We kindly ask you to mute yourself after having asked your question. Now, I will hand the conference over to the speakers, President and CEO Pehr Oscarson and CFO Christer Johansson. Please go ahead.
Thank you for joining us. Our CFO, Christer Johansson, is sitting beside me, and we will now present MEKO's results for the fourth quarter and full year 2025. The fourth quarter marked the end of a year that can be described as an important investment year for MEKO. In parallel, we concluded major warehouse upgrades in four markets, according to plan for improving operations within the program, Building a Stronger MEKO. We also launched several key initiatives to attract new customer segments and drive growth. In addition to this, we started the launch of our new ERP system in Poland and accelerated our cost savings efforts. In total, we reduced the number of full-time employees by 500 during the year.
We did this in a somewhat weaker vehicle market compared to 2024, with more car owners postponing service and maintenance due to uncertainty about the future. For MEKO, this resulted in lower sales in the first half of the year, which we partly offset in the third quarter. The market situation remained unchanged in the fourth quarter, with 0% growth reported in line with the same period in 2024. Overall, our results were negatively impacted with an adjusted EBIT margin of 2.2% for the period. The lower result have increased our leverage, and we are now fully focused on improving profitability and reducing our leverage. Compared with a very intensive 2025, we see better conditions in 2026 to do this. Let's move to slide three for a closer look at some of our important initiatives in 2025.
As mentioned, we completed upgrades and construction of four central warehouses, all at the same time. We automated the warehouse in Finland and built new automated ones in Norway and Denmark, where we now have moved in. In addition, we relocated to a central warehouse in Warsaw that is nearly twice the size of the previous one. This required a lot of focus. The benefit is that we now have stronger logistics platforms that support future growth. During the quarter, the business area, Sørensen og Balchen, began relocating from its warehouse to our new facility outside Oslo, which caused some disruption that Christer will elaborate on.
We will continue to fine-tune processes and technology in all our warehouses, as always the case in projects like this, but the major work is behind us. Most importantly, we still have significant efficiency gains to realize.
So let's look closer at some of the most important growth initiatives that we launched in 2025 and move to slide four. One important initiative is our increased focus on exclusive brands. We're seeing higher demand for affordable alternatives, and therefore launched the Every Part Matters in seven new markets to reach new customer groups. 2,000 products has been developed during the second half of the year into 2026, including the brake disc shown here. In addition, we decided to expand our e-commerce offering to meet the growing online consumer demand. Our webshop, Mekster, has now been launched in Finland and will soon enter Denmark, ensuring strong, strong coverage across the Nordics. So let's move to slide five and two other key initiatives. At the beginning of 2025, we entered into a partnership with Goodyear.
The goal was to increase our tire sales, which we did. Revenue in this category increased by 12% during the year. We are also strengthening our focus on commercial vehicles, where we see a strong customer interest. Our MEKO's ambition is to be at the forefront on delivering convenient digital customer experience for car owners. We're therefore pleased to see that bookings through our leading digital booking platforms increased by 19% in 2025. Higher volumes strengthens our relationship with the end customers and creates significant value for our [audio distortion] affiliated workshops. We also see strong sustainability performance as a competitive advantage over time, so let's look at the progress we have made in this area on the next slide. During the year, our climate targets were approved by the Science Based Targets initiative.
This means that we are now one of 10,000 companies worldwide to receive this approval. It's a milestone achieved largely thanks to the leadership of our Head of Sustainability, Louise Werne. We also reach our gender equality target for the year with 17% female managers. Our goal is to reach 20% by 2030. We do operate in a heavily male-dominated industry, which we are working to change through long-term initiatives, including, mentorship programs for women, and we are not done with this work and will increase our efforts, going forward. Finally, we also reached our target for using green electricity in our own facilities, and we now have a coverage of 98%. These are just a few of the initiatives we carried out during the year to strengthen the company, and there are many more.
Finally, MEKO has now a new group management team in place. The new team, including our business area managers, has a stronger connection to operations, and this enables an even faster execution. I'm also pleased to welcome our new Managing Director for Sweden, Erik Angervall, who started his position on February 1st. With that said, I hand over to Christer.
