sustainability because new legislation is expected, and we also see increasing reporting demands that requires investments from us and new ways of working, but there is also possibilities within this shift that we see. We note that 65% states that they rather buy from a company that is seen as sustainable; and even more, 70% states that they are willing to pay more. So we could do some good business here.

Interesting. So let's have a closer look, shall we, at the marketing trends and how they affect MEKO?

Yes, absolutely. We have a stable model, and that is true also when the time is changing around us. We need to move, and we want to move. We developed in line when we see that the underlying market growth within the automotive industry is shifting towards electric vehicles. And also when the mobility behavior is changing, we see new ways of ownership and buying and how you choose to move yourself. We also note that the competition is increasing. And also from new directions, we have the [indiscernible] digital entrants coming in, often competing with low price. We have both the OEMs and suppliers are striving for control over the customers. And we have an ongoing consolidation in the market as well.

Okay. So these are changes. And how do MEKO change? Do you have an example of that?

Absolutely. We need to change when the market is changing, of course. So we're developing new services, new kind of products because the consumers, they expect the same from us as they do from other industries with -- when they're ordering food or taxi or online health care, and we need to be prepared for that change. And then we also have responsible sourcing, cybersecurity and the Science Based Target that we have committed to. That's all an example of how we are meeting the rising global challenges out there. And also with the sustainable mindset, we can find new products based on, for example, circularity.

Okay. So to get to know what the trends are you also, I understand, have produced this product, quite an impressive, I must say, report. Can you tell us more about it, it's called The Mobility Barometer?

Yes, we are yearly conducting this survey. It's in the Nordics. We ask more than 4,000 respondents what they think about mobility and how they act and what decision they are making regarding mobility. So that gives us quite some good insights of the automotive and the mobility.

Okay. So let's have a look at a few of those insights, so.

Absolutely. And here to present, I'll give you 4 colleagues. We have [indiscernible] [Presentation]

Okay. So that was a few highlights from The Mobility Barometer. So we will take the car to the future according to this survey, anyway. How many cars will there be? Is it possible to predict?

It is possible to predict and the future will tell if we -- if it's true or not. We have 2 countries, as an example here. We have Norway, who has the fastest growing pace within electric cars in the world. And we have Denmark. Denmark is quite similar to Sweden, a bit ahead of Finland and the other countries. We are expecting a growth on the entire car park of approximately 1% to 3%. And that's in line with the historic growth that we have seen. And looking at electric cars, specifically, we see a growing number, both in absolute numbers and also share of the car park. And looking at Norway, we have almost 20% growth yearly. That's from a high base, and they are expected to reach almost 60% looking at 2030. And in Denmark, it's going faster, around 35% growth each year, and Denmark will reach around 20% in 2030.

Okay. So that is a clear trend then. But what will this mean for MEKO?

Well, exactly how we will be affected, it's too early to predict. We talked about it already. An electric car contains fewer parts. But on the other hand, they are expected to live longer. We also note that the parts -- components are getting more expensive. And I would say that we have never experienced our car ownership becoming cheaper. But nevertheless, we are prepared. We are well ahead with the competence, available parts, et cetera, to these kind of cars.

Okay. So to wrap it up, everything within markets and trends, what is the key conclusion?

I would say that car is still king, that we learned and the need for mobility is timeless. And we are ready, we're well prepared. We know the trends, and we're ready to take advantage of them.

Well prepared. Okay. Thank you a lot for that, Petra. So I think it's time -- thank you. It's time to have a closer look at the financial targets that was updated this morning. So I turn to you, Åsa Källenius, the CFO of MEKO. Welcome. Okay. So this morning, we learned that the targets were updated. Why have you made these adjustments?

As Pehr already touched upon, we do the update in the long-term financial target because they are based on historic numbers, and we do think they better reflect the strategy we have going forward, but it's all about creating shareholder value.

Okay. So we see the targets here on the screen. And just to clarify, this target is changed when it comes to EBIT. You previously had a target of reaching an adjusted EBIT margin of 10%. Now it's an annual adjusted EBIT growth of at least 10%. So what is the reasoning behind this level?

Well, MEKO is a growing company. We have grown organically by smaller acquisition and also by entering new markets with larger acquisitions. And our larger acquisitions have initially diluted our adjusted EBIT margins and set a new starting level for the margin. But as you also know, we have a proven record -- track record in improving adjusted EBIT. And after some time, increase adjusted EBIT again. And that makes us confident that we will reach the target.

So from an outside perspective, how important is the EBIT margin for MEKO now? Is it as important as before?

It is as important as before, perhaps even more important, and we are constantly working to improve EBIT also. And if you notice, we have a sales growth target of increasing 5% and an adjusted EBIT growth of at least 10%, and that means adjusted EBIT margin will also increase.

Okay. Just to have a quick look at the dividend policy, it's also updated. Now the target is to make -- pay dividends corresponded to 50% of profit after tax. Before it was more than that. It was at least 50%. So what will this mean in the future?

We have the same ambition to pay dividend also in the future. The update of this dividend policy is more -- to be more precise what the shareholders can expect going forward. So it's not at least anymore, it's 50%. But of course, it's always a review of the Board and the AGM, what the level will be.

Okay. Excellent. So shall we have a deeper dive into this target, Ã…sa, if you can walk through them?

Yes, looking at sales growth, we kept the target to grow 5% in average annually as a combination of organic growth and smaller acquisitions. But this time, we state that this is excluding selective M&As. So this part is new, excluding M&As.

Okay. If we have a look in the rearview mirror, how have you performed when it comes to sales growth historically?

We have a very long and proven history of growth, looking at the last 12 years, we grew 12.6%. And looking back 5 years, we grew even faster with 19.2%. These growth rates, they include selective M&As: Sørensen og Balchen, 2011; MECA, 2012; Inter-Team, as you said, 2018; and also our newest member in the family, Koivunen in 2022. But over the past 5 years, we've grown organically by 3%. And that's also in line with the market growth. And this is the same pace we are expected also going forward.

