Welcome to Dometic Q3 report 2025. Today, I am pleased to present CEO Juan Vargues, CFO Stefan Fristedt, 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 five 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 tough market conditions, where the most effect is really by consumer confidence. Steel staying at pretty low levels all over the world. We see also retailers, dealers, OEMs 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 order 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 - 12% to - 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. OEM also showing negative - 8% organically, which is a clear improvement versus the last 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. Strong EBITDA margins landing at 10.4% versus 8.6% for last year, a combination of on one side the margin improvements led by cost reductions.
As you all know, we are running a restructuring 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. At the same time, we also see that all segments, with the exception of mobile cooling, are improving our margins in comparison to the last quarters as well. We will comment specifically on mobile cooling solutions. Strong cash flow, free cash flow, SEK 527 million, and an early bridge landing point 3.2% in comparison to 3%, 2x to 3x last year. Looking in more detail to the numbers, almost SEK 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.
EBITDA just a little bit over half a billion krona over an EBITDA margin of 10.4%. Looking at adjusted EPS, we ended up at SEK 6.4 billion, and again, a free cash flow of SEK 527 million, and an average, I already commented, landed at 3.2%. Looking at the year-to-date numbers, almost SEK 17 billion in revenues, with a decline of 9% organically, 5% led by FX, and the same 1% led by portfolio changes. EBITDA just below SEK 2 billion. It is good to see, obviously, that we are getting closer as well on the EBITDA margin where we landed exactly at the same level as one year. We have seen a recovery in recent months and in comparison to the first half of the year. Adjusted EPS to SEK 19 and a strong free cash flow of SEK 1.4 billion.
Looking a little bit deeper into the sales evolution over time, Land Vehicles ended up at -1 0%, 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 APAC in comparison to last quarter, very much led still today by the OEM side. Marine positive was great to see after many quarters and also showing a positive order intake, which is positive for us, obviously. Mobile cooling 8% and then Global Ventures -6%. When looking at 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 service and aftermarket are moving 100 basis points upwards.
Just as a reminder, looking at the RBOEM situation, we are just now RBOEM stands for 18% of total business in comparison to the 49% in 2017. Obviously, we are a less sensitive company to the cyclicality that we have seen on the OEM side. Looking a little bit more in depth into the different channels, we see a clear improvement in service and aftermarket. Still, we see volatility month to month, but again, moving in the right direction. Distribution very much affected by mobile cooling solutions. The main reason for that is really inefficiency in Katy, Texas, since we had to employ above 200 new employees. 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 is going to be gone.
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 LV8 turning positive in the quarter, and this is the second quarter in a row that OEM in LV8 has been positive. 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 stronger margins, almost 30% compared to 27.3% last year, very much driven by cost reductions. On one side, we have a restructuring program, but we also have contingencies driven in all segments simply because we still see negative growth coming in.
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 product 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 stronger growth moving forward. We see, again, margin improvements in all the segments with the exception of mobile cooling in the quarter. When 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 9 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 market, 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. 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 mobile 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 a negative effect in Q4, and 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 and sales and aftermarket, 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 of 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. We see as well reduced losses in Americas. We will continue, as you know, to drive the recovery on the American situation. As we informed a couple of times during the last quarters, most of the restructuring program that we are driving will have an impact on LVA and LVE. Moving over to Marine, positive Q3 quarter with organic growth of 1%. We see OEM coming back to growth.
We still see a single-digit decline in service and aftermarket, but we also see a positive order intake that should help us as well in coming quarters. EBITDA record as well. We are again over 20% in EBITDA margin, 20.8%, as a consequence of the mix and also the cost reductions that we are driving in the segments. Then mobile cooling 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 cost us inefficiency. At the same time, we also saw a negative effect on the margins coming from both the tariffs. That will be gone in Q1 next year, at the same time as we have the labor inefficiencies. We also have a negative wage impact simply. The mobile cooling business is highly seasonal.
Historically, we always had a couple of hundred of non-immigrant foreigners working out of factories to keep up with the capacity needs. The U.S. administration did some changes on forcing us to increase the salaries. We are compensating our prices, but we have a time lag. 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 growth in other global verticals, very positive in some of the areas, and then a steep decline in mobile power solutions driven by the soft RV industry. Gross 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 at 1.5%.
We see as well that we are on target in regards to female managers, and we keep working hard in that area 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, and we ended up at 60%, slightly below the target for the year. Of course, we will reach the target at the end of December. 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 for the first time. It's 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 are also launching a new series of soft coolers under the Dometic brand for the first time. We have great expectations, also from a branding perspective, to help us to reinforce the Dometic brand among consumers. We move over into the gyro. We had very, very positive reception by customers. We have been introducing the products in a number of different shows around the world. We see order intake kicking in in many different areas. Happy with the results. 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.
