Hello, and welcome to the Dometic Q1 2022 Earnings Call. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a short Question- and-A nswer Session. Please also try to limit the number of your questions to two. Today, I'm pleased to present Juan Vargues, President and CEO, Stefan Fristedt, CFO, and Rikard Tunedal, Investor Relations. Speakers, please begin.
Hi. Good morning, everybody, and welcome to the presentation of the first quarterly report for 2022. As usual, we are very, very grateful for your attention. With that said, I would like to move on immediately to the report. Q1 2022 became our strongest quarter, strongest Q1 report ever. We have a strong backlog. We see retail inventory levels lower in several areas than we have seen historically. We still perceive supply chain constraints. Of course, as a consequence in this occasion of the Russian invasion, increase in raw material prices again. Of course, that leads to inflation, interest rates increases, and due to all of that, an uncertainty microeconomic situation. Performance-wise, we feel that we are in our strategy.
We are showing 55% sales growth, totally speaking, which is leading to a far improved sales mix. We keep on increasing prices to compensate for the negative effects of the cost increases. We are very pleased to see our EBIT margins ending up at 14.8, which is in reality matching what we delivered one year ago when excluding acquisition. When excluding, sorry, Igloo. We see Igloo also coming in at a level which is higher last year. With that, we mean an EBIT, EBITDA margin above mid-single digits. Good to see as well our leverage ending up at 2.7, despite the fact that we paid for three acquisitions during the quarter.
As we already communicated a few months ago now when the pandemic is fading away in the Western world, at least we are accelerating our restructuring program. That's why we communicated the closure of the manufacturing site in Elkhart. Looking at our financial performance, SEK 7.5 billion in total sales or 55% total growth, with 10% organic, 5% FX, and 43% due to the M&A. EBITDA strong SEK 1.1 billion or 39% up versus last year, leading to an EBITDA margin of 14.8% compared to 16.5% one year. The difference is obviously the dilution effect of the Igloo acquisition. Adjusted EPS ending up at SEK 2.27, compared to SEK 1.85 last year. Operating cash flow negative SEK 398 million.
We are building up inventories for the strong season that we are initiating now. On top of that, we have a different seasonality profile with the new acquisitions that we completed in recent months. Of course, we also have an FX effect and the cost increases that are kicking in in our inventories. As I mentioned already, leverage ended up at 2.7. We are very pleased to see growth in all the segments. We are very pleased to see growth in all our sales channels. I will come back to that. Organically, 7% organic growth, with growth in the same way in all the segments, but APAC that came in slightly below last year, showing growth in all the sales channels, which is very pleasing. Looking at the application areas, strong growth all over.
Climate driven very much by RV and Marine, food and beverage. You have a major effect, obviously, of Igloo. The reality is that we see strong growth in residential, we see a strong growth on the RV side, and we see a strong growth in hospitality. In terms of hospitality, we are just now running at higher levels than we were running just before the pandemic. That market has recovered for us totally. Power and control also very strong growth on one side driven by Marine, but on the other side driven by the mobile power solution acquisitions that we have been doing. Other applications is also growing everywhere, even if that's a minor part of the business. Looking at the sales channels, also very pleasing to see that everything is rolling very nicely. It's not the market.
As you can see, 30% the OEM part of the business, 23%, especially in Americas, I would say. While Europe is more affected by the lack of chassis. Distribution, very nice growth, very much driven by, as I said, Igloo, but also residential and hospitality. Of course, the transformation of the company that is taking place is also leading to lower exposure to the OEM business, as has been a part of our strategy from the beginning. As you can see, the OEM business has come down from 55% to 44%, even if we are showing clear growth organically. Which is again, very good from a cyclicality perspective, and that makes us to be a stronger company today than we were a few years ago.
The OEM, which is of course the interest of many, or many of our listeners, ending up at 28% versus 33% one year ago. Looking at our profitability, 14.8% versus 16.5%. Again, the dilution effect from Igloo. We see as a positive, the sales growth and pricing activities that we are implementing on continuous basis to mitigate for the cost. We have cost-saving activities all over the place, and we have a positive effect of currencies. At the same time, we have a negative influence of the Igloo dilution. We have a negative segment mix and channel mix in the historical Dometic, meaning that the OEM side is growing faster than distribution and service and aftermarket. We see freight cost and raw material prices continuing to go up.
Of course, inefficiencies created by supply chain constraints all over the world. It's very good again to see that EBITDA margins are in parity with what we performed last year. That, to be clear, was the best Q1 ever in the history of Dometic at the time. Moving over to the different segments. Americas, SEK 1.9 billion or 49% total growth with organic growth of 9% in all application areas. Very strong OEM business. We see growing order intake, including on the RV side, and a backlog which is at higher levels than one year ago. EBITDA, SEK 130 million or 22% higher EBITDA. EBITDA margin 6.8%, driven by sales growth and pricing, efficiency improvements. We have continued to work to lower the impact of the tariffs.
