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2016-11-11

Mekonomen: Interim report January - September 2016

SUMMARY OF THE THIRD QUARTER, 1 July - 30 September 2016 1)

? Revenue increased 2 per cent to SEK 1,432 M (1,405). Adjusted for
currency effects and calculated on the comparable number of workdays,
revenue rose 2 per cent. Sales in comparable units rose 2 per cent.

? EBITA amounted to SEK 154 M (196) and the EBITA margin amounted to
11 per cent (14).

? EBIT amounted to SEK 125 M (168) and the EBIT margin was 9 per cent
(12). EBIT was adversely affected by non-recurring effects of SEK 18
M (0), of which SEK 13 M (0) pertain to personnel-related
non-recurring costs for persons who have been part of group
management, mainly the former CEO in an amount of SEK 11 M (0).

? The gross margin amounted to 54.5 per cent (55.8).
? Earnings per share, before and after dilution, amounted to SEK 2.20
(3.01).

? Cash flow from operating activities amounted to SEK 78 M (155), of
which discontinued operations amounted to SEK -3 M (-18).

? Net debt at the end of the period amounted to SEK 1,620 M (1,760),
compared with SEK 1,626 M at year-end.

? After the end of the period Mekonomen Group has signed an agreement
to divest the Danish business to T.Hansen Gruppen / AD Danmark. The
transaction will be completed on 28 December 2016 and will result in
a negative non-recurring EBIT effect of SEK 25 M in the fourth
quarter 2016.

1) During the first quarter of 2015, the last two stores in Denmark
were discontinued and the Danish store operation is presented in the
2015-2016 interim reports according to the rules on discontinued
operations in IFRS 5. The Danish store operation was previously
included in the MECA segment. All amounts pertain to continuing
operations except cash flow and net debt.

CEO's comments

A result weighed down by Mekonomen Sweden and non-recurring effects

As acting President and CEO of Mekonomen Group since October 6, I note
that we have a weak result in the third quarter. Together with the
management team, I have taken measures aimed at reversing the trend
in Mekonomen Sweden. After the end of the period an agreement has
been signed to divest the Danish business.

In the third quarter, the sales growth in the Group remained
favourable in MECA, Mekonomen Norway and Sørensen og Balchen and we
believe that these units strengthened their market shares. Mekonomen
Sweden had a continued weak quarter and lost market shares. Earnings
in the Group were negatively impacted by the development in Mekonomen
Sweden and by non-recurring costs related to changes in management
and store closure. EBIT in the third quarter amounted to SEK 125 M
(168), including non-recurring costs of SEK 18 M (0).

Mekonomen Sweden - further measures required
In Mekonomen Sweden, the focus during the quarter has been on
correcting the implementation problems communicated earlier with the
new sales organisation and new store data system. This had a negative
impact on sales and earnings. Since I took up my position, I have
seen that we must take further action and the sales organisation is
decentralised so that the stores are regaining their traditional
strong role, in order to strengthen entrepreneurship.

Regarding the store data system, which has taken a lot of strength
from the stores, we have isolated the problem to the 30 stores where
the system was implemented in order to successively regain growth and
profitability in these. We are not there yet and there will be
continued implementation in 2017 only if we have achieved success in
the current 30 stores. In general, we will reduce the pace of change
considerably in our business-critical IT systems, where the only
implementation that is definite is an upgrade of the wholesaler
system in Mekonomen during 2017, which is a necessary element of the
preparations for a new central warehouse structure.

The cost and efficiency program, with anticipated savings of SEK 25 M
from 2017, is proceeding according to plan with only a marginal
effect on earnings in the third and fourth quarters. In the fourth
quarter of 2016, Mekonomen Sweden and Mekonomen Norway will have a
non-recurring cost totalling SEK 6 M related to the recall of Volvo
cars in which defective driving belts were installed. The issue of
responsibility for these defective driving belts is under
investigation. Main focus in Mekonomen Sweden is now on further
developing our customer offering, re-generating growth and advancing
our positions.

Strong sales growth to affiliated workshops
It is gratifying that sales to affiliated workshops continued the
strong growth in the third quarter, which is the part of the market
that we regard as strategically most important for growth. Sales in
comparable units in the Group rose 2 per cent during the quarter and
sales of spare parts under our own ProMeister brand continued to
develop well.

Divestment of the Danish operation
The loss in our export business to Denmark was SEK 6 M for the
quarter, which is a reduced loss compared with the third quarter of
2015. Agreement was signed after the end of the period with T. Hansen
Gruppen / AD Danmark for divestment of the Danish business. The
transaction will generate a negative non-recurring effect of SEK 25 M
in the fourth quarter, in addition to the ordinary result generated
by the Danish operation in the fourth quarter. The transaction means
that Mekonomen Group will have exited Denmark and will therefore not
incur any losses related to Denmark from 2017.

Market development remains stable
The market was stable during the quarter. We see potential for an
increasing overall market going forward, as a result of higher sales
of new cars and a growing fleet of cars in our main markets Norway
and Sweden in recent years. However, we expect no change in the
market during the remainder of the year since the expanding fleet of
cars reaches the aftermarket first when the cars are three years or
older.

Growth and innovation
The project to establish a new Swedish automated central warehouse and
our most important strategic project in digitalisation, our new
catalogue, are proceeding according to plan.

Our focus ahead is on further strengthening our customer offering and
driving sales growth in all of our Group companies. We will
capitalise on the strong entrepreneurial spirit and our committed
employees in the Group to strengthen our market position.

Pehr Oscarson

Acting President and CEO

For further information, please contact:
Pehr Oscarson, Acting President and CEO, Mekonomen AB, tel +46
(0)8-464 00 00

Per Hedblom, CFO Mekonomen AB, tel: +46 (0)8-464 00 00
This information is information that Mekonomen AB (publ) is obliged to
make public persuant to the EUMarket Abuse Regulation and the
Securities Markets Act. The information was submitted for
publication, through the agency of the contact person set out above,
at 07:30 a.m CET on 11 November 2016.

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http://news.cision.com/mekonomen/r/interim-report-january---september-20...
http://mb.cision.com/Main/550/2120711/588449.pdf

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