Dometic Group AB (publ)

And thank you for joining us on this call where we are going to present the first quarterly report for the year. So moving into the summary. As you all know, the market conditions continue to be tough for some of our main verticals. We have, I would say the quarter has been very much marked by the situation with the tariffs starting at the beginning of January. And of course, that as a company, we have spent, I don't know what to say, hours, days, weeks, calculating on different scenarios, obviously, and preparing ourselves. We see the retail inventories at our customers are lower and coming in some areas to very low levels. At the same time, as we still see, obviously, due to the market situation, customers are cautious in building up any new inventories. So the situation we see is a little bit every second month. We see that people are starting to buy, but then traffic is not as expected, and then they postpone the next purchase order. When looking at our performance, we reported 10%, minus 10% organic growth. Out of that, we also have 1% negative growth coming from the fact that we left one of the businesses that we already communicated back in December. We saw a situation with all the sales channels are improving in comparison to where we are coming from in Q4. And we see also some, as we already indicated, when reported Q4, some green shoots. We see that the order stock in LVA North America is starting to grow. We see also in the sub-segment OGV that even there the order stock is improving. We see that mobile cooling, specifically in Europe and in APAC is showing positive organic growth, nice positive organic growth after a few quarters of negative growth. We see as well that the service and aftermarket in some of the sub-segments are also improving. We saw specifically the service and aftermarket on the RV side is starting also to grow. So in other words, some positive signs of things are starting to move out there. Then of course, again, we have the tariff situation and the impact that that might have in consumer behavior moving forward. The challenge is still today is really the OEM. So I would say that the sales channels are really evolving as we expected when we communicated Q4 as well. So OEM continue to see a iteration even if it is less negative than Q4, why we see slight improvements both from a service and aftermarket and distribution perspective. We are happy to report, well happy, that's perhaps not the right word. We are proud of reporting a 10.4 everyday margin. Happy, we cannot be happy obviously when we are reporting lower everyday margins that we did last year. But again, I believe that the entire team is doing a fantastic job in protecting margins while the volumes are still very, very low. What we are doing obviously to support those margins is to on one side focus on the mix. As you all know, we have higher margins on the service and aftermarket and distribution that we have on the OEM side. So really moving resources, adding some more people in high margin businesses in comparison to the low margin businesses. We continue to launch new products and focus on product innovation. And of course that we pay a lot of attention to cost reductions all over. We also deliver negative cashflow for the quarter 400 million Krona in as we state a seasonally weaker quarter. Keep in mind that the lowest quarter always for us is Q4. Then we have Q1 while Q2 and Q3 are strong quarters for us. And then leverage ended up a 3.3 in comparison to 3.1 in Q4. So all in all, 11% in negative growth totally of which 10% is organic growth, negative organic growth. Every day ended up a 606 million leading to an everyday margin of 10.4 versus 11.8 with EPS delivering at 57 or adjusted EPS at 88 burden. With again, a negative cashflow of slightly more than 400 million Krona and a leverage of 3.3. Looking at the different segments, land vehicles came in at minus 12%. Marine came in at minus 13%. Mobile cooling at minus four and global ventures at minus six. And we will give some more details down the road. Looking at the safe channels, as we can see, no major changes is going on. It's obviously that the OEM is dropping much more that service and aftermarket distribution. You can see also looking historically clearly that the OEM side is far more cyclical than the other two, which means as well that as percent of sales is coming lower down while distribution especially is improving. And just as a reminder, if we look at the RVOM, America stands today for about 6% of total sales for the group. I think this is a pretty interesting slide to have a look at where we can see that in the last few quarters, again, we're still showing negative growth, but less negative. And I'm coming back to the green shoots that we see here and there with a backlog, especially in LVA, which is improving. We see as well that the service aftermarket is moving in the right direction, while marine on the section of the market is specifically still pretty low. Distribution, I commented the hospitality business with its residential are both positive, mobile cooling is negative altogether, very much marked by the US, while mobile cooling in both Europe and APAC have turned to positive numbers. And then as we also commented, OEM in America looks better while just now the numbers are very much impacted by EMA and APAC and marine steel at the same levels as we have seen now for a few quarters. Looking at our EVT, happy to report the gross margins are improving. And I feel especially proud of those margins when considering obviously that we are dropping more on our high margin businesses, both in LVC, as you remember, land vehicles, Pacific, where we have very high margins and marine. So the underlying gross margin improvement is obviously better than that. And it shows that we are a pretty resilient organization when considering the cyclicality that we are exposed to just now. We continue to invest in pro development and continue to invest in the sales organizations in what we consider to be the growth areas just now, meaning self-sufficiency market, meaning mobile cooling, meaning mobile power solutions. When looking at the tariffs, obviously this has been the theme, I would say, of the quarter for many companies, including us. About 50% of our sales is today going to the US market. Out of that, about 60% is produced today in the US. And the other three countries of what we are producing for the US market is Mexico, Canada, and China. We are ruled under USMCA for a major part of what we are producing today in Mexico and Canada, which is obviously giving us a good protection in comparison to the major competitors that we have today on the American market. We have commented a couple of times the last couple of