We see, as I said, a positive currency effect or the negative sales mix, since OEM is growing much faster, and we see as well supply constraints and raw material prices and freight costs as usual. In this case, I would like to mention or to pay special attention to the shutdown in Elkhart, where we used to manufacture refrigeration for the American market. That is just now moved to other plants in Americas. Looking at EMEA, strong growth. Again, 30% organically, 9% FX growth driven in several application areas. Very strong service aftermarket growth. In this case, the lack of supplies from the chassis manufacturers to the OEMs is slowing down our growth. We see positive effects of the recent acquisition of Cadac and NDS.
Strong EBIT improvements, 385 million or 56% versus last year with very nice EBITDA margin improvements of 300 basis points. I will not repeat myself. Basically, we are influenced by all the same parameters as we were mentioning for Americas. Specifically, special mention I would like to make to obviously Russia, the situation in Russia, where we have stopped all the business activities and made an accrual for that. APAC. Same. SEK 535 million segment sales or 25% totally. Organic growth, though, -2% after a very strong Q1 last year. Q4 2020 was weak for APAC because of pandemic. Q1 was strong, and that explains the negative in Q1.
Other than that, very nice development, driven by power and control, the Enerdrive acquisition. We see backlogs higher than last year as well. In terms of EBITDA, strong improvement, 31% up versus last year, ending up at SEK 136 million, with an EBIT margin ending at 25.3%, which is also very positive to see when we already have very high margins. Again, that's basically the same parameters affecting our margins in APAC. Moving to Marine, this is the first time that we are reporting Marine separately. Almost SEK 1.5 billion in sales, 12% total growth, organic 3% growth driven by steering systems and power and control. Backlog higher than last year. We are very happy to have completed the acquisition of Treeline.
Another step in this mobile power solution area that we will come back to in a few minutes. EBITDA ending up at SEK 371 million or 12% up versus last year, and once again, the same situation. The impact, the shortages of electronics is having the most impact on the Marine business in comparison to the other businesses. Some more data about Marine, since this is the first time that we are reporting separately. We used to have a historical business in Dometic in both in the air conditioning area, but also refrigeration. Then we did the SeaStar acquisition at the end of 2017. We can say that we have seen a fantastic development evolution since the acquisition.
We have been growing nicely, showing a CAGR of 7%, and especially we have seen it's a very, very nice profit improvement profile during the last years. We are today present in steering control, mobile power solutions, climate control, and fluid systems, and we see good opportunities to keep growing in this business area. What is driving this growth is very much the growing number of engines, the boats, more boats. We see also a clear technology shift from mechanical systems to hydraulic and electronic, which is going on. We have a much heavier content from service aftermarket. So service aftermarket stands for 45% of the entire marine business. That will continue as the systems are becoming more and more electronic, that require more and more service and upgrades, which is very positive for us.
We see also very good opportunities to upgrade the huge install base that we have on the marine side. The big opportunity that we see on top of that is obviously to really develop globally. We have a extremely strong market position in Americas, in the rest of the world, but we see even more opportunities in the rest of the world, both organically and through acquisitions. Moving over to Global, where, as you know, the huge part of Global today is Igloo, ending up at almost SEK 1.4 billion, totally an organic growth of 12%. Igloo developing very strongly on the top line when looking at the pro forma development of Igloo, but also very nice growth in the other Global verticals, meaning today, primarily residential and hospitality.
EBITDA 91 million or over 600% over last year. Again, I will not repeat myself where what I can mention specifically in the case of global is that Igloo is coming in with margins above the margins that they were showing in Q1 last year. Q1 last year was not impacted by the negative evolution on the resin prices that we saw from the end of Q2 and for the rest of the year. We see a very good performance in that business. A couple of words about Igloo, where is that growth coming from? It's on one side, volume growth, but it's also the consequence of the increased average sales prices that we have been implementing as a consequence of both on the prices, but also product innovation.
I will come back to that in a couple of minutes. Profitability, I already mentioned. We see resin prices after the Russian invasion coming up again. We have already implemented new price increases to compensate for the new price increases. We feel that we will see a good evolution even in the coming quarters. The integration is progressing very nicely and very active ongoing and continuous contacts on daily basis. Then we have taken an important decision to further invest in building up or strengthening our existing platform, Mobile Cooling. Which means in this case that we are expanding capacity. We are going to move our active cooling production from Asia into Americas to boost both Igloo, but even most especially Dometic, the Dometic brand moving forward in American markets.