Okay. So you have grown around 3% [ annually ] looking back? How will you manage to grow more than 5%?

Well, to start with, we have a very strong position in our market. And based on that and also the strategy we have -- the growth strategy we have going forward will mean we will take market share on top of the pace the market is growing, 3%. And top of that is strategic initiative we have and we would also have full effect from the Koivunen acquisition in 2022 in 6 months, January to June, this year. So this makes us confident that in 5 years' time, we will reach a net sales of SEK 19 billion.

Okay. Reaching a net sales of SEK 19 billion. So let's continue to the target of profitability as we touched upon. It is, as I said, annual adjusted EBIT growth of at least 10%. So looking back also in this regard, what do we see?

Well, we see, looking back 5 years, we can see that we have grown adjusted EBIT by an average 9.5% annually. And 2022 adjusted EBIT was somewhat a little bit lower after a historic high year of 2021. This was our record year ever in the MEKO history.

Yes. But looking at this, I mean, the new target -- the updated target implies an even stronger growth than what you have actually performed last 5 years. So how do you -- what is your view on that? How will you manage this?

Well, based on the historic performance, we have a strong start. And then add on that, the activities we have linked to our 4 cornerstones in our strategy, we are confident that in 5 years' time, we will reach SEK 1.6 billion in adjusted EBIT.

Okay. So let's have a look at the net debt target. That is unchanged and you should be in the range of 2 to 3?

Yes.

So if we look at the current level in Q4, it was, I think, 3.36. So you were above the level. So how are you going to get back within the range?

Well, our business model enables a very strong cash flow generation. And we have proved to be able to handle temporary higher leverage, high net debt. Looking at 2018, here after the acquisition of Inter-Team and FTZ, we were on very high leverage number, 6.44 when closing 2018. But our strong cash flow took us down, it took 2 years to be back on track and to be on target again. The target is to be between 2 and 3x. So I think we have proven ourselves that we can take a temporary high leverage and work it down. But unless you are right, we are temporary on a high level, and we has as a target. And we have now the ambition to be within target again when we close this year, 2023.

Okay. So then we will see the curve go down in a few months' time.

Yes.

Okay. Excellent. So you mentioned cash flow that is important for you. How have you performed in the past if we have a look at that as well?

Well, here, you see the last 3 years, we have been able to generate SEK 5.2 billion from our operations. This has been used to deleverage, pay down debt, debt related to the acquisition of FTZ and Inter-Team and also to finance the acquisition of Koivunen in 2022. It also enabled us to take some higher working capital related to the higher inventory levels we've seen in 2022. And it has also enabled us to pay dividend in the spring of 2022. And even left us with a little bit more cash in bank than when we started the 3-year period.

Okay. So let's have a look at the dividend policy as we touched upon earlier. And as you just mentioned, can you elaborate a bit on this?

Yes, we have a strong history of paying dividend for many years. It was SEK 7, and then we made the acquisition [ a right issue ] in 2018. But the Board has stated it stays firm with a policy to pay dividend also in the future. But of course, it will review the financial position, the market, acquisition possibilities, investments, et cetera. And also, we have the -- possible to do buyback of shares. So it's all about creation of value for the shareholders, and the Board has stated this year, they recommend to the AGM to pay a dividend of SEK 3.30 into installments to be paid in May and in November.

Okay. Great. So to wrap this up, also, what are the main conclusions as you see it?

Well, as I see it, we have a very strong, proven history of profitable growth. We have a resilient business model, and we generate strong cash flow. And backed on this, we are confident that we will have a net sales of SEK 19 billion and an adjusted EBIT of SEK 1.6 billion in the end of this 5-year period and get within the leverage target by the end of this year.

Okay. That was a clarification. Thank you very much also for that. So now we know how the financial road map looks like a little bit more. So it's -- to get a better understanding of how this is going to be achieved, let's have a look at the strategy. So Petra. Welcome again.

Thank you.

So it was exactly almost, as we said 2 years ago since you launched the new strategy. How have you managed to deliver on it, would you say?

I would say that we have done well. We are executing on our strategy in line with the plan that we have.

Okay. So any news since you launched it?

Well, the strategy is the same. It's a solid strategy that we have trust in. And we have a clear ambition what we're aiming for. But of course, we are reviewing our strategy [ yearly ] just to make sure that we're on the right track. And we have our 4 focus areas. We have better operations. That's about unbeatable availability and efficiency. We have better workshops. That's best-in-class workshop concepts, both for the workshops and the car owners. And better mobility is focusing on car owner, car drivers to give them a good customer journey. And then we have a sustainable growth that is future-proofing our business.

Okay. So 4 areas. Should we have a look in each of these areas, what you have achieved?

Absolutely. Starting with the better operation, and this is a broad area. Here, we are covering supply chain assortment, availability, MEKO as an employer and also data and IT structure. But looking at some of our accomplishments and what we are doing, we are constantly optimizing our network. That means that we close, we merge and we're opening new branches. As communicated in Q4, we recently closed and merged 9 branches in Norway. We are extracting synergies from our acquisition and Finland in focus here that we're on the right track to extract the SEK 40 million that we have communicated before. And that also include the merge of the 2 warehouses of Mekonomen and Koivunen in Finland. We launched a talent program contributing to suppliers with the future leaders within MEKO. And we had also committed to set Science Based Target that Louise will come back to and talk more about later.

Okay. So better operations is an important contributor to EBIT and Tobias Narvinger, the COO, will talk a little bit more in detail about that in a few minutes. But I also know that you have quite some interesting development within private label.

Yes.

Can you give us some insights?

Yes, I'll be happy to. We got it here. Private label is a product sold under our own brand that we own. It gives us a unique assortment and put us in the driver seat for development and positioning of these products. And we have worked with private label quite some years. Stable growth. Looking at the last 5 years, we have over 12% growth. And last year, we had sales of almost SEK 1.4 billion. So this is a really important area for us.

SEK 1.4 million, quite a lot, I must say. So let's go on to the next area shall we?

Yes. And that's...

