Thule Group AB (publ) (THULE) Earnings Call Transcript & Summary

Welcome to the Thule pre-quarter 2 update. [Operator Instructions]. Now I will hand the conference over to the CEO and President, Mattias Ankarberg, and CFO, Toby Lawton. Please go ahead.

Thank you, operator, and welcome, everybody, to this pre-quarter update. We will speak to the presentation available. And as usual, we'll start with a short recap of the previous quarter. We'll talk about the current market situation and to the priorities. And then to sum up before Q&A. Toby will cover some of the financial aspects worth to keep in mind right now. So and then, of course, we'll have a good time for Q&A session at the end. So I'll kick it off, and we can turn to the next page, just to remind everybody where we left off after the Q1 call. First quarter of this year was a good start to the year for us. we did show organic growth in a market that is still challenging. And on top of that, we also improved profitability. It's nice to see that the growth we're delivering is coming from our focus on building what we now call champion product categories, both growing the existing champions, where we have continued to launch new products and drive sales. and also fast growth in our 3 so-called champion candidate categories, categories that have the characteristics of a champion but are not yet big enough to be in the champion category. And the fastest growth we saw was from the product area active with kids and dogs, which is the area where we report our 3 champion candidates. Lastly, North America continued to move in the right direction, still the toughest market. But step by step for several quarters now, we are seeing improvements and then we also, again, were recognized for our product design through several new product awards in already in 2026 1st quarter, which we're really proud about. So it was a good start to the year. And then if we flip the page, we can see that, that was a continuation of a long-term trend. And most of you have seen this graph several times, but this is the representation of the sales and EBIT development since the IPO in 2014 until has a track record of profitable growth over a long time, and it was nice to see that the first quarter of 2026 was a continuation of that trend. Now if we turn to the next page, I'd also like to highlight something that was announced after the Q1 call in early May, I believe it was in May 6. We announced the acquisition of a small company in the dog transportation space, a company called Kerley which is the leader in a leader in premium dog harnesses and particularly the leader in harnesses of a certain model so-called best harnesses for smaller dogs founded by 2 very passionate Swiss mountaineers, climbers that have taken their knowledge about harnesses from the climbing environment into the dog environment and develop some of the really nice products that we are now happy to welcome into the Thule family. Very much complements the core 2 product range, which is around car and bike-related safety-related products. with a nice addition of these dog best harnesses and will also complement some organically developed product that will be launched harness products will be launched already in the fall of 2026. So we are happy to see further expansion in the dog transportation category through new products, but also then to the acquisition of this small Swiss company. If we turn to an update of sort of the market situation on our priorities on this page, we this is the this is the commentary that we had at the end of Q1. And I'd like to just remind everybody what we said and then also give a bit of a fresh update to where things stand at the moment. Starting with the market side. We said at the end of we said at the time of the Q1 report, sorry, that the market is still tough. We still see cautious consumers and retailers out there, particularly so in North America. Having said that, there were some positive signs in the marketplace of improving market conditions. But the only segment where we really had seen that materialize and had turned for the better, was within RV products, where some of the growth that we saw in Q1 came from market bouncing back and some of the growth from the new products we have launched over the last few years. We also commented at the time that we had not seen any negative immediate -- immediate negative effect of the crisis in the Middle East. And however, that if that would continue, we would expect it to, of course, impact macreconomic conditions and consumer spend and there were also speculations of a more positive scenario and positive in the sense that positive for the pulp industry that the development in the Middle East and some other things could lead to more of a staycation effect in terms of traveling and vacation in for the summer of 2026. So now we're in June and a few things have happened, of course. And what we see, though, overall is the picture is largely the same. We still see an overall tough market and you see North America has the toughest spot. If we look at public information, like consumer confidence numbers, we can see that the sentiment has drop continue to drop, drop further in the U.S., both in April and in May and also in the EU that the levels are lower so far in Q2 than they were in Q1. And I think the staycation trend is there are still some indications and some discussions that, that may come into place during the summer but it's still nothing that is visible in the marketplace already. And also to say, I don't think it would have been it would be really visible during summer if that would materialize. So overall, still a market situation, which is similar as in the first quarter. Now having said that, of course, despite the tough market continuing in Q1, we were really happy to see organic growth from the tool side in the first quarter. And we saw as I commented in the beginning, we were happy that, that came from our focus on building existing champions and building up new ones. And we are continuing to execute our agenda for 2026, very much in line with the direction we have set out. So we continue to execute to focus on building bigger and more champions and driving efficiency gains and we expect to see organic growth also in the second quarter. And there are several points to this agenda, which we have covered in detail before, and I thought not to go through them in detail now. they are very consistent with the messages we have delivered before. But we are, of course, happy to take questions at the end of this call if you would have questions around these strategic priorities. On the next page, though, I'd just like to highlight some of the launches that we are doing to support our focus on building champions. And as a reminder, we are focusing more of our R&D spend and increasing our spend on building champions, our existing champions. But we are focusing sorry, but we are, in total, bringing our R&D spend down to drive cost efficiency. So we launched catenate reflecting that set of priorities means that we are launching more products in the champion categories, plus less products than the last 2 years overall. But so far, we have been very active and launched several new products for all of our uncategoris, more or less. And since we are in spring, it's been a heavy focus on bike-related products. And if you click on the next page, I can just comment quickly on a few of the highlights so far. We have introduced recently a North American specific product called [indiscernible] , which is really a premium product for each by carriers or North American car fleet built for carrying heavier bikes to e-bikes that has been really well received. I'm really pleased about that. And we've also continued to push the use cases and to play in more price points, both lower and in higher price points. And on the next page, you can see the picture of our now most premium by carrier, which is called Thule Epos Park Secure, which is a bike area, which is basically an upgraded version of the previous most premium by carrier. Telepo now has partnering sensors to protect your car, your bike and of course, your by carrier while putting the car in reverse. And this launched early April and has had been very well received by both the press and key opinion leaders and also in terms of volumes. And then we have launched several other products in related to bike, but we have not only launched bike-related products. And again, on the notion of playing in more even more higher price points like the 2 lets park secure, you see on this page. We've also done products for lower price points or maybe mid price points from a market perspective, but now from a Tule perspective. So on the next page, you can see a picture of our entry-level roof box that has been upgraded to the PULSE 2, which has also launched this spring to strengthen our offer within rooftop boxes, and again, playing in more price points and more use cases. And then lastly, to just also comment on some products, bringing innovation to the marketplace on the next page. We're continuing to build also several other product categories selectively launch we just did in April called Thule [indiscernible] , which is a bit of an innovative product in rooftop 10s, where it is hard gel, which is very easy to open and close but also convert the tempt into basically a catch or a sofa, enabling the tend to act as the bedroom, if you like, but also as a living room, so to speak, and it's also very well received by the marketplace. So in all, we're continuing to execute our agenda for growth and for efficiency. And we expect to see continued financial performance improving as a result of the actions we are taking. And with that, I'll hand over to Toby, who will use the next page as a backdrop to give you some updates on financial aspects to consider as we talk about the second quarter.

