Dometic Group AB (publ)

Welcome to Dometic Q3 Report 2025. Today I am pleased to present CEO Juan Vargas, CFO Stefan Friestet, and Head of Investor Relations, Tobias Norby. For the first part of the call, all participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by pressing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.

Good morning everybody and welcome to the presentation of this third quarterly report. I would like to thank you all for participating today. We know that this is a very busy morning for many of you. With that said, let's move rapidly to the highlights. Starting obviously with still top market conditions where the most effect is really by consumer confidence still staying at pretty low levels all over the world. We see also retailers, dealers, VMs being keeping to be still today being very, very careful in building up inventories. At the same time, we also see encouraging signs of stabilization in oil intake. And we see that we are leaving this quarter with a far better backlog situation or the stock situation that we are coming from after the last two quarters. We saw improvements already in Q2, clear improvements as well in Q3. Looking at performance, a decline of 6% organically with service and aftermarket showing an improvement in comparison to Q2, moving from minus 12% to minus 4%. Distribution declined by 6%, very much driven by mobile cooling solutions, and we will get back to that. There are some aspects or some reasons for that negative decline. And then OEM also showing negative minus 8 organically, which is a clear improvement versus past quarters. And where we see land vehicle Americas moving in a positive manner, as well as marine, after many quarters being positive in the quarter. Strongly retained margins, rounding at 10.4% versus 8.6 for last year. A combination of one side of the margin improvements led by cost reactions. As you all know, we are running a structuring program that has been kicking in since day one, and we see very positive effects out of that, at the same time as we are working in many different areas. And at the same time, we also see that all segments with the section mobile cooling are improving our margins in comparison to the last quarters as well. And again, we will comment specifically on mobile cooling solutions. And strong cash flow, free cash flow, 527 million, and a leverage landing of 3.2% in comparison to three times last year. Looking in more detail into the numbers, almost 4.9 billion in revenues with 6% organic decline, 6% decline driven by FX, and then 1% decline led by the portfolio changes that we have been doing, leaving some of the businesses that we have been into before. Evitae, just a little bit over half a billion, Corona, over an Evitae margin of 10.4%. Looking at adjusted EPS, we ended up at 64 earlier. And again, a free cash flow of 527 million. And leverage, I already commented, landed at 3.2. Looking at the yearly numbers, almost 17 billion in revenues, with a decline of 9% organically, 5% led by FX, and the same 1% led by portfolio changes. And every day, just below 2 billion krona. And good to see, obviously, that we are getting closer as well on the EBITDA margin when we landed exactly the same level as one year. So we have seen a recovery in recent months in comparison to the first half of the year. Adjusting the PS to krona 90 earlier and a strong free cash flow of 1.4 billion. Looking a little bit deeper into the sales evolution over time, land vehicles ended up at minus 10%, which is a clear improvement versus Q2 with Americas showing 3% negative growth, which is a substantial improvement in comparison to the situation we saw in Q2. EMA showing a duration as well as a back in comparison to last quarter, very much led still today by the VM side. Very positive, was great to see after many quarters, and also showing a positive oil intake, which is positive for us, obviously. Mobile cooling, 8%, and then Global Ventures, minus 6%. When you look at the different channels, no major changes in reality. Perhaps to point out that the OEM side is for the first time in many, many, many years below 40%, while both distribution and services aftermarket are moving 100 base points upwards. And just as a reminder, looking at the RV OEM situation, we are just now, RV OEM stands for 18% of total business in comparison to the 49% in 2017. So obviously, we are a less sensitive company to the cyclicality that we have seen on the VM side. Looking a little bit more in depth into the different channels, we see a clear improvement in service aftermarket. Still, we see volatility month to month, but again, moving in the right direction. Distribution very much affected by mobile cooling solutions. and the main reason for that is is really inefficiency in kt texas uh since we had to employ uh above 200 new employees and by that training a lot of training cost us inefficiencies we will see this negative effect in q3 we will also see that in q4 and then it's going to be gone and then so so i'm We will come back to mobile cooling, but we have a double effect on one side that had a negative impact on the growth and that had also a negative impact on the margins. Looking at OEM, we see a clear path moving forward, different segments. So we see LDA turning positive in a quarter, and this is the second quarter in a row that OEM in LDA has been positive. And we also see marine turning positive. while we see still LVE and LVC being negative. Positive to see, obviously, we're looking at our results. Strong margin recovery in comparison to last year. We see strong gross margins, almost 30%, compared to 27.3% last year. Very much driven by cost reductions. Again, one side we have a structured program, but we also have contingencies driven in all segments, simply because we still see negative growth coming in. And we also have a positive impact on the sales mix. When looking at operating expenses, another area where we are working very, very hard, we see a decline of 6% in constant currencies, despite the fact that we continue to invest in a number of areas. We see growth development, one of the areas where we are