Coming back to these average prices, this is really, you look at the lower part of the slide, that's where you see the old product range that we used to sell to Walmart. You have the average prices for every single product. On the upper side, you see if you look at the Overland 25, for instance, a $59 average that you should compare with what we are charging today for the Laguna 16 or 28. We are moving in reality from average $20 to average net $59 for the same volume. You can do the same exercise yourselves when moving, when looking at the different products. That's what we are doing through innovation. We are really upgrading entire product range, rejuvenating the products, and offering many more benefits to the customers.
That innovation drives the average price and the margins at the same time. Acquisitions, Treeline, we communicated. This is another step in order to on one side grow the service aftermarket business through more electronics, but also the mobile power solutions in the marine industry. They are doing what we have been doing both in the outdoor business and on the RV side, but for marine applications. We are very, very happy. It's a $30 million company with nice profitability as well. Talking about mobile power solutions, we are extremely pleased with the evolution in the last 12 months. We have moved from turning a few hundred million SEK into almost a SEK 2 billion business. After six acquisitions, we see very strong growth.
We see that this underlying trend, that it will be there for many years, driven very much by sustainability and the demand for electrification. The more electrification we see, the more Mobile Power Solutions are going to be needed. Profitability for these businesses is above Dometic average, meaning that has also a positive accretive impact moving forward. What is really positive is the underlying growth trend in that business. If we move over to e-commerce, D2C, we also see improvements. We continue to roll out the new software platform. It is implemented in the U.S., it is implemented in Australia. We implement it in Scandinavia during Q4. We implement it in four new European countries during Q1, continue to do it during the rest of the year.
We have moved in the last 12 months from 2% of the revenues we have in service and aftermarket and distribution into 4%, which is doubling the business. Even here we are[inaudible]
Apologies[Crosstalk] for the delay. We will now go to our next question, which is from the line of Fredrik Ivarsson of ABG. Please go ahead.
Hello. Do you hear us?
I can hear you, yes.
We're not done with the presentation. What is
We got disconnected.
We got disconnected, yeah.
Please accept our apologies. Please continue with your presentation now.
Okay. D2C.
There we are. Well, first of all, I would like to apologize. I don't know what happened with technology, but we are back. Yeah. What to say? D2C. I was on D2C. I'm just mentioning that it is not just organic growth.
[Foreign language]
Juan Vargues is back. I apologize terribly for what happened. I don't know, this is technology, and we don't know. We will need to look after the call. I was moving to restructuring program, where we have announced during the quarter the closure of Elkhart. With that means that 20 locations have been impacted since we started the program. The cost that we took during the quarter is SEK 156 million. That brings the accumulated number to SEK 455 million since we announced in October 2019. We are working obviously to accelerate the program, and we are fully convinced that we will deliver what we promised by mid-2023.
Looking at the strategy progress, we are very happy to see, obviously, that the distribution service level of the market is today 56%. We communicated a couple of years ago that our target to start with was 50. We're already above that, and we continue to move the needle even more. Organic growth in all sales channels, in four out of five segments. Three acquisitions completed during the quarter, and happy also to show that D2C is doubling in comparison to one year ago. Innovation index is slightly below last year's numbers, and this is really impacted by the shortages that we see on the supply chain. We are fully convinced that we will recover that in the coming quarters.
We have won a number of design awards during the quarter, and we see a strong pipeline, as I mentioned, for 2022. On the cost reductions, I would like just to mention that we keep working on complexity, and we are down to 65% in comparison to the number of SKUs that we had, 2018, despite the fact that our innovation index is growing big time and that we have more products on the market than ever before. Sustainability, another area where we are paying great attention. We see injuries coming down, and we are very close now to achieving our targets or being below 2%, yes. On female managers, we are unfortunately standing still, even if we have a huge number of activities behind.
We'll continue to work very hard to achieve that number as well. CO2. Good job. We are implementing renewable electricity in all the factories, and this is what is kicking in stepwise, quarter by quarter. We are down 29%. We have a target of 30%, and we will beat that target as well. Then we also communicated a new KPI, which is the 100%—the 90% implementation for all new suppliers that we are taking in. We have been working during Q1 in putting in place all the processes and will be reporting from Q2 our achievements. With that said, Stefan, I would like to hand it over to you, please.
Thank you, Juan. Just want to go into the P&L here and highlight a couple of things in that. Going to the items affecting comparability, which is a total of SEK 159 million in the quarter. The majority of that is related to the acceleration of the cost reduction program. Then we have the SEK 22 million related to the closure of our Russian operation. Approximately 75% of this is non-cash items. To go a little bit faster here, I go to the next slide, the EBITDA bridge. We, on the organic and the currency-related effects, we see that sales growth and pricing is contributing positively, cost saving activities. On the other side, we have inefficiencies in our own operation due to supply constraints.
