Nordic Credit Rating (NCR) said today that it had revised the outlook on its 'BBB-' long-term issuer rating on Norway-based car importer and retailer Møller Mobility Group AS to negative from stable. The long-term rating was affirmed, as were the 'N3' short-term rating and the 'BBB-' issue ratings on the company's senior unsecured bonds in accordance with NCR's revised corporate rating methodology. The ratings are no longer under criteria review.
Rating rationale
The outlook revision reflects our view that market conditions will likely deteriorate as inflation and rising interest rates reduce consumer purchasing power. It also reflects greater competition as car makers increasingly sell through agent-agreements and electric vehicles become more affordable. These factors are likely to result in lower profits and weaker credit metrics over our forecast period through 2025 in an absence of mitigation.
We have lowered our assessment of the company's market position to reflect our expectations that changes in the industry business model are likely to reduce the company's competitive advantage. We have also revised our view of operating efficiency due to a weaker car market and our expectations of lower profitability. The impact of reduced profitability on our projections led to a downward revision our financial risk assessment of Møller Mobility Group. Our projections include a weakening of leverage metrics and interest coverage over the next few years, offset to some degree by the company's high proportion of leasing liabilities including in our adjusted net debt metrics.
Negative outlook
The negative outlook reflects the potential for weaker market conditions as inflation and central bank interest rate rises erode consumers' purchasing power, resulting in a sharp decline in profitability. It further reflects an intensified competitive environment as car makers increasingly sell through agent agreements and more affordable electric vehicle brands enter the market. These factors are likely to result in lower profits and weaker credit metrics over our forecast period unless mitigating efforts are undertaken.
We could revise the outlook to stable to reflect improved market conditions, with profit margins stabilising and inventory turnover increasing. We could also revise the outlook to stable to reflect 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 further declines in car sales that put pressure on profitability or supply chain issues that weaken profitability and brand reputation. We could also 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.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Negative | Stable |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB- | BBB- |
Contacts:
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@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 24 May 2022 and NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022. For the full regulatory disclaimer please see the rating report.