Dometic Group AB (publ)

Hello, good morning, everybody, and most welcome to this final quarterly report for 2023. Let's move to the highlights of the fourth quarter without any further delays. So market conditions are still soft. And of course, we are happy to report an increased margin and improved net debt leverage. We see improvements in the retail inventory levels, both in terms of service and aftermarket as well as distribution. We see as well a continued decline on the WM driven by marine, while we perceive as well that RV is becoming more stable, especially in North America, where the last two months the association has published the numbers and they are positive for the last two months of 2023. Looking at performance, 13% down on organic growth, So it's not the market moving from minus 5% in Q3 to minus 3% in Q4. So as we commented last time, we were expecting improvements and this is confirmed. We see a distribution coming down more than we expected from the beginning, driven by especially Igloos customers. At the same time as we see that inventory levels for those customers are much lower today than they were at the end of Q3. and a little bit more optimistic about the future. We see OEM coming down with 40% for the quarter, very much driven by marine, as said before, and also Americas. Very pleased to see that our margins continue to develop positively. We landed at 8.7% versus 7% last year. And of course, very happy to see as well that leverage is down to 2.7, starting to get close to our target of around 2.5. If we look more specifically at the numbers, sales ended up at about 5.3 billion krona, 40% down total growth, and 30% down organically. Every day, positive, 465 million, or 8% up versus last year, and as I mentioned before, 7% EBITDA margin versus 7% last year. EPS came in as 16 URN and adjusted EPS came in as 67 URN. Operating cash flow continued to be strong, ended up at close to 500 million, and Stefan will get closer later, a leverage, as mentioned previously, 2.7. Looking at the whole year, 2023, net sales close to 27.8 billion or 7% down totally or 12% down organically. EBITDA ended up at close to 3.5 billion or 12% down, while EBITDA margin ended up at 12.5% versus 13.2%. EPS for the year at 4.17 EUR and adjusted EPS at 5.93 EUR with an all-time high cash flow of 5.2 billion and a leverage ending up at 2.7. If we look at the sales growth for Q4 2023, I do believe it is worth to spend two seconds just looking at what happened with the post-pandemic effect starting in Q2 2022. And as you can see, we have seen seven consecutive quarters of negative organic growth. Starting with the RVOM in Americas coming very, very low and service in aftermarket. And now the last two quarters we have seen marine the duration in marine, but also the readjustment of inventories in distribution. Looking at organic growth, Americas coming down 16%, EMEA down 9%, APAC positive, plus 1% marine, minus 12, and global minus 22. Looking at different application areas, not major changes. So we could comment, obviously, that climate is increasing a little bit due to the launch of the new generation of air conditioners globally. And then on the food and beverage, it's very much driven by the decrease on the RV OEM as well as EGLU coming down in the last couple of quarters. Looking at the different side channels, we see that the OEM side came down to 43% compared to 44% in the previous year. At the same time, service aftermarket increased one percentage point to 20% versus 27%. Worth to mention as well that the RV OEM side, or the total OEM, continues to come down as we see a decline, especially in North America so far, while both CPV and marine increased in 2023 versus 2022. Moving into one of the areas that is very, very important to us, so it's not the market. The positive in this case is that you can see that we are getting close to the same levels as we were in 2019. You see as well that the seasonal pattern has changed and we have seen the last two quarters coming very, very close to the same seasonal pattern that we had in 2019. And we also can see again that we have inventory levels are starting to fade out, and hopefully we will see even further improvements in the coming months. Happy to see EBIT margins coming positive for the second quarter in a row, and of course a consequence of many different actions. On one side, we keep working obviously on price management. We continue to focus on cost reductions, but also the sales mix obviously has a positive impact on that with service and aftermarket not dropping at the same pace as it has during the last few years. It is clear as well that we prioritize margin before volume, extremely important obviously in terms of the low margin areas that we have in the company. We see good margin improvements in EMEA, in APAC and global, and the decline is driven in reality in marine and Americas due to the lower safe levels. Looking at Americas, organic growth 16% down, with service and aftermarket still being negative, but showing improvements in comparison to what we have seen during the last quarters. we see as well that the industry is stabilizing and we should see obviously growth during the the new year 2024. every time every day margin coming at six percent negative impacted on one side on one side by the sales decline but also showing a negative fx effect which is quite substantial for in in such a a weak quarter as q40s we have a new head of Americas in Todd Seifert that joined the 9th of January. And it's clear the focus in Americas is just now margin improvements and continued transformation journey versus a lifestyle company. Looking at our main organization, organic growth down 9%. Service and aftermarket still low, but even there we see that the inventory levels are improving. Slightly negative RBOEM, while CPBOEM is still positive. EBITDA came much better than one year ago. We see clearly the positive impacts of cost reductions. We continue to work on price management in a number of areas. At the same time as the extra logistic costs that we incurred during the second half of last year are starting