Thank you, Matthias. Good afternoon, everybody. Maybe firstly, just a quick comment on this page. And you can see the seasonality of our business here. And basically, if you look at the history, you can see that Q2 has been the biggest quarter for us. So seasonally, this is a big quarter. There's still a couple of weeks left and a couple of weeks left in high season. So we're not yet at the end of the quarter, but as Matthias says, what we see is we are in a tough market, but we do expect organic growth in a tough market. It's good to remember at the same time that in 2025. So last year was the strongest organic growth we had in 2025. So it is a tougher bar to reach organic growth this quarter, but we do expect that but remember, there are still a couple of weeks to go. I think also worth remembering on the net sales side here is that we've had quite some FX headwinds in recent quarters. And in Q1, for example, the negative impact of FX on sales was minus 7%. In Q2, the exchange rates have moved a little bit in our favor, you could say. So the FX headwind is still there, but it's less than it has been in recent quarters, but we expect it to be around 2% negative or actually slightly above 2% negative. So yes, that basically means that the reported growth will be lower than the organic growth. Then we have gross margin and as we as you know, we had a good gross margin development and an increased gross margin development during last year and during the last 24 months, basically. And part of that was obviously the effect from the acquisition of Quito, but there was also a significant step-up underlying in gross margin over recent quarters. And as we previously said, the main focus this year is on maintaining that good level of gross margin, which would be a good performance. When it comes to below gross margin to the SG&A, we have been pushing hard, as you know, on cost efficiencies and on reducing costs in SEC our SG&A was down significantly versus last year in Q1. So it was not by about SEK 60 million Q1. And the main impact is, as you know and we talked about in the Q1 report was lower development spend, which was also phased a phasing impact, which led to a bigger increase in Q1 bigger sorry, decrease in Q1. We also expect SG&A to be down versus prior year for the best half, but the vast majority of that will be from Q1, where we had this big reduction of SEK 60 million. And note here that I'm comparing also to the number for prior year, which excluded the one-off cost for the restructuring in Longmont, which we had of SEK 31 million which was reported in Q2 last year, and we showed the EBIT both including and excluding that impact. So not that I'm talking excluding that impact. We also have had some FX impact on EBIT. It's always hard to predict FX impacts. But in Q1, we had a negative impact of approximately SEK 30 million. In Q2, we expect it to be a bit less but still a negative impact from FX on EBIT. All right. If I just move on then to so a few words about the Middle East and the impact of the crisis, which Matthias touched on earlier as well. Just a reminder, we don't have any operations and any significant presence in, you could say, the Middle East or Gulf region. But we do expect some impact on costs for materials and freight due to primarily the increased oil and energy prices. However, so far, and we mean here Q1 and we expect Q2 to have relatively little impact. Material costs have largely been hedged in Q1 and Q2. There is some small impact on freight cost, which has gone up due to higher energy prices, but small. But that's the impact we expect the small impact we expect in Q2 would be a small impact from freight we do expect more of an impact in the second half where the hedging that we did on the material costs in Q1 and Q2 has now come to an end, and we've entered new contracts were buying materials and particularly here, I'm talking about aluminum and plastics. But also, obviously, we'll have the impact of freight costs in the second half year. Overall, we've worked hard to mitigate the impact of these costs, and we also decided to offset some remaining impact by some price increases. Most of these will be implemented during Q3 and they're being finalized and we'll further update in the Q2 call, which we have when we announced the Q2 result in July. And of course, the eventual impact of these energy-driven cost impacts will depend on how the development of the cost goes from here and whether they ease or not and how quickly they would ease as well. So okay, that's what I have to say on Middle East and price increases. And finally, just to mention, we you might have seen that we issued a bond at the beginning of May. So we issued our first bond of SEK 1 billion under the program. And that has a 3-year maturity, and we had a very good level of interest. It's diversified our funding and we were oversubscribed 2.6x on the bond. So really good to see that even bond invested have yes, have a strong interest in investing in Thula and a good view of Thula credit as well. So it's good to see so with that, yes, I think I'll finish there and yes, hand back to you.

