During the questions- and- answers session, participants are able to ask questions by dialing pound five on their telephone keypad. Now, I will hand the conference over to IR, Carl Fredrik Ewetz. Please go ahead.
Thank you very much for the introduction and welcome to Bilia's third quarter result presentation with CEO Per Avander, CFO Kristina Franzén, and I, Carl Fredrik Ewetz. We also have our Deputy CEO, Stefan Nordström, with us today. We're happy to present a solid result with higher order intake for new cars, positive cash flow, and a solid financial position. I will come back to the outlook in the end of this presentation. Here's our agenda. Per will start with the current situation in the industry, followed by Q3 numbers. Kristina will go through the financial situation, and I will conclude with our outlook. Let's start, and I'll leave the word to Per Avander.
Thank you, Carl Fredrik. In Sweden, we see signs of better interest in new cars from private customers. In Norway, we see good demand from private customers driven by good campaigns and new taxations of cars from the government. In Western Europe, the demand from private customers remains stable. In the port and fleet business, we see a little bit higher activity in all our countries. Most of our brands have strong campaigns, big discounts, attractive private leasing offers, and there is a high supply of cars from the manufacturers. The demand for used cars is on a good level in our countries, and we see stable prices for all cars except fully electric vehicles. At the same time, we know that in the end of quarter four in Sweden, we will see a lot of electric vehicles three years old.
All brands coming back from customers due to the government incentives were terminated approximately three years ago. In Bilia, the stock of used cars is on a low level in Sweden and on a balanced level in our other countries. There is a good and strong demand in the service business in Norway and Western Europe with good booking times. In Sweden, we see better activities but still somewhat lower booking times. Part of the explanation is some years of lower new car sales and export of young used cars. The total car market in Sweden 2024 was almost 20% lower compared to an average market the last 10 years. During the last three years, there is a shift in the car population to more older cars. Net turnover was better than last year.
We report an operational earnings of SEK 310 million with a margin of 3.2% compared to SEK 280 million last year. We had higher profitability in Sweden related to both service and car business. Our operating profit was SEK 284 million compared to SEK 260 million last year and included a profit of SEK 35 million related to divested properties in Sweden. Therefore, earnings per share was SEK 2.07 per share compared to SEK 1.15 last year. On this slide, you can see the quarter three profitability from 2019- 2025 in each country. On the left-hand side, you can see Sweden and the improvement of SEK 28 million. In the middle, we have Norway, and there you can see some small improvements. On the right-hand side, you can see Western Europe delivering a slightly lower result due to underlying less new car deliveries.
On this waterfall chart, you can see the different business areas. We improved earnings in the new car business and the service business but dropped a little bit in the used car business. We are moving over to the important service business, representing 72% of the earnings. In all our countries, we see a positive organic growth with an average of 4.1%. One reason is 10% higher deliveries of new cars, impacting our delivery workshops positively. There are the same number of working days in Sweden, Norway, and Luxembourg, but one day less in value. We report earnings of SEK 233 million, which was SEK 12 million higher than last year. There are several reasons why we report a higher result. As I mentioned, higher deliveries of new cars. Another is, in general, better activity in our workshop, and a third is higher organic growth.
The order intake of new cars adjusted for acquired and divested operations was 20% higher compared to quarter three last year. As I mentioned, we have seen a little bit better activities in all our countries, especially in September. For the car business, we report a result of SEK 81 million compared to SEK 73 million last year, coming mainly from Sweden. The profitability for cars in Norway and Western Europe was on a slightly lower level. For used cars, we reported earnings of SEK 61 million compared to SEK 96 million last year. In a historical perspective, it's a good level. As I mentioned in the beginning, the stock of used cars is on a low level in Sweden and at the balanced level in Norway and Western Europe. The reason for the lower earnings was price pressure on used fully electrical cars.
We have increased our underlying backlog of new cars with 900 units. For many different brands and models, we have really short delivery times. By that, we think 12,500 new cars is a good level. This means we often can sell and deliver a car in the same quarter. Yes, Kristina, it's your turn.
Thank you, Per. Financial position: during this quarter, we reported a strong operating cash flow just below SEK 800 million. This reported cash flow did include a received payment of some SEK 300 million related to the divestment of six properties in Sweden that Per mentioned before. After adjusting the reported operating cash flow for these divested facilities, this cash flow amounted to just below SEK 500 million for the third quarter, which is still a strong cash flow and in line with last year's level. The six properties that were divested are used in our Porsche, BMW, and Toyota operation, and these facilities are now leased back from the new owner for a period from 2- 15 years.
