Dometic Group AB (publ)

Welcome to Dometic Q3 Report 2026. Today, I am pleased to present CEO Juan Vargas. CFO Percarlson 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 this quarterly report, the third quarter for this year. Let's move on to the presentation. We are Very happy to report organic growth. It has been a while ago since we could show positive numbers. And what is even more positive is obviously that the underlying markets are still weak. We have still today low consumer confidence. But looking internally, we started by showing organic growth a couple of quarters ago in one of the segments. Then we got two segments, and now we have three segments showing a positive development. Even positive is that we continue to see a good audio intake in Q3 and a stronger backlog when we move into Q4 in comparison to what we had last year and what we had as well at the beginning of Q3. Obviously, we would like to see higher profitability. As you all know, we are working very hard with our structuring programs, adapting capacity all the time. At the same time, we have still today the headwinds coming from raw materials, just now, and obviously volumes are still very much down in comparison to what we had a few years ago. We keep working hard on implementing our strategy. That means these days, on one side, finding the pockets of growth, wherever they are, under tough market conditions, but also continue to adapt capacity to the new need by reducing complexity and using our assets in a better way, in a more efficient way. That means as well that considering the situation of the American market, considering the fact that the industry is down 14% this year, that we might have new interest rate hikes moving forward. The expectation is we should be careful with our expectations on the remainder of the year and next year. And therefore, we also launched a new restructuring program addressing primarily Land Vehicle Americas. There are a couple of other pockets, but the vast majority of the program will address Land Vehicle Americas, having as a target to have 215 additional million in savings by the end of 2028. Looking at the numbers, organic growth 3% up, EBITDA reaching 9.7 versus 10.4 last year, a negative free cash flow for the quarter of 90 million, affected by a few one-offs that Per is going to comment later on, and then all of that leading to a leverage slightly higher than a year ago, 3.4 versus 3.2. Looking at the underlying OEM markets, we see US RV production is very much down. both quarter-to-date but the same numbers in reality for the year-to-date number, minus 14%, so still very, very weak. We have also registrations in Europe. As you may know, we don't get numbers. There is no association publishing numbers every month as we have in the US on manufacturing, but we have registrations instead, which is a pretty good indicator of the state of the market. Registrations, we had a strong Q1 across Europe. We got a weaker Q2, and Q3, as you can see, is pretty negative, reaching 16%. and we're meeting dealers, we're meeting OEMs across Europe. Just now, the expectation is obviously that this weakness will continue for the remainder of the year and most probably also next year. Looking at the US marine business, a little bit of the same. We still have the majority of dealers feeling that their inventories are high, that they are suffering from obviously low consumer confidence and price pressure. So at this point, we cannot see any signals of any major change on market conditions from an OEM perspective. What we can do is obviously to focus on the rest of the areas where we are present, which means the service and aftermarket business or the distribution business. And considering all these factors, again, we are happy to see the evolution in sales and bringing us to the feeling that we are taking market share just now on a broad base. We expect as well our investments in substance of the market, in mobile cooling and marine to continue to show that the diversification process that we started a few years ago is paying off. Looking at the facts, again, 5.1 billion sales in sales revenue in the quarter, with 3% organic growth. EBITDA, 495, or 2% down, with an EBITDA margin reaching 9.7. Adjusted EPS of 3 EUR in comparison to 64 one year ago. I already commented the negative free cash flow of 90 million, and we'll be back to that, and the leverage ending up at 3.4. Looking at the year-to-date numbers, happy to report finally 1% organic growth year-to-date, not just in the quarter, but we are turning to positive even for the year. EBITDA, almost 1.8 billion in comparison to one year ago, or 10% down with an EBITDA margin of 11%. Adjusted EPS of 2 krona and 16 euro. Africa's flow of a little bit