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Edited Transcript of MEKO.ST earnings conference call or presentation 23-Aug-19 8:00am GMT

Q2 2019 Mekonomen AB Earnings Call

Segeltorp Aug 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Mekonomen AB earnings conference call or presentation Friday, August 23, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Åsa Källenius

Mekonomen AB (publ) - CFO

* Pehr Oscarson

Mekonomen AB (publ) - President & CEO

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Conference Call Participants

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* Mats Liss

Kepler Cheuvreux, Research Division - Former Equity Research Analyst

* Nicklas Fhärm

SEB, Research Division - Country Head of Sweden Research & Analyst

* Stellan Hellström

Nordea Markets, Research Division - Senior Analyst of Retail and Consumer Goods

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Presentation

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Operator [1]

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Good morning and welcome to Mekonomen's Quarter 2 Presentation 2019. My name is Anna, and I will be your coordinator for today's conference. (Operator Instructions) I will now hand you over to CEO, Pehr Oscarson, your host for this call. Thank you.

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [2]

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Thank you. Good morning, and welcome. Today, with me, I also have Åsa Källenius, the CFO. And I will start the presentation with going directly into the first slide.

The second quarter of 2019, we could report a stable organic sales, of course, in total, we have an increase of 90% when we also include the acquisitions of FTZ and Inter-Team.

Going forward, we will continue to focus with profitable growth and cash flow. We have an ongoing cost-saving program, which we have announced earlier, but it's working according to plan, and it will give us a full effect of annually SEK 65 million at the end of Q4.

We're also acting on unprofitable business, streamlining our organization, and of course, higher prioritization of the projects. And while I'm talking about unprofitable businesses, I also mentioned in the CEO comments, in this report that we are quite happy with the development in Preqas workshop equipment company and also in some of the loss-making workshops which we had. We are still struggling with Finland, but would work on that as well in the future.

When it comes to the integration of the acquisitions, FTZ and Inter-Team, that goes according to plan. And then also, which I will come back to later, we have -- in the summer, we have made customer survey asking what the customers -- which is very interesting, but I will be back on that later on in the presentation.

So then I will hand over to Åsa to take us through some financials.

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Åsa Källenius, Mekonomen AB (publ) - CFO [3]

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Yes. Good morning, everybody. Mekonomen Group second quarter, as Pehr said, we experienced a sales growth of 90%, of course, driven by the acquisition of FTZ and Inter-Team, but we also had a stable sales in old Mekonomen Group, with an organic growth of zero, but we have also 1 working day left in the quarter.

EBIT amounted to SEK 240 million compared to SEK 173 million the same quarter last year and adjusted EBIT is up from SEK 217 million to SEK 280 million.

As Pehr wrote in his CEO comments, it's better to look at first 6 months to get a more fair view of the sales and EBIT due to the Easter effect. Easter was in Q2 this year and in Q1 last year. So if we look at the development for the first 6 months, you can see that sales is up 96%, and we had an organic growth, even though we had 1 workday left in the first 6 months.

EBIT up from SEK 233 million to SEK 410 million, and adjusted EBIT up from SEK 316 million to SEK 494 million.

So looking at the bridge for the Q2, we had an EBIT of SEK 173 million in 2018; and this year, we are up to SEK 240 million.

We added the EBIT for our acquired company, FTZ and Inter-Team, amounting to SEK 102 million in the quarter. Looking at the old Mekonomen Group and for MECA/Mekonomen, we were down with SEK 41 million, but we had 1 working day less and lower demand during Easter, with minus SEK 18 million and minus SEK 12 million, together minus SEK 30 million, and the rest is a consequence of the weak Swedish krona, giving us higher purchasing prices and also the product and customer mix in this quarter.

We had a positive effect of Cental functions with SEK 27 million, and that is, of course, that we last year had adverse effect in comparability of SEK 19 million related to the acquisition of FTZ and Inter-Team, but we also have lower cost in Cental functions compared to last year.

And then we added the amortization of FTZ and Inter-Team acquisition. So from SEK 173 million to SEK 240 million in the quarter.

