Dometic Group AB (publ)
STO:DOM
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Dometic Group AB (publ)
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Hello and welcome to the Dometic Q1 2022 Earnings Call. [Operator Instructions]
Today, I'm pleased to present Juan Vargues, President and CEO; Stefan Fristedt, CFO; and Rikard Tunedal, Investor Relations. Speakers, please begin.
Hi. Good morning, everybody, and welcome to the presentation of the first quarter report for 2022. As usual, we are very, very, grateful for your attention. And with that said, I would like to move on immediately to the report.
So Q1 2022 became our strongest quarter -- strongest Q1 report ever. We have a strong backlog. We see retail inventory levels lower in several areas than we have seen historically. We still perceive supply chain constraints and, of course, as a consequence, in this occasion of the Russian invasion, increase in raw material prices again. And of course, that leads to inflation, interest rates increases and, due to all of that, an uncertain macroeconomic situation.
Performance-wise, we feel that we are [ executing ] our strategy. We are showing a 55% sales growth, totally speaking, which is leading to a far improved sales mix. We keep on increasing prices to compensate for the negative effects of the cost increases.
We are very pleased to see our EBITA margins ending up at 14.8%, which is, in reality, matching the -- what we delivered 1 year ago when excluding acquisition -- when excluding, sorry, Igloo. And we see Igloo also coming in at a level which is higher than last year. And with that, we mean an EBITA margin above mid-single digits.
Good to see as well our leverage ending up at 2.7x despite the fact that we paid for 3 acquisitions during the quarter. And as we already communicated a few months ago now when the pandemic is fading away in the Western world at least, we are accelerating our restructuring program, and that's why we communicated the closure of the manufacturing site in Elkhart.
Looking at our financial performance. SEK 7.5 billion in total sales or 55% total growth with 10% organic, 5% FX and 43% due to the M&A.
EBITA, strong, SEK 1.1 billion or 39% up versus last year, leading to an EBITA margin of 14.8% compared to 16.5% 1 year, and the difference is obviously the dilution effect of the Igloo acquisition.
Adjusted EPS ending up at SEK 2.27 compared to SEK 1.85 last year.
Operating cash flow, negative SEK 398 million. We are building up inventories for the strong season that we are initiating now. On top of that, we have a different seasonality profile with the new acquisitions that we completed in recent months. But then, of course, we also have an FX effect and the cost increases that are kicking in, in our inventories. And as I mentioned already, leverage ended up at 2.7.
We are very pleased to see growth in all the segments. We are very pleased to see growth in all our sales channels. I will come back to that.
Organically, 7% organic growth with growth in the same way in all the segments, but APAC that came in slightly below last year and showing growth in all the sales channels, which is very pleasing.
Looking at the application areas, strong growth all over. Climate, driven very much by Army -- Marine. Food & Beverage. You have a major effect, obviously, of Igloo, but the reality is that we see strong growth in residential, we see a strong growth on the RV side and we see strong growth in hospitality. In terms of hospitality, we are just now running at high levels that we were running just before the pandemic. So that market has recovered for us totally. Power & Control, also very strong growth, on one side driven by Marine and on the other side driven by the mobile power solution acquisitions that we have been doing. And then Other Applications is also growing everywhere, even if that's a minor part of the business.
Looking at the sale channels, also very pleasing to see that everything is growing very nicely. So it's aftermarket, as you can see, 30%; the OEM part of the business, 23%, especially in Americas, I would say, while Europe is more affected by the lack of chassis; and Distribution, very nice growth, very much driven by, as I said, Igloo but also residential and hospitality.
And of course, the transformation of the company that is taking place. It's also leading to a lower exposure to the OEM business, as has been a part of our strategy from the beginning. As you can see, the OEM business has come down from 55% to 45%, even if we are showing clear growth organically, which is, again, very good from a cyclicality perspective. And that makes us to be a stronger company today than we were a few years ago. And then OEM, which is, of course, the interest of many of our listeners, ending up at 28% versus 33% 1 year ago.
Looking at our profitability, 14.8% versus 16.5%. Again, the dilution effect from Igloo, we see that as a positive; the sales growth and pricing activities that we are implementing on a continuous basis to mitigate for the cost; we have cost saving activities all over the place; and we have a positive effect of currencies.
At the same time, we've had the negative influence of the Igloo dilution. We have a negative segment mix and channel mix in the historical Dometic, meaning that the OEM side is growing faster than Distribution and Service & Aftermarket. We see freight cost and raw material prices continuing to go up and, of course, inefficiencies created by supply chain constraints all over the world.
Very good, again, to see that EBITA margins are in parity with what we performed last year that, to be clear, was the best Q1 ever in the history of Dometic at the time.