investing the most, but also building up our sales organizations in a number of segments where we see a stronger growth moving forward. We see, again, margin improvements in all the segments, with the exception of mobile cooling in the border. We're looking at tariffs. Not much new here. to comment in comparison to last quarter. As you know, we have good protection in the U.S., having nine of 12 factories that we have in North America based in the U.S. in the short term, obviously, and this is still carrying a lot of uncertainties moving forward. It's very much about passing prices to the markets, something that we have done in a pretty good way, and we have compensated for everything but for a few customers in the mobile cooling solution area. And that's really the impact that we see negative in the quarter of $35 million that will be compensated by the pricing. We implemented prices already twice in all of the areas, by the way. But in the specific case of model cooling, we had a couple of customers where we prolonged the time for kicking in with the new prices. This is going to have also negative effect in Q4. From Q1, we will not see any more negative effects. Looking at different segments, starting with land vehicles, total organic growth, negative organic growth of 9%, with soft distribution on season of the markets, while we see as well a double-digit decline in OEM, in both EMA and APAC, but positive growth in Americas. We see also a pretty strong recovery margins for the entire segment, 6.3 versus 3.7, with clear profitability improvements in EMEA. A slight decline in APAC, but still showing very robust margins. And then we see as well reduced losses in Americas. And we will continue, as you know, to drive the recovery on the American situation. And as we informed A couple of times in the last quarters, the most of the restructuring program that we are driving, it will have an impact on LBA and LBE. Moving over to marine, positive Q3 quarter, we are getting growth of 1%. We see OEM coming back to growth. We still see a single-digit decline in services of the market. But we also see a positive water intake that should help us as well in coming quarters. EVTA recovered as well. We are again over 20% in EVTA margin, 20.8. And that's a consequence of the mix and also the cost reductions that we are driving in the segments. Then mobile pooling solutions. A double hit, I would say. On one side, we didn't manage to see growth due to the labor constraints that we had in the factory that caused us inefficiency. At the same time, we also saw a negative effect on the margins coming from both the tariffs. Again, that will be gone in Q1 next year at the same time as we have the labor inefficiencies. And we also have a negative wage impact. The mobile cooling business is highly seasonal. Historically, we always had a couple of hundred of non-immigrant foreigners working at our factories to keep up with the capacity needs. And the US administration did some changes on forcing us to increase the salaries. Again, we are compensating our prices, but we have a time lag. And those negative effects will be gone from Q1, as I commented before. Moving over to Global Ventures. where we see also a negative growth of 6%. We grow in other global verticals, very positive in some of the areas, and then still decline in mobile power solutions driven by the soft RV industry. Good margin improvements, 11.5 versus 9.2, very much driven by other global verticals. Happy to see as well our progress in the sustainability area with injuries well below target, so 1.5, We see as well that we are on target in regards to female managers and we keep working hard in that area and moving forward as well. We see renewable energy also quite a bit already now above the target for the year. We keep assessing our suppliers, our vendors. We ended up at 60% slightly below the target for the year. Of course, we will reach the target at the end of December, and we see also progress in innovation where we landed at 22%, a couple of percentage points above last year. We are talking a lot about sales decline. We are talking a lot about cost reductions, but we keep investing in the product area, in product innovation. This is the first time that Dometic, as the Dometic brand, we have soft coolers. It's a totally new area. For the Dometic brand, we had soft coolers under the Igloo brand, but we're also launching a new series of soft coolers under the Dometic brand for the first time. And we have great expectations. Also, from a branding perspective, to help us to reinforce the Dometic brand among consumers. Then we move over into the gyro. We have very, very positive reception by customers. We have been introducing the products in a number of different shows around the world. We see Oriente kicking in in many different areas, happy with the results. And on top of that, we are getting a lot of awards, which is always helping us when visiting new customers, offering a totally new product area for us as well. And again, we are getting awards, a lot of awards, not just for the gyro in the marine industry, but also for many other programs that we have been launching in the last 12 months. So positive to see that our investments are paying off both in terms of awards and order intake. And then on the restructuring program that we initiated one year ago, as you all know, will generate savings of 750 million when it is completed at the end of 2026. We closed down, so far, one factory and three distribution centers, affecting 250 people altogether. We are running just now annual savings of 250 as the running rate. We had a cash out in the quarter of 35 million, and yet to date, a little bit above 100 million. We keep continuing on our portfolio, and we discontinue one of the product areas that we had before. This is leading to a negative organic growth of 1%, and we keep investing on, sorry, keep spending time on the divestments. Still, we have not seen the finalization of any of them, but we keep working and convinced that we will see the results moving forward. And with that said, Stefan, let's go a little bit deeper into the results.

