Dometic Group AB (publ)

Hello, good morning everybody and welcome to this call for last quarter 2024. Let's proceed immediately with the highlights. In regards to the market, no major changes in comparison to what we saw during the last couple of quarters. We still see tough market conditions. We see as well consumers still being cautious, even if camping grounds have been clear during the season. Still, the question is very much on the retail inventories and the fact that our customers seem to be still cautious in building inventories during the season, but also now ahead of the season. We have noted in the last, I would say, two quarters that we get a month that looks a little bit more positive. And then we see orders coming down again. So the feeling is that dealers do have difficulties to calibrate how much they should have in stock for the time being. Looking at the performance, organic growth went down 13%. Service and aftermarket ended up at minus 9%, which is a slight improvement in comparison to Q3. In this case, we have to consider as well that last year, we had a pretty strong quarter in Q4, especially in the marine area. We were also happy to see mobile cooling coming back after a weaker Q3. They came back with a better Q4 and a clear improvement as well in comparison to Q3. On the William side, on the contrary, while we see that America is improving we saw, sorry, the duration is lower than we have seen during the last quarters. And the same is valid for the Marine UEM at the same time as we see how the UEM in both the EMEA region and APAC is accelerating exactly as we were expecting during the last quarters. EBITDA ending up at 7.3 versus 8.7 last year. Even here, when excluding the one-off due to the tariff recovery that we had in the U.S., we ended up at 6% in comparison to the 8.7%. And as you all know, we introduced a restructuring program in December 12th that will have an impact in the coming capital years. Happy to report a very, very strong cash flow as well, ending up at almost 800 million krona, leading to a leverage of 3.1 in comparison to 3 as we were showing in Q3. Looking a little bit deeper on the numbers, SAIS ended up at close to 4.8 billion or 13% negative growth. With EBITDA margins, ended up at 7.3, again excluding the one-off, ending up at 6%. and reaching every day of 349 million. When you're screwed, again, the one-off will be 286. Looking at EPS, negative adjusted EPS of 35 earnings, as I mentioned, a very strong cash flow, almost of 800 million, a leverage 3.1 in comparison to three times last year. Moving into the yearly numbers, 24.6 billion for the entire year, with 12% organic drop, EBITDA almost 2.7 billion, and what we consider to be a still very decent EBITDA margin of 10.8, considering obviously the tough market situation. Adjusted EPS ending up at 3.21, three Corona 21 earner, and operating cash flow over 4.2 billion, which is the second highest cash flow ever seen in the company, in the history of the company. Looking at it a bit deeper into the sales evolution, negative growth in all the segments. As we have seen, as I commented before, we see a stabilization of the business in LV Americans. We see also a lower drop in the marine OEM, while we see the OEM in EMEA and in APAC accelerating. Happy to see MCS, as I mentioned before, and then global. Even here, we have the MPS business, and that's also impacted by deterioration on the RV industry. Looking at the service of the market, slow recovery. Sorry, I missed one. Let's say by channel. Looking at OEM, as you can see, has never been percentage-wise in terms of sales lower than just now, 40%. We need to We see, obviously, that we are the lowest level on the cycle and that business should start growing in the second half as per our estimation. And then looking at the RVVM side, it's down to 20% of the total sales for the company. Looking at service after markets, a very, very slow improvement in Q4. And as I commented at the beginning, we see really a change every second month. We see that they are buying inventory and then they get a little bit slower. In this case, I can mention that we have Marine was very, very strong Q4 last year. We look at both the American business from a service of the market and the business in Pacific. They were in a pretty good shape in Q4, but the numbers are drawn down by the situation in EMEA and in Asia as well as in marine. We see, as we commented as well last quarter, that people are not upgrading prods. They are not replacing prods, but rather repairing the prods, waiting for one more season to upgrade. Looking at our EVT evolution over time, 7.3%, but then 6% excluding the one-off. We see gross margins pretty stable, slightly down, 20 base points. We see as well that we continue to invest. And I think that this is also important to mention that we have kept investing all the time in growth development and in building up our sales organizations at the same time as we are reducing capacity all the time in our manufacturing operations, distribution, as well as in administration. Number of FTEs down 15% in one year, about one third, 33% during the last three years. So we, in my opinion, we are doing a fantastic job in the organization, reducing capacity at the same time as we are not jeopardizing the future. by reducing product development for the sales organization. Looking at the different segments, Americas, organically 6% down. Stable services in off-the-market and less decline in the OEM side than we have seen before. Evitae margin, a minus 7.3. versus 6.2, minus 6.2 last year. And obviously, it's a consequence of lower sales. We continue to reduce capacity, but of course, we are sitting on infrastructures, and it becomes tougher and tougher. Hopefully, we will see the situation in America starting to show a positive evolution in the coming quarters. Looking at land