Hello and welcome to the DRAMETIC Q2 2021 Analyst Call. For the first part of this call, participants will be in a listen only mode And afterwards, there will be a short question and answer session. Please also try to limit the questions to 2. Today, I'm pleased to present Johan Vargheff, President and CEO Stefan Freistadt, CFO. Speakers, please begin.
Good morning, everybody, And welcome to Asania Stockholm and the presentation of the interim report for the Q2. If we look at the highlights For the quarter, we see that the market demand remains very strong in all segments and in all continents. We have a record high backlog for this period of the year. As many other industries and many other companies or most companies, I would say, We still see critical shortage on components and freight capacity and that creates obviously challenges. We also perceive the retail inventories to be very low, which means That we expect the restocking period to be extended.
We were discussing some months ago about 2021, Perhaps Q1 2022, we see now in accordance to our customers and the rest of the industry That it will take longer time to refill inventories. From a performance perspective, we show all time high sales And profitability, organic sales growth up 66% compared with a weak Q2 2022 where we went down 38%. We have also experienced a very high M and A activity And announced 6 acquisitions during this year 2021 and completed Three acquisitions during the quarter. EBIT margin at all time high as well 17.2% compared to 10.9% last year. Keep working on our innovation and innovation index reached for the first time 24% versus an 18% 1 year ago, and we keep working according to our strategy to reduce our breakeven point If we move over to the financials for Q2, As I mentioned earlier, 66% up organically and then we have a negative impact of 7% coming from FX And an addition coming from M and A of 8%.
Looking at EBIT Before items affecting comparability, we increased our EBIT by 165 percent, Ending up at DKK955 1,000,000 in comparison to DKK361 1,000,000 last year, Reaching an EBIT margin, as I said, all time high of 17.2%. We're looking at operating cash flow, Strong improvement as well, ending up at +181%. As you all know, we had a share issue Earlier in June, bringing our leverage down to 1.4% compared to the 3.1% that we were showing 1 year ago. And also a strong EPS development in comparison to last year, ending up at DKK1.85 Compared to for 2 or 1 year ago. If we move over to the year to date numbers, 41% up organically to be compared with minus 26% organically 1 year ago.
The FX impact is the same and M and A will add 4% of growth. Even here, we see that the numbers have developed very positively for us on the year to date numbers, ending up 115% up versus the same period last year of almost DKK 1,700,000,000 or 16.2% Margin in comparison to the 10.4 that we were showing 1 year ago. Cash flow 75% up versus last year ending up at 857,000,000 And EPS ending up after 2 quarters at SEK 3.50, Which is more than 3 times the level that we had 1 year ago. We are obviously very We have seen now 4 quarters in a row with organic growth and we expect the organic growth to continue in the quarters to come. Looking at the different segments, pretty much even with Americas being up 66%, EMEA 63%, APAC 65% and Global 70%.
Looking at different application areas, We are also happy to report that we see growth all over. When looking at Current currencies, we are up 72% on food and beverage. We are at the same level, 73% on climate. Power and control, an area where we are investing quite a bit, 124% versus last year and then other applications as well, 65%. Looking at our sales channels, we see OEM Current currency is growing 89%, while service and aftermarket is growing 74% and distribution 62%.
So again, all are so very pleasing to see that both all channels, all segments are growing nicely. If we look and compare to our strategy, we communicated 2 years ago that we wanted to grow distribution, Service and aftermarket faster than we were growing OEM. We see that this is really kicking in. We're looking at the same period, Toromont's rolling number, Same period Q2 2021 versus 2018, we have moved the needle from 39% to 47% coming from service and aftermarket and distribution. And of course, this will bring more stability to the business And this will also bring higher margins over time.
And on top of that, obviously, Most of the acquisitions that we are doing today will strengthen additionally both the service and aftermarket and the distribution business. Looking at EBIT, all time high. We are running just now at a 12 month rolling trend of 14.9 Influenced obviously by growth, giving us leverage, but also our price management Compensating for raw material prices, compensating for freight costs, compensating for the negative FX evolution that we have seen. And on top of the pricing, we also have Less negative impact from tariffs, even if tariffs still play a negative role in Americas, obviously, And then all the efficiency activities that we are running across the company. Looking at different segments, Americas, Up 66 percent growing in all the application areas, growing both on the OEM side as well as Distribution and service and aftermarket, and we are very happy after the completion of both Balterra.
And Balterra is bringing 2 different businesses, one which is service and aftermarket and then another part, which is mobile power solutions that we will mention later. And then some solar, which is 100 percent mobile power solutions. EBIT, a strong improvement, up to 7.3% coming From losses 1 year ago and on the factors influencing is very much similar with all the other segments. So we have obviously Leverage on the sales growth, we have a channel mix, we have lower impact from the U. S.
