Dometic Group AB (publ)

Good morning to all the participants and welcome to the presentation of this first quarterly report year 2023. Let's proceed to the presentation on the highlights immediately. So looking at the markets, very, very tough market conditions on the US RV markets. We got the latest news yesterday showing a decrease on number of units from manufacturers reaching minus 54%, which makes obviously life a little bit complicated for this industry altogether. At the same time, we also see that the inventory levels at our distributors and dealers are high, even if we perceive that they are starting to come down. On the performance side, we also perceived very clear results of the strategic initiatives that we have been taking the last couple of years. Looking at the results, growth, and we are talking about organic growth in this case, reached 30% down versus last year, with two segments doing well, marine, positive, plus 8%, and global, plus 5%, driven by e-group, but also hospitality doing very, very well. At the same time, we see the OEM side being down 14%, everything due to the RV OEM Americas. We see still today a strong CPV OEM and a strong RV OEM, both in Europe and in APAC. And then last but not least, service and aftermarket down 19%, which obviously has a major impact on our margins and on our everyday levels. Talking about every day, we ended up at 11.6% compared to 14.8% one year ago, with two segments showing deterioration, EMEA and Americas, and three segments showing improvements, namely marine, global, and APAC. We're also happy to report a strong operating cash flow. A lot of efforts have been put in place, obviously. to release cash during the last three quarters, and we see a gradual improvement. And then also very happy to see that all the KPIs on the sustainability reporting are pointing in the right direction for us. Looking at growth, 3 percent down of almost 7.3 billion krona with 30 percent organic deterioration. a growth driven by FX of 9%, and then on M&A, we have nothing left at this point. EBITDA, 847 million, Krona, 24% down versus last year, or an EBITDA margin of 11.6 versus 14.8. As I mentioned before, an improvement on cash flow of almost 600 million in comparison to the same period last year. EPS, adjusted EPS ended up at 1.44 in comparison to 2.27 one year ago. Leverage ended up at 3.2 versus 2.7 last year and 3.0 at the end of the year. Again, our sales growth, we see that organic growth has been coming down now for four quarters. So this is the fourth quarter, and we have seen a gradual deterioration driven primarily by the U.S. RV markets. We see as well, just as a reminder, the service and aftermarket has been negative for us since Q2 last year. So we are approaching a situation where we will have much easier comps in comparison to last year. Looking at different businesses from an application perspective, power and control, which stands for 20% of sales, shows strong performance, very much driven by the marine steering system range, as well as by mobile power solutions. Food and beverage, which is very much driven by cooling boxes, Igloo and Dometic, but also the CPV business on the cooling compartments and the RV, showing also good stability. At the same time as climate, which is very much depending on the RV industry, has been showing some deterioration due to the American markets. If we instead look at the different safe channels, we see that OEM has been moving from above 60% of total sales into 44% on the 12-month rolling number, which is at the same level as at the end of last year. And again, very much driven, obviously, by two things. On one side, the strong deterioration in North America RV plus also the deterioration that we see on the service and aftermarket during the last 12 months. Worth to mention that the RV OEM says North America stands today for 10% of total revenues for the company, which is important, obviously, since very often we are perceived very much as a very, very heavy American company and very exposed to the RV OEM industry. Looking at service and aftermarket, I believe as well that this is a very, very important slide that I would like to spend a couple of minutes on. So you can see on the different lines, the different graphs, the evolution of the market since 2018. What you see exactly is the impact in 2018, 2019, showing growth. Then we got into 2020, the first half extremely weak due to the pandemic. Then the market bounced back. And during the second half, dramatically, we saw a continuation during the entire 2021. And then if we look at 2022, you see that Q1 2022 was even stronger than 2021, which was, of course, the expectation of building up a very, very strong year for the entire industry, and that never happened. So you can see as well that Q2, we started to see the deterioration. uh and we got between 16 to 16 percent in q2 last year and down to 22 percent negative in q4 last year and we're still negative in this q1 this year on the contrary if you compare will we consider to be a normal base which is 2019 q2 last year ended up a plus four percent in comparison to q2 2019 q3 plus seven q4 plus ten And this first quarter of this year, we ended up at plus 60% in comparison to Q1 2019. So again, it is important to remember that we have this pandemic effect that we were very happy about in 2021. But just now, it is tough to compare. But again, we are starting to get very, very close to much easier comparables. Looking at our EVTA evolution over time, we see clearly the duration in Americas and EMEA at the same time as we see improvements in the other three segments. Two consequences, obviously when you are losing as much as 48% organic in Americas due to the RV industry is very, very difficult to mitigate. We have been reducing capacity big time, but still very, very difficult. And of course that we are sitting with facilities, we are sitting with inventories. And it is tough. The situation in EMEA is different. It's obviously very much impacted by the lower services of the market. At the same time, as we are moving a factory, as you all know, from Germany to Hungary, which means obviously