Thule Group AB (publ)

Good morning, all, and thank you for joining us for the Thought Group Interim Report Q2. My name is Carly, and I'll be the coordinator for today's call. If you'd like to register a question during the call, you can do so by pressing star-folded by 1 on your telephone keypad, and to remove yourself from the line of questioning, it will be star-folded by 2. At that time, it's the President and CEO, Matthias Ankerberg. The floor is yours.

Thank you very much. Welcome, everybody, to today's call. I'm also, as usual, joined by Toby Lawton, our CFO. We will talk to the presentation and it is later on available on our IR website as always. So starting off with the summary on page two, this quarter is a quarter where we're growing, even though the market is still tough, growing a bit more than in Q1 and total sales in reported currency amounted to 3.4 billion. That's 16% more than last year, excluding the currency effects. We continue to see a weak market, both on the retailer and the consumer side, and particularly so in North America. On a positive note, it's not getting worse, but it is still tough, and we'll get back to that. Organic growth was a small plus, 1.5%. Europe is out four, and North America is down three, which we are, of course, not happy about, but it's a Big improvement versus the development in the first quarter, which we'll speak more about later. Quite significant currency effects in the quarter of almost 6% negative takes reported growth in Swedish kronor to 10%. And it's very clear in the quarter and also in the previous quarter that the growth is coming from new products and new product categories, including the acquired QuadLock performance mount business, which continues to do well. It is, I guess, a fun fact, but it is the biggest quarter in terms of sales in Thule history and about 100 million bigger, I think, than the peak quarter during the pandemic. Gross margin increased close to two percentage points, driven by Quadlock, which has a financial profile with a higher gross margin and higher share of SG&A. EBIT or adjusted EBIT margin was down two percentage points. It costs a bit more to drive growth in a tough market. And as we have said going into the year and also in Q1, we have more product launches ahead of this high season that is in H1 this year compared to last year. So the product development costs are higher in the first half year compared to last year. So the operating profit or adjusted EBIT is in line with last year, excluding the restructuring costs for the actions we're taking in North America, the actions we announced the last quarter. Cash flow for operations was very good at almost 800 million. Just as a reminder, the working capital pattern that has been a bit different the last few years are now in line with historical seasonal pattern, and we have an inventory reduction target of continuing to reduce inventory on the back of the 1.2 billion we've done last two years of another 200 million this year, which is on track. A couple of highlights. We are very happy to have received further strong recognition for good product design. In March, we received seven F-Design awards. And now in this quarter, we have received 10 new Red Dot awards, which is, of course, a lot. Big credits to our team. We've also won the ADAC car seat test, Europe's most important consumer test for car seats. We won that during the autumn with our first product, and we won it again now during spring with our second product. And lastly, the changes we have made in North America are starting to pay off. We will get back to it in a little bit. Turning the page and zooming out, We see that the profitable growth trend is continuing. Thule has been a public company since 2014, and we have a good solid development of profitable growth for many years and continues also this year. We can also note that on a rolling 12 basis, net sales is now above 10 billion. And again, EBIT is a bit weighed by product development costs earlier in the year this year. Still, the total amount is about last year. We're a product company and we report four product categories. And as usual, let's go through them all to give you some flavor of what's going on in the business. The headline across all is that the new TULU products and categories are the factors driving the growth also in this quarter. Starting with sport and cargo carriers, which is... our biggest product category for sure. We've had a better Q2 than a Q1 with the net sales, which, and when I say net sales here, we refer to organic growth of 3% in the quarter, takes the year-to-date number to plus, plus one. Several good launches are really adding growth. So we've updated our best-selling bike carrier, Thule Easy Fold 3 in Q1. That's clear, clear support for the growth. We've launched a few North America specific bike carriers, which are really doing well. We've had a June launch of our new lightweight, more mid-priced compact bike carrier, Tula Outpace, which has started really well. And in general, we have several rear of car cargo products that are also adding really, really nice growth. So several successful