Trade tariffs, We have also been working hard with our price management and we have the underlying efficiency improvements. On the contrary, we are suffering from supply chain constraints, From the raw material prices, the freight cost, which is just now impacting all over the place and then negative FX. Looking at EMEA, very similar, 63% up organically, growth in all the application areas, Growth in the OEM side of the business, but also equally on the distribution and service and aftermarket. And in this case, we have not completed any acquisition, but we announced the front running acquisition back in June and then Butner that was Announced and completed in July, beginning of July. EBIT, EUR 343,000,000.
Looking at the EBIT margin, 16.7% versus 12.9% 1 year. And I will not repeat myself, basically, it's exactly the same factors As we saw for Americas with the exception of the tariffs. So we have leverage, we have price management and we have underlying efficiency improvements. Playing on the against us, we have obviously still there the supply chain constraints, we have raw material prices and freight cost And on top of that, FX and M and A transactional cost. Looking at APAC, In a similar manner, 65% organically up, growth in all the application areas, growth in all the sales channels, all time high backlog and we completed another exciting acquisition, Enerdrive, which is also 100% Mobile Power Solutions.
EBIT margin at all time high 29.5%. Two factors. On one side, we have The net profit by the sale of a warehouse in Hong Kong at the same time as we have negative transaction cost of €13,000,000 against those €1,000,000 of net profits. And then If you exclude for those 2, EBIT margin would have ended up at 25.5%, which is still a very, very high level. And then on the factors, exactly the same factors as for EMEA and the rest of the segments.
The Global segments, 70% up, growth in our application areas. We have an all time high in marine. We also have an all time high in residential. Hospitality is turning back to growth. We see also mobile deliveries where we are finishing off our field test And we are opening for orders, and we are optimistic about that vertical market moving forward.
In terms of profitability, ending up at DKK 370,000,000 or an EBIT margin of 22.9 percent versus 18.2 1 year ago And the same factors influencing. So we have leverage, we have efficiency improvements, price management and then against us The tailwinds we have sorry, the headwinds we have, the supply chain constraints, raw material prices, freight costs and then our mix. If we move on, we continue to deliver on our strategy. As I mentioned earlier, we see a very nice movement with distribution and service and aftermarket growing faster over time And the OEM business and standing today for 47% versus 39% a couple of years ago. We have announced 6 acquisitions year to date, We keep working on that area and we also see a rapid growth on our B2C channel, still a small numbers, but we are twice As much as we were 1 year ago.
If we look at our Pro Leadership Innovation Index on 24% all time high, And what is even very pleasing to see is that we are continuing to launch new products. And just As a reminder, on one side, we are revamping all the existing product areas that we had historically At the same time, as we are launching new products for new vertical markets. And we expect we have a strong pipeline, and we expect The pro launch is to continue. Macaw reduction, keep working very, very hard SKU, the number of Fuse is down now 57% versus the level that we were showing in 2018. But it's not only that, we are working on supply reduction.
We are 25% Fewer suppliers, we are working on space, 13% down and so forth. We have also announced the closure of 1 more site, and we are totally committed to our cost reduction target that were introduced In connection to the Capital Market Day. Looking a little bit on the growth side, we Pay a lot of attention to our website. We have implemented a new website. We see in the quarter an organic growth of 18%.
And this is important for us obviously since we are trying to communicate more and more with the consumers and this is also one of the fundamentals To enter into the B2C channel. If we look at social media, we also show a similar progress, 19% versus the situation 1 year ago with nice evolution on all the different medias. Understand this is going to be crucial to develop new ambassadors to have more traffic on social media for our B2C channel. Looking at outdoor, we launched our new cooling boxes and Dreamwear in both EMEA and Americas during the quarter After the interaction that we had in Australia, 1 year ago, and this is a very important area for our future, Moving the perception from high ticket discretionary spend into low ticket discretionary spend. We also launched a new generation of minivars and in this case, it's not just for lodging business, but also for the healthcare business And the elderly care.
And what I think is impressive is that we manage to improve performance at the same time as we are reducing energy consumption by 40%. We are finishing off the field test On our deli box, the food delivery on the food delivery market, we are receiving very positive feedback from potential customers, and we expect to start getting orders very, very soon now. We are investing in introducing ourselves into more outdoor channels. What you see on the slide is really Our presence on the Liverpool Outdoor Show that took place between June 29 July 1, where we are showing Our activity based vehicle outdoor approach, As you can see, we have rooftop tents, we have the hubs, we have the coolers, and we are going to be launching a totally new generation of products During the Q1 or next year. Looking at acquisitions, we have been very active.
We continue to be very active. And what I would like to mention is obviously that we didn't start working with acquisitions the 1st January. This is really The consequence of 1.5 years where we built up the organization, where we have people in the different continents and we are starting to see we are starting to harvest The hard work that we have been spending. Looking at what we are looking for, for acquisitions is very much Now on the distribution side and on the service and aftermarket, on the left hand side, you have the residential business, which is a distribution business. Then we have Frontrunner, which is a 100 percent outdoor company.
