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 stable. The 'N-1+' short-term rating and the 'BBB-' issue ratings on the company's senior unsecured bonds were also affirmed.
Rating rationale
The long-term rating reflects Møller Mobility's strong position in its core market. 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 moderate financial leverage and strong cash position, as well as unutilised credit facilities.
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. In our view, disruptions to Møller Mobility's supply chain could worsen its market position and weaken the company's financial risk profile. The company has a large off-balance-sheet repurchase portfolio with a maturity profile of less than two years, which could materially affect short-term liquidity and result in losses if market conditions deteriorate rapidly.
We have adjusted our assessment of size and diversification to reflect concentrated counterparty risk, which has been intensified by the war in Ukraine. Our financial risk assessment reflects a significant improvement in the company's financial ratios. However we do not expect these ratios to remain at their current levels over the longer term as inventories return to pre-COVID levels and supply chain problems ease, as we anticipate.
Stable outlook
The stable outlook reflects our expectation that Møller Mobility will maintain its market-leading positions in its geographic markets while maintaining its business and financial risk profiles in the face of supply chain disruptions caused by the war in Ukraine. It also reflects our expectation that some delivery bottlenecks will be resolved as new production capacity at Volkswagen comes on line. We could raise the rating to reflect reduced risk appetite and a commitment to current credit metrics, a more stringent financial policy, or increased diversification of revenue and risk. We could lower the rating to reflect increased leverage, with NCR-adjusted net debt/EBITDA above 2.5x and NCR-adjusted EBITDA/net interest below 8x. We could also lower the rating to reflect supply chain issues that weaken the company's revenues or long-term deterioration of its market position.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N-1+ | N-1+ |
| Senior unsecured issue rating: | BBB- | BBB- |
Contacts:
Mille Fjeldstad, analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 18 Feb. 2022, NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022 and NCR's Rating Principles published on 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.