Okay, thank you, Juan. Starting off by summarizing the T&L for the third quarter. We are very satisfied how the gross profit margin continues to develop, 29.6% versus 27.3% last year. And the increase is driven by sales mix. We also have the restructuring program and other efficiency measures that are taking effect. Then we also need to mention here that Opan has mentioned a couple of times of the effects, especially in mobile cooling, where we have a time lag between the tariff cost as well as labor cost increases versus the mitigating price increases. And that has had a negative effect in the quarter of approximately 0.7%. And we expect that to continue in Q4, as was mentioned before. But from Q1 next year, we expect that the price increases are done to fully mitigate this development. Moving over to operating expenses, we have reduced operating expenses in ConstantFX due to the decline in net sales. It has increased somewhat in percentage of net sales. We keep on investing in strategic growth areas, as we have mentioned, and you have seen some of the results of that in terms of product development. Mobile tooling and marine are definitely two areas where we keep on investing deliberately. Other operating income and expenses, 18 million, a small number in the quarter, and it's mainly related to a part of the FX effect. Net financial expenses is up a little bit in the quarter. However, the net interest on bank loans and financial income is is down 197 million versus 214, and then we have a negative FX revaluation effect on other items leading towards that. On tax, we have an effective tax rate of 32%, which is equivalent to 54 million in tax in the quarter. Moving over to the summary of our cash flow. Operating capital wise, we see that we are continuing to drive efficiencies in working capital. Coming back to that in a second. Then we have cash out related to restructuring of 35 million in the quarter. And then, as you can see, we are carefully managing our capital expenditure and where we spend it. Free cash flow before M&A, as we mentioned before, paid and received interest is spending down, and then we have been paying lower tax. Then cash flow for the period has also been impacted by that we did a bond issue of 300 million euro in Q3. Coming back to that, at the same time, we also did a tender offer of 100 million euro. which was then a partial repayment of the bond that is falling due in May 2026. And then I would also like to underline that we are going to see further debt repayments in Q4 and in 2026. Moving over to more of how has the free cash flow developed over time. And as you can see, I'm in 527 million. It's not on the same level as last year, which I did not expect either, but still solid level, I must say. And then you can also compare it to the other periods before that. So satisfied with the level of free cash flow in the quarter. Moving over to the working capital components, you can see that working capital over the last 12 months is starting to come down 26% compared to 30% in relation to net sales. And if we look on the quarter standalone, it was down to 21%. So we are moving in the direction that we have been talking about, where the target is to reach around 20% on net sales. And you can see on the inventory balance, we are 4.6 billion Swedish kronor now compared to 6.3 billion one year ago. And the number of days is down to 124 versus 139. So things are moving in the direction that we have been planning for and expecting. As you can see, accounts payable level is staying stable as well as accounts residuals. Then moving over to CapEx and resource and development. We are prioritizing among our CapEx project and we have been spending a little bit less than 100 million in the quarter. It's 2% of net sales versus 1.7. And in the last 12 months, that's equal to 1.3%. If we look on R&D, as I said, we continue to keep up that level very deliberately because we believe in that this is important for the future. And the R&D expense to net sales is now 3% compared to 2.7%. one year ago and 2.8% last 12 months. And as I mentioned before, it's a strategic important growth areas for us, example being mobile cooling and marine. Next is going to talk about the debt maturity. As I mentioned, we did a 300 million Euro bond on a five year maturity with a fixed rate of 5% in the quarter. And the proceeds are going to be used to refinance our debt portfolio. We already did 100 million in connection with this transaction by doing a tender offer on the 2026 bond. So there is 200 million left on that one. And then, as I mentioned before, you will see further debt repayments here in Q4 as well as in 2026. We have a USD loan that matures in 2028, but it can be prolonged one year to 2029. And the average maturity is 2.8 years, which is obviously a longer average maturity compared to last year. Average interest rates 4.8% and we still have an undrawn revolving credit facility of 300 million euro maturing in 2028. So moving over to our leverage, maybe we can, I mean leverage went down 0.1 versus Q2, which is obviously positive. And you can see in the table down below that it is mainly our cash flow development that has contributed with that development. We are obviously having a high focus across the organization on protecting margin and reducing working capital, as you know. We just keep on repeating that we are committed on achieving our leverage target of 2.5. That is important to us. But it is difficult to give an exact timing of when we will achieve. So with that, Juan, I hand back to you to do a summary of the quarter.