that we have double head counting and some efficiency costs that will fade away during the coming months. The expectation is that the factory will be shut down, totally shut down and moved by the end of Q2. On the contrary, Marin continues to do very, very well, and we will see some more details in a couple of minutes, as well as Igloo is also continuing to show improvements, and we have also positive effects from FX. Looking back at the details in different segments, Americas, as I mentioned before, organic growth 48% down. And again, totally impacted by the RV and the surface of the market. On the contrary, the CPV business still doing very, very well for us. And we got a number of contracts the recent years that we are turning into sales. during the last months that will continue. Evitae, obviously very much impacted by the lower volumes. And then we're looking at strategy. We see still today a better evolution of the acquired companies in the last couple of years, namely Valterra and SunSolar. And at the same time as the move of the factory in Elkhart is totally completed, in a successful way looking at emea organic growth seven percent down which is uh totally driven by the service and aftermarket or and and on the contrary we m is doing very well especially on the cpv side so that means commercial and passenger vehicles why we m is still positive and we don't see just now at this point any signals or iteration on that market Every day, half in comparison to the situation one year ago. And then again, two major impacts on one side, the service and after markets. And then the other one is inefficiency due to the factory move and still some high logistic costs due to the inventory build up of our customers. I already mentioned the closure of the Seagate factory a couple of times. I will not repeat myself. And then we are looking for further uh adaptation to the new uh volume levels in in the future to come apac even here negative driven by service after market on distribution uh on the contrary and the oem site is still going very very well and happy to report obviously that despite the negative growth and the wrong service me oh sorry product mix for us doing we m and so it's an aftermarket we still see everyday improvements in comparison to one year ago and we have obviously we have been adapting capacity as well to the lower volumes that we have seen now for a couple of quarters and we are happy to see as well that our acquisitions are doing very very well in in the segment marine Very, very nice to see that the growth is still there. Even here, we have a negative mix with OEM growing still very, very nicely while service and aftermarket is still negative. But as a continuation of the better, the level out that we saw in Q4, we got exactly the same situation in Q1 from a service and aftermarket perspective, which is leading us to believe that we will see improvements in the months to come. Even here, despite the negative mix, we see a margin improvement to 26.3 versus 25%. And I guess that many of you are wondering how comes that you are still growing at such a nice level. Well, it's a couple of factors. On one side, we see that even in the boating industry has been down now for a number of months from a retail perspective. We see that the entire industry did have a very, very high backlog level. At the same time, we see as well that the small boats have been coming down quite a bit, while the larger boats are still pretty stable. And then we see as well that the larger engines, where most of our equipment goes, is still growing very, very nicely. So it's a combination of a number of things, very much driven by the technology shift that we have been commenting since the acquisition of the sister a few years ago. We see a continuous movement from mechanical products into hydraulic and electronic products, and we see an acceleration over the last 12 months on top of that. Global, very much driven by Igloo, but we see organic growth both in Igloo and hospitality while we see negative growth on residential. We see as well a good margin improvement in comparison to last year and our expectation is that we will continue to see improvements in the quarters to come. The integration process moving according to plan in a positive way And we have no further news in regards to the lawsuit from the former owners. From an innovation perspective, a couple of pros that we have launched recently. On one side, slim, very slim, new cooling box on the Dometic brand, driven by compressor technology, which makes it possible to have it in a standard car. either in the console or in the seats on the back. At the same time, we're also launching as a way of penetrating more the outdoor standalone industry, a new series of tents, inflatable tents with our own technology, which we believe is going to drive growth in the coming years. And then moving from innovation to cost reductions, our manufacturing footprint program continues We booked 19 million in the quarter, bringing the total cost so far to 836 million out of the expected total number of 950. We have affected so far 1,800 employees. And the run rate from a savings perspective is 340 million over a total of 600 million, which means that we have another 260 million to go. And last but not least, sustainability, where Very, very happy to report that the numbers continue to improve. We see injuries coming down dramatically. Just as a comment, we used to be on four. Five years ago, we are down to 1.6, and we believe that we can reduce the number even more. On female managers, we also see improvements ending up on the quarter on 26% of managers being female, in comparison to 24% one year ago. We continue to invest on energy, converting more and more of our factors into electric energy, driving down the CO2 by 41 percent in comparison to the starting point, 2018, and ahead of the target that we have for 2024. And in terms of audits, we also see clear improvements year on year. We are just now at 94 percent compared to a target of 90%, and we are fully convinced that we are going to reach the 100%. And with that said, Stefan, handing over to you.