Moving over to the different segments. Americas, SEK 1.9 billion or 49% total growth with organic growth of 9% growth in all application areas. Very strong OEM business. We see growing order intake, including on the RV side and a backlog which is a higher level than 1 year ago.
EBITA, SEK 130 million or 22% higher EBITA. EBITA margin, 6.8% driven by sales growth and pricing, efficiency improvements. We have continued to work to lower the impact of the tariffs. And we see, as I said, a positive currency effect of the negative sales mix in -- since OEM is growing much faster. And we see as well supply constraints. And raw material prices affect cost, as usual. And in this case, I would like to mention or to pay special attention to the shutdown in Elkhart, where we used to manufacture refrigeration for the American market, that we just now moved to other plants in Americas.
Looking at EMEA. Strong growth, again 30%, organically 9% with growth driven in several application areas. Very strong Service & Aftermarket growth. But in this case, the lack of supplies from the chassis manufacturers to the OEMs is slowing down our growth. We see positive effects of the recent acquisition of Cadac and NDS.
Strong EBITA improvements, SEK 385 million or 56% versus last year, with a very, very nice EBITA margin improvement of 300 basis points. I will not repeat myself. Basically, we are influenced by all the same parameters as we were mentioning for Americas. And specifically -- a special mention I would like to make to obviously Russia, the situation in Russia, where we have stopped all the business activities and made an accrual for that.
APAC, same thing, SEK 535 million in sales or 25% (sic) [ 24% ] totally. Organic growth, though, minus 2% after a very strong Q1 last year. Q4 2020 was weak for APAC because of the pandemic. Q1 was strong, and that explains the negative in Q1. Other than that, very nice developments driven by Power & Control, the Enerdrive acquisition. We see a backlog higher last year as well. And in terms of EBITA, strong improvement, 31% up versus last year, ending up by SEK 136 million with an EBIT margin ending up at 25.3%, which is also very positive to see when we already have very high margins. And again, basically the same parameters affecting our margins in APAC.
Moving to Marine, and this is the first time that we are reporting Marine separately, almost SEK 1.5 billion in sales, 12% total growth, organic 3% growth driven by steering systems of Power & Control. Backlog, higher than last year. And we are very happy to have completed the acquisition of Treeline, another step in this mobile power solution area that we will come back to in a few minutes.
EBITA ending up at SEK 371 million or 12% up versus last year, and once again, the same situation. The impact -- the shortages of electronics is having the most impact on the Marine business in comparison to the other businesses.
Some more data about Marine since this is the first time that we are reporting separately. We used to have a historical business in Dometic, both in the air condition area but also refrigeration. And then we did the SeaStar acquisition at the end of 2017, and we can say that we have seen a fantastic development -- evolution since the acquisition. We have been growing nicely, showing a CAGR of 7%. And especially, what we have seen is a very, very nice profit improvement profile during the last years.
We are today present in steering and control and mobile power solutions, climate control and fuel systems. And we see good opportunities to keep growing in this business area.
What is driving this growth is very much the growing number of engines. The boat, more effect. We see also a clear technology shift from mechanical systems to hydraulic and electronic, which is going on.
We have a much heavier content from Service & Aftermarket. So Service & Aftermarket stands with 45% of the entire Marine business, and that will continue as the systems are becoming more and more electronic, thereby more and more service and upgrades, which is very positive for us.
And we see also very good opportunities to upgrade a huge installed base that we have on the Marine side.
The opportunity -- the big opportunity that we see on top of that is obviously to really develop globally. We have an extremely strong market position in Americas, in the rest of the world, but we see even more opportunities in the rest of the world, both organically and through acquisitions.
Moving over to global where, as you know, the huge part of global today is Igloo, ending up at almost SEK 1.4 billion totally and organic growth of 12%. Igloo, developing very, very strongly on the top line when looking at the pro forma development of Igloo, but also very nice growth in the other global verticals, meaning today primarily residential and hospitality.
EBITA, SEK 91 million or 600% over last year. And again, I will not repeat myself where -- what I can mention specifically in the case of global is that Igloo is coming in with margins above the margins that they were showing in Q1 last year. And Q1 last year was not impacted by the negative evolution on the resin prices that we saw from the end of Q2 and for the rest of the year. So we see a very good performance in that business.
A couple of words about Igloo. Where is that growth coming from is, on one side, volume growth, but it's also the consequence of the increased average sale prices that we have been implementing as a consequence of both on the prices but also product innovation. And I will come back to that in a couple of minutes.
Profitability I already mentioned. We see resin prices after the Russian invasion coming up again. We have already implemented new price increases to compensate for the new price increases. So we feel that we will see a good evolution even in the coming quarters.