Valterra, on one side, is a service and aftermarket business, But they also own Go Power, which is 100% Mobile Power Solutions, and then we have the 3 additional acquisitions in the same area, Mobile Power Solutions. So why is Mobile Power Solutions interesting to us? Well, It is clear that we see sustainability, electrification trends that are leading to Increased end user demand for off grid products. We have seen we have observed a number This company is growing very, very fast, showing very nice margins. And this is very, very appealing because we believe that the underlying trend Of people deciding to spend more time in nature is going to continue to grow.
At the same time, Nobody today wants to give up the convenience that we have at home. So that's where we play a role. And of course, in a future with electric cars, it's going to be even more important to have access To electricity and you will not be able to take that electricity or that power out from the car. So that's why when we are talking about solar panels, when we are talking about battery packs, when we are talking about generator, power generation It's extremely important for our future. On top of that, we see obviously that the more electronics you have, the shorter product cycles you are going Experience and the higher margins we are going to have.
So very, very interesting to us. Sustainability, we are totally committed to lead the sustainability in our industries. As you know, we have 4 KPIs that we are following on continuous basis, we are communicating. In terms of injuries, we are down 23% Towards the same period of last year, we are spending a lot of time to increase The number of female managers in organization, we cannot show that in the numbers yet, but we will see it. We are implementing our 3 years plan to get to elevate those numbers.
In terms of audits, in low cost countries, we have moved to 84% versus 77% 1 year ago despite, as you are aware of, the travel restrictions that we still have around the world. And then we're also investing in renewable electricity, and we have a reduction on Our consumption of CO2 tonnage of 12%. We have as a target 5%, but we have invested Faster to get to accelerate the progress in that area. In regards to restructuring program, We announced the closure of 1 more site during the quarter, which means that we are down to 22 Sites affected so far, another 26 employees will be leaving us for a total of A little bit more than 800 employees so far. On the cost side, euros 24,000,000 accrued in the quarter or euros 256,000,000 Since the beginning of the program.
And again, we hope now when the travel restrictions start to ease up that we will be able to accelerate our program. With that said, I would like to hand it over to Stefan, please.
Thank you, Juan. Starting off with the bridge For the Q2, and as you can see from this, currency continues to be a negative impact for us, SEK 34,000,000 in the quarter on EBIT. Then we have the M and A Transaction stuff we have been completing. I'm coming back a little bit to more details here in a second. But total in the quarter, we have SEK 270,000,000 Net sales included related to M and A and an EBIT of SEK 39,000,000.
Then we have the last column, which is, of course, a combination of a number of different things. And it's obviously, sales growth is an important part in this. Juan has already talked about price management, which We have been successfully been implementing to mitigate some of the negatives, which is related to raw material prices and freight costs. Then we have continuously less negative impact from U. S.
Trade tariffs, not in absolute terms, but in relation to the business volume. Obviously, operational leverage and cost savings are important factors Driving our affordability. And then except for raw material and freight cost increases, we So are obviously facing as the rest of the world supply constraints and increasing lead times. Moving The next. Here we have some more details on our acquisitions.
As I said, SEK 270,000,000 of net sales related to 8% growth from M and A. So if we look on this Before amortization of intangible assets, which comes with all acquisitions, we Are showing a data margin of 18.9% for the acquired companies And SEK 18.6 percent for domestic as an average. We are we have also taken a decision to handle M and A transaction cost of of bigger materiality and book them as item affecting comparability and that is a total of SEK 29,000,000. Then in the box below, you have the acquisitions we have done just to Help you understand when we are announcing them and when they actually are included in our accounts. So Twin Eagles was Announced in February and included from February as well.
Related to the global segment, Baltera announced April 22 That has been included since May. Should, however, highlight it's since the last week of May, so it's not the full month of May we're talking about. Baltera is belonging to the segment Americas. Enerdrive announced on May 18 And included from the 1st June related to the APAC segment. Frontrunner was announced May 20 And has not yet closed and is expected to close in Q3.
And this acquisition is related to the segment EMEA. And then we have Samsolar announced on May 26 and is also included from the last week of May and belongs to the segment Americas. And then we have the latest announcement of Bitmain Electronics, July 2 and will also be included in our accounts from July and belongs to the segment EMEA. Let's move on. Going over to the operating cash flow.
Satisfying development In the quarter, SEK 875,000,000 in operating cash flow, 80% cash conversion rate. And so we are the cash flow is making a bit of a comeback, we could say. So that's nice to see and expected as well. Moving over to the next page to talk a little bit about the different components in working capital. Starting with accounts payable.
As you can see, Number of days are moving up, and we have been driving in China, especially a program using bank promissory notes, but also the rest of the group is now moving up Terms in the agreement. So that's a nice development. DSO Starts to come down to levels we have seen historically. So I think on the DSO situation, we see things Stabilizing here. DIO are obviously higher, especially if we look On the graph, that is the short term view of DIO.