vehicles in EMEA, this is really what we saw together with the situation in APAC, the duration on the WM side. So, totally speaking, organic growth down 90%, very much driven by the WM side. ABTA positive 0.3 versus 2.4, positive last year, and a little bit as the situation in Americas is very much now about keeping, reducing capacity, at the same time as we keep investing in product developments. Looking at land vehicles, APAC down 23%, same story, very much driven by the OEM. We still feel very proud, obviously, of the EBITDA margins that we are delivering, 26.6 versus 29.1 one year. And it's a little bit of the same. I believe that this is important to consider, obviously, that in this case, when you have the high profitability that we are showing in a couple of segments, whenever they are dropping, or the magnitude that they are dropping, it's very difficult to compensate on the bottom line. So again, I feel very, very proud of what we are doing there. The same is valid in marine. Down 12%, we see OEM showing a lower iteration than we saw in previous quarters, while the aftermarket was weak in the quarter. Still, margins are very resilient, at 19% for the quarter. And in this case, we have to keep in mind that we are investing heavily in a new product generation, in a new product area that we are launching as we speak in February. Look at mobile cooling. Organic growth down 5%, a clear improvement versus the previous period, Q3. Evitae margin 7.4, of course, positively impacted by the one-off, but even when excluding that, we are positive in comparison to last year, even if we are showing negative organic growth. And even in this case, with lots of investments, both in the product development and building up our global resources. Moving over to global ventures, organic growth down 11%. We see growth in hospitality, This is also positive. While residential is down sales-wise, we see order intake is starting to show positive numbers now for a few months. So somewhere we start to see some green shoots, especially in the distribution area, with idlu being better, with hospitality still driving very nicely, and residential is starting to show positive order intakes. While on the contrary, mobile power solutions, which is very much driven by the RV industry, is still down. Evitae margins, 5.1. And even in this case, we have investments both in the pro-development area as well as in building up our global sales organization. Moving forward to sustainability, very happy to see as well the results. So injuries doing well and our targets, female managers, the same. same level as last year, well above the targets that we decided a couple of years ago. CO2, important improvements, and we have seen very clear improvements year on year since we started really to pay more attention to the side of the company. Audits, the same, well in parity, and also happy to report what I already have said, that we continue to invest in product development and innovation index ended up at 21%. versus the 17%. In terms of product development, we just launched a new series of air conditioners showing a fantastic performance, including also the new refrigerant that is going to be regulatory from next year. And with a fantastic achievement, we are reducing global warming potential by 70%, which is pretty amazing. The same, we have been investing quite a lot in mobile cooling, and we saw the first results last year in terms of seeing the EGLO branded products on active cooling started to kick in on the American market. We also extended the portfolio to more models to attract more consumers on different levels, price levels. We are also investing, obviously, on the outdoors, on alone areas, and how to get MPS to be really having an impact on all different product areas automatically, something which is starting to take place. We also introduced a cost reduction program in December 12th. The expectation is to have annual savings of 750 million once we are totally done at the end of 2026. We will see the first effects from starting in Q1 2025. We have no impact in Q4. And as you may remember, we have restructuring charges of $1.2 billion, of which $400 million are impacting cash flow. The whole amount is booked in Q4, and the cash will be having an impact from 2025. When looking at the businesses that we also communicated will be discontinued. We are talking about 800 million altogether. We had no impact in Q4. We will see a gradual impact in the quarters to come. And as we also commented, we are looking for a number of investments that will lead to a total annual sales of 1.5 to 3 billion. we commented we are not going to disclose any details it's a working process we feel good about the progress and we will comment more obviously when we have final completions and with that stefan yes i followed the last one sorry the new organization So obviously this is also a consequence of the restructuring program that we presented. This is a little bit what we have been doing during the last years, really getting more focused into different verticals. We have the three regional areas for land vehicles that are going to be converted into one single segment called land vehicles. Since we have the restructuring program, we are going to take it stepwise, meaning that we are going to consolidate into land vehicles, but we will still be disclosing evolution for the three regions until the restructuring program is totally completed we are just now in the in the process of recruiting annually for land vehicles global land vehicles and until that person that individual is in place i will be heading the segments and we are planning to start reporting from q1 this year again it's going to be an aggregated number And we will have a disclosure of the three different regions as part of the LV. And now, Stefan, could you please take us through the rest, please?