to become lighter. and we continue to do so. The same is valid with the factory move that we had from Germany to Hungary, where we see efficient improvements now month by month. Of course, we are, as anybody else, having shipments from Asia impacted by the situation in the Red Sea. We are working on that. We will do anything, obviously, to mitigate or eliminate the negative effects of that crisis. APAC is still really positive considering the market situation is still growing at 1%. Service aftermarket is a single digit negative, but even there we see improvements on inventories and OEM is still driving nicely. Every day margin, very strong 26.2%. And the same, we keep working on our cost reduction activities at the same time as we continue to manage pricing. Marine, 12% organic growth down. This is the second quarter where we see growth in service and aftermarket. So that's positive and having a positive impact on our margins. At the same time as we see that the OEM side continues to go down and will continue to do so for a couple of quarters at least. EBITDA margins are still very strong, 21.6. And we have to consider here as well that this is a weak quarter even for marine. So that means that the fixed cost has an impact. So we are happy to see that our margins are as resilient as they are. We continue, and that's one of the areas where we continue to invest heavily on product innovation, and we have a strong pipeline of products to be launched in 2024 and 2025. And then finally, in terms of segments, moving over to global, 22% down in organic growth, very much driven by the situation with Igloos customers rebalancing their inventories. At the same time, we see that the inventories at the end of the year are down quite a bit in comparison to the situation at the end of Q3, where inventories were quite high in comparison to the same period previous year. Every day, very strong, 6.2%, despite the loss on the top line. And we are very happy to see the progress that we are doing with Igloo and the profitability in that business. Looking a little bit closer to Igloo, what is positive is that consumers are still buying the products. You can see on the upper chart the evolution during the last couple of months, but also during the whole year. And you can see consumers keep buying cooling boxes. At the same time, if you look at the entire situation during 2023, we keep taking market share. So this is very, very clearly showing that it is not about the market demand, the underlying market demand, but really the inventories that the channel built up during the last 12 months. And what we see is starting to come down quite heavily. This is the final quarter for the year. So just looking a little bit on some of the strategic activities, we see again that the OEM side is down to 43% and therefore distribution of the market up to 57%. So 18 percentage points down from the situation we had in 2018. We see the D2C e-commerce sales up 90% in 2023, even if we are showing a negative organic growth of 13%, which we feel is very, very positive. So it's clear that we are becoming much more direct to consumer business. And we are also happy to see, obviously, that all these changes that we have been doing during recent years are starting to lead to higher margins despite a negative impact on the top line. From a product leadership perspective, inventories are coming down. We are starting to launch the products that we have been developing the last couple of years, but we have been very, very careful in launching because of the high inventory levels that we have ourselves. We continue to increase our investments in product innovation. We're up 11% in 2023. And we have put a lot of emphasis on developing global platforms with obviously geographical adaptation. And we have multiplied by four the number of global platforms that we have today. In terms of cost reductions, down 65%. The programs that we introduced 2019 and 2022 have been completed during the quarter. And if we look at manufacturing entities, we are down 29% in comparison to the situation we had close to 19. Of course that we have a few companies, a few factories more that came through acquisitions, but looking like for like, we are down almost one third. Looking at product launches, exciting product launches during the year, starting with the marine where we have seen, we saw a fantastic development in the first half. And then obviously the market contraction during the second half, we launched a new global platform for air conditioners that is growing nicely. Igloo launched the first generation of active coolers with Dometic technology inside. We have so far seen very, very positive evolution in our customer meetings. And then last but not least, last quarter we also introduced the NRX Refrigerator, a new platform for smaller refrigerators. In terms of correlations and our restructuring programs, we deliver what what we communicated previously so finally we booked 68 million in additional cost in the quarter uh landing totally speaking of 960 million which is the million above what we communicated at the start when we communicated different programs uh totally speaking to some people have been impacted by these changes and we are running just now at a rate of 525 million krona in savings. Of course, the volumes are lower and we expect to be on the 600 million that we communicated once the volumes are turning back. Lots of progress from a sustainability perspective. We are better than we targeted in all the parameters, so injuries ending up at 1.9 versus a target of two, a little bit higher than one year ago, but that's due really to the much lower number of work hours in 2023 versus 2022. Female managers kicking in and ended up at 29% versus 24% one year ago, so major change. And even in CO2 reduction, a lot of progress, happy, really happy to see how we are equipping all our factories with solar panels and by that reducing the negative impact on nature and on audit also better than target. So a lot of progress in all the different areas. And with that said, I would like to hand it over to Stefan, please.