The integration is progressing very nicely, very, very active and continuous contacts on daily basis. And then we have taken an important decision to further invest in building up or strengthening our existing platform, mobile cooling, which means, in this case, that we are expanding capacity. We are going to move our active cooling production from Asia into Americas to boost both Igloo but even most especially Dometic -- the Dometic brand moving forward in America markets.
And coming back to the average prices. This is really -- if you look at the lower part of the slide, that's where you see the old range that we used to sell to Walmart. You have the average prices for every single product.
On the upper side, you see, if you look at the Overland 25, for instance, a $59 average that you should compare with what we are charging today for the Laguna 16 or 28. So we are moving in reality from average $20 to average net $59 for the same volume. You can do the same exercise yourselves when moving -- when looking at the different products. But that's what we are doing through innovation. We are really upgrading the entire range, rejuvenating the products and offering many more benefits to the customers. And that drives -- that innovation drives the average price and the margins at the same time.
Acquisitions. Treeline we communicated. This is another step in order to, on one side, grow the Service & Aftermarket business through more electronics but also the mobile power solutions in the marine industry. So they are doing what we have been doing both in the outdoor business and on the RV side but for marine applications. And we are very, very happy. It's a $60 million company with nice profitability as well.
And talking about mobile power solutions, we are extremely pleased with the evolution in the last 12 months. We have moved from turning a few hundred million krona into almost a SEK 2 billion business. And after six acquisitions, we see very strong growth. We see that this underlying trend, that it will be there for many years driven very much from -- by sustainability and the demand for electrification. So the more electrification we see, the more mobile power Solutions are going to be needed.
Profitability for these businesses is above Dometic average, meaning that has also a positive accretive impact moving forward. And as I said, what is really positive is thee underlying growth trend in that business.
If we move over to e-commerce, D2C. We also see improvements. We continue to roll out the new software platform. So we -- it is implemented in the U.S. It is implemented in Australia. We implemented in Scandinavia during Q4. We implemented in 4 new European countries during Q1. We'll continue to do it during the rest of the year.
We have moved the last 12 months from 2% of the revenues we have in Service & Aftermarket and Distribution into 4%, which is doubling the business. And even here, we are [Technical Difficulty].
Apologies for the delay. We will now go to our next question, which is from the line of Fredrik Ivarsson of ABG.
Are we in, in that call or...
We are in the sales call.
Hello? Do you hear us?
I can hear you, yes.
We're not done with the presentation. What is -- we got disconnected. We got disconnected, yes.
All right. Please accept our apologies. Please continue with your presentation now.
Okay. Where does he start?
D2C.
D2C.
There we are. Well, first of all, I would like to apologize. I don't know what happened with technology, but we are back. And yes, what to say. DTC, I was on DTC. I'm just mentioning that it is not just organic growth [Technical Difficulty]
Juan Vargues is back, and I apologize terribly for what happened. I don't know, this is technology. We don't know. We will need to look after the call.
But I was moving to the restructuring program, where we have announced during the quarter the closure of Elkhart. And with that, that means that 23 locations have been impacted since we started the program. The cost that we took during the quarter is SEK 136 million. That brings the accumulated number to SEK 455 million since we announced in 2019. We are working, obviously, to accelerate the program, and we are fully convinced that we will deliver what we promised by mid-2023.
Looking at the strategy progress, we are very happy to see, obviously, that the Distribution and Service & Aftermarket is today 56%. We communicated a couple of years ago that our target to start with was 50%. We're already above that, and we'll continue to move the needle even more.
Organic growth in all sales channels. Organic growth in all the segment -- sorry, in 4 out of 5 segments. Three acquisitions completed during the quarter and happy also to show that D2C is doubling in comparison to 1 year ago.
Innovation Index is slightly below last year's numbers, and this is really impacted by the shortages that we see on the supply chain. We are fully convinced that we will recover that in the coming quarters.
We have won a number of design awards during the quarter, and we see a strong pipeline, as I mentioned, for 2022.
On the cost reductions, I would like just to mention that we keep working on complexity, and we are down to 65% in comparison in number of SKUs that we had 2018 despite the fact that our Innovation Index is growing big time and we have more products on the market than ever before.
And then sustainability, another area where we are paying great attention. We see injuries coming down and we are very close now to achieving our targets of being below 2%, yes.
On female managers, we are, unfortunately, standing still, even if we have a huge number of activities, behind. And we'll continue to work very hard to achieve that number as well.
CO2, good job. We are implementing renewable electricity in all the factories, and this as well is kicking stepwise quarter-by-quarter. So we are down 29%. We have a target of 30%, and we will beat that target as well.
