Ladies and gentlemen, welcome to the Domestic Q3 Report 2018. Today, I'm pleased to present Johan Vargas, President and CEO Per Arne Blomqvist, CFO and Johan Lunden, Head of Investor Relations and Communications. For the first part of this call, all participants will be in listen only mode and afterwards there will be a short question and answer session. Speakers, please begin.
Hi, good morning, everybody. Povar speaking, and welcome to this call for the Q3 of 2018. I would like to start by saying that I'm happy to report what I consider to be strong results in a tougher market environment on the RV side. We have seen improvements in a large number of areas. We are today a bigger company.
We see as well how the diversification is playing an important role for us now when the RV market is becoming softer. We have a stronger AV development in all the regions. And I'm also especially happy to see how our strategic actions are starting to play an important role in the future of the company. On organic growth, it is clear that we have been affected by the situation in the RV markets. We have a good organic growth in the EMEA region.
We had a flattish evolution in Americas despite a weak RV OEM market, ending up a minus 7% in the quarter after 2 very strong quarters. APAC has been down partially due to the weaker RV market as well in the Pacific area, but also due to the fact that we have been leaving low margin businesses in Asia specifically. We have seen growth in 7 out of 8 businesses. We are also very happy to see that the aftermarket after a very weak Q1, we got a strong 2nd and third quarter. On the market side, it is clear that the RV OEM market that we have been describing on the inventory level has started to have an effect on our numbers.
And obviously, the market has been talking quite a bit about Americas. We see not just this slowdown in Americas, but also in the MENA region as well as in Pacific, and I will come back to that. Having said that, we have seen a continuous positive evolution on the rest of the OEM market, meaning marine and CPV as well as in the aftermarket showing a very strong development. And in the same way, I'm going to communicate that Systa continues to develop for us in a positive way. On the EBIT, we see EBIT improvements in the 3 regions.
On one side, obviously, we have raw material prices playing against us. On the other side, we have seen both the effects of pricing as well as efficiency gains that we have in 2 out of 3 regions. We have a strong operating cash flow as well. We are also very happy to have got the euro bond, the €300,000,000 bond at a good rate, 3%. And Perania will come back to that.
Last but not least, we have a new head of EMEA that was appointed a few months ago and that joined the company on the 1st October. If we look at the financials for Q3, 32% up in total growth with flattish evolution organic growth, plus 1%, 8% coming from currencies and 23% coming through the M and A, primarily in this case, obviously, Sistar. EBIT, strong EBIT evolution, 46%, reaching an EBIT margin of 15.6% in the quarter versus 14.2% last year. As mentioned previously, we had currencies sorry, raw material prices playing against us, while we have both price improvements showing up quite nicely in both EMEA and APAC, while Americas have not been developing in the same manner. And at the same time, we also continue to see efficiency improvements, especially in EMEA, but also in APAC and to a lesser extent in Americas.
Even in this case, we have a good cash flow evolution and EPS ending up at SEK1.47 which is minus 3% in comparison to last year. But then we need to consider last year we had net profit coming out of the sale of one of the buildings we had in China. Excluding for that effect last year, we would have been 32% up in EPS as well. If we move on to the 9 months period, sales 32% up, 7% organic, 3% currencies and 22% coming from M and A. In the same way, EBIT has been showing a very strong evolution, 46%, improving every margins 1.5 percentage points from 14.4 percent to 15.9 percent as a consequence of the same factors, as I mentioned previously.
Even in this case, cash flow has been developing very positively, and we have exactly the same situation on EPS. We are showing just now plus 18%, but excluding the sale of this building in China, we would have been showing 30 2% for the 9 months period as well. If we look at growth, we have been showing a very strong organic growth for a number of quarters. As I mentioned previously, we have been negatively affected in the quarter by the RV OEM market all over, while we have been showing pretty nice growth still on the AM side of RV and in the rest of the businesses. So we are showing good growth in 7 out of 8 businesses.
And the average quarterly organic growth ended up after the last quarter of 9%. If we look at EBIT, same. We keep on a good pace in terms of EBIT improvements. On the 12 months only number, we are just now 1.7 percentage points better than 1 year ago. And we see a positive evolution even in during the last quarter.