Thank you very much, Toby. And I think we'll then can yes, we can move to the next page, but it's time to open up for questions. So I turn to moderator to manage the Q&A session.

[Operator Instructions] The next question comes from Daniel Schmidt from Danske Bank.

A couple of questions from me. I hope you can hear me. And maybe starting at the wrong end then, but starting with what you finished off in talking about the raw material and Clearly, raw materials spiked in March, and they stayed elevated in April. But then since then, it has started to come down and basically oil price and plastic related prices are almost where we were at the end of February. Aluminum has come down quite a bit, and it's not that far off and then steel prices remain quite high. Are you sort of lifting prices during Q3 related to the average raw material cost that you had in Q2? Or how does that sort of correspond to the latest price development? And could it be a situation where you raise prices more than you needed basically.

Maybe I can just go first on I mean, on the cost side, done. But we saw costs did go up in kind of March time, in particular, when the credit obviously started. They've been fairly stable on a higher level. And to remind, we buy some quite specialist sort of grades of aluminum and plastics. So it's not commodity pricing that you always see that translates into the prices we pay, they tend to be a bit more slow moving, you could say. But they follow the same trend basically. But we haven't seen I think we haven't seen it getting worse since the beginning of the crisis. It sort of went up and stayed there, but it won't be straight back to the levels before the crisis. I think that's good.

