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.