Looking at the market, and this is obviously I'm fully convinced questions that we are going to get in the coming days. We have seen clearly a slowdown during the last couple of months, especially in August September. We see in Americas, according to numbers from the Association, that American markets went up 9% 12 months rolling. And it is clear that we see when talking to the market, when talking to the industry, rest of the industry, everybody is talking about a correction for the high inventory levels that we have been experiencing. At the same time, we see the same situation in Americas as we see in EMEA as well as in Pacific.
I want to say Asia. Asia is a small market and still growing, but we see Pacific also coming down. And that means, obviously, that something is going on out there, and we are correcting for that, and we will come back to that. Again, we're looking at the 12 months rolling numbers, positive in Americas, plus 9% year to the 12 months rolling number, 9% in EMEA as well. We got information from the association just a few days ago that the top 5 markets across Europe did have a growth of 7% in number of registrations in August.
And we will follow obviously the evolution very closely during the months to come. Australia, we have a number of new players that are reporting to association and that's the reason for showing plus 2%. When excluding the new players, the market would have been showing minus 10%, which means that we are in parity with the situation in the market ourselves as well. If we move on to the other segments, CPV, we see still today positive evolution in Europe, and we are growing faster than the markets. We see as well very positive evolution in Americas.
And as you all know, we have been investing quite a bit during the last 12 months in building a good organization, a fully dedicated organization for CPV. We are starting to see awards coming in. We are talking about long cycles. So even if we are getting the awards just now, we will not see the revenues for a number of quarters, but it is moving in a very positive manner. So we are happy to see that.
On the marine, the U. S. Marine markets, we see as well positive evolution, plus 3%. We are developing both the automatic as well as sister much, much stronger than the markets. So obviously, we are taking market shares.
And then I would like to remind us that we have two factors on one side. We have a very strong position on the American market. But secondly, we also see a technology shift, which is helping us to grow much faster than the market as such. We continue to work on products and innovation. We have a number of important product launches lately.
We are showing just a new cooling box with double leads, meaning that you can open from 2 different directions. We are also improving in digital, so we will have communication capabilities. We have also launched a new switching platform for the marine industry, where we can connect all the electrical systems to the same device and being controlled through remotely, which is also very much appreciated in the American market. And last but not least, even in Australia, we are continuing to strengthen our market position by launching a new series of refrigerators on a narrow product range with added functionality and even their digital capabilities. If we move on to the different regions, Americas, flattish, 0 organic growth despite negative RV OEM market of 7%.
Aftermarket, on the contrary, grew very, very nicely, plus 15%. And we see a good evolution in marine markets. Up still the small numbers, but up 78%, showing again that the investments that we have been doing in the last 12 months are starting to pay off. Marine AM, very strong as well, plus 21%. And there are the AM market, plus 10%.
So this is a little bit what we have been commenting as well. There is no direct link between RV OEM and RV AM. And this is what we are starting to see in all the regions in respect to the RV markets. EBIT up 60%, an improvement of 0.2 percentage points. As I said, raw material and wage inflation playing against us.
At the same time, as we have been investing in both CPV and mobile cooling organizations, what we are doing is obviously that we are correcting for the situation. We have been adapting our capacity in the U. S. In the last couple of months. We are down 8% in number of FTEs in September 2018 in comparison to 2017, and we will continue to adjust depending on the situation.
Before we leave Americas, I would like to spend a couple of minutes more. First of all, we are not happy with America's performance. U. S. Did have a very strong evolution during the first half of the year.
Our volumes went up quite a bit. We were taking market shares. And it is our opinion that we could have done a better job in paying a little bit more attention to offsetting the commodity prices in the same way as we did in the other regions. So we were a little bit too slow in Americas. And I also believe that we were a little bit too slow in reacting relatively too slow in reacting on the noise in terms of the inventory levels that we could have started to adjust our capacity a little bit faster.
At the same time, after a couple of months in the company, we started to have a look as management strategically to what we could do to improve our performance over the place. We have started to look for manufacturing footprint activities, sourcing activities. And it is clear now that looking at the recent development in the RV OEM markets, what has been going on, on commodity prices and also the discussions about the U. S. Tariffs, those three factors are helping us to accelerate the efforts to increase the number of actions and reduce our cost base.
