Dometic Group Earnings Call: Margins Up, Growth Fragile

Dometic Group AB ((SE:DOM)) has held its Q4 earnings call. Read on for the main highlights of the call.

Dometic Earnings Call Balances Margin Gains With Cautious Outlook

Dometic Group’s latest earnings call painted a picture of a company tightening its operations and protecting profitability in a tough market, but still wrestling with falling sales, currency headwinds and a weak fourth quarter that led to a negative EPS. Management struck a cautiously optimistic tone: they highlighted clear progress on gross margins, restructuring savings, inventory reductions and cash generation, yet set expectations for only modest revenue growth and a gradual, rather than rapid, recovery toward their leverage targets.

Improved Gross Margin and Cost Control

Despite lower sales, Dometic lifted its gross margin to 28.7% from 26.8% a year ago, underscoring the impact of restructuring, pricing and efficiency efforts. The company stressed that underlying profitability is improving even as volumes decline, with targeted cost actions offsetting part of the pressure from weaker demand and adverse FX. This margin resilience is central to management’s strategy as they work through a downcycle in several markets.

Restructuring Program Running Ahead of Plan

The ongoing restructuring program is progressing faster than expected, with SEK 350 million in annualized savings already secured against a SEK 750 million target by the end of 2026. So far, around 300 employees have been affected, one manufacturing site and five distribution centers have been closed, and cash outflows tied to the program total roughly SEK 270 million (over SEK 200 million in the latest year). Management positioned these actions as foundational for future margin expansion once growth returns.

Solid Full-Year Profitability and Cash Generation

For the full year, Dometic reported net sales of about SEK 21 billion and EBITA above SEK 2.2 billion, corresponding to a 10.6% EBITA margin, only slightly below last year’s 10.8%. Free cash flow exceeded SEK 1.4 billion, a strong result given stagnant or declining demand in key segments. Management leaned on this performance to argue that the business model is robust, even if short-term earnings are under pressure.

Segment Margin Improvements Amid Soft Demand

Several segments showed encouraging margin trends. Land Vehicles EBITA rose to SEK 66 million from SEK 23 million, with margins improving to 3.6%. Global Ventures also strengthened, posting EBITA of SEK 28 million versus SEK 24 million and a margin of 7.1%. Marine maintained EBITA of roughly SEK 200 million and defended margins despite lower sales. These improvements highlight the benefit of cost measures and mix management, even as volumes remain subdued.

Mobile Cooling Returns to Growth

Mobile Cooling, one of the more challenged areas, returned to organic growth in the fourth quarter, driven by a strong recovery in North America. Management emphasized this as an early sign that demand can bounce back when inventory clears and confidence stabilizes. To combat rising tariffs and labor costs, Dometic has put through price increases effective January 1, aiming to restore margins in this segment after a difficult year.

Working Capital and Inventory Tightening

Dometic continued to free up cash from working capital by aggressively cutting inventory. Stock fell to SEK 4.8 billion from SEK 6.5 billion a year earlier, and days of inventory dropped to 119 from 138. Last-twelve-month working capital now stands at 25% of net sales (23% for the quarter), moving toward the company’s 20% target. Management signaled further efficiency gains ahead, which should support cash flow even if top-line growth remains modest.

Debt Management and Maturity Profile

On the liability side, Dometic repaid a USD 229 million loan in the fourth quarter and extended a USD 233 million term loan out to 2029, leaving average debt maturity at 2.7 years. The company articulated a clear plan to repay its remaining 2026 eurobond using cash on hand, which would lower financial expenses over time and reduce refinancing risk in a volatile rate environment.

Sustainability and Innovation Metrics Moving Higher

Beyond pure financials, Dometic highlighted progress on sustainability and innovation. Female managers now represent an all-time high 31% of leadership, and 37% of operations run on renewable energy, exceeding internal targets. The innovation index rose to 23% from 21%, indicating a higher share of sales from newer products, while workplace injuries are near record lows. Management framed these achievements as long-term value drivers that can differentiate the brand and support pricing power.

Strong Full-Year Adjusted Earnings

Full-year adjusted EPS came in at SEK 2.52, with reported EPS at SEK 1.34. While this marks a decline from prior peaks, it demonstrates that underlying profitability remains positive despite volume pressure, restructuring charges and FX drag. The spread between adjusted and reported EPS reflects the cost of ongoing restructuring and one-offs that management argues will yield future savings.

Cash Recovery Initiatives Underway

Dometic is also launching receivables-focused cash recovery programs, aiming to free up SEK 300–400 million by the end of 2026. Coupled with inventory reductions, these initiatives are expected to support continued free cash flow generation in 2026, albeit at somewhat lower levels than 2025. The strategy is to create balance-sheet flexibility for debt reduction and selective investment without relying on strong near-term revenue growth.

