Hi, and welcome to this Q&A session on Momentum Group's Q4 report. We have received some questions since we released the report this morning, we are going to answer them here. With me, I have our CEO, Ulf, and our CFO, Niklas. Let's start. The first question: In the report, you mentioned that the business climate is generally stable, but the organic growth rate is decreasing compared to previous quarters. Can you elaborate on this? Niklas, please.
As we have said during the year, we feel that the business climate overall is quite stable and moving sideways, actually. In Q1, we saw a bit higher growth rate, around 5%, followed by 1% in Q2, 3% in Q3, and now 1%, so it's quite stable.
The next question is on the same topic. Organic growth among many of your peers is increasing. Why is that?
We track our peers' performance as an important input to us and our planning. The peers being other compounders foremost, such as Addtech, Indutrade, Lagercrantz, et cetera. Compared to these players, we have a larger share of aftermarket business, and aftermarket sales tends to, at least over time, be a bit less sensitive to economic cycles, resulting in a more stable development. However, this also means that when the market turns, there is normally a certain delay for us. Our peers reports since Q1 in 2024 and also the industrial production, which is another metric that we follow, has during 2024 indicated that the demand is gradually coming back, which is, of course, also positive for us going forward.
Another question. 9% of your revenue comes from the automotive sector. How do you plan to handle this if 2025 turns out to be a tough year for the sector as some predict? Niklas.
Well, first of all, the automotive sector is a relatively small part of our business and also includes, well, not only cars, but also trucks, et cetera. Also, one other thing which is important to keep in mind is that we are not selling products to the actual cars or trucks, but to the production machinery that produces these vehicles. Over time, this segment has also actually decreased as a share of revenue in our business. Volatility in demand in general for specific segments is nothing new to us. If the reason is more short-term, there is usually a spillover effect as repairs and spare parts tend to be critical for many of our customers. We then adapt by decreasing our inventory purchases of certain articles and make short-term reprioritizations among customers.
If the reason is of a more long-term structural reason, we can also make changes to our assortment of products and also make pushes into other market segments.
Okay, now we have a few questions about the relocation of the central warehouse that Momentum Industrial is performing. First question: Will the results from Momentum Industrial be negatively impacted in Q1 due to the relocation, and are there more one-off costs expected? The other question is: What would be the benefit from the relocation of Momentum Industrial central warehouse, and can we expect any positive impacts or financials from it? Niklas.
The relocation of the central warehouse is progressing as planned in Q4 2024. There was a lot of preparation work in both logistics and IT, and where we also actually stocked up our local inventories in the branches in order to decrease the products that we had to move in the central warehouse. We moved during this quarter, that is Q1 2025, and as I mentioned in the presentation, the new central warehouse is up and running since a couple of weeks, with no negative impact on customer deliveries. We see a great advantage with the new central warehouse. It is highly automated and will have a positive impact to support Momentum Industrial's further growth.
Next question. Have you analyzed how the U.S. tariffs might affect your business? Niklas?
Well, first of all, we have an extremely minute level of sales to customers in the Americas and especially in the U.S. Of our purchasing, about 95% of our purchases comes from European suppliers, and only around 3% comes from suppliers in both North and South America. There is a very limited direct effect, I would say. However, the indirect impact of tariffs and how they will impact our customers foremost is harder to predict. Here we will have to wait and see how this all plays out.
Next question. Your EBITDA margin is typically between 11% and 13%. Do new acquisitions typically dilute margins or do they increase margins? Also going forward, is there potential to increase the EBITDA margin? Ulf?
I wouldn't say that the new acquisition dilute margins. As you know, we focus on profit to working capital where EBITDA margin is one component. To have the profit working capital above 45%, of course, we aim to have double-digit companies that we acquire, but also get double-digits in all our entities that we already have. Of course, to increase the EBIT margin, we work with that every day, that's also an aim. I wouldn't say that it's dilutive. I think that's the wrong context.
The final question. What does the acquisition pipeline look like going forward? Ulf.
The pipeline looks good. We have a robust structure and very confident in our process of making acquisition as well as approaching new companies. It's in our DNA, as we have grown, of course, we have more and more people feet on the ground in all Nordic countries. I would say that activities in the acquisition hasn't been higher than it is right now. I'm very confident in the acquisitions going forward.
Thank you for listening in. If you have any further questions, please contact us on ir@momentum.group. Okay. That's all question for this time. Thank you for listening and also if you have any further question, please contact us on ir@momentum.group. Thank you.