As I mentioned previously, we have reduced our number of FTEs by 8%, excluding Sistar. Sistar obviously is still showing a very nice growth, so we don't want to touch that. And so far, we are attacking our manufacturing structures, so to say. At the same time, we are still working on the impact on the full impact of the U. S.
Tariffs after the 3rd round of tariffs. We are working very, very hard to understand the full impact at the same time as how much we are going to mitigate the effects of the additional 15 percentage points, meaning totally 25 percent on Chinese products. So what I'm trying to say is that we have started to look at manufacturing footprint activities 6 months ago due to the fact that we have just now the situation with the tariffs. We are accelerating the entire process. We are looking at other countries to manufacture.
We are at this point looking very, very closely at Mexico. And we will be communicating clearly the net effect of the tariffs during Q4 or as soon as we have the final numbers. So a lot of activities in that area, obviously. At the same time, we also have to remember that the RMB has been devaluating heavily in the last couple of months. So just now, we are talking about 11% in comparison to the same period last year, and that will partially compensate obviously for the impact of the tariffs.
So that's why it's not that easy to say just a clear number here and now. At the same time, we will have a number of variables moving on. If we move over to EMEA, I have to say that I'm very happy to see the evolution has been very consistent across the entire year. Organic growth, still nice, 5%, with CPV OEM, another area where we have been investing during the last years, plus 15% marine OEM, 9% aftermarket 95%, RVAM still the same as in North America. We see that as RV OEM is coming down, RVAM is coming up heavily, marine aftermarket developing nicely and even lodging developing a very positive way.
I am especially happy to see as well that the margins continue to develop in a positive way. We have 160 basis points better than the same quarter last year. Here is really pricing, which is helping us. We have also efficiencies that we are gaining through the profitability program that we started 1 year ago, but we keep on finding new ways of increasing efficiency. We have a net improvement despite the raw material prices that are playing obviously against us.
If we move over to APAC, we went down 6%. Two reasons. 1 is, as I said, OEM, RV OEM markets, but we also left a number of low margin businesses that we have in Asia. We see why Pacific is coming down. Asia is still developing nicely.
We are 7% up in the quarter and even more obviously year to date. We have a number of businesses that are doing very, very well. Lodging was up 30% in the quarter. Marine was up 30% as well. And I'm especially pleased to communicate obviously the positive EBIT evolution that we see despite the fact that we have the wrong, so to say, geographical mix with Asia growing quite nicely at the same time as Pacific is slowing down.
Pricing is helping us. The fact that we left the low margin inverter business that we have in China And then again, mix and raw materials are playing against us. If we move over to strategy, we have been spending quite a bit of time as management pushing through a number of activities that we initiated some months ago. So I'm extremely happy, obviously, after the acquisitions of Systo, but also Oceania and S. A.
T. 1 year ago, 3 different acquisitions outside the RV environment, which will be helping to develop or to reduce our exposure to the RV markets. We have invested in building up dedicated organizations in Americas. We have also reorganized our EMEA operations, meaning that we have more people dedicated to the different segments. And I'm fully committed that we are going to see the same positive results that we saw in Americas before.
And the same is valid for the aftermarket, where we are dissecting what we On the RD organization, I commented a couple of times in connection to other reports that we are also starting to look at global probes and global technologies. We are reorganizing ourselves in order to improve our performance. We are working very, very hard in reducing our complexity, keep on working on reducing our number of SKUs. Happy to report that when looking at the last quarter, we are down 7% in number SKUs. And this is nothing that we are going to see in our results next month.
But over time, we will have a major impact in many different areas, both on the cost side, but also on the balance sheet. When we are talking about the inventories, this is one of the reasons obviously for our high inventory levels. On the operations, we are working in building up the sourcing a stronger sourcing organization with category management that we already had in Americas, but we are putting it together in Europe as well. We are also working on supplier quality. So we see evolution in those areas as well.
And then last but not least, as I said, we started the process of mapping our manufacturing footprint 6 months ago, and we are starting to get a very, very clear view on what to be done in the months and the years to come. Digitalization, another important area for us on one side in order to modernize the company, but also to reduce our cost. So on one side, we believe that we need to be to take an active role in the new world through e commerce that will also help us to reduce our cost on distribution. But at the same time, we need to get those infrastructures in place. So we are making all the progress on the ERP implementation.
