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.

If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five 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 ask questions on the webcast page. The next question comes from Gustav from SEB. Please go ahead.

Gustav Heideggel, Thanks, operator, and thanks for taking my question. This is Gustav Heideggel with SOB. If I may start with the US then, which is a bit of a topic today, I guess. With the new structure, it's always a bit hard to follow the development in the past now, but could you give us an indication where you think you are on organic sales now versus the 2019 level. And if you could add granularity and have a view on the volume versus 2019, I think that would be helpful. And connected to that, it would be great to get a um some color on the competitive dynamics in us i know that you had some competition on awnings during covid and then refrigerators from asia seems to be um a topic now so so some column that would be great thanks i don't have the numbers on top of my mind uh just now on the volume in comparison to 2019. uh what we can see is obviously the market just now even with we are talking about oem

are starting to grow. They are up 15% in the first two months, and we are still dropping. And that's telling you, obviously, that we are, on one side, very selective on pricing, and at the same time, as you just said, with the low volumes that we see on the markets, competitors are extremely aggressive on prices, and we don't want to follow. And that's a little bit all over in terms of products, but you said very much right. We look at refrigeration, we see a new competitive arena, that in reality was created in connection with the pandemic where the traditional suppliers companies like no cold or automatic of course did have difficulties to deliver during when the when the market opened up at the same time as chinese importers they started to kick in So it is clear that the competitive arena in the RV industry, I would say, has changed in America. We are talking, and again, I'm referring to LVA or the RV American business. We are talking about service and aftermarket. Of course, the numbers that you see is the combination of all the channels. We are talking of the service and aftermarket business. is very much in line with the rest of the group. So there I do believe that it's much more related really to the inventory levels and the weather also during Q1 in the same way as we saw in Europe. And then we will need to come back to you on the comparison to 2019. I cannot answer.

Yes, that's what we know.

And how... related to the refrigerators from Asia then. Could you remind us roughly what the share of your sales in America relates to this? And secondly, have you heard anything about, because there's been quite a lot of talks from both parties in the states now regarding uh um tariffs and so forth could could you elaborate a bit on sort of what scenarios you see in front of your own tariffs and whether or not that that could change dynamics for you in the market i mean if you look at refrigeration for lva i believe that is around 10 of our revenues for lva

nowadays, and we are coming from about 25% 2018-2019. At the same time, we also need to remember 2018-2019, we were growing like crazy since our main competitor at the time, Norco, did have difficulties to deliver. So we were taking massive market share 2018-2019. And then, of course, when they got the house in order, then they started to recover the market share.

And then we had the technology shift from

Absorption to compressor. Yeah. So historically, the American market has been, we're talking about technology absorption. The problem being, again, that we're in connection with the pandemic, a movement from absorption technology to compressor technology, where you have in home appliances, started to take place, since customers couldn't deliver to consumers. And that transition accelerated in connection to the pandemic.

And on terrorists, do you have any view there?

Not more that we have prepared ourselves. That's what we can see.

And I mean, if terrorists would come true, as there has been speculations about then, of course, it's going to be tougher for all the rest.

No doubt.

And if I can squeeze in a final question before I get back into line, but EMEA then perhaps a bit surprising positive trends in terms of registrations in Germany. Do you think we're out of the woods now in EMEA or is this a flip or what's your view internally on the market?

No, I do believe, I mean, I don't think that anybody knows I have to say, because We have seen registration numbers coming down heavily during 2022 and then 2023. Having said that, the last couple of months in 2023 were positive, and the first three months of 2024 are positive. So you take the last six months of registrations, Europe is up 3%. At the same time, it's clear the manufacturers have been producing much more. So depending on when interest rates go down or not, that will have an impact on whether manufacturing is going to drop more or less. But it is clear the last couple of years, we have exactly the same situation as we saw in America. You have much more manufacturing than registrations. So I think the key question is going to be, when do we see interest rate decreases and what is the level of inventories at that point?

Okay, thanks for taking those questions.

You're welcome.

The next question comes from Daniel Schmidt from Danske Bank. Please go ahead.

Yes, good morning, Juan and Stefan. Morning. Just a couple of questions on, I guess, the second topic for today, service and aftermarket. And you already touched upon it quite a bit, mentioning early Easter and rainy March and so on. And you estimated that might have an impact of 5% in the quarter. Do you see those 5% coming back in Q2, referring to Easter especially?

Well, Daniel, I'm not sitting with a crystal ball, unfortunately. But what I can tell you is that what we can see until now in April, it looks better.

