Hello, and welcome to the Dometic Q4 2021 earnings call. For the first part of this call, all participants will be in listen-only mode, and afterwards, there'll be a short question and answer session. Please also try to limit the number of questions to two. Today, I'm pleased to present Juan Vargues, President and CEO, Stefan Fristedt, CFO, Rikard Tunedal, Investor Relations. Speakers, please begin.
Hello, everybody. Good morning from our office in Stockholm, and welcome to the presentation of the fourth quarter and the full year report, 2021. As usual, we are very grateful for your interest in Dometic. I would suggest that without any delay, we move over to the presentation of the fourth quarter. We are very pleased with the outcome considering obviously the external circumstances that we are suffering from as many other industries. We continue to see a strong demand. We are ending the quarter with a record high backlog again. We see still retail inventory levels low across all verticals. As many other industries, we still suffer from supply chain constraints that are challenging, even if we see that thanks to the efforts done internally, we have managed to redesign componentry, especially electronics componentry, and started to get more access into chips.
Again, this is not over. We believe that it's going to continue, but we feel better than we felt three months ago. On the performance side, very strong growth, 32%. We have EBITDA, EBITDA margin excluding Igloo of 12.8% versus 12.7% last year. Then Igloo has, of course, a dilutive effect as we already announced in connection to the acquisition. We see also a positive movement in terms of pricing. Cost increases continue to rise, but we have reduced the gap that we had between price and cost increases in Q3, and we have a positive difference in Q4. Innovation index at a very high level. As you all know, the target for Dometic is 25% today. We reached the target in Q3, and we will stay there for a few months at 26%.
We're also happy to communicate that we are working very hard on the sustainability area, and we managed to reduce emissions, CO2 emissions by 24% during the year. If we look at financials, as I already commented, 32% total growth in the quarter with 2% organic growth, 2% positive effect from FX, and then 27% coming from M&A. EBITDA SEK 771 million or 10% up versus last year, ending up at 13.9% EBITDA margin. Looking at EBITA, we ended up at SEK 632 million versus SEK 536 million last year or 18% up, or an EBITA margin of 11.4%. Operating cash flow SEK 546 million, slightly lower than one year ago.
That's of course the consequence of building up inventories for Q1 and Q2. Happy to report as well a leverage of 2.6, which is very, very close to our financial targets. EPS of 62 öre compared to a negative of 54 öre last year. If we move over to the summary of 2021, we have taken major steps in accelerating our strategy, accelerating the implementation of our strategy, and driving our transformation journey. On the market development, I will not repeat. It's more or less the same that we have seen in Q4. Again, very happy to report record high revenues for the year and operating profits. Organic sales growth up 23%, very strong. Nine acquisitions were announced during the year. On one side, we had Igloo, extremely important acquisition strategically, a formative acquisition.
On top of that, 8 bolt-on acquisitions. We are also very happy to see how what we have been communicating according to the strategy, the shift from the OEM business to the distribution and service and aftermarket businesses is taking place. We ended up the year at 50% and of course, if we look at pro forma rates, it will be even lower. EBITA margin for the year, 15.6% versus 13.8% last year, which means that we are achieving our second major or higher profitability ever in the history of the company despite all the challenges that we have around us. Last but not least, the board of directors is proposing a dividend of SEK 2 and 45 öre per share. Summarizing the financials, SEK 21.5 billion.
Again, a remarkable Dometic of 33% total growth with 23% organic, 3% negative effect from FX, and then a positive effect of 13% coming from M&A. EBITDA close to SEK 3.8 billion or 41% up, and an EBITDA margin of 17.5%, which is 100 basis points above last year. Even EBITA strong over SEK 3.3 billion or 50% up versus last year. Operating cash flow above SEK 1.7 billion, lower again than SEK 2.2 billion that we could show last year, and is very much as a consequence of the inventory build-up. EPSA strong 5 krona and 58 öre. Much higher, obviously, not the level last year, 1 krona and 52 öre.