We are going to go live in Q2 next year. This is going to be this is a global process and not just an American process. So we have the other regions also involved in this process. And with those words, I would like to hand over to Perane. Perane, please?
Thank you very much, Juan. Before we dig into the details on year to date and also the quarter, I'd like to start to look at the more long term trends. If you look at the slide with sales, say a bit on the margin over margin and cash flow, you can see that We are today on the last 12 months running at a rate of SEK 17,500,000,000. So we are becoming a much bigger company than we were just 2, 3 years ago. We have passed SEK 2,500,000,000 in EBIT.
We have now an EBIT margin of 14.7 percent and the cash flow has reached SEK 2,300,000,000. So it is a more robust and bigger company today than we were just a couple of years ago. Also interesting to look at the trends for the different business areas. We see more or less double digit growth in all different areas, 10% in RV and CPV, up 9%, retail lodging up 16% and then, of course, Marine up with close to 200%. If we then dig down to the Q3 and we have all comments about just 1% organic growth, I think it's given that we see that the RV business or the OEM business within RV is down declining with 6%.
It actually means that all other areas, as Juan said, is actually growing. If we take the aftermarket business in our business actually growing with 12% in this quarter. So net net, we're talking about the minus 1.3% for the RV in the quarter. And that also means that the rest of the business is growing at 5.2%. So we see growth in a lot of different areas.
And this is also effect of the better balance that we have today. RV now stands for 54%. The OEM part of the RV is 40%. And we will continue to strengthen these other areas, which means that even though a 6% down on the OEM market mean that the company as a whole shows negative growth. If we then take the 5 years perspective, you could see that we have mentioned that before that we are close to $17,500,000,000 and growing with more than 120% in net sales.
But even more important, our EBIT has increased with 170%. And this is also for the future continue to grow, but make it happen with improved profitability or sustained profitability. If you look at the key ratios, interesting to see that now the EBITDA margin is now getting close to 19%, 18.6 percent, both when it comes to year to date and also in the quarter. We have mentioned operating cash flow, dollars 8 43,000,000 means an increase of 28%. And as I said, dollars 2,300,000,000 in cash flow the last 12 months shows the strength of the company.
If we then look at the growth and the impacts from the different currencies, in the quarter we had translations effects of 8%, 80%, 90% of that is the U. S. Dollar and the euro is weak in the Swedish krona, sort of shows that we are especially given that we have so much businesses in both the euro countries and also U. S. Countries or U.
S. Dollar countries that affect us in a positive way that will have a weaker krona. If you look at the transaction effects, they are positive in the quarter, but we also have some negative hedges. But it's slightly positive overall if we compare transaction and also hedging effect. Juan mentioned there, remember, this has actually been weakening with 11% since April.
And that, of course, is partly than offsetting some of the increased commodity prices that we have seen. The regional results, happy to see that, especially APAC making a big jump from 17% up to 22% in the for the margins in Q3. That also means that on a year to date basis are higher than last year. They are at 22.2%. And it's, I think, is a good thing.
But we protect high margins in APAC, and we have done it with a, I will say, better mix, but also that we have taken out lower profitability products from our sales. EMEA, we mentioned, they continue to improve the margins. Americas actually improving on a year to date basis, slightly up in Americas in the quarter. But we should also know that if we look at these results, the effects from commodities is year to date roughly €75,000,000 so far. And we realized €32,000,000 of this in Q3.
And I will say 80% of that is actually hitting the U. S. So they are sort of very much hit them by more commodity prices in the Q3 than before. Looking at the earnings per share, Juan has mentioned that before. Do not forget that it's last year we had $166,000,000 in gain from the sales of real estate in China.
And that means roughly SEK 40,000,000,000 so that has sort of affected this. We have a low tax paid in this quarter. It's due to some repayments that we have seen. Normally, we would rather see that the tax paid will be closer to 15%. It was 13% it's 30% year to date.
We'll get that it will probably be 15% at year end. Total tax today 25%, somewhat lower in the quarter, but we should expect roughly 25% for the year end. We continue to invest in the company. You can see that CapEx is at 2.2% and also that our product development is at roughly 2%. We invest, I will say, as much as we can and that we think is good for us right now.
