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.