Thank you, Jan. Starting with the income statement for Q4. The gross profit margin is holding up well, as we have seen also in the past. And that's a result of that we are Continuously working on adjusting capacity, as was mentioned here before. We also have a sales mix effect, less OEM part of the total sales, and then we are also starting to see the logistics cost coming down. On an operating expense point of view, we have a positive impact. However, it's still higher in percentage of net sales. We are obviously continuing to invest in strategic growth areas while we are controlling the spend in other areas. Then we have the one-time positive gain of 63 million related to tariff refund within mobile cooling, 63 million. And it's booked on the line of the operating income and expenses in line with previous handling of these type of items. Then on net financial expenses, they are slightly up versus the same quarter last year. And net interest of bank loans and financial income is 136 million. And then we have FX revaluation and other items of 38 million. And partially the improvements on this line is a bit masked due to the currency effect. On the tax side, we actually have a positive effect of 40 million in the quarter, and that has been impacted by the items affecting comparability in the quarter. Moving over to operating cash flow, 784 million is a good Q4 number, a little bit better than what we did expect, driven by underlying earnings, but also on the development of working capital. So with that, we move on to the underlying parts of core working capital. As we see, accounts payable is stable around 55 days. The same thing on accounts receivables, 45 days on an average here. And then inventories which we have been working very dedicated with 138 million and over 138 days. And the trend is continuing down. The working capital in relation to net sales is 29%. And I mean, working capital as such is coming down, but obviously net sales is also coming down. So that's a little bit why we are a bit stuck on that KPI. As I said, the number of days of inventory, 138 days, and in constant currency, that's a reduction of around 1 billion in the full year. But we continue to be committed to our target that over time, we should take the working capital down towards 20% of net sales. Moving over to CapEx and R&D spend. So capex in the quarter was slightly higher than the previous quarters, 2.1% of net sales, but 1.3% of net sales for the full year. And we will keep controlling this even though we feel that it's a bit on the low level, but That will then start to change when the overall business climate is changing. Looking on R&D spend, 3.3% of net sales compared to 2.8% last year. And it includes capitalized development costs of 13 million. And we continue to invest in structural growth areas like marine and mobile cooling is the most obvious examples here. And for the full year, it is 2.6% in relation to net sales. Taking a look on our free cash flow here in Q4 and in the full year. As we mentioned before, there is a robust operating cash flow in the quarter and it is the second best year ever supported by reduced working capital, obviously. The global restructuring program of approximately 1.2 billion is included in adjustment for non-cash items. For example, when you're looking at the change in inventory, that is not impacted by the part of the restructuring program, which is related to inventory write-offs. So that is a clean number. Obviously, we have a high focus on working capital optimization, and that will remain in 2025. And we will continue to carefully prioritize investment in fixed assets, as I mentioned before here. Free cash flow before M&A. The income tax paid declined in 2024, which is, of course, natural because the earnings are lower. And then the paid and received interest has been trading down in 2024, as expected. So we are... Prioritizing to take down leverage, of course. We have said that all along. And the global restructuring program includes also investment opportunities going forward, which we have mentioned. And they will then be communicated at the point when they are realized. Moving over to net depth to EBITDA leverage ratio, we ended at 3.1 after Q4, compared to 3.0 in Q3. The EBITDA obviously is contributing slightly negative, compensated by positive cash flow effects, and then we have the strengthening dollar versus the Swedish krona that is impacting on the FX side with approximately 0.2. And as I said before, we are continuing to be very committed to achieve our leverage target of around 2.5. That's what we are expecting to take a significant step towards in 2025. Taking a look on the debt maturity, we have an average maturity on 2.1 years. If we include the extension options, it's two and a half years. The average interest rate on the debt portfolio, 4.8%. We have the undrawn revolving credit facility of 280 million euro maturing in 2027. And we are, as always, continuously working with our debt portfolios. Moving over to the dividend proposal by the board. Proposed this to pay 1,30 kronor per share compared to 1,90 kronor per share last year. And the motivation is that it reflects a balanced view of the financial position, business outlook and the current market conditions. And that would be 40% of 2024 adjusted EPS. And as you know, our dividend target is at least 40% of net profit over a business cycle. So with that, John, I hand back to you to summarize Q4. Thanks, Stefan.