Thank you very much, Juan. So starting to look on the Q4 EBITDA development. As you have read, we went from 7% EBITDA margin in Q4 last year to 8.7%. This is very much driven by an improvement in the gross margin going from 23.4% last year to 27% this year. Sales mix, important contributor to this development. Price management, cost reductions. And we are step by step also enjoying lower raw material cost as we are turning over our inventories. And then we also have seen gradually declining negative effects from the logistic cost. And as Juan mentioned before, that the manufacturing efficiencies in EMEA is improving. Then in Q4, we have had just a minor impact from the Red Sea situation. Looking at R&D and SG&A expenses, they are going up, partially driven by the negative organic growth development, obviously, but that we are also continuing to invest in structural growth areas. And it's also partially offset by cost reductions that we have been running. FX have had a very limited effect on the margins, so not even worth mentioning. Moving over to our cash flow for the period, 488 million, which is lower than the same period last year. But as we have communicated previously, it was a very good quarter last year. Still taking the development of net sales into consideration until we have seen a robust performance on operating cash flow. And then we also have had a temporary increase in fixed assets, which I'm going to come back to in a couple of slides. Income tax paid almost on the same level as last year. And we have a full year P&L tax rate of 29%, which we communicated already in the last quarter here. Then very happy with the full year cash flow development, 5.2 billion in operating cash flow. You also need to take into consideration that we did pay 300 million euro back in a bond in September. Looking on operating cash flow over time, as I said, 488 million equivalent to 69% cash conversion. We had a cash conversion in Q4 last year of 166. But if we look on the previous quarters there, the quarter in 2023 is more in line with what we have seen. Moving over to the different working capital components. First of all, a comment on total working capital. On an LPM basis, we are on 31% of net sales. But I would like to draw your attention to the fact that if we look on the quarter isolated, we are down to 25%. So we are moving this in the direction of the 20% that we see as the first target to aim for. Inventory has been coming down from 9.3 billion to 7.3 billion, almost 2 billion. And that has been a sequential decline since Q3 2022. And we obviously also see that the number of days are starting to turn down. We have continuous actions and plan on how to optimize working capital towards the target of 20%, which we will continue to drive into 2024. So looking on CapEx and research and development, CapEx ended on 5.1% in the quarter, which is higher than previous year. And as I mentioned before, we took a decision to execute an option for a building related to mobile cooling in Texas. So that is amounting to 140 million Swedish Krona. The full year CapEx is 2.1% in relation to net sales, which is slightly up versus last year, but in line with what we have communicated. Looking on R&D, 2.8% in relation to net sales, which is a bit up from Q4 last year. And we are continuing to do investments in structural growth areas like marine mobile cooling and mobile power solutions. And the full year ended on 2.3% of net sales, which is also up a little bit versus last year. Moving over to net debt to EBITDA leverage, it ended up with 2.7%. which is nice that we are continuing to move. We were, this was driven by improvement in EBTA, but also we had some support from the currency development. I would still say that the total currency impact for the full year is still negative on this KPI. So still important to keep that in mind. And we are as we have communicated clearly before, committed to drive towards our target of around 2.5. Looking at our debt maturity, as I mentioned before, we did repay 300 million euro in September 2023, and the average maturity is 2.5 years. And if we are including the 1 plus 1 option, we have 2.8 years of maturity. We don't have any maturities in 2024. And then we have on that an undrawn revolving credit facility of 200 million euro, where it's formally maturing in 2026. But here we also have a 1 plus 1 extension option. So with that, Juan, I'm handing back to you to summarize. Thank you, Stefan. So the dividend proposal, as you have been writing, it's one krona ninety compared to one krona thirty last year. So it's forty six percent of twenty twenty three net profit. And this takes us to an average of 39% over the period 2016 to 2023, which is very close to our policy, which is at least 40% of net profit over a business cycle.

