Hello and welcome to the Dometic Q2 2022 earnings call. My name is Rikard Tunedal, Head of Investor Relations at Dometic. With me in this room, I have Juan Vargues, President and CEO, and Stefan Fristedt, CFO. For the first part of this call, all participants will be in listen-only mode. Afterwards, there will be a question and answer session where you can use the phone or the messaging function in the web interface. Please also try to limit the number of questions to two. Let us start with the presentation. Juan, please.
Good morning, Rikard. Good morning, everybody, and welcome to the presentation of the interim report for the Q2 . Without any delay, let's move on to the presentation as such. In terms of the market, we have seen a challenging macroeconomic environment. Not just macroeconomic, but even geopolitical environment as a continuation of what we saw in Q1, and as a consequence of that weakening market demand. We experienced that retailers globally started to rebalance their inventories during the quarter. Good news is obviously that the order backlog is still higher than one year ago. When looking at performance, all-time high in terms of sales, 53% up, slightly negative organic growth, -1%. We saw a very strong growth on the OEM side.
Igloo continues to develop very positively in terms of growth and profitability, and we are also very happy to see that all the acquisitions that we did last year are developing in a positive way. I would like to especially mention our mobile power solutions companies that are performing very, very nicely. On EBITDA, we ended up at 15.7% in comparison to 18.6%, and this is very, very much a consequence of a negative channel mix, and we will go a little bit more in detail into that. Also, obviously, that some of the supply chain constraints that we have been suffering from, or the entire world is suffering from, continued during the quarter, having a negative effect on efficiency. We are very happy also to report that Igloo is running just now at a double-digit EBITDA.
Again, some more comments will come later. Operating cash flow, SEK 738 million. Happy to see as well leverage at 2.9, considering obviously all the acquisitions that we did during the last twelve months. Of course, what we see when looking at the macro environment and when looking especially at the RV OEM industry globally is that second half is going to be weaker than the first half. As a consequence of that, we are acting very, very fast. When looking at the end of June, on pro forma basis, we are 1,000 people less than we were on June 2021. That's telling you obviously that we are starting to reduce capacity.
At the same time, we continue to drive our manufacturing footprint program that we introduced in 2019. As the last step of that program, we announced the closure of our German factory in Siegen and the consolidation into Hungary, our existing factory in Hungary. At the same time as we are also launching an additional cost reduction program that will affect about 700 people and lead into savings of SEK 200 million on annual basis. Looking at our numbers, sales ended up at close to SEK 8.5 billion or 53% total growth with a slightly negative organic growth -1%. FX having a positive effect of 11% and M&A contributing by 43%. EBITDA SEK 1.3 billion or 20% up.
As I already commented, EBITDA margin of 15.7% versus 18.6%. We are also happy to report obviously a nice EPS improvement, growing 36% and ended up at SEK 2.97 krona. Cash flow SEK 738, lower than one year ago as a consequence of the inventory build up that we are working very hard, obviously, to reduce in the coming months. Our leverage at 2.9. If we look at the half year's result, we ended up at SEK 16 billion, again, all-time high, of 54% total growth with 3% organic, 7% FX-led growth, and then 44% coming from M&A contribution. EBITDA at SEK 2.4 billion or 33% up with an EBITDA margin of 15.3% versus 17.6%.
Even here we see a nice evolution of our EPS, 30% up versus last year. Cash flow is still weak in comparison to last year, but we are working, as I said, very, very hard to improve moving forward. When looking at sales, as already commented, SEK 8.5 billion, 53% total growth. Americas showing a nice total growth of 35% of course, that we have contribution from the acquisitions. EMEA up 13%, APAC 12%, Marine 23%, and Global over 900%. We see organic growth in Marine as well as in Global, where the decline happened in both EMEA and APAC, Americas standing still.
Looking at the application areas. We see already here, obviously, the effect from our acquisitions, meaning that Igloo is having a very positive impact, obviously, on food and beverage, really stepping up. At the same time as we are also very happy to see that our Mobile Power Solutions are affecting the power control application, developing very nicely. As you can see, also, we see climate in comparison to the others coming down, especially in Europe, where the RV OEM is already on the RV side, is already down in the second quarter. Looking at the sales channels, and this is really what explains what happened to the margins. You see that OEM is growing very strongly during the quarter.
At the same time, our service and aftermarket is weak and, considering the huge margin difference that we have between the two sales channels, this is affecting greatly our margins in the quarter. Distribution, of course, showing a major growth. Looking strategically our sales channel development, and despite the fact that service and aftermarket was weak, in this specific quarter, we have moved the needle from 52% coming from businesses outside the OEM into 59% in one year. Worth to comment that the RV OEM, which is the most cyclical part of our business, is today down to 24%, despite the fact that we saw good growth in the quarter as well. In other words, we are a less cyclical company today than we were one year ago, and much less cyclical than we were four years ago.
