Dometic Group AB (publ)

Hello, good morning, everybody, and welcome this Friday morning to the presentation of the first quarterly report for 2024. Without any delays, let's move into the highlights for the quarter. So we'll start with the market conditions. We perceive the market still today to be under challenging conditions. We see as well that inventories at retail level both in terms of the market and distribution are on the way down. But at the same time, we also perceive that the order pattern, the purchasing pattern of our customers and our customers' customers is changing slightly. It is clear that high interest rates is leading to a situation where capital cost is also increasing. People are waiting until the very last minute to build up inventories for the season. we see as well and we end markets which is declining everywhere with exception of in reality the mayor region still today and i'm talking about the mayor region so it's the market and not our organization and at the same time it is also clear that american volumes in the rv industry have been growing but we have to keep in mind that we are still coming from 313 000 at the end of last year, which is in parity with 2012 GS levels. So still a very, very low level. If we look at Dometic now, moving from the market to Dometic, we went down 2% organically, with service north of the market down 10%. And I would say that that's perhaps the major surprise for us internally in terms of the report. It is clear that customers, as I mentioned earlier, are still cautious with their orders. But at the same time, as you all know, Q1 is a very short quarter for us. January, February are always very slow. And then March is when the season in reality kicks in. And this March, unfortunately, we have two factors. On one side, we have Easter, which is coming a little bit early. But then we also have a very, very wet and rainy month of March, where again is when we have our revenues rising. that did have an impact a negative impact i would say that our own estimation somewhere is that you take the weather and the eastern effect in those numbers should be around five percentage points if we look at distribution down 13 which is a major step in comparison to the minus 20 percent that we were showing in q4 and we see already a positive trend in mobile cooling We commented in connection to the last quarter that we saw inventories at retail coming down at the same time as sales from retail to the market were going up. And we will continue to see that pattern. Very, very happy to see that ABTA margins continue to improve despite lower volumes for the company. Ended up at 11.8. So another 20 base points better than the situation the same period last year. And then last but not least, we are also happy to show strong cash flow. Even again, it's slightly lower than one year ago, but we need to consider that 2023 was extremely high. And then leverage, standing at three, level three, where obviously is higher than what we were showing in Q4, but then you have even there two factors. On one side, you have FX being two thirds of the difference, and then one-third is due to the seasonality pattern that we can see every single year. So moving to the numbers, 10% down in total growth, 12% down organically, EBITDA down 9% still, and EBITDA margin improvements of 20 base points up to 11.8. Cash flow, operating cash flow ending up at 212 million krona And then leverage three, as I mentioned, and an EPS of 0.85 in comparison to one corona and four. If we move over to sales, we can clearly see that this is really the eighth quarter with negative growth. Still looking at Q4, ended up at minus 13. This quarter ended up at minus 12. And we expect, obviously, seeing improvements during the course of 2024. Looking at different segments, America is down 20% organically, EMEA down seven, APAC down five, marine down 13%, mobile cooling, the new segment, first time as we report as a segment, 16%, and then global down 4%. In terms of the side channels, no major changes. So the service and aftermarket channel went down 10%, the distribution channel went down 13%, and the OEM channel went down 13%, which means that we had a balance, so to say, drop in the different channels. What is perhaps worth to mention is that the RV OEM that represented 49% of sales in 2017 represents 22% of sales nowadays. even if it is higher, the higher level that we were shown in 2017. Let's have a look on the service and after markets, which I tend to believe is one of the major questions that we have for the quarter. So we ended up at 10%, as I said, a very rainy March and early Easter, having an impact in our numbers. Our estimation, our estimated impact is about 5 percentage points. And as I also commented before, we see a changing order pattern with our customers, which we have seen also in the distribution channel where companies or customers are pushing purchases forward and waiting until the last minute and expecting short lead times since everybody is sitting today on too high inventories. At the same time, it is clear that inventories are coming down. so we are expecting in the same way as we did in q4 that we will see improvements moving forward also perhaps worth to mention when we're looking at the upper part of the chart that you can see that the pandemic created a different pattern when customers were ordering much earlier than they were normally doing in