[ Better ] workshops.

Better workshops. And it is extremely important for us, of course, to have loyal workshop that are purchasing from us. And one key component to get those workshop loyals is our pace of concept development. A few examples of what we have done within concept is we have a service called profitable and efficient workshop. It's a service -- consultant service where we help the workshop [ are ] becoming more efficient, also more profitable. And at the same time, they are increasing their purchases towards us. We have launched a glass concept for our affiliated workshop, and that based on new agreements with insurance companies. And we have launched the market's best business system for workshop in Norway and Sweden. So all of this is contributing that we are increasing the number of affiliated workshops and also increasing their purchasing loyalty.

Okay. So I remember last time on the Capital Markets Day, you promised 1,500 new workshops having the competence to deal with electric cars. So -- as you call it E+, that is your definition, kind of a standard. So what are we today? How many?

There has been an amazing focus and dedication from the organization as well as the workshops. So we actually delivered before deadline and have a lot more than 1,500 workshops today. We have 6,000 people in our network with the competence to handle electric car. So we're very well positioned. And education with the new technology is one thing that always has been super important for us to keep up with the development. But we also have trainings within other areas such as legislation, business, leadership in order to be well prepared. So we lead the company a competence development within our own -- our affiliated and also other workshops.

Other workshops. So you educate the competitors as well?

Yes, we do. And for us, that's about taking responsibility for the industry. We had a lack of mechanics already, and we're in the middle of a technology shift. So by us contributing to the industry, we also assure that there will be an affordable choice for the car owner also in the future.

Okay. Interesting. So the third area is better mobility. Let's have a look at that?

Better mobility. And this is about the car owner, the car driver, we're pinpointing both companies and private persons. And it's strongly linked to better workshop area because we also know that another loyalty increasing activity from the workshop is us bringing customers to the workshop. So that's what the area better mobility is all about. We have a strong fleet offer to the business-to-business customers that had a growth of around 30% last year and with a total revenue of SEK 300 million. We launched service agreement during our last Capital Market Day, and we actually sold the first one during the presentation here on stage. We see a strong growth also within this area, 70% compared to last year. And we have also launched a super convenient service for the car owner, mobile service. You no longer have to go to the workshop. The workshop comes to you instead. And we are doing that within our own brands, but also through our acquisition in Omnicar service. And the fourth one, not on this slide, but on the next slide is digital bookings. We have our own booking solution. It's present on multiple web pages and under several brands. It's a white label solution. And we have been working with this a long time, and we were a pioneer when it comes to digital bookings and also bookings with a fixed price that creates a lot of trust from the car owner. You know what the price will be when you're leaving your car to the workshop. And this was actually launched back in 2016 under the brand Mekonomen at that point.

Okay. So are people using the service? Or are they still calling the workshop as they used to?

It's a mix. We see, of course, some shifting from the traditional ways and moving to the online channels. But as much as 30% are brand new customers to us that have never visited us before. And we also note through this online availability that we meet the newer car owners and, of course, also them with electric cars, and it's a super popular service to use. We had almost a quarter of a million booking going through this solution last year. And the average value of a bookings through this channel is around SEK 3,000. We have a lot of [ tire shops ] as well, lowering that figure a little bit, but SEK 3,000 makes a total revenue of more than SEK 700 million.

SEK 700 million. That's quite a lot from this booking service. So let's go to sustainable growth.

Yes. Sustainable growth is about future proofing our business, and we are doing that by expanding to new markets and areas. We are also looking for new customer groups or powertrain adjacent areas. And looking at this, of course, the largest achievement did last year was the acquisition we did in Finland, and it strengthened our position as the market leader in Northern Europe. We grew rapidly in Finland at that point and also entered 3 new markets with Estonia, Latvia and Lithuania. And we are also having a smaller acquisition that we are constantly doing. And they, of course, bring new revenue and also gives us the possibility to extract synergies. A good example is [ Avant ] that we acquired in February. It's a -- they have a timeless assortment of car accessories. They gave us access to -- they gave us exclusive rights to some of these product lines and new customer groups that we hadn't before. And the best thing is that this customer group also have an interest in our existing assortment.

So what is the timeless assortment?

Well, timeless assortment is something that will fit also an electric car or whatever powertrain we've got.

So you have launched MECA heavy vehicles in Finland already.

Yes, we have. And that's the next area. We have -- this is an area with huge potential. Looking at the heavy vehicles, they are a few years behind how we know the passenger car side and the light vehicles, and that's an area that we know by heart. So it's the same business logic, but there is a lot of work to be done both as a wholesaler and with concept. And we launched in Finland already. They had sales within heavy vehicles, but they needed a new brand for their concept. So it's a good example of how we can extract synergies and act quite quickly. During a few months, we implemented MECA heavy trucks in Finland. So now we're present in Sweden, Norway, Finland, and we have a plan for Denmark. And that creates a Nordic concept for heavy vehicles, which also is a very strong base for us to work with business-to-business customers also within this area.

Okay. Let's see where that line is going in the future, it's quite steep already. So thank you very much, Petra, for that. I think we will have short break, grab a coffee or some refreshments, and we'll back in just a bit. [Break]

Okay. Welcome back, everyone. So I just got a question about this barometer. This is it. And t's lying outside if you want to have a look and also maybe take a copy if you want to. So afterwards, it's outside. And also a reminder, if we can get the code on the screen, please, the Mentimeter code, if you want to -- there it is, if you want to ask questions digitally before the Q&A session, just go in there, scan the code or use that code, and we'll try to answer them. Okay. Excellent. So next on this -- in the agenda is to talk more about operational excellence, better operations within MEKO. And to discuss that, we have our COO, Tobias Narvinger, on stage. Please welcome. Okay. Tobias, MEKO has done a lot within operational excellence. I think a lot of us know that. But is there any more potential that you see it?

Yes, I think that really is. I mean, we have almost doubled in size here. So we are a really different company to what was just 5 years ago here. And that opens up, of course, to do a lot of things to generate more sales growth, but they also take out cost and efficiency in this new environment and across the markets here.