Thank you. Thank you, Stefan. So in tough times like we are going through, we have been going through now for four years, We have to control what we can control. And from that perspective, I feel good that we are improving our margins. We had a tough first half. We saw improvements at the end of the quarter. We have seen more improvements in Q3. Our intention is obviously to keep showing improvements moving forward as well. even if it's still tough and difficult to predict, we see a market stabilization. I'm happy to see the oil intake improving. I'm happy to see the backlog becoming stronger for every month. I have been spending a lot of time on the marketplace. I have been visiting a lot of shows. I have been meeting a lot of customers. And again, it's still tough out there, but the sentiment in the value chain is slightly better and it was three months ago, and much better, it was half a year ago. So that's kind of sending some positive signals and some faith that we are getting closer and closer to positive territory. I'm happy to see cash flow. We are working extremely hard on our working capital, driving down inventories, but not just on inventories. I think we do an excellent job on receivables, and we do an excellent job in payables, trying obviously to improve as much as we can our capacity of releasing cash and improving our leverage. Tariffs, the situation, lots of uncertainties, of course, but we are dealing with that in a good way. We have a negative effect in the quarter, but again, in comparison to what we expected on the 4th of April, I believe that the organization has done a terrific job landing this the situation with our customers and our customers are also keeping faith in what we are doing every single day moving forward difficult to predict as i said but the starting point in q4 from a top line perspective is a little bit better that we had three months ago and hopefully we will see that even in the future and then From a strategic perspective, we keep investing despite all the cost reductions that we are doing in a number of areas. There are two areas that we are not cutting. The other way around, we keep investing in product development, innovation, and we keep investing in building up our sales organizations. And of course, we need to finance that, and that's why we are driving a restructuring program, which is clearly paying off. And with that said, I would like to open for a Q&A session. Please.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 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 Wylela from Nordia. Please go ahead.

Thank you for taking my questions. I will ask them one by one. So on growth, Juan, you sound cautiously optimistic about the OEM business now in marine and in RV in the US. But when I look at some of the peers commenting on the market development, such as Malibu Boats or Winnebago, they do point to still flat wholesale volumes in 2026 in RVs and even declining both retail and wholesale in marine. So can you give us an explanation why you are relatively a bit more optimistic on that?

I mean, everything is relative in life, right? I mean, we are coming from a situation where we have been kind of shrinking 11%, 12% quarter after quarter after quarter. For the first time, we see oil intake more in upwards. We see the fact that we deliver 1% organic growth and we have a different backlog situation than we have seen. I fully agree with you that we are not going to fly. I can see the market turning back anytime soon, but I see an improvement. I see obviously that we are launching new products. I see that we are taking orders. I still believe that we might be seeing as well what we saw on the American RV industry. Growth for a number of quarters and then slowing down for a couple of quarters, stabilizing the market. So that's the expectation. I don't see that we are dropping 11%, 12% again from where we are. So that's on the marine side, Agneska. On the other side, Americans, I think it's pretty stable just now. I think that, again, retail is still coming down slightly at the same time as manufacturing is adapting again, as you have seen in the last couple of months. And the expectation is that it will be balanced during retail and wholesale. in 2025 and expectation for 2026 is a growth of some 3% versus 2035.

Perfect. Thank you. And then the second question is on EMEA and profitability in the business. When I look what we expected in Q2, you beat our expectations quite significantly. Now in Q3, you miss a bit. So just if you could give us some factors that are affecting profitability right now in EMEA, what are the tailwinds, maybe, you know, savings and less logistics costs, and what are the negative impacts in EMEA right now for you?

So you have a couple of questions. I mean, first of all, we've had a better mix in Q2 than we have in Q3, services off the market, the OEM, the balance built with services off the market and OEM. was different. Then we have a second issue. As you know, in EMEA, we have also an important business for us, which is the CPV, the commercial passenger vehicles. We have the situation, one of the main customers we have, GLR, did suffer a cyber attack. In that business, we have these margins, and that had a negative impact, both from a sales perspective, but also from a margin perspective. So those are the two main differences that we have in EMEA.

So on JLR, I mean, their factories have been closed for a big part of the quarter.

Can you quantify the impact on your EBITDA in the quarter?

No, not on EBITDA, but it had quite an impact on the EMEA numbers specifically. The sales. On the sales, absolutely.

On sales, okay, okay. Thank you so much.

But I mean, CPV is generally a more profitable, or yeah, it's an over average profitable business.

Understood.

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

Yes, good morning, Juan and Stefan. A couple of questions and then maybe turning back to Marine. I appreciate that it's quite difficult to exactly know if this is a longer turnaround or not. But I think given that sort of retail is not super strong, but it's also a function of the fact, I guess, that it's been quite hefty underproduction in Marine over the past four or five quarters. So I guess there's some catch up to be done there. Is that your feeling as well?