And then maybe to answer your last part of your question there, Daniel. I think it's right, it's been volatile, up and then maybe down a bit. And I guess, who knows the development over the next couple of weeks. But that's also part of the reason why we're still finalizing the price increases as we speak. The other reason is make sure we we're in high season, and we want to keep our teams and our customers focused on executing the plans we have and all the activations that are in. So we'll land this over the next couple of weeks and then execute it during Q3, and we can give you an update on the amounts and the the path to execution and when we have the call about the Q2 report.

But if I understand you correctly, given the history that you had, your aim sort of do a lot internally in order to mitigate and then the rest is going to be through price hikes and sort of with the end game being that you will hopefully defend the gross margin simply

Exactly. And as I think we commented that's spot on. And then I think as we commented on the Q1 report, I mean, we, at the time, some things said that we didn't expect this to be an impact on Thule as, for example, the magnitude of the tariffs last year, when we had to take some pretty significant price increases, then specifically to North America because although we did quite a few things to offset internally, that was too much to bear for us on the loan. So we are doing things now exactly to what you said, Daniel, and shifting around what we can and working with suppliers and the rest we we will use price increases to basically keep gross margin neutral as we can..

Okay. And then my second question relates across more of the top line and you mentioned in connection with the Q1 report that Q2 had started in [indiscernible] as you finished Q1 alluding to maybe a slight acceleration. I'm talking fairly small numbers here, I think, versus what the average rate that you had in Q1. Now it sounds more like you're maybe holding the same pace as you did in Q1. Is that a fair statement and sort of give any shed any light on what's been happening during May and June so far? .

I think if we that's a good question, of course, and you're sort of really into the nuances here. I think if we step back, it's from where we sit as sort of a management team, it's not a lot of difference in the underlying trend. The sales mix is a little different in Q2 than in Q1. And we should remember that the the way our business works is that we are really in high season right now. And the last 2 weeks of June, if a couple of big a couple of big customers are pushing hard in the end of June or if it's that or July, that could also impact numbers a little bit on the margin. So I think we're not seeing a big difference improvement or deterioration in market conditions, and we're seeing good results from our own actions and new product programs just as we did in Q1. And then I think that's sort of the level we're commenting on here. And then if that plays out exactly to a little bit higher or lower versus whatever momentum end of Q1 or Q1 in average, we'll have to wait and see until we've summarized the quarter basically.

Yes. Okay. Okay. And then just a final question on FX. And clearly, it will have a less impact on you in this quarter versus the previous quarter. Could you just remind us what the impact from FX was on EBIT level in Q1? .

Yes, I can so it was approximately SEK 30 million on EBIT level in Q1, and we expect it to be less than that in Q2. I assume it's hard to predict FX and a quarter is not finished, but where are we sitting now, that's what we expect.

The next question comes from Adela Dashian from Jefferies.

Good afternoon, gentlemen you spoke a better about the regional variances North America versus Europe and so on. But can we talk about the category mix and maybe also if you continue to see sustained recovery in the RV segment as the year progresses?

Sure. So again, Q2 is a really big quarter for us, the biggest one. And part of why that is or the big reason for why that is because it's bike season. So high season is bike season for Thule, which means we're selling a lot of by carriers and a lot of multiport and bike trailers and other associated byproduct, child bike seats, et cetera. So that mix is a bit different than, for example, Q1 that still covers, of course, a lot of the winter season. which is more related to ski. So that's a bit different. And we as maybe a side comment, try to also, as of last year, tailor our launches accordingly. So we have lost quite a few things around bike now in Q2. So that, I guess, is the overall comment on the sales mix for the quarter. On the RV side, Yes, we are continuing to see that the RV industry is recovering. It is a smaller area of sales in Q2 because of the reason I mentioned before, bike is bigger. And then there are some signs in the RV industry recently that is posing, I guess, a little bit of question marks for the industry with the registrations, maybe not as strong as hoped in Central Europe for the last 2 months, et cetera, that we are, of course, also monitoring carefully and having a lot of close discussions with customers and and others in the industry, but to plan the future ahead, and we can comment more on that when we talk in July. But so far, we see the industries continuing to recover. And then maybe as a last comment to your question around RV I'd also like to remind everybody that the growth we've been seeing in RV products, for example, in the last quarter comes also to a significant extent from new products that we have launched ourselves. So our performance is for sure based on market improving, but also our own actions.

