Ladies and gentlemen, welcome to the Dometic Q4 report 2018. Today, I am pleased to present Juan Vargues, CEO, and Per-Arne Blomquist, CFO. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. Speakers, please begin.
Hi, good morning, everybody, welcome to this call. This is Juan Vargues speaking. I am sitting together with Per-Arne Blomquist, CFO. I am very proud to present these Q4 results. In our opinion, showing a very strong performance considering obviously the headwinds in the markets and the tough comparatives that we have against last year. When looking at growth, we are showing a 6% organic growth outside the RV OEM Americas side, which is a strong performance organically in all the areas with double-digit aftermarket growth, with a very positive and strong growth in Marine. Both including SeaStar as well as the old Dometic Marine. That is very pleasing. We see as well, EMEA and all the businesses in EMEA are developing very nicely, including RV.
Again, altogether, in terms of the growth side, apart from the RV OEM in Americas, that we are all aware of, all the rest is showing very good improvements. When looking at the markets, just to say that the underlying demand we see in all the other markets is pretty satisfactory. Then again, to repeat myself, RV OEM in Americas and Pacific is on a low level. Considering the situation obviously, and the volume drop, I think that we are showing a very strong EBIT improvement. We have been implementing a battery of different measurements in order to protect our results. We have pricing. We implemented new prices during Q4. We have been working very hard on improving our efficiency altogether in order to compensate both for the commodities and the tariff situation that we have in the U.S.
On top of that, and based on the situation specifically in Americas, but also adapting our capacity to new levels, we have implemented contingency plans, pretty severe contingency plans in a number of areas that are also giving us respective results. At the same time, we are also very happy about the completion of the Kampa acquisition. An acquisition that will bring a good aftermarket growth moving forward. I will come back to that in a few minutes from now. In order to improve our competitiveness even more, we also initiated a restructuring program, which is going to affect all the regions. This is both regarding factories, warehouses, and nonetheless, also a number of offices around the world. We are also very happy about our new site in Mexico.
It took 97 days from taking a formal decision about building up a new factory in Mexico to the delivery of the first units from that factory. I'm very pleased with the cooperation with the Chinese teams and our American teams to get it done in such a fast manner. When looking specifically at Q4, we had a strong growth of 25% totally speaking, with a low organic growth due to the RV OEM. We were helped by FX 7% and a good evolution also coming from M&A 20%. When looking at EBIT, it's even better, +35% totally speaking, with an EBIT margin of 10.3% versus 9.5%. We see that the efficiency improvements that we started to kick in during the last part of 2017 continue to give the expected results.
On top of that, we have been also adapting our pricing to the new situation, both in terms of commodities and tariffs. As I mentioned previously, we are also very proud on how the organization has adapted into the new market demands in terms of volumes. This is also one of the reasons, obviously, for the stock results that we are able to show today. Again, the market is nothing that we can do about. RV OEM has been very weak during the quarter, as expected. I believe that the situation in the coming first and second quarter is not going to be fantastic either. I believe that we will see a weak first half and a stronger second half.
At the same time, we have to keep in mind that we are coming from a Q4 2017, where we were showing an organic growth of 16%. We have very tough comparatives. Very proud also to show a very strong cash flow, 60% up versus last year. In that number, we have to consider as well that we have over SEK 200 million in inventory built up in order to mitigate the effects of the tariffs in the first quarter as we were working on the Mexico factory. EPS on SEK 0.46 or 51% down versus last year. Even there we had very tough comparison. We had on one side the positive effect last year of the U.S. tax reform.
At the same time, as you all know now, we are booking SEK 92 million in restructuring costs during the quarter. Altogether, we feel very proud about our performance in Q4. Looking at the entire year, I feel good. This company is 30% bigger today than we were one year ago. We have shown a 5% organic growth, which is exactly what we said already after Q1 in 2018. We were expecting, obviously, the second half to be tougher, very much due to the tough comparisons that we had. EBIT, even better, 44% up versus last year. EBIT margins went up to 14.7% or 1.5 percentage points higher than we had one year ago. We are working very hard across the entire organization to keep on improving our efficiency all over.
I believe as well that we have done a pretty good job in adapting our pricing to the new circumstances on the markets, and mitigating the effects again from both currencies, commodities, and nonetheless, the tariff situation in the last half. Cash flow, more of the same, very strong for the entire year. Leverage, that has been obviously a question during the entire year. We are very pleased as well to have taken it down to 2.6 when excluding the Kampa acquisition, that has an effect of 0.1. The FX situation, as we all know, the US dollar has been strengthening in regards to the krona. Ending up at 2.8 and 2.6 adjusted for Kampa and FX. EPS, again, affected by the same factors as I commented before. Altogether, a very pleasant picture.