Looking at our EBITA evolution, down, as I commented, very much on one side due to the dilutive effect of Igloo that was expected from the beginning. The surprise, I would say, this quarter is really the mix, the negative mix that we experienced, that we believe is going to be corrected over time as the inventories are being rebalanced at retail level. On top of that, as I also commented, we have some inefficiencies due to the supply chain constraints, primarily on the ports, loading and unloading all the containers we have all over the place. Sometimes it's good also to take one step back and look at evolution over time.
What we can see on this picture is obviously that during the last five years, we have doubled the size of the company. We have also doubled our EBITA earnings. Especially, obviously, that the company is fundamentally different in terms of exposure to the RV OEM industry. If we move over to the segments, Americas was up 35%. We saw flat organic growth, very strong growth in the OEM, on the OEM side, while service and aftermarket was weak. We see everywhere, this is not just Americas, I will comment that in all the segments, that for the first time ever, I would say, we see strong growth on the OEM side, but negative growth and even pretty substantial negative growth on the service and aftermarket that we believe is really a rebalancing of the inventories.
Meaning that due to the supply chain issues that the entire world suffered from during 2020, 2021, and having customers obviously expecting a strong 2022, everybody was early on buying their inventories, preparing ourselves for a strong 2022, and 2022 is not becoming as strong as suspected, and thus leading to excess of inventories that they are just now acting on. If we look at EBITA, SEK 160 million, or 8.2% margin versus 8.9%, we saw an improvement in this quarter in comparison to the Q1 . Hopefully, we will see these improvements coming through as now we have also moved.
We have taken the last step of the move from Elkhart into Mexico, and that should give us the additional savings that we have been calculating with. If we move over to EMEA, some similarities on the situation, but also some differences. While the RV OEM industry in Americas has already filled in the inventory levels at retail level, that's not the situation in EMEA. EMEA and the negative OEM, RV OEM numbers we see are the consequence of our customers not getting chassis from the chassis suppliers, meaning that they cannot finish their own vehicles. At the same time as inventories in EMEA are still low. The question here is obviously what is going to happen in the second half when talking to customers, they expect also a weak second half simply because chassis suppliers will still be suffering from problems.
On the contrary, we saw a very, very strong development on CPV OEM and service and aftermarket exactly the same as for the rest of the segments, very, very weak and unusually weak, I would say. Even here, we've seen very nice development of all the acquisitions that we have made. EBIT margin 15.2% as a consequence of the very negative sales mix. On the strategic highlights, the fact that we announced the last step of the restructuring program announced 2019, which means the move from Siegen in Germany into Jászberény in Hungary. Moving over to APAC, 12% up totally, but organic growth of 10%. We need to remember as well that Australia and New Zealand did apply very, very strong lockdown measures in connection with COVID during Q1, the previous year.
Q2 was extremely strong, and we have very difficult comps. At the same time, we also see a little bit of the same effects as we see in EMEA, meaning that RV OEM manufacturers have difficulties to get hold of chassis and components, which is slowing down our deliveries. At the same time, our expectation is that this will continue during the second half. On the positive side, very, very strong evolution of Mobile Power Solutions in the segment. EBITA margin very strong still today, 26%. It looks lower than one year ago, but then we need to consider that one year ago, we have the net profit coming from the sale of a building in Hong Kong that had a positive impact of SEK 21 million.
As I commented at the beginning, we have been acting very, very fast on the weaker market conditions, adapting our capacity in APAC, but also in the rest of the group. Marine, still very strong, 23% totally speaking, with organic growth of 5%, primarily driven by OEM, while service and aftermarket is showing negative numbers exactly in the same way as the rest. EBITA, strong SEK 485 million or 27.7%, which is an improvement versus the situation last year, despite the negative sales mix that we got. Then, the acquisition, the Tread acquisition that we announced in Q1 has been developing also very, very nicely during Q2. Moving over to global. Strong growth, obviously, through the Igloo acquisition, but not just the Igloo acquisition.
We see both hospitality and residential developing very, very strongly for us. Hospitality business is already now above the numbers that we saw pre-pandemic, which is good since the hotel industry has just started to invest again. EBITA wise, SEK 197 million, which is 10% versus the 15% as a consequence of the dilutive effect of Igloo. Other than that, the margins are better than one year ago. If we spend a couple of seconds on Igloo, very strong organic growth, organic pro forma growth, I would say. Not organic, but pro forma. What we saw as well is that resin prices went up severely after the Russian invasion of Ukraine.
