Dometic Group AB (publ) ($DOM)

Welcome to Dometic Q1 Report 2026. Today, I am pleased to present CEO, Juan Vargues, CFO, Stefan Fristedt, and Head of Investor Relations, Tobias Norrby. [Operator Instructions] Now, I will hand the conference over to the speakers. Please go ahead.

Hello, good morning, everybody, to this Q1 report. Welcome to sunny and Stockholm, by the way, wonderful that spring time is back and the light -- we have the light back. So moving over to the highlights. We see an increased uncertainty following both the tariff situation and the geopolitical tensions in the Middle East. We see already now oil prices being very, very high. We see as well inflationary movements in terms of freight costs, in terms of raw material cost that will down the road have some kind of impact on consumer confidence. We continue to see retailers, dealers being very, very careful in building up inventories and ordering what they need. At the same time, we see also differences across regions. And most probably, the region where we see confidence index being the lowest is in the American region. Looking at performance, we are very happy to communicate finally after many quarters of negative growth. We are standing at the same level as last year. We are very pleased seeing the Service and Aftermarket coming back and showing a solid growth of 5%, positive to comment that is everywhere. So we see the regional businesses within land vehicles, and we see as well, marine everywhere also being positive from a service and after margin perspective. Distribution is slightly down 1%. Mobile Cooling being positive, which is good. We see also that the sell-through for our Mobile Cooling business is -- has been very positive in the first quarter. And in reality, the one that we are still missing is the OEM that ended up at 4% down versus last year, but very much due to the RBM in the American region. Perhaps even more positive is that both order intake and backlog continue to develop in a positive way. Positive development on EBITA margin, ending up at 10.6% and really based on 2 different factors. On 1 side, we have a positive mix reception of the market growing. At the same time, as we also see the savings coming from the restructuring program continue to improve. At the same time, we have many prod launches. We have been launching products, especially on the marine side and on the mobile cooling side during the quarter and in connection with the extra prod development costs, we also have marketing costs to launch to have successful launches for the new products. And last but not least, improved free cash flow even if it's negative, is quite a bit less negative than 1 year ago and totally in line with historical numbers. So as a matter of fact, better than what we have seen in the last 4, 5 years in practice. Leverage ending up 3.4x, which is slightly worse than 1 year ago, but following exactly the same historical pattern that we have seen due to, obviously, low invoicing levels in Q4 and lowering levels in Q1. If we move over to the figures, as I already commented, organic growth of sales with negative impact from currencies of 9% and then portfolio changes that continue to happen, delivering 1% in negative growth. EBITA 8% down versus last year, ending up at 10.6% in margin in comparison to 10.4% and adjusted EPS of SEK 0.86 in comparison to SEK 0.88, so very, very close now. And as I already commented, negative cash flow but quite an improvement in comparison to last year and leverage slightly higher than we had 1 year ago. Looking at growth. Land vehicles, ending up a minus 1%, very much driven by Americas, 6% down. EMA was positive 2% and APAC finally, minus 3%. Marine positive 2%. So we had negative 2 quarters ago, positive -- sorry, positive negative, positive again. So we are hovering around the same levels as last year. At the same time, we have a pretty good order intake. Mobile Cooling, very similar to marine, 1% positive, but also developing nicely on order intake and then Global Ventures 7% down. Looking at the different rate channels. In reality, nothing remarkable. No more that Southeast market is growing by that, becoming 30% of the total business, while OEM continues to go down slightly, ending up [ 58% ] perhaps worldwide to comment that RV OEM that used to be 49% in 2017 stands today for 18%. So again, we are getting less and less exposed to the RV OEM markets. Looking at the different channels, positive evolution everywhere. I do believe that looking at the different charts is very, very clear that we see a positive trend getting now into neutral growth for the group, but -- and hopefully, we will see also OEM come into positive terms in the near future. I would like to stay for a couple of seconds on this slide. What you can see the gray line is manufacturing. The green line is registrations. And it tells you a little bit where the different inventories look like in the different markets. Unfortunately, the inventories on Marine are much more difficult. We get production numbers, but we don't get -- the retail numbers include both on manufacturing in the U.S. as well as imports and that distorts the picture a little bit. But if we go back to registrations on the RV side, we see that we suffer a major deterioration in the industry from 2022 to 2025, stabilized in the last couple of years, but not coming back to growth. At the same time, we see also a risk balance between retail and manufacturing. At the same time, we see that Europe, we saw Europe kind of postponing the drop simply because we had, as you may remember, problems with component delivery from the chassis producers to the OEM industry, which means that we still have pretty good years 2022 and 2023. But we saw a major drop in the second half 2024 and a major drop in 2025. And of course, when looking at Dometic's evolution in the last couple of years and always comment in negative growth, what you can see is we got the hit in the U.S. first. As the U.S. was stabilizing, then we got Marine and we got as well. So that has been very much the main reason for this delay in coming into neutral territory and hopefully showing growth in the quarters to come. Again, coming back