Thank you very much. Let's start with our EBITDA development in Q1. The organic and FX part, which is obviously the majority nowadays, is very much impacted by the lower sales and also the negative mix where we have minus 90% organic sales decline in the service and off the market. In terms of S&A and R&D expenses, if we look in constant currency and also pro forma with the acquisitions, the S&A expenses, they are flat compared to last year. However, we are continuing to invest both in S&A and R&D expenses. in strategic structural growth areas such as mobile power solution and mobile cooling. Then we also have the logistic expenses, the extraordinary logistic expenses and the manufacturing efficiencies within EMEA that is impacting negatively. Ongoing cost reduction measures. They are contributing positively and then we have a positive impact from FX in the quarter. The acquisitions still falling in the acquisition column. It's related to KDAQ, NDS and Treeline and they were consolidated during Q1 last year. So moving over to cash flow. We have a significant improvement in our operating cash flow compared to the same quarter last year, it's almost 700 million. So that is very satisfying, I must say. It's driven by reduced inventories, then accounts receivables are seasonally driven up and then We also, when we're going below the operating cash line, we have the income tax paid sticking out a bit, which is related to payments from last year. And here you can see the operating cash flow in a longer time series. I went back even further than this and I can just say that this is the best Q1 from an operating cash flow point of view ever in Dometic's history. So again, very satisfying. And I think also when we look on the cash flow generated since Q2 last year, we are on a very good track. Looking on the different components in the working capital, the working capital totally is 34% of net sales, obviously significantly above our ambition level. But as we have said, we are expecting that to come down, maybe not to the level where we believe it's going to be decent, but we're going to take a meaningful step in that direction. In terms of Inventory, we see a decline from Q2, driven by operational improvement, and we are expecting this development to continue here. Looking on our spend on CapEx and R&D, CapEx is almost 100 million in the first quarter, 1.4%. in relation to net sales, which is in line with what we have seen historically. In terms of R&D, we are spending more, 2.1% of net sales, 155 million. And that is really driven by what I mentioned before. We have some in strategic important areas like mobile power solution and mobile cooling, where we are investing more on R&D. Looking on our net debt to EBITDA leverage, it came up to 3.2 in the quarter and as you can see on the little bridge below the chart, it's basically the EBITDA reduction that is driving this and we have some positive effects from cash flow and FX. So ended at 3.17 using two digits behind the comma. As we communicated already in connection with the last quarterly report, I mean, Q1 is our weakest quarter in terms of the cash flow. So it was not the quarter where we did expect, you know, any other development than what we are seeing. So according to expectation. With that said, we are absolutely committed on achieving our target of around 2.5. And as we also have been communicating before, we are going to take a meaningful step towards that target during 2023. And the items which is going to drive that is obviously the EBITDA development. We are going to see continued inventory reduction. We obviously have the dividend that we are going to pay now in Q2. And then we have some restructuring payouts still to be done. And along with earn out related payments from the acquisitions done in 2021 and 2022. And then obviously we have the CapEx component to consider as well. As you could see from our press release on March 31st, we have been renegotiating the first part of our bank agreement. The part that is maturing or were maturing in 2024. And with this new arrangement, we have increased our average maturity to 2.8 years. If we are including the extension options with one plus one year, we are on 3.0 years average maturity. We have also done a new agreement with Svensk Exportkredit for a loan of 44 million dollars maturing in 2026. Then the bank facility has been increased with $10 million, so totally $54 million in increased funding in relation to these two agreements. So we moved the maturity from 2024 to 2026, and then we have plus one, plus one on top of that. The revolving credit facility is also part of what we have been refinancing here now and it's still on 200 million euro and. yeah I was talking about extension options here, then we obviously have the euro bond maturing in September 2023 and, as i've said before, we, we want to keep our. options open here and our own cash and cash flow is going to play a role it's still the question to what extent and we had almost 4.4 billion in cash and cash equivalents ending q1 2023 and that is not including the additional 54 million of financing they are going to come in now during q2 So with that, Juan, I hand back to you to summarize. Thank you, Stefan.