We adapted prices already beginning of March, but it takes 60 days, which means that we had lower results in April and May and came back very strongly in June once the prices were already in place. On the strategic fronts, we keep investing, obviously, in other global verticals, product development, and we keep receiving also awards on our products. Igloo integration developing very nicely. On e-commerce D2C, I'm fully convinced that you are reading everywhere in the news that the online business is suffering from difficult times. We have been investing over the last couple of years, and we are just now running at 5% of our non-OEM business coming from e-commerce.
We implemented in the US, or North America, rather, Australia, and we are just now up and running in eight European countries and some more countries to come as well. Here we are also getting support from a number of the acquisitions that we did in the last couple of months already having a strong online business. Happy to report as well that we have our first store-in-store shop in Stockholm, participating together with Haglöfs in central Stockholm, and where we are showcasing our Dometic Outdoor standalone products, something we believe very much in. We have been launching the product range during the last couple of months all over the world, and we have very good expectations that that's going to be growing in the quarters to come.
On design, I already mentioned, I will not go through any details, but we keep receiving design prizes, and we keep working on the introduction of these new products to the market. Looking at our cost reduction programs, as I said, we already adapted capacity during the last couple of months. We are down 1,000 people less than one year ago. At the same time as we are, we announced the shutdown of Siegen, which means really that we are running just now at this point at a run rate on savings of SEK 250 million. As you know, the expected amount is SEK 400 million by mid-2023. We are fully convinced that we will be there.
At the same time, we are also announcing a new program at a cost of SEK 200 million that will also generate savings for another SEK 200 million affecting 700 employees. Stefan will give you more specifics in a couple of minutes from now. On our strategic execution, again, we keep moving the needle from the OEM, the once dominant OEM business, into both service and aftermarket and distribution. We are just now 59%. We see a very, very nice development on Mobile Power Solutions. As I commented a couple of times, we are running just now at a sales number of SEK 2.2 billion on pro forma basis. This is becoming one of the most important businesses that we have moving forward.
On the product leadership, still suffering from the supply chain constraints and semiconductors and the fact that we need to test, and that when we change semiconductor, it takes months, obviously, to be on the safe side. We don't want to launch a new product in a new product category and run into mistakes. That's moving slower than we expected when we launched these programs, obviously. We keep investing on innovation. This is one of the most important areas that we have to grow organically the company, and we will see the effects coming back. Cost reductions, obviously reducing complexity on continuous basis, and I already commented a couple of times the new steps that we are taking.
Sustainability, another area where we have been working very, very hard in the last couple of years, and we are happy to report that we are just now lower below the target that we have for 2024. We have reduced injuries in our factories by 42%. It's a great improvement and ensuring obviously that investments that we have been doing in health and safety are paying off. On the contrary, we are still not happy with how our share of female managers is developing. We are standing still, even if we are running a number of programs, but we have not seen the effects yet. On CO2, that's another area where we are making great progress. We have all the factories in Europe just now running on renewable electricity.
We have a few factories in Americas, and we are also investing in China to do the same. We expect additional improvements in the months to come. On ESG, we did what I consider to be a very good job in terms of audits in low-cost countries for the last couple of years. We are at a pretty high level, and now we are also starting to look at our acquisitions and how to get all these new suppliers to be 100% audited. With that said, Stefan, please, let's listen to you.
Thank you very much, Juan Vargues. Taking the first slide here, talking about our EBITDA development from Q2 last year to Q2 this year. The first bucket here concerns the asset gain that we had in Q2 2021 related to a sale of a redundant building in Hong Kong of SEK 21 million. Second bucket, the organic development plus FX effect. We have seen positive currency translation and transaction effects in the quarter north of SEK 100 million. Then we have had negative effects of sales channel and segment mix. Then we are continuing to suffer from inefficiencies due to the global supply chain constraints that we have in the world for the time being.
In terms of price versus cost increases, we are on a total Group level neutral on that in the quarter. However, it varies slightly from segment to segment. Third bucket is Igloo, and we are moving on in the expected direction, and we are showing double-digit margin in the quarter. We have seen a negative impact due to the rising cost increase driven by the conflict in Ukraine. That has then been compensated by price increases, as Juan mentioned before, effective from June 1. We also had the expected significantly improvement in margin in June standalone. We have the fourth bucket.
It's the other acquisitions, and they are developing very nicely, and they are delivering over or above average Dometic margins as we have seen in the past as well. Going to the next, talking about our cash flow for the quarter. We have had an operating cash flow of SEK 738 million. The adjustment for non-cash items are related mainly to depreciation and amortization, of course, driven by the acquisitions, but also FX components. We have the negative effect of the change in working capital, and that's mainly driven by the increase in inventories. I'm going to come back to that a little bit more in detail, in a couple of slides.