Okay. Can you give some examples, please? I think there are a lot of...

Yes. Yes. I mean, different areas will be, for example, here within purchasing, as we talked about, but also very much to create outstanding logistics, the widest product offering and also then how to leverage on this #1 position here. So if I may start here with purchasing.

Please do.

So I mean, we have very solid history here of the select acquisitions we've done. We generated a lot of savings directly. Normally, those purchasing synergies comes about a year after acquisitions here. So in 2010, we had the first acquisition of Sørensen. The year after, we realized some synergies. Thereafter, we had the acquisition of MECA, and we manage them to have big savings for the whole group thereafter. Then was a little bit quiet for a couple of years. And then we have this, which is almost like a merger actually when we acquired FTZ and Inter-Team, and then after also came the synergies. And that's why we also can say so confident now here that we are really sure also on the acquisitions here of Koivunen that we will generate the promised savings here. We know it takes some time. So full effect will come here in 2024. With that said, we see initially very early in the acquisition phase that we then get the purchasing synergies but also long term, there is, of course, more potential here to optimize the supplier selections. It's a lot more things also sit down and talk about how the supply is performing and measuring on delivery performance, quality and so on. And not the least during the pandemic, you can see who's really good supplier. So there's more optimizations to do here -- as well here.

More to do. And you measure this and you evaluate this more now than you used to, or is that a change?

No, but I would also say that being in 8 markets that gives a complete view on suppliers and seeing the total view here. So it's more of the same but on a bigger scale here.

Bigger scale. Okay. So let's move on to logistics.

Yes. And here, we actually see our logistic network. We try to put in all our branches. It wasn't really even possible here.

So one dot is 5 branches.

Yes, yes. So that kind of gives you a view how present we are in every market. I think actually in Sweden, it's on a McDonald level. It's likely to find a Mekonomen branch as to find a McDonald's. And of course, that together with our central warehouses, which you can see in all the markets here and also some regional warehouses. We have a tremendous network and, of course, optimizing this all time. We can do a lot on last mile distribution. We can do cooperating between the branches. We can also, of course, automate a lot of operations here. We've done an optimization project in Strängnäs in Sweden. We're looking into doing that in other markets. And you can also understand that we can, of course, make sure that we have some slow movers not in every location instead we keep them in one. And not talking about inbound flows as well, of course, as combining our flows into the company also gives us a lot of opportunity to optimize them. So there are very many different ways here to improve. I mentioned optimization, and that's one way we're going forward now also in Denmark, where we are reusing the experience we had in Sweden on automating our central warehouse. So that's one opportunity also to show on best practice, so to say.

Okay. So when will you start building the warehouse in Denmark?

It's actually being done here. So maybe we can jump on slide here. We are now making the ground preparations for this warehouse. And the background in Denmark is that we're very dislocated in several buildings. So combining this into one location and also, of course, putting in optimization, we'll really have higher efficiency and output and also secure the growth here. So this is a 3D model what it would look like, just looking on the ground preparation is not that exciting here. But we really hear in the planning mode here.

Okay. So I think some might wonder, can you quantify this in any way? I mean, is it possible to estimate what this will mean in cost savings or efficiencies and so on?

We have, of course, such a big project internal business cases on what we'll deliver, but we have not externally communicated anything. On -- I think with more saying this one of many activities which we have to take out future efficiencies, and also secure that. We are very confident in the future here that we will need space and availability to deliver parts in the future as well here. And I think this is just one part of this optimization. There is also, of course, other opportunities here.

Okay. So let's come back to efficiency savings, but can you develop the other area, it was logistics optimization?

Yes. And again, going back then to talking about huge network we are having here, we are actually doing optimizations all the time. I would say, especially in Sweden and Norway, we are not that consolidating, but showing also just availability in one branch to the next line one is also an opportunity we haven't fully utilized so far and are working on. And we have seen, especially in Denmark, what it means of having the market leader position and the best distribution all the time. So we believe that we can do more continuously here also in Scandinavia. In Poland, we have actually, since the acquisition, built 3 regional warehouses and that is also to the same theme, having on-the-day delivery. So I think Pehr explained that earlier, but it's really about having the parts on the day in many cases because the car is on the lift, and when you need something, you need to part available. So availability is really king in our industry. And it also means that if we are not having one part showing it, you might lose the whole order because then instead, the workshop will turn to someone else to buy the whole workshop order. And that's why it's so important all the time to have the availability here.

Okay. So availability, but still you -- as you mentioned, you closed down and merged 9 branches in Norway in Q4. Can you tell us a little bit more why and the reasoning behind that?

Yes. Here, we actually decided to do this on a bigger scale just doing it once. And I would say it's not like we're checking out. We really see that we're merging and instead, again, creating better customer services here by having bigger branches. Again, coming back to Sweden and Denmark, we are doing this continuously all the time. So we are evaluating are we in the right place? Can we do more by having a bigger branch instead? So it's a normal process securing that we all the time are in right location here.

Okay. So another area mostly focused is ensuring the best product offering, I think you mentioned there. So what are you doing there?

Yes. And we talked about this earlier as well. I mean, what we really have done in the last years is to secure that we now have the best offering on electrical vehicles. So thereby having the parts for everything which is needed. We are also even more actively now working with suppliers, demanding them to develop parts for us. We are even, in some cases, going directly to manufacturers in Asia and so on to develop parts, so just building the position that we are ready for electrical vehicles coming into our workshops. A third topic here is, again, talked about earlier as well, consolidation of private labels. The more volume we have, of course, the more we can take in our own private label, meaning we can develop ranges and thereby also securing our profitability because we're taking out basically one chain in the distribution going directly to manufacturers instead. So that's a huge opportunity also for us. And then the last, but not the least at all, is to have more sustainable products. This is something we're putting more and more focus on. I would like to state that already today, we are actually reducing remanufactured part for starters and alternators, brake [indiscernible] and so on. So in some sense, we are really in circular economy already today. I can also say that in big product like brake discs and so on, it's [indiscernible] better used. So we are really part of the circular economy, but is something we, of course, will develop even further here in the coming years as well.