For the group, the divested facilities generated a non-taxable profit of SEK 35 million, which also impacted our tax rate for the quarter, going from a normal tax rate of around 22% to a tax rate of 4% only. The divestment of the six properties in Sweden enabled us to finance our acquisition of a Volvo Trucks operation with basically no impact on our net debt leverage. As of July 1st, we acquired two companies that perform sales of new and used Volvo Trucks and provide related services. The business had in 2024 a turnover of some SEK 1 billion with an operating margin of around 4.5%. The business is conducted through nine facilities in mid-Sweden with around 160 employees and will be branded as Bilia Trucks going forward. We do look forward to the cooperation with Volvo Trucks, which is a significant player on the Swedish truck market.
During the end of the quarter, we also acquired a Jaguar and Land Rover business that has been conducted by Sandven AS in one facility in Bergen in Norway. The business had in 2024 a turnover of some NOK 280 million with an operating margin of around 3.5%, and the number of employees was 29 persons. During the quarter, we did make the second payment of SEK 130 million related to this year's dividend of SEK 5.60 per share in total. The dividend is paid in four installments, where the remaining two installments are in October and January. At the end of the third quarter, we had an earnings per share of SEK 5.76 versus SEK 5.08 last year. The financial target for the group is to distribute at least 50% of the earnings per share to our shareholders.
By the end of the third quarter, we utilized some SEK 600 million of our credit facilities of SEK 2.3 billion. As of the 1st of October, we also repaid a bond loan of SEK 500 million, which we refinanced during the first quarter this year by issuing a new bond amounting to SEK 800 million with a maturity term of five years. Finally, our net debt, excluding IFRS 16, at the end of the quarter amounted to SEK 2.5 billion. That was about SEK 400 million below the net debt at the end of last year. Our ratio net debt in relation to EBITDA was then 1.5x compared to 1.6x by the end of the second quarter and 1.7x compared to December last year.
By that, we have made a reduction and are also then well in line with our financial target to be below a ratio of 2.0 times. I think that's about the financial position.
Thank you for that. Moving over to outlook, our efforts to enhance profitability and operational efficiency remain a top priority while we accelerate this process by introducing an efficiency program. The $150 million savings will be fully implemented during the second half of 2026 with an estimated one-time cost of approximately $25 million SEK. Profitability, cost control, and capital allocation remain top priorities throughout the whole organization going forward. Moving over to the car business, for used car sales, we believe the remainder of 2025 may be characterized by some price pressure and higher competition as many electric cars will come back due to, for example, private lease renewals and the government incentives that were terminated approximately three years ago, like Per mentioned earlier. We currently have a low stock of used cars and are well prepared for such a situation.
For new car sales, we believe we will continue to see signs of increased activity from private customers. Demand from corporate customers is stable, and we see indication of some increased interest also within this segment. In addition, the forecast for new passenger cars registration for 2025 in Sweden is trending higher, now at 280,000. Combined with the assessment of a gradually better economic situation and improving forecast for cars, we see a cautiously positive development in demand for new passenger cars during the rest of 2025. Briefly on Bilia Trucks, which is the newly acquired Volvo Trucks business. Implementation is going according to plan, and the company is performing. This is a business we believe strongly in and see a good complement to our existing businesses. In our service business, we expect continued stable demand during the remainder of 2025.
In Q3, the service business represented 72% of our operating profit. We see good opportunities to continue developing our service business and through that improve customer satisfaction. Briefly and finally on consolidation, the rapid tech development of cars, especially the increased integration of electronics and digital systems, has led to a growing need for advanced service expertise. This development benefits Bilia and drives a consolidation of the market. The players with the capacity to meet future service needs strengthen their positions. We continue to evaluate opportunities in attractive business areas and are ready for continued growth. Yet again, a healthy balance sheet is always a priority for us and will continue to be so. This finalizes our third quarter presentations, and we can now open up for questions.
If you wish to ask a question, please dial poundkey five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial poundkey six on your telephone keypad. The next question comes from Andreas Lundberg from SEB. Please go ahead.
Good morning, everyone. Thanks for taking my question. If I start with the activity, you talked about some increased activity among private consumers. Can you perhaps give more color on what you see and perhaps the reasons for why you see it?
Yeah, one reason, as I mentioned, it's coming from we sell more cars, new cars. I often talk about the delivery workshops. We have had better activity in the delivery workshops, and we see a little bit better in our body and paint shop as well.
Andreas, this is Stefan here. When we come to sales, we can see we measure one example. We measure the floor traffic in all our showrooms, and we can see the activity with customers entering our showrooms is increasing. We can also see when we measure credit requests, when people ask for offers and business proposals, we can see that that activity is increasing. I think it's connected to also when you see the offers on private lease from our manufacturers. Today, the prices are attractive and the campaigns are better. In that perspective, we see the customers increasing the interest.
We also can see the higher activity in the fleet business. It's more activity among the fleet customers. The interest, the thing we have to do and work with is the interest is higher even there.
Okay, I couldn't hear you.
Thank you. Go ahead.
