Inter Cars SA

WSE:CAR

Q3-2025 Earnings Call

[Unknown Executive]

I'm informing you that I'm just starting the recording of the meeting. Okay. Welcome to our teleconference of the results of the third quarter of 2025. Our meeting will be divided into 2 parts as usually. One part will be dedicated to the summary of the market situation and also result of Inter Cars in third quarter of 2025. Second quarter, we will dedicate for the question from the participants. Our meeting will be held by Krzysztof Soszynski, Vice President of the Inter Cars; and Piotr Zamora, members of the Board Finance Director of Inter Cars S.A. Please, Krzysztof [Foreign Language].

[Krzysztof Soszynski, executive]

Hello, good afternoon, ladies and gentlemen. We will start as usual from description of automotive market. We will start from aftermarket, our segment of the market. The spare parts market still has development prospects, even though demand remains challenged and prices are not rising. Customers are a bit cautious, especially in Central and Eastern Europe because of the conflict between Russia and Ukraine. Inter Cars is achieving a high sales growth rate, which gives it a leading position in terms of dynamics in big companies above EUR 1 billion. Organic growth has proven more effective than mergers and acquisitions. We can see as well that the general situation is similar over the globe, starting from United States and ending on the Far East. If we touch our domestic, the biggest market, used car imports started to decline, but still during the first 10 year -- 10 months is above 800,000 vehicles imported.

We see that the age of the car park, especially passenger cars is we could say -- started to decrease and around 12.4 years as average. It's good because it's exactly our sweet spot to sell the best offer to our customers. Older cars are losing share, which is according to our strategy. If we touch the sales of the new cars, we see recording increases from January to October, more than 500,000 new cars were registered, what means growth 7% year-to-year. If we look to the new trend, the Chinese brands is growing up to 10% of the sales of the new cars. And as well something which is as well on a good percentage growth around 8% is the sales of electric cars. Companies dominate as buyers. It means 70% of the registrations in July. New car prices may rise as well this year. This estimation is around 15% year-to-year. What we see that the new trend is the present of Chinese manufacturers, which I mentioned, still in the share of wallet of car park is limited.

But we see as well that is a huge amount of the brands, but only a few are with the leading positions. We can name them as MG, Omoda, Jaecoo and BYD. As well, we see that some brands will withdraw from the market. European manufacturers have not recorded declines in sales. If we look on the Polish market. On Polish market, the Japanese and Korean still are with the big volumes, but they are a little bit decreased the sales year-to-year. If we look for the global OEM perspective, touching the old markets, not including the new Chinese giants, which want to raise the market share, the best results for the 9 months presenting Toyota. The second place is Audi, next is Renault and the fourth place is Ford. What it means that generally, the sales of the new cars is below expectation of the car producers. they invested a lot in the technology around the EV. Nowadays, they need to switch to the need of the different markets, which means that future is connected with few types of supply.

And we see that even by the end of the October was sold around 120,000 electric vehicles in Poland. Still, it's more slowly grow than were forecast. Automotive companies are once again investing in combustion engine and hybrid technologies and is anticipating balanced growth in the market, something which as well, I think many times we mentioned that from one side are ambitious, but from the opposite side is as well the possibilities as well the habits of the people, which you have a big we could say, subvention, then the sales of electric vehicles can come. But if the people need to pay a loan, this is limited. As well, we see that the dominant role is the companies, not the private people to buy. On the end, I would like to summarize as well the results if the car park not growing as were expected and the sales of the new cars is limited, which is not the case of Poland.

We see that as well the parts producers facing some troubles because as well they invested in the technologies which are not performed well, including. Coming back to our market based on the listed companies, we see that the third quarter first player finished with the loss of 4.7% of the market share. The second GPC represented in Europe by alliance limited growth around 1 percentage point growth. In third quarter, MEKO due to the acquisition of Elit Poland, 3.8% growth. This is similar growth, which is year-to-date for the 3 quarters. And we see that based on this data, which are available, the biggest growth is from the sale of the Inter Cars, 10.5% in euro for the quarter 3 and year-to-date 10%, which is exactly something which we emphasize as a success. Now I will switch the voice to Piotr, which as well present the results in details and as well the factors of these good results in the quarter 3.