We are getting awards, a lot of awards, not just for the gyro in the marine industry, but also for many other products that we have been launching in the last 12 months. Positive to see that our investments are paying off both in terms of awards and order intake. On the restructuring program that we initiated one year ago, as you all know, we'll generate savings of SEK 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 an annual savings of SEK 250 million, so that's the running rate. We had a cash out in the quarter of SEK 35 million and year to date of a little bit above SEK 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%. We 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. With that said, Stefan, let's go a little bit deeper into the results.
Okay. Thank you, Juan. Starting off by summarizing the P&L for the third quarter, we are very satisfied how the gross profit margin continues to develop, 29.6% versus 27.3% last year. The increase is driven by sales mix. We also have the restructuring program and other efficiency measures that are taking effect. We also need to mention here that Juan has mentioned a couple of times 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. That has had a negative effect in the quarter of approximately 0.7%. We expect that to continue in Q4, as was mentioned before. From Q1 next year, we expect that the price increases are going to fully mitigate this development.
Moving over to operating expenses, we have reduced operating expenses in constant FX 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 cooling and marine are definitely two areas where we keep on investing deliberately. Other operating income and expenses, SEK 18 million, 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 down, SEK 197 million versus SEK 214 million. 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 SEK 54 million in tax in the quarter. Moving over to the summary of our cash flow, operating cash flow-wise, we see that we are continuing to drive efficiencies in working capital. Coming back to that in a second. We have cash out related to restructuring of SEK 35 million in the quarter. As you can see, we are carefully managing our capital expenditure and where we spend them. Free cash flow before M&A, as we mentioned before, paid and received interest is pending down, and we have been paying lower tax. Cash flow for the period has also been impacted by the fact that we did a bond issue of EUR 300 million in Q3.
At the same time, we also did a tender offer of EUR 100 million, which was then a partial repayment of the bond that is falling due in May 2026. 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. As you can see, I mean SEK 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. You can also compare it to the other periods before that. 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.
If we look on the quarter standalone, it was down to 21%. We are moving in the direction that we have been talking about, where the target is to reach around 20% on net sales. You can see on the inventory balance, we are SEK 4.6 billion now compared to SEK 6.3 billion one year ago. The number of days is down to 124 versus 139. 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 receivables. Moving over to CapEx and research and development, we are prioritizing among our CapEx project. We have been spending a little bit less than SEK 100 million in the quarter. It's 2% of net sales versus 1.7%. 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. The R&D expense to net sales is now 3% compared to 2.7% one year ago and 2.8% last 12 months. As I mentioned before, it's strategic important growth areas for us, example being mobile cooling and marine. Next, it's going to talk about the debt maturity. As I mentioned, we did a EUR 300 million bond on a five-year maturity with a fixed rate of 5% in the quarter. The proceeds are going to be used to refinance our debt portfolio. We already did EUR 100 million in connection with this transaction by doing a tender offer on the 2026 bond. There is EUR 200 million left on that one.
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. The average maturity is 2.8 years, which is obviously a longer average maturity compared to last year. Average interest rate is 4.8%. We still have an undrawn revolving credit facility of EUR 300 million maturing in 2028. Moving over to our leverage, maybe we can, I mean, leverage went down 0.1% versus Q2, which is obviously positive. 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. It is difficult to give an exact timing of when we will achieve it. With that, Juan, I hand back to you to do a summary of the quarter.
Thank you. Thank you, Stefan. I mean, in tough times like we are going through and we have been going through now for four years, we have to control what we can control. 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. We see, even if it is still tough and difficult to predict, we see a market stabilization. I'm happy to see the order 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 shelves. I have been meeting a lot of customers.
It's still tough out there, but the sentiment in the value chain is slightly better than it was three months ago and much better than it was half a year ago. That is 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, on that 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 had 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 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 than we had three months ago, and hopefully, we will see that even in the future. 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.
Of course, we need to finance that, and that's why we are driving a restructuring program, which is clearly paying off. 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 five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six 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 Vajlejla from Nordia. Please go ahead.
Thank you for taking my questions. I will ask them one by one. On growth, Juan, you sound cautiously optimistic about the OEM business now in Marine and in RV in the U.S. 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. Can you give us an explanation why you are relatively a bit more optimistic on that?
I mean, everything is relatively live, 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 order intake moving 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 don't 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. That's the expectation.