to inventories. We are very much there on the RV side. On the marine side, we still hear and read from retailers in the U.S., especially that inventories a little bit too high, while Europe looks far better. And by the way, we have seen growth on the marine side, both in Europe and APAC during the last couple of quarters. EBITA ending up at 10.6%. Good progress on gross margins is very, very clear that the restructuring program is kicking in and having shown improvements on top of all the other efficiency actions that we are taking. We have an SG&A higher than 1 year ago, very much, as I commented, explained by the investments that we are doing and we keep doing improve development everywhere but especially in the Mobile Cooling marine area, which are reflected not just on the predevelopment costs but also on the marketing cost in connection to the prod launches. We see margin improvements in land vehicles. We see -- we are on neutral levels on Global Ventures, and we saw a decline in marine and mobile cooling. Looking at different segments, loan vehicles, 1% down, with good growth in terms of the market and again, a decline on the win side, very much driven by the RV side in Americas. Strong margin improvement, 9% with, again, significant improvements driven by the restructuring program and all the other activities. And we continue to invest, as we have commented many times on predevelopment. Innovation is clear. Clearly, the before behind organic growth and what we are working for. Worth what mentioned that we are still producing losses in Americas, but we see a major, major cut on those losses during the last 12 months. Marine, positive to see 2% growth with high single-digit growth in Service and Aftermarket, slight decline, very, very close now to neutral territory also on the OEM side. EBITA margins close to 18% is very much -- the reduction is very much driven again by -- on 1 side, delays on the price increases, so time lag the win price increases and the cost increases. And then, of course, all the uncertainties that we have just now with the tariff situation in the U.S. At the same time, as we continue to invest, as I said, improved development, leading to new product launches and marketing costs. Mobile Cooling, 1%. Here, we see good development on the U.S. market. We see a slight deterioration on the European and APAC markets, margins of 5.7%, so deterioration versus last year. we see a little bit of the same that we have still time lags to win cost increases due to the new direct situation and price increases. And even here, we keep investing in generating growth moving forward. Global Ventures, organic growth of 7%, down with other global verticals continued to develop positively. At the same time, as we see Mobile Power Solutions still negative, driven by the OEM. That business is to a high extent linked to the OEM business. EBITA margins on a neutral level. On 1 side, we see continued margin improvements on global -- other global verticals for the same, but -- as we see some margin -- or mobile power solutions, but totally speaking, neutral since we are also adapting our G&A costs to the new situation. Looking at stability, very good progress. We feel out what we are doing in that territory as well with injuries coming down have been down now below 1% -- target of 1% for a number of quarters. We see also female managers at a decent territory. We would like, obviously, to improve even more, but we have seen a major progress in the last couple of years. We continue to invest in renewable energy, and we are in operations, and we are up to 44%. Innovation, again, the major driver behind organic growth up to 24%. So we are very, very close to our target of 25%. And then we keep doing assessing our suppliers for very material, and we will secure that we deliver as well on our targets. Some of the recent launches, we launched at the end of Q4, a new brand, Waeco, which is also not just a number of products. It's also a new business model where we are addressing major wholesalers, main distributors and implementing a totally different business model, generating higher margins at the same time as we are capturing volumes. It is clear that we see a new demand for all the vehicles. And we are addressing that new demand that we have been seeing accelerated in the last couple of years as a consequence, again, of the inflationary cost increases post-pandemic, people are looking for lower price options. And we're addressing that. Positive reduction, very positive reaction even better than we expected during the first couple of months. Unfortunately, a little bit late since we are already now in Q1 and customers placing orders normally in Q4 for deliveries in Q2, and we launched the product in December. But again, so far, very, very positive reaction. Moving over to drinkwear, another of the areas where we are investing, launching the first series of premium drinkwear products, where we are addressing also modularity and delivering auto accessories, not just the bottles, but also a number of different options, and we are expecting, on one side, good growth and good margin evolution, but we're also expecting that this kind of product will reinforce our Dometic brand globally. Moving over to a new series of rooftop tents. This is also the third series of rooftop tents coming from Dometic, addressing the new market with SUVs and pickup trucks. And as a consequence of all the product launches, we keep collecting awards in different areas. In this case, we are talking about more cooling with a new high-quality and premium domestic branded products, both as hard coolers and soft coolers as well that we have been launched in the last couple of quarters, starting to kick in as well on store. Happy to report as well positive development on our restructuring program, the cost reduction program, you may remember, this program will generate SEK 750 million on running rates at the end of this year. We ended up Q4 last year at a running rate of SEK 350 million. We added another SEK 50 million. So new running rate of SEK 400 million and cash out in the quarter, achieving SEK 20 million. And with that, I would like to hand over to you, Stefan.