years that specifically for the land vehicles, America's on the other side, we have been exposed quite a lot to Chinese competition. And that has been a changing factor for us in the last couple of years. Well, now looking at the tariffs that are implemented at this point, it is clear that we have a competitive advantage in comparison to many of our main competitors during recent years. So again, we are not happy about the tariffs. I don't think that anybody can be happy on the tariffs, but at the same time, from a competitive perspective, we are well positioned. Obviously, we are working on pricing and we have already issued new prices in all the segments in the US, but that's of course a short term support. On the long term, we are evaluating and we are working on different scenarios to change both logistic flows and to add more local production in the US. Then of course, the problem just now is that you cannot start pushing buttons without knowing with some kind of certainty how the end game is going to look like. So just now, again, it's very much preparing the next steps, but from a long term perspective, we cannot just start pushing buttons. Looking at different segments, land vehicles down 12% with low single digit decline in service and aftermarket. And then if we are looking at the CPV side, the commercial and passenger vehicle side is from a service and aftermarket perspective, is negative while the RV side is positive for the quarter, which is good. We have seen a positive trend during the last couple of quarters. We see good stability in America. And again, we are, I would say, pretty optimistic that the situation created now with the tariffs might bring to us some competitive advantage from an RV perspective, which is positive. Every day margins ended up at 5.9 or 150 million Krona with reduced, I would perhaps mention specifically the reduced losses in America as a result, both on efficiency gaze, but also the fact that we are running, as you know, the restructuring program that we announced in December. Looking at marine organic growth down 13%, we declined both on the service and aftermarket and on the William side. We are very pleased with the product launch that we announced in connection to the marine boat show in Miami in February, and hopeful that that new product range is going to support our growth moving forward when the market starts moving upwards. Every day ended up at 256 million Krona or an every day margin of 19.7. Mobile cooling ending up negative organic growth of 4%. We see exactly the same situation as we saw during Q4. It's a little bit every second month. We see retailers building up inventories and then being cautious every second month. Good to see though, as I commented earlier, that both EMA and APAC are showing pretty nice numbers in Q1 after a number of negative quarters. Every day, good positive evolution ending up at 123 million Krona or 8.6. Even here, supported by product launches on one side, but also cost reductions. And then finally, Global Ventures ending up an organic growth of 6%. So the difference between the 13 and the 6% organic is obviously the fact that we exited one of the businesses that we communicated back in December. We have nice growth in both hospitality and residential, negative growth in mobile power solutions. But part of that, again, is the exit of one of the businesses, generated business that we had. And then the fact that that business is partially linked to the RV manufacturing. Every day ending up at 78 million or 13.3 versus 14.2 last year. We're also happy to report good progress in our sustainability scorecards with injuries at 1.2 versus a target of 1.5 with share of EMA managers reaching a target of 30% already in the quarter. With renewable energy ending up at 34% when we have a target of 35% for the year. We are working very hard as well to get, to audit our major suppliers on direct material. And we have all, we are already done to 48% when we have a target of 65%. And innovation index is stated at the same level as Q4 at 21%. And we are confident that we are going to see that percentage in growing during the quarters to come. A lot of the launches in a number of areas. We have been launching in both for the, the igloo brand and the domestic brand. We have a very, very comprehensive product range and we will continue. So we have a number of new product launches as well during Q1 and Q2 this year, both in the US and EMA. I think it's a good way of showing as well how the e-requisition was strategically so important to us to get really to the good and the better range of the cooling market while we, E-Gloo is also supporting us to develop new products under the premium, on the premium class for both the passive hard coolers, soft coolers and Dreamwear, which is as a matter of fact, something new for the METIC in the last couple of years since the E-Gloo acquisition. Moving over, this is the way we are showing ourselves as a consumer business, taking more and more space. So this is a 300 square meter store in store location in one of the major retailers in the outdoor industry across Europe, which is GoOutdoor in the UK. And I hope that you agree that it looks brilliant. Another super interesting area is the gyro. This is a totally new product range for us. And this has been a high growth, high margin market that has been evolving in the last 10 years, especially in the US, but also coming to Europe and the Pacific area. We estimate the global market to be about half a billion US. We have, as I commented, the product launch in connection to the Miami Boat Show in February. And we have won an innovation award already and feel optimistic about the evolution of this range already in 2025. So a lot of attention, we keep paying obviously to innovation and in a market which is tough to still gain market share based on our product innovation. And then last but not least, we introduced the restructuring program in December. We see a good progress in that area. You may remember we are talking about the annual savings of 750 million once the program is fully implemented at the end of 2026. We had good progress in the quarter, ended up by closing down one of the manufacturing sites and one distribution center. 150 people were impacted by those changes. This is just now giving us a run rate saving of 100 million and we had cast out in the quarter of 40 million. We continue to work on the divestment plan that we communicated as well. Things are moving, of course, that the situation just now with the tariffs, the oil uncertainties are getting into a little bit tougher negotiations that we had about six weeks ago, but we are sitting still on the table and having those discussions. And with that said, Stefan, the stage is yours.

