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 of the long-term rating reflects our view that competitive conditions remain tough and profitability weak. It further reflects the company's elevated financial leverage and our uncertainty about its long-term direction, despite signs of a recovery in order intake.
The long-term rating continues to reflect the company's strong position in its core markets. It also reflects the company's long-standing relationship with car manufacturer Volkswagen AG, which provides scale and diversity through a range of brands, and a joint venture finance subsidiary, Volkswagen Møller Car Finance. The rating is underpinned by the company's moderately low financial leverage.
The rating is constrained by the operating environment. The car industry is cyclical and currently undergoing rapid change through the development of low-emission vehicles, which could alter the industry structure. Reduced consumer appetite for big-ticket purchases -- requiring price adjustments -- are likely to reduce Møller Mobility's profitability. At this point, we believe that declining EBITDA margins are likely to be offset by higher sales volumes, effectively stabilising the company's financial risk profile. We see the company's large off-balance-sheet repurchase portfolio with a maturity profile of less than two years as negative as it could have a rapid negative effect on liquidity if inventory turnover decreases and prices decline.
Negative outlook
The negative outlook reflects uncertainty about the long-term direction of financial leverage. It also reflects a more challenging competitive environment and pricing pressure due to eroded consumer purchasing power and reduced appetite for big-ticket purchases, which negatively impact sales and margins. We believe that markets are likely to start to recover in the second half of 2024 and that the company has taken measures to adapt its cost base to more challenging conditions. We are cautious about the long-term impact on the competitive landscape due to an increasing number of car makers selling through an agent-based model.
We could revise the outlook to stable to reflect improved market conditions, with profit margins stabilising and inventory turnover increasing, or NCR-adjusted net debt/EBITDA below 2.5x and NCR-adjusted EBITDA/net interest above 8x over a protracted period.
We could lower the rating to reflect NCR-adjusted net debt/EBITDA above 2.5x and NCR-adjusted EBITDA/net interest below 8x over a protracted period or weakened inventory turnover and continuing weak car sales that pressure profitability.
| 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.