more than half a billion krona, a leverage of 3.4. Looking at sales, the graph is self-explanatory. Downed vehicles growing 2%. As you can see, America is still in decline 8%, but pretty far away from what we see in the decline of the market. Again, manufacturing in the US is down 40%. We are down 8%. So that's good news. EMA 9% up, very positive. APAC also turning to positive 1%. marine 4% mobile cooling strong 9% which feels very very good and then will adventures still suffering as well 6% primarily driven by the connection to the RV industry in the US Looking at the evolution of the different channels, we clearly see also how we have been targeting growth outside the high-ticket discretionary spend, moving more and more into distribution channel, moving as well into service and aftermarket, and that has brought quite a lot of resilience while looking at how the different end-user markets develop over time, especially driven by the OEM situation and consumer confidence. Looking at Locality Growth by Channel, I also believe that the slide is self-explanatory. We see the stability. We are coming from a negative situation for a number of quarters. with the American market falling first. Then once the American market is stabilized, then we have the European market coming down, and then the market in APA coming down. But the good news is that we have just now the opposite situation. We got into some kind of stability, and now we see as well that we are starting to grow. Especially happy to see, obviously, service and aftermarket, which we have been investing from a product and development perspective. We have been developing from even from a brand new perspective, introducing a new brand to address a different channel that we were used to. We see as well OEM being positive 4% despite the weakness in the RV industry. We are growing primarily driven by commercial vehicles at this time. And then distribution, pretty flattish, has been flattish for a couple of quarters and we still expect obviously to see that channel moving into positive in the quarters to come. EBITDAE showing good resilience despite the fact that we have raw material prices just now playing against us. You are all aware on plastics due to the oil prices coming up and being a pretty high level. and to 20% higher than one year ago. We have aluminum close to 40% higher than one year ago. We have steel 10 to 15%. So this is playing against us, but we still manage to mitigate some of the negative effects. gross margins staying at 29.3 versus 29.5 last year here we need to consider as well that we have a negative product mix with mobile cooling growing nine percent in comparison to the rest where we have lower margins in comparison to the average and then SG&A we have also been working hard we continue to invest in product development we continue to invest in sales activities and at the same time we reduce in other areas of the company especially administration all of this leading to a slightly lower every day margin for the quarter Going a little bit deeper into different segments, non-vehicles 2% up with growth in terms of the market overall and growth as well in the OEM channel, especially driven by commercial vehicles, while RB declining, but a pretty slight decline. So we see also that that's moving. Now we need to understand what is going to happen in the European market in the coming in the coming months. But we have seen a pretty positive development in Europe from an RBM perspective during the first quarters of this year. EBITDA ending at 6.3% or a little bit more than 140 million with improved gross margins despite raw material costs. And that's obviously a consequence of all the savings that we are getting through the restructuring program that we have been running in the last couple of years. We also see higher SG&A as a consequence of investments in both product development and sales and marketing in a similar way as in a couple of other segments as well. Marine positive, 4% organic with growth, very nice growth in service and aftermarket and Flattish on UVM. We are all aware of the situation of the boating market in the US. We see that market is still negative while we see positive in Europe, very much driven by the jacked market, the super jacks and the mega jacks going still very, very well. Good resilience of margins as well, 20.4 with stable gross margins. Again, protecting, we have tariffs in Canada kicking in at the same time as we have in pricing, we have the raw material prices. But again, we increase our prices and manage to mitigate the negative effects. And slightly negative effects effect as well in the marine business. Mobile cooling, very nice growth, 9%, very much driven by North America, and seeing very, very