So to the sales and result in the business areas. First, FTZ. FTZ is now included 10 months in the group. Net sales amount to SEK 860 million, and it's slightly lower than last year due to Easter and also to generally slow Danish market as in the rest of Europe, but we retained our market shares in Denmark. We had a very stable EBIT margin of 10% and EBIT amounted to SEK 87 million.

So the Inter-Team in the second quarter. Net sales amounted to SEK 582 million, which was a very strong sales growth driven both by higher demand within Poland and also high export to neighboring countries. In

Poland, we gained market share.

We improved EBIT, but we experienced high competition and price pressure on gross margin, also, of course, impacting EBIT margin. EBIT margin was 3% in the quarter, and Inter-Team is also included 10 months in the group.

So to MECA/Mekonomen in the second quarter. Sales amounted to SEK 1,447,000,000. We had a favorable organic sales trend in line in the market growth of 1% to 2% annually, adjusted for Easter. Total sales is up to 2%, whereas 1% is organic.

EBIT amounted to SEK 175 million compared to SEK 186 million last year, and adjusted EBIT was SEK 192 million last year, and SEK 145 million this year.

EBIT is negatively affected by less workdays, the Easter effect and customer product mix, and also increased prices due to the weak Swedish kroner.

We are, as Pehr said, acting on our unprofitable business as Preqas and our own workshops, but we still see challenging situation in Mekonomen in Finland, which we are focusing on right now.

To have a more fair view of the net sales and EBIT, you should look at first 6 months to even out the Easter effects, and then you can see we had an increase in sales of 5%, 5.2% is organic. EBIT amounted to SEK 248 million to compare to last year, SEK 258 million; adjusted EBIT, SEK 252 million compared to SEK 277 million. The EBIT, as I've said before, is affected by customer product mix and the strong -- the weak Swedish kroner against the euro. But this shows also that the cost reduction program is necessary, and we see that it's running like planned and we will see cost savings in this area later on this year.

The merging of our central warehouse in Strängnäs, Sweden is continuing as planned, and we see that we will have cost savings of SEK 50 million, with full effect on EBIT from 2020.

During this year, we have seen positive effects from the new automation regarding the warehouse efficiency and delivery quality, which will gain sales.

During this quarter, Q3, we will start to implement MECA in the warehouse in Strängnäs. We will start with some test pilots, a number of MECA branches to ensure full delivery capacity without any disturbances in the MECA ongoing operations.

And then on to Sørensen og Balchen, our smallest business area. Sales amounted to SEK 207 million compared to SEK 209 million, with 2 working days less in Norway. Net sales decreased with 1% in the quarter.

Sørensen og Balchen has the largest part of business, the consumer sales within the group and is more exposed to the retail market than the rest of the group, which is most -- up to 90% business-to-business sales, but we are making actions in Sørensen og Balchen to increase the shares to business-to-business, and it is proceeding well.

And as you can see, we could keep our EBIT and strong EBIT margin even though we experienced a small decrease in sales and EBIT amounted to SEK 38 million compared to SEK 39 million last year, and the same numbers in adjusted EBIT.

Well, I think I'll leave it there. I'll leave it over to you, Pehr.

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [4]

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Thank you. Yes, and for you who are following the presentation, we are now on Slide 12, I'll talk a little bit about the market and trends. We have -- to talk about some numbers of the different main markets where we are working in, and also how we are performing in those markets according to market shares and how also we are exposed to the business-to-consumer versus business-to-business.

The general trends in all markets is that the customer expectations is changing. We're needing more digitalization where online booking starts to be more and more asked for, and where we also see it that the car fleet itself will change in the future. We have next generation of cars, electrical, hybrid, and of course, higher share of software in cars also, which makes it the service and maintenance, maybe a little bit more where -- complex in the future.

Then looking a little bit longer perspective, we also see the impact of more connected cars, new actors selling cars, car sharing and so on, but also there will be some future consolidation and integration as well.

And as you see, we have high market shares in Denmark, Norway and Sweden, and quite small one in Poland, where we are 4%. And Poland is also very fragmented market compared to the others, with a lot of competitors in the same size.

Moving on to our footprint. I just want to -- we have a, in general, quite stable number of branches and affiliated workshops, especially in Sweden, the focus is very much into recruiting workshops for the main concepts, MECA and Mekonomen AB, where we also want to have workshops, which it's more important with the capacity in terms of number of mechanics than actually the number of workshops, but very stable development. It's every year workshops leaving and we're also recruiting. We have some increase as well, increase in Norway, Denmark, but with a bit higher increase in Poland.