I don't see that we are dropping 11%, 12% again from where we are. That's on the Marine side, Agnieszka. On the RV side, Americas, 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. The expectation is that it will be balanced between retail and wholesale in Q, sorry, in 2025. The expectation for 2026 is a growth of some 3% versus 2025.
Perfect. Thank you. The second question is on EMEA and profitability in the business. When I look at what we expected in Q2, you beat our expectations quite significantly. Now in Q3, you miss a bit. If you could give us some factors that are affecting profitability right now in EMEA, what are the tailwinds? Maybe savings and less logistics cost, and what are the negative impacts in EMEA right now for you?
You have a couple of questions. First of all, we had a better mix in Q2 than we had in Q3. The services of the market, the OEM, the balance between services of the market and OEM was different. We have a second issue. As you know, in EMEA, we have also an important business for us, which is the CPV, the commercial and passenger vehicles. We have the situation of one of the main customers we have, GLR. It suffered 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. Those are the two main differences that we have in EMEA.
That's what GLR, I mean, their factories have been closed for an entire month, a big part of the quarter.
Okay. Can you quantify the impact on your EBITDA in the quarter?
Not on EBITDA, but it had quite an impact on the EMEA numbers specifically.
The sales.
On the sales, absolutely.
On sales. Okay. Thank you so much.
CPV is generally a more profitable, or yeah, it's an over-average profitable business.
Yep, 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. Maybe turning back to Marine, I appreciate that it's quite difficult to exactly know if this is a longer turnaround or not. I think given that sort of retail is not super strong, 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. I guess there is 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 RV side, that we had a couple of positive quarters and then might slow down before getting stability. I do believe that we need just now to be super agile, right, on the way up and the way down as we have been on the RV side. The good news, what I perceive still, Daniel, 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. There is a catch-up.
My feeling is that some manufacturers have started to produce again. Of course, if retail doesn't come in Q2 when the high season starts in the U.S. specifically, we might have a slowdown again. There is another factor which I would like to comment on because a lot of the questions that we get are always about the U.S. market simply because it's 75% of the world market. We have positive growth in EMA that was pretty nice in the quarter, and we have positive growth as well in APAC. As a matter of fact, for us, the growth in Marine in the quarter was not negative, but we went offline in Q1. Again, 75% of the business is in the U.S. I'm telling you that the rest of the world did perform better.
Okay. Can you say something about the pace? This is very detailed, and sorry for that. 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 order intake. Order intake was positive. The order intake was more positive than sales in the quarter.
Yeah, keep in mind, Juan, that 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.
Even though there's no sort of big meaningful improvement in top line in Q3, it is back to growth, but the margin is up quite a bit. Of course, it comes back to the savings. 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, 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. Thanks. When you, as you mentioned, if you look at OEM on Americas 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 certain customers that have been maybe discarding you a little bit, and you're back to their model year 2025 and 2026 now? Is that what we're seeing? The market looks to be a little bit down on shipment so far in Q3, and the same was, I think it was flat in Q2. The market in the EU were up a couple of percent. Is that what we're seeing?
We have a lot of activities ongoing. We are done economics. 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 U.S. as in Europe. I'm optimistic. I mean, we are not there. Obviously, as you know, we shrank more than the market for a couple of years. Of course, our intention is to recover part of what we lost.
Yeah. If you look into the last quarter of this year in EMEA, 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 hefty. I don't expect, I mean, as you know, this industry is always kind of correcting by running short-term weeks. It is still to be seen what's going to happen in connection to Christmas. I'm not expecting the same negative effect as we saw in Q4 last year. You are reading and you are talking to more or less the same people as I'm talking. The positive is more optimistic today than we had one year ago. One year ago is really when all these massive shutdowns took place, right? Now we have seen very low production numbers for nine months, basically.
Registrations are already been a bit higher than production.
Absolutely. I mean, registrations, if you look at registrations for registrations after nine months, are down to -4% in Germany, -2% for Europe, right? Of course, that after one year, you will get more and more into balance.
Yeah. Yeah, sorry for missing the very early part of this call, but you did refer to labor irregularities impacting mobile cooling in the quarter. You said something about needing to hire 200 people. Is that coming back to immigration policy in the U.S.? Is that the reason? What was the impact in terms of impact on profitability? Is that continuing into Q4? Is that ending now?
It's Q3 and Q4, and then we are going to be done. Yeah.
I mentioned that the impact for Q3 was approximately 0.7% on the profit margin as a whole. It will continue into Q4 somewhere 1%- 1.5% units on the margin. From Q1, we expect these effects to be fully compensated by price increases. It's.