Thank you. Let's go in and dissect the income statement. Very good to see that we are keeping up our gross margin and even improving them during the quarter here. And that is related to obviously the sales mix and partially also the new product launches, but also that we are continuously working on adjusting the capacity to the lower volumes, including obviously the effects of the restructuring program that we are running right now. Operating expenses are down in constant currency with around 3%. And then of course, because the sale is down with 11, then the percentage in relation to net sales is up. Then we keep on investing in strategic growth areas that we have identified. And then the other operating income and expenses are negative 37 million, which is mainly related to FX hedges, partially offset up in the gross profit margin. If we look on the net financial expenses, they are, if we look on the interest on the loan facilities that we have, it's 138 million compared to 199. So it is moving down according to plan. And then we have somewhat higher FX revaluation effects and other items of 59 million, which is higher than last year. If we look on the tax line, the tax, the effective tax rate is, has gone up a little bit, 32% versus 30. But in absolute terms, we are down from 190 million last year to 87 million this year in the first quarter. Moving over to our cash flow. If we start to look on our operating cash flow, I mean, the working capital is of course, seasonally up a little bit, mainly driven by accounts receivable. But if we look on an LVM basis, the working capital is reduced with over one billion Swedish Krona. So I just feel that we are doing a great job and we will come back to that later and talk a little bit about the different components in the working capital. Then the cash effects of our restructuring program in the Q1 is 40 million Swedish Krona. And then we are continuing to prioritize our investments in fixed assets and product development in the quarter. Q1 last year was exceptionally low quarter due to timing. So that's why we have a difference there, but nothing that is really sticking out. If we look on the free cash flow before M&A, we have income tax paid, as I said, it has declined over 30% and then paid interest or the net of paid and received interest is also down with 16%. And then the refinancing activities is positive 900 million, but that's related to the refinancing that we did here in February, basically I'm coming back to that. So moving over to the next slide here, you see the free cash flow development over a longer time period. And as you can see, I mean, the first quarter is our weakest quarter, as you know, and it might move some 100 million back and forward here. And so 406 million, I would still say that that is within what we could expect. Moving over to working capital, so we can see that the working capital in relation to net sales is down on 31% last year to 28% on a 12 month basis. If we take the quarter standalone, we are down to 27%. Inventory balance, it's now on 5.6 billion and the number of days outstanding in inventory is 131 days compared to 145 days last year. But we also see that in absolute terms, the inventory continues to come down in the first quarter currency neutral around 350 million. So we obviously have a target of 20%, which leaves us further potential to take down the working capital in relation to net sales. My estimation right now is that we will not be on 20% of net sales this year, but we will still take a meaningful step towards our target during 2025. Accounts payable is stable and accounts receivable equally and so no big movements there. If we look on CAPEX and R&D spend, we did spend 98 million, which is in the pattern that we typically are spending, then we had, yeah, timing wise, a low quarter in Q1 2024. So CAPEX in percentage of net sales right now is 1.7%. R&D spend, we keep on investing in strategically important areas like mobile cooling, like marine to mention two areas. And on an absolute term, the spending is more or less kept on the same level, it's going up a little bit in relation to net sales because of the decline in net sales and it's now 2.8%. Moving over to the debt, our debt portfolio. As you have seen, we have, in February, we did issue a bond in Swedish Krona of 2.5 billion, 1.5 billion of that with a three year maturity and 1 billion with a five year maturity. We use that proceeds to pay back the NNN backed loan of 1 billion and also a bond of 500 million. And as you can see from the maturity here, we still have 0.5 million in a SEC bond. And the assumption is that we are going to pay that back here also during Q2. Then we have also prolonged half of our USD loan, previously maturing in 2027 to 2028. And we now have an average maturity of 2.5 years, 2.7 including the extension options compared to 2.1 years in Q4 2024. The average interest rates on the debt portfolio right now is 4.7%. And as you know, I've mentioned it before, a little bit more than 50% of the portfolio is fixed and then the rest is variable. Then we also have an Andron revolving credit facility of 280 million Euro maturing in 2028. And then obviously we have an updated EMTN program for being able to issue bonds in Euro and Swedish Krona. And then we also have a certificate program of 3 billion, which is more a source of short-term finance. If we go over to NetDebt to EBTA, the leverage ratio here, it ended with 3.3 compared to 3.1 in Q4. And it is sequentially a natural movement. We have seen a positive effect from FX. We have had a reduced EBTA and then we obviously have our seasonally weaker operating cash flow in the quarter. And we continue to focus on the important things to protect our margins and reducing our working capital. I mean, we are continuously committed to take the leverage towards around 2.5, which is our target. As you can imagine, with the current macroeconomic situation going on right now, it's a little bit difficult to exactly assess the timing. But I expect that we are going to see improvements over the coming quarters here. Of course, with the caveat on what is going on on the macroeconomic level and the tariff situation. So with that Juan, I'm handing over to you to make the summary.