Thank you. Then I will try to summarize the year. So, I mean, for most consumer businesses, 2023 became another tough year where consumers are obviously very, very cautious with the monies. We ended up at 12% negative organic growth. Happy to show how reliant the companies ended up at the everyday margin of 12% versus the 13.2. And what is even more important that we are starting to see improvements in the last six months and should continue to see those improvements moving forward as well. Operating cash flow, all-time high, 5.2 billion. We are getting close now to our leverage target of around 2.5. In terms of the future, we see service and aftermarket recovering stepwise. We're starting to get very, very close to the levels we are coming from pre-pandemic. Distribution, we have seen a number, well, two. pretty tough quarters. We believe that the inventory levels now are low and that we should see improvements, gradual improvements, I would say, in the coming couple of quarters. And then on the OEM side, we continue to see weak demand, a little bit changing shape from the RBOM Americas to Europe and Marine. And then strategically, we continue to walk the talk and implement our strategy as we have been doing since 2018. And of course, we will continue. We have very, very clear financial targets and we will continue to move and prioritize margins before volume. And that takes me to the next step. If we look historically at the situation in 2018, when I joined the company and we communicated the strategy, we are coming from three different regions. That's how the organization looks like. In those three different regions, we were in charge of all the products, all the channels, all the markets. Since then, we have more than doubled the size of the company. We have added a number of different industries. And as a company, we need to evolve with those changes. We can see how the marine business developed as soon as we started to put even more emphasis on that. We have seen how global has been growing as well. For us, we believe in specialization, we believe the focus pays off, and that takes us to the next step. After the Eagle acquisition, we see that we have a lot of synergies between the Dometic brand and the Eagle brand from a cooling box perspective, and that leads to a situation where we are putting those organizations together. As we communicated last time, one common single infrastructure, two different sales teams, since one is premium and the other is a better product. We also take in mobile power solutions. As you may remember, we completed six acquisitions of these companies in the last couple of years. And we believe that this is the right time to put those businesses together under one global MPS or mobile power solutions organization that will become part of global. So we are moving mobile cooling from global to become one single segment at the same time as we are renaming global to global ventures. and moving all the mobile power solution businesses into global ventures and what remains is really the three geographical organizations that will be in charge of land vehicles which means when looking at the structure if you look at the chart from the left hand side to the right hand side again the historical regions will be renamed to land vehicles americas land vehicles emea land vehicles apache One question you could raise is about why don't you put that together under one? Well, the reality is that the product ranges are pretty different. We don't have, apart from Thor, we don't have any global customers, so it doesn't make any sense at this point. Of course, that would be the ideal situation, but there is no balance in the way. But on the contrary, all the rest are substantial businesses with growth opportunities, and high margin businesses that we would like to develop even faster. And that demands focus. So we are working hard just now on the restatement on the numbers. And of course, as soon as we are ready, we will communicate it to you. And that's all for me. And with that said, I would like to open for 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. Please mute your line when you have asked your question and please limit yourself to only two questions. You can also write your question on the webcast page. The next question comes from Gustav Hagius from SEB. Please go ahead.

Thanks for taking my questions. If I was to start with the OEM channel, you wrote in your CEO letter in Q3 report that you foresaw stabilization in the US RV during Q4. And we always saw RV shipments up in December, 8%, if I recall. But I didn't see it in this report. But in contrast, you wrote that the OEM should be expected to be weak coming quarters. Could it just be a little bit granular? Do you still expect US RV to stabilize? Or is that a comment on EMEA? Yeah, that'd be helpful.