We have freight costs and raw material price increases, and we have a negative effect of the channel and segment sales mix. Obviously, the currency translation transaction effects are positive in the quarter. Igloo EBITDA margin above Q1 last year, and it's above mid-single digit margins on Igloo. The other acquisitions are contributing nicely, and they are delivering above Dometic average margins in the quarter. Going on to the cash flow for the period, highlight a couple of things. The operating cash flow is SEK -98 million. It's obviously driven by strong sales and demand. We also have a seasonal build-up in acquired companies. We have to prioritize that we secure availability of critical components.
We have the lead times that are still long. CapEx is up in absolute terms, but it's reduced somewhat in percentage of sales. Acquisitions is contributing to with SEK 628 million in the quarter. It's related to Cadac, MBS, and Treeline Capital. Moving on to the next slide, operating cash flow in a time series here. Here you see Q1 is our weakest cash flow quarter, and it's even negative now. As I mentioned before, it's driven by some of the newly acquired companies who have an even stronger seasonal pattern compared to the historical Dometic. We are now moving into the strong cash flow part of the year. Working capital, the different components, accounts payables, we are making good progress in extending terms with suppliers.
On the accounts receivable side, we see a stable development. Obviously on the inventory side, that's where we see the biggest build-up, and that's driven a lot by the longer lead times and the supply chain constraints. Moving on to the next. The acquisitions that we have done, the 10 acquisitions we have done over the last two years. As you can see up to the right, the seasonal pattern is stronger than if you compare it to the historical Dometic profile. Where Q2 and Q3 are accounting for significantly more than 50% of the total annual sales. If we look on where we have done the acquisitions, it's mainly in distribution and service and aftermarket.
They have a stronger seasonal pattern, but on the other hand, they are contributing with reducing cyclicality in Dometic. Moving on to the next, CapEx and research and development. CapEx is stable. Going forward, we are going to see somewhat increased CapEx level due to some of the acquisitions that we have done, but it is in line with what we communicated on the Capital Markets Day. R&D innovation continues to be in focus in Dometic. We are up 20% in absolute terms, a little bit lower in relation to net sales, but in absolute terms, we continue to invest in innovation. Moving on to debt maturity profile and leverage. We have a well-diversified profile with an average maturity of 3.5 years.
We also have our undrawn revolving credit facility of EUR 200 million. Our net debt leverage ended up on 2.7, which is in line with the targets of around 2.5x over a business cycle. We completed three acquisitions in the quarter. They contributed with 0.1 on the leverage. We still maintain a strong deleveraging profile, 0.6-0.8 times in a year. Final slide from me. Just putting Dometic in a four-year perspective, I think it's important. If we look on the left-hand table, we have the reduced leverage in line with target of around 2.5x .
Right now, 2.7x , but back in 2018, we were on 3.4. Keep in mind, 2.7 is still with the fact that we have completed 10 acquisitions over the last two years. Net sales is up 80%, and the important thing is this, that we have a much more diversified mix. The share of OEM has gone down from 65% to 44% in the last quarter. We have a healthy debt maturity profile. As I mentioned before, we had 2.6 years back in 2018, and we are now at 3.5 years. Looking on the efficiency and the organization expressed in LTM sales per employee, it has increased with 20%, and it's now SEK 2.9 million per employee.
With that, Juan, I'm handing over to you to make the summary of the quarter.
Thank you very much, Stefan, and I will try to be very, very brief here, in order to have space for the Q&A session. Strongest quarter ever. Strong order backlog. Igloo showing a strong growth and margin improvement.
On top of that, we see the distribution of service aftermarket is today 56%. Our exposure to the OEM business is coming down despite the fact that OEM is growing. High focus on cost and efficiency, and nonetheless obviously on pricing. While we have announced the closure of Elkhart, we also believe that it is important for us to be present on the major market in the world for mobile cooling, and that's why we are investing in our platform in North America. With that said, I would like to open for Q&A session, please.
Thank you. If you do have a question for the speakers, please press zero one on your telephone keypad to register. Please also try to limit your number of questions to two. Once again, it's zero one on your telephone keypad to register. Our first question comes from the line of Fredrik Ivarsson from ABG. Please go ahead. Your line is open.
Thank you so much. Good morning, everyone. First question on consumer behaviors and then specifically in the US and Igloo, if you could comment on what you see there. Have you seen consumers holding on to their money a bit harder, maybe during the last couple of weeks, or is the momentum still good? That's the first question. Second question on the inventory situation and any potential component constraints, given that inventory was up, I guess, 20% Q-o-Q, and assuming that the overall demand holds up, will you be able to deliver on the majority of the orders in Q2 and onwards?