the past 2024 we are hitting the same levels that we had 2019 and what we are expecting is obviously that we will see the seasonal pattern to come to normal levels during 2024. Happy to see as well when looking at the evolution of our ABTA margins that this is the third quarter in a row where we see improvements versus same period last year. We have three segments showing clear improvements, Land Vehicles EMEA, we see mobile cooling solutions also moving upwards as well as Global Ventures. We see as well Land Vehicles APAC standing at a very high level as well as Marine despite dropping top line. And then we have the situation in Land Vehicles Americas that I will come back in a couple of minutes. So let's have a look on the different segments, starting with Americas, LV Americas. Organic growth down 20%. We see a decline in services of the market. We see also very low volumes on the RV industry, on a very high competitive market just now, where everybody is obviously fighting for volumes. And we are taking a different approach in this case. As we have been discussing now for a number of quarters, we want to be more selective and really differentiate products where we are expecting to see service and aftermarket during the lifetime of the product and products where we see more of a transaction where we should be very, very careful in dropping prices and instead fighting for margins. Looking at EBITDA, despite the fact that we are dropping 90% on the top line, we are ending up approximately at the same level as we had one year ago, which drives our EBITDA margin to minus 11.5%. We see, of course, that this is having an impact on our infrastructures. We still have infrastructures, and we are working to reduce our infrastructures on LV Americas. And we have, as you all know, a new management in place, and it is as the head of the segment, but also creating developing the new sub-segmentalization in order to get even more accountability lower down in the organization if we look at lv in the mayor region down organically seven percent even there we see a decline in the service of the market and distribution in distribution we see still some improvements in comparison to what we are coming from in the last four quarters Again, inventories are definitely coming down. At the same time, in the EMEA region is in reality the only segment where we see that the OEM side is pretty stable so far, which is very much in accordance to what we have been hearing, obviously, from some of the OEM customers across the EMEA region. Happy to see that EMEA is coming up after a few weaker quarters. We see the impact of the cost reductions. We see the impact of the restructuring program that we have been running the last couple of years at the same time as we are still obviously dropping top line and that has a negative effect. Even in the main region, due to the size of the region, the complexity of the region, we have also implemented new sub-segment structures to really increase accountability and get even closer to the business. Moving into LV APAC down, even in this case, 5%, which is off the market, even in this case below last year. Distribution is starting to move outwards, which is positive to see. And we see that the decline on OEM is primarily coming from the RV industry, where the RV industry in Australia is coming down quite rapidly. Happy, of course, to report that we are keeping our margins despite a drop in top line and it's like in all the other cases we are working on continuous basis on efficiency improvements at the same time as the mix also contributed positively when we see distribution starting to move upwards moving over to marine down 13 organically with a service and aftermarket that has been stabilized in the last couple of quarters at the same time as uem and VM production, meaning our customers, VM customers, are pretty much down. Just for your information, boat manufacturing is down about 30%, engine manufacturing is down about minus 13%, and we are not close to those kind of numbers. But still, of course, when the market drops 30%, it's difficult to stay at the same levels as we were one year ago. Happy even here to see that our margins are holding up very, very well, ending up at 23.6%, despite the fact of the lower sales. And in this case, on top of all the efficiency improvements that we are doing to mitigate the drop in volume, we also have the technology shift, which is helping as well to keep our margins. and i'm referring obviously to the move from mechanical steering systems into electric steering systems moving over to the new segment mobile cooling solutions or mcs as we call it internally down organically 16 and which shows quite an improvement in comparison to minus 25 on q4 and that's exactly the levels that we saw during the course of the entire second half last year We see that the inventory levels of retail are coming down. At this point, they are down 20% in comparison to the same period last year. We see as well that sales from retail to the consumers are up 7%, and we also see that our market share is still growing and has been showing improvements of 2.7 percentage points versus last year. Every day margins, even here, coming up, 7.7 versus 7. And as you all know, Q1 is even from a distribution perspective, a very short quarter for us. In this case, we are driving sales initiatives. We are, as you know, introducing the new active cooling boxes