Is that impact both the tariffs and the labor irregularities combined?
Yes. It is mainly tariffs and the labor efficiency/labor cost. There is also some currency effects in there as well. The majority is related to the two first months.
Okay. 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, we have seen order intake improving quarter by quarter, right, since Q4 last year. We had a pretty low Q4. Our backlog situation was pretty low at the end of Q4 last year. We saw a further iteration in Q1, a clear improvement in Q2, and an additional improvement in Q3. 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. I get it. Thank you. That's all for me.
You're welcome.
The next question comes from Gustav Hageus from SEB. Please go ahead.
Thanks. Thanks for taking my questions. If I can ask a question on the organic growth in the quarter, down, was it 6%? You mentioned customers trading down in aftermarket. You mentioned some price increases, but more to come. 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 with your new price hikes going into 2026, that'd be helpful. Thanks.
I mean, the first majority of the prices is going to take place from a service and aftermarket perspective. The other one is really mobile cooling, what we have seen. We compensated for the tariffs in both marine and LVA. We almost compensated for the tariffs in mobile cooling, but again, we had a price time lag for a couple of customers, and they are a major customer for us. That's where we have the difference. Of course, we are doing minor price adjustments depending on the market, depending on the product, and depending obviously on the competitive situation. 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. The negative organic growth in the quarter, is it fair to assume that the volume growth was bigger than that number?
Yeah, I wouldn't overestimate how much bigger. I think we are a little bit bigger, not much.
Do you think the single-digit volume decline in the quarter is a fair assumption?
Yes.
Okay.
It is.
Okay. You mentioned the order intake improving sequentially. Do you see any trends in terms of mix? What type of products are sold? 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 some peers.
Yeah.
In Europe.
We see, let me see, there were two questions. The first one was, the second one is competition. The first one was.
Did you see any improving mix sequentially?
We have seen very clear improvements on the OEM side. We have seen very clear improvements on the distribution side. On the contrary, service and aftermarket has been the second month.
That comment relates to mix. Gradually improving mix in those two first, order intake. What was that comment on?
No, 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 LVE, we still see that LVE and LVC are tough still today from an OEM perspective. However, altogether, the OEM channel is improving quite a bit. We see the distribution channel also improving. There we have, as you know, a number of businesses where the biggest one is mobile cooling. I was telling you that mobile cooling order intake is improving quite a bit as well. Service and aftermarket has been pretty flattish in comparison to where we are coming from. It's still a negative order intake, less negative, but still negative.
Okay. In terms of pricing in the U.S. 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.
Yeah.
No, I think on the difference, the main difference is that we were pretty early. I feel some of our competitors were pretty late, but we see that all of them are increasing prices step by step. I feel the difference, obviously, is 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. The final one for me, I guess, is a bit speculative, but on the net debt/EBITDA gearing target, what do you reckon your chances are that you'll come below 3 as we end the year?
I think we are now moving into the part of the year where cash flow is a little bit less strong, right? Q2 and Q3 are the two strongest cash flow quarters that we have. I would probably say that three years would be nice, but I would still feel that I think we are still going to end above.
Thank you. Those were my questions.
You're welcome.
The next question comes from Frederick Evason from ABG. Please go ahead.
Thank you, operator. Good morning, gentlemen. Sorry, I got in a bit late, 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 Igloo in the U.S.?
Inventories are not bad on the channel where we can see, right? I mean, of course, we have seen two months pretty, pretty nice inventories coming down, and then you get major orders, and all of a sudden, the sell-through is a little bit worse. 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. 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. Everybody is placing the orders in the very last minute. That's a change from where we are coming from pre-pandemic, where people were building up inventories in advance.
Now, people are, I don't know if we can talk about just-in-time as in manufacturing, but retailers are as much just-in-time as they can and putting responsibility on us being ready.
Thank you, Juan, very clear. Staying on mobile cooling, it seems to me like the margin is almost set to expand in 2025 despite all the issues you mentioned, obviously sales being down 20% organic over the last three years. My question is, where do you see the margin in this business under more, say, normal circumstances?
I mean, we've commented from the beginning, right, that we expect mobile cooling to be 15%+ every day. That's where we, and that's still below, so to say, what the Dometic brand is coming from, right? We believe that lifting from where we acquired the company to 15% is a pretty nice achievement. I mean, you look at what we have been delivering during the last years, and we have seen an improvement year by year. That's our expectation.
If you look on the product launches that we have been showing here over the last couple of quarters in mobile cooling, that is products that are certainly going to contribute to that development.