For us, it's not a question about the demand side, it's also how effective we are. And I think at this level right now, we feel comfortable with that. We invest at the right pace, but also try to be slightly more effective as Juan has mentioned a couple of times before. Working capital, a bit on the high side, especially the in Americas, we have seen inventory go up. It's also on the finished goods.
We have also seen some on the supply side as well. Clear ambition to continue to take it down. We have seen good progress in EMEA and also in APAC and we are struggling a bit in the U. S, but we will take it down over time. Working capital in absolute terms, dollars 4,300,000,000 is lower than in the Q2, close to 300,000,000 dollars And we will continue to work with that also in Q4.
And that means that we expect to continue to have good cash flow. We had a cash conversion of 100%, 1% to 1% in Q3 and even more than that in Q2. And Q4 is normally a very good cash quarter as well, and we expect the Q4 this year to be sort of show the same trends that we have seen the years before. Leverage is down to 3.1. If you look at this in constant currency of BB3.
We have also the quarter raised a euro bond 300,000,000 dollars at 3%. Good pricing, I would say, given our rating, but it was well received in the market. But it also means that if you look at the leverage, some of the analysts I think has missed also that the higher leverage and the higher debt that we have in connection Sees acquisition also means higher cost. We are roughly now at 3% 3.6% in interest rate cost and that means roughly $400,000,000 per year in interest cost and you should take that into account when you look at the EPS. Financial targets, we have still the 5% when it comes to net sales growth aiming to reach the 15% this year.
Net debt, too, and that remains the same. And we will think we will come back to that roughly in the Q3 next year. There is no change on the dividend policy. So, Jan, please?
So summarizing the Q3, obviously, we are not happy about the organic growth of 1%. At the same time, we are happy or the fact that we have been diversifying the company for a while and that showed up obviously in the quarter, where we are showing that despite the 7% negative on RVVM, we are still showing growth. And I believe that we are becoming a stronger company for every day. Good profit evolution in both EMEA and APAC, more to do in Americas. I believe that we should have been a little bit faster.
It is quite clear that we are looking just now what is going on, on the RV market all over, and we are adapting our capacity immediately. I mentioned before that we are down 8% in number of these in Americas, but we are down 2% in EMEA despite the positive organic growth. We are down 6% number of FTEs in APAC and giving you a minus 5% in number of FTEs across the group, and we will continue to adapt. On top of that, and as a consequence, as I said, all the manufacturing footprint activities and the tariffs, the situation with the tariffs, we are looking at accelerating our manufacturing footprint and that will lead to us, Dometic, coming back to you during Q4 with more details and number about the restructuring program that we intend to proceed with. So I think that's a very important piece of information.
On inventories, we have been discussing a number of times. We are taking also specific actions. We are just now hiring a number of people that will be fully dedicated to help us to bring it down once for all. That will be, of course, supported by the complexity reduction that we are is taking place and where we already see complexity coming down in a number of areas across the company. So when looking at all these factors and taking everything into consideration, we keep our outlook of 5% organic growth for the year, and we keep aiming at an EBIT margin of 15% for 2018.
And with those words, I would like to open for the Q and A session.
Thank The first question comes from the line of Lucie Carrier from Morgan Stanley. Please go ahead.
Hi, good morning, gentlemen, and thanks for taking my question. I will have 3 questions and I will take them one at a time. The first one is on the North American margin specifically. You've had the C star contribution, which we know is accretive. You've also had double digit growth in aftermarket from what I understand.
And per previous comment, generally, this exposure is also quite nicely margin accretive. But the profitability expansion year on year is quite limited. So I understand the RV market was on OE side was down quite substantially. But it seemed to me that you had been expecting this slowdown in the RV market as per regard to your guidance and if only the comp base. So I'm just trying to understand what has been the evolution around the operating leverage on the OE business.
Has that taken you by surprise in terms of the deleveraging maybe from the lack of growth? Just for us to understand a little bit because from what we understand of the industry, the outlook is not necessarily on the improving side from here.
I mean, it's quite clear. I mentioned that before, Lucie. We are not happy. I do believe that we have been too slow and that we should have reacted much faster. And obviously, that's why we have been reacting now in the last weeks and we have taken down the number of people and we are looking at our pricing as well.