Thank you very much, Juan. Moving to the income statement, starting with our gross profit margin development. And this is really a very nice development that we have seen now for almost 2 years where we have had a continuous improvement of our gross margin. And it ends up with 29.6% in the quarter versus 28.7%, the equivalent period last year. And that has then favorably impacted by sales mix but also the restructuring program and then partially being offset by the fact that we have still a certain lag between price increases and cost increases, including tariffs. I mean there has happened a lot of things in the first quarter. We have also had the decision by the Supreme Court in the U.S. and making some of the tariffs illegal, then we have obviously had the escalating situation down in the Middle East, which has been starting to drive up input cost for our products. Operating expenses in reported currency, we are down. But in constant currency, we are up 5%. And there is 2 things to that. We obviously have effects from our global restructuring program, which is driving down the cost as expected. But then we also have in the quarter some of -- for increased product development as well as marketing related to product launches. You just saw a number of the examples here in Juan's presentation. Looking at net financial expenses, which is on its way down as expected and driven by the gross debt reduction, which is going to continue here now in the coming quarters. Tax is on the same level as last year, and the effective tax rate is 33%, which is as we have communicated before, affected by the deductibility of interest expenses in Sweden. Moving on to cash flow summary, as Juan already mentioned, very nice to see that the free cash flow is actually quite a bit better than the same period last year. You know that we have the seasonality where Q1 is always our weakest cash flow quarter. And now when we're moving into Q2, we are moving into the strongest one the same with Q3 is also a very strong cash flow quarter here. But in the quarter, we have seen working capital on the one hand, been impacted by higher inventory. It's, of course, measures to make sure that we have the inventory to fulfill the demand. And then we have seen on the other side, the improvements in trade receivables and payables. Mention was that the cash out related to the restructuring program in the quarter was SEK 20 million. Program to date, we have SEK 256 million in payout. And as you remember, we have talked about it should be totally SEK 400 million, and we still stick to that. So there is SEK 140 million approximately to go, which will happen in 2026. And then CapEx is a bit lower than the same period last year, and we continue to prioritize investments in fixed assets. And we also have a new model, which actually means that we have less needs to invest in fixed assets going forward. If we look then on interest expenses paid, they are down as well as tax paid. So that is also helping to drive the free cash flow. Moving on -- yes, here, you can see what Juan was alluding to that yes, minus SEK 192 million in free cash flow stacks up quite well in a historical comparison here. So I'm happy with how we continue to manage this well. If we look on working capital, the last 12 months, we are down to 20%, 25%, which is 3% units better than the same period last year. We are 26% in the quarter. Inventory balance, SEK 5.2 billion. In constant currency, that is then up versus last year. But as I mentioned it's really to make sure that we can keep the service level to our customers here. So number of days, 121 days, and that's 10 days less than the same period last year. But as you can see, there is still potential to continue to drive that down towards around 100 days. On accounts payable, it's -- the movement there is very much mix related, where do we have the major sourcing in the quarter, so a little bit more China, longer payment terms there. Even we already talked about and accounts receivable, you see that the days sales outstanding is starting to come down, which I would also expect due to the program that we have been putting in place. Okay. Moving over to CapEx and research and development costs. We ended up SEK 72 million in the quarter, equivalent to 1.6% of net sales. And as I said before, we are making clear priorities, but we have also created a model where we underlying need to invest less in the machinery and equipment. On the R&D side, we are now on 2.9%, SEK 132 million in the quarter. And we are continuing to prioritize to invest in product development. We can also see that on our innovation index, as mentioned before, it's up to 24% now in Q1, and that is something that we will also continue to prioritize going forward. Moving on, so if we take a step over to our debt maturity profile, the total gross debt is now SEK 15 billion as of the end of Q1. We have an average maturity of 2.5 years. And then we have an undrawn revolving credit facility of SEK 300 million maturing in 2028. Then we will pay back the SEK 2.2 billion in the remaining 2026 Eurobond here tomorrow using cash on hand. And then we also have a plan to repay the SEK 0.8 billion, which is a private placement that we have maturing in September 2026. So with this, you will see the gross debt continuing to come down. And also the net debt driven by the free cash flow that we are expecting to generate during 2026. Looking after the leverage ratio, it ended at 3.4x, as was mentioned before. It's all the different components that is very slightly all contributing to take it up from 3.3x, as we had by the end of Q4. This is not unusual that leverage ratio is moving 0.1 in the first quarter. So from now, we are going to obviously come into the cash flow strong part of the year and the leverage will then start to move down here and in Q2, Q3, especially. With that, I will hand over to you, Juan, to make the summary.