[Piotr Zamora, executive]

Thank you very much, Krzysztof. Hello, everyone. Good afternoon. A couple of highlights we would like to pay your attention to regarding our financial statements. In the first quarter of 2025, Inter Cars once again increased its market share and recorded sales of PLN 5.4 billion. This represents a 10% increase over the third quarter of 2024. If we look on the more cumulative basis after 9 months, sales growth reached 8.4%. Our results are increasingly close to the targets we published in connection with the management program implemented by the General Shareholders Meeting in June 2025. Whether we're going to reach it fully, we cannot confirm it yet, but I think we are getting closer to this target. The target for 2025 is 12%. I think the answer will be because the trend generally in sales in November is more or less the same what it was in October. But it is -- the outcome is really very much dependent on the sales of some segments, especially the tire segments, I mean, the seasonal products.

What is also important, we would like to emphasize this that in the third quarter of 2025, Inter Cars' sales in Poland accounted for less than -- or for about 38% of group sales, which is -- and this tendency continues at the end of first half of 2025, sales on domestic market in Poland amount -- compared to the total group sales amounted to 39.5%. So there is a decrease of 1.5 percentage points over the quarter. And this rapid change simply translates into increasing geographic diversification. Over the past 9 months, we have opened 19 new branches abroad and closed 4 branches in Poland. Overall, we had 680 branches at the end of September 2025. To what we attribute the -- what are the factors to which we attribute the success of the third quarter. There are 2 main reasons. First of all, this is something what Krzysztof mentioned earlier is the higher sales growth than the competition on local markets and also improved margin. This was made possible because thanks to maintaining by Inter Cars, its competitive advantages.

Especially I would like to mention some of them, which are highly appraised by our customers, especially this is the product range, parts availability, convenience of delivery. That means that our distribution network and logistics plays an important role in the success and also some other conditions which are highly appraised by our customers. It's ease of returns and the claim process itself. If we talk about the gross margin, the consolidated gross margin on goods sold for the first 3 quarters after eliminating the impact of exchange rate differences was 29.3% versus 29.5%. So there's a slight decline. However, if we look only on the gross margin for solely quarter 3 and we eliminate the exchange rate differences, then the gross margin is exactly on the same level. So it's 29.9% as it was last year. And this is the first quarter in which we actually changed the trend of gross margin decline.

And a key factor apart from other -- these factors that I mentioned before, influencing margin was, of course, the scale of Inter Cars' operations with individual suppliers, the portfolio of suppliers and the portfolio of products, allowing us to obtain favorable purchasing terms for our customers. Regarding the level of operating costs, the share of sales and general administrative costs in quarter 3 2025 relative to sales revenue amounted to 14.3%, and it was higher than for the same period of the previous year when it was 14%. So obviously, we noted a slight deterioration of this ratio, and it is due to 2 factors. First of all, slightly lower sales volume than expected compared to the cost base that we have.

And of course -- and also the second factor is the accumulation of logistic costs related to our efforts resulting from our efforts to accelerate finalization of some of the logistic projects to obtain earlier benefits coming from optimization of logistic processes. So we should be expecting some optimization of logistic costs in quarter 3 and also in 2026 coming from these expenditures. At the same -- of course at the same time, we, of course, continuously focus on reducing the costs by implementing process optimizations, particularly in the area of logistics, but also in the IT. If we are talking about the financial cost in quarter -- we noted a decrease in cost, a decrease of PLN 10 million from PLN 44 million in quarter 3 2024 down to PLN 33 million in quarter 3 2025. And this is primarily due to the capitalization of interest cost on loans financing the investments in robotization.