launches. Having said that, it is a tough market, particularly so in North America, continues to be weak as we've exited Q1, sort of Q2 continues. Consumers are cautious, but also on top of that, retailers are cautious to build inventory. So growth in total continues in sporting cargo carriers in Europe, almost there in North America in the quarter, but a big improvement versus last quarter's trend. Second category, RV products. We have the second quarter in a row now with growth despite the weak market. Had 4% growth, organic growth in the quarter. Takes the year to date to three. The industry is going through a weaker period and we have our sales pattern reflect that. We continue to decline in sales to the OE channel or the RV manufacturers, but that's offset by good growth in the aftermarket channel, that is to dealers. And we should also point out that also in the RV business, we have invested in new products and it is very clear that the new products, which also received some nice design awards, are adding to the growth number in the quarter, now that the season is here. On page five, we'll cover the remaining two product categories. And active with kids and dogs is a mixed picture. In total, the category grew by 1%, which is a bit better than Q1, taking the year-to-date to minus two. We have two new product categories in this area, and they are both adding to growth for sure. The first is dog transportation, which was launched early last year. A really nice start last year. Actually, the best start of any new product category. Continues very strong also this year with the premium dog crate Tula Alex and the dog trailer Tula Bexy. And we just launched the product that you see on the picture to the right, Tula Cappy, which is a crash-tested dog harness for dogs now in June, which also had a very early, of course, but a good start. So very pleased with the development in dog transportation products. And also car seats, child car seats for sure add value. Of course, boosted a bit by the ADAC test, which we're pleased about. And another new product coming also here in the second half of the year. So two good growth drivers there. However, offsetting that is a decline in sort of bike-related products in this active with kids and dog area. Very cautious retailers to take on inventory and some of them, also struggled financially, and we see that pattern from Q1 continues now in Q2. The highlight in this product family is that we continue to see very nice, good sales momentum on Tudor.com, but on the retailer side, it is more challenging. So a total of those two different sort of aspects added that to plus 1%. Bags and mounts is also a mixed picture, where in total the category grows a lot. But that's because we include the acquired Quadlock business. Organic net sales, which is the bags business, declined by 21%. So Quadlock, if we start there, is two thirds of this product category bags and mounts now. Continues to do really well. increased sales by more than 15% organically, continue to be fueled by good products and good market expansion. And we're very happy to see that the business continues to do really well. The bag side is the opposite side of well, a big decline and a couple of clear reasons for why. First of all, we should just remind everybody that we have had a declining part of this category for a long time, which we refer to as legacy products that are being phased out over time. And then secondly, an important factor here is that North America represents a very large share of this category. It's for many purposes, mainly North American business where the market has been very weak. And a lot of this is sourced from Asia and Southeast Asia in our case and Retailers have, particularly related to the tariffs, also been very cautious to take on inventory in this category. Same positive note as with Active with Kids and Dogs, that we do continue to see good growth of bags and luggage. Tullo branded products on Tullo.com, we reach our own consumers and they are happy to receive our products and we see sales growth there, but a very challenging retail environment in bags. So on the note of North America on page six, we have for sure been impacted by the weak North American market in Q1, particularly following the tariff announcements made. And we had a minus 13% organic sales development in Q1. And as you may remember, if you follow us, we talked a quarter ago that we made significant changes to North America. We have a new dedicated North American sales organization in place that is now based in our regional head office in Connecticut co-located with one of the two factories that we have in the US and we have closed a satellite office that came with an acquisition many years ago which and that decision has now been accelerated and Toby will cover that later but it relates to the one-off costs so that new organization dedicated to North America on the sales and marketing side we've also focused our growth investments on we think are the most attractive pockets we um We are the market leader in bike carriers, but we have lots more to do there. And then we have a new