So let's start first with more of the facts. Clearly, the market was another challenging one. With organic growth down 12%, EBITDA that we consider to be robust, considering the situation, ending up at 10.8, and a very strong cash flow of 4.2 billion. If we look at the outlook for 2025, it's clear that we are entering the year with lower inventory levels, practically everywhere. So even in the areas where we see, no matter we are talking about EMEA or we are talking about APAC or marine, inventories are coming down quite dramatically now when production is coming down at the same time as registrations are up or much less down than production. So we feel confident that we are moving in the right direction. The market is moving in the right direction. We are also expecting service and aftermarket to recover stepwise. We have said that a couple of times. It is clear that we have seen a couple of times back and forth movements. We see that our customers in the distribution channels have difficulties to calibrate. The good news still is our consumers keep camping. And as far as they are camping, they are using our products. So it's going to come back. It's a question of when. And then we see VM. And even here, I have to admit myself, we see inventories coming down. We see that inventories in the RV side in North America have not been lower for the last 20 years. It's massive. We see also that if you look at marine, while retail is down 7%, manufacturing is down 29%. So it should be relatively fast now before until we get into some stabilization of the markets. So from that perspective, I feel, we feel that we're a little bit closer to the draft and that we should be passing somewhere during the first half. Then strategically, I feel that we are doing a very, very good job. We keep simplifying our business. We are taking a lot of the complexity that we used to have. We have decided to run a restructuring program that will reduce complexity additionally. We are working with our investments. We feel that we will get some of these done in the coming quarters. We are, as you know, simplifying as well our structures with LV now becoming one single vertical instead of three. We believe that that will also lead us to a faster restructuring program and additional simplification of the business. And we keep investing. So even if we are reducing costs in all the rest of the company, we are accepting really pro-development where we keep investing all the time and we see more and more products coming to the market. And the other area where we are investing is in building up some of the new business areas, both in terms of salespeople and also building up the organizations. So I cannot say that we are happy. You can never be happy with your performance when you are delivering less money than we did last year. But I'm really proud of what we are doing as an organization. I'm fully convinced that with all the efforts that we are taking, once the market comes back, we will have a fantastic upside. And with that 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 5 again on your telephone keypad. Please mute your line when you have asked your question and please limit yourself to only two questions. You can also write your questions on the webcast page. The next question comes from Frederick Ivasan from ABG Sundal Collier. Please go ahead.

Thank you. Morning, gentlemen. I've got three questions. First one on EMEA, obviously soft in the quarter due to the, I guess, land production halts among the customers, et cetera, et cetera. But what do you see and hear from your customers in terms of production volumes when you look into Q1, please?

I mean, it's still soft. So, I mean, all customers are communicating more on the second half than they are communicating on the first half. So, I don't think that we will see any fantastic numbers coming in in Q1. I think it's going to take the first half. Registrations with the exception of December. December was slightly negative. With the exception of December, we have 15, 16 months during the last period that have been positive registrations. So, that's really positive. But then we have massive, as you know, shutdowns by Knaus, Heimer, all the major players, Trigano. So, of course, that has an effect. At the same time, all of them seem to be very positive about the second half.

Okay, that's clear. Thanks. Second one on the distribution business, you mentioned that the ramp up of new products sort of supported growth in this business. Can you give an indication of this impact and maybe also if you could talk a little bit about the pipeline for the coming quarters?