When looking at the sales growth in constant currencies, we were down 2% totally. As I said, 25%, please have a look on Q4 2017, showing a fantastic 16% organic that we have never seen for many years. The comparatives are pretty tough. Yes, I think I move on to the next one, which I believe is a very important slide. I think that we spend a lot of time, obviously, discussing the situation on the RV market, discussing what's going on just now in Americas. When you look back at what happened in the last five years in Dometic, the reality is that all the businesses, but RV OEM, is growing exactly at the same pace organically as RV OEM.
When looking at the last years, please keep in mind that it's not just that Dometic is growing on the back of the RV OEM market situation in Americas. All the rest, organically, has been developing very nicely. On top of that, if we look at what happened over the last five years, the reality is that our total growth rate is 50% higher for everything apart from RV OEM than RV OEM. This is also what we see in Q4 and what we have seen in entire 2018. That despite the headwinds on RV, we're still developing as a company in a very nice way. Which is leading us obviously to the next picture, which is showing how the company, how Dometic is becoming a more diversified company, reducing our exposure to the RV OEM market.
We can just see that everything apart from RV OEM went up from 51% in 2017 to 60% for the total weighting in 2018 and growing at a faster pace. Altogether, we are working according to our strategy. When looking at EBIT and EBIT margin, same, I'm very pleased obviously to see that we improved EBIT margins by 1.5 percentage points. We also have a 0.8 improvement in Q4 despite, again, lower volumes, despite the tariffs, and obviously compensating by a number of different measurements. On top of that, since we want to improve our performance even more by becoming a more efficient company, we are also initiating a restructuring program during Q4, where all the three regions will be affected. Americas by $34 million net, EMEA, $57 million net, and APAC, $1 million net, while gross is $10 million.
We have a SEK 10 million there, which is coming from the net profits that we had one year ago from the sale of the factory in China. We expect as well a very good payback of one year. This is not going to be a long program. Considering the situation, obviously, that we have on the market and the potential we have, we decided to implement it very fast. On the growth side, Kampa, we are very pleased. We believe that it's a very good company that has been showing very nice growth, first in the U.K., where they had a very strong position, then in a later phase, establishing themselves across Europe and showing very nice organic growth and a very good profit improvement over time.
On the product area, we are also pleased to launch during the quarter a new product, which we believe is going to become more and more important in the future. People, our lifestyle. People are spending more time outside. No matter we are talking about marine or we are talking about campers, they want to have access to their computers, they want to have access to their cell phones. We are launching a Dometic PLB40, which has a number of features that are pretty unique on the marketplace and have very strong expectations on the development moving forward. I believe that we are going to see more products like this moving forward. Helping obviously to strengthen our position on the marketplace. When looking at the regions and starting with Americas, we were down 10% organically.
When looking at, again, everything outside the RV side, our organic growth ended up at 31%, with after-markets, as through the SeaStar, showing a very strong 13%. Showing as well a very strong evolution of the SeaStar acquisition, 13% as well. Then we can just realize that the OEM market, the RV OEM market is pretty soft and show two-digit negative growth. When looking at EBIT, we also delivered in America a strong performance, +30%, with EBIT margin coming down to 10.8% from 11.9%. There I have to say that I feel very good about the speed that we showed and implemented all these actions to adjust our cost, to reduce our capacity in the factories, while also increasing prices to compensate for the tariffs. Moving to EMEA, I am extremely happy. I think that EMEA, 15, 16 months ago, was in a negative trend.
I do believe that during the entire 2018, we have demonstrated that EMEA could come back, has showed to be coming back with both a very strong organic growth at the same time as we have a strong EBIT improvement. There I have to say Q4 was perhaps very positive surprise when looking at the organic growth including the RV OEM market. After the Düsseldorf exhibition there was some noise about the inventories, there was some noise about the market. Again, Q4, we had a very strong organic growth. After-market up 13%. We have seen a positive trend for years. We see also RV AM up 20%, fantastic development. CPV AM 22%. Marine, again, this is not including any SeaStar numbers, 8% as well.
Altogether, a very good evolution, and I'm fully convinced that it's also a result of the fact that we are implementing our strategy. We are getting more dedicated teams, more focused approach into different segments. EBIT also very strong, +127%, and it is really coming both from efficiency improvements and the pricing measurements that we have been taking the entire year. As you can see, we are doubling the EBIT margin as well. Looking at the situation in APAC, we went down 5% organic. We have seen also during the last couple of years that the RV market has been flattish. Now it's becoming a little bit weaker. At the same time as we have also been leaving the low-margin businesses that we have both in Pacific and in Asia, especially in the CPV area, but not only in the CPV.