No, no. It was obviously what we were talking on the earlier report was all together. So we expected clearly an stabilization on the RV OEM Americas. And as you know, the association, American association is expecting to have a growth of 15 to 20% in 2024 versus 2023. We have seen the last two months became positive in North America. At the same time, as we see the European businesses, the business in Australia are starting to show weaknesses. which is very much according to expectations. So again, mixed bag. America's coming back at the same time as EMEA and APAC that have been positive until now, starting to move into the negative territory. Then we have marine. Marine has been now negative for two quarters, and we are expecting to see a negative marine for a couple of quarters, and then we are expecting to see an improvement versus the second half. Yeah, that was the OEM. CPV feels positive, so that's also perhaps worth mentioning.

And a follow-up on that, the growth numbers you referenced there in the U.S., 15%, 20% perhaps, is given that you have reduced your SKUs and given that there's some discussions in the States of sort of lowering content per vehicle to make RVs more affordable perhaps, is that a relevant number for you, you think, volume-wise, 15% to 20%? No.

No, it is not. First of all, you have a slightly different situation in the US today in comparison with some years ago. During the pandemic, you got a situation with a number of Chinese importers taking standard refrigerators. They have been kicking in. And of course, we want to increase our margins in the US. And refrigeration is one of the areas that is driving very little service. So we are selective. We will be more selective. So if the market grows 15 to 20%, you shouldn't expect that the metric is going to grow on the RVVM side in North America by 15 to 20%.

That's clear. And lastly, into 2024, from what you can see now with all the parameters on the external costs, Red Sea, other freight and raw materials and whatnot, do you have any sense of if things stabilize at this level, if you're still going to have a tailwind from external costs supporting your margins for 2024? Yeah.

Yeah, we expected to see. I mean, it's clear that we have a situation in the Red Sea, but as we discussed, I mean, you have two different impacts. One is obviously on lead times and that might have an impact in Q1 in terms of revenues in the first quarter. But then you have obviously extra charges. Every single company just now is implementing surcharges. Of course, our intention is not to be sitting in midway. Our intention is clearly to pass that to the markets. At the same time, we see that raw material prices are down versus the situation one year ago. We have been sitting on inventories, but as the inventories are coming down, we are starting to invoice material that we purchased to lower cost. And then we have all the efficiency activities that we have been running in recent years. I mean, just to give you some kind of flavor, our number of FTEs is down 22% versus December 2021. So we have been doing a lot of activities to become more efficient and to become more resilient.

Thank you. Thanks for taking the discussion.

The next question comes from Agnieszka Wajlela from Nordia. Please go ahead.

Perfect, thank you. Just coming back to Americas, I just wanted to know if you could reflect on your performance in Americas in 2023. You mentioned the portfolio optimization that it was burdening growth, so if you could quantify that. And also looking forward, what's your strategy What kind of headwind from further reduction in SKUs or products or where you are in the US could we expect in 2024?

I think we are talking about products. In America, I don't think it's just not about SKUs or reducing number of SKUs in that way. I mean, the reduction of SKUs moving forward is much more in reality by implementing global platform as we are doing with with air conditioning, as we have been doing with some of the other products, I think in America just now it's clear that after two years of market contraction, we have overcapacity. We have been adapting very, very well in terms of FTEs, but we still have factories. We still have fixed costs. And that's kind of the next step where we are looking at how do we reduce that. At the same time, even in America, we have extra warehouses that are costing extra simply because we had loaded for a good 2022 that didn't didn't happen so this is what the kind of course that we can still take down during the coming months as the market is coming back so i don't think it's about reducing as we did excuse by another 30 just by cutting the tail just now is much more about global platforms as we have been working on

Maybe follow up, because when I look at your kind of organic index that I create and say if we start at 2019 and if we are at 100, then I arrive at 60% of that in 2023. And then I imagine that there is some price inflation on that, so some volumes obviously probably cut by half between 2019 and now. Markets weren't supportive, yes, but they didn't come down as much. The question really is how much of this volume decline was due to your own kind of strategy to exit some verticals and also how much of that is left, so to say.