When it comes to the number of branches, it's also very much stable, and this is also what we expect in the future that it might be some -- where we try to merge 2 branches or we might close down if it's unprofitable and so on. But in general, the footprint will be stable in the future as well.

Talk a little bit about group synergies. Since we almost doubled the size of the company, we have been working a lot with the purchasing synergies, and that proceeds according to plan.

Now we also have started some collaboration between the group business areas. The First Best practice area which is out is within training and technical support. It's very interesting to see that all 4 business areas have a good, let's say, are actually market leader when it comes to these areas, so we are very good but we can still be even better or they are, we will also, as the next best practice area, start the common development of future product label within the group.

I'm on Slide 15. We are launching a new branch concept in Sweden called BilXtra, and this is to attract new customer groups and broaden the target group in Sweden. Of course, the purpose is to gain market shares from the competitors. This is a -- we work in a very efficient establishment strategy, where we both can acquire small branches or do franchise cooperations, but these branches has already a wide customer base and that's what's important with it. The brand exists already in the group in Norway, where it's operated by Sørensen og Balchen, but in Sweden, BilXtra are operated by MECA Sweden.

Talking about attracting mechanics. We have -- usually, I most talk about Sweden, but now, to widen the perspective a little bit, we also have some very good collaboration with technical upper secondary schools in Poland. We have, in all the Group, and maybe as we said in Denmark, is the best one on this when it comes to kind of "Always on" advertisement to -- ongoing advertisement to attract mechanics in traditional and social media and through organizations and authorities.

Here, I would say that our strong brands in all the markets is what's really -- it's a good argument, and that also attracts mechanics, of course.

The upper secondary school in Sweden, which we have ran for a couple of years, starts its third year. We still have full classes, ample classes in first grade in Stockholm and Lund and we have students on all 3 grade levels.

We also started the mechanic training program for adults, where, together with the Swedish Public Employment Service, that the purpose is -- that is that within the 30 weeks, unemployed adults are retrained to become automotive mechanics.

Yes, as I said from the beginning, we made a very large customer survey during the summer. We have over 1,500 workshops who has been answering on this. We have generally high ratings within all the Group companies. And of course, the result of this will be used for the development and improvement of customer experience in the group.

And the most important areas for the customers is development of services and concept, its central marketing and providing new clients to the workshops and also, which is very interesting, the contact with local store. And this is also 3 areas where we -- very higher-rated and get very good responses, and I think especially the contact with the local stores, extremely important now and even in the future.

We also asked about the most important reason for joining a concept or for affiliation and the 3 top reasons is the brand, and then deliveries and range of spare parts.

This leads to some focus areas. We will continue digitalization of the booking process. We will continue to attract car owners to our affiliated workshops and of course, the development of the concepts, and we also will continue to development of private label and assortments in general.

What maybe was the most interesting from this customer survey is when we asked affiliated workshops if they -- what they think about the future within the next 5 years, and more than 50% who believes in an increase of their business, and that's very encouraging, and we have always talked about the affiliated workshop is a strategic most important customer groups, and this is, again, one good argument for that, but it's, of course, it's nice to see that there is a positive view of the future among our customers.

And then finally, focus for the rest of the year is profitability, synergies, best practice, we have the cost-saving program, and as I said, act on the unprofitable business. We will continue to develop concepts to create even better customer value, and the growth, of course, is to leverage on the initiated strategic investments, which we have, and of course, focus on organic growth. So that will be the focus for the rest of the year.

And that is the last slide, so then I will open up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question comes from Stellan Hellström from Nordea.