So it's crystal clear. I think that we have been suffering from sometimes you suffer from your own success. And obviously, the fantastic growth that we had during Q4, Q3, Q4 last year, Q1 and Q2, even if people were talking, we were not seeing these numbers coming through. Now we got the numbers coming through and we didn't react fast enough.
And then once again, as I said, I mean, we had an impact from raw material coming in the quarter. We had $32,000,000 for the whole group and more than $20,000,000 of that was in the U. S. So it hit them pretty badly in the Q3.
I understand of the impact, but you had kind of highlighted to us that you were expecting some slowdown in the raw mats. So it seems that you had known at least at the level of the company from your communication.
Saket, I mentioned already we were just low.
And then also, if you look at the quarter as such, I mean, we had also more of a slowdown also in September where some of the manufacturing actually closed down the 1st week in September, closed under production. So it's been a pretty rapid change in the models, I would say, in the late part of the quarter?
[SPEAKER JOSE HUMBERTO ACOSTA MARTIN:] September came as a cold shower, and it became as a cold shower all over in terms of RV. So it was Americas, EMEA and back at the same time.
Okay. Understood. The second question I had was more around the current trading. I was seeing after you reported this morning, I guess you had a press call, you were mentioning that October was kind of tracking better than September. But when this is tracking better than September, are we talking about a positive growth number?
Or it's just kind of sequentially better? And how should we think also about that in terms of the comp base?
I think it's better than September. At the same time, you have to go back to Q4 last year and see what happened in Q4 last year. It was extremely high. So if you look at the numbers after 3 quarters and consider that we are stating 5%, that's telling you that we are expecting still a negative growth for Q4. So we prefer to be a little bit more cautious and to start taking out cost at the same time as we will adapt obviously if we see the RV market is looking better than we're expecting just now.
At the same time, I have to convey the message. We see this in the RV markets and the RV OEM rather standing for 40% of the business. We are growing in all the other businesses. And we don't see any signals so far, we don't see any signals anywhere else. So it's very much limited to the RV OEM and it's not just Americas, it's all over the place.
Okay. And just my last question more on the strategy and all your initiatives. So, Juan, you've been at the company now for almost a year, I mean, 10 months. You have spoken very early on about a lot of the initiatives you wanted to take. You've detailed some of them around reducing the SKUs.
You're now looking at the manufacturing footprint, procurement and so on. Can you give us maybe I mean, I'm guessing you're now quite advanced in looking at that in almost 1 year. Can you give us maybe a bit more granularity around the savings that you're expecting from those initiatives, but also the implementation? Because my concern is, it might be maybe a multiyear and we are facing quite a year and we are facing quite a lot of headwind at least in the short term.
Well, obviously, to tell you a number here now, it is something that I cannot do. What I can tell you is that we will come back during Q4 with a structured program. The structured program is not going to be run over a number of years, simply because there is no company that can run 10 factories or 6 factories or 7 factories in 1 year. We need to take a step by step, But what is going to happen is that we are going to act already now to mitigate or eliminate the risks that we have in 2019. And then we will take it from there.
And that's going to be obviously in Americas, but not just in Americas. We are also going to look at Europe. As I said, this is nothing new. We have been looking now for about 6, 7 months. But obviously, we are accelerating the plans due to the tariff situation and the RV headwinds.
All right. Thank you.
So give us some more weeks. We'll come back.
Thank you. The next question comes from the line of Peter Reilly from Jefferies. Please go ahead.
Well, good morning. You obviously had a very good quarter in terms of the art market growth, plus 7%. Can you give us a bit more color of what's going on there? I'm particularly interested in whether you've seen some positive weather impacts and therefore the underlying rate is maybe slower than that. And also I'd like to know a bit more about the retail business in the U.
S. Where you got particularly strong growth. So maybe you can help us understand what's happening there. And I guess that's mainly your mobile coolers business. So maybe we can start with that one, please.
No. It will start from with the last question is totally right. So obviously, we started to invest in the mobile cool business about 1 year ago, And we see very strong growth, still small numbers though. But if I look at the quarter, I think we were up some 78%, which means that we are some 57%, 58% after 9 months, which is pretty strong. We see as well coming back to the total aftermarket, we see also lodging, where we had a very strong growth in the quarter plus 18%.