Yeah, okay. Okay, good. And we talked quite a bit about the Red Sea and Q4 report and surcharges. And I think Stefan mentioned just briefly in his statement, it sounded like you haven't been impacted really. Or could you shed some more light on that and the ability to pass on and so on?

No, but we have a negative impact of about 1 million euros in Q1.

the same time we are also obviously compensated for that for pricing so our expectation is that we are going to cover up for any negative impact and then it is of course two weeks longer later yeah yeah okay uh good uh and and do you fear anything in terms of freight price freight costs uh They were coming up quite a bit and then down, but then up again now. Still, of course, nothing compared to a year and a half ago, but still quite a bit more than we saw before Christmas. Sort of looking into the second half of this year and so on, is it getting more difficult given the volatility that we have now at least?

No, not really. I mean, the problem that you have with freight prices, especially on ocean freight, is that you have contracts and you have normally annual contracts. The problem is obviously that when you have a small war here or there, then they apply what is called for force majeure. And then you can forget the contracts. So if you look at the contracts that we're negotiating just now, they are lower than the contracts that we had one year ago. But of course, if we have, again, another small war, then we don't know. So just now we see the contracts are at lower levels than we had one year ago.

Okay. Okay, good. And then maybe some smaller ones. I think everyone expected one-offs to be behind us, but is there going to be sort of smaller one-offs here and there in the coming quarters as well?

Not of any significance, no.

And then maybe just one more on Iglo. Any update you can give us in terms of the dispute? I think you mentioned two quarters ago that there was a court date set for Q1 2025. Is that still the case? Yep. And no changes to that timetable at all?

No changes.

Exactly the same schedule. Okay. And maybe just the last one, sort of in terms of improvements when it comes to MEA, which was quite sort of meaningful, and you mentioned Ziegen and all that. Is that still something that's going to look even better, or are you at the level that you want to be now in Hungary?

Oh, no. No, no, no. It will keep improving. No doubt.

Okay. Okay, that's all for me, guys. Thank you. Thank you, Daniel.

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

You mentioned the hesitance from some customers to build inventory as it costs more right now, ahead of the selling season.

can you just remind us what divisions really this behavior affects most right now and what is your kind of overall overall inventory assessment in the channels yeah that is really service out of the market and distribution that those are the two sales channels we m is not affected by that they are they have always they're always running on very very low inventories so it's really the two other channels and that if we are talking about the level i mean unfortunately it's not easy to measure that there are the american market is always much much better european market we see that as i mentioned during the call that you look at retail inventories for coolers are down 20 today in comparison to the same period last year and we see as well that post meaning sell through from retail to consumers is up seven percent so we are pretty convinced that in not too Long from now, we are going to see improvements on the top line. And we saw, by the way, an improvement in comparison to Q4. So then the correction, the inventory correction from retailers started in reality in June last year.

All right, perfect. And on the chart that you show actually in the slides package, you showed 2019 trend improving in Q2. Do you think that we will see this kind of improvement this year also?

Are you referring to Igloo?

This is another pattern.

That's our expectation.

No doubts. We're going into our most important quarter on service and aftermarket. It is like you said, that the ordering patterns have been being short before the pandemic, then getting longer, and now it is getting even shorter than it was before the pandemic.

I think what is important to remember when looking at that chart, and of course that we are a little bit surprised in the same way as you are, is that we have seen a clear pattern during the last six quarters. There has been improvement quarter on quarter, and then all of a sudden you get it to minus 10%. There is no logical reason. And it's everywhere. I mean, if you had, you know, one segment, you could say, okay, something happened in that segment. But what you have in common is weather. No matter you look at the weather in the US, you look at the weather in Europe, or you look at the weather in Australia, it has been extremely wet. That's the only thing that you find in common. And all the markets are coming down. So our expectation is obviously that we will see improvements, as we commented. April has started well. Then, of course, we have another two and a half months to go.

Great, thank you. And on Americas, that's my second question, really. Can you remind us about the split that you have between OE and the aftermarket business? And also, if you could tell us what growth this subsegment had in Q1?

Yeah, so if we look at LDA, Historically, it has been 65% OEM, 35% AM, or service on aftermarket. If we look at just now, without having the numbers on top of my mind, I would say that we are closer to 55-45, 50-50. Since the OEM still is very low. While service on aftermarket, even if it has dropped, it has not been dropping by far at the same pace as the OEM.

And in the quarter specifically of this minus 20% organic growth, how was it split in this segment?