Hi, good morning, Fredrik. On the first question, whether we see anything, and especially considering Igloo, we don't see anything. We see, we are following the sales through every single day. We get information every single day, and just now we don't see anything. It has been, as I said, Q1 was very, very strong and the beginning of Q2 looks still strong. On the second one, we have been building up inventories. We have been especially looking for semiconductors. As I said, it looks much, much better than it did in Q3 and even better than Q4. But of course, there's still, you have certain chips here and there that will or might lead to problems, but that's nothing that we know just now.
The problem, the issue, again, as you are familiar, as I am with the pandemic situation in China and a vast majority of the semiconductors that are produced around the world are coming from China. You cannot say just now that we are not going to have any issues, but we feel much better than we felt a few months ago and better than we felt in Q4.
Please also keep in mind the seasonal pattern, especially in Igloo and in Front Runner, where there is compared to the historical Dometic a stronger build-up in front of the high season where we are going in right now.
Excellent. Thank you.
Thank you.
Thank you. Our next question comes from the line of Douglas Lindahl from DNB Markets. Please go ahead. Your line is open.
Thank you very much for taking my questions. I'll start with the first one, which is basically on the organic growth of 7%. Would you mind commenting on how much is pricing versus volume on that one, please?
It is of course an average. We have different verticals, we have different products. It's a difficult one. Our estimation is that it's approximately 25% that there's volume and 75% which is pricing.
Okay, thank you. A second question is on the balance sheet. You mentioned that you're taking that down over time, but how do you view your balance sheet in the context of your financial target now? Would you see room for additional M&A growth and stretching the balance sheet a bit more? I guess maybe, yes, given that you're entering more cash flow positive seasonality pattern, or how do you view that?
Yeah. No, but I, you know, first of all, I mean, we are coming into the stronger part of the cash flow year right now, and it's pretty significant, as you can see from the historical numbers. As I mentioned, we did complete three acquisitions in the first quarter. They added 0.1 in leverage. Obviously the bolt-on acquisitions, there is still room to do that. But the larger, more transformational acquisitions, we obviously now have to digest Igloo and make sure we are implementing the measures that we have been planning to do. The smaller bolt-on is still in the cards.
If I may just third, the last one on Igloo. Obviously you're improving profitability year-over-year, but would you say that this was in line with your internal expectations or did Igloo sort of surprise from the upside?
No, I mean, we, I mean, of course that we were very disappointed when we announced that the profitability in Q4 was lower than we expected.
Mm-hmm.
At the same time, we also announced clearly that we were putting in place measures to improve the profitability, and that's what we have seen in Q1, and that's what we are expecting to see moving forward.
Excellent.
The situation with Igloo didn't come as a surprise. What was a surprise was the devolution of gross prices and the fact that Igloo before we took over was too slow.
Yeah. Okay. Thank you very much.
Again, that's what I would like to point out. I mean, we don't have a crystal ball. What we can see as Dometic is that we have been pretty good in passing prices to the market.
Mm-hmm.
I'm not talking just about Q4. I'm talking about the last two years with all these raw material prices moving upwards all the time.
Okay. Yeah. Thanks.
Thank you.
Thank you. Our next question comes from the line of Rizk Maidi from Jefferies. Please go ahead. Your line is open.
Yes. Good morning, gentlemen. I'll speak to two. First one, Juan , we sense some cautiousness on in your outlook in the press release and rightly so, on the back of the geopolitical developments and increased inflation.
Mm.
-lower consumer spending. I'm just wondering whether you see anything in the business today that points to, either a slowdown of demand or any discussions you've had with customers where you sense some cautiousness?
I think, I mean, I believe that we all read the same news. It is difficult to avoid thinking about how the consumers are going to swallow this inflation, which is kicking in everywhere. I don't think that our customers are different to me or to you. It is clear that there is a concern about how the future is going to look like. We see that despite the inflationary cost increases on the material side, I mean, this is also important to remember. We see still today that the salary raises all over the world have been pretty moderate so far. I believe that we need to wait some more months to evaluate. There is more cautiousness today everywhere. This is not about Dometic. This is not about our industry.
I'm fully convinced that if you talk to the Sandviks or the Alfa Lavals or the Atlas Copcos of the world, they will tell you the same, because that's the reality. We are reading about the same news everywhere. Yeah.
I think it will be important to mention that the way Dometic looks like today compared to, let's go back to 2018.
Mm.
I mean the OEM part of the sales is significantly less than.
Well, infrastructure.
Which makes us less cyclical, exposed.
Yeah, that's important to remember. Keep in mind that since 2018, we have already gone through a couple of major slowdowns. One starting in Q3 2018 when the RV market all over the world went down dramatically, and then the second during the pandemic. I think that we have demonstrated that we are pretty agile in reducing our cost and obviously matching our output.
