Nordic Credit Rating has lowered its long-term issuer rating on Norway-based car importer and retailer Møller Mobility Group AS to 'BB+' from 'BBB-'. The outlook is stable. The senior unsecured issue rating has also been lowered to 'BB+' from 'BBB-', while the 'N3' short-term issuer rating has been affirmed. The ratings have been withdrawn at the issuer's request.
Rating rationale
The lower long-term issuer rating reflects our expectations that Møller Mobility will continue to operate with weaker credit metrics and that net debt/EBITDA is likely to stabilise above 2.5x on a long-term basis. In addition, we now believe that a market recovery is more remote than we initially anticipated. Previously, we had expected management to take sufficiently strong remedial action to reduce near-term debt to offset the impact of declining profitability and cash flows on financial leverage. We now believe that the company is likely to continue to face operational headwinds, with profit margins stabilising at lower levels than in the past due to high pressure on prices and low demand for big ticket purchases. We expect these factors to offset any positive contribution from measures such as suspension of dividends.
We consider Møller Mobility's liquidity strong and its liquidity management sound, enabling the company to handle highly seasonal swings in working capital. 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 car deliveries during the holiday season. We expect the company to increase inventory in response to rising demand for used cars. In 2024, Møller Mobility increased its credit facilities by NOK 500m and extended their maturity to 2027. We believe that the increased facilities are adequate for dealing with seasonal liquidity variations. However, we take a negative view of significant working capital fluctuations due to changes in inventory because of repurchase commitments and uneven delivery of imported vehicles, which has a negative effect on smoothing liquidity and debt uptake.
Møller Mobility is essentially dependent on the competitive position of the Volkswagen Group, and that Volkswagen will continue to have an attractive car offering. However, rapid technological innovation and intense price competition in the wider industry could reduce the desirability of the Volkswagen brand, in turn reducing Møller Mobility's inventory turnover and heightening the residual value risk of the company's used cars. Positively, we believe that the Volkswagen Group has taken measures to remain competitive and that Møller Mobility is likely to maintain its leading position in its core markets.
Stable outlook
At the time of withdrawal, the stable outlook reflected our expectations that Møller Mobility's profitability will stabilise at lower levels than in the past but that inventory turnover will remain adequate to support financial leverage within our requirements for the former rating. It further reflects our belief that the Volkswagen Group will continue to offer consumers attractive price-to-value deals, enabling Møller Mobility to maintain its leading market position in the Norwegian market.
Related rating actions
i) Møller Mobility Group AS 'BBB-' long-term issuer rating affirmed; Outlook negative, 14 Nov. 2024.
ii) Møller Mobility Group AS 'BBB-' long-term issuer rating affirmed; Outlook negative, 22 May 2024.
| Rating list | Withdrawal | To | From |
|---|---|---|---|
| Long-term issuer credit rating: | NR | BB+ | BBB- |
| Outlook: | - | Stable | Negative |
| Short-term issuer credit rating: | NR | N3 | N3 |
| Senior unsecured issue rating: | NR | BB+ | BBB- |
Contacts:
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@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.