Welcome to Dometic Q1 Report 2018. Today, I'm pleased to present Juan Vargues, President and CEO, Per-Arne Blomquist, CFO, and Johan Eliason, Head of Investor Relations and Communications. For the first part of this call, all participants will be in the listen-only mode. Afterwards, there will be a short question and answer session. Speakers, please begin.
Hi. Good morning, everybody. This is Juan Vargues speaking. I have with me Per-Arne Blomquist, CFO of Dometic. I would like to welcome you all to this presentation, the first quarter. Thank you for your interest. Starting with the highlights for the year. Q1 became a pretty strong quarter for us with very good organic growth in all regions, with APAC showing strong 16%, Americas showing also a very strong 12%, and EMEA 6%. We are also very happy to communicate that integration of SeaStar is proceeding very well and totally in accordance with our initial plans. I'm extremely happy to see as well our strong EBIT improvements with EMEA executing well on the profitability program that was initiated in Q3 last year.
On top of that, we have been obviously spending quite a bit of time working on our pricing, especially considering the headwinds that we see on the raw material prices. We have seen a positive effect out of those efforts. On cash flow, a good development as well. Of course, this is the weakest quarter we have every year, developing in line with expectations. We see an improvement in comparison to last year. I'm also very happy to say that we have appointed the new CTO, Anton Lundqvist, a very important decision for us in order to increase the pace of innovation. We have seen at Dometic at the same time as we will start working even harder on reducing complexity and increasing efficiency. If we have a look on the financial summary.
Sales achieved over SEK 4.4 billion, giving us a total growth of 29%, of which 10% was organic growth. We had 2% negative effect from currencies. Obviously, we had the positive effect of the SeaStar acquisition on M&A. We also had some positive effect from Oceanair that was acquired at the end of last year. That will be gone from Q2 2018. EBIT, very strong, +53%, achieving SEK 638 million with an EBIT margin of 14.4% in comparison to 12.1% last year. Here we have a positive effect of the SeaStar acquisition affecting 0.4 percentage points, which means that the underlying EBIT improvement is a very solid 1.9 percentage points. That's especially a consequence of many different activities. Underlying, we have obviously margin improvements. We are reducing quality costs, we have reduced logistic costs. G&A is also developing in the right direction.
We see a lot of underlying measurements that are starting to kick in. On the contrary, we see also a negative effect from currencies as well as from material prices. That's why it's so important for us obviously to work even harder on the pricing. Cash flow ended up at SEK -27 million, which is still an improvement in comparison to last year. EPS showed a pretty good growth of 27%, reaching SEK 1.27. If we move over to the long-term trend, we see that sales growth has been very consistent since the company was listed. During the last nine quarters, we have never been below 5% on organic growth. Looking at the compound annual growth rate, we are just now running at 13%, of which 9% is purely organic growth. A very consistent development now for over two years.
When looking at the EBIT trend, obviously here we are working very hard to improve even more, and we see again that a lot of the activities that we initiated starting in Q3 last year are starting to kick in. When looking at the 12-month rolling trend, we see an EBIT improvement of one percentage point. Even there, when we are looking at the compound growth rates, we are developing very nicely at 26%. We maintain our target of achieving 15% during 2018, and we are working very hard to achieve that. When looking at the market situation, and of course, we are very much aware that this is very much a question of the day on the RV market, especially. Far, so good. We know that we are at all-time high, both in North America as well as in the EMEA region.
When looking at Q1, we are still very happy with evolution. We have to consider in this case that we have a negative effect from the Easter that happened one day in March and one day in April this year in comparison to the situation last year where Easter took place in April. On top of that, we have also been suffering both in the EMEA region as well as North America from the cold weather. That has been, again, affecting our numbers. In terms of Q2, what we can obviously state is that April so far looks very promising. That's obviously everything we can see so far. Far, so good in terms of the RV markets. On CPV, we see a different evolution in EMEA, which has been still growing at a 3% rate, while North America is developing strongly during the last months.
I have to say, I'm very happy to see what we are doing in this segment of the market, where we are just now growing at a pace of 25%, which is very strong. One of the reasons for this growth is that we are getting more and more dedicated resources in both EMEA and Americas, and we are starting as well to invest in APAC to develop into that market. Looking at Marine, the market is still growing at a 3% rate in comparison to last year. Even here, we see a positive evolution of our own company achieving 6% organic all over the world. Again, very positive. Here we see also opportunities to develop both in terms of new product categories, and there SeaStar is obviously playing an important role.
