Thule Group AB (publ)

Hello, everyone, and thank you for joining the Thule Interim Report Q3 call. My name is Molly, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Matthias Ankerberg, CEO to begin. Please go ahead.

Thank you very much and welcome everybody to this call. As usual, I'm joined here by Toby Lawton, our CFO. We'll speak to you a presentation that will also later be available at our website. And as usual, we'll do a short presentation followed by Q&A. So starting off with the highlights on page two, we are now three quarters into the year and we have three quarters in a row with organic growth and improved profitability, which is clearly a step in the right direction. In the third quarter, we deliver this growth despite seeing a declining RV market, which of course impacts us. But on the other hand, we see continued really good momentum and accelerating growth in active with kids and dogs, which is helping the quarter nicely. Profitability continues to be improving and strong and improvement is driven by the efficiency initiatives that we are actively pursuing. Now that we also are close to a year from setting the updated financial targets at the end of last year, we can also assess our progress so far and can conclude that we are on track towards the new financial targets that were set in November 25, which is something we will get back to. But zooming in on the quarter on the next page, it is another quarter with continued growth and increased profitability. Modest organic growth up just over 1% and the reported growth in SEC is 3%. It is a continued tough market, particularly in this quarter in the RV segment, which we'll come back to, but also more generally in the North American market. Europe continues to do better than North America with organic growth being up 4% in Europe and minus one in North America. And the difference between the reported growth relates to currency and also to the small acquisition of Curly that we did at the end of Q2. Gross margin is really strong. However, please do note that there is a positive impact from tariff refunds amounting to 52 million SEK. And there is also a negative impact from the higher raw material prices. And then they in turn are partly in the quarter offset by price increase within mid-quarter. And we will get back to all of those three points later on. All in all, we have an EBIT margin of 20%, which is clearly above last year. Again, excluding the tariff refunds, we are still in line with or just marginally better than last year's level, which for those of you who follow closely may remember that was a historically high level. So we have a solid profitability and also excluding the tariff refunds. Sales and admin costs are decreasing as percent of sales and all in all EBIT amounts to 521 million SEK. and continued, this is a good cash flow quarter for us, and continued good cash flow and also that above previous year, almost 800 million SEK. And zooming out to the year to date, we are now grown 2.5% organically this year so far, an improved gross margin and an EBIT margin that is up by 1.5 percentage points. Taking a further step back before we dig into the details for the quarter, we can see that This means we continue the long track record of profitable growth at Thule. And this chart shows the development since the IPO in 2014. On the last 12 month basis, we are now at 10.4 billion SEK of sales, 1.8 billion of EBIT and 17.3% EBIT margin. And as mentioned in the beginning, it is now almost one year since we set new financial targets. We announced those at the Capital Markets Day or in conjunction with Capital Markets Day in November last year. And since Q4, which is the smallest quarter for us, following the third quarter, we have a fairly good view about sort of where the direction is heading this year and can evaluate the progress made so far. And the conclusion is that we are developing on track towards the new financial targets. We should mention that we have three financial targets, organic growth, profitability and dividend payout ratio. And we can see that despite the market not being easier than last year, we are improving on all metrics. So very overview is organic growth is now two and a half percent for the year so far, clearly up versus the minus one last year. EBIT margin is up. 1.3% on the last 12-month basis compared to last year and dividend payout ratio continues to be above the target. It's also worth to just mention that these targets are announced, they are ambitious, they are above the historical performance of Thule and we like them to be ambitious because we want to be ambitious, but we have also been clear that they are not to be reached immediately. We have an ambition to reach them in the mid-term, which we have said is two to four years. And I think perhaps more interesting than the numbers themselves is to see what is driving these numbers. And you may remember, if you participated at the Capital Markets Day, that in addition to the targets, we laid out the plan for how to reach them, both what's going to happen on the growth side and what's going to happen on the efficiency side. And we also set ambitions. We call it midterm growth ambitions for all of our four product areas. And then we can see that for each and every product area, we are moving in the right direction. So for example, sporting cargo carriers last year was a minus 1% organic growth. This year we are at plus one so far, and the ambition is to get to five. So a step in the right direction. RV products, four last year, three this year so far, almost at the mid-term ambition already. Active with kids and dogs, we see a big improvement, 13% growth this year so far, almost at the 15% we are targeting as an ambition level. And it's nice to see that that product area is also now more meaningful in size, so it contributes also nicely to the total. and same improvement on bags and mounts from minus 10 last year to plus 2 this year so far and a good step in the direction to 10% so good progress on the sales development in all four product areas towards the midterm edition so with that overview completed I thought I'd turn into a bit more detail on the quarter specifically and as usual we'll give some highlights and comments to each of the four product areas, starting off on page seven with Sport and Cargo Carriers, which is our biggest product area. It's just over half of sales in Q3. And in the quarter, we saw a small organic growth of plus 1%, taking the year to date to 1%. And this is, as in previous quarter, driven by new Thule products. We have a delivered several new products also this year and we continue to see that premium is doing really well and a good example is the new premium bike carrier Tule EPOS Park Secure where we have taken our best bike carrier and put parking sensors on it and it's a great example of how we can expand the category and attract the consumer that still has money to spend and has the passion and willing to spend it on great products. So that's a great example and We have continued momentum, what we call rear of car cargo, so boxes that you mount behind the car. And actually also when we upgrade entry price products like the rooftop box, Thule Pulse has helped also. Generally, we see the most positive development around the premium price points, particularly connected to new products and innovation. We do see quite good growth in Europe, but we do continue to see a decline in North America, which is holding this total sport and cargo carriers growth back. Within RV Products, we are currently experiencing a negative market development, which is clearly impacting sales. We declined 5% in the quarter, taking the year-to-date to three. Coming from a period where market conditions had been improving for a few quarters, we did see a decline in registrations of new vehicles, motorhomes and caravans starting around mid-quarter two in most European countries. that has continued into summer also in the third quarter. Clearly this is impacting sort of sales of new vehicles obviously but also then our sales to those customers. It is for us so far particularly impacting the aftermarket or the dealers which are closest to the consumer whereas the OE channel in manufacturers is more stable. We continue to do better than the market and the registrations and we continue to see that as we've talked about for several quarters that new products also within the RV products product area are adding growth for us. And we can also note that the consumer interest continues to seem high with high activity and great bookings at campsites across summer and good attendance at big fairs now recently. But a tougher market takes the sales down in the quarter by minus 5%. The third product there is Active with Kids and Dogs, where we see fast and also accelerating growth, 22% organic growth in the quarter. If we include the acquisition of Curly, small acquisition, and look at the total, net sales is up 31%. And we see that all of the three categories that we call champion candidates are continuing very strong. And these, just to clarify, are categories where we have the opportunity to be the global number one, drive the category through innovation, and get leverage as the number one player in the category and out-innovate competition. But they are not yet of the scale that we call them a champion. They are not yet at 500 million sec each. But we continue to see really good growth in all-terraining running strollers. We see a very nice trend in dog transportation, including the launch of the new products and the harnesses Tulip Dart, excuse me, and also sustained momentum in child car seats, which is also further boosted by the rollout of the connected car seats that was initiated during summer as continued throughout Q3. We are also pleased to see that we have seen an improved trend for multi-sport and bike trailers, which is also part of this category. Had a tough start due to still too much stock at retail, but turned around mid Q2 and continues to grow now in Q3. And similar to other categories, this is clearly the most premium products that are driving the growth. And the last...

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