Yeah. So I cannot give you exactly the percentage, but it's clear that we launched a totally new series called CFX5 on the Dometic brand. We launched a new series called CFX2, which is a more affordable product. We launched the new active coolers under the Igloo brand. We are launching the Igloo range both in 8-pack and EMEA. So without any kind of doubts that that had a couple of percentage points of growth for the year 2024. Then moving into 2025, we have a whole new range that we will be launching in Q1 and Q2 as well, both on the hard coolers and on the soft coolers as well as greenware. So those investments will continue and you will see wave after wave of new products. That's one of the areas where we are betting.

That's very clear also. Thank you. And last question on the networking capital and, I guess, inventory in particular. You've been reducing the position quite significantly during the last year, as you talked about, Stefan. But what do you plan for 2025? I guess you might not reach the 20% targets already this year.

But I mean, as I said before, the networking capital is clearly coming down. You can see that in absolute terms. Then obviously the KPI in relation to net sales is a bit challenging for when we have the organic development as we have. But with that said, for 2025, I mean, I still see that we have further opportunities possibilities and potential to continue to reduce working capital. And we are working with it. We have plans for it. Will it be? As Juan mentioned, we had the second strongest year ever on operating cash flow. Will we be able to repeat that in 2025? It's probably going to be a little bit lower than that. But still, there is continuous potential to reduce working capital.

Perfect. That's all my questions.

Thank you, Fredrik.

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

Yes, good morning, Johan and Stefan. Just a couple of questions from me then. Coming back to RV, but maybe more on the U.S. side, if I look at your numbers for Q4 and try to sort of dissect what is OE and what is aftermarket, given what you write, It looks like the underperformance that you've had now for a couple of quarters versus the RV shipment data is looking a bit less bad. Is that just base effects or is it you sort of regaining some momentum with the customer base in the U.S.? ?

I think it's still early to say, but it looks better on the RV side, but it looks also better on the CPV side. So it's a combination of both. And then we have, on top of that, we have a service market doing reasonably well. Okay. The service market, you know, when I comment on this a little bit every second month, That's also valid for North America. You get the feeling that dealers do have difficulties to calibrate. So we had a weaker Q3, and now we have a pretty good Q4.

Okay, good. I heard your comment on EMEA, of course, but I... it's hard to refrain from the fact that if you read Trigano's latest trading update, which was very poor on top line, there was a positive signal when it came to underproduction, where they basically said that they would stop to underproduce during the start of 2025. Is that old news? Have you heard anything else regarding that? Or how do you view it?

No, not really. But I guess that we are back to the never-ending discussion. I mean, You have your own customers, and that's one of the parameters that we are following. At the same time, we also have a track record, obviously, of our customers being a little bit too optimistic in comparison to what we will see for real later on. So we are simply trying to follow as close as we can. And I cannot be sitting here today and saying that I'm expecting a fantastic growth next year. I don't see that. I do believe that we will see some improvements. I think Q4 was tough. And of course, all factories are shutting down in December. But this year, as you are aware of, some factories shut down already in November. And some factories are planning to start producing again in February. So it has been a very, very long prolongation. I believe that January will be tough for many since the factories have been closed down. So I believe that we see some improvement in Q2.

and then grow the improvement for the rest of the year. The production stock is related to that. The inventory levels by the dealers have been elevated. When you try to estimate how that looks like between the different manufacturers, it looks different. Some are better off and some are a bit worse off. it's not surprising that you maybe get a little bit different signals from different manufacturers depending on how their inventory situation looks like.

Yeah, okay, good. I have to come back there, Daniel. The good news in this case is that if you compare the European market with the American market, the positive is that we have registrations now for 16 months. And of course, if manufacturing is down 20-25%, It doesn't take that long before you are in balance again. So there is balance in the US. We should get balance during this year in Europe as well. And the same, you see exactly the same in APAC, right? I mean, we see heavy, heavy drops at the same time as retail. It's not falling by any means at the same pace.