Thank you, Stefan, summarizing Q1, very, very happy, but we are leaving the negative growth behind us that we see as well as improving gross margins and EBITA margins, positive order intake and order backlog that continues to develop in a positive way. We see a good mix, sales mix with certain aftermarket showing solid growth. With improvements in free cash flow leverage that ended up at 3.4x versus 3.3x. At the same time, as we see as well still today, low consumer confidence driven both by the volatility on the tariffs nonetheless, by the new upcome situation in the Middle East. Due to that fact, we decided to withdraw the dividends, as you know, on the 12th of March. And already at that time, we communicated that the main reason was what the risk that we saw moving forward. We also commented that it was not a profit warning. And hopefully, you realize as well when looking at the numbers that what we said, we are not collapsing became the reality as well. Again, we feel good about Q1. We feel good about the intake and the backlog still. We don't know how the ongoing work in the Middle East is going to have an impact in Q2 or Q3. The theory is obviously that we are moving into Q2 in a positive manner with a strong backlog. Then we will see what happens during these 3 months. We are still of the opinion that we will see organic growth in 2026. But of course, we're also very mindful of the situation in the Middle East and the impact on, again, oil prices, inflation, interest rates and consumer confidence. We continue to invest strategically. We see prod development and innovation index coming up. Of course, with that, we also have some extra marketing costs that we are kind of happy to expand. We are starting to move into a growth phase again. And we are also very pleased with the way the restructuring program is developing over time. And with that said, I think that we can move into the Q&A session.

[Operator Instructions] The next question comes from Agnieszka Vilela Nordea.

I have 2. So maybe just starting with the demand outlook. Mid-March, you were quite cautious on about the demand prospects, especially in the light of Middle East conflict yet to finish Q1 with flat organic growth for the quarter. And I wanted to ask, was there anything that really surprised you to the positive? And also maybe a follow-up on that you have built some inventories in the quarter. Should we interpret it as a sign of you expecting higher sales in Q2?