Can I follow up on the fleet activity? As far as I'm concerned, this has been rather stable for some time. Why do you think you see higher activity among fleet customers?
No, but I think as Per mentioned, we can see that the interest rate is going down. I think the customers now, they have been like saving up a little bit. Now it's time, and it's a pent-up demand for cars, new cars among private consumers because they have been waiting.
The best market for us, the last quarter, is Norway. We are coming from low figures last year, but we sell a lot of the new cars in the Norwegian market. One reason is that we changed the taxation to government next year. Today, you have VAT with NOK 500,000. You have to pay VAT.
The government now, they say next year, if we have NOK 300,000, it will be a cost for the customer NOK 50,000. The year after that, they will reduce to zero, so it's NOK 75,000. What we can see now, we can see a better activity in the Norwegian market from both fleet business and private consumers. We think it can be really good in quarter four and the next year for order intake in the Norwegian market.
Thank you. If I shift gear to the service operation, can you start with a talk a little bit about TD? You have seen some pressure on the profitability during the last, call it, two, three years. The reasons behind that, what you are doing to improve it, and perhaps also the difference between the second and the third quarter. I recall Q2 was a little bit tough, especially on the Swedish side. Thank you.
It was Sweden, and we had low booking times. It was not only Bilia, it was a market phenomenon, you can say. What we try to do now is work with the older stock of cars. When I say older, often the customers are really loyal to us, the first and the second owner of the car. When the car is 7, 8, 9, 10 years old, sometimes we miss them to an independent workshop. We try to work harder with them. As Stefan mentioned, the interest rate is lower. Maybe some of the customers had a moment like wait and see. We see a little bit better activities. As I mentioned, when we sell more new cars, we have more to do in our workshop as well.
Andreas, one thing, when we see the result in after sales, you can see when we measure it, when you take it in SEK from 2014 to this year, for the first nine months, it's actually the second best result we have. Only 2021 was higher when you talk about SEK. It's actually, I would say, a strong result in the after sales business. We continue with efficiency and the efficiency program and try to do it step by step.
Yeah, our profitability has come down, right? Even though maybe the third quarter was a decent one.
Yeah.
All right. Okay, cool. On the efficiency program you mentioned, could you give more flavor on this? Where are you looking to be more efficient? What does it mean for the Bilia organization?
I think it covers all aspects of the group, right? It's to do what we do in a better way, to be more efficient. I think we also talked a bit about it on the capital market day we have. It will involve most of the operations we have, but it will not involve the sort of production people in that sense. It will be implemented fully by the second half of 2026. There will be some one-time expenses that will be taken then in the fourth quarter.
Is this mainly labor, or are there other savings you think you can make?
Yeah, I mean, the majority refer to people cost then, but it will, of course, be handled in as a smart way as possible. That will be sort of taken in a natural way to the extent possible.
It can be consultants in our IT subsidiary companies as well.
Yeah, it's a minimal consultancy, but also there to consider when people are leaving to not make replacements and so on. There are different aspects of it.
Lastly, on the used car business, you talk about an increased supply mainly coming from EVs in the fourth quarter. What do you think are the implications and also for the residual values, also considering that you most likely value your cars multiple times a year?
Yeah. What we do, as you mentioned, Andreas, is that we make an assessment of the expected market value for all the cars where we have a residual value. We do that on a monthly basis. We have, of course, done our very best estimate for the market value when they are being returned. That also means that we have taken a little bit more cautiousness into that valuation we have done for those cars.
We think we have control over the residual value for a car that is coming back in the end of quarter four. All brands will, it is sort of a two things reading because of the incentives three years ago from the government. What happened in the market is that all our competitors, they have residual values and the financial companies as well. We don't know what will happen with the peak. Therefore, we talk about it.
I think also, Andreas, Stefan, we have prepared for the situation. As Per mentioned, we have a really low used car stock in the Swedish market. We are well prepared. From the beginning of this year, we have worked to reduce the stock of used cars. It's a quite big change from the last year-end.
We are well prepared now when the cars are coming because the stocks in the Swedish market are low now for us.
Yeah, cool. Sounds good. Thank you so much.
Thank you.
Thank you, Andreas.
The next question comes from Mats Liss from Kepler Cheuvreux. Please go ahead.
Thank you. A couple of questions. First, the first quarter is normally seasonally strong there for a service. You mentioned this EV, coming back a lot of EVs there. Should we expect this to be balanced seasonally stronger for the fourth quarter, or is it a marginal impact there since you have prepared for this return of EVs?