The rest of Asia continues to develop in a positive way. Of course, when looking at the numbers as a consequence as well of leaving the low-margin business, we are very happy to see how our EBIT margin is growing to 20.9% in comparison to 18.7% one year ago. Keep in mind, obviously, that we have higher margins in Pacific than we have in Asia. We have, in reality, a negative geographical mix during the quarter. If we move on to strategy. We had a meeting, a conference with our top 155 managers across the group in Berlin in October, where we introduced a new revised strategy for the group based on three different blocks. Profitable expansion, product leadership, and cost reductions. We are going to come back down the road always in the same manner on this, commenting these three different blocks.
On the growth side, Kampa, I already commented. We are very happy about that. We see the after-market developing very nicely, and we are putting even more resources into the after-market. We see marine developing strongly, both the old marine and the new marine, and no signals of deterioration on those markets. On the product leadership side, we are implementing global platforms. We have decided to go for three global products, refrigeration, air-conditioning, and mobile cooling, and three global technologies as well. We continue to reduce complexity by reducing heavily the number of SKUs we have across the organization. Something that we will not see in our numbers in the short term, but will have a major effect down the road.
Looking at cost, we have seen good efficiency improvements in all the regions. We have adapted our capacity very fast to the new market demands, especially due to the RV situation. We put in place a new restructuring program that has already started to be implemented. Again, as I said before, I'm very, very happy about how we reacted on the tariffs, how fast we could put a factory in Mexico, which is in production as we speak. With those words, I would like to leave over to Per-Arne, please.
Thank you, Juan. Starting with the last five years. As you can see, we have been growing this company in a pretty good pace, added on more than 100% on net sales, but even more important, 163% on EBIT. As Juan said here at the beginning, we're a much stronger company today than we were just a couple of years ago. If you take the last year's growth of 30%, which means SEK 4.2 billion in added sales. We have also added more than SEK 800 million in EBIT, that implies an incremental EBIT of over 19.5%. From that perspective, I think that even though we had a good first half, somewhat slower second half of 2018 has been a very, very good year for us. If you look at the different trends, supports what I've said, that sales is going upwards.
We continue to grow EBIT. We have a slightly slowdown on the EBIT margin improvement. Above all, we have a very strong operating cash flow since the beginning of the year. This is important for us because we're aiming at continue to invest in the company. We're aiming at generate cash to make it possible for us to continue to work with the different M&A activities. If you look at the different business areas development, I think the strength right now is that we are growing in a lot of areas outside the RV OEM, as Juan also had alluded to. If you take the marine business, it has been growing with 6% organically and over 200, including the acquisition. That means that we today have a business that is slightly south of SEK 5 billion in marine. CPV up 7%, retail and loading up 9%.
Within retail, we have our activities around the mobile cooling. We have a lot of areas where we see growth and where we're investing in growth for the future. That includes marine, that includes CPV and retail, and loading as well. Of course, RV, which is our biggest area. You can see also that slightly rebalance, as we said at the beginning of the year, RV is now down to 53% from 65%, and marine is up to 26%. We're starting to get bigger segments, which are big and where we also are market leaders in these different businesses. If you look at the key ratios, I think it's a good reading for the year. We have 30% up in growth, 5% organic growth. EBIT going to 14.7%, which means it's a 38% increase. EBITDA up with 41%.
Important to look at the EBITDA from a cash flow perspective. Working capital is still on the high side, that we're working very, very hard to take it down, I still think that we should be able over time to take it down to 20%. That will require better processes when it comes to inventory, that is also something that we have invested resources and competence in right now to make sure that this can happen. Operating cash flow up with 51% and SEK 2.6 billion. Good for us to have this cash flow for the future, I will come back to the EPS later on in the presentation. If you look at the translation FX, 7%, of course, it's the U.S. dollar and the EUR that impacts. If you compare rates in U.S. dollar, we went from 851 up to 887.
The euro went from EUR 9.63 up to EUR 10.2. That makes sort of the big difference that we have in FX. Summarizing the regional results, you can see that all regions, they have improved their margins. Americas from 14% up to 15%. We have EMEA from 10.4% up to 12.1%. Perhaps also more impressive to see Asia Pacific go up from 20.4%- 21.8%. Remaining sort of the top region from a margin perspective, and even that they have lost somewhat on top line the last quarters. I think it's a good thing we have taken out unprofitable business, as I said before. That also shows that we are keen on both improving the margins, but also on the growth, but it's not growth at any cost.