Absolutely. So no surprises -- Agnieszka, good morning, by the way. So no surprises. Again, the communication on March 12 was much more due to what we could happen due to the war. It's very, very seldom that you see the word starting day 1 and then inflation, interest rates and consumers stopping to buy. You see that normally after a number of months. So I think we were very clear at the time of the communication and we try to clarify even a couple of days after the announcement that we were not collapsing. And I think that this is what we proved this time. We are happy to see the order intake and the backlog strengthening even more in Q1. Then the question, and I think that at least our take away is that we take it in a very positive way at the same time, as I also believe that many people in the value chain are expecting to see higher prices down the road as a consequence of the higher inflation. And since we are at the beginning of Q2 in my view that we have an effect of people forward buying, so to say. At the same time, so you can take it in a negative way, you can take it in a positive way. Nobody wants to build up inventories. People are super careful on building up inventories. So again, we are starting the quarter. I'm coming to the second question, we're starting the quarter with a stronger backlog. In theory, we should see growth.

But we only have 1 month approximately -- yes.

Four to six weeks. Yes.

Okay. Perfect. And then my second question is on the input costs for you. Would there be some inflation in the polymer prices. So maybe if you could please remind us about your plastics exposure and maybe tell us how quickly this higher commodity prices are affecting you to your hedge? And what kind of price increases would you need to implement to neutralize the impact?

I mean, of course, I mean, it's not just plastics. I mean everything is just now going up is we see those moving targets. But of course, that we have been working very, very hard during the last few weeks, and we are implementing price increases as we speak. We have not seen any major effect in Q1 simply because you are sitting inventories. But it is clear that suppliers are knocking on the door, and we are already now talking to customers. So our intention is, as usual, to cover up for the potential cost increases. And the post increases -- the cost increases will come as a portion of time. Just now, obviously, the target is to push back as much as we can. At the same time, as we are seeing inventories. But at the same time, we also need to act very, very fast and start discussing with our own customers as well.

The next question comes from Daniel Schmidt from Danske Bank.

Sorry if I may be repeating something that you already said that was relating to the call. But I hear you in terms of order intake and order backlog heading into Q2 and what you said about what sort of -- what you said about your announcement on the 12th of March. And is it sort of -- am I getting it right that for the month of March, you didn't really see any deterioration. Did you have -- because I assume that you did get hit by the winter storms in the U.S. in January and February, which caused some production shutdowns.

Yes. But at the same time, I do believe that you have 1 winter storms, which is totally right. At the same time, we also see that in retail, we are especially talking about the RV industry in the U.S., we see that retail was also down. So I believe that we need to take care of -- to be a little bit careful in a way we are interpreting the weather impact in the first 2 months. I mean, again, we were just talking about production, I would agree with you. But of course, when you see the retail -- RV retail is also down, the customers are careful, then I believe that we need to wait for some more time to understand. As you know, production was down 11%. If you look at the number retail in February, they were down 22%.

I'm just getting to your momentum in the quarter. I...

Q1 was good. March intake was good and backlog was even better. Our backlog strengthened in March.

Good. And then a totally different question maybe, but in the recent days, there has been confirmations from both SEI and Patrick Industries that they are talking about a possible merger, who knows if that's going to happen or not. But if that happens, do you see that theoretically at least as an opportunity for you guys in the U.S., especially to regain some shares where they are occupied by a possible merger and internally focused and so on.

I feel there is -- of course, that what you are saying will happen anyway, right? It takes a while to integrate. So there will be -- if that happens, it will take some momentum from the organization. But at the same time, I would like to point out, we are competing with Lippert. Basically, we are not competing with Patrick. Patrick and Lippert are competing with each other. The only area where we are competing with Lippert is -- sorry, with Patrick is a Patrick acquired a company two years ago called RecPro turning $80 million. So they are -- we are talking about the OEMs, we are competing very, very little with them for not saying nothing. And on the aftermarket, it's very, very limited as well. So I don't mean that, that will change. I think might change in the short term, as you said, because, of course, it takes a lot of attention for the organization to integrate companies and we are talking about 2 major companies. So this is not just the 1 absorbing the other. But I don't expect any major any major impact on the long term, simply because we are not competing with Patrick.