So summarizing, I mean, it is clear that the market is just now has been tough for a number of months in a situation where on one side, the US RV industry is in a kind of free fall at the same time as this industry, as many other industries are still. is still suffering from the inventory built up around the world. But in many industries, I believe that we are performing well. I believe that we are performing a good double digit every day, showing that the strategy that we communicated already four years ago is paying off and creating a more resilient company. We have two segments showing growth, organic growth, and we have three segments out of five showing profitability improvements that are obviously supporting our results. Moving forward, difficult to know. Just now is very much about observing what is going on every single day and obviously reacting on those changes. We are expecting a gradual improvement on the service and aftermarket in the coming quarters. Difficult to know what is going to happen next month or the month after, but we will see improvements. We expect as well stability in terms of distribution, where we see obviously that hospitality, Igloo are doing very, very well. We also expect improvements in the second half somewhere. in terms of residential. And then it's very much what is going to happen on the OEM side, where we see, as we mentioned before, CPV doing very well globally. We see OEM in EMEA and APAC doing well. And then we see when is the OEM market in the US going to start stabilizing. Our expectation is obviously that that's going to happen during the second half. At the same time, we have marine. We don't see any changes in our numbers from the marine side. Even there, we're expecting improvements from a service and aftermarket perspective at the same time as we are obviously realistic and can see that if inflation doesn't come down, if interest rates don't come down, there is obviously a risk that we will see a deterioration on the marine OEM down the road. We will continue to put a lot of attention to our cash flow. And we, as Stefan already mentioned before, we are totally committed to reach our 2.5 leverage level. And then obviously on the two different segments that today are kind of struggling, EMEA and America, we will continue to stay close and we will continue to adapt. our cost so we can see improvements even during the second half. Some of them will come but for natural reasons meaning that we are very close to end up the shutdown of Seegin and we have the logistic cost and obviously as a service not the market is coming back the number of local warehouses is going to be reduced and our results are going to improve. And not to forget the major impact that we have from a service and aftermarket margin perspective. So two different spots on the short term, be close and adapt. On the long term, we are very optimistic about the long-term trends for mobile living, and we will continue to implement our strategy as usual. With that said, I would like to start with the Q&A session.

If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Frederick Avasan from ABG Sundal Collier. Please go ahead.

Thank you, operator. Good morning, gentlemen. I've got two quick questions. First one on the service and aftermarket within the marine division in particular. I think you saw this part of the business sort of starting to decline before both RV and CPV as well. And I suppose that means that it should recover before as well. So can you say anything about what you currently see within that part of the business?

We have seen a clear improvement that started in Q4. We saw more or less the same numbers or the same negative numbers that we saw in Q4, which are much better than the numbers that we saw during the previous, I would say, four to five quarters. So we see a clear trend upwards, even if it is still negative.

Perfect. Thank you. And second question on the margin in ECLO. It looks like it has expanded around but at least I'd say two percentage points. Can you explain what's driving that and also whether that might be a decent proxy for the full year, i.e. two percentage points margin expansion versus last year?