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Stellan Hellström, Nordea Markets, Research Division - Senior Analyst of Retail and Consumer Goods [2]

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First, I would like to ask about the initiative to address unprofitable units here, and you say that the situation has stabilized in some of the business. I guess, it was loss-making, so it sounds like [advancements] is not really profitable yet, and also the situation has worsened in Finland. Just a little curious on this, if there's any deadline here when you expect to achieve profitability in these units, and yes, that we should look forward to?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [3]

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I wouldn't say one deadline because it's several deadlines. We have made kind of turnover plans for this and it's very different. We have a workshop of equipment company and a very small garage in another view. So -- but I would say that -- and of course, it's always risk that there will pop up new units in this list. But we have a very strong commitment to act on it as fast as possible, but we don't want to make any stupid decisions either if it's -- if we see some possible future. And you say stabilize, yes, I would say that when we say stabilize, in Preqas and some of the workshops which was unprofitable, then we are in turnaround phase. We haven't yet, so it has improved a lot compared to last year, but maybe still not on the positive side, but a very good trend. The only exceptions, I would say, is Mekonomen Finland, which I also mentioned, where we still haven't seen that, but we are acting on that at that moment.

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Stellan Hellström, Nordea Markets, Research Division - Senior Analyst of Retail and Consumer Goods [4]

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Okay, good. Maybe just -- So it is fully possible that everything is continue according to your plans here and it could still be a loss in each of these units next year, for example?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [5]

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I hope not so, but that's too early to promise.

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Stellan Hellström, Nordea Markets, Research Division - Senior Analyst of Retail and Consumer Goods [6]

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All right. Then maybe a little bit further update on the cost savings initiatives. The -- you said -- I think you said before that you expect a run rate of the cost savings program to be SEK 30 million by -- for Q3. Is that still valid?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [7]

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Yes, that's the plan, and that's still valid.

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Stellan Hellström, Nordea Markets, Research Division - Senior Analyst of Retail and Consumer Goods [8]

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Are there any contributions from these initiatives at all in this quarter? And are there anything else that we could expect from maybe synergies or -- yes, in the third quarter?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [9]

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In the second quarter, we had a very small impact from the cost savings. And as we said, Q3, Q4 will be -- the output from the program.

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Stellan Hellström, Nordea Markets, Research Division - Senior Analyst of Retail and Consumer Goods [10]

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And the synergies project, is there a time when you will see -- start to see something there as well or is it just you're only committing to the very long term target? But I guess, at some point, you should start to see something a little bit earlier on?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [11]

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Yes, that's possible, but we have communicated the long-term goal, and that's what we stick to.

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Stellan Hellström, Nordea Markets, Research Division - Senior Analyst of Retail and Consumer Goods [12]

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All right, yes, maybe you can also comment on Mekonomen/MECA, a little bit further on the weak margin development. Obviously, we can see the calendar effect, but maybe you can leverage a bit on what the unfavorable customer mix is about, and also a little bit how FX is impacting you in this quarter. There has been currency movements, yes, but haven't you been able to compensate with pricing or is this a balance sheet effect?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [13]

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I'll start with the last one. When it comes to the currency effect, we are struggling with that, so we have higher prices in MECA/Mekonomen, which we couldn't move on to the next trade level. We are, all the time, monitoring the prices, and we do changes. We do increases in some of the product groups, but we also need to have a clear balance to still be competitive. So there is a margin pressure, thanks to that. If it will be room for increasements (sic) [increases], then we will of course do it further on as well. The customer, the product mix, it's quite complicated, but the Easter effect itself it also is about seasonal variations. We have, for example, we have increased sales, our fleet sales, which is strategically very good, but then with that business is very low margin, so it's quite a complex material, but it has -- where we have a stable margins, I would say, it's also back to the affiliated workshops. That's an area which is not only grow but also stable within total margins.

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Operator [14]

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The next question comes from Nicklas Fhärm from SEB Equities.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [15]

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A few questions on the quarter. I would like to start by asking you, you have previously communicated that you will have to charge your P&L with some costs related to FTZ and Inter-Team integration costs relating to potential synergy effects later on at about SEK 60 million-or-so. You took SEK 5 million in such costs in Q1, but there was nothing in this quarter. And I was just wondering why, and should we just move sort of our remaining cost assumptions thus to Q3 and Q4 instead, please?

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Åsa Källenius, Mekonomen AB (publ) - CFO [16]

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Well, altogether, we have SEK 30 million in costs for receiving synergies, and we had SEK 60 million, we had none in this quarter, but it could still see some cost reaching synergies later on, but probably not to up to SEK 60 million, but we will probably have some more in the coming quarters since we are continuously working with Easter projects, within the group now to receive synergies in other areas.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [17]

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And second question. Could you confirm the net debt based on IFRS 16 is SEK 5.956 billion, please?