And that's driven by that we need to build inventory to secure deliveries, and we also have new product Introductions that we need to build up inventory for, and then we also have significantly increasing lead times, especially from Asia to the rest of the world. So if we look on a total level, we are actually Working capital in relation to net sales on a historic level. Moving on to the next, talking about CapEx and Research and Development. As you can see and What we also basically have been communicated, we are hovering around the level between around 1.5%, Equating to SEK 77,000,000 in the quarter. And even though we are doing more things, we feel that we are doing different things and that we are getting higher efficiency out of the investment that we are doing.
Looking specifically on the research and development spend, 1.8% in relation to net sales, SEK 102,000,000. And as you can see from the development of the innovation index, the investment that we are doing are certainly Driving and renewing our product portfolio. Next step. Cash flow for the period, some highlights. I already mentioned the operating cash flow improved to SEK 875,000,000.
We have done acquisitions of around SEK 1,600,000,000 in the second quarter. And then there has happened a couple of things Within financing, as you know, we did the directed new shares issue here in the beginning of June, Which brought almost SEK 3,400,000,000. And then we have also paid out Our dividend of SEK 680,000,000 Looking on our debt portfolio. There has been one change in the quarter, and that's the SEK 2,000,000,000 facility provided by IKM, which has been extended with 2 years to 2025. Then we also have our undrawn revolving credit facility of EUR 200,000,000 So looking on our net debt, as was mentioned before, It has been coming down to SEK 1,400,000,000 obviously driven by the directed new shares issue.
And as you also have noticed, we have changed our target to be around 2.5 times over a business cycle. So basically taking that to the level where we have seen it on an average for the last couple of years. So this obviously means that we certainly have capacity to continue to execute on our M and A strategy Going forward, so with that, I'm handing back to you, Juan.
Thank you, Stefan. So let's summarize the quarter. So on the business side, All time high sales and EBIT. We feel confident about the future. We have an order backlog, which is brekohai.
We continue to see strong underlying market demand. Again, We see that with that backlog, with the underlying demand, we see that we have a positive outlook for the coming quarters. And we also believe that it is going to take longer time than initially expected to refill the inventories On the market side, at the dealer side. Looking a little bit more internally, we continue to work on our innovation index And we are improving quarter by quarter. We have a very high focus on cost and efficiency improvements.
We are very happy to see how the company is reducing our exposure to 1 single segment By increasing on distribution, increasing on the service and aftermarket side, we're standing close to 50%, as I mentioned previously, With the new acquisitions, once we are reporting all of them, we are pretty convinced that we will be close to 50%. Six acquisitions announced year to date, and we keep working on more acquisitions, more opportunities out there. And we are happy obviously about the share issue giving us the muscles to continue that journey. And with that said, I would like to open for the Q and A session. Yes.
By the way, I forgot to mention obviously that we have a Capital Market Day. We are going to have a Capital Market Day on the 30th November in Stockholm. So please save the date. And now we open for the Q and A session.
And our first question comes from Daniel Schmidt, Danske Bank. Please go ahead. Your line is now open.
Thank you, operator, and good morning, Fran and Stefan. Just then two questions from me and starting With the sort of the operating leverage in Americas, all regions are basically back to the margin levels that you had in Q2 2019 or even above apart from Americas. And I, of course, appreciate what you said in terms of the impacts and maybe the impact from the U. S. Dollar and the mix It's probably bigger in Americas than in EMEA and other parts of the world.
But is it also fair to say that supply chain issues Continue or has been bigger of a bigger problem in the Americas than any other regions?
Yes, I would say so, but you have a couple of components more. I mean, keep in mind that we are talking about Q2 2019. The 10% tariffs What's implemented during the second half of twenty eighteen was also we were building up inventories of 10% tariffs That we were consuming in the 1st quarters of 2019. And then during the second half of twenty nineteen, the 25% tariffs started to kick in. So in reality, we are also still today penalized by that.
Then you have a clear mix. And as I feel we have mentioned a couple of times But RV OEM is the lowest margin area that we have, and we are growing faster on RV OEM in Americas Lower margins that we are driving on the rest of the world, that has an impact. If you look also at the weighting, the weighting of our BOEM in Americas is higher Now for the other regions, so you put everything together is very much mix driven. Then we have, as you just said, So more impact on delays. We know that a number of manufacturers started to run longer weekends During the last 6, 7 weeks, so we expect to see a little bit more leverage in the quarters to come If everything goes as we expect.
Yes. And is it fair to you also said that you're totally committed to the cost reduction Target and you hope that to be able to accelerate the cost cutting program once now sort of travel restrictions are easing. Is this more related to Americas than the rest of the group? Or is it equally distributed?
Well, I think we have weaker America.