Okay. So let's have a closer look at the #3 there, private label, what are the upsides as you see it? And to start with, what are we seeing here?

So this is actually all our brands, which we have today. And as you can see, there's a lot of them. What we have had is a great success with ProMeister, which is a brand here used in Sweden, Norway. We have now also introduced it a couple of years back, now in Denmark. And what we then see is, of course, that we can build kind of a premium brand with all the volumes we're having. Maybe even more important, now also coming into Poland and also Baltic states here, they are more focused in many cases on costs and want to have a cost-efficient alternative and maybe a little bit lower spec. With our volumes now, there's also possibilities for us here to develop a price side. So we can make even more and scale, which no one else really our competitors can do here. And I think this is what is it's all about. Nobody can really do the same here as we have a #1 position here in the region.

Okay. Talking about scale, so this is a substantial part of sales?

It is. And a lot of the revenue comes from private labels. Also, Petra showed the graph earlier. It's also very good for us because we build the loyalty to our brands. If it's a good product, the product will be loyal to MEKO. We can also say that once we introduce in many cases, the ProMeister on one references, we take almost like 80% market share. So it's a very well-perceived brand once we introduce new products here.

80% sounds like a good figure. So if you can -- we were talking a lot about MEKO having the leading position in the Northern Europe. What can you do more to utilize on the size?

Yes. And I think if we show this one again, of course, seeing the geography here, one can understand, if we very early can see what's happening in one market, reuse that another one is an opportunity for us very early to catch up trends. We can, of course, if you connect all these warehouses instead of having 100,000 items in Finland, in Sweden, in Norway and Denmark, if we can connect that together, we can, of course, show a much wider offering to the customers. So connecting ourselves in this network is very important, that gives us a higher availability towards the customers. And also, it's very obvious here that we can help also for the smaller countries here now in the Baltic states, they are now connecting down to Poland. And that is a huge lift towards what the earliest could get parts from Finland. So it's really about being all around the Baltic Sea here is helping us and really, again, giving us the position, which is very hard for someone else to copy from us here.

Okay. So you've talked upon quite many opportunities and the possibilities here. So I do have to ask, is it possible to quantify this in any way? What will this mean if you look at the financials?

No. I mean, it's very hard to quantify. I think what we want to send across here is that there's a lot of different opportunities which has opened up being this big in this region. How you weigh all this together is very hard to say and also is happening in the market. But I think the signal for us is that we are very confident on the financial targets we launched. We have a lot of activities. We have warehouses in Denmark coming up, giving efficiencies. We have activities in Sweden, Norway and so on. So we are confident that we will go in the right direction. We have also said that, I mean, internally, we are constantly monitoring also the OpEx levels in compared to sales, and we are confident that we will take out 0.5 percentage unit on that one every year. It's also a very tough year this year, of course, but this is a long-term goal, and that's why we're having a lot of activities. And thereby, we see that we will, for sure, deliver on these kind of projects.

Okay. Thank you very much, Tobias. Thank you for that. So now we know where MEKO stands. And we have looked at markets and trends, financial targets and also transformation. But it's -- I think it's time to dig a bit deeper into the future of a more sustainable mobility. So please Petra, Louise and Pehr, come up on stage. So let me start by saying welcome to you, Louise Wohrne. You're the new Head of Sustainability at MEKO. Welcome.

Thank you.

Okay. So it's a shift that we've touched upon. Let me start by asking you, Pehr, how do you describe this shift? And MEKO's position in this shift?

We are and we will be playing an important role in this shift in mobility as we had talked about, and there's a lot of places where we can really do big change through our different offerings. And yes, best-in-class, being first and so on.

Okay. Best thing, being first. Petra, you mentioned that sustainability is one of the clearest trends when we talk about markets and trends. So if we look back and see what MEKO have done in recent years, what have MEKO been doing.

We have been very successful getting the basics right. We have control over our environmental footprint. We have secured responsible sourcing. We have safe and inclusive workplace. And as we have talked about already, the education, we have a high degree of competence.

Okay. So Louise, you're quite new. As I said, you had the same position at Billerud, which is in pulp and paper industry. If you compare the sustainability work within that industry with the aftermarket industry, what do you see?

I would say that the pulp and paper industry has focused on sustainability more in the past, but I think there's a lot of potential in the aftermarket industry. And I think that MEKO is a leader, and now we're accelerating that work.

So why do you think that the aftermarket industry not has been as in the forefront, so to speak, as other industries?

I think some other industries have had more regulatory demands on them and also higher customer demands, which has forced them to focus more on those questions.

Okay. So the theme today as we've touched upon is leading the transformation part of the theme in a way. So Petra, that is what MEKO is stating. Is that a bold statement?

It's a bold statement, but I would say it's true. No, but we are getting acknowledged in the industry for the work that we're doing. We're quite often hosting colleagues from the industry. They would like to visit our workshop, learn more about our concept. And next week, Pehr and I were going to Brussels to speak at the conference there sort of talking about our pole position within this area.

Okay. So why have you this position? What is the key to success, so to speak?

Yes. I would like to point out 5 areas within this. Education is key here, and we've been working with this for a very long time. And as I said before, over 6,000 people in our network know how to handle electric cars. And then we have the assortment also very important to have in place. We have secured that we have coverage for the 30 most common electric brands that are operating in our markets. And we have tools, equipment, diagnostic that also crucial to have in place in order to handle new technology. And one example how we have developed here is that we hosted an event together with a partner to sort of push our suppliers a little bit within the diagnostic area. Because they thought they had everything in place. It turned out during our test that they didn't. But now we joined forces. We're on track there as well. And that could be said about these first 3 that I just mentioned that could also be summarized, don't wait just to do it, because we have -- we are forced to develop our own standards, our own trainings, our own products within private label and so on in order to be in pole position. And the last 2 that we've got take advantage of our existing strength. We have strong concepts in the market, and that's a good foundation to make change happen. We can implement what's needed into our concepts to be prepared. And we had a strong geographical coverage and the strong availability also as an offer. And that makes us a good partner for newcomers. And that's what embrace the change is all about. We see that there is a shift in the traditional market, and especially when it comes to buying cars or new ownership models. And these newcomers, new car producers entering our market, they don't have the network, and they need someone to take care of the aftermarket, and we are their perfect partner within that area.