Mm.
I guess the short summary is, well, we don't have a crystal ball. We can just listen and evaluate in the same way as you do, but we are prepared to act.
Understood. Obviously the group has transformed quite a bit with more aftermarket and distribution. Just perhaps on this point, Juan, can you just share with us any sort of data points or historical sensitivity of your aftermarkets to, you know, the ongoing sort of headwinds that we're seeing now and, you know, any data point that shows the more resilience of the aftermarket versus the OEM?
Yeah. I mean, if you look, I mean, I can give you 2 data points. The first one is on the historical aftermarket business in the old Dometic, so to say. We used to have a difference of 10-15 percentage points in growth rate difference on the way down between the OEM business and the aftermarket business. That's the kind of resilience you had in the old business. Now we are adding companies that don't have any OEM exposure whatsoever. That includes Igloo. If you look at Igloo in the last 10 years, they have been extremely stable. Not even in 2020, they went down.
Mm.
We believe the Dometic exposure today is much lower exposure than we had a few years ago. Even comparing Q1 this year with Q4, sorry, Q1 2018, Rikard , can you remind me? We are on 28% now, but in 2018, the RV OEM exposure was-
40%.
40%. We have reduced.
Mm.
Our RV OEM exposure by 12 percentage points in four years.
Understood. Yeah. Cool. The last one is quickly on price-cost, which was 40 basis points down in Q3. I think it was slightly negative in Q4. Can you just update us on Q1 and in the face of the ongoing higher cost inflation, are you still going for new rounds of price increases?
Yes. Yes, we are. We, as you are obviously calculating, Q3, that's where we lost about six weeks of price increases. We implemented price increases at the end of Q3. We got impact, positive impact in Q4, but for the entire Q4 we were slightly below the previous year. In Q1 this year, we are slightly above. We are ahead of the cost increases, and our intention obviously is to be ahead. It doesn't give you any warranty, obviously, that we could not miss some weeks, because it's not easy to get back to customers every three weeks or every four weeks with price increases. The intention is clear. We said after Q3 that we were going to get back, and we are back.
Okay, perfect. Thank you.
Thank you.
Thank you. Our next question comes from the line of Gustav Hageus from SEB. Please go ahead. Your line is now open.
Thanks, operator. Thanks for taking my questions . Returning a little bit to demand in retail, you mentioned that inventories are still on the low side, but I assume they've come up a little bit sequentially. Do you expect sort of how far of a distance we still have to go until they are at a normalized level as you see it? Is that a material addition to your growth potential for Q2?
I think it's very difficult. I mean, I guess that the easiest one to look at. I guess you're thinking about this, again, the RV OEM. I think on the RV OEM, it is clear that you have the situation with the chassis in Europe. That's one. You have also what we hear just now, what we read from the reports that are coming. We're looking at 2024 that they have. Their inventories are just now more or less the same levels as they were in February 2020, just before the pandemic. At that time, they were still lower than they normally are.
We believe that there still is some space, but it is clear that on the RV OEM Americas, which I guess that's what you're referring to, it is clear that the situation today is not the situation we had six months ago.
I was more referring to your entire business mix, 'cause as I understood it, you see low inventories across categories. The RV-
Yeah.
The RV is one thing, obviously that is quite visible, but I'm more curious maybe on the other categories where some of your peers have perhaps indicated more of a stable or normalized situation.
Yeah. We see marine, we don't see at this point any issues. Again, the marine situation just now is more the other way around. This is a little bit like on the chassis in Europe. It's much more supply problems for the industry, getting material for the industry, which is not Dometic, which is really just now delaying the pace of refilling the inventories. If we look at our distribution businesses, we don't see yet any signals, so to say, of a slowdown. I mean, if I take the entire business, the entire Dometic, I don't see any signals that this will stop tomorrow. On the contrary, of course, that I feel more cautious today than I was six months ago, without any kind of doubts.
Of course, six months ago, we didn't know about the Russian invasion, we didn't know about additional inflation cost increases. A number of factors kicked in. Six months ago, we were still speculating about increasing interest rates. Now, the interest rates are a reality.
Thank you. My second question is regarding inventory. If I remember correctly, you called out higher share of goods in transit as a driver to your inventory growth last quarter. I didn't hear you say that today. Is that situation improving or is that still a material factor in Q1?
No. The situation is still the same, and I mean, now it's not only on the ocean, it's also on getting it to the ports and getting it on the ships. I mean, you probably have seen the pictures outside Shanghai, for example. I mean, it's piling up on all sides, I would say. There is no improvement on that side for the time being.
Okay. That's helpful. Thank you, guys.
Thank you.
Thank you. Our next question comes from the line of Karri Rinta from Handelsbanken. Please go ahead. Your line is open.