I believe that we have consciously been selective on the products as we communicated earlier. There are products that will bring service business down the road I'm recording revenues for 15 years. There are other products that are not. So it's difficult to quantify that. I will need to get back to you, but it is undoubtedly that we are working on that, especially in North America, considering obviously that this is North American market where we have the lowest gross margins, that we have always had the lowest gross margins.

all right perfect and then my second question is on on the marine business if you could help us with kind of ins and outs for 2024 what kind of decline do you expect for the oem business in 2024 what do you see in inventories what they are doing there and also what do you expect from aftermarket yeah so we take if we take starting with with the lead from proctarius i mean

About 25 to 30% of what we are doing in our business, the marine business, is major yachts. They are sitting on backlogs normally to two to three years. I can tell you that I was visiting one of our main customers in Australia some months ago, and they had a backlog that was up to 230. So if you order one boat just now, you will get your boat, 230. So then you can imagine that we are talking about a totally different animal. So that's about 30% of our business. Then we have 70%, which is very much related to the American market. And that's very much about the steering systems. And that's also air conditioning for smaller boats. And what we see there is that clearly we have two quarters now in a row coming down quite heavily at the same levels as we saw 2019. So I personally believe that from a new wind perspective is not going to become much worse than that. Then the question is, when is it going to turn? I mean, I believe, I mean, if you look at the cycles and you believe, you think about what happened to the RV and what we saw on the marine industry also, 2018, 2019, I believe that we have another two quarters that will be more or less on the same levels at the same time as we are expecting also improvements there on the second half. On the service and aftermarket, it's the other way around. Marine service and aftermarket started to point south, became negative already in Q3 2021. And we have seen now two quarters being positive. So we believe, which is the typical situation, the historical situation, when OEM goes down, service and aftermarket goes up. And as you know, service and aftermarket has been pretty negative for us, which has never happened in the past, in the last 18 months. So mixed bag. We expect obviously the OEM to continue to be negative, but we also expect the service and aftermarket to partially compensate for that.

especially in the first half of 2024.

And then you have the margin difference, obviously. Even if we have strong margins on OEM marine, we have even stronger on marine AM.

Perfect. That's very helpful. Thank you.

You're welcome.

The next question comes from Carrie Rinta from Handelsbanken. Please go ahead.

Yeah, thanks. Thanks for taking my questions. And then first to follow up on the marine OEM, can you give us a more specific ballpark on the OEM decline that you saw in the second half of last year, Q3, Q4, and if there was a sort of a decline in Q3 and then a larger decline in Q4, or how did those two quarters look?

Same decline in Q3 and Q4 from an OEM perspective. Exactly. And it was minus 15 or I was around, well, I can tell you the number, 20% down. 20% down, okay, okay. And just keep in mind what we have communicated a couple of times. This is not the first time that we see a situation in Marin. We saw the situation 18-19. 18-19, the worst quarter we had was minus 14%, right? We were a minus 16% in Q3. We were a minus 12% in this quarter.

Okay. And based on your sources, how do you see sell in versus sell out? So how much of this do you think is due to retailers having to adjust their inventories? So is the sell out to consumers noticeably better, same or worse?

I think it's pretty much similar just now during the last couple of months. What is happening just now is obviously that we are close to the start of the season and then we will see what happens. Yeah.

All right. Sure. And then the second question is about this new segment structure. And, uh, I think, I think it's early days, but do you see some synergy potential from combining these or more or less standalone operations into a combined entities?