We see RV AEM developing very nicely. We see also marine AEM developing very nicely. CPV has been a little bit weaker on the AEM side, while it has been very strong on the OEM side. So, I think what we see on the AM market is really the consequence of having more dedicated people spending more time in developing AM. I think it's crystal clear.
It's not in one region, but it's in other regions as well, which is obviously very, very pleasing to see. That was the second question. The first question was, please?
Weather, where you
Yes, the weather. Yes, I mean, it's always ups and downs, right? I mean, of course, that you could say that Q3 could have been positively affected in some areas, while the fact that it has been so long that definitely you as well that people have not been using the equipment as for a period of time. Then we are forming also from a Q2 where we saw improvement despite the fact that we had a late spring. So I cannot tell you, I mean, lodging is not influenced by the weather.
We are talking about retail, perhaps a little bit. So it's impossible to me to say might have been, but I do believe that the reality is that we have been spending a lot of time in developing focusing on the AAM organization and getting more dedicated resources. We have today if you compare the situation today with situation 1 year ago, we have dedicated organizations for lodging, We have dedicated organizations for mobile cooling. We have dedicated organizations for CPV. And of course, that is paying off and will pay off.
And we will just now with the situation on the RV OEM, it is clear that we will invest even more in developing those areas of the company.
Yes. And if I can just come back on the RV, OEM aftermarket split. You said that, obviously OE you have the headwinds you all know about, but aftermarket is developing favorably. How much of that do you think is just a sort of natural issue where if the aftermarket if the OE is weak, therefore, you get more interest in aftermarket? I mean, is how does that countercyclicality work and how long does it last?
And you also said in your comments that you were seeing bad news everywhere, but the European data on RV OE has been generally holding up better than the U. S. Data. So are you also getting nervous about the European OE for next year as well?
I have exactly the same feeling. I believe that we have if you look at the numbers that we have in terms of EMEA is registrations. So, registrations have been positive, but it doesn't tell you obviously production. What we see in our numbers is what we are delivering to the OEM manufacturers. So if I go back to the first question or first comment, is it countercyclical?
I don't think that I can tell you after 1 quarter. I do believe that if you look at Q2, we had, as I said, late spring, we had a very weak April, but we saw a pretty strong May June as well, despite the fact that we were growing big time on the OEM side.
So then I'll think I'll answer Peroni here. I think that, I mean, we can't look at the sort of trends in 1 quarter. And remember, as Juan said, it was a very, very slow start, which meant that no one's actually stocked up, which they normally did in May June, and we are seeing that happening right now. But it also shows that we have a seasonality. I mean, we're often talking about cyclicality.
We have a seasonality, which is important that when we see the change, I mean, you will see this kind pattern. But I think it's a combination of perhaps a later stock up but also the dedicated organization.
Yes. And then if I can just lastly finish with the your product development spend is not going up as a percentage of sales, but you talked a lot about the growth initiatives. Do you still expect to take up product development as a percentage of sales? Or is that something you're going to review given maybe a weaker end market outlook than you had 6, 9 months ago?
I think that we need to have some time just now in order to get the organization in place. So I think that I communicated before that we are revising as well what we are doing. Pro development was very much connected to the different factories historically. We see that we are diluting our investments by doing so. We are creating centers of excellence.
We have created 3 global products, 3 global technologies. And just now to invest at the same time as we are going through all those changes will be wrong. I think we need to get it right first and then we will invest, we will increase the pace of investments.
But at the same time, we actually increased the $75,000,000 in absolute terms. So don't forget that, because I mean, this is the you're talking about something in relative terms. So actually have increased this year with $25,000,000
Okay. Thank you.
Thank you.
The next question comes from the line of Daniel Smith from Danske Bank. Please go ahead.
Yes. Good morning, Juan and Perrone. I just wanted to ask you two questions and start with raw material. And Juan, you said that you were slow in adapting the pricing in the U. S.
Market. How should we view raw material into the last part of this year? I think you said it was €32,000,000 and negative impact for the quarter and €20,000,000 in the Americas. Would you dare to give us any sort of estimation for the last quarter?