Moving down below the operating cash flow, we paid the dividend of SEK 783 million. We have also taken up SEK 1 billion in a private placement bond in May. And that makes the net cash flow from financing more or less neutral. Total cash flow for the period of SEK 358 million. The next page is just showing the operating cash flow development over time. We are seeing the expected pickup in Q2 2022, however, not to a level that we are satisfied with. We have a cash conversion of 48% in the Q2 , which is below our expectations for this time of the year.
Moving over to working capital, where you have the three different components on the accounts payable side. I'm really happy with the job we are doing there in improving payment terms. It's steadily moving up. Accounts receivable is showing a stable development. We have the last portion, which is inventories, which is now up to 137 days. If we look on the increase between Q2 last year and Q2 this year, which is approximately SEK 5 billion. SEK 1.5 billion of that comes from acquisitions. SEK 1.3 billion comes from the weakening Swedish krona. We have SEK 1 billion that is driven by raw material price increases, also increases in inbound logistics costs.
We have SEK 1 billion that is related to securing critical components and also longer lead times where we see more than double the lead times for shipments between Asia, and Europe, and Americas. We are driving actions across all segments now to get back to our inventory efficiency, which is natural. We are expecting improvements of that to come through here in the coming quarters. CapEx and research and development, we are in absolute terms spending more. As Juan mentioned, we are spending money on innovation, which is important to us. In relation to net sales, we are either slightly down or flat to previous periods.
Taking a look on our debt maturity profile, which I consider to be a well-diversified debt profile. We have an average maturity of three point three years. As I mentioned before, we did the private placement of SEK 1 billion in May to a rate of 5.1%. It's of course higher than what we have had before, but I still see the average financing cost in our portfolio to be satisfactory. We also have an undrawn revolving credit facility of EUR 200 million. As you saw, the Q2 net debt leverage ended at 2.9 compared to 2.7 in Q1 2022. We have paid the dividend, and then we also have the weakening Swedish krona, which is contributing negative with 0.1 on the leverage.
We of course also have the continuous buildup of working capital. We are still in the position that we have a deleverage profile that is strong and we are working very focused on improving that during the coming quarters. Juan has already mentioned the restructuring program starting with the one from 2019, and as mentioned, we have now basically entered into the final step in that by the announcement of the closure of the manufacturing in Siegen in Germany. As you remember, in Q1, we announced also the closure of the refrigeration manufacturing in Elkhart in U.S.
Totally 24 locations have now been impacted since the start, and 243 employees affected in the quarter, and 1,200 since the start. As mentioned, the targeted savings, SEK 400 million, we are expecting to achieve that mid-2023, and the run rate so far is SEK 250 million. We had SEK 13 million in cost in the quarter, and that is SEK 468 million since the start of the program. The total cost estimated to be around SEK 750 million, and most of the remaining spend there is expected to come in the coming three quarters, and the majority of that is going to be cash out. Turning to the 2022 restructuring program, that's the next step in our efficiency plan.
The scope of that is continued optimization of locations and right sizing of resources, very much driven by the digitalization effort that we have been putting in over the last couple of years. We have started the journey in bringing the number of ERP systems down, where we have started with US and have now continued with EMEA. We have invested in e-commerce solutions for B2B and B2C, and that is now starting to pay off in terms of more efficient transactional flows. It concerns all segments and all functions, and it is going to impact approximately 700 employees. The savings will amount to SEK 200 million, and they are in addition to the SEK 400 million from the 2019 program.
We will start to see a gradual impact from Q4 this year and will be fully realized by the end of 2023. The cost, as mentioned, SEK 200 million, and the majority of that is going to be cash out. As the times are getting a little bit tougher, if we look in a historical perspective on how Dometic has shown resilience in downturn scenarios in the past. In the upper graph, you can see the profitability over time in 2016 to 2021, and also how it has been performing, for example, during 2019 when we had a 16% reduction of RV production in U.S., but also during the COVID-19 outbreak in 2020.
We have been clearly showing that we have been able to keep up the profitability level and that the sales development have been coming back rather quickly. Also, our ability to generate cash in a historical perspective is something that we feel is contributing to our resilience in tougher times, and we don't see any changes to that profile. Levers to pull is, of course, that we are continuously doing various types of scenarios on the future development. We have recent experience of handling downturns. We are accelerating our restructuring program, as we have been talking about. We have less infrastructure today in terms of number of sites, number of factories. The sales mix is clearly turning towards service and aftermarket and distribution.