focus on pickup trucks or renewed focus on pickup trucks. And then thirdly, we have done price increases as of June 1 to offset the impact of the tariffs. And it's nice to see that as we wrap up Q2 that the changes are paying off. It is still a weak market, although not getting worse. And we have a clear improvement in the sales trend with Minus 13 in Q1, now being minus 3. Of course, we're not happy until it's a plus, but it's good to see that things are moving in the right direction. And it's even better to note that the difference is really driven by the new, strong, performing North American bike carriers, which actually have been in very high demand. Even if the market is tough, we've been selling more than we can produce, which is a nice problem to have in this situation. We continue, of course, with this work and the bike carrier work, but also the new truck bed rack tool Xscape, which we believe is a really strong product, very robust and easy and quick to both install and adjust. We launch here towards the winter at the end of Q4. And also note that both these products are also produced in the US. This could be noteworthy given the tariff discussions. We have... We're really proud of the team and of the whole Thule organization that we've also been winning further recognition for our product development and design. So page seven, just outlining, we won the ADAC, the Europe's most recognized car seat consumer test again. And it's a product called Thule Elm, rearward facing for children, small children between six months and four years old that won the test now in May. And digging into the details and the test results, particularly, I would say, we're particularly happy to see that we are recognized as the number one brand to eliminate misuse, which was a key part of our car seat launch, that a lot of car seats are safe. But, of course, we could take it to the level in terms of both safety and convenience. But we also know that a lot of car seats are not installed correctly. And we wanted to deliver a product where it's easy to do. a good installation that is safe and we get good results from that design. So that's really nice to see. Winning with the first product and with the second product. And we've also been awarded more design awards. We had seven IF design awards received in March this year. And now we have received 10 design awards from Red Dot, which is the second of the two big international design award organizations. Very pleased to see that. call out that we have or note that we this year have been receiving awards also for north american specific bike carriers but also for in this list two rv products to the villa swing into the villa track that also help our performance within the rv business of course turning to page nine we are of course focused on growth for the short and the long term But another one of our key priorities is to drive further efficiency within our supply chain. You may remember we have been very focused on inventory levels and taking 1.2 billion SEK out the last two years. And we are now taking the next step to extend and automate our warehouse facility in Poland, in Huta in Poland. It is a fully automated warehouse, or it will be a fully automated warehouse with triple the pallet capacity of today. And that means we can eliminate costs for two external warehouses and actually also reduce inventory levels. We reduce double handling and we can optimize logistics better. And of course, also lower personnel costs. And we expect this project to be or this new warehouse to be up and running by 2027. And I will give the word to Toby to go through some of the more investment details of the project.

Thank you, Mattias. And good morning, everybody. Just to give a few of the financials on the Huta project, we expect a capex of approximately 450 million sec, and that will be phased over the next three years, as you see below, 30% in 2025, 60% in 2026, and 10% in 2027. The cash savings from the project are approximately 100 million sec per year, which we expect to have full effect first from 2028. But there will also be a one-time positive effect on inventory of approximately 80 million SEC, and that will come successfully during the first year of operation of the new facility. Then we expect some depreciation, of course, annual depreciation of approximately 25 million SEC, which then results in an EBIT impact of 75 million SEC per year, again with full effect first from 2028. And just to mention, this is uh, uh, an important project for us, but it's part, it's part of the Tula investment program that we have going on the normal investment program. And we expect that to remain at approximately, uh, 2.5 to 3% of revenue over time. So, um, so we expect to remain at that, at that level, excluding, uh, leasing CapEx. All right. And with that, I can flick on to the next slide, slide 10. Um, and, uh, There's a lot of numbers here, but just to orientate, the left-hand side here you see is a recap of 2024. In the middle, you see 2025 by quarter, and on the right-hand side, you see a year-to-date comparison of the figures for 2025 and 2024. And if I