Persistent Negative Organic Growth

The main blemish on the quarter was continued negative organic growth. Fourth-quarter organic sales fell 3%, and full-year organic growth was down 8%. Several segments remained in decline, including Land Vehicles (-4% in Q4), Marine (-3%) and Global Ventures (-3%), with particular weakness in the Americas where Land Vehicles posted double-digit drops in some regions (LV Americas -10%, LV APAC -10%). The company is relying on cost actions and mix management to weather this demand slump.

Quarterly Profitability and EPS Under Strain

Short-term profitability deteriorated in Q4. EBITA margin slipped to 6.0% from 7.3% a year ago, while reported EPS was a loss of SEK 0.67 and adjusted EPS was a loss of SEK 0.39 for the quarter. Management attributed the weak quarter to lower volumes, significant FX headwinds, Mobile Cooling margin pressure and higher restructuring costs, and cautioned that volatility could persist before the full benefits of restructuring and pricing actions feed through.

Material Currency Headwinds

Foreign exchange effects were a major drag, cutting about 2.1 percentage points from the Q4 EBITA margin and roughly 0.4 percentage points for the full year. Management quantified FX sensitivity: a 5–7% move in the U.S. dollar could swing full-year EBITA by approximately SEK 47 million. They also warned of potential dollar and euro moves into the first quarter, reinforcing FX as a key risk factor for earnings volatility.

Mobile Cooling Margin Drag Despite Growth

While Mobile Cooling returned to growth, its margins were hit hard. The segment lost the benefit of a SEK 63 million one-time duty-drawback recorded last year and faced around SEK 30 million of additional costs from tariffs, higher labor expenses and inefficiencies, partly linked to hiring about 250 new employees. This combination created a notable drag on Q4 margins, which management aims to offset with the January price increases and operational fixes.

Lower Q4 Free Cash Flow and Restructuring Cash Out

Fourth-quarter free cash flow dropped to just SEK 20 million, down sharply versus the prior year. The decline was driven by adverse currency effects of about SEK 250 million, seasonal inventory build, delayed invoicing and a sizable SEK 103 million cash outflow for restructuring. Management portrayed this as a temporary setback, arguing that the underlying cash-generation capacity remains intact once these short-term factors normalize.

Leverage Ticks Higher

Net leverage rose to 3.3x EBITDA from 3.1x a year earlier, moving further above Dometic’s target of around 2.5x. The increase stems largely from weaker EBITA, despite strong cash flow and some debt repayments. Management reiterated its commitment to bringing leverage down, but acknowledged that the journey back to target will be gradual and depends on both operational improvements and market stabilization.

Market and Demand Uncertainty

Management described the demand backdrop as uncertain, with retailer and dealer inventories being rebuilt cautiously rather than aggressively. The OEM channel now accounts for 39% of sales, down from 62% in 2018, reflecting a mix shift toward aftermarket and distribution. However, hesitant dealers mean improved order intake is not yet fully converting into sales, adding to near-term visibility challenges.

Legal and Macro Risk Overhang

The company flagged ongoing legal and macro risks, including an Igloo-related court case moving to trial and possible changes in tariff policies, along with broader geopolitical uncertainties. While provisions are in place for the legal issue, timelines and outcomes remain unclear, and any adverse regulatory or tariff developments could pressure both demand and costs.

Higher Near-Term Financial Expenses

Net interest expense remains elevated in the near term, reflecting temporarily higher debt levels and a still-challenging rate environment. The effective tax rate is also being pushed up by nondeductible interest and a fourth-quarter provision linked to ongoing tax audits. Management expects financial expenses to ease after upcoming bond repayments, but noted that investors should anticipate some near-term drag from financing costs.

Measured Guidance and Cash Flow Outlook

Looking ahead, Dometic is guiding for low- to mid-single-digit revenue growth in 2026, signaling that management does not expect a rapid rebound in demand. Free cash flow in 2026 is projected to be slightly below 2025’s level of more than SEK 1.4 billion, even as working capital efficiency improves toward a 20% of sales target and an accounts-receivable program releases SEK 300–400 million by end-2026. The restructuring program aims for SEK 750 million in run-rate savings by 2026 (with SEK 350 million already secured and total cash out expected around SEK 400 million), and management expects leverage to fall meaningfully from 3.3x toward the 2.0–2.5x range. Price increases are intended to offset the SEK 30 million Mobile Cooling tariff and labor headwinds seen in Q4, but FX volatility remains a major wildcard for EBITA.

In sum, Dometic’s earnings call showed a company executing firmly on cost control, restructuring and cash management, while acknowledging that the top line and quarterly earnings will remain under pressure in the near term. Investors heard a message of disciplined self-help—better margins, tighter working capital, and clearer debt plans—set against a still-soft demand environment and sizable FX and cost risks. The path to stronger growth and lower leverage appears plausible but gradual, making Dometic a story of operational progress that still needs a more supportive macro backdrop to fully translate into earnings momentum.