Yes, it is. At the same time, I need to comment as well, Daniel, that we might be seeing what we saw on the other side, that we had a couple of positive quarters and then might slow down before getting stability. Again, I do believe that we need just now to be super agile on the way up and the way down as we have been on the other side. The good news, what I perceive still, Daniel, I mean, again, You can take it from a negative perspective or a positive perspective. The positive perspective is obviously that I don't see the market coming down 12% again. That even the decline in retail is becoming smaller than what we have seen. At the same time, as you are totally right, production has been very, very low in comparison to retail. So there is a catch up. So my feeling is that some manufacturers, they have started to produce again But then of course, if retail doesn't come in Q2 when the high season starts in the US specifically, then we might have a slowdown again. And then you have another factor which I would like to comment because obviously a lot of the questions that we get are always about the US market simply because it's 75% of the market, the world market. But we have positive growth in EMA that was pretty nice in the quarter. And we have positive growth as well in APAC. So as a matter of fact, for us, the growth in marine in the quarter was not negative, but we went offline in Q1. And again, 75% of the business is in the US. So I'm telling you that the rest of the world is performing better.

Okay. And could you say something about the pace? This is very detailed, and sorry for that, but given that you are shifting from decline to growth now in marine after eight quarters in a row of decline, could you say anything about the pace you saw from July till now, basically, when it comes to marine on a year-over-year basis in order intake or in sales or anything?

Has been pretty stable in sales. We have seen improvements on the rain intake. So the rain intake was more positive than sales in the water.

But keep in mind, Daniel, that the part of that order intake is obviously for delivery also next year. Absolutely. Not everything is going to be delivered now. In the coming weeks. In the coming weeks or in the coming quarter.

Yeah. But even though there's no sort of big meaningful improvement in top running Q3, it is back to growth. But the margin is up quite a bit. And of course, it comes back to the savings. But is there anything, has there any impact at all when it comes to the gyro that you've talked about? Is that selling? Has that been delivered in Q3? Is that having an impact? Is that going to have a bigger impact in the coming quarters?

We are delivering the gyro. is it doesn't have any substantial impact on the margins. On the contrary, you have, as I commented, a geographical mix, which is benefiting us just now.

Okay. Okay. Thanks. And then, as you mentioned, if you look at OEM on America's, on the LV side, it is the second quarter in a row that you are performing better than the market. Is that the function, you think, of the work that you did last year in trying to get back to On certain customers that have been maybe discarding you a little bit, and you're back to their model year 25 and 26 now, is that what we're seeing? Because the market looks to be a little bit down on shipments so far in Q3, and the same was, I think it was flat in Q2, the market in Europe, a couple of percent. Is that what we're seeing?

We have a lot of activities ongoing. We have many kind of doubts. That's what I can tell you, is that we are working very, very close to our customers just now. We're spending a lot of time. I am visiting quite a few of the customers myself, getting the feeling. We see positive, we get positive comments in recent shows as well, both in the US as in Europe. So I'm optimistic. I mean, we are not there, obviously. As you know, we shrunk more than the market for a couple of years. And of course, our intention is to recover part of what we lost.

Yeah. And then on EMEA, if you look into the last quarter of this year, I think there was quite substantial production shutdowns, especially from one of the bigger players. Do you see the same development happening this year or will there be less shutdowns, you think?

I think that we will see improvements versus last year, simply because last year was brutal, right? I mean, Q4 last year was very, very, very heavy. So I don't expect, I mean, as you know, this industry is always kind of correcting by running short-term weeks, still to be seen what's going to happen in connection to Christmas, but I'm not expecting the same negative effect that we saw in Q4 last year.

No.

And again, you are reading and you are talking to more or less the same people as I'm talking. I mean, the positive is more optimistic today than we have one year ago. I mean, one year ago is really when all these massive shutdowns took place, right? Now we have seen very low production numbers for nine months.

And registrations have certainly been higher than production.

Absolutely. I mean, registrations, if you look at registrations, registrations after nine months are down to minus 4% in Germany, minus 2% for Europe, right? So, of course, that after one year, you will get more and more into balance.

Yeah. And then sorry for missing the very early part of this call, but you did refer to labor irregularities impacting mobile cooling in the court. And you said something about needing to hire 200 people. Is that coming back to immigration policy in the U.S.? Was that the reason? And what was the impact in terms of impact on profitability? And is that... continuing into Q4? Is that ending now?

It's Q3 and Q4 and then we are going to be done.

So I mentioned that the impact for Q3 was approximately 0.7% on the profit margin as a whole. And then it will continue into Q4, you know, somewhere 1 to 1.5% units on the margin. And then from Q1, we expect these effects to be fully compensated by price increases.

And is that impact, is that both the tariffs and the labor irregularities combined?