Yes, yes. I mean,
it's obviously high cost country driven. We are sitting with a number of factories In Americas, we have still today a few factories in Europe as well. But of course, if we are talking about priorities, Americas for us is a priority Because we see that in the numbers clearly. Yes. So we want to get to the same average numbers that we have in EMEA.
There is no reason We're not believing that we should not be delivering that. But then we also need to work on the mix, as I said. We have more exposure to the RVVM business in Americas than in the rest of the segments.
Good. And then the second topic, you talk about prolonged period of restocking. And of course, we've heard this for some time, but it does sound that you are Sort of highlighting this yourselves a little bit more, what are you seeing sort of in terms of retail demand? It's One thing that, of course, inventories are low entering 2021 and there's been some supply chain issues. What are you seeing in terms of the end market demand as we And the Q3 and during Q2?
Still very positive, and that's what is driving our assumptions. But obviously, the demand is still there. It is clear that dealers, the OEM dealers are not refilling the inventories at the pace that it was expected before. And because of that, when you have a combination, higher demand will continue at the same time as you have inventory levels that are not growing at the pace that was expected. That means that the period that it will take to refill is going to be longer.
Yes. And do you feel that sort of it's an equal impact in terms of supply chain issues and higher demand than That are keeping inventories low or do you have any sort of shed some light on that?
No, I think that you we still have I mean, it is Clear that people are still not taking a flight to the Caribbean or To Thailand, I think that this is obviously supporting the industry without any kind of doubts. I mean, if you look at Camping in Sweden or camping across Europe or in the U. S. Is difficult to get to the space. They are fully booked.
And I don't think that's just going to go away either. I mean, of course, that we will see sooner or later that we cannot be at these levels forever. But is I see it as an acceleration of the underlying trends for outdoor life and lifestyle that we have seen over the last 10 years.
Yes. Okay. Thank you, guys.
Thank you, Juan. Thank you.
And our next question comes from Lucy Perrier, Morgan Stanley. Please go ahead. Your line is now open.
Hi, good morning, gentlemen. Thanks for taking my I was hoping you could help us understand how much price increase you were able to pass in the second quarter And how much you estimate the impact from raw materials and I guess also supply chain constraint to remain a tailwind In the second half please, because I think you would help us to understand whether you see maybe an acceleration of that headwind or maybe a deceleration?
Hi, Lisi. It's Stefan here. So what we can say about that is If we see the net of these effects, obviously, the price increases that we managed to pass through less The raw material price increases and the inbound freight increases. I would say that we It's more or less even. So we were a little bit below in the Q1, and now we are a little bit above in the second quarter.
So far so good. But I mean, this is things that is evolving almost day by day, week by week here. So it's We know that there will are going to come more price increases here a little bit further into the year here And to mitigate, yes, the continuous cost pressure that we have From different sides. So I would say, so far, we are satisfied with what we have been managing to do here.
So just to be clear, our intention is to be ahead. That's our clear intention. And it's of course, I mean, what you can see is our pricing are increasing and the cost is increasing. And then we need to increase prices again and then cost continues to increase As for any other industry.
Understood. So but basically what you're saying is actually in the second quarter, You were able to kind of mitigate the headwinds, so the margin overall was not disproportionately impacted by the headwind basically.
Correct.
Thank you very much. My second question was around M and A and the M and A envelope. I mean, I appreciate that I mean it depends on timing of closing of acquisition, discussion with targets and so on. But Are you expecting something equivalent to be achieved in the second half versus what you've done in the first half in terms of spend or something higher, something lower. What can you give us on that at the moment?
Well, what we can give you is We keep working exactly the same pace as we have been working in the last, I would say, 18 months. We've got the pandemic in between, so we restarted Our activities again in Q3 last year and during the first half, we harvested some of that And we keep working exactly at the same pace. So it is clear that this is crucial for us To accelerate our journey, our transformation journey to become less exposed company to 1 single segment. That's the target. We want to see less exposure and we want to see high margins.
Understood. And just on the point on the margin, the new reclassification you are making from M and A cost into items affecting Comparability, is that a new classification on for 1 that should look at So acquisition by acquisition or is that when you look when you see that the total M and A cost is exceeding a special threshold, You're making the reclassification because obviously that makes it a little bit more difficult to compare EBIT margin versus history.
Yes, correct. But I mean, so if we take the acquisitions we have done now, The acquisition that qualifies to be taken as item affecting comparability is Valdera. So if That size of acquisition, but it, of course, has to be evaluated case by case. But Then the rest of the M and A costs, they are included in EBIT because we also believe that This is going to be a part of our normal business. It's, of course, going to be a little bit up and a little bit down, but It's a part of our strategy.
So then you obviously have to add, I mean, everyone knows that You don't have 100 percent achievement on all your M and A efforts. So of course, sometimes that will be something that is sunk. And yes, so but depending on the materiality, then it We'll be included in items affecting comparability if it's more material. So that's the way we have decided to do it.