Earnings per share in Q4, somewhat lower or even half what we had in Q4 last year. Sometimes you tend to forget that we had the tax reform in the U.S., and we had a positive effect from that, given that just a week before the tax reform was established, we acquired SeaStar. That meant roughly SEK 278 million in the positive taxes. Otherwise, you could see that the underlying EBIT improvement from the different businesses has been pretty good. If you now take the full year, SEK 5.33 in earnings per share compared to SEK 5.05 if you exclude the tax sort of effect. Should have been at SEK 4.11. It's a pretty good improvement of the underlying, both operational and also from a financial net perspective improvement.
Whenever it comes to the tax rate, on the high side today, the 27%, but we expect this to be around 25%-26% during the year. Tax paid will slightly go upwards, given that we have had a high profit generation during the last couple of years, and the tax losses carry forward will disappear during the next 12-15 months. CapEx, continuing to invest in the company, 2.9%, slightly higher than I have seen before. The increase comes mainly from SeaStar, where we have made some important investments for the future, and I feel very, very comfortable that these investments will yield good result in the months to come. Working capital, I mentioned before, a bit on the high side, but we should also remember that we have added on some effects from the tariffs, and also from pre-buys that were done from China.
All in all, if you look at on the slide with the working capital, it means roughly SEK 250 million. That, I think, makes also the cash flow even more impressive as we have added on these amounts, but still have a very, very good cash flow generation. You could also see that the working capital now is below SEK 4 billion. The cash flow per quarter, we have had the same pattern as previously, that the first quarter in the year is slightly negative, and then we have a very strong second quarter and a good third and fourth quarter.
I'm happy to see that the fourth quarter in 2018 was well above the quarter in 2017. We've been working very hard on the cash flow side, and we will continue to do that to make sure that we keep up a very high cash generation. This cash generation helps us to lower the gross debt that we have. We have repaid roughly SEK 1.1 billion in senior loans, term loans during the Q4. That means that our gross debt has gone down from SEK 12.8 billion down to SEK 11.6 billion, and also gives us a leverage, before constant currency and the Kampa exclusion to 2.8x. We are, when we're looking now at the leverage, convinced that we'll come closer to our 2x, which is the target for the group during this year.
Finally, if you look at the financial targets, yes, we reached the 5% that we have in organic growth as a target. Very close to the 50% on EBIT margin. A bit high on the leverage side, but it's according to the plans that we had when we acquired SeaStar, and we are fully committed to really make sure that we get down to 2x at the year-end. Dividend policy, as you have seen, we propose a dividend of SEK 2.15, which is up to roughly 5%, but that means 40.4% in payout ratio. Juan, should you summarize 2018?
Thank you, Per-Arne. Well, as my first year in Dometic, I'm extremely proud of our achievements. This is a more diversified company than we had one year ago. We really hit our organic growth of 5%, as we already mentioned at the beginning of the year. We show a very strong aftermarket growth of 7%, helping us obviously on our margin journey. We are extremely pleased with the integration of SeaStar. That has been a fantastic acquisition for us. We will see more things happening, obviously, in Marine during the course of the coming years. EBIT improvements, very pleasing, 1.5 percentage points with very strong improvements in EMEA, in APAC, in SeaStar. Of course, we have the RV OEM markets have an effect on our Americas organization. We are just now working very, very hard to improve the situation even there, despite the headwinds.
A lot of hard work internally to get business process owners in place so we can really work both on innovation side and on the cost reduction side. We have, in my opinion today, a very strong team, which is starting to have an impact on our evolution. A lot of efforts during the last months on improving efficiency. We started a journey on the SKU reduction, complexity reduction, and it's starting to pay off. We adapted promptly to the new demands on the RV markets. I think I'm extremely happy and proud on how the organization took on the challenge. It's not easy to grow as fast as we have been growing during the last years and pull the brakes in the manner that we did to mitigate the negative effects.
Restructuring program ongoing, that will help us, of course, to stay and to improve our competitiveness in the marketplace. Again, I think it's impressive to build up a site in 97 days and to be up and delivering products already now. Last but not least, very positive as well about the Kampa acquisition. When looking at 2019. We believe that we will be slightly positive at the end of the year. We have obviously two quarters that will be a little bit tougher due to the comparatives that we have and the situation in the RV OEM market, especially in Americas. We believe that that will be more than compensated by the growth that we have in all the other segments, and also an improving RV OEM market in the second half of the year.
