Dometic Q2 results show delayed aftermarket recovery, earnings beat

Investing.com -- Dometic Group reported a mixed set of second-quarter results on Tuesday with an 11% organic sales decline, which was worse than the consensus expectation of a 5% drop.

The company’s net sales reached SEK6.3 billion, 6% below consensus estimates of SEK6.7 billion.

The Service & Aftermarket business saw a 12% organic year-over-year decline, worsening from the 7% decline in the first quarter. Distribution organic sales fell by 7%, compared to a 3% decline in Q1.

OEM sales were down 14% versus 16% in the previous quarter, in line with expectations, with Americas showing net sales growth in OEM for two consecutive quarters.

By division, Land Vehicles posted an 11% organic revenue decline, mainly due to lower OEM in EMEA and APAC regions, as well as reduced Service & Aftermarket sales in Americas and APAC.

Marine organic revenues also declined by 11% across both OEM and Service & Aftermarket channels. Mobile Cooling Solutions saw a 10% organic decline, while Global Ventures posted an 11% decline.

Despite the sales miss, adjusted EBITA came in at SEK877 million, representing a margin of 14.0%, which exceeded the consensus estimate of 12.8%.

The earnings beat was driven by the Global Land Vehicles division, which performed 17% better than expected. Both Land Vehicles and Marine divisions showed year-over-year margin improvements.

Leverage remained flat at 3.3x in the quarter but increased 0.4x year-over-year. Net cash flow from operations decreased to SEK1,693 million from SEK1,881 million in the same period last year.

The global restructuring program announced on December 12 is progressing as planned.

Since its start, 225 employees have been impacted, and one manufacturing site and two distribution centers have been closed.

Annual run-rate savings at the end of Q2 were SEK192 million, with cash outflows related to restructuring charges during the first six months amounting to SEK74 million.

Looking ahead, Dometic expects to see a gradual recovery in demand through the Distribution and Service & Aftermarket sales channels under normal circumstances and with current visibility on inventory levels.

The company noted it is encouraged by a stabilization in order intake, though it remains difficult to predict demand patterns in the coming quarters.

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