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Åsa Källenius, Mekonomen AB (publ) - CFO [18]

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In the report, I know it's -- I have to look at the exact figures, but sounds like to [SEK 51.9 billion], yes. But net debt is 4,042, excluding IFRS 16 FX and the...

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [19]

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Sorry, no, no. You said SEK 5.149 million, did you?

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Åsa Källenius, Mekonomen AB (publ) - CFO [20]

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Yes.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [21]

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Yes, All Right. And my third question on the second quarter results. I would be very interested to learn about how the negative 40 bps in organic growth is actually breaking down into volume and prices, please?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [22]

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Can you repeat the question? I'm not sure if I understood you right.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [23]

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Yes, sorry. How does the organic growth rate in the quarter breakdown into volume versus price, please?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [24]

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Again, that's a little bit complicated because we have a trend with -- that spare parts, in general, are -- we're selling. Let me take an old example. A spark plug 10 years ago, costs SEK 15. Now, it costs SEK 80. But you don't change it that often again. Is that the price effect that spark plugs is more expensive? Or is it because of the product change? But that's one. And then you also have, of course, some price effect, and I would say that the volumes is quite stable. But when we talk about the market in general, increase of 1% to 2%, that is included with the price effects on all these effects, so when compared to markets, it really doesn't matter.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [25]

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So Pehr, it's helpful. But is it fair then to say that generally speaking, the flat development in markets and in your organic growth rate is basically reflecting flat volumes? So any growth is up to price and changes in mix. Is that a fair assumption?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [26]

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Yes, I would say that's a fair assumption. But again, that's also when -- that's the general market. So if you compare to other companies in Europe or authorized (inaudible), it's exactly the same trends, I would say.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [27]

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Let's look into the future a bit. Current trading. I was just wondering last year in Q3, you had a pretty decent organic growth rates. You have a bit of a difficult comparison year-on-year perhaps, and I was just wondering, could you just give us some idea of what will actually drive any organic growth in this quarter? And what are the main risks? Maybe it's economics (inaudible) et cetera. Can you please elaborate?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [28]

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We would -- we're not doing a forecast like that, and we're not disclosing, but we had a difficult summer last year. I wouldn't say that it is so much better this year, but that's one thing to look at. But again, it's for us, it's mostly to continue to be good in the market and be active on sales and so on. I don't see any general trends changing from Q2 to Q3, which will affect our business.

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Åsa Källenius, Mekonomen AB (publ) - CFO [29]

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And as we said, we are expecting the market to grow 1% to 2% organically and are expecting ourselves to follow the market at least.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [30]

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All right. And final question on -- could you -- can you give us an update on your full year CapEx guidance and possibly also tax guidance please?

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Åsa Källenius, Mekonomen AB (publ) - CFO [31]

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I don't think we've made any guidance for CapEx or tax. We will...

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [32]

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No, no, perhaps you haven't, but if you can share any thoughts on the tax rate for the full year, it will be most helpful.

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Åsa Källenius, Mekonomen AB (publ) - CFO [33]

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Yes. I think we will come back to that later on.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [34]

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Okay. And CapEx, please?

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Åsa Källenius, Mekonomen AB (publ) - CFO [35]

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I think we said before, we will have CapEx in the approximately SEK 150 million.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [36]

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And that is still -- I mean, now halfway through the year or actually more, 8 months into the year, that's still a decent investment?

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Åsa Källenius, Mekonomen AB (publ) - CFO [37]

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Probably a little bit less, but I cannot disclose anything at the moment.