Thanks, Pehr. So we're looking at financials for Q4 on page seven, and the takeaway is in many ways similar to that for the year as a whole. This has been a year with flat top line, pressure on gross margins, and significant investments for the future. Q4 is normally the weaker quarter, as also seen in 2023 and 2024. Taking this seasonality into account, Q4 reflects a continuation of the stabilization that we saw in Q3. Net sales are down 3% versus Q4 last year, and this is fully due to FX translation and a stronger Swedish krona. Organic growth, which is FX-adjusted, remained around 0%. Cash flow was stable compared to Q4 last year, with some help from working capital. Profitability, however, measured as adjusted EBIT margin, is down compared to a year earlier.
One factor in this is pressure on gross margins. Pushing in the other direction, we have, as communicated, launched initiatives to improve cost efficiency. For this quarter, those initiatives did not provide a full offset, but we are seeing good traction. Perhaps the best illustration here of is the size of our workforce on page eight. In fact, we leave 2025 with circa 500 FTE less than we had coming into the year. And on top of this 8% reduction, we have further reductions, circa 70, which are decided, negotiated, and communicated, and which will come about in Q1. And here I wish to highlight three contributing work streams. Firstly, the cost program that we launched mid-2025 is progressing well. The required decisions are taken, much was completed late in Q4, and a smaller part is still in implementation phase.
Secondly, integration of Elit, the acquired business in Poland, is nearing its end. This includes merging both central functions and reducing overlaps in the network by taking out what soon will be 18 branches. Thirdly, automated warehouses do require less staff, and realizing the upside here is not yet complete. But in terms of execution, we took the last big step here around year-end, where we merged the warehouse operation of Sørensen & Balchen into the new joint facility in Norway. So to sum up, good traction and very tangible effects, not quite done yet. Completing these actions and doing so to the full extent is, of course, key to protecting profitability in a market where gross margins are under pressure. Staying on that note, let's move to page nine.
Comparing gross margins with Q4 2024, the development is similar to what we've seen earlier in the year. We have commented on the country mix before, pointing out that growing in Poland is, in itself, a good thing. It may be dilutive to group margins, but it is supportive to the purchasing power of the group. The larger factor here is, however, the price component, and in several of our markets, including Denmark, Poland, and Finland, we have seen tougher competition. This comes in the form of new entrants and intense competition for volume amongst existing ones. So with those comments on margins, the step to adjusted EBIT on page 10 is not long, because with sales being more or less flat, the trend in adjusted EBIT is a net result of cost and gross margin development.
And here, the effect from price is more or less instant, but several of our improvement products, they have longer lead times contributing to the year-over-year development seen here. And looking at the warehouse products specifically, the full year has been a transition, and this impacted many parts of the business, also below the EBIT line, as illustrated on page 11. As discussed in earlier calls, we took new leased assets into use early in the year, including the new warehouses and automation in Denmark and Norway, and those are long contracts corresponding to large lease liabilities, as shown in the graph. Under IFRS 16, they are also reported as interest cost or represent interest cost. In the table here, we've singled out that part, highlighting that what I would call regular financing cost has remained flat.
And even more important, this warehouse transition has now come full circle. We have vacated eight out of eight legacy buildings. Going forward, one should hence expect a gradual, uneventful amortization of these lease liabilities. Moving to page 12, one can note that net debt, which excludes IFRS 16 liabilities, has stayed relatively flat, and the increase in leverage is instead driven by reduced EBITDA, which in turn is heavily affected by one-off costs incurred in 2025. Now, regardless of reasons, operating with a leverage of 4 is not in line with our financial target, and getting back to the 2-3 range is a priority. This will take some time, and in that context, it should be noted that Q1 normally comes with a weak working capital development due to seasonal trends.
It is also against this backdrop that the board intends to recommend to the 2025 AGM, and that no dividends are paid for 2025. Before we sum up, I will give a few brief comments by business area, starting with Denmark. In Denmark, we saw a slight organic growth in Q4, with new regulation on winter tires being supportive. Efforts to ramp up the new facility remained intense, which also came with a fair share of temporary cost, as seen here in the difference between EBIT and Adjusted EBIT.
Also in Finland, on page 14, sales benefited by healthy demand for tires. However, that product mix, in combination with the competitive pressure, affected margins and profitability negatively. Turning to page 15, Poland and the Baltics, we saw relatively healthy organic growth of 5%, and this growth has been achieved while also doing many things on the cost side. This went some way, but not all the way, to offset reduced gross margins.