At the same time as we see opportunities to grow even faster outside North America in comparison to the situation we have today. When looking at the market, I was very positively surprised about the work that we have been doing during the last quarters. It was very pleasing to see that we published the first e-magazine Australia. This is a way, obviously, of reaching the end users. It's a way of creating demand. The first number of this magazine reached 110,000 individuals in the Pacific region. We are evaluating just now the results in order to investigate whether we should also go and do exactly the same in other regions. At the same time, we keep working hard on our One Dometic.
We have had a number of shows with a great attendance all over the place. We are getting more and more consistent in the way we are introducing ourselves to the market. I'm glad to see that as well. A number of product launches during Q1 as well, with Americas launching a few products, especially for the RV market. While EMEA, we have been focusing quite a bit on the CPV market. We have a new control with new software. We are also introducing new inverters, especially for the truck industry. Then APAC, we have a new series of refrigerators, having a narrow design and much improved aesthetics. I have to say, this is an area where we are going to see further investments.
I believe that we have a lot of potential to increase the pace of innovation, to have more launches more often, at the same time as we work on reducing the cost on our products and become more efficient as an organization. That's one of the reasons, again, for investing in a new CTO. Just now we are doing a job in mapping out where we have the resources, how many resources we have, and how we increase our efficiency. If we look at the different regions, Americas, this show a strong growth, organic growth of 12%, with the RV market still developing in a very positive way. As I mentioned previously, SeaStar is performing well according to the plan, even a little better than we expected from the beginning.
We see a good evolution both on the CPV market, where we are putting together a dedicated team to develop that part of the market. At the same time as we have also been investing in building up a team working on the retail segment. We have seen a very strong evolution during the first quarter of this year. Great EBIT improvement in Americas, where we see cost reductions in logistics and distribution. We have seen also a slightly positive FX effect in Americas. We also had a positive effect of class action, giving us SEK 22 million in reimbursements. That also impacted our numbers. At the same time, we also have a negative impact from the raw material prices that are affecting all of the regions. I'm very pleased to see the evolution of the American market. On the EMEA region, more of the same.
Very strong growth in Germany, good growth in Southern Europe, despite the cold weather and the Easter effects. EBIT, very positive evolution, reaching 12.3% in the quarter versus 10.6% last year. There we see is primarily two effects. One, what we have been doing on the efficiency program that we have been running in EMEA is running very well. We have achieved 95% of the headcount reduction that we were looking for. We have a few people to go, and we see already, obviously, the savings in our numbers. At the same time as we have been compensating the commodity price increases through selective pricing in a number of products in a number of markets. We see in EMEA, obviously, a negative effect of the commodity prices. We will continue to work very hard to compensate for, unfortunately, still increasing commodity prices.
If we move over to the APAC region, very solid growth, 16%, with good evolution on the RV market, both in Pacific and in Asia, and the same is valid for the retail markets. As you all know, we are huge in the Pacific and we have been investing in Asia, and I'm very happy to communicate that China did show a 49% organic growth in the quarter. Not only China, the rest of Asia also did show a 38% organic growth rate, with most of the segments developing very strongly. EBIT, on the contrary, and the fact that we are obviously growing Asia in comparison to Pacific or much stronger in Asia than Pacific, is having an effect on our margins in the region.
Even there, we are just now working very hard to compensate the commodity prices that are affecting us, and we have new price increases in the pipeline as we speak. If we move over and look a little bit at the most important areas where we are working on the growth. We are talking a lot about the RV market, the reality is that when excluding RV, we have an organic growth of 9% for the entire Dometic Group. We are also working hard on developing the aftermarket, and we saw a pretty good evolution during the quarter. There is more to do there. We see also that through the additional focus that we are paying to CPV, retail, and lodging, we have good opportunities to develop those segments moving forward, and we will see more of that moving on. On innovation, I already talked about the CTO.
The target there is obviously to start working on our fragmentation. We have a very scattered setup in terms of sites, RD sites, and pro development. We want to move more into global products and develop a number of platforms all over the globe. At the same time as we also look at a number of shared technologies, where we will put together a number of resources to increase the pace of innovation. At the same time, as we are working on reducing our cost all over, we have seen good evolution at G&A, as mentioned previously, logistics quality. We are also spending quite a bit of time looking at what we can do more on digitization, where even there we had a very fragmented setup, and Per-Arne and his team is doing a great job in starting to really put together a strategy for the future.