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Operator [38]

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(Operator Instructions) The next question comes from Mats Liss from Kepler Cheuvreux.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [39]

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First, while looking at the report, the Polish improvement, do you expect that to be sustainable? Or is it more like a strong second quarter with the help from the export business, et cetera, that sort of made it look better? Could you say something there?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [40]

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I think we would need to go back to what we said when we did the acquisitions. We have, of course, long-term goals to increase the EBIT margin in Poland as well, and this was a good step on that journey. How fast it will take and when it will be next step, that's too early to say.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [41]

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Okay, good. Secondly, just for -- you mentioned the integration of the warehouse in [Spain] and Eskilstuna and there, you have SEK 50 million synergies there. When will this be sort of complete? Is it early 2020 or is it gradually during the year?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [42]

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I would leave that open because and it's not that I want to hide anything, but it comes -- it can come early in the year or later in the year. And why we keep that open is because we need to be extremely sure that we will not have any disturbances in the deliveries to America. We started with pilots now, if that is very successful and when the ramp-up is doing good, then yes, we can be early. If we need to make adjustments, could be in IT systems or whatever, we need to do those adjustments and then it will take longer time. So I really don't want to put a date on it. I would rather be sure that we have efficient warehouse working.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [43]

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Yes, sounds good. And then you have synergies in the acquisition, the SEK 100 million there. Could you say something about -- well, progress there. I mean you are talking about 2021 that it will be fully implemented. Have you seen some of them already or?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [44]

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As I said before, we don't comment on that. It's still a 2021 full effect. The project is working according to plan, and we haven't met on any, let's say, obstacles or something, but that's what we disclosed for the month.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [45]

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What I meant was the FTZ and the Inter-Team synergies?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [46]

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Yes, but there's still very limited effect in the P&L for the first the half-year. When it will come, again, that's will be full effect from 2021.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [47]

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Okay, great. And I also -- well you mentioned the future private-label for the whole group. Did that include all the business areas, including FTZ and Inter-Team, I guess, also, but when could we expect this to be launched?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [48]

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Well, the situation is like this but we have a private-label in -- both in Poland and Denmark. We would like to increase the number of categories. We will probably increase the number of brands or maybe consolidate a number of brands, but the biggest, let's say, good thing out of that is when we do this together, we can consolidate the purchasing for private-label mostly from Asia, and we can consolidate transport costs and so on, but have ProMeister in Sweden and Norway, we have Carwise in Sweden and Norway, we have a brand Kraft, which is in used in Poland and some other brands as well. So now we're doing a -- and put all the resources together to make something really good out of this. That's the plan.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [49]

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You will keep the brands locally and you won't sort of make a single brand?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [50]

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I don't think we'll have single brand because it has different purposes in terms of what should be premium or pricing and so on. But we will try to reduce the number of brands, but I wouldn't say that, that we will change out something. That's more of a market perspective.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [51]

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Do that include the LKQ brands also? Or is it more like Mekonomen brands only?

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [52]

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In the first phase, we're looking mostly in Mekonomen, but we also have some working groups together with LKQ, where we, of course, try to benefit if they have something which we can use as well. So which -- we're working closely together with them also.

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Operator [53]

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Ladies and gentlemen, there is no question in the queue at the moment. (Operator Instructions) And we do have another question from Nicklas Fhärm from SEB equities.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [54]

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We've discussed it over the past few quarters, and it relates to your strategy in Inter-Team in the Polish markets. So remember, we discussed the sort of the strategic choice between growth and margins, and I was just curious to understand if you've come to any new conclusions or you can give any updates on that, please.

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [55]

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No, we are working on that strategy at the moment, as we speak, but you can also see that when you look at the number of branches in Poland, we haven't increased the number of branches this first 6 months. So what we did was to make a pause in that expansion. And now we are evaluating and trying to form a new strategy for the future. If it will be more branches, less branches, that I will come back to later.

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Operator [56]

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(Operator Instructions) We do have another question from Mats Liss from Kepler Cheuvreux.

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Mats Liss, Kepler Cheuvreux, Research Division - Former Equity Research Analyst [57]

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Just a follow-up, I guess. You mentioned the third quarter last year was, well, quite tough trading conditions or whatever you indicated. Should we see that as -- well, things have sort of started out better this year? Or if you could...

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [58]

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I'm sorry, I can't comment on that.

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Operator [59]

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(Operator Instructions) There is no questions coming through. So I will hand back to you, again. Thank you.

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Pehr Oscarson, Mekonomen AB (publ) - President & CEO [60]

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All right then. Thank you, everybody, for listening, and thank you for good questions. So that will be all from us. Goodbye.

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Operator [61]

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Thank you for joining today's conference. You may now replace your handsets to end this call. Thank you.