Thank you, Stefan. So summarizing the quarter, we feel that we are delivering a robust performance in what I would say, most probably toughest times that we have experienced at least I have experienced in my professional career after the pandemic. We continue to take actions to both protect our margins and to mitigate the tariff impacts, both from the short term and on the long term. We see inventories coming down on continuous basis, but we also see obviously customers being cautious in building up new inventories. And considering all together and under normal circumstances, we would expect to see service not the market, recovering as well as distribution stepwise. And our expectation would be to see also we am clear we am improvements during the second half. Then of course, it's impossible to assess without getting more certainty in how the tariffs are going to impact demand. Strategically, we continue to work on the right things. We continue to invest in the areas that we believe are going to generate growth and higher profitability moving forward. We continue to invest in innovation. And of course, we spend a lot of time in taking down our break point by reducing costs all the time. So altogether, we are confident that despite the turbulent times, we are going to take Dometic to a higher level of performance moving forward. And with that said, I would like to open for the Q&A session, please.

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 write your questions on the webcast page. The next question comes from Agnieszka Wilela from Nordea. Please go ahead.

Thank you so much for taking my question. So maybe starting with the gross margin development in the quarter, you improved it despite lower volumes in the quarter. So can you tell us about what were the main drivers? And also if you could kind of rank them, what was the most important for good margin development on the gross margin side?

So I mean, as we have commented, we have much higher gross margins, maybe day margins on certain aftermarket. And of course, having a more positive mix have some major influence on our margins immediately. Then of course we are running a restructuring program and we are already now generating savings. So it's a combination of both. But again, Agnieszka, don't underestimate service and aftermarket margins. They are huge for us in comparison to OEM.

Perfect, that's very helpful. And maybe just following up on that, I think on page seven, you showed the sales growth for different channels. And I just know that Q2 last year was quite good actually for both service and aftermarket and distribution. So should we be a bit concerned with the fact that you're meeting a bit tougher comparables now going into Q2 or do you think that the business will continue to improve sequentially?

