CEO Arni Ekholm comments quarter 3/2022
“Relais Group sales developed positively during the third quarter and clearly exceeded the same period last year as the turnover grew with 10,3%. The turnover increase with comparable exchange rates was 12%. In addition, the profitability and cash flow improved clearly compared to the first half of the year. The development of the Scandinavian units was very strong, supported by the acquisitions especially in the repair and maintenance sector. The general market conditions in Scandinavia were clearly more positive than in the Finnish-Baltic markets. The turnover and profitability of the Finnish-Baltic business was on a lower level than last year, reflecting the general market development according to our own estimate.
Looking at the wholesale operations of the Group, we managed to reach the last year’s turnover level with comparable exchange rates. The Scandinavian wholesale units reached a turnover growth of 8% during the quarter, supported by the positive local market development and the acquisition of Trucnik AB in Sweden. The turnover of the Finnish-Baltic wholesale operations declined with 8% as a result of the negative local market development. We have been able to move the inflation-related price increase pressure sufficiently to the product prices. This has enabled the stability of the gross margin levels within the wholesale operations.
The Group’s repair and maintenance operations grew strongly driven by the acquisitions made in the Swedish market. STS Sydhamnens Trailer Service AB and Skeppsbrons Jönköping AB have strengthened Relais Group’s position considerably as the biggest independent repair and maintenance operator for commercial vehicles in the Nordic region. The operational efficiency measures taken in Raskone Oy during the first half of the year started to give a positive effect in the profitability during the quarter. In addition, the changes made in the salary setting of the mechanics contributed positively to the recruitment and retainment of the workshop personnel of Raskone. The demand situation in all the Group’s repair and maintenance companies was solid and the capacity utilization level grew clearly.
The sales of vehicle lighting products was stable reaching the last year’s level, mainly due to several new product launches and the strong performance of Strands Group in the export markets. As a whole, the vehicle lighting season sales started somewhat later than during earlier years owing to the market uncertainty caused by the general economic situation. The uncertain demand situation is prevalent especially in Finland and in product segments directed to consumers. Supported by the implemented price increases, the gross margins of lighting products have largely remained on last year’s levels. Also the sales of spare parts was on a stable level and in line with last year. The gross margins were on the same level as last year, due to successfully implemented price increases.
As we told in connection with the publishing of H1/2022 results, we have initiated several actions aiming at increasing the operating efficiency of the Group. We have started a program within the Finnish wholesale operations targeting at lowering the level of net working capital and increasing the efficiency of the pricing process. The program is advancing according to plan. We expect the level of net working capital is to go down during Q4 and the optimization of the pricing process is expected to increase the profitability during next year. In addition to this, all Group companies have increased the amount of different commercial activities to minimize the effects of the uncertain demand situation caused by the general market conditions.
When assessing our business outlook for the remainder of this year various external factors emerge, all of which are outside our circle of influence. The consequences of Russia’s war on Ukraine cause great uncertainty in the demand situation of the markets. In addition, the steep increase of energy prices and general cost of living, the unstable geopolitical situation and its negative impact on the economy make it very challenging to estimate the market situation for the coming quarter. As before, the Company is not giving a numeric guidance of the rest of the year.
Looking at the factors within our circle of influence, we are well positioned to develop our business favorably also during the last quarter of the year 2022. Our ability to deliver lighting products during the ongoing season is good and we will launch a number of new products to the market also this year. We have been able to solve several challenges that faced our repair and maintenance business earlier this year. The demand situation in that business area looks stable. We believe that a possible economic recession may even increase the demand for reasonably priced spare parts and repair and maintenance services. We will also continue the active processing of corporate acquisitions over the coming year, and we expect target company valuations to decline to a more moderate level than before. This lays a good foundation for carrying out acquisitions and the implementation of our strategy also moving forward.
In this connection, I want to take the opportunity to express my warmest thanks to our skilled staff for a robust performance during this quarter. The almost thousand Relais Group-professionals in six countries work very hard to serve our customers even better every day.”
Chief Executive Officer