Moving to Sweden and Norway, the picture is a little bit different. Here, organic growth remained in slight negative territory, but we were able to defend margins. And operationally speaking, the quarter was quite busy as we brought the warehouse of Sørensen og Balchen in under one roof in Norway. This joint setup is also reflected in cost-sharing models between the two business areas, and this lowered cost in business areas, Sweden and Norway, in the quarter. The flip side hereof is seen in the final business area, Sørensen og Balchen, which in effect end up with double rent in the quarter.
As of February 2026, the old facility in Holmlia has been decommissioned, and we are glad to note that with this, we have, as I mentioned earlier, exited 8 out of 8 legacy facilities. That said, it was a challenge to drive sales throughout the move, and we assess that a majority of the business area revenue shortfall in the quarter is due to limitations in availability. So with that, I'd like to hand back to you, Pehr.
Thank you, Christer. A few final words from me. We have now left the project-intensive 2025 behind us, with better condition, conditions to increase sales and profitability and gradually reduce leverage. Our logistics platform is now of a high international standard, and we're working toward long-term growth with several initiatives. With that in mind, I'm confident that we have the right core pillars in our strategy. We will always improve our operations, build stronger workshops, and offer the most car owner-friendly services and grow sustainably.
However, we are evolving how we execute our strategy. This means, for example, that we have accelerating e-commerce offering to consumers while continuing to invest in our branch network. It means launching our own brands to grow and attract new customers alongside established third-party brands. We will move forward with the same goal as before: to be the most complete partner for those who drive, repair, and maintain vehicles, even as the playing field changes. So that will be all for me. Thank you all for listening, and now we are open for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. We kindly ask you to mute your phone after having asked your question. The next question comes from Mats Liss from Kepler Cheuvreux. Please go ahead.
Yeah, hi. Thank you. First, on a couple of questions. Christer, you mentioned that, well, working capital is somewhat, well, boosted during the first quarter, and, I just wondered, but due to seasonality, I mean. And, I just wondered what... I mean, now we have changed the warehouse structure, and what opportunities do you see when things now have settled to reduce, well, inventories and working capital, in the immediate to longer term perspective?
Yeah. Now, so the main priority now with regards to the new logistics setup is to get efficiency, efficiency up through reducing FTEs, and that is our main priority now. So I would say that's the, it's the bigger contribution from these products here. Over time, could there be opportunities for us to reduce working capital? We're definitely looking for it, but I'm not yet willing to commit to a number on that front.
Okay. And then, I mean, fourth quarter was somewhat mild, and winter conditions have sort of progressed more here in the first quarter. Could you say something about, well, how demand have developed during, well, it's early days still, but, what are the normal sort of trends when winter condition becomes like they are right now?
It's too early to say because we don't have any numbers yet to share on that moment. Generally speaking, the first thing which happened when it's very cold is that the waiting turn time to get a time at the workshop will be longer. So I mean, due to the capacity, that's probably the first thing that will happen, that it will be take longer time to get an appointment at the workshop. But again, we will come back when we have some more details about how it impacted this, this time.
Okay. Yeah, finally, there, I mean, you have pretty good progress in Sweden, Norway, in spite of, well, the warehouse structure changes in, in the impact of those in, in Norway. But, and, and Denmark may be a touch better than I expected. But what about Finland there and, and Poland, Baltics? Should we expect those markets to perform at breakeven at best, or do you see any sort of light in the tunnel, or could you say something there more?
Yeah, but we again, we're not guiding like that, but of course, we have much higher ambitions than, than we're showing now. And, if we split a little bit, I mean, the operations in Baltics is very stable. So that, and, quite good also. In both Finland and Poland, it has been a year of a lot of investments and changes. Finland should start to benefit by the, of the automated warehouse, which we installed, during the year, and also a lot of other cost savings.
So that should be good for possible better profitability. And also Poland has, this year has been extremely intensive. We had the move of the warehouse, we launched the ERP system, and also the integration with Elit Polska, which we now are kind of in the on the finish line also. So there has been a lot of, let's say, call it investment years or change years of changes. So, we have absolutely much higher ambitions for those markets.
Yeah, yeah, finally, there, I mean, you mentioned that the CapEx program is now implemented. What, what kind of CapEx could we expect here for 2026?