Okay. Good. Good. And then maybe a very detailed question for Stefan. Other current liabilities are up a bit versus the end of the year despite currency going in the other direction. Is there anything in that number that's related to the court case or further reservations or anything?

The very simple answer to that is no.

No? Good. That's all for me. And I just want to thank Stefan as well for good collaborations through the years and good luck.

Thanks a lot, Daniel. Appreciate it.

The next question comes from Lou Kocher from Amundi.

Perhaps you mentioned it, but I didn't get it. What do you expect as cash payout for restructuring in 2026? And yes, P&L impact versus cash impact and same for 2027, if there is?

Yes. As I mentioned before, we have said in the past SEK 400 million in total cash payout of the program. We have a program today paid out SEK 256 million. So that means that we have SEK 144 million to go for -- and that is mainly -- it's going to come in 2026. So it's -- so I don't expect there to be anything left for 2027. Then in terms of saving, as you know, the program in total should generate SEK 750 million. In savings, we should be on a run rate jumping into 2027 on SEK 750 million. We reported now after Q1 that we are on SEK 400 million in savings. So if we overlay that with our plans, we feel we are absolutely on track to achieve that. And you could say I could add as well that in 2026, what is going to happen is that it's going to be a little bit more backloaded than in 2025. And the reason for that is that we have some major activities that we're working on, but we will see the effects later on in the year.

The next question comes from Fredrik Ivarsson from ABG.

Most of the questions I had have been asked, but I have 1 on Marine. And I guess when we listen to all the boat manufacturers, it's a little scattered view, I think, with the high-end manufacturers being quite optimistic and talking about higher backlogs and so forth, whereas the mass market is more cautious. First, do you share this view? And second, how are you positioned towards this backdrop in that case?

An, I would agree we saw -- you go back to the last few years. First, we saw what Americans called for blue color boating coming down dramatically. Then it took about 18 months before we saw the bigger boats coming down quite a lot. Then we saw the low price both in stabilizing about 8 months ago. And now we see the bigger boats moving onwards really during the last, I would say, 6 months. So it feels good. Order intake has been promising. At the same time, as you -- when you read all the information about American marine retailers, they're still cautious. So I simply believe that we need to wait a little bit more because we might be seeing what we saw with the American RV industry a couple of years ago that went down, manufacturers started to build up, retail didn't come back and then the manufacturing came down again. So we are kind of hovering about the same levels that we were manufacturing 2 years ago. You look at the RV industry. So I believe that we need to see these for some more months before we can see now it is moving. The fact is that our intake has been growing. So from that perspective, we feel positive, but I would like to understand a little bit more in 1 or 2 quarters. So we see that consistency.

On top of that, we also feel that the inventory situation is still not on an optimal level by the dealers in North America, but it has certainly improved. So it's...

That's true. That's very much on the American market that we are looking at Europe. Europe looks good. And we had high digit positive growth in Q1 and even APAC is the same. Having said that, obviously, the U.S. market stands for 75% of the global markets. So improving. We are still not there, but it is improving clearly.

Okay. Great. And on the positioning, could you remind us of where you are?

So we are very well positioned in -- systems. We are very well positioned in full systems. We are very well positioned in ACs. I would say that those are the 3 main categories. We have seen as well. So that's on the OEM. We see the aftermarket side, we have seen very nice growth, very nice growth in Q1. We saw also growth in Q4. So aftermarket has been showing positive numbers now for a couple of quarters. And again, from an OEM perspective, we have very strong positions. And we need to keep in mind as well that the market is much more fragmented. Obviously, that we don't have, what can I say, any dramatic look-alike offering to put it in some way.

The next question comes from Daniel Schmidt from Danske Bank.

Yes, me again. Just 2 follow-ups and another detailed question, I forgot last time to Stefan, you're repaying this bond tomorrow SEK 2.2 billion. Could you give us any indication of how much that would change your financial net on a quarterly basis going forward?

That is running with a financing cost of 3%.

And you were getting basically just 1%, 1.5% on the cash that you held?

Yes, sometimes a little bit more actually. Sometimes...

Maybe 1 percentage point or a little bit more maybe in a positive impact on the financial net, is that fair?