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 the investments that we have, still we see margin improvements. Now we have a couple of one-offs this quarter, and then we had also the production issues in Q2, right? Apart from that, we see an underlying improvement year- by- year, a clear improvement year- by- year.
Yeah, I appreciate that. Thanks. A follow-up just on the one-off you mentioned just now, Juan, did I hear you right? Do you guide for 1%- 1.5% on the group margin impact in Q4?
Yes, based on both the tariffs and the wages and the labor efficiencies.
Okay, so like SEK 40-SEK 60 million.
We'll be gone again from Q1.
Yeah, absolutely. Good. Maybe last one from my side. I saw the Igloo lawsuit trial move 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. There is not, we have not provoked that delay. Good.
Okay.
It's not us trying to delay. It's the other way around. We would like to get it done.
Okay.
We can leave 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. I'll start with tariffs and section 232 extension in August. I'm just wondering if this drives you to, you know, if there's any impact direct or more importantly, indirectly on the business. I'll start there.
I think that we will have to see where this ends in the bitter end. 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 tariff cost.
Okay. Thank you. Secondly, on service and aftermarket, 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. This market has historically been quite resilient. This is exceptional. Do you actually expect to recoup those big, call it, destocking years? Does that need to reverse at some point in your view, or do you basically see it as a post-COVID build-up in inventories that would never go back to?
No, I think that we are human beings. I think that is going to come back. In order to get to that point, we need to get consumer confidence. We need to see the traffic and the foot traffic into the stores, the foot traffic, both physically and digitally, to increase for the dealers to dare to build up more inventories than they are doing today. Just now, it's in the very last minutes. Again, I'm fully convinced, you know, remember, if you go back five years ago, we, you know, the flight industry would never come back, right? Their carriers would never recover. You know where they are today, right?
Yep. Yep.
I think it's time.
Understood. 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. How do you see the appetite from potential buyers at the moment and the valuations you're able to get? Thank you.
You have two different areas. One is product areas that we are leaving, that we are discontinuing. Low margins, we don't see that we can get into a number one and two position globally, and then we don't want to be part of that. As you know, we have already left 1% and it's more to come. We will see changes over time. 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 sell side and the buy side. As we said, we want to create value. We don't want to give things away. If we need to wait until the market looks in a better way, then we will do it. Again, all those discussions keep on going.
Perfect. Thank you very much.
You're welcome.
The next question comes from Johan Eliason from SB1 Markets. Please go ahead.
Yeah. Hi, Juan 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 net debt will end up too. 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. I thought that would be the case for Q4, just wanted to see if there's anything to bear in mind there.
Yeah. I think that you should look on the seasonal pattern, right, of our cash flow. That's number one. We were talking about that we had SEK 35 million in payout in Q3. I think you should expect that to be a little bit higher in Q4. That would then, of course, also give you an indication that the cash out has been a little bit lower for 2025 compared to what we did believe in the beginning. That's more related to the timing of certain activities. That will be a little bit more that is flowing over to 2026. 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, 2023 was the best year ever. 2024 was the second-best year. I think 2025 is coming thereafter.
It's probably a good way of thinking about it.
Good. 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 U.S. 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. We have seen that all of them are increasing prices step by step. 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?
Yeah, we commented 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. 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 carrying too high inventories. If 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'd rather lose business than they carry inventories. Everything is in the last minute. On the service and aftermarket, it's exactly the same. Wholesalers nowadays, bigger distributors are not carrying inventories. They want manufacturers like us to carry the inventories. Dealers and smaller dealers, they are gone.
I believe we got that question before. Do you think that these kinds, the typical inventory build-ups are going to come back? I'm fully convinced that they will. 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. Final question. 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 and at a run rate of SEK 250 million by the end of Q3. How should we view that going into 2026? Because it's quite meaningful steps that are supposed to be taken in terms of savings in 2026. I think you've said run rate SEK 750 million as we leave 2026. Of course, it comes back to the actions that you need to take. How are they sort of scheduled for 2026, 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 backend loaded because you're obviously going to get, you know, the full effect is coming. Going to come gradually after the implementation. We have some bigger projects that are going to take until like mid-next year before they get fully implemented. On the other hand, we also have some other activities that are going to be completed now in Q4. I would probably see it a little bit twisted towards the second half. I mean, we still confirm SEK 300 million run rate saving at the end of this year and SEK 750 million by the end of next year.
Okay. 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?
In terms of kroner, we are talking about SEK 30 billion for EMA.
Okay.
It will be.
Okay. Thank you. Thank you. That's all for me.
You are welcome.
There are no more questions at this time. 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. 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. Thank you very much for your attention and have a great day, all of you. Thank you. .