We've been through an investment boom, if you will, in 2025. I think this is by no means a normal year on this front. But if you go back a few years before 2025, you see the kind of the maintenance CapEx level being reflected. That is what one should expect, going forward.
Okay, great. Thank you.
Thank you.
The next question comes from Andreas Lundberg, from SEB. Please go ahead.
Yeah, good morning. Thank you for taking my questions. If I start with the price pressure markets, i.e., Finland, Poland, I think you mentioned Denmark as well. In addition to, you know, cost saving, what can you do about the situation on the demand side?
We can, which we are doing. There's two very clear initiatives when it comes to the, to handle the price pressure, and that is the launch. So, can you please mute your phone when up? Because I can't hear myself. It's the e-commerce is one way of doing it. That is to offer a, let's say, a cheaper way for the consumers to buy the parts. We launched it in Finland a couple of weeks ago, and we are also entering Denmark later this year.
And then maybe even more important is our initiatives around exclusive brands, where we now also launch. We have the ProMeister brand, which is the top brand, but now we're also launching Every Part Matters, which is more price effective and affordable brand, which will be available for the customers here during the spring. So that's two very clear initiatives which we're doing.
Okay, thank you. And you also talk about the let's fight for supplier bonuses among some of your competitors, i.e., they have reduced prices, they get more volumes. How is that dynamic, you know? Does it differ depending on what time of the year you're in or, and how we view it in 2026?
Yeah, let's see how it develops. But usually, this is a question for Q3, I would say, because then we know if the general demand in Europe has been okay, then it's one thing, otherwise there will be an increase in competition in the end of the year, because that's when people start to realize that they're, they are missing the targets. So, in the beginning of the year, it should not have any impact.
Okay, cool. And what about currencies? You source a lot in euro, I think. How is that the situation, and then will you benefit from that in 2026?
So it's correct, as you say, that we do source quite a bit in euro, and we're also selling some parts in euro-denominated currencies. So the impact from FX is not as large as it was if you go back a few years. The blend in our sales and purchasing is now more balanced, you could say. So one should not anticipate massive effects from this. Generally speaking, though, a stronger SEK is somewhat supportive.
Okay, thank you. And on the cost programs you already touched upon, but can you say something more concrete on how much you realized in the fourth quarter? What programs are already starting to help?
Yes. So, as I think we said already in Q2 and definitely in Q3, the focus here has been to, to reduce staff. And as you could see from some of the numbers we shared, we've been, successful in this. Relating specifically to the SEK 100 million cost-saving program, we had, by end of year, reduced the number of employees by 100, and then there was another 70, then that's kind of in the pipeline, if you will.
So that means that the full run rate is not reflected in Q4, for sure. But as of today, we're happy with the progress in this program. And that is, of course, then, as I think we've also explained earlier, unrelated to the efficiency gains from the automation, so that's, that's a separate work stream, if you will. So, good, good traction, but definitely not the full run rate in Q4.
Thank you on that one. Okay, you also touched upon the... In addition to the one-off cost, if you will, you have running too many warehouses in 25. Is that? Can you quantify that, or what implication it had on?
Absolutely
- costs?
So, in the bridge between EBIT and adjusted EBIT, which is in one of the notes, in the report, you will find a specification by item, and, one of those items are the, the call it the double rent and the extra staffing related to the warehouse transition. I think it's in the range of 80 million , if I'm not mistaken, for the year. And, it's, quite pleasing to note that this is now coming to an end. Because, of course, those are big costs that we've absorbed in 2025. And, as of, recently, we have handed back the keys, and we've settled everything with the landlords and whatnot, so there's nothing of that now impacting the P&L.
Cool. And finally, if you don't want to comment on the outlook or the start of the year, can you talk about the Q4? It was kind of in a mild weather, whether that was positive, negative, or neutral for your demand side. Thank you.
I don't know how much the weather was impacted. It was a slower end of the quarter in December, and that could be a mix of working days, how the workshop has been open or closed during the holiday times and so on. So it's more of a mix of a lot of things. So I don't think that we can blame the weather rather positive or negative for Q4.
Cool. That concludes my questions. Thank you.
Thank you.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
All right. Thank you all for listening, and, I wish you all a good continue of the day. So thank you for-