Yes. It will -- I mean we are on 4.2%, 4.3% on average cost of our portfolio right now. So this will take it up a little bit. But in absolute terms, as you are after, it will go down. And that's -- and it will continue later in the year when we have the SEK 750 million in private placement that we are planning to pay back as well.

Exactly. Okay. Good. And then, I guess, you already touched upon it, but I missed it as I missed part of the call. Any details on the European market on the RV side. You grew in the quarter. Was that both OE and aftermarket? What was the momentum in the quarter?

We see the OEM business, bringing up to the way registrations across the were very positive, I have to say. And we see order intake as well being positive for us now for a few months. So I'm optimistic even the Service and Aftermarket has been improving lately, absolutely. So I'm far more. I mean, if I think about the venography, is clear. I feel far more optimistic about the RV and the marine industries in Europe that I feel about the U.S. market. I see U.S. consumers showing much lower consumer confidence than the European ones. Europe is not flying, not me wrong. But again, inventories are gone, manufacturing is starting to build up service aftermarket is moving also into positive territory. What you see on the American markets, that inventories are relatively low, but retail is still negative as a consequence of consumers entering the stores but not pushing the button. And as far as that doesn't happen, of course, it will be a slow movement.

The next question comes from Agnieszka Vilela from Nordea.

I have 2 follow-ups. Maybe starting with your SG&A development. I mean you have quite good progress on the gross margin. But now with the SG&A costs being higher, much of that benefit is kind of disappearing or fading away a bit at least. But could you just tell us about your investments in marketing and product development. I mean it's all for good reasons, but how would you evaluate the success of your initiatives there? How much this new product should add to your growth? And also, should we expect this kind of cost to be elevated for the coming quarters?

I believe that we will see that cost, especially in those 2 segments being higher for another 1 or 2 quarters, and then they will be coming down. But at the same time, as I said, we have been investing quite a bit on product development. We believe that it is super important. We have been preparing ourselves for a growth phase to develop the products, if you are not launching doesn't give you a loss. At the same time, as you know, Agnieszka, we are trying to reinforce the B2C side. The B2C side from a marketing perspective is simply higher cost. At the same time, it's also bringing higher margins. So I believe that you need to see the combination gross margins and SG&A. And hopefully, we will be showing a positive balance moving forward.

And then my second follow-up is on the Marine business. You grew organically by 2% in the quarter, but the operational leverage was quite low with EBITA still falling 17%. So can you just remind us what was the driver behind the lower earnings? And how should we think going forward about the earnings progression in Marine?

The main issue in the Marine business is obviously that we are producing in Canada. We have a situation with the targets. As you know, things are changing on a continuous basis. And at the same time, you have also some time lag between the cost increases and what we are provisioning on tariffs and potential tariffs and the price increases that we apply. So it's very much a time line. We should expect that to improve moving forward.

And could you just quantify the tariffs you're paying on the marine side ballpark?

I don't have the number on top of my mind...

No, we don't have that available right now. But I mean it's obviously -- it's -- I mean we obviously know what we are paying. But with what has happened now in the first quarter where the Supreme Court were declaring some of them not appropriate. So they're obviously impacting the dialogue with some of the customers. So it's -- it is a challenging environment to operate in terms of this where things are changing very, very frequently. And it is...

Because no customer. I mean that's also for us when we are a customer. I mean, you get crazy when you get new price list every second month. That's the reality that you need to play just now, right? So we implemented new prices as late as one month ago that we are not seeing, obviously, the effects on the marine side. We have clearly -- Agnieszka, you're totally right, we have a time lag in the Marine side, between the tariff situation and the price increases, again, as late as one month ago, we applied new price.

Plus what we talked about before in SG&A investments especially in product development.

Yes, yes. Absolutely.

We have a few questions from the webcast audience that we can take now then. And the first 1 relates to the backlog, how did we see it change during the quarter? And then what's the typical maturity in the backlog?

So good progress in January, flattish in February, better in March again. And normally, our backlog, we are not an industrial, right? So our backlog is somewhere 4 to 6 weeks. So we are starting the quarter 2 in a stronger situation than we were starting in Q1. But again, we cannot take any conclusions on how May or June will look like. The starting point is positive.

