Welcome to Dometic Management Q&A, board's proposal regarding dividend. Today, I am pleased to present CEO Juan Vargues, CFO Stefan Fristedt, and Head of Investor Relations, Tobias Norbäck. For the first part of the call, all participants will be in listen-only mode. During the questions and answer 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. This is Juan Vargues speaking, and welcome to this conference call. The reason for this call is obviously that both in the US last week, attending the trial that we had with the counterpart on the Igloo lawsuit, meaning ACON. We testified both Wednesday and Thursday and arrived back to Sweden on Friday evening at 5:30 P.M. As you all know, we sent a press release on Thursday, and the reason for that is that last Thursday was the very last day to send the invitation to the AGM. In connection to that, during the few days before Thursday, we were obviously observing what was going on on the markets. We realized that the war in the Middle East is starting to have an impact.
We saw oil prices as $62/barrel on the fifteenth of February, at $74 on the fourth of March, at $103 on the twelfth of March. We started to hear comments from dealers, especially in the U.S., both from a marine perspective and RV perspective. We started to read comments. Of course, in such a situation, it's about taking a decision. We could take the decision to continue to run the AGM as nothing happened, or really consider proactively whether the situation in the Middle East will have an impact on our customers, not today, but tomorrow, in the months to come. Especially considering obviously, March is for us, the heaviest month in Q1, and then we have a Q2, which is also the heaviest every year and a Q3.
We don't know whether the war is going to last for another week, two weeks or six months. In such a situation, you need to take a decision. The decision, the proposal for the board was obviously to withdraw the payout of the dividends just in case. That's very much really what happened during the week. Right or wrong, the decision was taken, and that's what we communicated as soon as we could on Thursday last week. With that introduction, I would like to open for the Q&A session. Please go ahead.
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 Fredrik Ivarsson from ABG Sundal Collier. Please go ahead.
Thank you. Morning. Thanks for the time. This is appreciated for sure. Juan, you said you're starting to hear comments from players in the RV and marine industry. Can you elaborate on some of that statement? What kind of comments are you hearing?
Yeah. I mean, the impact of oil prices, the impact of inflation on consumer confidence. There are also reports from the Fed from last week and the week before. I started to talk about the oil prices and the potential influence that oil prices will have on American consumer, especially on the RV industry and the marine industry, since we are talking obviously on high ticket and discretionary spend.
It's more, I guess, precaution more than you're actually seeing the markets pulling back orders and stuff like that.
Indeed. Indeed.
Okay.
It's forward-looking.
Got you. And then it would be interesting since you were in the U.S. in the trials last week, if you could give some kind of reflections from those days.
Positive. Both Stefan and myself testified. We feel optimistic, as we always felt. Our attorneys, and we have many of them, feel very optimistic as well. Unfortunately, just now it's about waiting. We know, I mean, the communication from the attorneys is that most probably we are not going to have any final verdict before year-end or beginning of next year. Just now it's nothing more than we can do. What should be done has been done.
Okay. Thanks. Last question. Obviously, March is the biggest month of the first quarter, but can you say anything about the first couple of months on trends and various pockets in the industry?
A little bit of the same comments that we have been commenting in the last months. We have seen our intake, which is coming very, very close to an inflection point. We see the backlog in the same situation. We experience a better January, a little bit weaker February, but nothing special. More of the same. I mean, again, two weeks ago, as you remember, we were quite optimistic about 2026. I think the change that we see just now is obviously how oil prices, inflation will impact consumers. Of course, historically, we have that experience. Of course, if the world stops next week, you will have a situation. If the world lasts for another six months, then we will most probably have a different situation.
Yep. Super clear. Thanks so much for the time. Appreciate it.
You're welcome.
The next question comes from Agnieszka Vilela from Nordea. Please go ahead.
Thank you for taking my questions. I have a few. Maybe again, coming back to the demand situation right now. I think you actually wrote in the press release that the demand and trading conditions are somewhat weaker than anticipated already for you. This is really my question. I mean, are you really seeing it already in your orders or sales? Also if you could comment, maybe a bit more in detail on the development across the business areas and geographies.
It's very much related to the U.S. at this point. I mean, we see Europe in a better shape. We have registration numbers for January and February. They were positive. We are aware that there is a tax situation in Europe, which is most probably also benefiting the high registration numbers in January and February. We see APAC pretty stable at this point. It's very much the marine and the RV side in the U.S. where we are experiencing those kind of comments, and we see that it has been a little bit softer in the last couple of weeks.