A lot of attention into operational excellence. With those words, I would like to hand it over to Per-Arne.
Thank you, Juan. If we take a slightly longer look than just the quarter and move into the Dometic Group trends, you could see that, and also the ones that have been following us know that we have had a good sales growth from actually our IPO. This has continued, and we also improved the results from there to until the first quarter last year. It was a tough quarter. We had a lot of commodity pricing affecting us. We were a bit late in pricing this. We increased the efforts to improve efficiency and also to be more strict on pricing when it comes to just commodity increases. You can see now from the third quarter last year that the trend is now sort of moving upwards, both when it comes to the EBIT margin and the EBIT in absolute terms.
That's a good trend, and it's something that we will pursue and make sure that we can continue to show also in the coming quarters. Operating cash flow has been good, and we'll continue to show a very positive development. This is a highly cash-generating company, and even now after the acquisition of SeaStar, we have a good underlying cash flow. If you look at the trends of the different businesses, very often a lot of discussion around the RV business. Yes, it's growing. We are happy with that. 14% in constant currency on 12 months rolling is good. We can also see that we have a marine business growing with 82%. Even if you exclude the SeaStar acquisition, we are positive there. Retail and lodging, we have been talking very much about especially the retail business and the mobile cooling business is growing with 23%.
CPV, slightly below these growth numbers. We had a big project when it comes to AC stations during 2016 and 2017, which has not been repeated. We can now see in the quarter that we are now picking up the growth, as Juan mentioned before. If we just take the quarterly growth, CPV is now close up to 5%. The split of the different business areas has also slightly changed. Before we had an RV business of 65%, now it's down to 55%, and the marine business now is close to 25%. I would say overall, it's a good growth in the different businesses, and we are not only relying on the growth in RV. If you look at the pace that we have right now and go back the last five years, we have become a much bigger company. 2013, we were roughly at SEK 8 billion.
Today, we have passed SEK 15 billion, if you take the last 12 months rolling in turnover, an increase of close to 93%. This is a path that we will continue to pursue to make sure that we have profitable growth going forward. Looking at the key ratios, I mentioned some of these, but you can see also if you compare Q1 this year with the last 12 months and last year, that we are very close to 10% in growth, which we have been now for quite a while. EBIT is now up to SEK 2.1 billion and we are pacing now at 13.8% in EBIT margin. Of course, we still have our ambition to reach the 15%, and this is a good way onwards to the 15%.
Sometimes we forget also EBITDA is important for us when it comes to cash generation, and this is also a number that we look at very closely, even though that we might not discuss this so much in the different calls. Working capital, slightly higher than last year. Come back to that later on because the underlying development has been good. Cash flow, as I said, continued to be good. Earnings per share up 27%, and we are now pacing at SEK 5.32. If we take the net sales bridge, yes, we have had some effects from currencies, but it has been different effects. In this quarter, we saw a negative development on the US dollar compared to first quarter.
If you recall, a year ago, we had a dollar that was more than USD 8.80, and the average rate that we are looking at right now is USD 8.30. This I would expect to have a less negative impact going forward because the dollar has been strengthening the last couple of weeks and the last months. Euro has also been strengthening, and that will strengthen even further, so we will see even more positive effects on the translation effects in the Dometic Group. If we now look at the regional results, Juan has already mentioned about the margins, but I would like to emphasize that especially EMEA, which had a tough quarter last year, actually is increasing in a very good way, and you can see the efficiency programs that we initiated in the third quarter now is yielding result, and we also expect that to continue going forward.
Even though Americas had the SEK 22 million that we mentioned before, it is a good margin improvement, and we also had the cold weather, one day less in the month. So I would say that the increase that we see here is not affected by the reimbursement as such, but we have a good underlying performance in the American region. Earnings per share, up with 27%. We have slightly higher taxes this quarter. You can see that especially the tax paid is up to 19%. We have been around 7%, 8% on an annual basis last year. In the first quarter, we were at -1%. The reason for the 19% is that we have a withholding tax in Hong Kong for a dividend that we took out, that we had to pay for. We also have generally higher taxes paid in Canada.