Okay. I see. And then can I also ask on it's been a rather wet start to the summer spring season in Europe. Has that impacted you at all? Or does it because of timing, not really since the I guess, the replenishment orders are coming in the kind of the peak summer months rather than in the early spring?

Yes. I would say that in general, I mean, weather, of course, always plays a role. But plays a rather small role for Thule. And to your point, we work with a multitude of go-to-market models and some customers are taking things in early, some are waiting a bit. Some have larger orders intake in the beginning and others are now working more with replenishment orders. So overall, it's a little shift between sort of mid weeks and months. But as the quarter goes I don't think you will have I don't think we will sum up Q2 and see that has a significant weather effect. So I think it actually be ignored.

Great. Maybe lastly, Mathias, is DTC growth still outpacing wholesale or retail? And do you have any like specific numbers that we can make use of there?

Yes, we are seeing good growth in D2C and it's really encouraging from 2 points both that, of course, the growth is coming, and it's nice for the business and for the margin profile, although maybe it's sort of a marginal mix positive effect. But the other 1 is we clearly see that DTC is now becoming a real muscle for us in the sense that it's an important channel to launch new products where we have a D2C opening a lot more countries than we had just 2, 3 years ago, and we have a bigger consumer database that interact with us on a quite regular basis and are curious about the assortment and some of the services provided. So becoming more of a strength for us. And we have or do have some numbers, but I hope it's okay for you. We always try to comment on specific numbers when we do have the quarterly report, so we can share the exact details at that point.

The next question comes from Mats Liss from Kepler Cheuvreux.

A couple of questions. First, regarding I mean, you mentioned organic growth here in continues and that's big season for you. And well, the question is really, is it a more sort of upgraded premium product that are getting attention? Or is it more the more mature, maybe not so price product that you are sort of get a feel for if consumers try to trade down or if they stick to the feeling products you're offering?

Yes, I can start. No, I think in general, we continue to see that new products and upgraded products really drive growth. So that and this year, in for example, bikes were in Q2, we are launching product with both higher price points and more advanced features, if you like, but also lower price points for us than we've done in many years. And both are working well. Both our news and both are spec differently and both are meeting apparently a consumer need marketplace. Then having said that, what I think we've tried to call out the last couple of quarters is we do continue to see the best performance in the higher price points. And I think it's probably a sign of the times that in maybe a bit tougher times, the people that do have both the wallet and sort of the passion or the interest are the ones that are continuing to spend probably to a higher extent and that we see across virtually all of our product categories that most premium end is performing the best.

Okay. Great. And then just if you could remind me about I mean, you implemented some efficiency cost savings measures. I think, especially in the North American market. And we have seen the impact so far, but the year-over-year impact in the second half, could you just remind me of that. .

I think I mean, in summary, we're working hard on costs. We do expect to have some improvement in reduction in costs during the full year. We saw we saw that in Q1. But as I mentioned, the Q1 was also was about SEK 60 million down in cost, and that was a big impact, which was also partly due to the phasing in development costs, which also particularly helped Q1. So.

Maybe I was a bit too late with North America. I mean those measures were implemented a year Okay. I mean in North America, we did some measures the closure of Longmont. It's not that big. So that's number one that was done last year in Q2.

Yes, yes. Great.

The next question comes from Hai Huynh from UBS.

I just have one. I believe you guided for leverage of 1.7x, 1.8x. Q1 rose to north of 2x on seasonality. With the Q2 do you expect to still have 1.7, 1.8x in the year an ambition, especially once Q2 rolls off and you had to start with a higher raw material space. Does that change the working capital outlook and leverage outlook? .

Yes, I can take that. But firstly, we haven't guided on any leverage sort of specific number. But what we have said is we do expect to see leverage come down. And obviously, with our seasonality, Q2 is a big quarter revenue-wise. And then cash flow-wise, we have it's important to remember that we also pay a dividend so actually the best cash flow quarter is actually Q3 for us. But we do expect to see Evercord mainly quarter 3 to see leverage come down.

The next question comes from Johan Eliason from SB1 Markets.