Looking at our trajectory in the last years, again, we are extremely happy to see the levels that we are achieving. Of course, with the additional acquisitions, it will continue during 2022. Total growth of 32% with Americas showing 23% up. EMEA 19% up. APAC, a strong 26%, and even Global, a very, very strong 55%. Looking at Q4 this year in comparison to Q4 2019, organic growth was 70%. That's telling you obviously that Q4 last year was very, very strong, and now we are facing tougher comps moving forward. Looking at our application areas, we see growth all over the place. We see an acceleration in food and beverage. That's on one side, organic growth. On the other side, that's where Twin Eagles and Igloo are kicking in.
In power and control, we see a very strong acceleration as a consequence of the acquisitions that we have been doing in the mobile power solution area. As you can see, contributing greatly to the evolution. In other applications, that's where you find Valterra having also a major impact, especially in the area of sanitation. If we look at different sales channels, more or less the same. Very strong development in both service aftermarket and distribution. Again, this is both organically and acquisitively. Organically, we have been building up teams all over the world, both in service aftermarket business and the distribution business. Of course, the acquisitions are also starting to play a major role in our development.
You can see clearly the shift that we are doing from OEM starting at 61% for the full year 2017 to 50% in 2021. If we look at pro forma, we should be on around 42-43% when moving over to 2022 before we generate any growth. A very strong shift in the breakdown of the group. EBITA ending up at 15.6, as I mentioned previously, in comparison to 13.8 one year ago. Excluding Igloo, we should be on 16%. I'm commenting excluding Igloo, obviously, because Igloo had an impact for two months. Otherwise, we would be higher than that.
We will, of course, for next year, not comment Igloo if, because it's part of the running business, so to say. Positive impact from the growth, of course, pricing, cost savings activities, and then we have currency, positive currency effect. At the same time, we also see obviously negative effects by the supply chain constraints. On one side, leading to freight costs, leading to inefficiencies in our factories. We see raw material prices that stabilized for a few weeks in, you know, the beginning of Q4, but they're starting to creep up again. Not at the pace that they used to be, but creeping up anyway. At the same time, again, as we have compensating, more than compensating by price increases.
Last but not least, we also have tougher comps due to the fact that we were coming Q4 out of the pandemic, and we still had a very, very low cost base. Looking at different segments, Americas up 23%, organic -6%, very much due again to a fantastic Q4 2021. We see growth in all areas, especially in power and control and other applications. We see both the OEM business and the service aftermarket business developing nicely. And we also can observe the acquisitions are driving a better business mix. EBIT margin ended up at 3% versus 1.9% last year. And again, I will not repeat myself. It's a lot about pricing. It's about working with our efficiencies in our factories and our distribution.
Acquisitions are having a positive effect. If we look at the full year, growth rate 34% total, 20% organic, and a clear improvement from 0.9% in EBIT margin last year to 5% this year. Looking at the EMEA, 19% total growth for the quarter organic of 8%, driven very much by the climate application. We are leaving 2021 with an all-time high backlog in EMEA. Even here, the acquisitions are helping us to get a better business mix in comparison to the OEM. EBIT margin is slightly lower than last year, 5.1% in comparison to 5.9%. As usual, here we have the supply chain constraints playing a role.
We have the raw material prices that we are partially compensating by the price increases. We have also extra M&A transactional costs that kicked in in the quarter. Looking at the full year, 24% up or 22% up organically. A clear EBIT margin improvement from 11.5% to 12.9% this year. We are extremely pleased to see our APAC segment continue to develop. Total growth in the quarter was 26%. Organic growth 1%, with growth in all application areas and in all sales channels. With backlog at much higher levels than we had one year ago. Even here, acquisitions are playing a positive role.
EBIT margins, fantastic, 26.3% compared to 25.9%, despite the fact that we have a lower cost base one year ago. The same reasons, so we are working very hard on the pricing, we are working efficiencies. Against us, we have obviously the supply chain constraints and raw material prices. Looking at the entire year, 49% up totally, 34%, organically. A very, very strong margin improvement, up to 26% in comparison to 20.6 one year ago. Finally, looking at Global, very strong 55% total growth with organic 5%. Here is really where you have on one side, Twin Eagles doing very well for us. We have Igloo showing also a very strong growth in the quarter. Very solid growth in Marine as well.