Perfect. Thank you. Maybe if you could also help us to kind of quantify this kind of downside in the US. It's not that it's full stop that you see already, is it?
We can say, I mean, it's clear that we have read in a number of comments that Dometic is collapsing. What I can comment is that we are not collapsing.
Yeah. Thank you. Maybe on cash flow expectations also. I mean, Q1 is usually a negative free cash flow quarter for you. On the other hand, you had a bit softer cash flow in Q4 building inventories. With what's happening, should we still expect, you know, a negative free cash flow quarter in Q1?
Yes, you should expect negative cash flow in Q1. You know, you can probably look at last year and you get a good indication.
Thank you. That's all for me.
Thank you.
The next question comes from Daniel Schmidt from Danske Bank. Please go ahead.
Yes, good morning, Juan and Stefan.
Good morning.
Good morning. Coming back to the geography, I hear what you're saying in terms of the U.S. is where you see the weakness. Why is that the case? Why isn't this sort of a global impact?
Well, I don't know whether we are going to see that in Europe or not, but obviously, inflation, the risk for inflation will have an impact sooner or later. For us is more when is the situation in the Middle East going to stabilize? Of course, when you see the oil prices going through the roof in the last, I would say 10 days, because it has been 10 days, then you need to start thinking what is going to happen, what kind of influences are going to happen in three months from now. I mean, the other problem that you have is lead times and logistics. That is not having an effect on us yet. That might have obviously in the coming weeks, but we don't see that happening to us at this point. The same with logistics.
We don't see that in our numbers just now. Of course, if the situation continues, sooner or later we have an impact.
Mm.
What we see, the comments from the dealers are primarily just now coming from the U.S. That's what we see.
I think we can also add Daniel about tariffs. I mean, it's you know, on the one hand, you could, of course, argue that what the Supreme Court decided in the U.S. could in the long run be positive, right? I think there is also still uncertainty on what is really going to happen there. That uncertainty is obviously not beneficial for the consumer sentiment.
Oh. Are you sort of between the lines saying maybe that dealers in the U.S. are more jumpy than they are in Europe?
Yes, they are faster.
Mm.
I mean, there's.
More and more nervous.
Yes. Absolutely.
In general, on the back of the tariff.
I mean, you have the interest rate situation, right? It has been promised a number of times the interest rates would come down. Of course, at the same time as oil prices are coming up in the way that they are doing, I think it's easy, especially for the kind of vehicles that we are talking about. I think it's easy to understand that they are nervous. Again, it's not coming from us. I mean, you can read already comments from Baird. I don't know if you are following Baird and the comments, right? I have one in front of me saying, "Our dealer sample suggested continued retail declines and a stable to improve in inventory comfort. Notably, recent actions in the Middle East and related volatility in oil prices have dealers concerned." It is.
Yeah.
That's what is having an impact, obviously, just now on the sentiments.
'Cause you have a bit contradictory data out the same days that you guys were out, and maybe that the difference is that this is big ticket and was quite fuel dependent. You also had Dick's Sporting Goods out the same day guiding quite well for 2026 in terms of like for like growth and all that.
We don't see.
That's high-ticket items.
Yeah. I have to say that we have not seen anything on the Igloo side. Of course, then we are talking about $175.
Well.
What we have seen so far is the high ticket items, which are connected to the boats and to the RVs.
Connected to the fuel price.
Yes.
All right. In this situation that you might end up in, we'll see where this takes us. What is your sort of plan in terms of counter actions?
Well, I think we have demonstrated so far that we are pretty good at adjusting our cost and working on cash flow, and of course, that will be more of the same.
Are you-
It's clear after what we have seen during the last couple of weeks, we are looking for more opportunities at this point.
That is still to come, or have you already sort of decided on more actions?
We are always working on actions, Daniel, but of course, it's not the same if the market goes down with 5% or it goes down with 10% or 15%. We are not expecting 10% or 15%. We are simply being proactive and cautious. Nothing more, nothing less. We are working on continuous basis with contingency plans. We have the restructuring program that was announced in December 2024, and then we work with contingency plans. What happens if the top line drops 5%? What happens if the top line drops 10%?
Mm.