I think, I mean, as you know, we don't guide, but we have been communicating from day one that we knew that there were a number of opportunities to increase EU margins. One is obviously pricing to be more focused on price management. Secondly is product mix. It is clear that we have different products within the range and some products are high margins than others. It's very much about being a little bit more selective on the low margin products at the same time as we're a little bit more attention on the high margin. And then third, but not least, cost. We see clearly that business is also very dependent on two things. First of all, internal efficiencies, and we can improve even more. But secondly, it's also on the raw materials. mean we we 2021 and part 2022 were tough and due to the regime prices regime prices have been coming down at the same time as we have been working pretty well on our pricing and that has a positive effect all together and of course our intention is not to release for now but to be very very close so far so good according to our expectations yeah

That's very clear. One quick follow-up on that one. Can you remind us on where you are in terms of pushing and introducing more active coolers in the U.S.?

We will introduce the first coolers under EGRU brands in Q4 this year. That's the expectation. So obviously we have been working with that project now for one year. At the same time, I can also comment from that perspective, from a mobile cooling perspective, that we are developing the organization, the EGLU organization in Europe. We have transferred a number of resources from a domestic organization that used to be working on domestic second brand Mobicool into EGLU. So we are forming EGLU Europe as we speak. and all the resources have already been moved and all the resources are already meeting.

Perfect, thank you. You're welcome.

The next question comes from Gustav Hagius from SEB. Please go ahead.

Thanks for taking my question. I have a few if I may. Firstly, if we can be a little bit more granular or so on the cost reductions that we see this year related to the Seegin closure and the run rate cost program, where are we in terms of the year over year impact as you see it now in H2 from cost savings, both I guess from Seegin but also a rough indication where you think if there will be cost reductions from lower inventory based in containers and so forth.

With the raw material prices and the freight costs, it is clear that we see that coming down in comparison to the situation we had one year ago. Having said that, it is also clear that we are sitting on inventories ourselves. So even if those lower costs are coming in balance sheet, they are not shown yet. on our P&L expectations that we are going to start seeing that in the second half, clearly.

And then on the restructuring, do you have the... I would say we're talking about around 100 million year on year. If you see how it has been building up since Q1 last year.

And we have, as I mentioned, 206.

Obviously, the disclosure of the OC. And then we also have the full year effects of the continuous program that we launched in Q2 last year.

Sorry, you broke up a little bit. Could you reiterate what was the year-over-year EBITDA impact from those savings, the structural savings H2 year-over-year? Was it 100? 100 million. Yeah, okay. Perfect. And then you keep referencing in the report that you're a bit cautious on OEM, just so that I understand. I guess everyone assumes that American RV OEM will at some point trough, maybe start to grow again H2, and then you have the marine business that seems to be running quite well, and your CPV that is running very well with longer contracts. So what OEM are you referencing, and do you have any hard data on this? Because I also know that European RV OEM markets are seemingly quite strong still. So is this more of a hunch, or do you see any data on this?

Yeah, I think it's, I'm trying to understand.

I mean, if inflationary, an interest rate, we are manufacturing now, they have a back, working on the back, but they could not deliver.

But then the question is, again, is that back going to be there forever, or will it end if the The good news is that we expect that if that happens in America, if that happens in the market, that will be, to a very high extent, compensated, obviously, by the inflation and the growth on the American market. And, of course, that the surface of the market will be coming back. So, to me, it's very much a question of timing. The big Detroit is that marine can face that it is going. they cannot be feeling bad forever. So we try to be as realistic as possible, but we also look at what is going around in the surrounding industries.

Yeah, I think I can't really hear you but let's take that offline maybe and I'll pass it on maybe it's I don't know if it's my line okay thank you good stuff the next question comes from Douglas Lindahl from DNB markets please go ahead

Hello, gentlemen. Thanks for taking my questions. I wanted to start off with the marine business. Juan, you mentioned that you see the marine for larger engines doing well. First, I wanted to see what you believe is the reason for that. And with regards to the backlogs within the marine business, how long do you think this can expand? I didn't hear your answer if you answered it in the previous question.