Leaving also the year with all-time high backlog levels. We see also that the hospitality business has been coming back very, very strong, and we expect that continue in the coming year or in this year, sorry. EBIT margins 12.3% in comparison to 20%, of course, affected by Igloo. Excluding Igloo, we would have been showing 19.2% versus 20%. The same reasons, obviously, supply chain constraints and component prices. Looking at the year, very strong, 37% up totally, 24% organic. Total EBIT 19.2% in comparison to 20.4% last year. Even here, excluding Igloo, 21.4% versus 20.4% last year. A couple of words about Igloo. Ended the year very strong.
As you can see, we are the market leaders in the American market, the prime market in the world. Ended up with a market share of 31% versus 20% last year. What is interesting here to observe is what is happening just now with the average prices in comparison to the volume. We are growing much higher in U.S. Dollars than we are growing in number of units. The reason for that is innovation. We're starting to move from a good positioning to a better positioning. We're starting to penetrate also deeper and deeper the sporting goods markets and of course adding 90,000 stores to Dometic. That will help also Dometic to penetrate that as a channel.
B2C, that they started in 2020, at the end of 2020, showing also a very strong growth still. Small numbers are showing very nice growth. We are working very hard on the integration process and working both from a product development, working from geographical evolution all over the world. We already have the price increases coming through from Q1, from January. We should start seeing clear improvements versus last year. Looking at strategy, I will make it very short. Dometic, we are working our strategy, working the top. What we communicated to you during the Capital Markets Day, 2019. We see clearly the shift that we have done in terms of distribution and servicing of the market.
We have our acquisitions kicking in and accelerating the process. We see also our B2C efforts, again, still very low numbers, but growing dramatically as we are implementing it in more countries. Product leadership, very, very happy. 36%, very, very strong level and great evolution in the last few years. We have a strong pipeline of new products coming through in the coming years as well. Working hard on cost reductions. I think we reduced complexity massively. As you can see, SKUs down 59% since 2018. We are accelerating now the restructuring program that slowed down due to the pandemic in 2020 and 2021. Social media, another area where we are investing.
As you can see, Facebook is starting to slow down big time, but we are shifting more and more towards Instagram, showing a very strong growth, and then LinkedIn also showing a very strong growth. Outdoor, that's our main area moving forward. Dramatic change in number of impressions in number of stores worldwide. On one side, we moved organically quite a bit from 3,500 to over 5,000 stores. Then we got the Igloo acquisition kicking in with another 90,000 stores. I would say a massive change in how Dometic looks like moving forward. We see also our efforts, as I mentioned previously, on B2C and e-tailers. E-tailers growing organically in the quarter by 89%.
Looking at our own channels, our own e-commerce channels, growing in the quarter 52% and growing for the year 93%. Acquisitions. Hopefully, the slide is self-explanatory, how we are integrating companies, and that all the companies but Igloo are integrated into Dometic. We're using double branding already now after a couple of months, and Igloo will be separate as they stand for something different. You can see as well where the acquisitions are coming from. Most of the acquisitions are in mobile power solutions. We have service aftermarket, we have the vehicle-based outdoor market, and then finally, residential outdoor. So 100% according to the strategy that we communicated. Talking about acquisitions, NDS, we announced at the end of the quarter and will be completed during Q1 2022.
It's another important step in our mobile power solution entry. It's a company, again, contributing with 75% of the sales in the service after market, complements geographically acquisition of Büttner perfectly. Büttner is obviously tackling the north of Europe, while NDS is tackling the south of Europe. As I mentioned, completion is expected in Q1. Looking at product development, a lot of new products flowing through here. We have some samples. Front Runner did launch during the quarter, different solutions, heavy-duty solutions for overlanders, especially. You see as well the barbecue, the new barbecue grill, making it easier to pack and unpack when you are on the road.
Marine, another very, very important area of our business, where we have been investing in the last few years and showing a fantastic development. We're starting to develop the products also for other geographical areas and investing even more in developing the solution of the market part of the business, where I have to mention that if you compare the RV vertical and the marine vertical, the marine vertical is much more service-intensive than the RV vertical, and that's also one of the reasons for the marine business to be very important to us. On the restructuring program, a lot of activities behind the scenes, but no location affected in the quarter, so 22 locations up to now since we started the program. Number of employees affected so far, 804.