We have one of the biggest entities within SeaStar has its base in Canada, so we will expect that we will have a higher paid tax going forward. We have been below 10%, but I will say that we will be around 10% or slightly north of that number. CapEx and product development, nothing dramatic. We continue to invest roughly at 2%, both in CapEx and also in product development. CapEx is usually a bit seen at the beginning of the year. We will increase CapEx at the end of the year, purely due to the effects of peak seasons in some of our major regions. We try to invest more during the second half of every year. Working capital, negative compared to Q1 last year.
SEK 135 million is coming from the SeaStar acquisition, but you could see if we exclude SeaStar , we would have gone down to 21.6%, and I would expect the working capital or the ratio for the working capital to improve during the year. That is also based on the development, especially on the inventory side. We have increased working capital with SEK 900 million, but roughly SEK 650 million, SEK 660 million of that is from SeaStar . We have a slower start on the after-market, both in Europe and in Americas, which have not taken down the inventory levels as we have expected, but we will expect to see lower inventories coming out now with the sun shining outside the window right now. We will see effects both in Americas and Europe the coming four to five months.
Cash flow, slightly better than last year, and we should now expect to see more or less the same pattern that you could see in Q2 to Q4 for 2017 now coming up in the coming three quarters for Dometic in 2018. Leverage, same pattern as last year. We went up on several notches from 3.3 to 3.4. This is according to our plans, and you will also see a deleveraging process starting, and we will be around 2.5 at year-end. Finally, the financial targets. We are beating the long-term net sales growth targets. We are now going upwards towards the 15%, and we are slightly above our net debt target, but we will see, as I said before, a pretty quick deleveraging process coming up in the coming quarters. Juan?
Yeah. All together, we summarize Q1. We are very pleased with evolution. We have seen a very solid organic growth of 10%. We have also seen a very strong growth outside the RV markets, achieving 9%. We see good profitability improvements across many lines. We are pleased with the SeaStar integration. We believe that we have a great team, and we are very optimistic about evolution moving forward. Again, the CTO will have a major impact moving forward in our company. Just now, management is working very hard to improve operational performance. We are looking at different areas to keep on developing our margins in a positive way. In terms of the outlook, we stick to our initial outlook, 5% on organic growth as a consequence of the lifestyle trends. We still see positive consumer confidence. We are investing in pro-development.
We will see more of that moving forward. We are also spending a lot of time to expand outside the RV markets. In terms of profitability, we will achieve 15% during this year, and we will also achieve a leverage of 2.5 times EBITDA. All in all, we feel confident that we will achieve our targets for the year. With that, I would like to open the session for Q&A.
Thank you.
Thank you.
If you have a question for the speakers, please press 01 on your telephone. Our first question is from Eirik Karlsson, Industrial Equity Partners. Please go ahead.
Thanks for the excellent report. I would like to discuss the first sentence of your report, please, where you said Dometic has had a positive start to the year with our efficiency and pricing initiatives beginning to generate results. Would love to break that up into efficiency and pricing. What have you done on efficiency so far, and what's left to do? On the pricing side, how much pricing have you taken gross, and what have you achieved net? Thank you.
Yeah. We are talking about efficiencies. We are working on many different lines. It's impossible just to have a one-liner. If you force me to choose a one-liner, obviously, I will say EMEA. That we had a very specific program that was communicated at the end of Q3 or the report of Q3, and we started to see the effects in Q4. We have seen a lot of effect during Q1, obviously, and we will see additional effect moving forward. That's not the only thing that we are doing. We are working all over just now, not just to work on the short term, but also on the long term to start seeing consistent improvements during the coming years. In terms of pricing, you are very much aware of the commodity prices. We have started to increase prices at the end of last year.
We continue to increase prices during Q1 this year, and we see more prices coming through simply as a consequence of the commodity prices coming up. Our target is in the first place to compensate for that. In the second place is obviously to start looking at products, variances where we don't have volumes enough and where we need to be a little bit more aggressive, obviously. I don't have a number to give you just now. I believe that what we see just now is that we are well compensating for raw material prices all over, and we are compensating as well for the negative currency effects that we see.
Very clear. Thank you so much.
Thank you.
Thank you. Our next caller is Peter Wylie from Jefferies. Please go ahead.
Good morning. I've got three questions, please. Firstly, can you give us a bit more detail about your new product initiatives? I'm thinking particularly of active cool boxes and SUV coolers and CPV in the U.S. Secondly, and sort of related to that, I'm interested to know more about the priorities of the new Chief Technology Officer. On the one hand, you talked about needing more modularity, scale efficiency, too much fragmentation, but also you want to have more innovation that gives you better pricing and better gross margin. I'm just interested to understand a bit more about his priorities and how long you think it's going to take before you start to see any meaningful impact from that.