Absolutely. I mean, this is, I mean, this is nothing new. I mean, if you look at the acquisition, this was the plan from the beginning is simply the, first of all, you need to integrate Igloo to become part of the metric. And then you can integrate the Igloo side and Dometic side. I mean, that's why it's so important. So we see a common infrastructure, a common management team, but two different organizations. So the synergies are crystal clear. I mean, if you go to YouTube and look for ICF, you will see the launch that we are doing just now of Igloo products, totally branded, totally new product range for active coolers under Igloo brand that we are launching. And that's a clear synergy after what we have been doing together for the last 24 months. So integration of companies like that is the same as when we did the sister integration. So you have two different steps. You have first step, which is to integrate the new company into Dometic. The second is how do you run it moving forward? We did that with Marin. Keep in mind that we acquired Marin in December, 2017. And then we communicated the new global Marin in 2020. And now we are doing exactly the same with Igloo. So to me, the marine is a growth platform. Mobile cooling is a growth platform. And then just to fill in what we are doing with mobile power solutions is a little bit the same. We acquired six companies around the world. They were companies turning 20 to 40 million euros dollars. And now we are putting those companies under one single umbrella to start looking for the synergies from a product perspective. We have already been working on the branding perspective So that allows us to move into product design and process.

All right, great. Thanks for taking my questions.

You're welcome.

The next question comes from Gemma Permalu from JP Morgan. Please go ahead.

Hi, good morning. Thank you for the presentation. I just wanted to come back on the registration. You mentioned that you obviously had a minor impact in the fourth quarter. Are you able to quantify this at all? What should we be looking at as a sort of low double-digit impact on sales? Any rough indication would be helpful. I'm just wondering, now that we are already in January, how are you thinking about or internally in your forecast, by how much are you assuming that delivery charges or some of the surcharges will go up to? And then my second question is just guidance for 2024, really. You mentioned that you will be having some new products in the pipeline for marine. So any guidance in terms of housekeeping or for modeling purposes will be super helpful. Thank you.

Yeah. So I mean, if we start with the Red Sea situation, I would say that a very limited impact in Q4. Keep in mind that the crisis started somewhere in November after the attacks at the beginning of October. Then we are expecting, yeah, I would say from a group perspective, it's not a massive effect on the top line. We are going to have, as we commented, some lead time delays. Everything will be depending, obviously, on what happens moving forward, right? What we have seen just now is, again, a couple of weeks of additional lead times and extra surcharges. Quantifying, I mean, this is our first kind of estimation, but around 50 million kroner during the first quarter, I don't think is... I think it's quite realistic, what we can see just now, but keep in mind that this is moving targets. I mean, depending on the number of attacks, that could change as well. So that's what we see just now. In terms of surcharges, we are working as we speak on implementing surcharges on our customers in the same way. And our customers obviously won't like it in the same way as we don't like paying for those surcharges. So I think we are a little bit back to a similar situation than we were two years ago. It takes some weeks before we can implement all these surcharges, but once they are there, then we get compensated. And then, sorry, that was the first one. And then we were talking about, were you referring to Maureen specifically?

Yes, thank you.

Maureen, and if possible, any guidance for the group as well, whether that's revenue, trajectory, or topics. Thank you. Yeah. Our expectation just now, and as you know, we are very, very careful with guidance since this is moving all the time, but our expectation just now is that the first half will continue to be tough, a little bit mixed bag. Some of the segments and some of the product areas will be improving, some will be deteriorating, but we see that it is going to continue to be tough. while we are expecting improvements during the second half. And of course, what happens with interest rates will have a major impact. I mean, we have been suffering from a negative sentiment on the market now for two years. And we saw, I mean, you remember what happened with share prices just two months ago.

But these comments were for OEM and then we have the service and off the market that we are expecting gradually to continue to improve.

And distribution. I mean, distribution has been negative for us for half a year as well. So of course, if you look at service being negative, distribution being pretty negative for half of the year, and now we're expecting improvements moving forward, that's 53% of our revenues. So even if the OEM is kind of tough still we're expecting improvements on 53 of the business moving forward gradually so improve second half in comparison to the first half thank you you're welcome the next question comes from henrik christian's son from carnegie please go ahead

Yes, hello, good morning. So two questions. Let's start with the global divisions, if you could give some more color there. Very strong EBITDA and a big step up compared to previous Q4s, so typical Q4s, despite this very weak volume development. What happened there? Is it sustainable, sticky, and what does that mean for margins when volumes come back? Let's start with that.