good sell-through, I have to say. Higher than I would expect, but obviously, here I would like to talk about the weather, but I do believe the weather has had a positive impact in this season in comparison to last year. margins lower than we expected and enough of 5.4 but very much driven again by raw material prices have increasing prices but we are still suffering from a tight black between cost increases where we get new cost increases on monthly basis and price increases where we normally when we are talking about the major accounts we have anything from three months to nine months implementation and then working as well on SG&A to adapt the capacity to the new levels. Global ventures, negative organic growth of 6% with mid-digit negative growth both on other global verticals and mobile power solutions. Every day margin 7.7, and here we are clearly suffering from factory under-absorption. In this case, in this segment, we have small livings and it's a bit more complicated to adapt capacity to the demand on the markets, even if we are still working to reduce our capacity even there. Looking on sustainability, we're also happy to report that we continue to make quite nice progress with injuries coming down below target with share of female managers above targets, which is also positive. Renewable energy also developing in a nice direction and above our target for this year as well. and the same is valid in terms of assessments of direct material suppliers also there above target for the year. As I commented earlier, the American market is now developing as we all would like to see. That means that we continue our efforts looking at the restructuring programs that have been implemented until now We would expect annual savings of 900 million, so 750 million from the program announced in December 2004, another 150 million from the program that we announced in Q2 this year. At this point, we are running a savings of 600 million, adding another 110 million in savings in Q3. As we speak, we are just now working on shutting down three manufacturing units. that will obviously bring additional savings in the quarters to come. You will look at what we have done so far. One manufacturing unit has been shut down, another six distribution centers have also been reduced. Now moving forward, We still suffer from overcapacity, especially in Danville, America, considering the situation of the market, and we don't see the market turning back anytime soon, so we need to continue. We are adopting capacity, we are reducing costs, and we are also working on the Pro Portfolio. Additionally, I would say, it's a job that we started in December 2024, We want to improve asset utilization. We want to reduce capacity and look at additional footprint adaptation. We keep working hard on simplifying the product portfolio. We will be selective on customers and products and channels, so the three dimensions. As commented earlier, it's very much focusing on Land Vehicle Americas and getting back to profit, to a profitable situation. The program as such, we are booking a restructuring cost of $425 million. We'll generate $250 million in additional savings, bringing the total savings once we're done with the three programs to $1,150,000 in savings. And the estimated cash impact is going to be $140 million. So we try as much as we can to drive a split vision, which means that work very, very hard on savings, work very hard in adapting capacity to the market needs, at the same time as we continue to invest in the long-term growth generation, which means that we continue to invest in pro-development and keep our levels at 3% of sales. We can invest in innovation. and we are just now 23% in our innovation index. As some of you may remember, innovation index is for us is the share of products that we are selling that are less than 36 months. Just now we are running at 23%, having as a target 25%. And we continue to invest in sales and marketing, not the least driven by the number of product launches that we have in the pipeline. We have been launching a lot of new products and we continue to launch new products. a few examples of product launches during the quarter. We have new AC equipment in the air distribution box for the RV industry and the commercial vehicles. We have a new kitchen equipment and air fryer, even there for the RV and commercial vehicles industry. We have a new premium series of road racks and the front runner brand. So that's the new Dometic front runner series that we believe very much on. And we have also launched a new generation of solar panels. And this will continue way forward. So a lot of things going on in the innovation pipeline, in other words. And with that, Per, I would like to hand it over to you.

