Welcome to Dometic Q1 Report 2018. Today, I'm pleased to present Johan Vargas, President and CEO Per Anne Lundqvist, CFO and Johan Lundgren, Head of Investor Relations and Communications. For the first part of this call, all participants will be in a listen only mode and afterwards there will be a short question and answer session. Speakers, please begin.
Hi, good morning, everybody. This is Juan Maris speaking. I have with me Per Blomqvist, CFO of Dometic. And I would like to welcome you all to this presentation in the Q1. 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're also very happy to communicate that integration of Cistar 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 and especially considering the headwinds that we see 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, but developing in line with expectations and we see an improvement in comparison to last year. And then I'm also very happy to see that we have appointed the new CEO, Anton Lundqvist, a very important decision for us in order to increase the pace of innovation. We have seen a dramatic 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 EUR 4,400,000,000 giving us a total growth of 29%, of which 10% was organic growth.
We had 2% negative effect from currencies. And obviously, we had the positive effect of the sister acquisition on M and A, but we also had some positive effect from Oceania that was acquired at the end of last year and that will be gone from Q2 2018. EBIT, very strong, plus 53 percent, achieving DKK 638,000,000 with an EBIT margin of DKK 14.4 percent in comparison to DKK 12.1 percent last year. Here, we have a positive effect of the Cistar acquisition affecting 0.4 percent, which means that the underlying EBIT improvement is a very, very solid 1.9 percentage points. And that's especially a consequence of many different activities.
So underlying, we have obviously margin improvements, reducing quality costs, we have reduced logistic costs, SG and A is also developing in the right direction. So 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 minus €27,000,000 which is still an improvement in comparison to last year.
EPS showed a pretty good growth of 27 percent reaching DKK1.27. 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 9 quarters, we have never been below 5% on organic growth. Looking at a compound annual growth rate, we are just now running at 13%, of which 9% is purely organic growth. Some very consistent development now for over 2 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 activities that we initiated started in Q3 last year are starting to kick in. We're looking at the 12 months rolling trend. We see an EBIT improvement of 1 percentage point. And even there, when we are looking at the compound growth rates, we are developing very nicely at growth rates, we are developing very nicely at 26%. And we maintain our target of achieving 15% during 2018, and we are working very hard to achieve that.
We're looking at the market we know that we are at all time high both in North America as well as in the EMEA region. But 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 affected our numbers. So in terms of Q2, what we can obviously state is that April so far looks very promising.
And that's obviously everything we can see so far. So, so far, so good in terms of the RB markets. On CBD, 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. And 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 markets.
Looking at marine, the market is still growing at a 3% rate in comparison to last year. And even here, we see a positive evolution of our own company achieving 6% organic all over the world. So again, very positive. Here we see also opportunities to develop both in terms of new product categories and their sister 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 in Australia. And this is a way obviously of reaching the end in 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 another 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, and we are getting more and more consistent in the way we are introducing ourselves to the pro 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 and we are also introducing new inverters, especially for the truck industry. And in 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 and our products and become more efficient as an organization. So that's one of the reasons again for investing in a new CTO. And 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, Cistar is performing well according to the plan, even though it's better than we expected from the beginning. We see a good evolution both from the CPV market where we are putting together a dedicated team to develop that part of the market. At the same time, we have also been investing in building up a team working on the retail segment and we have seen a very strong evolution during the Q1 this year. Great EBIT improvements in Americas where we see reduction cost reductions in logistics and distribution. We have seen also a positive slightly positive FX effect in Americas.
We also had a positive effect of class action giving us 22,000,000 euros 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. But I'm very pleased to see the evolution in the American markets. On the MENA 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.
And then we see is primarily 2 effects. 1, 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 reduction, 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 pricing, selective pricing in a number of products in a number of markets.
We see in EMEA obviously a a negative effect on the commodity prices. And we will continue to work very, very hard to compensate for unfortunately still increasing commodity prices. If we move over to the APAC region, RV markets, both in Pacific and in Asia and the same is value for the retail markets. As you all know, we are huge in the Pacific and we have been investing in Asia. I'm very happy to communicate that China did show 49% organic growth in the quarter, but not only China, the rest of Asia also did show a 38% organic growth rates with most of the segments developing very, very strongly.
EBIT on the contrary and the fact that we are obviously growing in Asia in comparison to Pacific or much strongly in Asia and Pacific is an effect on our margins in the region. And 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, what we are working on the growth, We are talking a lot about the RV market, but the reality is that when excluding RV, we have an organic growth of 9% for the entire diabetic 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 fermentation.