Approximately 20% of our total workforce is temps, so that makes us flexible to adjust to increasing or decreasing demand. We can, of course, limit or freeze capital expenditure, and historically we have generated cash from a reduction of working capital when we go into a downturn. Moving on to what have the acquisitions then contributed to our, to the resilience of the group. Of the acquired businesses, more than 85% of them are outside the cyclical OEM business. We have, looking into the structural growth areas, we have 6 acquisitions in the last 16 months in Mobile Power Solutions, which is a structural growth area driven by the electrification trends and sustainability.
Also, looking at our largest acquisition, Igloo, historically, they have been showing a strong resilience also in tougher times. They had low single-digit sales growth during the financial crisis in 2007 and 2008, and they have had growth each year from 2019 with a CAGR of 6% since 2010 up to 2021. With that, Juan, I hand back to you to summarize.
Thank you, Stefan. I would like to start by stating that Q2 is once again all-time high in terms of sales and earnings. We showed total growth of 53% and the backlog is higher than one year ago. The market conditions clearly are starting to get tougher as a consequence of the situation on the market. We see declining OEM production, especially on the RV OEM side. We see that already happening all around the world, even if the background is slightly different. Europe and Australia are driven just now very much by the lack of access to chassis.
Retailers are clearly rebalancing their inventories that did have a negative effect on our margins in Q2, and hopefully we will see that leveling out during the coming months. At the same time, I'm very, very happy to see, obviously, that all the experience that we have been collecting for years as organization is paying off when looking at the acquisitions and the areas where we acquire these companies, that they are giving us a totally different mix moving forward. Strategically, we are becoming more resilient as a company. We continue to execute on our strategy. Efficiency is an important part. We need to become more and more efficient so we can finance as well our growth in new areas.
That explains, obviously, the step with announcement in Siegen as the final step for the restructuring program, 2019, but also the start of a new program, for to be run during the coming 16-17 months. Finally, we are very optimistic on the future of mobile living. We believe that this is an underlying sure and an underlying growth trend, despite what we are experiencing just now on the short term. We introduced our strategy in May 2019. We are very, very confident that the strategy that we are driving today is going to pay off in the long term. With that said, Rikard, please, let's open for the Q&A session.
Yeah. Thank you very much. Operator, over to you.
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Yes. Hi. Good morning, gentlemen. Yes, I can hear you. Sorry, just, there's a bit of an echo. Yeah, I'll stick to two questions. Firstly, Juan, we've moved from last quarter, you mentioning in the press release that retail inventory levels being below historical levels to now talking about rebalancing. Maybe if you could just spend a little bit of time here on what has happened in the quarter. Clearly, it caught you by surprise. Also there, do you have any sense of the whole pull forward demand that you've seen last year, and how long this sort of weakness in the service and aftermarket should last?
I think we need to split it up into the OEM business and the service and aftermarket business. The comments last quarter were very much on the OEM business. The OEM business was showing still very low inventory levels. The inventory levels have been filled in the US, which is not the case in Europe and Australia. In Europe and Australia, inventory levels are still low. On the contrary, manufacturers, our customers, do have difficulties to complete vehicles because they are lacking chassis from other suppliers. That's one. The second one is that we have never experienced and after market going down in Q1 as we saw this time.
The only explanation that we have at this point is really that our retailers have been loading up with inventories in preparation of the 2022 year's season, and the season didn't start in the same positive way, obviously, as 2021, and they have been sitting on excess inventories. Again, if we look at historical numbers from 2005 and forward, we have never seen the aftermarket business, the service and aftermarket business dropping as we saw in this quarter. For us, so far it is a temporary slowdown, and we believe that it's going to be leveling out as months go by.
Understood. Thank you. Was this performance throughout the quarter, or did it get worse as the quarter progressed?
I would say that the first three weeks in April were good, but then we saw a change during the last week, and then it has been pretty stable during May and June. You see, I mean, that something perhaps that I can comment is that if you look at some of our customers' reports, I mean, you can look at Camping World. They were commenting Q1, their Q1, where their own business service and parts was down 20%. If you look at another important customer like Keystone, they were also showing 10%. It is clear that they are just now working on their own inventories, that the sales was not in Q1 as good as they expected.
Okay, thank you very much. Last quarter, you helped us with the split of organic revenue growth between sort of pricing and volume. I was wondering if the sort of pricing element was still sort of 5-5.5% in Q2.
Yes, around those numbers. Yes. Absolutely. Again, of course, what you can see is that raw material prices are coming down. Keep in mind that what we see just now on all the statistics is something we are going to see in our numbers in six months from now. If you compare the raw material prices in the first half of 2022 with the first half of 2021, they are still very, very high.