We will continue to invest in developing our businesses outside the RV, meaning diversifying our company and keeping exactly the same course as we initiated a couple of years ago. We intend to invest more in pro development. Innovation will be key for our future as well. Of course, we have the doubts, like anybody else, about what is going to happen on the RV OEM in the coming months. The only thing we can do, obviously, is to work very hard to mitigate any negative effects coming from there. On EBIT, we have, as I mentioned previously, a battery of measurements to make sure that we maintain our margins and that we see that we reach our long-term financial targets of 15% as a consequence of all the activities that we have taken in place during the last months. Leverage is big for us.
We will keep on working very hard. As Per-Arne mentioned, we have mentioned a couple of times we are pretty good at receivables. We are pretty good at payables. Inventories has been a challenge for us. We are working very hard, and we are starting to see during the last quarter a major effect of the investments that we have done in the area with specific resources to take it down to a better level. With that, I would like to thank you all for your attention and open for the Q&A.
Thank you. Ladies and gentlemen, if you do have a question for the speakers, please press zero one on your telephone keypad. If you would like to withdraw your question, that would be zero two. Once again, for any questions, that is zero one on your telephone keypad. Our first question comes from the line of Daniel Schmidt from Danske Bank. Please go ahead, Daniel. Your line is now open.
Thank you. Good morning, Juan and Per-Arne. I have two questions, and I appreciate, of course, that there's high uncertainty when it comes to the RV market in the U.S. right now. Juan, could you say anything or shed some more light on what you see in terms of work week schedules from the big customers in the U.S.? There was comments yesterday from one of your competitors that some of them are going to actually increase from four to five days in a couple of weeks time. Are you seeing and hearing that as well? What do you think about the destocking, and where are we in that sort of journey? I think I start with that one.
I think it is clear that retail sales has been just now better than production numbers, which means that the inventories are coming down. I believe there is still more to go. In regards to your question about our competitors and our customers, I hear exactly the same comments from the market. We also need to keep in mind that January was extremely cold in Indiana. It was extremely cold in Elkhart. Customers stopped for additional days due to the cold weather. The question is whether they are compensating now for the days that they shut down the factories or if we really see or they really see higher demand in the coming weeks. I think it's simply too early to mention more than that.
It's very clear, Per-Arne here that they are going back to five days right now.
That's a fact.
We're working Saturday. That's a fact. The question is whether it's to compensate the very slow January or if it's a uptick in the market.
Yeah. This shutdown due to the cold weather, that was only the last week of January, right?
Yes, that's correct.
Yeah. All right.
You have 20 working days, you shut down for two days. That's 10%.
Sure. No, but yeah, it's a good point. Secondly, you've had sort of raw material headwind in at least the latter half of 2018. You talk about price hikes during Q4, and if you look at steel, aluminum, and so on, those prices are down since five months ago. Is it reasonable to assume that you can actually experience raw material tailwind as we get into the spring and summer?
You are totally right. If you look at what happened on the steel price and aluminum prices, they were much higher during the first half. Well, they have been increasing in reality during the last two years. It is first during the last half year that they have been coming down. They have been coming down much more rapidly in EMEA and APAC. They are starting to come down in America as well, even if it's not at the same pace. Obviously, we have inventories in between. Yes, we should be seeing improvements in the coming months.
We had roughly SEK 90 million in 2018 when it comes to headwind on the raw material. Even that, we have actually improved our gross profit to close to 1% units. Coming back to the price hikes and efficiency, you can see that it had sort of materialized.
Yeah. All right. Thank you, guys. That was it.
Thank you.
Thank you.
Thank you. Our next question comes from the line of Lucie Carrier from Morgan Stanley. It's now open for your question.
Hi. Good morning, gentlemen. Thanks for taking my question. I will have three questions. I will go one at a time. Could you maybe comment on the current trading in the various regions and including on the marine side? Because one of your customers this week has signaled a slowdown in the marine market and specifically on motorboat for 2019 versus 2018. That would be my first question on current trading.
I think, I don't see any differences in the first, again, we have obviously four or five weeks into 2019. I don't see any major changes to what we have seen in Q4. In terms of that specific customer, I don't know. I cannot comment on that customer, but what I can comment is obviously the expectation from the industry still for 2019 is clearly a stated 3%-4% growth, and everybody's talking about full books for them to deliver.
Yeah.
We don't see, and looking at our numbers, we don't see any indication whatsoever. One side you have the industry statistics, you have the industry forecast, and then we have our numbers. More than that, we cannot judge at this point.