It is mainly tariffs and the labor efficiency slash labor cost. there is also some currency effects in there as well. But the majority is related to the two first months.

Okay. And also, sorry for dwelling here, but Juan, you mentioned at the end of your remarks, I think, that the starting point from a top-line perspective is a little bit better Was that referring to the start of Q4 compared to the start of Q3? Or what was that comment relating to?

Yeah, so we have seen oil intake improving quarter by quarter since Q4 last year. So we had a pretty low Q4. Bad rock situation was pretty low at the end of Q4 last year. Then we saw a further deterioration in Q1. We saw a clear improvement in Q2. and we saw an additional improvement in Q3. So our backlog situation at the end of the quarter is much better than the backlog situation that we had at the beginning of Q3, which is positive.

Okay. Okay. Then I get it. Thank you. That's all for me.

You're welcome.

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

Thanks for taking my questions. If I can ask a question on the organic growth in the quarter down with the 6%. You mentioned customers trading down in aftermarket. You mentioned some price increases, but more to come. So it would be very helpful if you could try to sort out the components in organic decline here in respect to price mix and volume and what you expect in terms of prices now, if you can quantify that a bit, what are your new price hikes going into 2026? That would be helpful. Thanks.

I mean, the vast majority of the prices is going to take place from a service and aftermarket perspective. And then the other one is really mobile cooling, what we have seen. We compensated for the hikes in both marine and LVH. We almost compensated for the tariffs in mobile cooling, but again, we felt a time lag for a couple of customers, and they are a major customer for us. So that's where we have the difference. And then, of course, we are doing minor price adjustments, depending on the market, depending on the product, and depending, obviously, on the competitive situation. So I would not expect massive price increases moving forward as far as the market looks as it does. I think that we need to be careful just now, and we also need to find the right balance, obviously, between keep improving our margins, but also starting to recover some volume now when the market seems to move into a little bit easier situation.

Sure, but the negative organic growth in the quarter, is it fair to assume that the volume growth was bigger than that number?

I wouldn't overestimate how much bigger. I feel we are a little bit bigger, not much.

So single-digit volume decline in the quarter, is that a fair assumption?

Yes.

Okay. It is. Okay. And you mentioned the order intake improving sequentially. Do you see any trends in terms of mix, what type of products that are sold, and do you In terms of price versus competitors, if you can have a comment on that too, given that you have quite a lot of exposure from internal production versus on peers.

Yeah. So we see, let me see, there was two questions. The first one was, the second one is competition.

The first one was... Sort of, if you see any improving mix sequentially. Yeah, yeah, yeah.

Sorry, sorry. So we have seen... very clear improvements on the William side. We have seen very clear improvements on the distribution side. And then on the contrary, service and aftermarket has been every second month.

And that comment relates to mix, so gradually improving mix in those two first. What was that comment on?

But again, if we think about the three channels, we have seen very clear improvements on the marine side, right? On the OEM altogether, but especially on the marine side and LBE, we still see that LBE and LBC are tough still today from an OEM perspective. But again, altogether, the OEM channel is improving quite a bit. We see the distribution channel also improving. And there we have, as you know, a number of businesses where the biggest one is mobile cooling. So, as I said, your mobile cooling or intake is improving quite a bit as well. And then service and aftermarket has been pretty flattish in comparison to where we are coming from. So still negative or intake, less negative, but still negative.

Yeah, okay. And in terms of pricing in the US versus some competitors, I guess, in particular in mobile cooling and so forth, are you following also non-domestic producers in terms of price, or are you... Yeah.

I think the main difference is that we were pretty early. I think some of our competitors... were pretty late, but we see that all of them are increasing prices step by step. So I feel the difference, obviously, that most probably they built up a lot of inventories just in case, as soon as Mr. Trump was elected, while we implemented the prices in connection to the tariff implementation.

Okay. And then the final one for me, I guess it's a bit speculative, but on the net debt TBDA gearing target what do you reckon your chances are that you'll come below three as we end the year?

I think we are now moving into the part of the year where you know where cash flow is a little bit less strong right Q2 and Q3 is the two strongest cash flow cores that we have so it's I would probably say that three years would be nice, but I would still feel that I think we're still going to end above.

Thank you. Those were my questions.

You're welcome.

The next question comes from Fredrik Ivasen from ABG. Please go ahead.

Thank you, operator. Good morning, gentlemen. Sorry, I got in a bit later, so excuse me if you already discussed this, but I'll try. First one on mobile cooling. We've seen sales declining, I guess, for three years now, and we've been talking about inventory reductions among retailers for quite some time now. Do you guys have a view on the inventory levels at the moment where you're at? especially Glow in the US?