We have a very scattered 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 in SG and A, as mentioned previously, logistics, quality. And we are also spending quite a bit of time looking at what we can do more on digitization, where we even there we had a very fragmented setup.
And Beran 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 Perane.
Thank you, Man. If we take a slightly longer look than just the quarter and moving to the Metacorp 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 the IPO until the Q1 last year. It was a tough quarter. We had a lot of commodity pricing affecting us.
We were a bit late in pricing this. And 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 Q3 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, is growing. We are happy with that. 14% in constant currency on 12 months rolling is good.
But we can also see that we have a Marine business growing with 82%. Even if you exclude the Seast acquisition, we are positive there. A REIT and a lodging, we have been talking very much about this, but 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 and 2017, which has not been repeated.
But we can now see in the quarter that we're now picking up the growth as Juan mentioned before. So if you 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 percent, now it's down to 55%. And the Marine business now is close to 75%.
So 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 to last 5 years, we have become a much bigger company. 2030, we were roughly at €8,000,000,000 Today, we have passed €60,000,000 if you take the last 12 months rolling in turnover, an increase of close to 93%. More importantly is that we have increased the EBIT with close to 1 120%.
And this is a part that we will continue to pursue to make sure that we have profitable growth going forward. The this year with the last 12 months and last year that we are very close to 10% in the growth which we have been now for quite a while. The EBIT is now up to 2.1%, and we are pacing now at 13.8% in EBIT margin. And of course, we still have our ambition to reach the 15%. This is a good way onwards to the 15%.
Sometimes we forget also the EBITDA is now above 16 percent. 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. Our working capital, slightly higher than last year. I'll come back to that later on because the underlying development has been good. Cash flow, as I said, continue to be good and earnings per share is up 27%, and we're now pacing at 5.32%.
Percent. 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 U. S. Dollar compared to Q1.
If you recall, a year ago, we had a dollar that was more than $8.80 and the average rate that we are looking at right now is $8.30 This I would expect them to have a less negative impact going forward because the dollar has been strengthening the last couple of weeks in the last months. Euro has also been strengthening and that will strengthen even further. So we'll see even more positive effects on the translation effects in the domestic group. If we then look at the regional results, Fran 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, very good way. And you can see the efficiency programs that we initiated in the 3rd quarter now is yielding result and we also expect that to continue going forward.
Even though Americas had the $22,000,000 that we mentioned before, it's a good margin improvement. And we also had a COVID one day less in the month. So also 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, with 27%. We have slightly higher taxes this quarter.
You can see that the tax paid is up 19%. We have been around 7%, 8% on an annual basis last year. In the Q1, we were at minus 1. The reason for the 90% 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 C Store has its base in Canada. So we would expect that we will have higher pay 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. So we try to invest more during the second half of every year. Working capital, negative compared to Q1 last year. The The €25,000,000 is coming from the Caesar acquisition.
But you could see, if we exclude Caesar, we would have gone down to 21 point 6%. And I would expect the working capital order ratio for the working capital to improve during the year. And that is also based on the development, especially on the inventory side. We have increased working capital with $900,000,000 but roughly 6.50 $660,000,000 of that is from C Star. We had a slower start on the aftermarket both in Europe and 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 winter right now. So we will see effects both in Americas and Europe in the coming 4 to 5 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 3 quarters for domestic in 2018. Leverage, same pattern as last year. We went up on several one notches from 3.3 to 3.4.
This is sort of 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 growth targets. We are now going upwards towards the 15% and we are slightly above our net target, but we will see, as I said before, a pretty quick deleveraging process coming up in the coming quarters.
Juan? [SPEAKER JUAN CARLOS ALVAREZ DE SOTO:] Yes.
So altogether, if 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 system integration.
We believe that we have a great team and we are very, very optimistic about the evolution moving forward. Again, the CTO will have a major impact moving forward in our company. And just now management is working very, very hard to improve operational performance. So 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 growth, on running 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. And 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. So all in all, we feel confident that we will achieve our targets for the year. And with that, I would like to open the session for Q and A. Thank
you. Our first question is from Erik Karlsson, Industrial Equity Partners. Please go ahead.
Thanks for 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? And then on the pricing side, how much pricing have you taken growth and what have you achieved net?
Thank you.
Yes. I mean, we are talking about efficiencies. Obviously, we are working on many different lines. It's impossible just to have a one liner. If I if you force me to choose a one liner, obviously, I will say EMEA that we had a specific very specific program that was communicated at the end of Q3 or the Q3, 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. In terms of and obviously 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. So our target is in the 1st 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 compensated for raw material prices all over.
And we are compensating as well for the currency, the negative currency effects that we see.