And the underlying we should be improving. Then you are right that Q2 was strong while Q3 became pretty weak. Remember that we had a strong Q2 and then Q3 became minus 11%. So I feel underline, I have, it's impossible to me to say exactly with two decimals where it's going to end up. But you see a trend clearly. I mean, if you look at the quarter, it's very much marine, I would say, which is taking down to 7%. The rest, but even if you take CPD and you just look at land vehicles, land vehicles is nothing about place now. So marine is taking down just now, both from a we are taking on service and aftermarket perspective. So we are optimistic that it's moving in the right direction, that inventories are becoming lower and lower.

Perfect, thank you. And then my last question is on the kind of net leverage and cash flows. Can you help us to understand the potential cash, cash flow impacts in the coming quarters? And here I think both about, Stefan you mentioned about the working capital development, but also maybe if you could tell us about the cash outflows that we could expect both the very probable one or like the dividend, I mean, it has happened and then maybe the potential downside related to the, for example, settlement with Iglo's seller.

Yeah, so if we start with the dividend, I mean, that's 450 million and that is already paid now in April. So that will come off if we talk about the restructuring program, I mean, as you remember, we did say that all the 1.2 billion around 400 million was going to have a cash impact. And I would say that we have program to date, we have seen a bit over a hundred million there. So the rest is going to impact, during the rest of the year, basically, also the difference between 400 and a little bit more than 100 so far. So, and then obviously we are going into our strongest quarter in terms of operating cash flow now in Q2 and Q3 we also know is seasonally a strong cash flow. So I still expect us to be able to see that we are, you know, improving on working capital, there is more potential as I mentioned before. As I also mentioned, I mean, I don't feel that we are going to be on 20% to net sales by the end of this year, but we're still going to take a meaningful step towards that. So that obviously gives you an indication that we still have, you know, a substantial effect that we are expecting from working capital release also this year. It's still not going to be like in 2023 or 2024, but still meaningful.

Thank you for the answers.

You're welcome.

As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Martha Ford from Jeffreys. Please go ahead.

Hello, good morning. I just had a question on your outlook. So I noticed that when you talk about OEM, you now only expect possible improvements in the second half, which you didn't mention previously. So is this because you've seen incrementally more weakness in OEM, or is this just to reflect the greater uncertainty that you're seeing?

No, in reality, what we see is that when the OEMs, I think that is very much in line with what we already communicated. So I think that if you look at, especially the European OEMs, we're a little bit more optimistic from the OEM perspective for the second quarter of this year. And we were more cautious, and we said that our expectation is most that it should be improving towards the end of the year. I believe that they are becoming a little bit more cautious themselves as well. That those are the kind of signals we are getting just now.

Thank you very much. And then maybe on the tariffs impact. So how much have you raised prices in the US? I think you've given us any level there, and also how much do you expect that you might have to raise prices if tariffs remain as they are?

Well, we have already raised prices. So the prices went up, some of the prices went up already at the beginning of April. Then we have new communications, obviously, for the US administration, we raised prices again, and they are going to be live already at the end of this month. And then we have a new round, which is kicking in mid of May. So prices have already been communicated to everybody. And then they are kicking in at different steps.

And

of course, that we are talking about, so as we commented about 15% about what we are just now selling in the US is coming from Chinese factories. While we have very high protection levels, both for what we are manufacturing in Mexico and Canada, since they are

USMCA. Great, thank you so much. You're welcome. Yeah, we have a question on the

web there, I think you probably partly answered that, but we'll take it anyway. If you're looking at your sales in US, 60% is produced in the US and the remaining 40%, how is the split between Mexico, Canada and China?

Yeah, so I think we commented in China and the rest is obviously a combination of Canada and Mexico.

So 15%, is China. Okay, back to you operator.

There seems to be no questions in line. So I leave the word back to the speakers.

Okay, so thank you very much for your attention. Has been another challenging quarter, obviously, but we feel good about what we are doing as a company, delivering on our strategy, investing despite the tougher times that we are facing, and of course navigating towards some kind of light, some kind of clarity in regards to the tariffs. We feel good from a market perspective, from the sense that inventory levels are low, we feel as well that the underlying trends for the outdoor industry are still there. Then of course, we have the post pandemic situation that we are working on, feel confident about the future. So thank you very much for your attention and have a great day.