Inventories are not bad on the channel, what we can see, right? I mean, then, of course, we have seen two months pretty nice inventories coming down, and then you get major orders, and then all of a sudden, the sell-through is actually a bit worse. So, I mean, Something that we didn't comment on the report is that the last month, meaning September, was pretty rainy in the U.S. And for the mobile cooling business, that has a lot of impact. So we cannot say that we perceive inventory levels in the mobile cooling channel being high just now. They are gone. I think people, on the contrary, are very, very, very careful in not building unnecessary inventories. So everybody is placing their orders in the very last minute. And that's a change from where we are coming from pre-pandemic, where people were building up inventory in advance. Now people are, I don't know if we can talk about just-in-time manufacturing, but retailers are as much just-in-time as they can and putting responsibility on us being ready.

Thanks, Juan, very clear. And then staying on mobile cooling, it seems... To me, the margin is almost set to expand in 2025, despite all the issues you mentioned. And then obviously sales being down 20% organic over the last three years. So my question is, where do you see the margin in this business under more, say, normal circumstances?

I mean, we, we, we commented from the beginning, right?

That we, we expect mobile going to be 15 plus every day. That's, that's, that's what we, and that's still below, so to say what the Dometic brand is coming from. Right. But we believe that lifting from where we acquired the company to 15% is a pretty nice achievement. And if you look at what we have been delivering during the last year, so we have seen an improvement year by year and that's our expectation.

And I mean, if you look on the product launches that we have been showing here over the last couple of quarters in mobile cooling, I mean, that is products that is certainly going to contribute to that development.

I mean, this is one of the areas, clearly, where we are investing a lot in product development. We're investing in building up our sales organizations. And despite all investments that we have, still we see market improvements. Now we have a couple of one-offs this quarter, and then we have also the interaction issues in Q2, right? But apart from that, we see an underlying improvement year by year, a clear improvement year by year.

Yeah, I appreciate that. Thanks. And a follow-up just on the one-off you mentioned just now. Juan, did I hear you right? Do you guide for one to one and a half percent on the group margin impact in Q4?

Yes. Based on both the tariffs and the wages and the labor inefficiencies.

Okay. So like 40 to 60 million, Zach?

We'll be going again from Q1.

Yeah, absolutely. Good. And maybe last one from my side. I saw the the EGLO lawsuit trial moved to March from September. Do you have anything to comment on that?

No, I mean, from our side, the sooner the better, since we feel very, very confident that we are going to win the case. So we have not provoked that delay.

It's not us trying to delay, it's the other way around. We would like to get it done.

the discussion beyond us. Good. Thank you. Thank you.

The next question comes from Rizik Mehdi from Jefferies. Please go ahead.

Good morning, Juan and Stefan. Thanks for the time. Just like the previous caller, I joined late, so sorry if this has been tackled. So I'll start with tariffs and Section 232 extension in August. Just wondering if this drives you to, you know, if there's any impact direct or more importantly, indirectly on the business. And I'll start there.

I think that we will have to see where this ends in the bitter end. But I mean, with the price increases and other measures we have taken, we believe that we have, you know... When the time lag has closed, we believe that we have taken the measures to compensate for the increased tariffs.

Okay, thank you. And then secondly, on service and aftermarket, I mean, the decline now, as you said, Juan, was less than before. Historically, you talked about this bullwhip effect. Maybe if you could just talk about sort of sell-in versus sell-out here. You know, this market has historically been quite resilient. This is exceptional. Do you actually expect to recoup those big, call it, de-stocking years? Does that need to reverse at some point in your view? Or that's basically you see it as a post-COVID build-up in inventories that would never go back?

No, I think that we are human beings. I think that it's going to go back. But in order to get into that point, we need to get consumer confidence back. We need to see the traffic and the food traffic into the stores, the food traffic, both physically and digitally, to increase for the dealers to build up more inventories that they are doing today. Just now, it's in the very last minutes. Again, I'm fully convinced. Remember, we go back five years ago, the flight industry would never come back, right?

their carriers would never recover. And you know where they are today, right? I think it's time.

Understood. And then perhaps last one on my side, just perhaps an update on divestments of non-core assets. How much has been achieved? How much is left? I don't know if you can communicate on this. And how do you see the appetite from potential buyers at the moment and the valuations you're able to get? Thank you.

So you have two different areas. One is product areas that we are leaving, that we are discontinuing. No margins. We don't see that we can get into a number one and a two position globally. And then we don't want to be part of that. As you know, we have already left 1% and is more to come. We will see changes over time. And then we have the divestments where we are working extremely hard. We are in discussions with a number of partners, but obviously we still have a gap between the safe side and the buy side. And as we said, I mean, we want to create value. We don't want to give things away. And if we need to wait until the market looks in a better way, then we will do it. But again, all those discussions keep on going.