And then we also communicated a new KPI, which is the 100% -- the 90% implementation for all new suppliers that we are taking in. And we have been working during Q1 in putting in place all the processes, and we'll be reporting from -- during Q2 our achievements.
And with that said, Stefan, I would like to hand it over to you, please.
Thank you, Karl (sic) [ Juan ]. I just want to get into the P&L here and highlight a couple of things in that.
Going to the items affecting comparability, which is a total of SEK 159 million in the quarter. And the majority of that is related to the acceleration of the cost reduction program, and then we have the SEK 22 million related to the closure of our Russian operation. Approximately 75% of this is noncash items.
So to go a little bit faster here, I go to the next slide, the EBITA bridge.
We -- on the organic and the currency-related effects, we see that sales growth and pricing is contributing positively, cost-saving activities. On the other side, we have inefficiencies in our own operation due to supply constraints. We have freight cost and raw material price increases, and we have a negative effect of the channel and segment sales mix.
Obviously, the currency translation and transaction effects are positive in the quarter.
Igloo EBITA margin, above Q1 last year, and it's above single -- above mid-single-digit margins on Igloo. And the other acquisitions are contributing nicely, and they are delivering above Dometic average margins in the quarter.
Going on to the cash flow for the period, I highlight a couple of things.
The operating cash flow is negative SEK 398 million. It's obviously driven by strong sales and demand. We also have a seasonal buildup in acquired companies. We have to prioritize that we secure availability of critical components. We have the lead times that are still long. And then CapEx is up in absolute terms, but it's reduced somewhat in percentage of sales. Acquisitions is contributing to SEK 628 million in the quarter. It's related to Cadac, NDS and Treeline Capital.
Moving on to the next slide, operating cash flow in a time series here. Here you see Q1 is our weakest cash flow quarter, and it's even negative now. And as I mentioned before, it's driven by some of the newly acquired companies. We have an even stronger seasonal pattern compared to the historical Dometic. But we are now moving into the strong cash flow part of the year.
Working capital, the different components. Accounts payables, we are making good progress in extending terms with suppliers. On the accounts receivable side, we see a stable development. And obviously, on the inventory side, that's where we see the biggest buildup, and that's driven a lot by the longer lead times and the supply chain constraints.
Moving on to the next, the acquisitions that we have done, the 10 acquisitions we have done over the last 2 years. As you can see up to the right, the seasonal pattern is stronger than if you compare it to the historical Dometic profile. So -- where Q2 and Q3 are accounting for significantly more than 50% of the total annual sales.
So if we look on where we have done the acquisitions, it's mainly in Distribution and Service & Aftermarket. So they have a stronger seasonal pattern. But, on the other hand, they are contributing with reducing cyclicality in Dometic.
Moving on to the next, CapEx and research and development. CapEx is stable. And going forward, we are going to see somewhat increased CapEx level due to some of the acquisitions that we have done. But it is in line with what we communicated on the Capital Markets Day. R&D innovation continues to be a focus in Dometic. So we are up 20% on -- in absolute terms, a little bit lower in relation to net sales. But in absolute terms, we continue to invest in innovation.
Moving on to the debt maturity profile and leverage. We have a well-diversified profile with an average maturity of 3.5 years. And we also have our undrawn revolving credit facility of SEK 200 million.
Our net debt leverage ended up on 2.7x, which is in line with the targets of around 2.5x over a business cycle. And we completed three acquisitions in the quarter. They contributed with 0.1 on the leverage. We still maintain a strong deleveraging profile, 0.6 to 0.8x in a year.
Final slide for me, just putting Dometic in a 4-year perspective. I think it's important. And if we reduced -- or if we look on the left-hand table, we have the reduced leverage, in line with target of around 2.5x. So right now 2.7x. But back in 2018, we were on 3.4x. Keep in mind, 2.7 is still with the fact that we have completed 10 acquisitions over the last 2 years.
Net sales is up 80%. And the important thing is this, that we have a much more diversified mix. So the share of OEM has gone down from 65% to 44% in the last quarter.
We have a healthy debt maturity profile, as I mentioned before. We had 2.6 years back in 2018, and we're now at 3.5 years.
Looking on the efficiency in the organization expressed in LTM sales per employee. It has increased with 20%, and it's now SEK 2.9 million per employee.
So with that, Juan, I'm handing over to you to make the summary of the call.
Thank you very much, Stefan. And I will try to be very, very brief here in order to have space for the Q&A session.
So strongest quarter ever, strong order backlog, Igloo showing strong growth and margin improvement. On top of that, we see the Distribution and Service & Aftermarket is today 56%. Our exposure to the OEM business is coming down despite the fact that OEM is growing. High focus on cost and efficiency and nonetheless, obviously, on pricing.