We added another SEK 36 million in the quarter, restructuring costs, bringing the total figure to SEK 319 million. We are accelerating now our pace in terms of implementing the program. I'm also very happy to report our progress in the sustainability area, with injuries coming down dramatically in the year by 26%. We got a lot of activities in all our segments. We increased our number of female managers from 24% to 25%. Unfortunately, we didn't reach our target of 26%. Again, working very hard to achieve and get higher than even the target that we see just now, 26%. Audits, despite the pandemic and all the restrictions to enter, especially China, obviously, but we ended up at 88%.
Also a lot of progress in comparison to the situation one year ago. Another very important area for us. CO2, we moved to green electricity in a huge number of countries in the year. We expect also further reductions in the years to come. With that said, Stefan, I would like to hand over to you, please.
Thank you, Juan. Moving directly over to our net sales and EBITDA bridge. The three components here, starting off with currency. We had a SEK 99 million positive effect on net sales and a SEK 30 million positive effect on EBITDA. I think there has been some questions around this too, to clarify, where does these currency effects come from. 50% is translation related, and 50% is transaction related. A part of the transaction related effects are sitting in other operating costs and income. The other side of this is sitting in the gross margin. You have to put them together to get the total effect.
Moving over to M&A contributed positively with SEK 1,132 million in net sales and SEK 103 million in EBITDA. Igloo has been dilutive on our margin. They have posted a slight EBITDA loss in the quarter, and it's a little bit about 40% of the sales that is related to Igloo. That means that the other acquisitions are accretive to margin. Moving over to the last column, volume, price, mix, cost, and other. We obviously have had a positive sales growth.
If we look on pricing and combine that with the effect on the cost increases on freight and raw material, as Juan has mentioned before, we are seeing that the price increases are coming through, and they are not quite double the size compared to Q3, but almost. They are continues to be offset by further cost increases. One thing specifically, which has been a driver here in the quarter, is that we're increasing the level of spot buys. That's really a measure to mitigate the constraints that we have had on the component side. There is a cost related to mitigating this effect. If we add it all together, we have a slight improvement versus Q3.
As you remember, it was -0.4% on the margin in Q3, so there is a slight improvement to that in Q4. We have to also mention that we have further price increases coming through here directly from the beginning of Q1. We will see a further development in the right direction here in Q1 first quarter. As you know from before, we have been investing in sales and marketing-related activities, and that is to strengthen B2C, it's to strengthen outdoor service and aftermarket, as we have mentioned in previous quarter.
We also have to recognize that we had a low cost base in Q4 2020 coming out of the pandemic, lockdowns and all the effects that the pandemic had in 2020. Those are the main effects in that column. Moving over to the same view but for full year. As Juan mentioned before, we are moving from 13.8% EBITDA margin to 15.6%, despite that we have negative currency effects in the full year. They are SEK 143 million on the EBITDA level, and it's also approximately 50/50 between translation and transaction here. M&A has been contributing with SEK 2.1 billion in sales and almost SEK 300 million in EBITDA.
As we mentioned, Igloo has been diluting this margin related to their November and December, and then the other acquisition, they are accretive to the average Dometic margin. Volume, price, mix, and cost. We have seen a growth of SEK 3.7 billion, and we have had a drop-through of a little bit more than 25% on that. That's driven by that for the full year, pricing have had a better effect than in the last two quarters. We have been continuously to execute on our cost saving activities. Obviously, we have some negatives on supply constraints, freight cost, and raw material prices. We have the investments that we have decided to do, which is approximately SEK 130 million.
Let's move over to the next. To give you some better flavor to how the acquisition has impacted Dometic in 2021 as reported, we have SEK 2.1 billion in net sales, and we have SEK 298 million in EBITDA. If we would present that on a pro forma basis as if we would have owned all the acquisitions for the full 12 months, then that would equate to SEK 6.6 billion in sales and SEK 661 million in EBITDA. Of that, Igloo is approximately SEK 3.8 billion in sales and SEK 110 million in EBITDA. Total amortization of acquired related intangible assets, including not only the acquisitions we have done during 2021, but the totality that we have, is going to be around SEK 0.5 billion-SEK 0.6 billion.
