Dometic Group AB (publ)

Hello, good morning everybody, and welcome to the presentation of the quarterly report for the second quarter of 2023. I suggest that without any delays, we start immediately with the highlights for the quarter. We are proud to deliver another quarter showing solid earnings and record high cash flow, especially considering the current market conditions. We still see inflation interest rates having a negative impact on consumer demand. We see the RV industry production in the US still at very, very low levels. Up to May, the industry is down 50%. This is not the number for Dometic, but for the industry. We see as well that the inventory levels on the service and aftermarket import and service and aftermarket for us still down. but we see clear improvements in comparison to what we saw in Q1 or Q4 last year. In regards to performance, 10% down in organic growth, driven primarily by Americas, down 35%. At the same time, as we see OEM outside Americas still showing nice growth for us. Service and aftermarket, 10% down, but again, clear improvements versus Q1 where we were showing 19 down or q4 last year where we were showing 22 down every time margin before items affecting comparability comparability 14.1 on the decline is driven primarily by americas we see improvements in the emea segment even if we are still below last year we continue to have solid margins in APAC and marine, and we are very happy to see the strong improvements in segment global driven primarily by Igloo. And of course, we feel very, very proud of delivering a very strong operating cash flow driven by the reduction on our inventories. If we move on to the financials, we ended up at 8.3 billion in sales or 2% down in total growth with 10% drop in organic and supported by an increase, a growth of 8% due to currencies. Evitae almost at 1.2 billion for an Evitae margin of 14.1 to be compared with 15.7 last year. We also reached an operating cash flow of 2.3 billion, which is obviously a heavy improvement in comparison to the delivery last year.

And with that,

Leverage remained at the same level as in Q1 2023, at 3.2, despite the fact that we had the dividend payouts, we had burnouts, and a negative FX impact on the numbers. And finally, EPS ended up at 1.67. If we move over to the year-to-date numbers, we ended up at 15.6 billion, in the same way, at 2% total negative growth with 11% drop in organic growth and 8% in positive FX effects. Every day, slightly over 2 billion krona or an everyday margin of 13% in comparison to 15.3 last year. Even in this case, heavy improvement in operating cash flow delivering almost 2.6 billion in comparison to slightly over 300 million last year. and APS ending up at 2.72 order. If we look at the sales growth, I will not go through all the numbers, but perhaps worth to mention that we are showing, again, 10% organic growth drop versus 13% down in Q1 and 11% in Q4 last year. If we move over to sales by application area, no major changes in this case. Perhaps the one to mention is climate, which stands today for 28%, and the one that is mostly affected by the RV situation in the US, since the number of air conditioners is higher in the US than anywhere else. And that market is obviously the largest market in the world. Other than that, very, very stable. If we move over to sales channels, worth to mention here that the OEM has moved from 61% in 2017 to 43% in 2023, at the same time as the RV OEM has moved from 49% in 2017 to 22% in 2023. And as you can see, distribution is increasing its share simply because the RV business is dropping more. Looking at the OEM, which is something that is not always that we are elaborating, you can see that the RV OEM side stands today for 22%. And it has been growing since 2017, clearly. But what is even more important is that the CTV business has doubled its size in the last five years, and the marine business has multiplied its size by four in the last five years, both organically and acquisitively. Looking at the service and aftermarket and what happened during the last couple of years, you can see the pandemic effects after the first half, the very weak first half of 2020 kicking in when the market bounced back in the second half of 2020. continued to grow dramatically in 2021 and also Q1 2022. And then the bullwhip effects that we have been commenting a couple of times started to kick in in Q2 last year. What's important here to mention is that on one side, we see the service and aftermarket gradually improving. We were showing in the quarter minus 10% in comparison to the minus 22% in Q4 or minus 19 in Q3. Oh, sorry, Q1 2022. this year. And the other factor which is important is that now we have Marine being positive, and we have also APAC being positive, while we need to recover America's anemia. But we see, again, that the buildup, the inventory buildup that took place in the last 18 months is starting to be consumed all over the world. Looking at EBITDA, we ended up at 14.1. driven very much by Americas. We see that EMEA is improving quarter by quarter now, but still below last year's. And the reason for that on one side is the sales mix, where we are still growing in OEM while we have a still quite negative growth in service and aftermarket, but also the extra logistic costs that we have commented in a couple of quarters now. And on top of that, the inefficiencies caused by the factory move from Germany to Hungary. And then happy to see that Igloo continues to improve its margins. If we move over to the segments, Americas, total negative growth of 27%, with organic growth of 35% down, very much due to the RV situation. We see the service and aftermarket is below last year's numbers, but much better than we have seen during the last quarters. So again, coming up gradually as we have been commenting. Every day, negative 26 million or negative every day margin of 1.8%, which of course is not easy to compensate when the market is dropping at the pace that it is dropping. What we are doing about that is obviously to continue to right-size the business, looking for additional savings wherever we can at the same time as we continue also to drive price management. and prioritizing margin in regards to volume. EMEA, positive growth, totally speaking, 5%, but organic negative growth of 4%, with good organic growth in OEM, both on the RV side, but also the CTV side. In the same way as in America, service and aftermarket is still below last year's numbers, but a clear improving trend. EBITDA ended up at 312 million krona or an EBITDA margin of 12.8, which is still below last year's, but we see also a major improvement in comparison to what we saw during the last quarters. Even in this case, the mix is having a negative impact since we are still quite negative on the sales and aftermarket, and we see as well the logistic cost starting to point down in comparison to what we have seen so far. We are expecting to see inefficiencies due to the factory move to Hungary in the coming months, but it will gradually improve. And the reason for that is obviously that when you are moving a factory for a certain period of time, you are carrying double money in order to secure the quality and the delivery performance. Siegen, the factory that we have in Germany, has been totally closed, which means that all manufacturing refrigeration in Europe today is taking place in Hungary. In the same way as in Americas, we continue to look for improvements, improving efficiency, reducing our costs, and also driving price management. APAC showed an organic growth, negative organic growth of 3%, with double-digit organic growth on the VM side. Service and aftermarket is slightly up in comparison to the same period of last year, while distribution is still having a negative impact on our numbers. Solid EBITDA margin, 130 million, or 25.8%. And even here, obviously, the growth on the OEM side at the same time as we have negative distribution is having a negative impact on our margins in the quarter. And happy to see that the acquisitions are still keeping a very, very good level of performance.