Mathias on Toby. Just a follow-up. I mean you mentioned that you expect also positive organic growth in Q2 here. How is it with [indiscernible] those sort of still trending around the double-digit level? Or how is that development?

Yes, Johan, I think I'll answer accordingly. I think Cord Dock has had a pretty consistent about 10% or for several quarters last year, north of that up to 15% growth, and it is a growing category and a growing business and It, of course, can go a little up and down between the quarters, but we continue to see good opportunities and growth good growth for the [indiscernible] business. And then again, we won't get into specific numbers here before the quarter has closed and do those at the Q2 call. But a long path of continued growth opportunities ahead of us and continued execution in line with our plans.

Good. And just remind me, is there any particular seasonality with Cardlock considering its origin for Q2.

Yes. not so much. I'll start and then Toby, you can maybe add if you like. But I mean, from a geographical point of view, also [indiscernible] Sales in 100 countries and North America and Europe is the biggest footprint. So it's impacted by the Northern Hemisphere summer, if you like. Q1 is the smallest quarter, and the others are fairly similar in terms of revenue, in terms of size. And then Toby, feel free if there's some additional color you'd like to provide .

Yes. I think that covers it to.

Yes. Good. And then just finally on this bond. I mean, does that imply anything on financial net in the quarter, sometimes people pay off some early debt, et cetera, that causes a spike around events like this? Would that be the case for you also?

No, that's not the case here. And this it's not that we're trying to increase our level of debt either is maybe worth mentioning as well that it's purely a diversification of our funding base. So we think it's good to optimize our funding base to get diversification and also the lowest cost.

And there's no temporary sort of in Q2 now. .

No, there's no I mean, we expect the financial net to be steady. No big difference from previous quarters. .

The next question comes from KarlCarl Deijenberg from DNB Carnegie.

So could I first ask if you could give any quantification on the magnitude of the raw material raw material exposure that you mentioned, plastic and aluminum and believe you've quantified that in old annual reports, I think, roughly 15%, respectively, of the cost of goods solar. And I just wanted to understand, is that ballpark, a similar exposure you're having today as well? Or has that changed over time? .

Can cover that. That is the our exposure to aluminum as a material, yes, case, that's not changed.

Okay. Great. And then just also on the comments you made on the anticipated price adjustments. I was just curious, have you started to see any other peers or brands starting to do hikes already on the back of this? Or is it still a little bit too early? .

Small, I would say, hikes here and there, but nothing too much. I think if I would venture to guess that a lot of people are thinking similar to us right now. Let's wait a little bit and see how this plays out. Plus, we're right in the middle of high season for a lot of our categories. So let's give the customers and the consumers the chance to buy things that are sort of a steady situation before we mix things up too much. So I would say, overall, not a lot, actually, quite little.

And just finally, also, I wanted to ask what the latest is on tariffs. I mean that's obviously been quite dynamic with regards to news flow on Section 232 and you made quite big price adjustments last year in the U.S. on the back of the. So what is the latest there for you? Has that changed anything in the last couple of months? Or is it let's say, steady state from a cost angle. .

Yes. So I would say if you look at the tariff impact, we have now versus what we had, say, this time last year is basically at the same level, a very similar level. It's different tariffs or it's charged in different ways than it was this time last year but the overall impact is about the same. I just want to the situation yes, essentially no different going forward.

[Operator Instructions] The next question comes from Fredrik Ivarsson from ABG Sundal Collier.

Two questions from my side. First, on the U.S. pillar, you've been talking about the ex-cap launch for some time, and I'm curious to hear whether you've seen any impact from that category or from the product range in Q2? Or is it too small? .

Yes, well, both actually, I would say, it's been launched at the very end of last year and of course well, not, of course, we've been really pleasing to see that it's had a good impact. I really is changing things around in that little category. Having said that, of course, it is not on its own force of big enough to change the whole North American situation and therefore, of course, a small impact to the group. But it is a good contribution, and it is a good stepping stone for us or to really change things around in the truck category where we have been not very active at all for many years.

Okay. Good. And second one, on the gross margin, it sounds like you're sort of aiming for a stable 1 in 2026. But shouldn't we expect a positive mix effect if Kodak becomes the larger share of the group, which it sounds like it's heading towards that sort of way given that it has a completely different gross margin profile, of course. .

