LKQ announces third quarter results
LKQ is confident at the potential for more non-new OEM parts, particularly in Europe, the collision parts provider told investors in a conference call Thursday, following the release of its quarterly results.
It also described trends driving the parts on the North American continent and discussed its performance in the European and UK market.
Overall, LKQ’s parts and service revenues grew 6.8 per cent organically (not counting acquisitions) worldwide, and 60 per cent of its North American parts and service growth ensued from collision parts wholesaling. The firm’s quarterly revenue grew 6.4 to $1.83 billion, with net income up 10.7 percent to $101.3 million.
LKQ also stated that it was at the ‘tail end’ of new branches in the United Kingdom, which would mean fewer revenue growth spurts created by presences in a new market. The company should have 200 by the end of the year and has said the ‘right number’ is 225, according to CEO Robert Wegman.
But that’s just the foundation to grow by selling more types of parts across the country, he said.
‘The new part introductions are going to be huge for us,’ Wegman said.
LKQ plans on bringing remanufactured and recycled parts to the British Isles, ‘There’s a lot of opportunity to bring the products we have here in the U.S. over to the UK.’
And with the average car in Britain 7.8 years old and 8.6 years in the rest of Europe, LKQ should have a ‘nice tailwind,’ added Wegman.
LKQ also hopes to spread parts on the continent, particularly in the ‘Benelux’ region (Belgium, Netherlands, Luxembourg), through Sator and by fostering more non-OEM usage among European repairers and insurers.
It plans to use its experiences with 17 insurance carriers in the United Kingdom as a ‘launching pad’ for their policyholders on the continent.
‘We have those relationships already built,’ he said, and the vendors are the same as in Britain.
Right now, OEMs have a 93 per cent parts market share in Europe. That’s a lot of room to grow if LKQ can compete.
‘Lots of opportunity,’ He continued, ‘we’ve been very successful in the U.K.’
He said alternative parts were in the ‘9-plus’ per cent of United Kingdom market share, up from 7 per cent in 2012. Non-OEM parts grew 34 per cent year-over-year last quarter in Europe, according to Wegman.
The firm’s CEO told an analyst it’d likely be easier to make the case for alternative parts when OEMs have such a grip on the market. However, one must convince buyers they’re an adequate substitute.
‘The initial pushback comes at the beginning,’ Wegman said. Following that, he said it subsides.