In the restructuring program that has already been launched in December 2024, there is, you know, further actions already decided for 2026, which has been a part of the plan, but the execution is going to happen this year. It's very much activities in North America.
Yeah. All right. Maybe just a nitty-gritty question on January and February that you talked about a little bit. The winter storms that we had in the U.S., which impact the production of RVs, at least.
Mm.
From late January to early February. Is that part of your comments? Did you see that impact as well?
Yeah. We see OEMs working, running just now four-day weeks instead of five days.
Right.
We know that retail in January was down 15%, while manufacturing was down 11%.
Yeah.
From an RV perspective, while marine was down 17% on retail.
Yeah. February-
We don't have the numbers for February. They will come most probably at the end of next week or the week after. We know as well as I commented before, that the OEMs are running four-day weeks.
All right. Then maybe you talked, you got the question on the Igloo case, and you said it will take to year-end according to your legal counsel.
Yeah.
Wasn't it sort of a maximum of six months we call it when it comes to the ruling or it could be nine months equally?
Yes. I mean, it's normally we should get away in six months, but of course, as they are careful on telling you that it could be also beginning of next year.
Yeah.
I mean, for us, the sooner the better, right?
Yeah.
Since we are optimistic about the case, and we believe that it's going to be good for us to leave it behind us.
Mm.
Because there is the post phase now after the trial, right? The six-month starts to count from when that post phase is concluded.
Yeah.
You know, each side should file, you know, some type of additional, you know, summary information and so on. It's when this six-month period starts to count.
Yeah.
According to our legal advisors, they said end of the year, beginning of next year.
Maybe just to summarize my questioning, you don't wanna give any small detailed guidance on how you think the quarter will end in terms-
No.
of organic growth and your cost savings from the cost saving program. Is that on track or worse or better than you expected?
The restructuring program is running according to plan.
Yeah.
Yeah.
On guidance, as you know, Daniel, we don't guide.
In terms of the cost-saving program then, do you think it's gonna be a fairly linear savings throughout 2026, in line with or is that back-end loaded or?
You know, as I said, we have, you know, decided actions, and they are more back-end loaded, if I say so. It's things that has. They are in preparation now, but they will be executed during the year, and the effects will start to come through more in the second half of this year. We of course have full year effects of what was already done last year and so on. There is obviously things like that. For the additional new activities, effect is going to be seen in the later part of the year.
Okay. You mentioned the cash flow should be in line with Q1 last year. Any-
Somewhere. Somewhere in that neighborhood. It's going to. You know, my view is that we will have a negative cash flow.
Yeah. Okay. Okay, thanks. That's all for me.
Thank you.
The next question comes from Eric Blake from Fitch Solutions. Please go ahead. Fitch Solutions, please go ahead.
Hi. Thank you for taking my question. I was just wondering if you could tell me if this is going to have any impact on your previously announced plans for repaying the outstanding 2026 bonds?
No. Yeah. The answer is no.
Okay. Thank you.
Yeah. The answer is no.
Some echo. Little echo.
The next question comes from Johan Eliason from SpareBank 1 Markets. Please go ahead.
Hello, Johan and Stefan. Thanks for taking my questions as well. Most of them were obviously asked already. I wanted to follow up on the debt repayment here. You said you will repay a bond, and then you sort of highlighted potentially an additional SEK 800 million after the summer. Is that in any way related to your view on the dividend payment that you are prioritizing bond repayments as we speak?
That is absolutely one of the, you know, reasons. As we noted in the press release to keep the financial flexibility. That could be one of the consequences. I mean, it's the EUR 200 million in May, absolutely, we are going to repay that. The SEK 750 million in September, it's a little bit, you know, depending on the party who is sitting on that private placement with us. We have a readiness to pay that back as well.
That's within the potential planning, yes.
Okay, good. I think there are many reasons for you to try to run a stronger balance sheet going forward. I would view this as a positive decision from my point of view. Thank you very much.
Thank you.
The next question comes from Mads Lindegaard Rosendal from Danske Bank. Please go ahead.
Yes, thanks for taking my question. Could we touch a little bit on your COGS? We have seen many commodities rise this year and now also, as you say, oil. How should we think about COGS this year? How hedged are you in your key COGS? And could you also just for memory list your key sensitivities when it comes to COGS? Thanks.