So it's more on the VM side than it is on the aftermarket. But still double digit negative on service costs in the quarter. And by the way, we have the number just now, 50-50. So it has gone from 65-35, so it's not the market, to 50-50 just now.

And then just last one for me on Americas. I mean, you had minus 12% EBITDA margin in the quarter and it looks like it was the lowest point ever for the division, I understand. And I appreciate the fact that the sales really collapsed in the quarter. But my question really is, do you believe that you're doing enough in the region and also do you expect Americas to turn to profits during 2024?

I mean, we will do anything we can to turn into profit. We are doing a lot of things, a lot of activities. know from if we are talking about organizationally i would say that lva is probably number one number two number three and then ldma is priority number four number five so i hope that i'm clear enough it is clear that we are working extremely hard we don't like the numbers that we are showing we need to find a way to turn that business to profit again If you look at our everyday margins and just extract Americas, you will see the effect.

And I mean, as you mentioned as well, I mean, we have changed the head of LBA, but it's not only on that level, it's one step down as well, where we are strengthening the organization.

And of course, again, it's easy to have a look at Americas, look at losses when we have been making money, but keep in mind that the volumes are 50% down. from the volumes we had two and a half years ago. So it's tough.

Yeah, I understand. Thanks so much, Juan.

You're also welcome.

The next question comes from Douglas Lindahl from DNB Markets. Please go ahead.

Hi, gentlemen. A few questions from my side as well. Thanks for all the answers so far. It's been super helpful. I wanted to circle back to America's a bit. Obviously we've seen the market here grow and you're not sort of following that trend, but then you mentioned very high competitive environment and you saying no to certain orders, but given that dynamics and the sort of growth trends we see, when would you expect your business to turn positive again organically? So maybe not exactly the same question, but more on the top line side.

I cannot tell you a day or a date, but it is clear that we are doing a number of changes in the organization. I mean, on one side is we don't want to buy market share. I don't believe that that will benefit us in the long run to buy market share now when the market is still a very low volume and you have lots of competitors dropping prices to keep volumes. We believe that that's the wrong medicine when the market is in such a shape. So our focus just now is internally looking at our structures, looking at our sales organization, looking at verticals. What can we do in other verticals? So, you know, for me, LVA has to continue a transformation of the business that we have been driving in Dometic in the last five, six years. And we will get back to growth. I cannot tell you a date, but we will get back to growth. That's no question. We will get back to profits.

But I mean, we also need to keep the extraordinary situation in mind here, which has never happened before, where OEM hand service in the auto market has been dropping double digits at the same time. Normally, you have a different pattern there where they are not going hand in hand.

We commented on the question of Agneta that just now we have a share which is 50-50. If service in the auto market has started to grow, then we have a massive impact on our margins immediately.

Okay, I know we're sort of thinking about the organic portion of things, but I realize it's a difficult question.

Well, it's going to be very much about how the market reacts as well. I mean, we have seen during the first two months of this year that shipments are up 15%. Of course, if that continues, we will see improvements in our numbers as well. You know, you have a backlog in midwinter, so it's very, very difficult to say exactly when things are going to happen.

Our job is just now... No, I... You expected towards the later part of this year, mid, or sort of how should we think?

Well, how are you thinking? Correct.

Second half. Second half. Okay, good. Okay. So then maybe moving onwards, one area we didn't talk a lot about, but you did mention on the marine side, that you're not dropping as much as the both OEMs and the ending manufacturers. But it would just be interesting to hear more about your expectations here for the marine business in 2024. Maybe also it's possible breaking that down in service and OEM as well.

I feel that the marine business has been very, very negative now for about one year. We are talking about both in industry. We are expecting that the industry will start dropping far less in the second half. And the buy, we all suspect that our sales to OEMs are going to be dropping less than we have seen in the last nine months. I mean, keep in mind that for us, it didn't start yesterday. We have seen very, very low numbers during the last three quarters, even if our numbers are much better than the industry numbers. In terms of the service of the market, we see stability. We have seen stability in the last two quarters, which means that it's still negative, but it's slightly negative. And in the same way as we're expecting on the rest of the service and aftermarket, we're expecting to go back to growth during this year without any kind of outs. We are a little bit more optimistic on the marine side simply because the marine side started dropping earlier from a service and aftermarket perspective. Yeah, yeah, yeah.

And they were also the most stable one in the first quarter.

Yes.

Thank you, Juan and Stefan. You're welcome.

The next question comes from Frederick from ABG Sundal Collier. Please go ahead.

Thanks so much. Morning, guys. Just tagging along to the aftermarket discussion here. Can you tell us what happened to the margin in the aftermarket given the soft top line?