I mean just to comment from me. There's obviously a lot of things which impact One is product mix, where there's some positives like you mentioned, and some if has been growing faster than the average, which will probably is on the other side. Then of course, this material cost plays into that somewhat Fredrik and how we mitigate that material cost plays into that plays a little bit into that as well, which has been negative recently that we've been having to take. So yes, overall, it's a combination of all those effects, but we're we made some good progress in gross margin, I think, over more than a year now over probably 6 or 7 quarters. And I think we feel good about the level of gross margin we've achieved, and it's important that we hold on to that and holding on to that will be a good performance in this environment.

The next question comes from Matt Liss from Kepler Cheuvreux.

Just coming back to the Champion creation, you're in the process of I just wondered, I mean, is it I mean it's basically organic growth to Champions or are these acquisitions that you potentially have to do like in the estate and something that we like to speed up the creation, I mean. .

No, it's a good question. I think if we then stepping back and I guess, to your point, at quite a bit away from the sort of Q2 discussion. We can see that over time, the growth and the profit that to has delivered over many years has come through these categories that have the same characteristics that we now call champions. And the 2 characteristics we're a clear market leader, #1 in a pretty small market where we can innovate more and better than competition that's and then that's really the champion characteristic. And then we draw a line at SEK 0.5 billion. So if you're above that, you're a champion. So we have 6 of those today, the champion categories. Our ambition is to go to 10% by 2035. And we have 3 internal sort of candidates at the moment that the chain criteria but are still smaller than the half billion market. The old terrain and running strollers is one, the dung transportation is 1 and then the car seats in Europe is the third one. So we have a few. Having said that, then we have, of course, a few more things in the meeting to be launched over the coming few years have potential. And then also we are, I would say, proactive in terms of M&A. I mean, we have about 25 companies that we speak to on a regular basis, and some of those could add to a business that we have and, therefore, boost the path towards a champion. Hopefully currently boosts the dog transportation area towards being a champion. And some companies are big enough that and has it a good enough fit that they could be stand-alone sort of acquisitions that could form a new champion like what we could do in performance on now. But we did change having said all that, M&A then, of course, plays a role, but we did change the financial targets in November last year to specifically be around organic growth rate because we just want to emphasize and underline that the main priority for us is to drive the organic growth through building out the existing champions and building up euros. So it plays a role, but the main focus is organic.

The next question comes from Daniel Schmidt from Danske Bank.

Yes. Sorry, just a short follow-up on what you just talked about this acquisition although is quite small. Would that entail any sort of additional costs that you will book in Q2 related to digs or anything sort of anything meaningful that adds to the cost, please? .

So it will add some cost in Q2, but it will be small as it's a small acquisition, but of course, there will be there is some costs associated. And I think good point, Daniel, we can explain that impact in the Q2 information. But it's small, but yes. Yes.

So you will probably write it out or speak about it at least in connection with the call.

The next question comes from Adela Dashian from Jefferies.

Maybe while we're on the topic of camping categories. I guess 1 product or category reach is this champion status is growth from there on going to be more price weighted? Or do you see opportunities to continue to take, I guess, market share and see continuous volume progress beyond the point of becoming a champion category?

Thanks,. It's a good question. And I think of course, all categories have their own little characteristics. But I think the more general point is actually that we can continue to innovate and find new use cases to build the market or drive the market, if you like. For example, we were a market leader in rooftop boxes, and we could develop rear of car boxes or we were market leaders in top of the car by carrier transportation, and we could invent recard bike carrier transportation and open up new segments, if you like, within the champion. And I think that's sort of probably 1 of the most important points about the sort of champion status is that when we have scale enough knowledge enough capabilities in terms of development and distribution and ambassador activation and consumer awareness, et cetera, and us, our innovation in this category really pays off because we get a lot of return on that leverage. So innovation-driven is probably the best phrase to use when it comes to how do you grow a champion. And then that could come through volume or more premium products, therefore, higher average price, if you like.

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

Thank you, everybody, for joining the call and for answering sort of asking questions to make this interactive. Always good. I hope you have a good mid-summer for those of you in Sweden, a good weekend for the rest of you when you get there and see you at the Q2 call. Thank you.