We never give forecasts, but if a sort of a guideline to use, I guess it will be a pressure of fully electrical cars. Stefan mentioned we are prepared for it, and we can survive and wait a little bit. We don't have big discounts for EV cars in quarter four. We sell them so fast, we can wait and see in quarter one with some of the EV cars. It's only in Sweden. In the other end, we think we will deliver more new cars in the Norwegian market, as I mentioned now, with the changing of taxation for the government. There we see some signs that it will be a good new car market in the end of quarter four. Maybe it's a sort of a balance between a bit drop in Sweden, but maybe better in Norway where we talk new and used cars.
About service, I know previous quarters and second quarter, you mentioned that car owners were a bit cautious in handing in their cars to the body and paint shops due to not wanting to be too aggressive on paying for those kinds of measures. Has this sort of eased now? Do you see that there is a pent-up demand for body and paint shop work as well in your business?
Yeah, we think it's a little bit better when we look at the booking times in the different body and paint shops now. A reason in quarter two, maybe it was too costly for the customer to pay because often they have a sort of, what you say in English, they have to pay some cash when they have the insurance company, and some it can be quite high. We see better activities in the body and paint shop. I guess the customer thought it was too expensive for a while, but now they have to do it. I've talked to so many colleagues and competitors in the car industry, and nobody could say it's only this problem we have had because it was the same for all at that time. Now it's a little bit better again.
If you look at the motorways, it's happened a lot of accidents every day. It must be a lot of job in our body and paint shops.
Thank you. You mentioned, I mean, the cars become more high-tech, and you also mentioned that you try to keep the cars in your service shops for longer, second and third owner there. Does this mean that you gain market share, or would you say that you are sort of keeping your position?
It's not easy to measure in the service business because you don't have official figures for that. What we can measure in each workshop, we can see how many cars we have into the workshop from zero to three years old, for four to six years old, and older than that. We can see and measure in each workshop, and we can see more older cars into our workshop because we try to be attractive with different campaigns and so on.
When you extend these service offers, do you use sort of brand-specific spare products, or could you offer these sort of multi-brand or?
No, no, Mats, it's brand-specific parts anyhow. As we mentioned before, we are working more with our vehicle dismantling where we renovate spare parts. We are starting to also offer slowly now renovated parts, but it's brand-specific parts with warranty. That's no change. We look into how we can have a special pricing for the older segment. That's what we're working with. We don't like a multi-brand strategy in our workshops. It's specific for each brand. If you see we have a showroom for Volvo, there we repair and have service for Volvo.
Great. Finally, just about your truck operation now growing in importance gradually, I guess. Will this sort of be more of a Swedish operation, or are you sort of addressing Volvo Trucks brands in other countries as well?
The easiest way for us is to grow in Sweden first. When we are full in Sweden, we maybe can go to Norway or Finland in the future. Now we integrate the business into Bilia, and we have full respect for the business because the service business is much bigger. If we say often that when we talk Bilia, the turnover of the total turnover is 22%-25%. Here it is 40%. It's a really big service business. If you will see some step for growth, it will be in Sweden.
Okay, great. Thanks.
Thank you.
The next question comes from Alexander Siljeström from Coreto Securities. Please go ahead.
Good morning, guys. A couple of follow-ups from me. Wondering if you can talk about how you see the lower VAT exemption in Norway for EVs impacting demand in 2026.
No, I didn't follow. What did you? Could you please repeat that? The lower tax rate?
Yeah, the VAT exemption, lower the VAT exemption in Norway. How will that impact demand in 2026?
Yeah, if you start in the past, it was free from VAT, fully electrical vehicles. A couple of years ago, the government took a decision. Today you have to pay VAT over NOK 500,000. Now they take a decision for next year, NOK 300,000. What we think, and our Managing Director through the headness in Norway, say to us, it will be a race now with a lot of order intake because you save NOK 50,000 each car from now to the end of this year. The government say, the 1st of January 2027, there is no incentive when we are talking VAT. Next year, the customer will save NOK 75,000 each car. What we think, we will have a really good order intake this year and next year.
Okay, that's very helpful. Maybe just on the cost savings program, if you can expand a bit on the phasing, do you expect some positive impact in H1 and then reaching a full run rate in H2? How is that looking?
Yeah, there will be some positive effects also during the first half of the year. That's right. It will be fully implemented in the second half.
Cool. Maybe just a last one from me on the used EVs here in Sweden. Do you, obviously a drag on Q4, but do you expect this to be a drag into Q1 and Q2 as well? Could it be over post Q4?
We think it will come back, cars also in Q1 next year.
You have the peak now in Q4. We don't have so many residual values in our books. For example, BMW Financial Services and Volkswagen Financial Services will have a huge amount of fully electric vehicles at the end of this year. For us, it's limited, the amount we will get back. The peak is Q4.
Okay. That's very clear. That's all from me. Thank you very much.
Thank you.
Thank you.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Thank you for that, and thank you for listening. If any further questions, just give us a call or send us an email. Thank you very much.
Thank you.
Thank you. Bye-bye.
Thank you. Bye-bye.