I mean, what happened there is really, I mean, of course, that Igloo was much better from a margin perspective. And I mean, it has been a little bit of the same situation during the whole year. It's clear that we are more selective, that we are working on the product mix, we are working on the geographical mix, and we are working on the channel mix. And we have seen the margin improvements the whole year. Then of course, you have to consider, Henrik, that Q4 is a weak quarter. so any major deviation to the positive or the negative will be substantial but not to forget the other businesses that we have in global the other businesses that we have in global are improving profitability big time and i i want to re-emphasize big time because that's also what is leading us to take next step in this specialization of different businesses So there is one reason. If you look at the marine margins, since we created the global business, they have been increasing the margins big time. We did the same with global. We see clear margin improvements and growth. And now it's time to take next step.

So Q4 will not be a lost quarter going forward, but it's this type of level of profitability.

Henrik will do anything to deliver. As you know. But again, it's a weak quarter. Any kind of deviation, up or down, will have a major impact in Q4. And especially Igloo. We know that Igloo is very, very, very slow. It's a very low quarter for them.

But if we look on a longer term period, I mean, we are happy with the development of the Igloo profitability. So it's absolutely also in a longer term moving in the right direction.

Okay, good. Second question on cash flow and working capital development into 2024. If you could provide some flavor there, what you're doing, progress expected and capex and R&D levels. And related to that, leverage coming down 2.7 times, of course, much driven by FX in this quarter. And a lot of that has reversed in Q1 so far. But at what point will you press the M&A button again?

Yeah, if we start with the first part, I mean, as we have mentioned before, I mean, we still expect that there is going to be a working capital release in 2024. And that is what we are having our plans to deliver. And as you see, I mean, on an LTM basis, working capital is on 31%. If we look on the quarter isolated, we're down to 25 and you know that we are driving for 20% in the first step. So we are on the way, but we still have a way to walk until we can feel that we are moving into the area that we are satisfied with. So from that point of view, I think you can, I mean, That's what we are planning for. And I mean, I will always need to remind everyone of the fact that Q1 is our weakest cash flow quarter of seasonal reason. So obviously that will be no different this year. We were slightly positive, 300 million on operating cash flow in Q1 last year. so um and that is where we have been you know hovering between zero and and 300 million i would say if we if we look back in in history with the exception of of 2022 so uh so something in that uh in that neighborhood between zero and and plus a couple of hundred million i would i would say so uh If you also look from a historical development, leverage is typically staying flat or going up a little bit in the first quarter, and then we are more than well catching up with that in Q2, Q3, and Q4. So I expect us to see a similar pattern here during 2024. And with that in mind, so it basically means that we're obviously expecting leverage to continue to come down. And to answer your final question then, as you know, I mean, M&As are uh, a part of our, of our strategy execution. And, and, and, uh, it's, um, it's, um, we would like to get back to that, uh, situation, uh, again, that we can, you know, start executing. Um, you should maybe not expect there to be another, another igloo or, uh, or, uh, or a sea star. I mean, we, we are, you know, uh, mainly having, you know, the typical bolt on, uh, opportunities in our pipeline. So slowly but surely, but first things first, right?

I think what is important, Henrik, is to remember that just now we are not the only ones, but everybody is just now sitting on the table and talking. And we are on one side, buyers, and at the same time, we are sellers. And we see exactly the same from the same side and we see it from the buying side. So everybody is dancing with everybody. but just now there are differences on valuation so so i guess the point i'm going to make is that we are not losing any target that is interesting to us just now we keep working but first things first as rika said sorry at the stephan mentioned great just a quick follow-up there on on the r d and capex for this year so you capex you have this building that you're tunistically picked up related to mobile cooling

But underlying, is there any pickup in CapEx or R&D going to 2024? Or should we assume the typical rate?

I think you should assume the same ratios.

Perfect. Thank you.

You're welcome.

That was the last question at this time. So I hand the conference back to the speakers for any closing comments.

Thank you. Well, thank you everybody for your attention and your interest in Dometic. The market is nothing that we can do about. But on the contrary, we can do a lot of things to improve our efficiency and to get our strategy implemented. And that's where our focus is. We are fully convinced that we will see continued cash flow improvements. We will see inventories coming down. and we will see margin improvements. And that means that we keep creating a better company. So thank you very much for your attention and goodbye.