Thank you. Then there's a question on leverage. Do you stick to the target of 2.5x. And how should we see -- what's the Fed expectation of the leverage evolving towards this 2.5x?

I -- we can absolutely confirm that we speak to the target of around 2.5x. We are now coming in to strong cash flow quarters here. So my expectations are that we are going to move towards 3 and potentially even slightly below that. I don't foresee that we are going to achieve around 2.5% during 2026.

And finally, a question on CapEx, there was a mention of lower CapEx need going forward. Can you please elaborate on that?

I mean, as we have been running the different kind of restructuring programs. We obviously have created something where we have been outsourcing to a higher degree than what we have done before. That is 1 driver. And then just by the fact that we have fewer factories as we have been closing factories during these programs, we have gone from 31 factories down to 22 now. So it's obviously also reducing the need for CapEx in machinery and equipment.

And it's a logical consequence. I mean, it has been very much on purpose since we introduced the new strategy, we want to have a similar level of CapEx, but the profile of the CapEx was going to change by investing less in factories and maintaining factories, investing less in machinery, but investing more in tooling in connection to innovation. So that's an important one.

Good. That's it from webcast audience then. So back to the operator, please.

The next question comes from Andreas Lundberg from SEB.

Andreas with SEB here. Back to the leverage question, you're targeting 2.5x. You say how comfortable are you with that given the cyclicality of the business? Would you consider even a lower level would be more suitable as...

I mean the target is expressed around 2.5x, right? So in certain times, it could be below 2.5x. In some other situations, it could be on 2.5x or even slightly above. So depending on where we are in the cycle, I can agree with you. How -- and typically, historically, I mean, we have been deleveraging somewhere in the neighborhood of 0.6x per year. And now when things are starting to -- yes, it's maybe difficult to talk about normalization, but a little bit more stable, I would still say that we still have that deleveraging potential in our model.

And in all subject time. Keep in mind that we move from 2x to around 2.5x over time when the market was growing when everybody was asking Dometic, "Guys isn't this moment to grow additionally by acquisitions." So market turned very, very sour. We have been fighting super hard to come down to around 2.5x and once we are approaching to 2.5x, then we will decide as whether there is the right target or not. But just now, we are still far away from 2.5x. So we have a clear target to reach around 2.5x. I think it's super important. From our side, we understand the situation. We are working extremely hard. And again, things -- financial targets change over time. But this is not a time to discuss a change. This is the time to get into the financial target.

Earlier, I think it was a year ago, we talked about potential divestments or exits in certain categories. Where do you stand today? Or where does your thinking stay today?

The same working, but the market has not been very, very positive for divestments either. So it's clear that we have been talking, we have been out to the market with a couple of assets. And we have been very, very close to completing 1 of the deals. And then we have the same severity and then things change overnight. The wellness of potential buyers to invest at that moment change. So we are working very, very hard. And hopefully, as the market is stabilized, it's going to be a little bit easier to divest those assets. So we continue to work on that. But again, the environment has not been the appropriate.

And I also think worthwhile to mentioning here is that for this to make full sense. I mean there is this strategic assessment of course, but that it should also make financial sense. I mean, we need to get a certain valuation and it's not -- so that's obviously a part.

Okay. And then lastly, on the cost savings side, what remains -- or what kind of cost savings remain?

We have a number of projects that are just now ongoing. As you may understand, this kind of decisions are very, very sensitive. You don't want to communicate before you are ready to communicate. But as we commented earlier today that they are going to be backloaded. We are working just now on the preparations, making sure that everything is going to work out. And we will communicate the different steps as they are happening in connection to these quarterly reports. But you don't want to get it concerned necessarily.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you very much all of you for attending the call and for showing interest in how Dometic is evolving. And I would also like to take the opportunity to thank Stefan for these years, has been a tough environment. I believe that you have contributed in a great way to our development even if the time have been very, very tough. So thank you very much, and all the best in the future.

Thank you very much for these kind words.

For all of you. Thank you, and hopefully, we see you soon. Bye.

Bye-bye.