And our next question comes from Ritz Miele, Jefferies. Please go ahead. Your line is now open.
Yes. Good morning, Juan and Stefan. So The first one is really on the supply chain bottlenecks and the component shortages. So if I look at your organic revenues excluding FX and M and A, Looks like it was sequentially stable from Q2 to Q1. It does feel that those headwinds are actually getting worse.
I'm just wondering if you could comment on this or whether you can assess what could have been your organic growth if you were able to deliver on ship your products?
I feel you could have added a couple of percentage points more without any kind of doubts. And I have to say that this is not just one segment. We see that in all the segments. We don't see that in one product. We see it more or less in all products.
So I mean, again, we are not vaccinated against what is going on around the world like Many other industries. It is tough to deliver 66% up organic When you are chasing every single day. And again, we are talking about componentry, but we are talking about containers. The price for our container today, first of all, you need to get hold of the container, then you are paying 10 times more than you were paying 1 year ago, Just to for you to get a feeling. So it is a struggle.
At the same time, I also believe That we like the rest of the companies are becoming better and better. I guess that we are getting used To live with this pandemic and the consequences of the pandemic. So I mean, this is kind of the Q4 now In this situation. As you know, You can read immediately obviously that the electronic suppliers Building up new factories, they are building up factories in Asia. We also have Europe, which is starting to invest in that area.
We have Americas, But it will take a while. So I'm not expecting the situation to ease it dramatically in the coming weeks. I hope That it becomes easier at the end of this year.
Understood. The second one is really a follow-up on Lucie's question on raw material and freight costs. You were helpful last quarter to actually assess those. I think you talked about 80,000,000 Sort of headwind with pricing roughly under 1.5%. I'm just wondering if you could sort of give us those same numbers this quarter.
And whether your comment, Juan, on you're willing to be ahead as well as the target also applies to Q3 where I think we should get The peak headwind in terms of romance.
I think that's kind of our job. I mean, of course, that we are looking at those curves Every single week, we are following what is going on on steel prices, aluminum prices, plastics, all that kind of stuff. And we are reacting as soon as we see that we are moving to the next level. So we have been increasing prices Already starting in Q3 last year, we have been increasing prices in Q4, we have increasing prices in Q1, in Q2. Now we see the raw material prices stabilized during the last couple of weeks, but we don't know what's going to happen in 3 weeks from now.
So if we see prices coming up on the raw material side, we will have to increase prices again.
And it's not the only raw material There is also freight cost is also going up to quite extreme levels.
So even here, I do believe that the pandemic has created an extreme situation. And when you have this kind of situations, You also need to behave accordingly, which means that we need to be on our toes and we need to be very, very fast On adapting our pricing to our cost. And so far I think that so far we have done a listen, Joe, in doing so.
Okay. And then lastly, the Mobile Power Solutions sales of SEK 1,000,000,000, what sort of normalized growth Right. Should we are you seeing in this vertical?
We are seeing 2 digits. We are seeing 2 digits for years.
Okay. Thank you very much.
Thank you.
And our next question comes from Agnieszka Villela, Nordea. Please go ahead. Your line is now open.
Thank you. So starting with kind of 2 questions that I have. Number 1 is about what do you feel about your sales In Q3, on kind of absolute level, I mean, traditionally, when we look at Q3, it's usually slower than Q2, given holidays, etcetera. However, now I noticed that you did build EUR 500,000,000 of inventories in Q2 versus Q1. And the question really is do you plan to kind of ship these inventories now in Q3?
Or do you feel you need to have this elevated inventories for quite some time? And also, when I do my calculations, I do expect that acquisitions will probably add something like EUR 200,000,000 more in Q2 in Q3 compared to Q2. So do you feel that you have kind of potential to actually exceed sales in Q3 versus Q2? That's my first question.
Q4, I've not been calculating such a way.
It's I mean, if we just Considering how I'm going to answer you here, but I mean, we are looking Positive into Q3 and yes, yes, also versus what we achieved last year. So And obviously, M and A is also going to help up here. And What did you
say? On inventories, maybe if you can just elaborate. I mean, you raised your inventory level by €500,000,000 this quarter. Is this inventory to be shipped out in Q3? Or do you feel like you need to keep kind of high inventory level?
Yes, both. It's Q3 and Q4 because keep in mind that we have quite a bit of inventory on the sea. So it takes about kind of 60 to 80 days to reach increasing. So in both Q3 and Q4, I would say, will be the second half of Q3 On Q4? Yes.
That's a reality.
I said that in Q1 that we have never had so much inventory on the sea, and I can Exactly the same in Q2. So it's the lead times is really
All right, that's fine.
I mean, that we are optimistic because we see the backlog, we see our inventories, And it will come out. The question is only when, which week or which month?
Yes, okay. And then Concerning the acquisitions, I mean, keep in mind that Valterra and Sam Solar, they were Coming in the last week in May. So it's not they were not in the full month of May. And the Enerdrive is 1 month included. And then, of course, Twin Eagle is there fully in the quarter.