Perfect. Thank you very much. You're welcome.

The next question comes from Johan Eliasson from SB1 Markets. Please go ahead.

Hi, Sian and Stefan. Just a few questions here at the end maybe. On the cash flow again, you already alluded to where you sort of think that that will end up too, but are there any particular issues we need to bear in mind when modeling the final quarter cash flow? Are there any sort of higher charges from the restructuring programs or tariffs being paid out etc that could potentially impact the fourth quarter cash flow. I guess otherwise the pattern this year has been a decent cash flow but a bit weaker than last year and I thought that would be the case for Q4 but just want to see if there's anything to bear in mind there.

I think that you should look on the seasonal pattern, right, of our cash flow. That's number one. Then, you know, we were talking about that we have 35 million in payout in Q3. I think you should expect that to be a little bit higher in Q4. And that would then, of course, also you know, give you an indication that the cash out has been a little bit lower for 2025 compared to what we did believe at the beginning. But that's more related to, you know, the timing of certain activities. So that will be a little bit more that is flowing over to 2026. But I think you should expect the payouts of that to be a little bit higher. I think that's what I should comment. I mean, it's like I've said, I mean, 23 was the best year ever. 24 was the second best year. And then I think 2025 is coming thereafter. So it's probably a good way of thinking about it.

Yeah, good. And then you are leaving some areas where you see are not competitive. You've seen some competitive pressure. I think you talked about the big fridges over in the US previously. Are you seeing any changes in the competitive picture now of the tariffs and all what you have out there?

Not much that far. What we have seen is that we were pretty early increasing prices on the tariffs. Most of our competitors in the U.S. were slower. I guess that they built up inventories in connection with the election. But we have seen that all of them are increasing prices step by step. So I do believe that we need to wait a little bit longer to see what happens. I think that a lot of people have been leaving on inventories.

Okay. Thank you very much. That's all I had.

You're welcome. Thank you.

We have one question from the webcast audience. Could you please give some color on the inventory situation in the different distribution channels? Can we comment before?

We see inventories in both APAC and EMA coming down stepwise simply because of the difference between retail and manufacturing in the last 12 months, we see the U.S. LV side. So the LV side in the U.S. is in balance, total imbalance. We see marine still unbalanced. In the marine side, 70% of dealers, American dealers, still feel that they are covering too high inventories. We are talking about distribution. We don't see any inventory built up. I think that what we see there is that dealers and retailers are carrying as little as they possibly can. They rather lose business than they carry inventories. So everything is in the last minutes. And then on the surface of the market, it's exactly the same. So wholesalers nowadays, bigger distributors are not carrying inventories. They want manufacturers like us to carry the inventories. And dealers, smaller dealers, they are gone. So I believe we got a question before. Do you think that this kind, the typical inventory buildups are going to come back? I'm fully convinced that they will. But in order for that to happen, we also need to see consumers starting to spend more money. I think we have been suffering the entire industry or industries. It's not just this industry. I mean, we see that everything having to do with consumers, with the exception of food, is behaving in a very similar way.

Okay.

And we have one question remaining in the queue, I believe.

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

Yes, hi again. Just two short follow-ups. On the savings program, it sounds like you're quite happy with the progress so far in a run rate of 250 by the end of Q3. How should we view that going into 26? Because it's quite meaningful steps that are supposed to be taken in terms of savings in 26. I think you've said run rate 750 as we leave 2026. And of course, Comes back to the actions that you need to take. How are they sort of scheduled for 26? Or how should we view that? Is that back-end loaded or evenly distributed through the year?

I would probably say that it's a little bit more back-end loaded because you're obviously going to get, you know, The full effect is going to come gradually after the implementation, but we have some bigger projects that is going to take until mid next year before they get fully implemented. But on the other hand, we also have some other activities that is going to be completed now in Q4. So I would probably say it's a little bit twisted towards the second half. But I mean, we still confirm 300 million run rate saving at the end of this year and 750 million by the end of next year.

Yeah. Okay. And then just maybe coming back again to the CPV incident in EMEA, you got the question and you said that it had an impact on sales, sounded meaningful. Would you dare to estimate how much that was in top line impact for you guys?

It was, in terms of cronies, we are talking about about. 30 billion for EMA.

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

You are welcome.

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

Thank you very much. To all of you for your attention, as we commented at the beginning, we know that it's a very busy day for many of you. We will keep working hard to protect our margins, but also to keep investing in the areas where we see the growth moving forward. And we are fully convinced that we are going to get down our leverage to the targets. We cannot say when, but that's our firm intention, and we will get there. So thank you very much for your attention and have a great day, all of you. Thank you.