Lastly, I'd like to know a bit more about APAC, how big Australia is today, how big China is, and whether you think you're just at the start of a longer period of growth in China. Because I think APAC has taken most people by surprise over the last couple of years, been generally better than expected, despite a pretty strong and not very fast-growing Australian RV market. If you could run through those, that'd be great.
Yeah. We start with cool boxes. We have seen a fantastic evolution all over, I have to say. Obviously, we have different weight in the different regions. We have historically been very strong in the Pacific area. We have been also strong in EMEA, while we were non-existent in North America. In North America, we have been building up an organization over the last, I would say, six months. It's still early days, very early days, but we see already now that we are getting into a number of stores. We are getting into a number of retailers, very important retailers in the market that are trying us, and we foresee major improvements moving forward.
We have seen a fantastic evolution of mobile cooling in EMEA, and our ambition is to have even more dedicated resources across the EMEA region, while APAC, both Pacific but also Asia, continues to develop in a very positive way in that area. That's clearly one of the areas where we want to invest even more. We believe that we have very competitive products. We have a very competitive product range, and it's much more about developing as an organization with fully dedicated resources in line with what I have been doing before. If we are talking about the CTO, you have short-term activities, and you have long-term activities.
On the short-term activities is really to map out, on one side, the complexity we have in terms of SKUs, in terms of similar products that are still not the same, in terms of where we have resources, how many engineers do we have, mechanical engineers, electronic engineers, software engineers. How we can get from this fragmented setup that we have today. Just to give you a sample, we have today 28 factories, 22 factories in the Dometic. We are developing three chips today in four different factories in three different continents. The question is obviously if we need to have that set up or if we need to start beefing up and creating centers of excellence in line with any other global organization.
Again, as a company, we are doing a good job, but I believe that we can become much more industrial or industrialized than we are today. Just now, again, on the short term is number of SKUs, how do we reduce number of SKUs? How do we reduce the complexity we have? How do we improve our competitiveness at the same time as we are reducing our inventories, obviously. On the long term, is much more on the generation planning. We want to focus a lot on generation planning, on common platforms, and on modularity, which means exactly the same. We cannot have 50 people developing electronics in 25 different countries. We need to have centers of excellence. Obviously, that will take a longer while. On the short-term activities, we are taking those kind of activities as we speak.
On the long-term activities, you will not see any generation of products in two and a half years. It will take somewhere between two and a half to three years if we are talking about long term. That's why we need to work in parallel on both. On the weighting, APAC is 80-
I can take that. We are talking about roughly 75%, is New Zealand and Australia. We see a good growth in China. We are growing in the quarter with more than 50%, but it's still a very small portion of that. We see a very good development in the Australian market. We are probably taking market shares, which is good, but we also would like to protect our margins. We are focusing on a profitable growth, but we have done very well in the Australian market, which has been rather flattish. We should not forget the aftermarket retail business as well. Talking about the cooling boxes, this is one of the best markets, this is the best market for compressor-driven cooling boxes in the world.
That also helps us now with new launches on new products, that also help us to grow the business double-digits in Australia.
If I can come back, please, on the active cooling boxes. Obviously, in the U.S., you're coming essentially from 0, and the market didn't really exist because it was just plastic boxes where people put ice in. What do you think in terms of the growth trajectory? You've got very high numbers now in percentage terms, but it's still relatively small. I guess the product's still not very well known. Do you think that the percentage growth rate can accelerate because you get greater market recognition? Do you think that the percentage growth rate slows down just because the numbers get bigger, and it takes time to penetrate what is in effect a completely new market?
Yeah. I think that these are very early days. What we have seen, as you just mentioned, we are growing big time from small numbers. We will continue to grow big time for a number of quarters. Again, we have a team that we put together in the last six months, it takes a while before you understand the pros, you understand the market, and start selling. At the same time, I believe that we have a great potential. Then, of course, we foresee organic growth, we will also start looking for acquisitive opportunities on that side.
That's very helpful. Thank you.
That's a segment that we are very interested in developing into the future.
Okay. Thank you.
Thank you. Our next caller is Rasmus Engberg from Handelsbanken. Please go ahead.