Yeah. So, I mean, if we start with the backlog, which is obviously important, very, very important at the point, we have exactly the same backlog that we had one year ago. So that's good news. We see all together that our total backlog for the company is lower than the backlog that we had one year ago. At the same time, as we see the order intake coming up now during the last weeks. So there you have two data points. So it's clear that we are coming from a situation where the market has been shrinking for a while. North America, but also the other economies have been kind of cooling down. At the same time, we see that oil intake is on the way up, so that's positive. And then on marine specifically, it is crystal clear that what we see is a difference between larger boats and smaller boats. On the smaller boats, we have seen both in retail but also manufacturing that the smaller boats have been shrinking now for a number of months, while we see still very good traction on the larger boats. and the more again over 200 horsepower they are still growing high two digits and that's obviously the the group that is having the smaller boats they are not as financially resilient as the one buying larger boats correct an important piece of information of course that on the smaller boats you have mechanical steering on the leather boats you have hydraulic and electronic cities steering and then you have a major

price point difference as well so that's another thing which is driving our growth in comparison to what the industry is performing all together yeah okay interesting um thanks for that on switching topics a bit um on the earnouts excluding igloo I know that your other current liabilities is down somewhat sequentially what's the reason for that would you say Stefan

The reason for that is that we are continuously updating what we are, you know, expecting that we will have to pay. So we have done that. And then the payment as such excluding Igloo is, you know, going to come, you know, around 500 million during QTEC.

So excluding Igloo or not will be 500 million in Q2.

Yeah. And you know our point of view on Igloo, right?

Yeah. And a final question, if I may, on APAC, super strong profitability, as you already highlighted there with organic growth declining. How should we think about this business in sort of a negativity? growth environment, is this sustainable margin levels, would you say, or are they exceptionally strong here?

We have always been pretty strong in APAC and that's a consequence of the mix. It is important for you guys to understand the main difference that we have between OEM business and service and aftermarket business. That's valid even in APAC, not to the same extent as in the rest of the regions, but that's also valid. And then we have a good mix where OEM is less than 45% in comparison to sales and aftermarket and distribution. So I cannot guarantee you that we are going to be on 25.6% forever. But since I joined the company, we have never been below 20%. It is not my intention to reduce it. We know that we are perfect. We still see opportunities. But of course, it's very much due to the mix. The good news in this case is that we have a negative mix and still we perform better. At the same time, I hope that you note as well that we are pretty good at reducing costs, adapting our capacity needs into new situations. And then you have another factor which is of importance, and it is the acquisition that we made and the NPS acquisition that we made two years ago that has a nice accretive impact on the APAC numbers as well. So NPS altogether is bringing in very nice margins. I mean, I would tell you, all the acquisitions that we did during 2021, 2022, with the exception of IGRO, and that's why we are paying a lot of attention to IGRO as well, to elevate those margins.

Okay, thank you very much.

You're welcome.

Please state your name and company. Please go ahead.

Yes, good morning Stefan and Juan. Hope you can hear me. A couple of questions from me and maybe starting with the outlook. Somebody said that it looks bleak and of course it does, but you actually detect slight improvement of the outlook compared to what you wrote in the Q4 commentary when it comes to what you say in terms of OEM where you actually added that you expect to see stabilization in demand by the end of the year when it comes to the RV business in Americas. How do you model that and what do you hear from your customers? I can also come up with a situation where you're actually back to growth by the end of Q3. What do you find realistic?

I think, Daniel, that you have to differentiate what customers tell us and what we think. I mean, history tells so far for the five years that I have been in the company, history tells that our customers tend to be a little bit too optimistic and that we tend to be a little bit more realistic, you would say. So of course that I am a little bit more optimistic today for two different reasons. One, the traction that we had on the marine business, on the RVVM in both EMEA and APAC is still there. So that means that we see, so to say, a postponement of the negative trend, which is positive. Secondly, we see order intake flattening out and starting to improve as well, which is positive. But at the same time, you cannot deny the fact that everything is going to have to do with inflation and interest rates if you're going to buy a new boat, no matter if you are in Australia or you are in the US. It's a question of time. So I think, I mean, I'm not... I'm more optimistic today. I would say that I am perhaps less pessimistic today than I was six months ago when we saw that the American market was coming down at the same time as we could find a logic on the other OEMs were going to come down as well. Then you also need to model in your files that the American market is always at this shape, not dramatically, very, very fast. And it starts growing dramatically on the way up again. While Europe and APAC are much, much softer movements. So I think to me, it's very much a question of timing. It's really when will EMEA, OEM and Marine OEM have some negative impact? And when are we going to see the US, RV, Americas flooding out and starting to go? So everything is about timing.