on the American market. We are also introducing the passive cooling boxes in the rest of the world, both in the Eagle brand and the Dometic brand. and we are betting a lot on innovation and just as an example of that we communicated in connection to last quarter we were introducing the first active coolers under igloo brand with nomadic technology inside we are very happy to see that on one side we are starting to sell in 600 new stores across americas and this is i'm talking just now about igloo coolers active coolers which is great to see. We see also that sales is starting to happen, meaning sales from retail to the consumers above the expectations. So we are very happy to see. We're also happy to see, obviously, that next week the magazine published a report a few weeks ago where Igloo is awarded the position number eight among all the consumer wood brands which is fantastic for for a cooling brand and we of course we are talking about being behind companies like procter gamble companies like colgate so we are talking about major players in the consumer space moving over to global ventures even here we see a drop of four percent We see mobile power solutions being very, very stable, and the drop is really, and we see our hospitality business, which is also slightly positive, while we have residential in the US, which is still negative. Happy to report margin improvements, and they are to a very high extent coming from our mobile power solution business. And speaking about mobile power solutions, we're also very happy in the way the integration is taking place. On one side, obviously, those businesses are competing within their own industry, but at the same time, we see fantastic opportunities to create new synergies by really connecting the mobile power solutions from Dometic with other Dometic mobile devices. In this case, it is really the first 48-volt air conditioner connected to Dometic mobile power solution solutions, meaning that you can basically spend the night in your RV off-grid and still have your air conditioning on during the whole night. From a sustainability perspective, even there, a lot of progress with both injuries developing better than our targets. We see share of email managers 29%, even they're higher than our targets and showing a great improvement in comparison to one year ago. We see CO2 reductions taking also major steps in comparison to our targets that were set in 2020. We see audits for new suppliers also well above targets Last but not least, a new KPI that we are introducing formally, which is Innovation Index, where we are happy to report one more step in our recovery in Innovation Index. As you all know, we have as a target 25%. We are coming from 14% in Q1 last year and ending up this quarter at 18%, and we will continue to see the improvements. uh now our inventories are coming down and we are introducing the new pros that have been ready and waiting really for our inventories to be introduced in the last quarters and with that said stefan could you please yeah thank you like us yes thank you starting off with our uh ebitda bridge um where we obviously have a drop in in in absolutely the ebitda with 78 million and

Behind that is a number of things. First of all, of course, the negative organic growth of minus 12% is a clear reason. But with that in mind, it's actually really nice to see that we still are able to improve our growth margin to 27.9% from 26.5% last year. And behind that is that we are and have been implementing efficiency programs, including the closure of the manufacturing in Sigen. We also gradually see declining negative effects from the extraordinary logistic costs. We also gradually, as we are consuming our inventory, enjoying lower raw material costs. As you know, we have been actively working with our price management And we have not a very significant impact of the Red Sea situation in Q1. Then we have R&D and SG&A expenses. They are in absolute terms down in constant currency with 5% in the quarter. But in relation to net sales, they were going up to 16.2% from 15% of sales. We are continuing to invest in R&D in the structural growth areas that we see. And then that is partially offset by cost reductions in SCNA in the other estimates. Then FX in the quarter has a very limited impact. There is no effect of acquisitions. Moving on to cash flow. Operating cash flow of 212 million. compared to 294 last year, which I see as a solid performance, taking the seasonally weak quarter into consideration. Income tax paid a little bit lower than last year. And on this point, we like to highlight that the effective tax rate is 30% in the quarter, and it is higher, somewhat higher than what we have seen before, and it's driven by the mix. of countries where we are paying tax basically, so we are more successful in the higher tax restrictions. Then we also have the tax deductibility of interest costs that is impacting to a certain extent. Acquisition and divestments impact on cash flow is 103 million in the quarter and it's related to one of our earlier acquisitions and we have left 50 million to be paid in Q3 this year related to acquisitions then we are done and we still have Igloo but you know our view on that we don't think that we should pay anything additional. Financing minus 993 million we have paid back 1 billion of an EKN backed loan here in Q1 And then we have been issuing commercial papers at the value of 