All right, thank you. So good morning, everyone. I'll walk you through the P&L and the cash flow in the coming slides. So on a very solid and good top line, I would say, with the growth of 3%, especially encouraging, obviously, is that we have growth in three of the largest segments. That gives us a gross margin of 29.3% which I would consider as a good margin management as we still have a quite heavy headwind from the higher material prices both in resin and in metals, plastics and metals impacting not the least the mobile cooling business. We also have a little bit of a negative impact on the currency as we have seen strengthening of the RMB in the year and in the quarter and as you know we have quite a lot of production in China both internally and externally sourced. Against that we have the price increases that has been implemented throughout the year and we see an effect of that and that gives us basically a flat margin year over year. On the operating expenses, underlying SDMA is up in line with sales, which is in a way good because it's a lower pace of increase than what we have seen earlier in the year. The other part here in the operating expenses is the other operating expenses in income, where we had a couple of good ones in 2025. But underlying SDMA is up in line with sales. of 495, 9.7%, which is slightly down compared to last year, but still quite a good number for us. Below that, we have a couple of big items impacting the P&L. We have the items affecting comparability, which is a net number of 72 million. The restructuring provision for the program that we have launched, that Johan talked about, of 425 million, which is then offset by the reversal of the provision related to the ACON earn-out case. that we had a victory in, say that we also communicated during the quarter. So that's 354 million favorable, that gives us the unfavorable of 72 million in the quarter. Below that, we have the non-cash adjustment of the intangibles related to acquisitions. So that's an impairment of close to 4.2 billion, a significant number, obviously. That's in for land vehicles, which is, I mean, you can say connected to the restructuring program that they have launched and also in the global ventures, also related to the American market. And then we also have an adjustment of the intangibles on the mobile pooling side. And I would say that this should be seen more as a retroactive adjustments on the balance sheet. I mean, due to the development we have seen in the market in the recent years, rather than a changed view on the future. And why now in this time? Well, we always do an impairment test in Q3 every year. So that's the reason for the timing. And on the financial side, financial expenses are slightly down, primarily supported by lower interest expenses as our debt is coming down. And then we have taxes of 245. Taxes this quarter is a little bit distorted obviously by the high number of non-recurring adjustments of the IAC and the impairment. I would say you can still assume an underlying tax rate of some 34% when doing your estimates. Taxes here has also impacted that we have taken a very conservative approach on the reversal or release of the ACON earn up. And we believe that we come back in Q4. Moving over to the capital side. So working capital still at 25% on an LTM basis. In line with what we have seen here during the last year. Still running with high inventories. Which is then offset by a favorable development on the payables, partly related to the inventories, but also better terms. And then also favorable development on the receivables. We do believe that we have potential to come down especially on the inventory side. and we still have the target of 20% working capital for the Group. As we have talked about also 100 days on the inventory might sound a little bit aggressive at this point in time but we believe there is potential there for further cash release from working capital. One should be mindful though that now going into the fourth quarter we are going into the pre-built season for the mobile cooling business to be ready for the early or the springtime sales, especially in the US in 2027. Moving over to next slide. Relatively flat, the small peak you see on the CAPEX side in Q3 is related to the manufacturing moves we are doing in the US, where we are building up capacity in the receiving plants. As Juan mentioned, we have three restructuring cases ongoing in the US now, which should be finished towards the end of the year. It will also give us some more savings related to the 24 restructuring program. R&D remains on about 3% of sales, which is a level we believe is good for us to be able to launch all these new products that we have. And that takes us to the cash flow itself statement. There we file an operating cash flow of 563 million for the quarter. which is impacted by the timing of the accounts receivable program where we have a lower amount now in the program due to the seasonality of sales. That's an unfavorable timing impact compared to last year of 350 million as we got paid in the second quarter instead of the third quarter. The inventory impact is lower than what we have seen in the first half. that we start to flatten out the curve. Below operating cash flow, we have significant interest payment in the quarter related to the annual payments of the bonds, two of the Euro bonds. So that's a 20 million payment in the quarter on the quarterly extraordinary impact is about 15 million Euro out of that. And we also have the payment of a tax settlement of a tax dispute that has been ongoing for a couple of years in Germany actually. And that takes us then to a negative free cash flow for the quarter. Furthermore, we have also paid back 750 million of debt in the quarter, which was done in August. And this then shows you the seasonality for a number of years of the cash flow and obviously a negative free cash flow in the quarter is not something we would like to see. I think we have some good reasons for that, which is below the operating cash flow side, which is favorable and what we are aiming to deliver. And this has an impact obviously on the leverage side, which is somewhat up compared to Q2 driven by the lower EBTA LTM as well as the cash flow and FX. So all three are going in the wrong direction for us. Typically, otherwise, we have a relatively good hedging on our leverage. Compared to last year, 3.2 going to 3.4 is all related to the EBDA as our net debt is down compared to last year, which we continue to work on to get our debt down. It's a key measurement for us, obviously. and just the status on the the maturity profile on the debt side that we have them in a couple years from now but we are continuously obviously working together with our bank group to have a solid and good profile on our debts okay I think that concludes my part so what about moving forward