But it looks like they could trade places sort of starting to look like the U.S. market could be troughing out towards the end of Q3 maybe. And maybe then you will see some weakness in the European market, for instance.

Are you seeing any changes?

changes when it comes to consumer credit availability in the U.S. market on the RV side?

No, not more than people need to be more cautious for natural reasons.

Okay, good. Just a nitty-gritty question for Stefan maybe. Given what we know, as you mentioned, when it comes to the earn-out payments being around 500 for Q2, and you have the dividend as well, and what you say in terms of cash flow in H1 versus H2, and you also had restructuring payments, I think you mentioned as well, in Q2. And then again, maybe a good big release on inventories. Is it reasonable to see free cash flow being positive in Q2?

um let me say i would i would hope so uh but uh of course i mean there is a lot of dynamic uh driven by the demand of course which is going to be to be crucial i mean we are taking all measures internally to you know to uh

continue to drive down our inventory, which is obviously going to be crucial here. So it's going to be a little bit tough to the demand development here and the service in Baltimore. And as we say, we are expecting a gradual improvement here. But also on that side, as Okan is mentioning, it's a lot about timing. When will that happen? It comes down very much to the demand. But as you model it, given what you expect in terms of cash release from inventories, it's not impossible, although you do have the dividend. and you also mentioned something about restructuring payments. Yeah, you're right in your set. Yeah, okay. Okay, bye. No, but the idea is alignment. I mean, whether it's going to happen happened on the 27th of June or on the 10th of August. What we know is that Q1 is a tough quarter for us. Historically, it has always been a tough quarter for us. Q4 and Q1. And I do believe that at least the takeaway is we have a good performance. We are delivering 11.6% in every day. We are delivering a strong cash flow in our second week of quarter every year. We have service market down 90%. We have an organic growth in America of minus 48%. And we're still delivering good cash flow, good everyday margins. The best is yet to come.

I guess that's the best I can say. Okay, good. And then a final maybe in integrity as well on the inventory and that expected to continue to come down and that sort of in relation to what you guys mentioned in terms of freight costs and raw materials. If we see inventories coming down as you expect during Q2, will we still have to wait until Q3 to see positive effects from freight and raw material in the P&L?

The more material for that, you need to think H2.

Okay, thank you. That's all for me.

The next question comes from Agnieszka Vilela from Nordea. Please go ahead. Hi, guys. My first question is on your comment, Juan, on the improving order intake in the recent weeks. Could you just elaborate on that? Is there any specific segment that is driving this improvement? I would say that we see practically everywhere with the exception of America. But if we look at at the three different state channels. We see the improvements in the different state channels, and then we're looking at segments. We see in reality global, we see Americas showing very, very, very well. And then we have Americas being still negative, clearly. APAC is quite flat-ish. Yeah, that's it. Marine doing the same levels as last year. Perfect, thank you. Juan, if you could comment on the pricing environment. right now, if you look at yourself and your industry, is there any risk that you will need to cut prices if the demand slows down a bit more in the marine business or in EMEA? Or do you want to try to stick to your pricing? we will stick to our prices. To me, this is very much up to each company to decide from my perspective to be aggressive on prices in a situation where your products are not seasonal and where the demand is not there, that would just prolong the pain. So why would you do that? So our intention is that the way around. In a situation where the market is falling as it has been falling, I don't believe in buying market shares, especially if the market shares are on the most low margin business that we have. So I would say the other way around. Our intention is to be is more selective moving forward as the OEM market is moving upwards.

Again, we have a different mix today than we had a few years ago. And we have a financial target that we will hit. In order to do that, we cannot just keep doing things in the way we always did. We need to be more selective on pricing. We need to think a little bit less on market share. and think a little bit more in how do we grow the company in a more profitable way than we have historically done.

Perfect. Thank you. And then just the last question on your commitment to 2.5 times than the TBDA. Do you have any kind of time target for reaching that?