Okay. You mention private label, again, I must say, but you said it as you're forced to produce products within private label. Can you elaborate a bit on that?

Yes. When looking at the bigger suppliers that usually supply us with products, they have a European or sometimes even global perspective on development. And looking at our markets, we're way ahead of Europe and globally when it comes electrification. So it gives us a very good position to actually take the lead on development and take the position and deliver spare parts with a new technology to the market.

Okay. Pehr, you have had quite a career within the industry for some time. And it's not the first time the industry is going through a shift. What is your perspective on this shift?

Yes, that's true. I've been through quite many of these technologies. And it's -- every time, it's new challenges, but there is some similarities each time that we need to educate the workshops. The workshops need to have maybe new equipment and so on. Maybe what can mostly be most difficult is also to explain for the car owners that you actually can go to an independent workshop even though it's new technology and so on. What I have experienced, sometimes in the past is that the independent aftermarket lose some market shares towards the OEs during the first couple of years in the technology shifts. I don't believe that will happen this time because we are doing so many good things. And in many ways, are leading this transformation even further away than the OE. So this is a great opportunity to actually change that way actually to gain market shares this time.

Okay. Louise, from your perspective, if you have a look at the shift, what do you see from a sustainability perspective?

I would say what we're already seeing that business and sustainability are becoming even more linked than before. I would say that it gives the opportunity to really be a more sustainable company in actual performance. And we will also see more directive on the decision in this area. For example, the Corporate Sustainability Reporting Directive.

Okay. Thanks. Pehr, Petra mentioned that you have new players coming to the Nordic region and they don't have any network and they want to be present here. So you have made some agreements with some of these new players. Can you tell us a little bit about that.

Yes, we have announced this with VOYAH, Chinese. We also have collaborated with Fisker, American car, and we have some more of these dialogues also. And it's like Petra said, that's what makes us very interesting for them is that we have a very good network. We have the locations. We have the capabilities and the competence, and we also have this geographic footprint which is very interesting for them.

Okay. So let's have a brief look at what is happening in Norway now with your agreement with VOYAH and Electric Way, which is the company that is a distributor of VOYAH in Norway. Our colleague, Oskar [indiscernible] went to Norway and met with Torje Sulland, the CEO of Electric Way.

Norway is one of the most developed countries in the world when it comes to electric vehicles. And the amount of EVs keep rising. In 2022, MEKO and Electric Way entered a partnership regarding training, spare parts and workshop services. Electric Way has the exclusive right to sell and distribute vehicles from the brand VOYAH to the Scandinavian market. And here I am at the VOYAH Experience Center in Oslo to meet Torje Sulland, CEO of Electric Way and talk about a strong collaboration. [Presentation]

Okay. That was a glance from Norway and Electric Way. And one example of how MEKO is finding new businesses as the transformation continues to as more sustainable mobility. So Louise, you mentioned earlier, there's more to do when it comes to MEKO's footprint environmentally. Can you elaborate a bit on that?

We want to increase our efforts. And we have a broad range of activities ongoing. For example, we have a new sustainability strategy, which is based on a recent materiality assessment, which is completely in line with and also supporting our overall business strategy. So we start from why, which is to enable safe and sustainable mobility for all. And we do that by setting the conditions for better operations, by enabling better workshops and making better mobility to happen.

So these are 3 out of 4 strategic areas?

Yes. We've chosen the ones where we see that we have the greatest impact when it comes to sustainability and also a quite clear value chain connection.

Okay. So what is MEKO going to do?

Well, to set conditions for better operations, we're going to have climate policy in place. We will be an attractive employer, so that we will attract, retain and also activate employees. We shall develop sustainable and circular products as Tobias touched upon and which I will come back to as well. And we will, of course, ensure that our sourcing is carried out in a responsible way. To enable better workshops, we will reduce our environmental impact. We will lead competence development across our own affiliated and other workshops, as Petra has already talked about today. And we will, of course, make sure that we have equal, inclusive and safe workplaces. I mean we have a gender-equal management team today, but we are in a male-dominated industry, and we need to attract more women and people of other backgrounds to ensure that we stay competitive as well. And to make better mobility happen, we'll ensure service to all low-emission customers. We will innovate for safe, sustainable and circular car ownership. And I mean, we're already doing that today because we're taking care of the cars that are already on the market as well as adapting to the new emerging technology.

Okay. So you've touched upon it, Pehr touched upon it, it's about MEKO sustainability, keeping good cars, so to speak, on the road. But is there an age limit where it's not good for the environment anymore that it's better to buy a new car? And what is that age? Just curious.

Well, the simple answer is yes. The more complex one is that it depends, and it's not so easy to answer. Of course, it depends on the powertrain that you have. There a study that came out about a year or 2 ago from [indiscernible] and Chalmers that indicated that it was after 11 years that you need to shift, but it depends on the powertrain. So if you switch from gasoline to hybrid, then it will probably be lower than 11 years. If you switch from gasoline to gasoline, then that fuel efficiency that you probably have from the newer car might eaten up by the environmental impact of producing a new one. So this is an area that we need to look more into, I would say. And the last one here is to nudge customers towards sustainable solutions and products. From this mobility parameter that has already been mentioned, we found out that many car owners don't know how they should have a sustainable car ownership. And there, of course, we have an opportunity to offer them our products and services so that we help them doing that.

Okay. So we touch upon circularity. But how do you define circularity?