Very clear. Thank you so much.
Thank you.
Thank you. Our next caller is Peter Reilly from Jefferies.
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 States. And then secondly, and sort of related to that, I'm interested to know more about the priorities of the new Chief Technical Officer. On the one hand, you talked about needing more modularity, scrap proficiency, too much fragmentation, but also you want to have more innovation that gives you better pricing and better gross margin.
So 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 some any meaningful impact from that? And then last, 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. It's been generally better than expected despite a pretty strong and not very fast growing Australian RV market. So if you could run through those, that would be great.
We'll start with the full 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, very strong in the Pacific area. We have been also strong in EMEA, while we were not existing in North America.
In North America, we have been building up an organization over the last, I would say, 6 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 calling in EMEA. And our ambition is to have even more dedicated resources across the EMEA region, while APAC, both Pacific, but also Asia is developing continues to develop in a very positive way in that area. So that's clearly one of the areas where we want to invest even more.
We believe that we have very, very competitive products. We have a very competitive product range and it's much more about developing a sales organization with fully dedicated resources in line with what I have been doing before. We are talking about the CTO and you have short term activities and you have long term activities or 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 these fragmented setup that we have today. I mean just to give you a sample, we have today 28 factories, 22 factories in the U.
S. Domestic. We are developing switches today in 4 different factories in 3 different continents. And the question is obviously, if we need to have that set up or if we need to start kind of beefing up and creating centers of excellence in line with any other global organization. So again, this we 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, it's much more on the generation planning. So 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. So on the short term activities, we are taking those kind of activities as we speak. On the long term activities, you will not see a new generation of thoughts in 2.5 years. It will take somewhere between 2.5 years to 3 years if we are talking about long term. So that's why we need to work on parallel in parallel on both.
And then on the weighting, APAC is 80%
I can take that. We are talking about roughly 75% in New Zealand and Australia. And we see a good growth in China. We are growing within the quarter with more 50%. But it's still a very small portion of that.
But we see a very, very good development in the Australia market. We are probably taking market shares, which is good, but we also would like to protect our margins. So we are focusing on the profitable growth. We have done very well in the Australia 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. Well, this is the best market for compressor driven cooling boxes in the world. And that also helped us now with new launches on new products and also helped us to grow the business double digit in Australia.
And 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 got very high numbers and percentage downs, but it's still relatively small. I guess the product is still not very well known. So do you think that the percentage growth rate can accelerate because you get greater market recognition there? Or 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 to compete in new markets?
Yes. These are very, very early days. So what we have seen as we just mentioned, we are growing big time from a 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 6 months.
It takes a while before you understand the growth, you understand the market and start selling. At the same time, I believe that we have a great potential. And then, of course, we foresee organic growth, and we will also start looking for acquisitive opportunities on that side. That's a segment that we are very interested in developing into the future.
Okay. Thank you.
Thank you. Our next caller is Rasmus Henbai from Handelsbanken.
Please go ahead. Hi. Can you hear me?
Yes, we can hear you.
Yes, good. So 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 to do you think you'll continue to grow throughout this year? Or does the sort of 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. But I mean, what we can see is obviously how the market will 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.
And of course, we are just as curious as you are. So 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. So 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. I mean, we cannot stop selling when the market looks as it does. We don't see any signal just now or the deterioration.
On the contrary, of course, that we are working on contingency plans and they are ready in other regions.
And as you know, Rasmus, I mean, the second quarter is the biggest quarter for us. So, when we have concluded that, then we will know much more how year end will look like. So I think it's too early to say anything whether we will exceed or not.
I think if we look at European and 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 Association, if we look at the statistics from American Association, they are still talking about the big numbers. And if we look at Q1 April, we still see good numbers.
We have a after the Q2.
Yes. Yes. And sort of related question, I know this is a very difficult question, but just trying to sort of big picture understand it like this 10% growth in Q1, how much would you guesstimate is price? And how do you see that trend? Do we I would assume that we require more and more price hikes throughout this year to offset raw materials, right?
I'm fully convinced. I mean, I don't see any signals just now that commodity prices will slow down. And our job is obviously to protect our margins. So we are not prepared to grow at any price. Yes.
And I think that's a very, very clear statement.
But I would guess that I mean if you have a 10% growth, I will say that majority is volumes anyway. Yes, sure. But it's a couple
of percent price or something. That's what I'm trying to understand.
I don't think we are talking about debt prices. I would consider we are talking about 1.5 percent perhaps
just now.
But again, that's a moving target. The problem with Rasmus is that that's a moving target. If you asked the question 1 month ago, I would tell you most probably a different number.