It has been improving, but it has been improving on one side due to the mix. You know, when the aftermarket in America is dropping more than the aftermarket in APAC, you have a positive effect on those numbers. Then you have as well the fact that logistic cost is coming down. The logistic cost impacts service and aftermarket quite a bit since you have individual shipments very, very often. So we see improvements due to that. And then, of course, we are still very, very keen on our pricing, having selective pricing.

And are we talking percentage points of improvements or basis points?

We are talking base points, high base points.

Okay, excellent.

And we expect that to continue. Again, keep in mind that we still have very low levels.

That's clear. And then I thought you mentioned improvement potential in terms of infrastructure in the Americas. Can you just give some color on where exactly you see potential for improvements here?

No, but it is clear that it's very much about what we expect in terms of growth from the industry in the coming couple of years, right? As I mentioned before, we are down just now to 212 years levels. And the question is, is it going to take a couple of years to go back to 450, 500,000 units, or is it going to take longer time? How many DCs do we have? Can we consolidate more? Should we be moving to more 3PL? So it becomes variable cost instead for fixed cost. So it's a lot of activities that are taking place, obviously, in order to take down our cost base. I mean, what I would like to... Of course, it sounds strange, but keep in mind that we are dropping top line 20%. We are delivering the same krona at neutral currency rates as we were doing one year ago when we were selling 20% more. So a lot of activities are taking place, even if the results are bad.

Yeah, that's good. That's all my questions. Thanks a lot.

You're welcome.

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

Hi, good morning. This is Johan Kepler-Chevreux. A few questions just on this active cooling box you're introducing in the U.S. Now you applied the Igloo brand. But my understanding was sort of also that you would also push the Dometic brand business in the U.S. sort of in a different price point. Is that sort of still ongoing?

Absolutely. It is ongoing. You will see Dometic branded products in more stores, in more retail chains during 2024, starting in Q2.

And the profitability level of those for you, vis-a-vis the similar products under the other brand is positive, I suppose? Absolutely. Absolutely.

Dometic has higher gross margins than Eagle will have for similar technology, simply because of the brand position.

Yeah. excellent then i have a question to stefan just trying to understand your movements in the debt when i looked at the q4 presentation you had maturity profile for the usd part of 3.3 into 2025 and then 2.6 in in 2026 and now you say that that 2025 dollar denominator loan has been pushed out to 27, but in the chart you showed today, it's still sort of 3.625, but very limited 26 instead. How should I interpret these graphs?

Yeah, exactly. That's the, yeah, exactly. We have signed the agreement on March 27th, but then it's effective from the 1st of July. So there hasn't happened anything yet on this. So it will be effective from the 1st of July.

So the total debt repayment profile after this contract for 2025, how much will that be? Sort of of this 3.6-1.1?

I mean, we did repay one euro bond last year of 300 million. Then we have repaid one billion of an EKM-backed loan in Q1. And then we will repay another 100 million US dollars in Q3.

Yeah. And what is due after this coming into effect in July then? What is due to be repaid in 2025 of the 5.6 billion you have in the chart today?

Exactly. So what we have then remaining in maturities for 2025 is then the second part of this EKN back loan, which is 1 billion. And then we have one private placement of one billion as well. So that is what is then remaining to refinance or pay back in 2025.

So we're down to two billion in total. Yes, exactly. Excellent. And I understand it. Then just on the interest cost was maybe a little bit above my expectations in the quarter here. How do you see this item developing for the remainder of the year?

I mean, approximately 50% of our total debt portfolio is fixed, and then the other half is variable. So we have an average of 5.2% or something like that right now on our debt portfolio. And I mean, a little bit depending on how the underlying interest development is going to be. But I mean, I think Everyone is agreeing on that it should come down. It's just a question when it will come down. So over time, I expect that to decrease.

But for the near term, we should assume the same for Q2 and Q3 unless we have a major development on the interest rates. Correct. Okay, thank you. That was all I had. Thank you.

The next question comes from Carrie Rinta from Handels Banken. Please go ahead.

Yes, thanks. Good morning. Thanks for taking my questions. Just two for me. One, the tough competitive situation in the USRB business, and you say that you don't want to buy market share, but there's probably players that do want to buy market share, and there's probably players that might want to buy market share by making acquisitions. So how should we think about this increasing the likelihood that we might see some divestments in your RV business in the US?