Thank you. If you look at the history of how sticky those price increases are and the elasticity of demand, especially when you have a weak environment, has pricing historically been sticky?
We have been pretty resilient, yes.
Okay, thank you very much.
Thank you.
A reminder to ask a question, please press star one. As a reminder, please state your name and the company name before asking your question. We'll now take our next question. Please go ahead.
Yes. Good morning, guys. This is Daniel Schmidt from Danske. Can you hear me?
Yeah. Daniel?
Sorry. Do you hear? Yep. Okay. There's something with the line. Yes, it's not only me. Anyway, a couple of questions from me then. You're saying basically that the raw material prices that we see now has been coming down quite a lot since April. That will have an impact on your business towards the end of this year. Is that correct?
Yes.
Could you shed some light? You said that you've had this historically good resilience in terms of price stickiness. Could you shed some light on where you're stronger and where you need to follow the market more and where you can keep your own pricing a bit more? Could you give us some sort of some more data on it and sensitivity.
Absolutely. I mean, it is crystal clear that service and aftermarket is always much more resilient than the OEM business. That has always been the case.
What do you think about sort of the new business that you've acquired over the past two years? Of course, you don't have any history on that business, but in terms of market position and competition and so on, and the need for price increases that you have been conducting, is that gonna be sort of difficult to keep or in line with the average for the group or better? Or how do you see it?
We see, I mean, you have on one side, you have Igloo, as Stefan commented, and then you have all the rest. If you look at all the rest, they are on underlying growth trend businesses, industries. We see that even today, even the Q2 , in the same way as the Q1 , they are showing very strong growth and very strong profitability. Looking at Igloo, we see as well that the prices that we implemented at the end of last year kicked in during the Q1 this year. Again, when recent prices went up in March, we implemented new prices, and we see already now in June. Worth to mention as well that there is a lot of statistics in the U.S., on the cooler markets. Igloo, even considering the price increases, is gaining market share, which is positive.
That's telling you, that's giving you some kind of indication that it's not about, it's not just about Igloo automatic, that everybody just now is forced to increase prices.
Yeah. Speaking about raw materials, in sort of looking at the other side of that and the inventory levels and so on, are you then also saying that the downturn in raw material prices should have a positive effect on working capital as we get into Q4? Is that a fair assumption?
Absolutely. I mean, that's also what Stefan commented, that out of the inventory levels that we see, a huge part is obviously prices. Both on raw material prices, but also on the logistics cost. I mean, keep in mind that we are paying kind of still today 40% more. Still today, even if container prices have been turning south, we're still paying 40% more than we were paying one year ago.
Container prices, is that also a six-month lead time, when we compare to the spot prices that we see right now?
About.
Yeah. I think I lost you there a little bit.
No, I said, Daniel, that it's about the same.
Yeah. Okay
... depending on the port. You have longer lead times in the U.S., a little bit shorter lead times in Europe. As an average, I would say that it's very much around the same.
Yeah. All right. You write that the implementation of new price increases when it comes to Igloo by the first of June had a significantly positive effect on profitability. I think it's a bit hard to exactly know the mix that you're exposed to when it comes to the Igloo raw materials. It looks like that raw material component has been coming down as of late, which of course, many others have as well. You raised prices by the first of June. Does that mean that you're looking into Q3 with an improving profitability?
Yes.
Even though we're entering more of a mid-season?
If you compare with Q3 last year, without any kind of doubts, of course, the volumes will be lower in Q3 than Q2. At the same time, you have the new prices kicking in, and the new prices are higher since recent prices went up quite a bit as well. The answer is yes.
Yeah. Do you agree with the fact that recent prices have been coming down lately?
Yes. Again, keep in mind that we have even their inventories, so you will not see that on Q3. You will see that most probably at the end of Q3, beginning of Q4.
All right. Okay. Thank you. That was two questions from me.
Thank you.
Agnieszka Vilela from Nordea, please go ahead.
It's Agnieszka Vilela at Nordea. Thank you for taking my questions. Starting with your comments about the retail inventories being balanced right now. I just wonder what do you think about the future demand for you? And here I'm thinking about H2 this year or 2023, and maybe if you could split it and look at both the distribution and aftermarket, when will you think the inventories will be rebalanced and the kind of underlying resilience will appear again there? And also, what do you think about the demand coming from OEMs? Thanks.
I think that we need to split it up into the different businesses. If we look at the RV OEM, it is clear, as we commented before, that already today, American inventories are very much at a normal level. The expectation is that the market will start pointing south. I guess that you are following RVIA like I'm doing, so the to-go number is kind of -20% to -25% for the remainder of the year. On the contrary, we look at Europe and Australia. The fact is that the numbers have already been negative for a number of months because of the lack of chassis supplies. There, I believe, I know that the inventory levels are still low.