If we move back, we first need to look at what is linear economy, which is what we have today. So today we usually take something, we produce something, we use it and then we dispose of it. When we are talking about the circular economy, it is about using resources in a better way and closing that loop. And MEKO is contributing to circular economy today by repairing those resources, cars, put on the market, but also through the products that we put on the market and sell. And as Tobias has already mentioned, we're already using, we're offering parts that are remanufactured or using recycled content as a primary resource. But I think, it's not very known. So we should communicate that more than we do today, and there's also more that we can do in that area.

Okay. So how will you proceed?

I'm convinced that there's more that we can do in this area, so that we ensure that the products that we sell are perhaps remanufactured or recycled or using recycled content. So we're also going to talk a little bit more about climate. So global warming is one of the biggest challenges that Mankind is facing today. It's still possible to reach The Paris Agreement and showing that global warming stays under 1.5 degrees, but it's very urgent. So besides contributing to this transition that society is undertaking today by, for example, training our own employees, but also others when it comes to electric cars competence. We also need to act within our own operations. And that's why we have committed to setting science-based targets within the science-based targets initiative.

Okay. So maybe not all are the familiar with the details about science-based targets. So what is it?

It's an initiative that drives climate action in the private sector and where companies send in their targets to get them approved to ensure that they are in line with the latest climate science and also with The Paris Agreement. And we already have some KPIs, when it comes to climate. For example, we have a target that all the electricity in premises where we have the electricity contract should be renewable by 2025. But we're also seeing that we also have a new KPI that we should shift our own vehicles for our own company cars and delivery vehicles into more low-carbon technologies such as hybrids or electric or whatever other low-carbon technology that may evolve by 2030. So committing to science-based targets is truly a milestone in Meko sustainability work because we will -- we are stepping up our ambitions when it comes to sustainability. And now we have about 2 years on us to actually set the targets and to get them approved by the science-based targets initiative, and that work starts now.

Okay. Very interesting. Thank you, Louise.

Thank you.

And -- but I think we have gone through the agenda, we have gone through the agenda. So now it's time maybe prior to summarize. Yes, what are your takeaways?

The main takeaways from this session is that we are stronger than ever. We have strengthened our position in the last couple of years and we will continue to do so. We have good opportunities in increasing efficiency. We have a very solid foundation to create value. And we now have also communicated financial targets, which very much support the strategy going forward. And last, but definitely not least, we are investing for the future. We are in the front seat in the transition, and we are having the kind of pull positions and by that also extremely and very inspired to continue this journey.

Okay. Excellent. Thank you. So it's time for the Q&A session. So please come up [indiscernible].

Okay. Thank you. We have a microphone somewhere. So if you please raise your hands if you have any questions and we will answer them.

Mats Liss, a couple questions. First, I mean you mentioned the growth you see in private label. And I guess it's something that will probably affect your profitability going forward. And on the same theme, if you could say something about -- well, you take a larger risks in the private label say, I guess, more responsibility for you as a company. Could you say something how you handle those risks?

Yes. Maybe if I start to, I think that's again one way of securing rather the margins we're having today. I think in a more competitive landscape. This is a very good way of securing that we keep what we have today rather than maybe even asking for higher gross margins than we have. I think the second one, of course, there will be a huge responsibility, but we also have today resources in Asia. So we have a local sourcing office, and we also see that we make sure that we follow and monitor that we are having right factories. We are also, of course, seeing with the whole global economy here, whether we ought to place more in Europe. We do have some of our factories also actually already today in Europe as well. So there might be shifts on where we are producing here, but we monitor this all the time and of course, need to follow also global discussion here in the world. I don't know if that's an answer to the question.

Yes. Great. And secondly, about the financial targets. I mean, you -- well, what was the biggest challenge to reach the 10% earnings growth that you expect? Is it sort of internal company-specific issues? Or is it more related to the market?

Well, it's based on where we stand today and the initiative we have in the 4 cornerstones in our strategy. The thing, Tobias, you mentioned some of them. We have efficiency gain within the company. We have synergies to take out. We have cost reduction to do. So it's, I would say, it's in our hands to deliver on this target. And as I think Pehr mentioned, well, we can look around us right now, it's challenging at the moment, but this is a long-term plan. And I'm very convinced we will reach that target. But of course, it will take effort, but we will get there. I'm sure we will get there.

And then about the gearing, well, outlook and guidance you gave there that you expect to be within the 2 to 3 target towards the end of the year is sort of a back-end target? I mean, will you reach that during the second half? Or is it sort of something that will appear earlier?

Not earlier, but we will reach that second half, and we didn't mention that yet today, but we are also in the process looking into our real estate that we acquired when we acquired Koivunen. We communicated that when we communicated the acquisition that it's a large part of the acquisition was also real estate in Finland and the Baltics, and we are in the process looking into selling some part of that. And depending on that, it could be earlier, but I can't promise before Q4 this year.

Okay. Let me just had a question also digitally here. So about the net -- debt target. With current leverage, how far do you need to come down, considering new selective M&As?

Well, our plan is to get down to between 2% and 3% in the end of this year, and then it's really selective M&As. So it's really depending on what will be on the market, but we won't do any M&As before we are back on track.

Okay. That was a clear message. Okay. Do you have any more questions, Mats? Back in the end.

Andreas Lundberg, SEB. On the M&A thing there, you talk about selective M&As versus M&As included in your growth target, what's the difference? Or how do you define a selective M&A?

Larger acquisitions, new markets and I mean what we do in the organic, that's more on, let's say, call it, like add-on acquisitions. But what is not selective M&A that is typically buying a workshop or a branch or a company like Avant in Denmark that are kind of adding some products and services and so on. And with selective M&As that is typically in the team after Setcoin and that kind of company sort of growth.

If I look at your previous core business, i.e., Mekonomen, Sweden and Norway and MECA, perhaps generating a margin of some 14%, I think, in 2015-ish. Last year, MECA/Mekonomen generated below 7%. I know it's a different business mix, and you have included education costs, et cetera. But also, I guess, you have benefited from synergies also in those areas. Could you explain the bridge there, what has happened in the last 6, 7, 8 years?