Yes, hi. Can you hear me?
Yeah, we can hear you. Yeah.
Yeah, good. I was a little bit curious about how you think about the growth rate. Now, you're doing roughly 10% organic growth in this quarter. As you move forward, do you think you'll continue to grow throughout this year? Does the 5% organic growth, does that imply that there might be a negative quarter towards year end, or how do you think about that with whatever plans and visibility you have?
I would love to have a crystal ball, I have to say. What we can see is obviously how the market did grow in Q1. We can see just now how April looks like. It looks promising. We don't see any signals at this point of any slowdown. Of course, we are just as curious as you are. We are following this every single week. We are looking at the numbers we are getting, we are looking at order intake, we are looking at registrations, especially in the RV market. We are looking at the stock levels. The only thing we can do, obviously, is what you are doing. Is to look at that and to be prepared. At the same time, it's exactly the same. We cannot stop selling when the market looks as it does.
We don't see any signals just now of a deterioration. On the contrary, of course, that we are working on contingency plans. They are ready in all the regions.
As you know, Rasmus, the second quarter is the biggest quarter for us. When we have concluded that, then we will know much more how year end will look like. I think it's too early to say anything whether we will exceed or not.
If we look at European, again, coming back to the RV market, which is still today the most important market for us. If we look at the statistics from European Caravan Federation, if we look at the statistics from Recreation Vehicle Industry Association, they're still talking about the big numbers. If we look at Q1 and April, we still see good numbers.
Well, you have to build a start in a way, let's see after the second quarter.
Yeah.
Yeah. Sort of a related question. I know this is a very difficult question, just trying to big picture understand it, like this 10% growth in Q1, how much would you guesstimate is price? How do you see that trend? I would assume that we require more and more price hikes throughout this year to offset raw materials, right?
I'm fully convinced. I don't see any signals just now that commodity prices will slow down. Our job is obviously to protect our margins, we are not prepared to grow at any price.
Yeah.
At least, I think that's a very clear statement.
I would guess that, if you have a 10% growth, I would say that majority is volumes anyway.
Yeah, sure. It's a couple of % price or something, that's what I'm trying to understand.
Again, we are talking about the prices. I would consider we are talking about one and a half perhaps, just now. Again, that's a moving target. The problem, Rasmus, is that that's a moving target. If you asked the question one month ago, I would tell you most probably a different number.
Yeah, sure. I'm just trying to big picture understand how this pans out through the year. Just a final question on growth. Is it fair to assume that Easter and the weather is a more negative thing in EMEA than it is in the Americas?
Yes.
I would say Easter, yes.
Yes.
Weather, I don't know, because we had snowstorms.
In Chicago, California.
Yeah. I think weather is the same, but the Easter is also the celebrating time in the U.S.
You have a double effect in EMEA, meaning the weather plus the Easter, while in North America is much more the weather than Easter.
Cool. Thank you.
Thank you.
Thank you. To ask a question, you will have to press zero one on your phone keypad.
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Okay, we have another question from Eirik Karlsson, Industrial Equity Partners. Please go ahead.
Thanks for taking another question. Would love to hear your reflections on SeaStar now and how the integration process is going. Anything that is going a little bit better than planned, and anything that is a little bit slower than planned, perhaps?
We see, I guess, in both areas, we are very optimistic. We have seen stronger growth than we expected. Of course, the question is always there, okay, was management a little bit cautious when was having a new owner? We see better than expected growth. EBIT margins are developing well. This is a very innovative company working very hard on product development. We like that a lot. Cultural-wise, we are very similar as companies, so we have a very good feeling and obviously we are spending a lot of time understanding the company and how can we support the company to grow additionally. At the same time as we are also looking at how do we get their products to be sold across EMEA at the higher levels as well as in APAC using our organizations. We feel very good. We feel very comfortable with that.
If the question is, have you seen anything negative? Discussing negative, not at all. On the contrary, I would say. They have performed very well in the first quarter, but they also had issue with cold weather. It's very difficult to put down the boats if you have snowstorm and ice on the lakes then. I think given that, they have performed very well.
Very good. Thank you so much.
Thank you.
Thank you. We have a question from Joshua Beddington from Morgan Stanley. Please go ahead.
Thanks, guys. A couple of questions, if I may. Can you just quantify the raw material and FX impact in Q1, then give us your expectations of the impact for full year 2018?