If you look at the outboard motors that we are addressing within SeaStar, I mean, there, we also have a technology shift as well in addition to that. Talking to our head of Americas yesterday, he said that all the manufacturer more or less have a full backlog right now. There is no tendency or indications of a slowdown.
Thank you very much. My second question was around the different initiatives you've been taking. The first one is on the cost saving and optimization measure. Is the SEK 92 million restructuring you've taken in the fourth quarter, is that the full of your initiatives? You said the benefit's roughly the same amount for in one year or is there more to come to that? The reason why I'm asking is also to know how you're going to be reporting from now on, because previously when the optimization program was done in Europe, it was taken directly into EBIT, but I think that now you've excluded those costs. I'm just trying to understand, from more, I would say, for us, our model standpoint, how we should look at those expenses if they are more restructuring expenses from here.
If I start with the technical question. I mean, last year, we also had a restructuring program that we took below the line. Otherwise, we have normally, I mean, we have transaction costs for M&A, et cetera. If they are at lower levels, we take that within the line. If you have bigger restructuring programs, we just take it below the line because that will otherwise sort of distort the comparison. Yeah.
Understood, are you expecting more from here, or is the program or is what you wanted to achieve done for now?
I think, Lucie, that we are an acquisitive company. We have 28 factories. We have I don't know how many sales offices around the world, and that would be wrong for myself to say that this is the last time that we are going to do anything. As far as we're acquisitive, we will keep on having programs to stay competitive all the time. Then, of course, we will deliver the savings that we are stating that we are going to get.
As also Juan said, I mean, we have taken out a high number of people from the factories before the Q4, and that has been taken within the normal now. When you come into a certain restructuring program where it's not only people, it's also closing down sites, etc , then it's too much of a one-off that will distort the numbers.
That think about the case.
Sorry, I understand that. I'm just trying to get a sense from you whether for 2019, we should expect further strong initiative on the restructuring.
At this point, we don't have any additional plans.
If you could quantify that.
Oh.
At this point, we don't have any additional plans.
Okay. Then just my last question was actually on the production in Mexico, the ramp-up of the new factory. I was just curious if everything that you were producing in China for the U.S., is that now everything is produced in Mexico, including air con?
No, it is not because obviously you have different tariff levels for different products. Now what we are doing is really air condition.
The product line within there.
Only air conditioning. All of the air conditioning is now in? Thank you.
Thank you for taking my question. The weakest quarter of the year for EMEA.
We are working extremely hard to improve from that level.
It sort of dilute the whole margin for the Group. I mean, so the ambition is really to improve the margin and do not have sort of the slowdown in EMEA. If you look at the other regions, they are much more evenly spread. That will be the ambition also for EMEA going forward.
I mean, we are coming back obviously to why we are taking all these actions, why we are taking restructuring. We have infrastructures. We need to become more agile than we are today, right? We have been seeing this during the entire year. EMEA will get close to the levels that we have in other regions. We cannot do it overnight, but I do believe that you saw quite good improvements in 2018, and I foresee quite one improvement in 2019 as well.
Which was the plan when we had the two-year program that we launched a year ago
Yeah, excellent. Just a question around Marine and the comparison to the RV. The RV slowdown is partly a reason on the back of the dealers building too high inventories for the demand that started to slow somewhat last year. Are you seeing any similar risk there in the Marine that there might be too high inventories in the dealers out there? Or is it a completely different sort of picture for that channel?
We don't see any risk at this point, as a risk, of course, that in the terminal cycle, you will always have inventory built up, and you need to take it down. Just now what we can say is that we are following obviously very closely, that we are talking to our customers, we are seeing our numbers, and we don't see the risk at this point. If we see, obviously, a deterioration, we will need to act in the same way that we have acted in terms of the RV. Just now, all the contacts, all discussions that we have with customers is that they are hiring people. They have difficulties to deliver because the backlog is full.
If you take the Marine business in the U.S., they're also producing, when it comes to steering system, very much from factory direct to the OEMs based on the production. Of course, you will have a certain build-up in the aftermarket.
That might be a risk, but that's also the hope of the business. If you take Europe, when it comes to air conditioning, a lot of these things are also order-based, customer base.
I think perhaps a final comment is where if we look at Marine in Dometic, I am talking about both the SeaStar and the own Dometic Marine. The second half and even Q4 is even stronger than Q3, and Q3 was much stronger than the first half. The growth pace has been increasing during the last quarters. We don't see any indications at this point of any potential issues on the Marine side.
Okay. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Fredrik Moregård from Pareto Securities. Go ahead, your line is now open.