Regarding the net profit, we achieved an increase of profit of 15% for the entire period of 9 months. The profit amounted to PLN 238 million. And this is quite a significant achievement considering the -- once competitive conditions on various markets, but also the impairment loss that we have accounted for the loss of the warehouse in Ukraine. We have published at the beginning of September, the report regarding the accident or attack actually of the Russian forces indirectly to the neighbor on the warehouse, which was in the neighbor area and our warehouse caught fire and unfortunately we incurred the loss. The inventory turnover rotation was 137 days, exactly on the identical level as it was in the same period of 2024. I think this is all from my side regarding the comments or highlights on the financial statements for the 3 quarters and the third quarter of 2025. I will now pass the voice to Krzysztof to summarize our presentation.Thank you.

[Krzysztof Soszynski, executive]

Yes. Thank you, Piotr. We remain the fastest-growing distributor among market leaders even as the demand weakens in some sea regions. Looking ahead to 2025, we see growth potential supported by a resilient aftermarket, especially since the vehicle fleet has historically performed well during downturns. Market uncertainty may accelerate consolidation, benefiting agile companies like Inter Cars. Rising operating costs are driving this trend and our early investment in process automation and digitization keeps us at the forefront. We consider robotics essential, our Brasov warehouse in Romania is nearly fully robotized with the transition to the new facility set for September and the old lease ending. Meanwhile, our logistics center in Zakroczym is expanding with PLN 235 million investment automated with Skypod system, of which PLN 92 million has been invested so far. Completion is expected in Q1 2026.

Additionally, our ILS Balkan automated warehouse in Russia valued at around PLN 250 million is now operational, further boosting our efficiency with Skypod technology. We're believing that based on this kind of situation, variety of the segments, good penetration and product availability from many brands, giving us optimistic future, and we believe that especially demand will flow up and down, and we can use this based on our logistic footprint in 21 markets. Thank you very much, and we switch to answer the questions.

[Krzysztof Soszynski, executive]

Already, we have the first question. The first question is net debt-to-EBITDA ratio is about 2, taking into account CapEx, [Foreign Language] should we expect increase in this ratio in 2026?

[Piotr Zamora, executive]

Yes, we expect a slight increase, but it should not go above 2.5, yes? It should be slightly less, assuming that we expect improvement of the EBITDA also in 2026. So I think the fair expectation would be that it should remain more or less on the level as it is now.

[Krzysztof Soszynski, executive]

You have already opened 19 branches outside Poland in 2025. What are the plans for 2026? And in new countries, special attention to some of the -- like Germany.

As we discussed as well on the meeting with the published investors that we -- generally, the first step on the new market is to build the distributors because you know that our system is based on the kind of a -- it's not one-to-one franchise model is kind of a deal based on the distribution contract. It's something between franchise and agency. And we try always to switch the local players, which have the access to the garage. We believe in this concept. Why the first is to know them, then to choose from them this one which understands our concept and which with motivation and engagement as entrepreneurs can support, they grow, thanks to this strength, our scalability and the fast development on the market which means that every year, we open around the 10 to 20 locations, probably next year naturally will be the case. But in comparison to the number of the locations already we opened, it's not a big change and the big CapEx issue.

[Piotr Zamora, executive]

Yes. But the process of opening new branches on the market where we already have a distribution network is very much decentralized, yes? So it's much more dependent on the local country manager and the franchisee partners and how they see the market growth, yes. From the point of view of the market share, evidently, we still have quite a big space outside of Poland, especially south of Poland, where generally the market share is around 13% to 16%. So much less than the market share that we have in Poland or, for example, in Lithuania. So from this, you can expect that if we assume that the growth will be more or less at the same level as it was in 2025, the same amount of branches should be opened outside of Poland, yes?

[Krzysztof Soszynski, executive]

What do you think about ESOP for 2025 sales of PLN 21.7 billion EBITDA, PLN 1.47 billion still possible?