While we have announced the closure of Elkhart, we also believe that it is important for us to be present on the major market in the world for mobile cooling. And that's why we are investing in our platform in North America.
And with that said, I would like to open for the Q&A session, please.
[Operator Instructions] And our first question comes from the line of Fredrik Ivarsson from ABG.
First question on consumer behaviors and then specifically in the U.S. and Igloo, if you could comment on what you see there. Have you seen consumers holding on to their money a bit harder maybe during the last couple of weeks? Or is the momentum still good? That's the first question.
And second question on the inventory situation. And any potential component constraints given that inventory was up, I guess, 20% Q-on-Q? And assuming that the overall demand holds up, will you be able to deliver on the majority of the orders in Q2 and onwards?
Yes. So on the first question, whether we see anything especially considering Igloo, we don't see anything. We see -- we are following the sales-through every single day. We get information every single day. And just now, we don't see anything. It has been -- as I said, Q1 was very, very strong, and the beginning of Q2 looks still strong.
On the second one, we have been building up inventories. We have been -- especially been looking for semiconductors. As I said, it looks much, much better than it did in Q3 and even better than Q4. But of course, still, you have certain chinks here and there that will or might lead to problems. But that's nothing that we know just now. The problem -- the issue, again, as you are familiar as I am with the pandemic situation in China, and -- the vast majority of the semiconductors that are produced around the world are coming from China. So you cannot say just now that we are not going to have any issues. But we feel much better than we felt a few months ago and better than we felt in Q4.
Please also keep in mind there the sales-through pattern, especially in Igloo and in Front Runner where there is, compared to the historical Dometic, a stronger buildup in front of the high season where we are going in right now.
Our next question comes from the line of Douglas Lindahl from DNB Markets.
I'll start with the first one, which is basically on the organic growth of 7%. Would you mind commenting on how much is pricing versus volume on that one, please?
Yes. So it is, of course, an average -- on an average -- since we have different verticals, we have different products, this is a good one. But our estimation is that it's approximately 25% that is volume and 75% which is pricing.
Okay. And second question is on the balance sheet. You mentioned that you've taken that down over time. But how do you view your balance sheet in the context of your financial target now? Would you see room for additional M&A growth and stretching the balance sheet a bit more? I guess maybe yes given that you're entering a more cash flow-positive seasonality pattern. Or how do you view that?
No. But I -- first of all, I mean, we are coming into the stronger part of the cash flow year right now, and it's pretty significant as you -- as we can see from the historical numbers.
Then, as I mentioned, we did complete three acquisitions in the first quarter. They added 0.1 in deleverage. So obviously, the bolt-on acquisitions, there is still room to do that. But the larger, more transformational acquisitions -- we obviously now have to digest Igloo and make sure we are implementing the measures that we have been planning to do. And -- but the smaller bolt-on is still in the cards.
Okay. If I may, just a third and last one on Igloo. Obviously, you're improving profitability year-over-year. But would you say that this is -- was in line with your internal expectations? Or did Igloo sort of surprise on the upside?
No. I mean, well, we -- I mean, of course we were very disappointed when we announced that the profitability in Q4 was lower than we expected. At the same time, we also announced clearly that we were putting in place measures to improve the profitability. And that's what we have seen in Q1, and that's what we are expecting to see moving forward.
We -- it didn't come -- and the situation we did, it didn't come as a surprise. What was a surprise was the evolution of resin prices and the fact that Igloo before we took over was too low.
But that -- the fact, it has been -- again, that's what I would like to point out. I mean we don't have a crystal ball. What we can see at Dometic is that we have been pretty good in passing prices to the market. And I'm not talking just about Q4, I'm talking about the last 2 years with all these raw material prices moving upwards all the time.
Our next question comes from the line of Rizk Maidi from Jefferies.
I'll stick to two. First one. Juan, we sense some cautiousness in your outlook in the press release, and rightly so on the back of the geopolitical developments and increased inflation, lower consumer spending. I'm just wondering whether you see anything in the business today that points to either a slowdown of demand. Or any discussions you had with customers where you send some cautiousness?
But I think -- I mean, I believe that we all read the same news. It is difficult to avoid -- to prevent thinking how the consumers are going to swallow this inflation, which is kicking in everywhere. So I don't think that our customers are different to me or to you. It is clear that there is a concern on how the future is going to look like. We see -- I mean, this is also important to remember. We see that despite the inflationary cost increases on the materials side, we see still today that the salary raises all over the world have been pretty moderate so far. So I believe that we need to wait some more months to evaluate.
There is more cautiousness today everywhere. This is not about Dometic. This is not about our industry. So I'm fully convinced -- whether you talk to the Sandviks or the [ FLs ] or the Atlas Copcos of the world, they would tell you the same because that's the reality. We are reading about the same news everywhere. So yes.