Yes, sure. I'm just trying
to big picture understand how this comes out through the year. And just a final question on growth. Is it fair to assume that Easter and the weather is kind of a more negative thing in EMEA than it is in the Americas? Yes.
I will say Eastern, yes. Yes. The weather, I mean, we have snowstorms in Which we have, yes. So it's I think well, there is similar, but it's also the celebrating time in the U. S.
So you have a double effect in EMEA, meaning the weather plus the Easter, while in North America, it's much more weather than Easter. Cool. Thank you. Thank you.
Thank you. We have another question from Erik Karlsson, Industrial Equity Partners. Please go ahead.
Thanks for taking another question. I would love to hear your reflections on C Star 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 most areas, we are very optimistic. We have seen some more growth than we expected. Of course, the question is always there, okay, whether was management a little bit cautious when was having a new owner. But we see better expected growth. EBIT margins are developing well.
This is a very innovative company working very, very hard on product development. So 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, how can we support the company to grow additionally. At the same time, 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 organizations.
So we feel very good. We feel very comfortable. And
if the customers haven't seen anything negative, this is going to be negative in order to work on the contrary, I would say. And the boats if you have those to open eyes on the lake still. So it's something that given that they have performed very well.
Very good. Thank you so much.
Thank you.
Thank you. We have a question from Joshua Weddington 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 and then give us kind of your expectations of the impact for full year 2018?
If we look at the impact so far this quarter, we'll say that we have a net effect of €15,000,000 to €20,000,000 negatively. And I would guess that we will be roughly at €60,000,000 €70,000,000 year end with the present prices.
Okay. So was that FX and raw materials combined?
That's only raw material FX is a bit we have some effects on the FX, but at the same time, it's we have hedges that are covering this. So 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 remain strengthening towards U. S. Dollar, that has been an effect.
On the other hand, we have had positive effects on strengthening of euro versus dollar as
well. So
overall, it's a bit of neutral, but you have positive effect, you can say, in Europe, negative effect in the U. S. Yes.
Thank you very much. And secondly, so I think you benefited in your EBIT from a €20,000,000 reimbursement in 1Q. Were there any other one offs? And are you expecting more reimbursements in the quarters in 2Q, 3Q?
No. I think we will see less reimbursements. We did not have any positive we have all the opposite and more negative effects on one day that's in the U. S. Business and also the cold weather and then also, to some extent, also tougher phase in the way we make on sales in the U.
S. So it's so I would say that you should not regard the American result as always on the contrary. But 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. And one final one, if I may. So you mentioned you're constantly monitoring the market numbers. How are the inventories of these looking at the kind of U. S.
Dealers?
They are a little bit higher than where they used to be 4 months ago, 3 months ago. But still, when talking to the players, they are still stating that they are under control. But they are still making orders. So we don't see again any dramatic changes so far.
But this is also of course something that we are following because you also say that there are slightly higher numbers in the inventory levels. But 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, Wisconsin. So it's difficult to know what is what, but we are following this very closely.
I go back to Perane'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. Okay. Okay. So we have one more question from Peter Reilly from Jefferies. Please go ahead.
Just two follow ups, please. Firstly, could you help us understand the SeaStar seasonality a bit? I mean, domestic itself is very seasonal. It looks like from what I can work out from your numbers, SeaStar is a bit less seasonal. So just to try and help us model what happens during the course of the year, maybe you could provide some color on that?
And then secondly, 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 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. So wouldn't it be best for everybody if you move to a pre PPA basis both for your targets and for your reported numbers?
If I start with other things that you need to include sort of all the things that you have. We have bought the company and you will hopefully go in the best. And I don't like what I call the F ups numbers as earning before all bad stuff. The is a part of the result that we have, and we need to be able to cover that. But I think it's good to look at the EBITDA because that's sort of a cash flow statement as well.
So we will keep that. I know that some are lighter to take this away, but it's for me. We need to cover this as
well. We are talking about seasonality. There is a slight difference. I don't think that we see a major difference. What we see at Cista is obviously that the share of aftermarket is slightly higher than we have for asset average.
So that so
again, no major effect. I don't think you should calculate with any major effect on seasonality.
Okay. That's very helpful. And I guess we can always do the PPA adjustment ourselves anyway, so we can choose how we which number to look at.
Yes. It's up to you. So as long as we are transparent about it, you can look at it. I mean, we're so for me at the end of the day, it boils down to what we can create on EPS. But 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. Again, 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 1st part of the year. So thank you very much.
All of you. And talk to you soon. Thank you.
Thank you. You may now disconnect your