I would say that it's quite far away in history, but the 14% that was very extraordinary at that time also. And when we look at the competitor, we are still, I would say, by far, the most profitable company. So I think that there was a couple of years that we shouldn't compare towards. But then more of an average between and the possibilities that, that lays around. And as we said today, to be able to grow actually a bit more than the revenue that will increase the margin year-by-year going forward.

So the industry profitability is much lower today than 10 years ago?

Sorry, I didn't...

The industry profitability is much lower today than 8, 10 years ago?

Yes, yes.

Okay. Great. Any more questions? Okay, on the front row here, please?

Stefan Stjernholm, Nordea. Last year, it was much talk about supply chain challenges. Would you say that has normalized now? And if so, is there a potential to take down inventory?

It has normalized a little bit. It's still challenging, but it's much better than it was last year. If it's on that, if it's safe enough to reduce inventory, I wouldn't say and that also decisions that should be made in each market how they see the challenges because a little bit different suppliers and different products in the different markets. But it starts -- it's better than it was last year.

And sourcing cost, how they develop? Is there a need for further price increases or...

I think we have -- Tobias to complement -- but I think we have a little both up and down. Now some of the transports cost has actually gone down in the last period, but then we still have some inflation in some of the products.

Yes. Yes, I can only add. I mean we're monitoring something that's looking better here, but of course, there are other things increasing still in an inflation economy. So I think we need constantly monitoring where we are in the market, and that's actually something we're doing already today, making sure that we're having the right pricing in the market. With that said, of course, some of the raw materials should come more back than it has early as well. So hopefully, that will balance well, but we'll monitor the situation.

And I can just add that the very strong increase in inventory levels we saw during 2022, we do not expect but there are still perhaps need to keep a higher security level. And we also have now the high inflation increase in the inventories, of course. So -- but we don't see what we saw in 2022.

And another topic nowadays is, of course, interest rates. Can you please give an update on your interest structure on your loans?

Well, we normally not -- do not talk about exactly how it looks like, even if many of you know because you're from the banks. But we have -- we have the bond, and we have the long-term loans. We have some hedging. When it comes to interest, I feel safe. We will also reach that covenant towards the banks. So we are keeping track on it.

Any more questions for the audience? Okay. We have some questions that have been sent in here. So one is regarding the competition, as we talked about. What is your view on the online spare parts competition? And what are your plans for e-commerce going forward? So Åsa, maybe you.

Absolutely. We are very much an online company already today. Looking at our sales, more than 90% is going through the online channels. But looking at the pure new comers' digital first entrants within e-com, they have a different setup and a different price structure connected to that as well. And we have historically put the cost for the service level that we offer. It's regarding availability, many deliveries during the days, easy return handling and all that, that is sort of illustrated on the price of the part. So we, of course, need to develop to be easier to compare to the newcomers and of course, also develop our offer to become in some areas, more like pure e-com player and take up that competition as well.

Okay. I hope that was an answer that was accepted. So another question related to heavy vehicles as you talked about, Petra. What are the margins in this segment compared to the business related to light vehicles? And what is the potential going forward?

We say there is a very large potential because we have only just started this journey and have very, very low market share in each market even though the growth is significant. Looking at the margins, you could argue that they are a little bit lower. But on the other hand, we are succeeding within heavy vehicles using our existing facilities. We use the same branches, the same warehouses, et cetera. So we're sort of adding on new assortment, being able to handle that in a very efficient way. And if we do not increase our cost structure, everything that we put on top is seen on the bottom line.

Okay. Any more questions from the audience? Otherwise, I think I have one here. I don't know if we have answered this, so...

We have one more.

One more. Okay. Great.

One of you mentioned glass as an opportunity. What's the status today? What's your go-to-market strategy? And how is the equipment you have -- don't have mechanics possibility to do this kind of business?

May I take that one as well? It varies between the different markets on how we are working with glass because the structure connected to the insurance company also varies between the different markets. So there is a different business logic. Looking at Denmark, we are very well positioned, and the glass work is often done in ordinary workshop like the ones we've got. So looking at the products group, we have almost the same market share within glass as we have in other spare parts categories. The one thing I mentioned here is starting in Sweden now where we have some new agreements. And we have also added the equipment and also the training to be positioned. And as some of you may have seen before, we had a tour within training, a big giant truck that visited 24 -- 27, I think it was, places in Sweden educating within electric vehicles. We are doing the same thing now with glass to increase the competence out there. So we're sort of handling it a little bit different between the markets, but we're definitely on it.

Okay. We have another question about supply chain. Supply chain disruption took down new vehicle sales. How do you view this effect on Meko?

[indiscernible] We -- I mean, we -- as I said, 35 million cars in our markets. And the average age, I would say, 10 to 13 years of age, also in different markets. So what happened when the new car sales goes up and down, that gives an impact on the age of the car fleet of those 35 million which is also increasing year by year, as Petra showed. So -- yes, low new car sales shouldn't be bad for us. But again, it's very few percentage of the change when we look at the total. So we normally, we say that even if it's a very good year or a bad year that doesn't reflect us that much, but it shouldn't be bad at least.

Okay. It shouldn't be bad. This might be bad, I don't know. The EU is discussing a ban on you as fossil fuel cars from 2035. How will this affect Meko?

I think it's connected to what Pehr just said. And what we have talked about, we see a shift in the market, and it's moving towards electric vehicles, and we're very well prepared. And that decision is quite natural because looking at the European car fleet, the average age of a car is approximately 15 years, [indiscernible] to 2050. It needs to start at the latest 2035.

And maybe even more pioneering in Norway, of course, we will have enormous experience if this is happening in Mainland Europe and so on. So it's also actually an opportunity that we can bring on our experience and we already adopt the markets here.

I hope that was answer to the question. Any more questions from the audience? Otherwise, I think we are quite done here. So thank you very much. I don't know if you want to have any concluding remarks, Pehr?

No, I think we just did. Good questions as always. An interesting discussion. And thank you very much for attending this day and see you in the future. Yes.

So thank you very much for all of you that has been here and also say thank you to the ones that have been watching this online. Thank you.