Good morning. Thank you very much for taking my question. I was wondering about the retail business in the U.S. You've been talking about that as one of your major growth initiatives in the Americas region. I was hoping you could provide us with an update of how those initiatives are progressing and what your feel is for your retail listings from the coming spring.
If you look at our growth in retail in Americas has been impressive during the entire year. Q4 was even stronger in comparison to the year-to-date numbers. I can only comment that it has been very strong. On what we have done during the years is always this, is on top of that we have been listed among a number of the major retailers in the U.S. They have been testing us in a number of stores. We have got very positive feedback, and we expect that growth pace to continue during the year in 2019. So far, very positive.
All right. Thank you. Lastly, on the European RV market, the sentiment obviously grew better as the.
Yeah.
Year progressed in 2018. I was hoping maybe you could tell something about how discussions are going with OEMs for the coming season here.
Well, I think that not just the discussions, but if you look at the association, the RV Industry Association, they have just now a forecast which is 5% down versus last year's numbers. Obviously we don't see anything yet. As I mentioned previously, Q4 was positive, more positive than we expected, I have to say. Q1 so far looks promising. If you look at the industry and customers, they are talking about 5% down versus the production numbers last year.
Okay. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Agnieszka Vilela from Nordea. Please go ahead. Your line is now open.
Thank you. I have a couple of questions. Starting with your outlook for 2019, you do expect your growth to be slightly positive, yet Q4 was negative. If you can walk us through your expectations when it comes to the different markets. You mentioned RV Europe OEM, which is expected to be down, Marine growing somewhat 2019. If you can tell us something, what you expect for RV OEM in the U.S., where will this market bottom out? Also what are your expectations for your aftermarket growth in 2019? Thank you.
If we start with the RV OEM market and the impact on 2019. We are coming from a quarter where we had negative growth of 2%, we are comparing with a quarter Q4 2017, where we were growing at 16% organic. We had a very strong growth in the first half of 2018, we saw the negative growth in the second half. The numbers are the same. If I go back to the industry, if I talk to our customers in Americas, they are expecting a weaker first half in comparison to the first half 2018, they are also expecting a strong second half in comparison to the second half of last year. Altogether, what the RV Industry Association is expecting is that the industry will come down by 6% at the end of 2019, split into halves.
Okay.
A weaker first half, a strong second half. If we look at after-market, after-market has been extremely good for us, not just for 2018. The average growth rate for everything but RV OEM has been 7% during the last five years. If you look at last quarter or last year, we were growing at the same pace. Marine, we don't have any indication whatsoever of any slowdown. On the contrary, we saw an acceleration in Q3 in comparison to Q3 2017, acceleration of Q4 in comparison to Q4 2017.
That's why the way we see it today is that everything will continue to grow during 2019, we expect a slightly better second half on the RV that will give us a slightly positive 2019. Of course, SeaStar has been growing very well nicely for one year. We have now Kampa coming in also with a very nice organic growth rate. Those are the fundamentals behind our statements.
If you take Kampa, that will add on the growth for us, of course, M&A growth. In addition that, we also expect them to grow their business more than what has been growing last.
Well, if we look historically, during the last 35 years, we had negative growth one year, 2009. For the rest of the period, we always had growth.
Okay. A follow-up on restructuring and follow-up on the Lucie question, really. I appreciate the fact that you say that if you acquire more companies, there will be need for more restructuring. My question really is that in your current structure, don't you see need for doing something more? If you look, for example, at your factory footprint don't you see need for closing some factories? Wouldn't you like to have more dense cost base? What do you think about that?
Absolutely. It's not new. 20 factories are too many factories, we will do it. At the same time, we cannot do everything at the same time. You can only do a number of factories or consolidate a number of offices or a number of warehouses every year without creating turmoil. Keep in mind that we also need to deliver growth and EBIT every year.
Yeah. Perfect. Thank you.
You need to take these changes stepwise.
Yes. Thank you.
Thank you.
Thank you. Our next question comes from the line of Peter Reilly from Jefferies. Please go ahead, Peter. Line is now open for your question.
Well, good morning, gentlemen. I've got three questions, please. Firstly, can you give us an update on what's happening in the U.S. CPV market? You've launched a number of product initiatives, you haven't really said much the last couple of quarters. If there's anything you can tell us there, that would be appreciated. Secondly, I'd love some more detail on what's happening in SeaStar. It's your first full year of ownership. I would guess that 13% growth is materially higher than expected a year ago. Maybe you can help us understand what's been going on there and what's happened to the profitability. Lastly, I've got a question on profitability in EMEA, but maybe I'll come back to that when you've talked about the first two.