Butner is going to be Almost the full quarter Q3. And then front runner is a little bit depending on we are Waiting for some decisions to be made by authorities out of our control here. So But we expect it to close in Q3, but we are not 100% certain exactly when in Q3.
Yes. That's
my point that you should see like stronger contribution from M and As in Q3 versus Q3.
Yes, yes, yes, absolutely. Yes. Absolutely.
Yes. And then my second question, can you just help us to understand what are the kind of building blocks So for you for improving margin in Americas, what can you do?
We have to do a lot. So I mean one side is obviously the mix. It is crystal clear. It is clear that we have activities to reduce our cost as well. But I think one of the main contribution factors that we have in Americas is the mix.
It is too much RV OEM. And as you know, RV OEM, I mean, it's no secret. We have communicated several times, but that's where we have Absolutely, the lowest margins in comparison to anything else.
And that's obviously both Valtara and Samp It's obviously addressing that and helping us, but even with them compared to the other segments, Still more, more weight towards OEM.
So now we are investing in building up our service and Aftermarket business, we're investing in developing our outdoor business, where we have very nice margins. So it's very much about exposure. Americas has historically been for domestic very much about one segment, one vertical market segment. If you compare both with APAC and EMEA, where we are much more fragmented, which means that we are Obviously, reducing exposure. Perfect.
And if I may, I have
As I said, we are working a lot On reducing the tariff effects, and that's coming step by step. And we are obviously reducing on top of that in reducing our cost base, our infrastructures.
Great. And if I may, very short kind of housekeeping questions. Did you have any cost for the direct share issue in your financial costs this quarter?
No. That is netted down. So it's according to existing accounting principles.
All right. And then also on the CapEx guidance for the full year, what can we expect?
I think you should You see the levels that we have been hovering around for quite some time, maybe with some Lower levels last year, I mean, I think you should expect us to stay around these levels. We don't have Any plans to take that up in any dramatic direction?
And then the last one on the amortization of PPA, if you could guide us there. What kind of run rate should we expect, say, per quarter in the coming quarters years?
I mean, that is obviously going to be a little bit depending on the Various acquisitions, they look slightly different. And we Yes. You can see yourself that it was SEK 12,000,000 in the second quarter related to acquisitions. So obviously, that is not the full quarter for Valtera And for SAM Solar. So but I think if you The acquisitions to come, are they going to be significantly different?
No. They are going to hover In the same ballpark in terms of the amortization. So I think you can use this information that We have provided with you combined with when you know that they have been coming into our accounts here To make your view.
Yes. Just looking at the purchase price allocation that you have in Note 10 in the report, I can see that you have trademarks of EUR 67,000,000 and then other intangibles of EUR 621,000,000 for the 4 acquisitions. And Maybe to ask a question a bit different like for what's your accounting principle when it comes to amortizing this kind of PPAs? How many years
It's between 2 to 15 years. And Trademarks, it's depending on 2 to 4 years typically. Customer relationships, 10 to 15 years Typically, in technology, that could really vary, but let's say, 5 to 10 years depending on what we are talking about Okay, Andreas.
Thank you.
Thank you.
Our next question comes from Johan Eliason, Kepler Cheuvreux. Your line is
now open.
Yes, good morning. This is Johan. Thank you for taking my question. I was just wondering With all these acquisitions you have now done, you've added dealers. Could you sort of mention how big your dealer network Today versus where you were at the beginning of the year?
We I cannot tell you just exact numbers simply because we are just now in the process of integrating the companies, difficult to know How many dealers each of these companies do have? But if we started on somewhere around 36,000 dealers around the world, I would assume that we are today adding another 1500 or so. When looking at the companies and looking at information that we have received during the DDs, that will be my assumption, 1500 more. Good. But what's important there, what's important is that the vast majority of the dealers we've had in the past, obviously, Way more on the RV aftermarket side.
Now we are adding stores. We are adding distribution. So we are opening a channel. If you look at Frontrunner, that's an outdoor company, A pure outdoor company with a pure outdoor channel that we are very interested in. At the same time, obviously, as we are Organically working with the areas of the world, with Natura Company, with Globetrotter, with all these outdoor companies around the world.
Also keeping in mind that some of the acquired companies actually have a rather high share of the business to consumer. Absolutely.
So just to give you something that you might be interested on, if you look at this Company, Frontrunner, they are 50% B2C.
Good. Then one thing. Obviously, the acquisitions you highlighted came with quite good margins already in the quarter. A number of those have centered basically around, to my understanding, at least the same technology in the solar space.
Yes.
Will you be able to take out synergies basically from common technologies going forward on all these The smaller acquisitions you are making in the sort of space.
That's how we believe. So obviously, it takes a while. These companies are not companies having big factories and big infrastructures. But Our expectation is obviously that we don't need to have 4 different set of suppliers when we are supplying to the market similar kind of products. So it will happen over time.