Okay, good. And just maybe two shorter ones. When we talk about discontinuing certain product categories, which of course announced before Christmas $800 million in total, do you have a good view on sort of the sequencing of that discontinuation? Is that going to be...

h1 heavy or is it going to be gradual throughout the year or sort of some help with modeling there it's going to be a statewide is is yeah i mean i cannot tell you so much more it's going to be a statewide and it's going to be a little bit different depending on geography as well since the plans are not exactly the same everywhere i mean this is this is really what we are trying to simplify daniel as well by creating an elder organization. Since we had the three elder organizations, they had different focus on different product areas in different regions. Of course, what we are trying to do is to build up something which is when we are developing products that we have a similar approach. When we are betting on our product range, we have a similar approach. So the intention, obviously, is to take one more step in simplification in the same way as we did with marine or the others. And this has an impact on this discontinuation of the process as well.

Okay. Okay, maybe just the last one, and it's been very erratic, of course, when it comes to different statements regarding Mexico and Canada and tariffs, but quite aggressive as of late. Have you taken any actions in the past couple of weeks to mitigate any sort of very negative surprises on tariffs?

No, we are obviously working very, very close. We have our people on attention. We have our own tables, our own impact here and there. But so far, just now, it's impossible to take any decisions. It's always the same. No matter what you do, You don't know if you are going to be right or not. We know the impacts. We know that we have capacity in the U.S. if we need to move some capacity back to the U.S. We have Canada. So it's going to be depending, obviously, on where and which country is going to be impacted the most. And then we will take actions. And then I think it's important to remember, keep in mind that in terms of the U.S. market specifically, we have been competing Chinese companies in the last three years. So if it becomes heavy duties on China, I don't necessarily believe that it's going to have a negative impact on us. It might be the other way around.

Yeah, sure. I'm just thinking more about Mexico maybe and to some degree Canada. But maybe on Canada you feel that you have fairly good pricing power and yet you can pass on any tariffs. I guess it's a bit more difficult in Mexico maybe, given what you're sourcing from there.

Yeah, but at the same time, we also have competitors sourcing from China. Our main competitors are sourcing from China, both components and finished products. We are not. So I think we need to wait. I would love to tell you this is what we do now because we know. Just now is simply guessing. Keep in mind that we were coming from six months of discussions on 60% tariffs in China. That would be 35% extra tariffs on existing products. And that would kill, obviously, Chinese imports. And now all of a sudden we have tariffs on Canada. So I think simply that we need to be patient, work. It's clear that we are working internally. But the question is, are you building capacity in the U.S. here now? The answer is no. We have the capacity.

Okay. Thank you, guys. That's all for me.

You're welcome.

The next question comes from Gustav Hagius from SEB. Please go ahead.

Let me ask my questions. Good morning, guys. If I can follow up on Daniel's questions on the trade tariffs and all that. How big of a process would it potentially be for you to reverse the decision to unwind the refrigerator business in the US in a scenario where that market would dramatically improve on the back of new tariffs. I believe it was 25% of your business in Americas for RB at some point. Could you expand on that? That'd be interesting.

I would, from my point of view, I would say that the resources that we have internally in terms of assembly operations and so on, we obviously have them still but then in the step that we took that we were partially outsourcing a part of it i think it's more of the on the on the supplier base then and a little bit our assessment on how how how long term is this i mean is it i mean is it going to be a change that is going to to to be for a longer period of time or is it you know a short-term reaction and so on so it's a It will have to be an assessment of the longevity of such an opportunity, I would say, as well.

And it's going to be judged by problems, one country by country, at the same time.

And on another note... Sorry, go ahead.

No, as I commented before, we have all the segments have plans, but it's difficult to just push buttons without having certainty.

Yeah, that's understandable. And on another note, once you've consolidated all your RV into this global new segment, could you expand a bit on what will be the interdependencies between that RV segment and the other segments and the businesses?

Very little. Yes.

So what would be the business rationale to keep it internally rather than to maybe have it live its own life eventually outside of Dometic?

I mean, at this moment, there are no plans. But again, as a company, you should never say never, right? I mean, it's clear that we are doing... If you look at what we did with Marine, if you look at what we did with MCS, if you look at what we did with NPS, what we did with hospitality... We are building up global businesses. The rationale is that we believe that this is simplifying the structure, that we will gain efficiencies, that we will take decisions that will impact the entire globe instead of having three teams kind of driving different questions at different times. So we are doing this not with the purpose of divesting. We are doing this with the purpose of developing. Then you never know.