No, but it's what we have said that we are going to move to towards that target during 2023. But, you know, are we going to reach that exactly? Probably not. So it's a meaningful movement towards that target. Okay, and maybe just a short follow-up on this one. You still have 9 billion SEC in inventories. Can you share with us how much of that inventory do you plan to release at the end of 2023? Thanks. I mean, it's very soon to be also, you know, a material release for the remainder of this year. It's obviously also a balance here depending on timing when the service of the market is going to start to recover as So that is obviously one factor. On the incoming side of inventory, we are taking significant measures. We have containers down 58%. We have a number of of FTAs down 14% very much related to our manufacturing capacity. It's going to be a balancing act also when that happens. you know the the uh the service of the market going to show recovery here so um so it's it's like it's like a day-to-day game here I would say. The good news that we know is obviously that we have Q2 and Q3 that are the strongest for us. At the same time, as Stefan commented, we have the KPIs in place to measure every single Every single day, every single week, the number of containers that we are coming from China, and we know exactly the number of fees that we have in the factories.

So obviously, when the inflow of new material is coming down as dramatically as it is doing, at the same time as what we are producing is so much less than we need. At the same time, as I pointed out, simply because of seasonal reasons, the effect should be there. In our opinion, it's pure mathematics. Absolutely, yeah.

Okay, perfect. I understand. Thank you.

You're also welcome.

The next question comes from Johan Eliasson from Kepler-Tuvriax. Please go ahead.

Hi, Johan, Stefan and Rickard. Thank you for taking my questions. I was just... I was wondering a little bit pricing versus volumes. So organic, you dropped some 13%. How much of that was positive pricing? Where are we in terms of volume developments? I would say that pricing is somewhat dependent on the product. It's very difficult to give you a number for the entire group since we have so many products and so many verticals. But I would say that an average price is some 10% to 12%. Keep in mind that we have been increasing prices now for two years. And we have recent price increases again. Okay. into global and I guess you had positive 5% organic. Are we talking about the same 10-12% price hikes there? Yes, so if you look at the American market and there are we are following with the numbers from one of the American associations looking at that. If you look at the last, I would say, two workers, the volume of the American market from a cooler perspective has been down, while our revenue has been quite a bit up. I wonder just, I mean, this is a bit of a guessing game, obviously, but you were talking about the stable costs in EMEA because of the plants you're running. Can you quantify find it to a degree now in Q1, Q2? Well, I can tell you that we still have in Germany about 240 people. 240 people. And of course, we need... to hire and we need to train 240 people. So if you calculate the average cost for a person, then you realize that this is quite a bit. That's for sure.

But I guess we are having the number on the top of my mind that there's more probably 1% on the AVT on EMEA.

Yeah, good. And then one thing I was thinking about just having acquired an electric vehicle of my own. In the CPV segment, I mean, your air conditioners and then fridges and what you have have always been focusing quite a lot on energy efficiency because they are used when the engines are not running in the mobile homes or boats, etc. Would this be an opportunity for you? Because in an electrical car, I mean, this energy efficiency is as important as it is for a still standing RV, obviously, to keep the aircon going.

Or is that sort of an opportunity that is not really open to you because there are two big competitors in that space? I think you have different factors. So if you look at our CPV OEM business, you have one business which is cooling compartments and that business is showing a fantastic underlying growth and it has been showing a fantastic growth now for years we are getting awards and that market is a growth market clear Then you have the truck business. The truck business has also been doing pretty well in the last 24 months. We are selling air conditioning and we are selling also refrigeration. So many kind of mini bars for the truck industry. has been doing also very, very well. The new one, which is also very interesting, is, as you know, we've made six acquisitions for mobile power solution companies. And, of course, both cars, but nonetheless, need to electrify to reduce consumption. That's a fantastic opportunity that we have in front of us. Some of the businesses that we acquired are already doing that, but we have more opportunities to extend it to the other businesses. Okay, looks promising for the future then. Excellent, that were all my questions. Thank you very much. Thank you. Okay, thank you very much. That was the final question. I'm just handing over to Juan for some final remarks. Please. Thank you, Richard. Ladies and gentlemen, thank you very much for your attention. And again, I think that the market is not a world that we can do without. We are doing our very best to perform in a very, very positive way and to make sure that that our company keeps developing according to our strategy. So thank you very much to all of you, and have a great day.