But I think it's really important to mention that the way Dometic looks like today compared to -- let's go back to 2018. I mean the OEM part of the sales is significantly less than -- I mean it has less cyclical exposure.
I mean that's an important -- that's important to remember. Keep in mind that since 2019, we have already gone through a couple of major slowdowns, one starting in Q3 2018 when the RV market all over the world went down dramatically, and then the second during the pandemic. And I think that we have demonstrated that we are pretty agile in reducing our cost and obviously matching our volumes.
So I guess that the short summary in this. Well, the short summary is we don't have a crystal ball. We can just listen and evaluate in the same way as you do. But we are prepared to act.
Understood. And obviously, the group has transformed quite a bit with more aftermarket and distribution. Just perhaps on this point, Juan, can you just share with us any sort of data points or historical sensitivity of your aftermarkets to the ongoing sort of headwinds that we're seeing now? And any data point that shows the more resilience of the aftermarket versus the OEM?
Yes. I mean if you look -- I mean, I can give you two data points. The first one is on the historical aftermarket business in the old Dometic, so to say. We used to have a difference of 10 to 15 percentage points in growth rate difference on the way down in the OEM business and the aftermarket business. So that's the kind of resilience you had in the old business.
Now we're having companies that don't have any OEM exposure whatsoever. And that includes Igloo. If you look at Igloo in the last 10 years, they have been extremely stable. Not even in 2020; they went down.
So we believe the exposure -- the Dometic exposure today is much lower than the exposure that we had a few years ago. And even comparing Q1 this year with Q4 -- sorry, Q1 2018 with -- Rikard, can you remind me? We are on 28% now, but we were -- in 2018, the RV OEM exposure was?
40%.
40%. So we have reduced our RV OEM exposure by 12 percentage points in 4 years.
Understood, yes. Cool. And then the last one is quickly on price/cost, which was 40 bps down in Q3. I think it was slightly negative in Q4. Can you just update us on Q1? And in the face of the ongoing higher cost inflation, are you still going for new rounds of price increases?
Yes. Yes, we are. So we -- as you are obviously calculating, Q3, that's where we lost about 6 weeks of price increases. We implemented price increases by the end of Q3. We got impact -- positive impact in Q4. But for the entire Q4, we were slightly below the previous year. In Q1 this year, we are slightly above. So we are ahead of the cost increases. And our intention, obviously, is to be ahead. It doesn't give you any guarantee, obviously, that we could not miss some weeks because it's not easy to get back to customers every 3 weeks or every 4 weeks with price increases. But the intention is crystal clear. We said after Q3 that we were going to get back, and we are back.
Our next question comes from the line of Gustav Hagéus from SEB.
And returning a little bit to demand in retail. You mentioned that the inventories are still on the low side, but I assume they've come up a little bit sequentially. Do you expect sort of -- how far a distance do we still have to go until they are at a normalized level as you see it? Is that a material addition to your growth potential for Q2?
I think it's very difficult. I mean I guess that the easier one to look at -- but I'm -- I guess you are thinking about this, again, the RV OEM. I think on the RV OEM, it is clear that you have the situation with the chassis in Europe. That's one. And then you have also what we hear just now. What we read from the reports that are coming, we're looking at Thor, that they found their inventories are just now more or less the same levels as they were in February 2020, just before the pandemic. And at that time, they were still lower, and they normally are. So we believe that there is still some space. But it is clear around the RV we -- Americas, I guess that's what you're referring to, it is clear that the situation today is not the situation we had 6 months ago.
I was more referring to your entire business mix because as I understood it, you see low inventories across categories. So the RV is one thing. Obviously, that is quite visible. But I'm more curious maybe on the other categories where some of your peers have perhaps indicated more of a normalized situation.
Yes. So we see -- in Marine, we don't see, at this point, any issues. I think the Marine situation just now is more the other way around. It's a bit like on the chassis in Europe, It's much more supply problems for the industry, getting material for the industry, which is not Dometic, which is really just now delaying the pace of refilling the inventories.
If we look at the -- our Distribution businesses, we don't see yet any signal, so to say, or a slowdown. So, I mean, if I take the entire business, the entire Dometic, I don't see any signals that these will stop tomorrow. On the contrary, of course, that I feel more cautious today than I was 6 months ago without any kind of doubts. But of course, 6 months ago, we didn't know about the Russian invasion, we didn't know about additional inflation cost increases. So a number of factors kicked in. Six months ago, we were still speculating about increase in interest rates. Now the interest rates are a reality.
And my second question is sort of regarding inventory. If I remember correctly, you called out higher share of goods in transit as a driver to your inventory growth last quarter. I didn't hear you say that today. Is that situation improving? Or is that still a material factor in Q1?