All right. Appreciate that. Thanks, guys.

Thank you.

The next question comes from Martha Ford from Jefferies. Please go ahead.

Hi. Good morning. I just had a couple of questions. First, on the consolidation of the landscape. I previously said that the differences between the geographical markets meant it was pretty difficult actually to consolidate them into one group. So what changed your view now and how do you plan to go about consolidating them?

It's really difficult to grasp you, but if I understood well, the question was, have you changed your mind? You were talking in the past that the products were different and now you are doing this. Is that right? Yes, exactly. Okay, okay. So it is true, obviously, products are different, you have different sizes, but you also have a lot of monalities. We have today in the LV regions, we have on one side some B2B, on one side we have a lot of B2B and we have some B2C. On the products, it is clear that you have sizes, but you still have a lot of common componentry. The way of approaching to the market is common. If you look at the factory where we are manufacturing in China, it's very much going to both the land vehicles EMEA and the land vehicles American organizations. That trade will be simplified dramatically. the the way of prioritizing will simplify so you are getting very much of the same similar situation that you have in the all the other segments it's not always that you have exactly the same products but you still have more commonalities and you have more efficiencies by putting this together and just having it independently as it is today and the best example there is our new air conditioning range which is a global range uh building on a modular design so so so that's uh

That's a very good example of a global approach.

And of course, if you go back two years in time, we have much more complexity in terms of products, in terms of variations. What we are doing, nonetheless, now when communicating both the structuring program and the investments that we are taking, additionally complexity from the different LV businesses, which makes it possible all of a sudden to have one common organization.

Thank you very much. And then second, on the outlook for 2025, OEM as a whole would be under pressure, but given the improvement we're seeing in Latin America and in marine, is there a chance that you could actually see growth in H1 or is that still the second?

I'm very hesitant on H1 altogether. I do believe that we will still see OEM growth. down and as you can see on on the wem we were down 18 in q4 i don't think it's going to be perhaps 18 in q1 but it's going to be it's going to be in my opinion two digit negative and i do believe that it's going to get much better in the second half and so i again i think h1 is going to be very much about service of the market and distribution and then hopefully we will see the OEM side coming back in H2.

Okay, thank you very much.

You're welcome.

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

Yeah, hello, Johan, Stefan, Richard. I hope you can hear me well.

Yes, yep.

Good. I am wondering a little bit about Q1 and the seasonality. You obviously have a very weak cash flow in the first quarter normally. And now what we hear is that your customers are pretty cautious. I heard something from Brunswick indicating that all the dealers are very late in placing orders because they know that all the suppliers can deliver pretty quickly. How do you manage this? I guess you have to have some inventories available for you to to to be ready if there are demand and at some time you you want to to manage your cash flow are you doing any type of factoring or extra things like this right now or no we're not doing any factoring as we speak no so so but i mean to address the question that you that you have i mean this is of course the

the very fine operational balancing act that we are going right now. But the interesting thing is, of course, that If we look at the last 18 to 24 months, it has just been a discussion about reducing inventory, reducing inventory and reducing inventory. Now the discussion is both including a discussion about continuous optimization of inventory, but also making sure that we are not missing out, as you're saying, that all of a sudden we have problems with the service level to customers. So it's a little bit of a more balanced discussion right now, which is, of course, a sign in itself, if I say so.

And as I said, it's also a question of how you see orders coming in. Even if we have low visibility, we have high visibility in some areas than others. As I commented before, we start to see positive oil intake now for a couple of months, for instance, in North America and some of our businesses. Of course, there is much more about starting to build inventories. You know that when the orders are coming, it's going to happen. You will need to deliver. So, totally for discussion is when we see, obviously, VVM in Europe or in APAC is still going down a high two digits. So, I think that we need to do both. is looking business by business, geography by geography. I mean, that's the way we run the business. And that's why, again, we need to simplify the more as much as we can, as we are doing. So we see that as a geography, but we see different markets as they are.

Yep. Yep. Yeah, it will be interesting to see how this plays out on another topic. I mean, you have a proposed dividend, a solid one. Have you ever sort of considering paying in two installments to match your cash flow profile a little bit better? For example, Husqvarna is doing that, for example.