The problem is more to get access to componentry so they can finish off the vehicles. There, I don't see I don't foresee a dramatic change to what we are seeing already now. If we look at commercial and passenger vehicles, which as is also one of our businesses, that market is growing big time for us. It is clear that you have again the introduction of new technology, the cooling compartments into vehicles, which is generating growth underlying, even if the automotive industry already now is negative. If we look at marine, we see still very low inventories. We have a strong backlog, so we don't foresee any drama in the coming months. There you have also the technology shift that you have from mechanical products to hydraulic and electronic.
That's on the OEM side. Again, it's very much just now what we see is the RV OEM, which is of course 24% of our business. Another 24% of the business, about half, is Americas, which is the area where we see the major challenge in the coming months. You have the service and aftermarkets. Historically, and Agnieszka, we are looking at numbers from 2006 and forward. The service aftermarket has been extremely stable. When the RV market has dropped 20%, this for the entire group, the service and aftermarket and distribution has been down 3%, 4%.
You have a gap which is normally 15-20 percentage points between RV OEM or rather OEM and aftermarket, which is the reason for us being on the belief that what we saw in Q1 with some of the aftermarket customers, like the Camping World, the Keystone, that is really that they enter the year with inventories for a high demand that they saw in Q1, and then they pull the brake, and we have been suffering in Q2. We should see this rebalancing taking place. Is that going to happen in August or in September? I don't know. I do believe that we are going to see this leveling out. Of course you could say, "Yeah, but interest rates, consumer demand." Well, still to be seen obviously.
Keep in mind that now we have moved the company quite a bit from high-ticket discretionary spend to lower-ticket discretionary spend. Obviously, when we are talking about the passive cooler, and as Stefan was showing before, we have not seen Igloo dropping during all these years. There was a Lehman Brothers in the US as well, but they didn't see any downturn. Again, we feel confident. At this point, we feel confident. Of course, that we have owned all those those companies for a few months. The only thing we can do is to look at the history, and the history proves to us that they are pretty resilient.
Perfect. Thank you. That's very, very helpful. Could you also maybe quantify the decline of service and aftermarket in the quarter organically? How much was it down for you year on year?
Yeah. It's over. It's two digits.
2 digits. Okay.
Yes.
Perfect. Maybe just a few words on your cash flows.
Sorry, Agnieszka.
I'm thinking about the
Agnieszka, sorry, just let me. I mean, when you look at our margins in Q2, please consider the mix. It has a massive impact.
Yes.
You know that very often we get these questions, "Yeah, but what about the margins in between OEM?" It is a massive difference, and that plays a major role for our margin deterioration in the quarter. So as
Perfect. Thank you. On inventories, I appreciate the fact that you would explain what was driving the absolute level. Even looking at the inventories in relation to the days of sales, you can see obviously they're climbing. When do you expect to take down your inventories and realize sales from that? Will it be also kind of connected to the fact that you will need to break production a bit more?
I think for most of the segments we have seen the peak now. As you heard Juan saying, we are 1,000 people less now at the end of Q2 compared to the same period last year. As we also mentioned in the last quarterly call that we are continuing to adjust the capacity on what we are seeing in terms of demand, but also how we are going to manage the inventory. We are looking ahead for the coming quarters that we are going to see the inventory level gradually going to come down.
Obviously, I mean, we have currency. We can't do much about that. We have the acquisitions. They are contributing with SEK 1.5 billion, and then it's the raw material price increases and also the longer lead time and the critical components. They will obviously fade out a bit over time. We are also driving, as we mentioned, efficiency activities in each one of the segments to improve the situation. We are looking forward to the coming quarters to declining inventory.
Perfect. Thank you. That's all for me.
Okay. We have a question on the web. It's about Igloo. Any change in market conditions for Igloo?
Not really. What we see is a little bit that if we look at all the statistics that we are getting from the NPD, the retail association, we see that number of units is coming down at the same time as U.S. dollars are coming up. I do believe that you will see very similar conditions no matter if we are talking about grills, barbecues, or coolers. Those kind of products are very much connected. We see that our growth is there. We had a strong growth in Q2. We don't see any slowdown. Keep in mind that we have been introducing new products now that we are a much more innovative company today than we were two years ago or five years ago. This is helping us big time.
We can see that average prices are going up as a consequence of two things. One is pricing as such, obviously, but the other one is innovation. We are repositioning the company from being good and better to better and good, which is leading to high average prices. We will see obviously higher margins over time as well.