Yeah, thanks, Karri. Thanks for taking my questions. The first is, the FX impact on the EBITDA. Would you care to help us, quantifying that a bit more specifically? How much was your EBITDA boosted by FX in the first quarter?
Yeah. Approximately SEK 100 million.
Okay. That's helpful. Then second, you mentioned divestment on one of your slides, and you discussed potential for acquisitions and bold, maybe bold fonts, but more transformational. When it comes to divestments, should we consider these to be more in terms of sort of bolt-on acquisitions or should we expect something transformational? Should we expect something to happen already this year?
Our intention definitely is that you will see the first steps this year. Absolutely. We are working as we speak. In terms of whether it's going to be bolt-on or transformational, a little bit of the same. I would say that's something somewhere in between. The vast majority.
All right.
Will be businesses that don't fit anymore, businesses that are lower margin than our average. Businesses not having impact on our service and aftermarket development. We have a few smaller, but we also have some that are sizable.
All right. Thanks. That's very helpful. Thank you.
You're welcome.
Thank you. Our next question comes from the line of Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open.
Hi, it's Johan Eliason here. I was wondering about Igloo. Obviously, the margin seemed to develop positively on a pro forma basis year over year. I guess somewhere between 5% and 7%. Now, could you remind me of the seasonality profile on the margin of Igloo? I guess the peak quarter would typically be Q2, or am I wrong there?
No.
No, you're right. It's like we communicated on the Capital Markets Day that Q2 is by far the largest quarter.
In terms of margin as well and not in absolute.
Yeah, no, absolutely from a margin point of view as well. Q2
Good.
Q3, and then Q4, Q1. Very, very similar but more pronounced. More, very similar to the Dometic seasonality profile, but more pronounced.
Excellent. In this business, have you been able to push through any Dometic branded products yet, or?
I mean, you have two different sides. You have the entire product management, product manufacturing, and you have the interaction to customers. In terms of introducing to customers, Igloo people and Dometic people just now are visiting customers. We are getting exactly as we said, Igloo is helping us to open doors. Of course, it takes a while to start launching the new products. Just now, that's what we have been spending enormous amounts of time during the last couple of months, really looking at the product ranges. What is going to be Igloo? What is going to be Dometic? How do we give access to Igloo to the, our technology at the same time as how do we get access to capacity in the factories? That's why we are investing. You will see that coming synergies.
We have very tight collaboration, and we are driving the integration very intensively.
Do you think there will be any sizable numbers already this season, or is it rather for next year?
I think it's too late for this season. I think you would expect the next season.
Okay.
This season is very much about preparation. Keep in mind that the season in the outdoor business is really Q2.
Yeah.
If you acquire in Q4, it's very, very difficult to get products out. You need to do the sell-in for next year is done now, basically.
Yeah. Then on the restructuring program, you mentioned now in the chart somewhere that in total you have taken some SEK 400 million in charges. I think originally you talked about SEK 700 million in total charges.
Yeah.
for this program to get the benefits of 400. Is that still valid?
Yeah. We have 750 that we communicated. We're communicating now about 400. That's correct. That's obviously telling you that now we are coming with a couple of bigger sites. We started with the smaller sites and then the pandemic hit. We have been training for a while, and now we are again moving to the bigger sites. That's why now we do Camarillo, and we have some more.
Okay. Excellent. Many thanks.
Thank you.
Thank you.
Thank you. The next question comes from the line of Daniel Schmidt from Danske Bank. Please go ahead. Your line is open.
Yes, good morning, Juan and Stefan. Most of my questions have been answered. Stefan, could you just help us with sort of the growth number for Igloo on a pro forma basis in the quarter, and maybe also the absolute top-line number? I guess you can almost get it from the global sort of sub-segment, but still.
Yeah, I think you will have to take it the way that we have expressed it, that it is a strong growth and so it's obviously double digits and yeah, it's been positive and above expectations, I would say.
When you talk about sort of the resin price moving up, Juan said that you will also sort of act accordingly when it comes to further price increases. Was that also sort of the beginning of Q2, or was that already implemented by the end of Q1?
That has been going all the time.
Mm.
We are evaluating during our reviews every month. This is one of the main topics, and it has been one of the main topics since this process started in August 2020, in reality. Again, keep in mind that we have been delivering really good margins, compensating for cost increases with exception of Q3 2021.
Mm.
Other than that, we have always been ahead or in parity, and our intention is to keep doing the same.
Specifically around Igloo, I mean, we had a view on the resin price profile development, and after the Ukraine crisis, that got changed a little bit. Not massively, but to a certain extent. For that, there has been compensation implemented.