We have considered it, but we have not implemented it. So... It's obviously something that is possible today. I agree.

Okay. And then on another topic, you have announced that you might potentially sell some businesses. And then this program you announced in December, you sort of hiked the potential in terms of sales to BetaVest a little bit. Do you have any active discussions ongoing on that front? Or is this much later down the road?

No, we have active discussions. We have assets on the market and where we are having continuous discussions or where we are in the process, basically. And then some of the assets, they are a little bit earlier in the process or we have been with them in the market before and we are taking them to the market again. There is absolutely activities ongoing, and they are in different stages. But as I said before, we will communicate around that at the time when they actually materialize.

Okay, that's all for me. Thank you very much.

You're welcome. Okay, we have a few questions on the web. First one for you, Stefan, I guess. How will you reduce leverage down to 2.5?

Yeah, that's the known levers to pull, of course. I mean, first of all, it's about earnings to keep on working on improving that. And I think we have certainly been taking measures with the restructuring program that we have been communicating and also as we have been talking about that we are expecting gradual improvement in some of our businesses during H1 and then OEM in the later part of the year. So that's obviously going to help the earnings to improve. And then there is, of course, what I talked about before, the working capital, both the core and the full working capital, where we still continue to see optimizations that can be achieved. So that is one. Then it was also like we heard here as a question about the divestments. when they happen they will also contribute to reducing the leverage and that's of course a positive benefit of that on top of the operational and strategic reasons for the divestment.

So that is the answer. Thank you. Next question. Can you please give us your thoughts on the upcoming bond maturities and how you plan to tackle those?

Yeah, as I said in one of the bullets when I talked about our debt portfolio, we are continuously working on that. We ended the year with 4.2 billion cash at hand. That's obviously one component in this. But then we are, you know, continuously and proactively working with it as well. And then we obviously have a little bit more than the longer term. We have the 2026 Eurobond, 100 million euros for India in May next year. And it's, of course, you know, the right thing to do is to start to work on that in time. And then we have to see when it actually happens. But we are certainly on that. Let's come back to that when we announce the activities step by step here. But we are not sitting and doing nothing. We are pretty active.

Thank you. Another one. Can you please provide some color on the exposure you have to Knaus Faber, receivables and revenues? And how isolated do you think the legal case is?

On the legal case I have no idea, since we are not involved by enemies. So I cannot comment more than we are not involved by enemies. On the exposure, so far we have not seen any exposure.

I mean, we have been taking some measures in cooperation with Knaus on how to deal with our day-to-day business with them. So I think we are on top of that. So we know what the receivables exposure is and how we deal with that on a continuous basis.

Very good. some more cash flow stuff here. Would you be able to provide guidance on CapEx and tax outflows in 2025?

Yeah. CapEx, we have been talking about around 2% of net sales now. We have obviously been below that. And as I said before, we are going to keep on controlling that and really make sure that we allocate cat picks to the to the most important areas but i mean so that's maybe more the short term the long term we should be around around two percent as we have talked about then in terms of taxes i mean we have had an extraordinary year in 2024 of course impacted by the different events we have had. And for 2025, I would say that we should assume a tax rate slightly above 30%. And that's higher than what we want. But as we see that the business is starting to come back the way that we have organized our transfer pricing system, it's going to operate more efficiently. So I think that the first step, that's not for 2025, but beyond that, the first step is to come down to 2029 and then we know we have been on 2027 also historically. That would be a point of guidance on the effective tax rate.

The last web question is on the dividend position on 1.30 Swedish krona. If getting down leveraged is a priority, why didn't you reduce the dividend more?

That was a discussion that we had in the board. There is different stakeholders in the company, as you're well aware of. And this was, you know, a decision that was taking that into consideration. This dividend level is going to increase leverage with less than 0.1. So the judgment of the board was that this was a balanced decision.

Good. Back to you, Operator.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Well, we would like to thank you for your attention, following us all the time. As I said, we cannot be happy with the results when we are delivering less money than we did last year, but we feel confident that the market will come back and that we will see a very good upside for our investors. With that said, thank you very much and have a very good day.