[Piotr Zamora, executive]

Yes, I think we already partially answered this question when we were talking about that we are getting closer to the realization of the sales target. Regarding the realization of the EBITDA versus the LKQ plan, currently, if we take the cumulative EBITDA, which was published in the report for 3 quarters, EBITDA -- cumulative EBITDA for 12 months at the end of September amounted to PLN 1.376 billion, which is on the level of 95% of the LKQ E target. So if we -- even assuming that we do not deliver the results for the quarter of 2025 will be on the same level as it was last year, then we will have simply 95% of realization. Hopefully, we will be able to improve our results also in the quarter 4 of 2025.

[Krzysztof Soszynski, executive]

Then next, could you disclose prices versus volume trends year-on-year in quarter 3?

I think as we a little bit mentioned that we see less, we would say, declining of the prices and the gap between turnover and the cost of goods sold is more balanced.

[Piotr Zamora, executive]

Yes, so for the entire group, the difference is 11% growth in units and 10% growth in value. However, it is very much dependent on the country because...

[Krzysztof Soszynski, executive]

And the products group.

[Piotr Zamora, executive]

And the products group.

[Krzysztof Soszynski, executive]

And the segment.

[Piotr Zamora, executive]

Yes. But for example, in Poland, this difference was about 2 percentage points.

[Krzysztof Soszynski, executive]

And what I mentioned that, for instance, the tire business is challenging in some countries. We are benefiting that we are with many countries, we can balance, but we see that generally, the winter season because of the weather is challenging and what we hear from our colleagues it depends on the weather when the snow will come and we could say the cold temperature, then for sure, it will boom as well.

Could you elaborate on gross margin in Q4? What trends you are currently seeing?

We think that this -- what we see in the first 3 quarters will continue in the fourth quarter. This is our...

[Piotr Zamora, executive]

The question mark is about the tires, which seems that in the sell-in, in purchasing overall on the market, there is a 4% increase, for example, in Poland, while we have noted significantly better results. The issue is with the sell-out. So the distributors are stocked with the tires. So we will see what happens. This is the question mark it also depends on the weather conditions, which are out of our control, yes?

[Krzysztof Soszynski, executive]

Krzysztof mentioned that prices in Poland are not increasing, any trends of the changing in the near future?

I think that is understanding of our competitors what they have in the figures on P&L. If they face that -- the results on the net profits are even worse than the last year, I think that they will change mind not to decrease the prices. The first symptom is still to have a big growth, but we see that the growth of the market is limited. I think the companies which are small, they only can play in the niche, thinking about the bigger prices less turnover. If they will continue, the consolidation will be even faster.

Could you provide us with the progress on opening German market?

As we discussed, we are growing in German market double digit. That is the building of the distribution means that the first is in each of the land to have many distributors then to learn them Inter Cars and the model of our distribution based on this concept of the 3 partners and then switching them. For sure, next year, we will open the first location to the testing, the value we can bring to the garage, but the first is that we need to have the ready IT is on the way, but this is like not something which we want to be very fast because for us, the German market is important. And based on the growth double digit this year, we need to be aware how to do this on an efficient way. We have a German team. We build the team. We extend the sales representatives on the local markets on the book of German company, and we believe that we will do this slowly, but on effective way.

Next question is additionally, at the start, you mentioned, if I'm not mistaken, 7% year-to-year increase in new registration, 10 of the new cars are Chinese, 8% share of electric, all those that are related to Poland?

Yes, I spoke about the Poland, but as well I mentioned the global growth of some of the producers. Like this year, if we find about the global, the biggest growth from old giants is Toyota, 7.7% for 3 quarters. The next was Audi 4.6%, next was 3.7% Renault and Ford. But these are data globally and the data, which as well we use for looking on the local markets always are from Polish markets as well is giving us kind of insight of Central Eastern European car park because smaller markets are in many cases, similar, maybe not Czech Republic, there is a very big influence of Volkswagen Group. But in other markets, this flow is similar, why we as well always try to see description of the biggest steel market for the group. What -- as well as the data that Chinese brands in the sales of the new cars, they are above 5% of the cake in European markets, which means that it's not tendency on the Polish market.