Yeah. Okay. Good. Maybe just sorry for a third question here, but on the same topic. Could you, in order just to help the audience, me, give any sort of average profitability for Q2 in Igloo? I know that you were hit last year by what we just talked about, but if you look a couple of Q2s back, what has been the sort of average profitability, you think?
Q2 for Igloo was still very good. In reality, it happened, the rising prices kicked in at the end of Q2.
Yeah. Yeah.
You have half a month about being negative, but you have two and a half months being pretty positive. Again, keep in mind our comments during the forum. We acquired Igloo because we saw how the company was improving. The rising prices kicked in in June last year, and we saw the deterioration for three months. As soon as we took over, we acted, and you see the margin improvement coming back.
Mm.
I mean, if we should say something, I mean, if we are, you know, above mid-single digit now, what's going to happen in Q2, then we are of course talking about double digits.
Yeah. That was maybe what you saw last year, before the latter part of Q2, I guess.
Correct.
Yeah. Okay. Sorry. Thank you. That's all for me.
Thank you. Any other question?
Yeah, exactly, because since we were out for a couple of minutes at the end, we can still stay for a couple of minutes more. If you have any other questions, please.
Thank you. It is zero one, just as a reminder. The next question just comes from the line of Agnieszka Vilela from Nordea. Please go ahead. Your line is open.
Thank you. I would like to ask you about the marine business. You showed on the slide that the retail boat prices are increasing quite dramatically, doubled compared to last year. I want to ask about your own pricing power in this business, and also if you could kind of put it in reference to the 3% organic growth in the quarter. What was the price impact, and how were the volumes affected by the supply bottlenecks that you mentioned?
I think, Agnieszka, that either we express ourselves in the wrong way or we have the wrong chart, because it is not about doubling in a couple of years. It's about doubling during the last 10 years, basically.
seven.
Oh, okay. Yeah.
2021. I mean, so that's a major difference. What is telling you, in reality, is that electronics has been kicking in in the marine business now for a few years, and that's why average prices is going up dramatically. More engines, more electrification, driving the business. When you say just now, the growth that you see just now in the quarter organically has nothing to do with the underlying growth that we have. That's why our backlog is very, very solid.
Can you just remind what was holding back the organic growth in the quarter for Marine?
It's really the access to electronics, both from us, but also from our customers.
Yeah. Then my last question is on Elkhart. You closed the factory there and moved production to Mexico, if I understand correctly. Can you just say what kind of cost savings you expect from that and how the margin in Americas could develop? Also whether you're a bit concerned that you might lose some market share to your peers that are still in Elkhart. Thanks.
Yeah, I mean, we have been communicating that the phasing of this program is that we have a couple of larger projects at the end, and Elkhart is one of them. That's of course going to be, you know, an important contributor for us to achieve SEK 400 million. Obviously there is still some projects to be announced, which we cannot talk about today. With the announcement of Elkhart, we are taking an important step towards the total SEK 400 million. There is a couple of more products that needs to be announced, and we are accelerating, as we said.
In terms of losing market share, to my knowledge, nobody is manufacturing refrigeration in Elkhart. Our main American competitor is not manufacturing in Elkhart, and then the rest of the main competitors are importing finished goods from China.
Yeah.
In theory, Agnieszka, it should be the other way around.
Perfect. Thank you.
You're welcome.
Thank you. Our last question is a follow-up question from the line of Rizk Maidi from Jefferies. Please go ahead. Your line is open.
Yes. Hi. Thanks for taking the follow-up. Just two housekeeping questions which have not been, I guess, asked. Obviously electronics was a bottleneck in Marine, chassis systems in EMEA, potentially other divisions. Can you just help us with the lower invoicing from just the supply chain constraints? Is it usual for the 3%?
No, but, I think it's very much in line with what we communicated last quarter as well. We are talking about a couple of percentage points. We are doing an analysis.
Mm.
More in Marine than in the other segments. Marine is more than a couple.
The last one is on the SEK 400 million cost-saving program. Can you just give us an update on where you are? What has been achieved in the quarter, please?
We are approximately on 210, which is about 52% of what we have planned. That's of course before we get the savings from Elkhart. We're including the savings from Elkhart, we should be somewhere between 65%-70% of the program.
65%-70%. Okay.
When they are kicking in.
Yeah.
Okay. Very good. Thank you very much.
You're welcome.
Thank you. As we have no more questions registered, I'll hand back to our speakers for any closing comments.
Thank you very much. Well, thank you very much, everybody, for paying attention to us. We are obviously very happy with the quarter, and as we said, we don't have a crystal ball, but we are prepared. We will be growing if the growth is there, and we will be reducing our costs if the growth is not there. Thank you very much and talk to you soon. Goodbye.
Goodbye.
This now concludes our conference. Thank you all for attending. You may now disconnect your lines.