No. No. I -- the situation is still the same, and -- I mean, now it's not only on the ocean, it's also on getting it to the ports and getting it on the ship. And, I mean, you probably have seen the pictures outside Shanghai, for example. I mean it's piling up on all sides, I would say. So there is no improvement on that side for the time being.
Our next question comes from the line of Karri Rinta from Handelsbanken.
The first is the FX impact on EBITA. Would you care to help us quantifying that a bit more specifically? So how much was your EBITA boosted by FX in the first quarter?
Yes, approximately SEK 100 million.
Okay. That's helpful. And then second, you mentioned divestment on one of your slides, and you discussed potential for acquisitions and maybe bolt-ons but not transformational. But when it comes to divestments, should we consider this to be more in terms of sort of bolt-off acquisitions? Or should we expect something transformational? And should we expect something to happen already this year?
Our intention definitely is that you will see the first steps this year, absolutely. So we are working as we speak.
And in terms of whether it's going to be bolt-on or transformational, a little bit the same. I would say that's something -- somewhere in between. The vast majority will be businesses that don't fit anymore, businesses that are lower margin than our average, businesses not having an impact on our Service & Aftermarket development. And then we have a few smaller, but we also have some that are sizable.
Our next question comes from the line of Johan Eliason from Kepler Cheuvreux.
It's Johan here. I was wondering about Igloo. Obviously, the margin seemed to develop positively on a pro forma basis year-over-year, I guess somewhere between 6 and 7 -- 5% and 6%. Now could you remind me of the seasonality profile on the margin of Igloo? I guess the peak quarter would typically be Q2? Or am I wrong there?
No, you're right. It's like we communicated on the Capital Markets Day that Q2 is by far their largest quarter.
In terms of margin as well and not in absolute?
Yes. No, absolutely from a margin point of view as well. So Q2...
Q2, 3 and then Q4, Q1. So very, very similar but more pronounced. More -- very similar to the Dometic seasonality profile but more pronounced. .
Excellent. And in this business, have you been able to push through any Dometic-branded products yet or...
We are -- I mean, you have to be precise. You have the entire product management, product manufacturing, and you have the introduction to customers.
In terms of introducing to customers, Igloo people and Dometic people just now are visiting customers. So we are gaining -- exactly as we said, igloo is helping us to open doors.
Then of course, it takes a while to start launching the new products. So just now, that's what we have been spending enormous amounts of time during the last couple of months, really looking at the product ranges, what is going to be Igloo, what is going to be Dometic, how do we give access to Igloo to the -- our technology at the same time as how do we get access to capacity in the factories. And that's why we are investing. So you will see that coming afterwards. We have very, very, very tight collaboration, and we are driving the integration very, very intensively.
But do you think there will be any sizable numbers already this season? Or is it rather for next year?
I think it's too late. You'll probably see, I think, the new specs next season. This season is very much about preparation. Keep in mind that the season in the Outdoor business is really Q2. So you acquire in Q4. It's very, very difficult to get products out. You'll need to do -- the selling for next year is done now, basically.
Yes. And then on the restructuring program, you mentioned now in the charts somewhere that in total, you've taken some SEK 400 million in charges. I think originally, you talked about SEK 700 million in total charges for this program to get the benefits of SEK 400 million. Is that still valid?
Yes. So we have SEK 750 million that we communicated. We're communicating now about SEK 400 million, that's correct. And that's obviously telling you that now we are coming with a couple of bigger sites. We have started with the smaller sites, and then the pandemic hit. We have been training for a while, and now we are, again, moving to the bigger sites. So that's why now we do Camille, one, and we have some more.
Okay. The next question comes from the line of Daniel Schmidt from Danske Bank.
Most of my questions have been answered. But Stefan, could you just help us with sort of the growth number for Igloo on a pro forma basis in the quarter and maybe also the absolute top line number? I guess you can almost get it from the global sort of subsegment, but still...
But I think you will have to take it away that we have expressed is that it is a strong growth. And so it's obviously double digits. And it's been positive and above expectations, I would say.
Okay. Okay. And when you talk about sort of the resin price moving up, Juan said that you will also sort of act accordingly when it comes to further price increases. Was that as of sort of the beginning of Q2? Or was that already implemented by the end of Q1?
That has been going all the time. So we are evaluating, doing our reviews and every month. We -- this is one of the main topics, and it has been one of the main topics since this process started in August 2020 in reality.
Again, keep in mind that we have been delivering really good margins, compensating for cost increases with the exception of Q3 2021. Other than that, we have always been ahead or in parity. And our intention is to keep doing the same.