Okay. Thank you. Next question operator.
Fredrik Ivarsson from ABG, please go ahead.
Yes, thanks. I think you actually just sort of answered my question, Juan. But just to confirm, because I think you said on Igloo in Q1 that you grew double digits, and now you say that you grow nicely as well. Does that mean continuously double-digit growth?
That's totally correct.
Okay, great. Thanks.
You're welcome.
The next question comes from Henrik Christiansen, Carnegie. Please go ahead.
Yes. Hello. Henrik Christiansen, Carnegie. Question from me on the cash flow. You give good explanations on the inventories, why that's gone up and the drivers for that. Is there any difference to trade receivables that are also up, or is that similar dynamics there? Is there anything different in trade receivables?
Yeah. No, I would say that, on the acquired companies, especially Igloo, there is slightly higher payment terms. We know what type of customers we have on the other side. Other than that, I would say it's a very stable development in terms of, if you look number of days, as in relation to the business volume, so to speak. Any, the majority of that increase is basically because we have a bigger business, so to speak.
Good. The second question is on leverage. You ended last year with 2.6x net to EBITDA. Leverage has since moved up, and yes, you closed acquisitions through Q1, you paid dividends, FX goes against you. You also have cash out from restructuring program in coming quarters. Are you still confident that you will bring leverage down by this historical 0.6-0.8x this year?
I would say that we were going to be on the lower side of that range this year. Related to the working capital, I mean, that will improve, but it will also take some time to get down to that historical level. That we are going to see that development in that direction, yes, that's what we are expecting.
Perfect. Thank you.
Douglas Lindahl from DNB Markets. Please go ahead.
Yes. Hello, gentlemen. Thanks for taking my questions. Just a clarification question to begin with. You commented in the quarter report that the backlog is up year over year. I'm assuming you're talking about the organic backlog, right? Would this also be true when adjusting for pricing? That's my first question.
No. If we are just looking at volume number of units, but that's a difficult question, obviously, because we have 12 different product areas. You could say in general terms, volumes are starting to go down, but that's compensated by the prices. As you know, obviously, the backlog is very much driven by OEM and less driven. About, I would say 2/3 is OEM, 1/3 is aftermarket. As we have already commented, the aftermarket side was pretty low during the quarter. That has a major impact on the backlog as well. The turnaround on aftermarket is very, very fast.
Yeah. Yeah, understood. On the marine business, Juan, you talked a little bit about that, but then you said that you don't expect anything negative over the next few months, if I heard you correctly?
Yeah.
Can you talk a little bit about the marine business in terms of your backlog visibility and also how this business has performed in previous market downturns?
We have seen on one side we see a strong backlog still today. We see strong sales. We see that inventory levels are still low. It's a bit of the same situation that for the RV OEM in Europe or in Australia. The problem for the marine industry has primarily not been demand. It has been really the access to componentry. We feel still today very confident on the OEM side. Like anybody else, it has been on the aftermarket side in Q2. On the backlog, we have a good visibility from an OEM perspective. What we see, the positive impact that we have is really a technology shift.
If we look at the average price per hull or per boat, the average price is coming up all the time simply because they are using less mechanical products, they are using more hydraulic and more electronic products, and then the average time goes up dramatically. If we look historically, what we have seen is in reality 2 quarters at the end of 2019 where we had negative growth. Apart from that, we have seen the company growing all the time. Again, keep in mind that we have-
And-
That we have quite a bit negative growth on the aftermarket in marine as well. That's telling you that the OEM marine is still extremely solid.
Yeah. Maybe a bit difficult to answer, but in terms of the businesses that you've acquired within marine, they have a bit longer history, I guess.
Yeah.
What can you say about their performance?
Very strong. So far, very strong.
I'm sorry, historically in downturns, I should specify.
It has been also quite stable because the historical Dometic has been very much aimed to the larger yachts. Normally that's a less sensitive market than when we are talking about the smaller boats. The American part of the Dometic marine, the SeaStar is reacting on. I believe that we have very good mix with the larger boats on the historical Dometic marine, and then the smaller boats now with American part of the marine business. It's a pretty good balance.
Okay. Okay, great. Thank you.
Thank you.
Thank you. That's all the time we had today for questions. At this, I'd like to hand people back over to Rikard for any additional or closing remarks. Over to you, sir.
No, thank you very much. Before ending, any final words from you, Juan?
No. Well, thank you very much all of you for showing interest for the company. We keep working on our strategy, and we will make sure to keep delivering. Thank you very much for your attention. Have a happy holidays, by the way. I guess that for many of us, this is the last day. Enjoy your holidays, and we'll see you soon. Thank you.