And we don't feel that we are done by any means. I mean, that's the good news. Being a new market, being a fast growing market, what happens obviously that you are getting New and new startups. So we see this area as a very interesting area moving forward for the years to come.
Excellent. And what's the strategy with all the brands you're acquiring? Are you keeping them or
They will be demanding.
Jewel branding?
You got it right. So we are implementing double branding within the coming 6 months. I have already seen the logos, the new logos.
I haven't seen that, but I will look for them. Excellent. Thank you.
Thank you. Thank you.
And our last question comes from Harik Winkler, Handelsbanken, please go ahead. Your line is now open.
Yes. Thank you. And the first question is a follow-up of the previous question. It's broadly about your post acquisition strategy for companies that you acquire. Do you have a Certain process that is pretty much the same for all companies and then there's of course always company specific variations.
And the
reason that I'm asking is that at what point Do you start to have sort of constraint bottlenecks either in terms of managerial resources or Your systems, either financial reporting or IT systems.
So if we take the first one, I mean, it is Clear that we have a number of people. I mean, Stefan is coming from an acquisitive company. I'm coming from an accomplice company. We have a number of people coming from that kind of environment. So we have the experience and the means to do that.
Secondly, we have a clear plan. I mean, I see. It is difficult to be a 1 brand company when you have a strong position. So I don't see Dometic having 1 single brand, But I don't see Dometic having 20 brands either. So I see Dometic having one main brand, which is Dometic.
So we look at front runner. Front runner will become front runner domestic. If we look at Go Power, it's going to be Go Power Domestic. We're talking about some solar, it's going to be some solar domestic. And then what happens over time in 5 years, 10 years, still to be seen.
But they are going to be domestic identified because again, we are buying nice companies, very nice companies in new markets To build up a domestic brand on the outdoor, then the question is more, okay, but what happens if You buy a different company being sizable and where in areas where you already have a very strong position. Well, 1 plus 1 will never be 2. So that's when I see obviously that we might need over time I know the brand to attack the better segment, but we are not there at this point. Then if we are talking about systems, I mean, this is not about Ometi. Remember where I'm coming from.
I mean, we don't have one single ERP. And of course, whenever you are Equine a company, you need to have a plan on how are you going to integrate these companies from a financial perspective, From an IT perspective, from a legal perspective, we need to reduce number of occasions. We need to reduce number of legal entities. We need to reduce number of EAPs. Again, I think that I had a pretty good education on that in that area.
I think that Stephane has a pretty good education as well. We have a few more people that are used to do it. And keep in mind that we are not buying global companies. So if we are buying a company in Germany, that acquisition will impact the German organization and the media management. That has nothing to do with the U.
S. We are acquiring a company in South Africa that has very little to do with American business. So that's the other one. I mean, it's not just me running the company or Stefan running the company. We have some people out there that need to be in charge Of integrating these companies.
And that's very much about building up competence. We can that's why we need to be decentralized. And that's why we have decentralized in the company since I joined it because I don't believe in being acquisitive and being centralized. It is impossible. You become the bottleneck, as you just said.
All right. Fair enough. And then a question related to decentralization. And maybe you gave an example of some component suppliers have started to sort of re shore or build up production closer to end market. So Your plan for manufacturing footprint, is that still 100% intact compared to what it was before the pandemic?
Or have you made some sort of Pandemic driven adjustments in where you want to be in 2 years' time when you're done with that?
I think that It's quite similar, which is basically what you are talking about. So I mean already pre pandemic, I mean the entire process started with the U. S. Tariffs. I mean, with the U.
S. Tariffs and the way that China is developing during recent years, it is clear that Political decisions are having an impact in the way we are doing business nowadays. And we believe that we need to have Assembly plants in Americas, and we need to have assembly plants in Europe, and we need to have assembly plants in Asia. Then the question is, How much how do you get also critical mass when you are purchasing? So I think that you have the componentry side And then you have the heavy manufacturing side.
As you may remember, one part of our manufacturing strategy We want to add less value in our factories. We want to become much lighter, which means that we are outsourcing more. And as we are outsourcing more, we are going to outsource more close to the main markets. So I see Our factories in China having less impact in the future than they had historically. And that process already started 2 years ago And we'll continue.
All right. That's very helpful. Thank you very much.
Thank
you. And this concludes our Q and A session. I will hand back to the speakers.
Well, thank you very much for your attention, all of you. We are not obviously I'm happy with our results. We will never be totally pleased. We know that it's more out there. We know that obviously the shortages did have an impact in our numbers and we will continue to work very, very hard To deliver on our targets and to deliver on our strategy.
And it is coming. That's what we see and that's something that we are happy about, We are really walking the talk and making our strategy a reality. So thank you very much for your attention. And Those of you going on vacation, enjoy your vacation and we'll see you soon. Thank you.
Bye.