But if you look on the global footprint, BMW is not giving good results, but in Poland is one of the brands, which is gaining the market, which means that these changes or the -- we could say the market, we need to make analysis market by market. On our meetings, it's not possible. But we always try to see the global picture and then local picture, the same we compare as Inter Cars our competitors based on segments, while it's -- if we are on 21 markets and then we go to the -- each segment and then look only on our competitors will be much more difficult to make any comments on this kind of the meeting. We try to show the trends. and the general input from the biggest our market and then influence for the capital growth. This is the way of our idea how we present this kind of summary of each of the quarter.

Next is total CapEx for Zakroczym Skypod project is about PLN 235 million and accumulated investment in September amounted to PLN 92 million. And more than PLN 140 million should be in 2026 from the robotization?

[Piotr Zamora, executive]

No. Actually, the CapEx for the Phase 2 in Zakroczym was around PLN 250 million, and it's going to be completed in 2025. Next year, the CapEx that we should including -- that we are planning to invest is solely related to the investment in the new warehouse in Steszew in the western part of Poland, which is correlated with both with the sales to the West, mainly to the Germany, but also increasing demand because currently, even Zakroczym, the main warehouse is at certain limits of its operations. So we need regional warehouse in the Western part of Poland.

[Krzysztof Soszynski, executive]

I was not precise because we found that the Zakroczym is not anymore good place to scale the business because of the efficiency in one place by the number of the people. And we call internally that in Poland, we will have like 3 places as one place is Zakroczym divide to the 3 zones, which make playing role in the logistics in the future. It's the Steszew and the Sosnowiec on the South, but we will not increase anymore the Zakroczym because it's not any studies, which prove us the financial guidelines to do this. We believe that much better solution is to split and extend or we could say convert the media hub in west of the Poland as an extension of the Zakroczym for the Northwest part of the Poland and the West...

[Piotr Zamora, executive]

Maybe it's worth emphasizing, Krzysztof, that in case of Zakroczym, we are already at the scale of operations that we are afraid that if we go beyond, we will not have economies of scale, but it will lead to rather like unefficient processes. And the second point is that we have a warehouse in the South in Sosnowiec, which supports operations of Poland, but also supports the operations of the countries located south of Poland. And this warehouse is located in the premises for which the lease contract ends in 2027. So now we are currently in the process of preparing the -- or looking for the next location for this warehouse. So given this, we are not able to implement robotization in this warehouse. That's why we need the third warehouse, which will be located in Steszew, which I mentioned. The investment will be spent in over 2 years in 2026 and 2027. Each year, we're going to spend around PLN 300 million for this investment. Yes, overall PLN 600 million. Okay. Are there any questions?

[Unknown Executive]

Yes, we have also the question, what EBITDA margin improvement in basis points can be expected in 2026 from the robotization?

[Krzysztof Soszynski, executive]

But sorry, you can look to this LKQ because I think that for exactly 2025, '26 and '27, we publish this data, and we would like to be in this bracket.

[Piotr Zamora, executive]

Yes. But we've already made public information about the amount of logistics savings coming from these 3 robotization investments, we expect in 2026, the savings in logistic costs amounting to between PLN 70 million and PLN 80 million annually, yes? So you can actually compare it to the EBITDA, which is included in our LKQ program for 2026. And the EBITDA is PLN 1.6 billion, yes? So this is the expectation.

[Krzysztof Soszynski, executive]

If we do not have any additional questions, of course, we are always open to further dialogue. Thank you for today teleconference results of 3 quarters 2025 and see you next quarter. Thank you for your audience and attention to our presentation.

[Piotr Zamora, executive]

Thank you very much.

[Unknown Executive]

Thank you for participation. A recording of this teleconference will be uploaded in the -- will be published in our Relations site. So thank you and see you after the results of the fourth quarter.