299 million. And then the net of paid and received interest is 170 million, which is up compared to 140 last year. On the next slide, you just see the development of operating cash flow in historical perspective. As you can see, 212 million is a rather okay operating cash flow to be the first quarter. If we go into working capital, we see a stable development on accounts payable and accounts receivable. On inventory, which we have reduced to 7.7 billion compared to 9 billion one year ago. We see that the number of days of inventory is coming down, 145 days currently. And we are obviously actively continuing to work on driving down inventory and we will see more of that for the remainder of the year. And as you know, our overall target of working capital is 20%, and we obviously have a gap to the 31 that we have where we are at the moment. But we should see that continuously coming down during the year. Going to CapEx and research and development, we had a rather low quarter on CapEx. mainly timing related, but also that we are selective on where we are allocating resources. We are on 2% of an LDM level, which is a level that we have been communicating we should be around. Looking into R&D, we spent 2.4% in the quarter. As I mentioned before, we are continuing to invest in structural growth areas like mobile cooling, mobile power solutions, and marine. And the last 12 months, we are on 2.3% R&D to net sales. If we take a look on our net debt development, it ended up with 3.0 compared to 3.2 one year ago. And that has been a movement upward from 2.7 in Q4. The main reason for that is the weakening Swedish corona, which contributes to with 0.2. And then we have the normal seasonality impacting Q1, which is contributing with 0.1. As you know, we are committed to achieve our leverage target of around 2.5 And it will trend down during the year, and we will move into the target area during 2024. We then go to our debt maturity profile as of the end of March. There has actually happened a number of different things. First of all, as I mentioned, we have repaid an EQM-backed loan of 1 billion. So that is 50% of that facility. We have also refinanced the second part of our credit facility agreement with our bank group. As you know, we did the first part in Q1 last year. And on March 27, we signed this agreement. And that is relating to the US dollar term loan of 333 million, maturing in 2025, which we now have then extended with three years with the one plan, one plus one year extension options. Then we will amortize 100 million of that term loan in July 2024. Then on the RCF side, we have increased that with 80 million euros. So that is now a total of 280 million. And as I mentioned, it was signed in 27th of March. Then we have also issued 299 million in outstanding short-term commercial paper program with four to six months maturity. this refinancing activity will increase our average maturity to 2.6 years. So with that, Juan, I hand back to you to summarize.

Thank you. Thank you, Stefan. So, I mean, looking at the business, the market is not a lot that we can do about. It is what it is. And obviously we have a massive impact post-pandemic in connection as well with interest rate increases and high inflation rates. What I really feel proud of is the transformation of the company. Despite the fact, if you compare Q1 2024 with Q1 2022, basically top line is down 25%, which is less, obviously, than many other companies in consumer businesses. You look at our profitability, as you can see, we are holding up in a very, very strong way in comparison to our peers in the industries where we are present. So it is clear that in the last years we have created a far more resilient company. That's something that we within the company feel very proud of. We have lots of people doing a fantastic job to create and develop a better company every day. On the market, still difficult. It is clear our expectations are largely in line where we communicated also after q4 we see that service of the market will continue to recover during 2024 we see distribution will be also recovering and hopefully we will see this in the in the coming couple of quarters now and on the oem side it's a little bit the same we see that it's still tough We see that some areas are going to show improvements in the coming couple of quarters. Some areas, and now I'm referring specifically to the NEA region, will deteriorate sooner or later. But altogether, we're expecting the OEM to show some improvements by the end of the year. Strategically, it's more of the same. We have a strategy and we watch our strategy. So we will continue to work in the same pace and in the same direction. We have implemented a new segment structure, as you are aware of. We are, on top of that, also increasing accountability in new levels of the organization by creating sub-segments in our largest segments. It is clear that we have three segments improving margins. We have two segments. hold the margins at a very, very high level. And then we have one segment that we simply need to fix, which is Americas, and that's what we are working on. We are also very, very convinced that we will see the American market growing on active cooling, and that will become a great asset for Dometic in the future to come. And last but not least, we will continue to prioritize margin before volume. And with that all said, I would like to open for the Q&A session.