But specifically around Igloo, I mean, we had a view on the resin price profile development. And after the Ukraine prices that got changed a little bit, not massively but to a certain extent, and for that there has been compensation implemented.
Yes. Okay. Good. Maybe just -- sorry for a third question here, but on the same topic, could you -- in order just to help the audience and may -- give any sort of average profitability for Q2 in Igloo. I know that you were hit last year by what we just talked about. But if you look a couple of Q2s back, what has been the sort of average profitability, you think?
Q2 for Igloo was still very good. In reality, it has -- the resin prices kicked in at the end of Q2. So you have a couple of months about being negative, but you have 2.5 months being pretty positive.
And again, keep in mind our comments during the forum. We acquired Igloo because we saw how the company was improved. Then the resin prices kicked in, in June last year. And then we saw the deterioration for 3 months. As soon as we took over, we acted and you see the margin improvement coming back.
I mean, if we should say something, I mean, it's -- if we are above mid-single digit, now what's going to happen in Q2, then we are, of course, talking about double digits.
Yes, yes. And that was maybe what you saw last year before the latter part of Q2, I guess.
Correct.
Our next question...
Any other questions?
Yes, exactly because -- since we were out for a couple of minutes, I think we can still stay for a couple of minutes more. So if you have any other questions, please.
[Operator Instructions] And the next question does
come from the line of Agnieszka Vilela from Nordea.
I would like to ask about the Marine business. You showed on the slide that retail boat prices are increasing quite dramatically, doubled compared to last year. So I wanted to ask about your own pricing power in this business. And also, if you could kind of put it in reference to the 3% organic growth in the quarter. What was the price impact? And how were the volumes affected by the supply bottlenecks that you mentioned?
I think, Agnieszka, that I -- either we expressed ourselves in the wrong way or we had the wrong chart because it is not about doubling in a couple of years, it's about doubling during the last 10 years based on...
Since 2007.
2007.
Okay. Yes.
From 2007 to '21.
Yes.
I mean so that's the major difference. What we're telling you in reality is that electronics has been kicking in, in the Marine business now for a few years. And that's why average prices is going up dramatically. More engines, more electrification driving the business. And then when you say just now -- the growth that you see just now in the quarter organically has nothing to do with the underlying growth that we have. And that's why our backlog is very, very solid.
And can you just remind what was holding back the organic growth in the quarter for Marine?
It's really the access to electronics both from us but also from our customers.
Yes. And then my last question is on Elkhart. You closed the factory there and moved production to Mexico, if I understand correctly. Can you just say what kind of cost savings you expect from that and how the margin in Americas could develop? And also, whether you are a bit concerned that you might lose some market share to your peers that are still in Elkhart?
I mean we have been communicating that the phasing of this program is that we have a couple of larger projects last year and Elkhart is one of them. And so that's, of course, going to be an important contributor for us to achieve the SEK 400 million.
Obviously, there are still some projects to be announced which we cannot talk about today. But with the announcement of Elkhart, we are taking an important step towards the total SEK 400 million. But there is a couple of more projects that need to be announced, and we are accelerating, as we said.
And in terms of losing market share, to my knowledge, nobody is manufacturing refrigeration in Elkhart. Our main American competitor is not manufacturing in Elkhart, and then the rest of the main competitors are importing finished goods from China.
Yes.
So in theory, I mean, yes, that should be the other way around.
And our last question is a follow-up question from the line of Rizk Maidi from Jefferies.
Just two housekeeping questions which have not been, I guess, asked. So obviously, electronics was a bottleneck in Marine chassis systems in EMEA and potentially other divisions. Can you just help us with the lower invoicing from just the supply chain constraints? Is it the usual 2% to 3%?
No, but I think it's very much in line with what we communicated last quarter as well. We are talking about a couple of percentage points. We are then gaining a lot more in Marine than in the other segments. Marine is more than a couple.
Okay. Understood. And then the last one is on the SEK 400 million cost saving program. Can you just give us an update with where you are, what has been achieved in the quarter, please?
Yes. So we are approximately on SEK 210 million, which is about 53% of what we had planned. But that's, of course, before we get the savings from Elkhart. We -- including the savings from Elkhart, we should be somewhere between 65% to 70% of the program.
65% to 70%, okay. Well...
When they are taking it, yes.
Okay. Unless we have no more questions registered, I hand back to our speakers for any closing comments.
Thank you very much.
Well, thank you very much, everybody, for paying attention to us. We are obviously very happy with the quarter. And as we said, we don't have a crystal ball, but we are prepared. We will be growing if the growth is there, and we will be reducing our cost if the growth is not there.
So thank you very much and talk to you soon.
Goodbye.
Goodbye.
This now concludes our conference. Thank you all for attending. You may now disconnect your lines.