Uh-
CPV first?
Yeah, CPV first. On CPV, we have seen. First of all, we recruited a new team coming from the automotive industry in the CPV business in Americas. We have been awarded a number of orders during the year. The situation is looking promising, at the same time, we are talking about long cycles. Unfortunately, we will need to wait another 18-24 months before we see that in our books as sales. Just now is awards that we are getting. On the aftermarket during CPV aftermarket, we have seen improvements as well during the second half of last year. We are expecting it will not be any dramatic changes in terms of sales in Americas during the year, simply because, again, it's long cycles. We are very excited about the evolution during the last 12 months. The second question was-
Adding on to this, you could say that 2019 is sort of a gap year. Second question was about SeaStar's performance.
Seastar.
Oh.
Fantastic. I believe that it could not be much better. With my experience in acquisitions, I know that the first year is normally the toughest year because a lot of changes for the companies, integration, restatement of financials, all the kind of things that you need to be working on, and branding, all that kind of stuff. To have a company performing organically a 13% growth rate at the same time in the quarter, two digits also for the entire year, at the same time as we are improving EBIT margins quite heavily is very, very pleasant. I think we have a very good company, a very good team, and we expect SeaStar to keep on growing.
Yeah. I was surprised by the growth as well because, as you said, normally the first year is more difficult, and sometimes these things have been slightly inflated before the sale process concludes. Where does the 13% come from? Is that new product introductions, winning share, growth in the end market? Have you got any synergies yet with the other marine activities?
Yes.
Is SeaStar more or less still standalone?
No. You have a number of areas, and now you raise a couple of questions within a question. The first one is both new products, but we also have, what we commented before, a technology shift. The content of boats is growing all the time. The entire marine industry is moving from mechanical steering systems into hydraulical, and from hydraulical into electromechanical. The average content for a boat changes from one to four to one to seven. By default, even if the number of boats could be reduced, we should be seeing a pretty nice growth. That's one. In terms of cooperation, we are cooperating more and more, I have to say. This is, by the way, the last quarterly report where we are going to mention the word SeaStar, because from now it's Dometic Marine Americas.
SeaStar is becoming integrated as an integral part of Dometic, simply because we see more things coming in the marine industry. We believe that organization is a very good engine for additional growth within Marine globally. On the integration, we have, obviously, a financial integration is already done. Just now we are working on the branding integration. SeaStar, as I mentioned before, is becoming Dometic Marine Americas. We are working on the pro branding. We will also have a double branding strategy with the SeaStar products and Dometic. One of the reasons is, again, that we have the same culture, we have the same targets, we are growth companies, and we believe that together we can achieve much more than as just Dometic companies on their own. SeaStar is already today pretty much integrated, is going to become fully integrated during 2019.
When we talk about the synergies, we said that it should be back-end loaded, it's more to come. We will see a lot of initiatives coming in 2020, but also in 2021.
And then lastly on the-
Perhaps just to comment that we are just now increasing the pace of cooperation integration also in APAC. We are hiring people that will be supporting SeaStar in APAC as well as in EMEA.
Lastly on the margin in EMEA, you had a very good improvement in 18, 170 basis points up. You've obviously had a number of drivers because you got the benefit of the restructuring program. I guess mix has been better. You've had volume leverage as well. Can you help us understand a bit the blend of those three? Because I'm trying to work out whether you've reached a new base level because it's mainly restructuring or whether it's primarily been you just had a combination of good mix and volume, the underlying, if you like, hasn't changed that much.
I have to say that there are no free tickets. I mean, we are working on the three parameters that you mentioned, a couple more, we will continue to do so. Obviously, we have the restructuring program that we launched five quarters ago. Now we are launching a new one, which is also going to have a positive impact on EMEA. Apart from that, we have a lot of underlying activities. Yeah, you can add those three at the same time. Okay?
Thank you very much.
Thank you.
Thank you. We have now reached the end of our call, so I'm handing back to our speakers for any closing comments.
Thank you very much, everybody, for your attention and for very good questions. From my side, I would like to take the opportunity to thank my team, all our members around the organization and, of course, to give a special thanks to Per-Arne Blomquist, which, as you know, is leaving the company. Per-Arne has done a terrific job for Dometic in the last five years, and he will be supporting us also until we have a successor to him. I am wishing him all the best in the future to come. Thank you, Per-Arne, for a fantastic job.
Thank you. Well, thank you.
This now concludes our conference. Thank you all for attending. You may now disconnect.