Yes. We have I mean, if you look at the estimate for the whole year, it's down €90,000,000 which means that we have done €50,000,000 to go. So I mean, what we also have seen is some kind of improvements now during the last quarter that we have lower prices. So it's nothing dramatically happens. We should have less of an impact in the Q4 than we have had in the Q3.
So both the steel and aluminum that are important to us have been coming down in Q3 in comparison to the 1st 2 quarters. The question here is obviously, is that going to continue? Because it has happened in the last couple of years a couple of times that the pace of increases came down, became even negative, but then it rebounds back after a while. So just now it looks it has been looking in the 1st 2 quarters. All right.
Thank you. And I think you mentioned also before that you're doing you were lagging with the price hikes, but I guess those are going to be more aggressive now in the U. S. In Q4 versus what you saw in Q3 then. So those sort of $15,000,000 are they going to be more sort of more evenly spread across the regions?
Absolutely. I mean, the message has been very, very clear to all organization. Yes. Okay. And as you see, I mean, we managed to do it in both EMEA and APAC, and there is no reason for managing in the Americas.
I think this is more home cooked than anything else.
Yes. Okay. Good. Just and then finally coming back to RV in EMEA again. And I think you were quite clear that you saw weaknesses in all regions.
And again, at the same time, you have these registrations data being quite positive. These are, of course, lagging data. But what's your feeling in terms of sort of inventory correction need or risk in EMEA or in Europe, so to speak, by the end of Q3 going into Q4?
Customers, European customers, everybody is telling me that this is an inventory correction and things will be fine. The question is, should we wait or should we act? And obviously, we are acting. Yes. Pacific is a different ballgame.
If you look at the market in Pacific, it has been growing even in the good times, it has been growing somewhere between plus 2% and minus 2%. So Pacific is an acceleration of the this acceleration of the growth that we haven't seen has been very, very low. But both Americas and EMEA have been extremely optimistic. They are still optimistic, but I don't dare to be optimistic.
Would you say that dealers in Europe have taken on slightly bigger inventory risk this year versus last year?
I think that happened during the Q1, perhaps during the 1st months, but I do believe that what we are seeing just now. Obviously, when we are producing less, and registrations are coming still up, I believe that there is a correction by the OEM manufacturers at this point.
Okay. Thank you. Thank you so much.
Thank you.
The last question comes from the line of Rasmus Enghberg from Handelsbanken.
Please go ahead. Yes. Hi. Can I ask you about the U? S?
Given that you have such a strong increase in the share of aftermarket sales relative to the RV OEM, yet we don't see that much operating leverage. But you say that you have taken us a lot of staff, but did that really happen during the quarter? Or is that something that has a future impact rather than
No. I said September at the end of September, we were 8% fewer people. So obviously, if you don't see the savings in September, you will see the savings through. And then the other question, if I relate to that one as well, the slow price increases in the U. S.
Took place both on the OEM side as well as on the AM side, And that's what is disappointing and that's what we are currently.
Yes. And if you want us to say which is the bigger problem that you had too many people in the factory or that you were late with the pricing, which one is the sort of bigger factor in this quarter?
I think it's a combination. I really believe it is a combination of both.
And then I
think if you look at the quarter, the effect, I mean, September was really poor for us. August was not that bad and July was okay.
Yes. And then a slightly kind of bigger question. You have said in the past that sort of you need to deserve the right to grow and that you need to sort of get to your margin targets before embarking on an expansion strategy. Considering the sort of clearly weaker market and the fact that you will do some footprint adjustments, I suppose, does that mean that you will sort of put a break on your expansion? Or is that a separate thing?
Or how do you see that going?
No. I think we have underlying if you look at our numbers, we have underlying improvements in a lot of different areas. And the fact that we need to correct capacity in on the RV market and we need to reduce headcount in a number of factories doesn't mean that we should stop everything. In my opinion, it's the other way around. Just now, we need to put even more attention to the other businesses.
I mean, this is to some extent funny because the entire I mean, if I look at the discussions that we had since I joined the company, you guys have been questioning how long the RV market is going to continue. And I have stated that's why it's so important to diversify and to reduce the weighting for the RV market. So to me, it's just even more important now.
Right. Okay. Thank you.
Thank you.