Yeah. On the COGS side, we are hedged absolutely to a certain extent. We are, you know, also by the fact that, you know, the inventory that we will need for the main season here just starting off. I mean, we have already a lot of it already. So, it's not 100%, of course, but I mean, already a portion is or a pretty decent portion is already there, so to speak. It's. We obviously have the whole situation with tariffs, which eventually also impact COGS, right? There, I think the world is kept a little bit in the dark.
I think we have an idea what we are going to do with that, and so on. That's obviously, you know, a little bit of an unknown if I say so. We had also planned price increases, obviously already implemented, but also implemented from the first of January here. It's like I said before, there is still a lot of uncertainty around that part. If we talk about what type of materials, we have obviously polyethylene or polypropylene, which is a big component in our mobile cooling business, but also in some of our other businesses.
We have things like aluminum and copper.
Yeah
We have obviously electronics. That would probably, you know, list the absolute main things.
Mm
that we have.
Okay. If there's a headwind, it would be more visible next year rather than this year. I mean, if prices stay where they are now for these key areas.
I mean, we are obviously selling stuff also in the later part of Q3 and Q4. That could potentially affect them, you know, mainly more so for next year. I agree.
Thanks. Of course, that you have moving targets as well, right? Because we have been suffering from the tariffs, clearly, and just now tariffs for some of the countries are coming down. I think it's a moving target at this point. Of course, if they are kicking in or they are kicking much, then we will also need to adapt prices. It's. But again, then we are talking about consumer confidence again. You have two different questions. What is going to be the effect on COGS for Dometic, but also what is going to be the effect for pricing for the consumer down the road, not just for Dometic, right? If raw material prices are coming up, that will impact all suppliers, and that will impact our customers as such.
Yeah, true.
Mm-hmm.
The next question comes from Daniel Schmidt from Danske Bank. Please go ahead.
Yes. Thank you again. Sorry, I just had two short follow-ups. Could you give an update on you, Stefan, and your positioning? What's happening there? Are you leaving by the end of April as communicated, or are you staying longer, or are you gonna have somebody in place soon?
I am leaving at the end of April, and the rest of the question I hand over to Juan.
We are working on that, and we will communicate obviously as soon as we are done.
Okay.
It is moving. The process is moving, obviously.
Okay. Just the nitty-gritty, you said that OEMs in the U.S. are running at four-day production weeks now in March. Was that five-day production weeks in March last year, or is that on a
Yeah
On the same level as last year?
Yes. It's slightly lower.
It is a step down year-over-year, simply.
Yes.
That was all for me.
Keep in mind, I mean, we don't have
Yeah
We don't have the numbers for February, right? We have the numbers for January. January, so as I commented before, retail was down 15%, while-
Yeah
Production was down 11%.
Yeah.
I feel they are trying to get into the same level as retail, so they don't build up inventories.
Is it sort of when you talk about dealers, and you say both in marine and RV, is it sort of equally from both channels or both end markets that you hear the same, or is it tilted towards one or the other?
It's both. It has been more clear. There is more information, far more information, in terms of RV industry than marine industry. But we also get the comments from the marine industry.
Okay. Okay. Thank you.
Thank you.
The next question comes from Agnieszka Vilela from Nordea. Please go ahead.
Thank you. Just one follow-up on ACON lawsuit, you sounded quite optimistic about the hearing that you had last week. Just for us to assess the risks, if the verdict goes against you, what is the maximum earnout that you would need to pay out?
Well, in our opinion, we are not going to pay anything, in our opinion. What they could claim is the first tranche, and the first tranche is $75 million. The second tranche-
Okay. Thank you.
is just on the skies.
The second tranche is not kind of under this lawsuit, no?
I mean, the first tranche is $83 million. I mean, you know, we are sitting here and speculating now because we are speculating against ourselves because we don't believe we should pay anything. If threshold is met, then it would be $75 million. You know, as we are not even at $75 million, obviously we are at zero. It's just that you have a I mean-
We have not won yet, formally.
No.
We need to wait. What we can comment is obviously that our legal counsels are very optimistic, that we feel good after testifying, that we got obviously feedback from our attorneys as well. They continue last Friday, was also a positive day for us. That's what we know.
Thank you.
You are welcome. With that said, thank you very much for your attention. We really appreciate it. Hopefully you got some more clarification on really what happened during the week and why we communicated in the way we did. With that said, thank you very much. Have a good day all.
Thank you.