Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB-' long-term issuer rating on Norway-based car importer and retailer Møller Mobility Group AS. The outlook is negative. The 'N3' short-term issuer rating and 'BBB-' senior unsecured issue rating were also affirmed.
Rating rationale
The affirmation reflects our expectation of a market recovery for car importers and retailers in 2025. We expect Møller Mobility's leverage to be temporarily elevated at year-end 2024, with net debt/EBITDA above 2.5x and interest coverage below 8.0x, before recovering in 2025. We believe management will take actions to strengthen the company's balance sheet and reduce net debt in the near term. Despite our expectations of a market recovery, we are cautious about the current low visibility on revenues and on how strongly markets will rebound after the sluggishness in 2023–2024. We will continue to assess the impact on the company's long-term financial leverage.
We consider that the company's liquidity management is sound and will enable it to handle highly seasonal working capital swings. Working capital accumulation is typically highest in the final four months of the year and lowest in the four months through August due to limited supplier deliveries of cars during the holiday season. We expect the company to marginally increase its inventory, which remains low compared with historical levels, to capture rising demand for used cars. The company recently increased its credit facilities by NOK 500m and extended their maturity to 2027. We believe that the increased credit facilities are adequate for dealing with seasonal liquidity variations.
In commercial vehicles, where market performance has outpaced expectations, Møller Mobility has gained market share, reporting 36.5% as of 30 Aug. 2024, up from 30.8% in 2023. The service market has shown stable profitability and growth, somewhat offsetting the negative impact on the company of slumping sales of new and used cars. We are monitoring the possible impact of car manufacturer Volkswagen AG's recently announced potential closing of German plants on Møller Mobility's access to new cars, which could dampen its inventory turnover and volumes. Still, we believe that electrification trends, high penetration of electric cars in the Norwegian market and Møller Mobility's long-standing relationship with Volkswagen reduces the probability of less access to new cars.
Negative outlook
The negative outlook reflects our view that the market is approaching a cyclical bottom, and that Møller Mobility will need to take measures to strengthen its balance sheet over the coming months. Depending on the magnitude of expected market recovery, competition, and management's financial discipline, the company's long-term financial leverage could stabilise at levels consistent with the current rating drivers. The outlook also incorporates our view that Møller Mobility will maintain its market position and that Volkswagen will continue to deliver popular cars to the company in a timely manner.
We could revise the outlook to stable to reflect NCR-adjusted net debt/EBITDA below 2.5x and improved interest coverage over a protracted period or improved market conditions, with profit margins stabilising and inventory turnover increasing.
We could lower our rating on Møller Mobility if the company does not succeed in deleveraging in the near-term to NCR-adjusted net debt/EBITDA below 2.5x and improved interest coverage over a protracted period or weakened inventory turnover and a continued sag in car sales that pressures profitability.
Related rating actions
i) Møller Mobility Group AS 'BBB-' long-term issuer rating affirmed; Outlook negative, 22 May 2024.
ii) Møller Mobility Group AS outlook revised to negative; 'BBB-' long-term issuer rating affirmed, 16 May 2023.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Negative | Negative |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB- | BBB- |
Contacts:
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.