Yeah. If we look at the impact so far this quarter, I would say that we have a net effect of SEK 15 million-SEK 20 million, negatively. I would guess that we will be roughly at SEK 60 million-SEK 70 million year round with the present prices.
Okay. Was that FX and raw materials combined?
That's only raw material. FX is a bit, but we have some effects on the FX. At the same time, we have hedges that are covering this. I think you see more effects on the translation than on the transaction right now. Even though we have had, especially when it comes to the krona strengthening towards U.S. dollar, that has been an effect. On the other hand, we have had positive effects on strengthening of euro versus the U.S. dollar as well.
Okay.
Overall, it's pretty neutral, but you have positive effect, you could say, in Europe, negative effect in the U.S.
Yeah.
Thank you very much. Secondly, I think you benefited in your EBIT from a SEK 20 million reimbursement in one Q.
Yes.
Were there any other one-offs, and are you expecting more reimbursements in the quarters into Q3, Q4?
As reimbursements, we did not have any positive. I would say, rather, we have all the opposite, have more negative effects on one-off effects in the U.S. business, and also the cold weather, and then also to some extent, also tougher phasing that we make on sales in the U.S. I would say that you should not regard the American result as always said on the contrary. You will see less of these kind of reimbursements going forward. There will be, but how much, I don't think that will be this magnitude.
Okay, thank you. One final one, if I may. You mentioned you're constantly monitoring the market numbers. How are the inventories of RVs looking at the U.S. dealers?
They are a little bit higher than they were they used to be four months ago, three months ago. Still, when talking to the players, they are still stating that they are under control, and they are still taking orders. We don't see, again, any dramatic changes so far.
This is also, of course, something that we are following, because we also see that there are slightly higher numbers in the inventory levels. The question is, what is what? How much is the impact from cold weather? I mean, we had snowstorms just a week ago in Madison and Wisconsin, so it is difficult to know what is what. We are following this very closely.
I go back to Per-Arne's comments. I do believe that we need to have Q2.
Q2 will give us a very good indication about the numbers moving forward.
Okay. Thank you very much, guys.
Thank you.
Thank you. If you wish to ask a question, please press 01 on your phone.
Okay.
Okay. Sorry, we have one more question from Peter Wylie from Jefferies. Please go ahead.
All right. It's two follow-ups, please. Firstly, could you help us understand the SeaStar seasonality a bit? I mean, Dometic itself is very seasonal. It looks like from what I can work out from your numbers, SeaStar is a bit less seasonal. Just to try and help us model what happens during the course of the year, maybe you could provide some color on that. Secondly, a sort of philosophical accounting question. Your EBIT margin now, you've got a significant negative impact from PPA amortization, about 110 basis points in Q1. Why report EBIT after PPA when it's a sort of non-cash quasi goodwill amortization charge, especially when you're comparing with a 15% margin target that was set when you had a minimal PPA amortization burden.
Wouldn't it be better for everybody if you moved to a pre-PPA basis, both for your targets and for your reported numbers?
If I start with that, I think that you need to include sort of all the things that you have when you have bought the company, and you will, for good or the bad, and I don't like what I call the EBABS numbers. That's earning before all bad stuff. The PPA is a part of the result that we have, and we need to be able to cover that. I think it's good then to look at the EBITDA, because that's a sort of a cash flow statement as well. We will keep that. I know that some will like to take this away, but for me, we need to cover this as well, given how it is. Yeah.
I mean, we are talking about seasonality.
Yeah.
There is a slight difference, but I don't think that it's a major difference. What we see at SeaStar is obviously that the share of aftermarket is slightly higher than we have for as an average. Again, no major effects. I don't think you should calculate with any major effect on seasonality.
Yeah. Okay. That's very helpful. I guess we can always do the PPA adjustment ourselves anyway. We can choose which number to look at.
Yeah. I mean, it's up to you. I mean, as long as we are transparent about it, you can look at it. I mean, for me, at the end of the day, it boils down to what we can create on the EPS. It's difficult to take it away on EPS level.
Okay. Thank you very much.
Thank you.
There are no further questions at this time. Please go ahead, speakers.
Okay.
I would like to thank you all for paying attention to us. Again, my final words is that we are very pleased with our report. Obviously, a month doesn't make a summer, and a quarter doesn't make a year, but we are very pleased with the first part of the year. Thank you very much, all of you, and talk to you soon. Thank you.
Thank you. You may now disconnect your line.