start with the revenue growth, as Matthias has mentioned, we do have – Revenue growth, obviously this quarter in a challenging market, but revenue growth in total is 10% from 3.1 billion last year to 3.4 billion this year. That's a 10% reported revenue growth. We have organic growth of 1.5%. Then QuadLock contributes with over 14%. And then we have a negative impact this quarter from FX, which Matthias has mentioned, which is obviously due to the stronger Swedish crown, which we see this quarter. The growth is driven by new products and categories, as Matthias has mentioned, and also to mention here again that the last 12-month revenue has increased and is now 10.1 billion when you take the last four quarters together. When it comes to the gross margin, we had a Q2 gross margin of 46.3%. this is approximately two percentage points up versus last year, which was 44.4. So two percentage points up approximately, or 1.9 percentages up versus last year. It's also 1.5% better than the first quarter gross margin. And just to mention here that the biggest factor versus last year is quad lock, but versus the first quarter, we are returning to the normal pattern where we We still have the highest gross margin in our biggest quarter, which is the second quarter, but we expect to see a more even gross margin across the year, across the four quarters. If I come down to the cost side, selling expenses have been impacted mainly by the acquisition of Quadlock. And here it's important to remember that while Quadlock has a positive impact on gross margin because it has a higher gross margin, It also has a higher level of selling expenses. So it does impact the selling expenses. And the other factor in selling expenses is the earlier phasing of the product launches this year ahead of the high season. Then we also have administration expenses where we also have some impact from the acquisition of Cordlock, of course. Coming down to the adjusted EBIT, We had an adjusted EBIT of 734 million this quarter, and that is adjusted to remove the impact from the one-off impact from restructuring costs in North America, which was 31 million SEC taken this quarter. And they relate to the closure of our site in Longmont, Colorado. So if you look at the adjusted EBIT margin, Then the adjusted EBIT margin is 21.6% in quarter two. We had 23.6% in quarter two last year. So this is lower than the adjusted EBIT margin last year. And the main impact here is from the development cost related to the phasing of product launches, which we mentioned earlier. So that's the main impact on the EBIT margin. But it's important to remember it's the same new product which we're launching, which are also driving the top line growth. So they come hand in hand. Then further down the P&L, we have an interest expense in quarter two of 39 million sec. We have a tax charge of just over 150 million sec, which is an effective tax rate of 23%. And then, yeah, net profit in the quarter, 512 million sec. Good. And if I move to the next slide, slide 11, here we have the cash flow in the same same format so i won't repeat that um and you can see cash flow from operations in the second quarter was 744 million sec um working capital contributed here with 156 million sec which is uh part of our seasonal pattern which matthias mentioned earlier that we we build up working capital some quarters and we release some quarters and we release uh some working capital in quarter two but it's a It's a swing between different lines within working capital. So this quarter, we had a good reduction in inventories of 303 million, which is normal for us due to the seasonality, because this is the high sales quarter. So we sell down inventory. And we're still very much on track towards our annual target for the full year to reduce inventory by 200 million SEC. Receivables goes the other way, however. We increased receivables because this is a high sales quarter. Again, it's the same effect. And we increased receivables by 282 million in the quarter, but overall working capital reduced by 156 million. Then we had a capex in the quarter of 58 million SEC. Year to date, we are on 98 million SEC for the first half year. That level is expected to be a bit higher in the second year as we start to have some of the Huta CapEx in H2, but still within our expected investment program. And then we had a dividend payment also in the quarter of 448 million. So all in all, that means we had a, if I move to the next slide, slide 12, we're very focused on our cashflow. We're very focused on managing our leverage. and the net debt came down slightly but net debt and leverage are basically on a similar level than they were in in q1 um going forward i think it's important to be aware we we do expect this to come down in q3 both net debt and leverage ratio net debt to ebitda and that's due to the fact that also due to the seasonal patterns but that we we have a strong cash flow in quarter three uh And we also have no dividend payment in quarter three. So that means that we expect to reduce our net debt and our leverage in quarter three. Okay. And with that, I hand back to Matthias.