That's crystal clear. We have mentioned that a couple of times. We need to get LVA to a totally different margin profile. They have always been most exposed to the RV industry and especially to the RV VM industry. And as we all know, that's where we have the lowest margins. so either we lift our margins through pricing cost efficiency improvements or we will consider to the best no doubt about that all right so we are we are open and that's that's no secret i mean we have been talking about that since 2021. good but would you say that uh i mean of course with every day that goes by

I mean, I don't know if the likelihood is increasing, but at least you have been working on this for longer.

Are you thinking about LVA specifically or other parts?

No, LVA specifically.

LVA specifically. Not really. I mean, LVA has been very much about increasing efficiency. And something that we have done, but at the same time, obviously, when the market is 50% of the market that we had two years ago, then it's very, very tough to see that in our numbers. At the same time, we have been commenting that you have products that will lead into service and aftermarket revenues for 15 years. And there are products that are very transactional. Of course, that we will look in the first place at those kind of products that are transactional. And we are doing that as we speak. Then the question is, is it about divesting? Is it about increasing or repositioning the products so we become even more high margins? We are working on that, I can assure you.

Sure, thanks. And then the second question is that maybe trying to summarize, and you have been clear about RV OEM business, that that's likely to weaken in 2024. But then if you look at the rest of your portfolio, would you Do you think that you can safely say that the worst is behind you, i.e. that organic growth rates are not getting worse in any of the other subsegments?

That's our feeling. And the reason for that, the logic behind that is obviously that everybody overstocked in 2021, in the first quarter of 2022, in the expectation of a good season in 2022. And then we got interest rates kicking in in a brutal way. so of course that those inventories are consumed step by step it has taken longer time than we expected and i guess that you expected as well when looking at other consumer businesses but of course the inventories are lower at the same time we're also expecting that sooner or later interest rates are going to come down we know that camping grounds are still filled fully booked and as far as our products are used sooner or later you will need to upgrade sooner or later you will need to change So we are fully, I mean, again, the situation that we have seen in the last two years on the service and aftermarket side or on the distribution side, we have never seen anything like that. Never. But again, we, the last time we had a pandemic was 100 years ago.

Exactly. Thank you. That was very helpful.

You are welcome.

The next question comes from Henrik Kristiansson from Carnegie. Please go ahead.

Yes, hello. So one question to Stefan perhaps. I think you mentioned that there was some impact from lower raw materials. And the question then is what was the impact in the quarter first? And then if you look at the spot rates currently compared to the cost you have in your inventory, Once that inventory is worked through, you sound quite keen on keeping prices. I mean, how much could that help on the margin side? Is it one percentage point? Is it two? Or any sort of indications there would be interesting.

I mean, it's always the combination of all the different items that I was listing in the rich here. I mean, there is a dynamic in this with raw materials, because even if our inventory has been coming down quite a lot, we still have inventory that has been acquired to a higher cost, obviously, X number of months ago. And as we are consuming that, that is then replaced by products that has been acquired to a lower raw material cost. And then now we can maybe see some developments on the raw material markets where things are potentially pointing a little bit upwards again. So it's obviously a continuous dynamic here. But we will continue to see effects of this, both on the logistic side as well as on the raw material side going forward. And it's going to be, if I just estimate it here, like 50 to 100 basis points or something like that. So it's going to be helpful.

I think what we have to remember is that even if the raw material prices are lower than they were one year ago, they're still much higher than the situation that we had pre-pandemic. I think that's a reference point. Again, we can't speculate about what is going to happen moving forward, but we know the raw material prices have been much lower than they are today.

Yes, good. And then the second question on working capital, 31% the sales, target 20. What do you think is realistic to achieve during this year?

I think the following, Henrik, that it's always very difficult to have this in relation to net sales KPIs when net sales is developing organically as it does. But I mean, as a matter of fact, we are 2 billion lower in working capital now compared to one year ago in constant currencies. So I think that is an underlying positive development. Even the Tories continue to come down in Q1, even though it was not as much as in Q1 last year. But as I have said before, I still expect that we are going to have a continuous meaningful reduction of working capital during 2024. Will we be able to repeat the record operating cash flow that we had last year? Probably not. But it should still be strong.

perfect thank you there are no more questions at this time so I hand the conference back to the speakers for any closing comments so thank you very much everybody for your attention again continue continues

challenges on the markets but we will continue to work very very hard to continue to improve our margins and we are more positive moving forward than we have been until now and the reason for that is obviously that we see that the second half should be better than we have seen lately and at the same time we continue to work on our efficiencies in order to improve our margins and deliver a strong cash flow and reduce our leverage with that said thank you very much for your attention all of you and have a great weekend thank you