2018 was one of the most important years ever in Mekonomen’s nearly 50-year history. After the acquisitions of Danish FTZ and Polish Inter-Team, Mekonomen Group is in many ways a new company. We have doubled in size which creates significant advantages for us and, in extension, for our affiliated workshops and their customers.
The acquisitions of FTZ in Denmark and Inter-Team in Poland influenced a large part of 2018. But it is now when the acquisitions are done the most important work begins. Although FTZ and Inter-Team will continue to work under their respective brands, we have a lot to learn from each other. I am convinced that the exchange of knowledge will go both ways. The implementation of the new companies in the Group’s purchasing collaboration began immediately after the acquisition and is proceeding according to plan. The collaboration and experiential exchanges are initiated continuously with great commitment and high priority focus by the Group’s managers and employees.
Rapid market development requires local management
Our industry is in the midst of a major transition. Forces come from several directions. Electrification and digitalisation are two strong well-known forces that drive the market. However, people’s view of transportation and their relationship to the car are also affecting what our market will look like in the next few years.
Our organisation will also be developed to effectively govern the new, larger, Mekonomen Group. At the same time that we cooperate in the areas in which we benefit most from the Group’s overall size, our businesses are also differentiated and active in markets with different conditions. To ensure an offering at the forefront that meets the trends in the market and the customers’ needs, the decisions must be made quickly and close to the customers. Since we now are represented in countries that have made varying progress in their development, the need for local management is extra important.
Our core markets being in different phases and more geographically spread also reduces risk in our business. This applies both to the risk of weaker market development in individual countries and the weather, where geographical spread is an advantage. In 2018, for example, we were negatively impacted by the long, hot summer and mild autumn we had in the Nordic region.
I look forward to further developing the decentralised management that was implemented in the Group before the acquisitions of the new companies FTZ and Inter-Team.
2018 was a challenging year
Besides the weather being negative for our business, 2018 began with a challenge when we were struck by a strong drop in sales of DAB (Digital Audio Broadcasting) in Norway. Excluding FTZ and Inter-Team, and newly acquired smaller businesses in Sweden and
Norway, sales only increased marginally during the year. In turn, profitability was negatively impacted by acquisition costs and the weak SEK’s effect on purchasing costs. There is still a lot to work on in the Group that involves streamlining of operations, which is high on my and management’s agenda for the next few years. The work on a shared central warehouse for MECA and Mekonomen in Sweden is continuing according to plan and, as previously announced, is expected to provide annual savings of SEK 50 M beginning in 2020.
A changing market
The traditional automotive aftermarket for spare parts has been impacted by low growth, which has been a challenge in our market-leading operations in the Nordic region. As a compensatory effect in the future, I believe the high new car sales that we have had for a number of years will have a positive effect. I am convinced that with our size and strong position we will be among the future winners in our industry. An industry that is experiencing a fundamental change in many ways. The clearest trends are the digitalisation and electrification of the automotive fleet.
We have come far in terms of digitalisation. Both in terms of the industry and within Mekonomen Group. The large majority of Mekonomen Group’s sales take place digitally, especially sales to workshops and other companies.
Mekonomen is far ahead in terms of electrification as well. We have a major advantage from having been active in Norway for a long time, since Norway is the country with the most electric cars per capita worldwide. Now we can take this knowledge with us to our other markets. With our size we have the necessary strength to invest in expertise and equipment needed to position ourselves in the electric car aftermarket, in line with the growth in each market.
More vehicle technicians are needed – fast!
As a leading player in the industry, we have a responsibility to ensure that our business is sustainable. Sustainability is an integral part of our business, where we contribute to the global sustainability goals and comply with the principles of the UN Global Compact that we signed in 2013.
The absolutely greatest challenge for our industry, as I have pointed out many times, is the shortage of skilled automotive technicians. Together with the other players in the industry, we see a need for more then 6,000 employees in the next few years.
There is extensive interest in our own ProMeister Automotive upper-secondary school programme and high admission grades are needed to get in. I hope that the interest in the profession – which today is a varied profession with a high technical content – will continue to grow so that the industry’s needs can be met. Having skilled automotive technicians in our workshops is a prerequisite to be competitive and provide a good customer experience.
Recruiting, training and skills development of automotive technicians is strategic and an area where we can contribute to society by creating jobs and contributing to the industry’s continued development. Sustainability must be an integrated part of our business where we contribute to the global sustainability goals and comply with the principles of the UN Global Compact, which we signed in 2013.
Acquisitions make us stronger in the market
We see several advantages in being a larger company. Not least, it makes us stronger on the purchasing side. Our industry involves large volumes, and naturally larger volumes create a better negotiating position. We also strengthen our position as a leading player in the Nordic region, while taking the step out in Europe.
As a stronger and more competitive player, it is now time to advance our position and further improve the offering to our customers. In 2019, we will focus on developing our concepts with improved range and service offering to all customer groups. We are ready to meet the challenges of the future, focus on profitability in all business areas and take shares in our markets.
I would like to express my thanks to our shareholders for entrusting us to carry out the large acquisition in 2018 and thanks to all colleagues for the commitment and good work during the year. I also want to welcome all of our new colleagues in Denmark and Poland to the Group and I am looking forward to shared successes in the coming years.
President and CEO
CEO´s comments in Annual Report 2018