Looking on the distribution of sales, all these acquisitions that we have done is taking down the cyclicality of Dometic, but we are still seasonal. You can see Q1 is 23%, Q2 is 31%, by far the largest and most important quarter, and then 25% in Q3, and 21% in Q4. In the table below, you can see when they were announced and from which month they are included in our accounts and in which segments they are reported. Can we move on to the next? Cash, operating cash flow, 68% cash conversion in Q4. Cash flow in general has not been coming up to the levels that we are used to see. That's very much driven by working capital.
There is a very clear volume-driven component of the buildup in working capital, but we also have significantly longer lead times, more than double, from China to the rest of the world, for example. We have product launches as well, impacting the number. That is, we are moving over to actually the details of the working capital. Here you can see that on the accounts payable side and the accounts receivable side, we are improving on accounts payable quite significantly, which is according to plan. We are focusing on this. On the accounts receivable side, we see a very stable development. You can see the development of inventory that I was mentioning.
On a total working capital point of view, on a 12-month moving average, we are on 87 days, which is not significantly above what we have seen in the past. Looking at CapEx and R&D, CapEx came out higher in absolute terms in Q4, very much driven by capacity investment in Igloo and in EMEA. It came out on a percentage of net sales around 2.8%. On the R&D side, we see an increase in the absolute spend, but a decrease in relation to net sales, which is really related to the growth in the organic business plus obviously the acquired businesses here.
We are going to stay in the range that we communicated on the capital markets, 2%-3% on R&D. Moving over to cash flow. I think operating cash flow is slightly below last year, and it is driven by changes in working capital, as I mentioned before. We also have obviously the acquisitions included, so we have a seasonal inventory build-up in Igloo. We have the investment in fixed assets, which I already mentioned, what they are related to. It is mostly related to investments made by acquired companies. We obviously have finalized the acquisition of Igloo, thereby the SEK 5.8 billion acquisition in the quarter. Let's move on.
Yeah, this one you have seen before, but nicely, we have now 3.8 years in average maturity, which is an improvement from 3.3 one year ago. Then we also obviously have the undrawn revolving credit facility available of EUR 200 million. In terms of net debt leverage, we have been ending up after the acquisition of Igloo on 2.6 times, and that's close to the target of around 2.5 times over a business cycle. As you know from before, Dometic has a rather strong deleveraging profile, which we are assuming that is going to continue in the future.
Juan Vargues has shortly mentioned, and we have also mentioned in our quarterly report, that we are from Q1 2022 going to change our financial reporting. This means that we are going to break out Marine as a separate segment, so that will leave segment Global and be a segment of its own. I mean, why are we doing this? I mean, first of all, segment Global will be too large to manage in an efficient way. It will also not be very transparent from a financial reporting point of view. But then the most important thing really is Marine itself, because it's a strong and prioritized global platform, and it has attractive margins.
This is certainly an area which we want to continue to grow and capture the potential that we have also in other parts of the world than North America, talking about EMEA and APAC. Just to be clear, segment Americas, Asia Pacific and EMEA, they will remain exactly as they are. We will start reporting EBITDA by segment also from the first quarter. We will provide to you a restatement of previous periods, which we did distribute in the middle of March, and which will then contain information from 2019 up to 2021. As you know, our Q1 report is published on April 28 according to the new structure.
Juan has already mentioned that the board is proposing a dividend payment of 2 krona and 45 öre, which is equivalent to 44% of net profit. We believe that this takes our strategic agenda into consideration and the current market conditions and that we should be able to continue to maintain a solid balance sheet to support our growth ambition. As you know, the dividend target communicated says at least 40% of net profit over a business cycle. With that, I hand over to you, Juan, to make some concluding comments.
Thank you, Stefan. Well, we already heard about the dividend, and we have seen the evolution of the dividend payouts during the last years. Coming back and trying to link, so to say, the quarter, the short-term perspective with long-term perspective, when looking at the other financial targets, you can see that in the last couple of years, we have moved the company from SEK 14 billion in revenue to a full year of SEK 21.5 billion in 2021 or SEK 26 billion on a pro forma basis. If we forget pro forma and look at the actual numbers, and compare to the other years, we are above the financial target. We are at 11% and 4.4% organic, so not far away from our organic financial target, so to say.
If you look at EBITA, we have also taken up our profitability quite a bit despite all the challenges that we have seen in the last couple of years in terms of tariffs, in terms of FX, during the time, and then of course, the inefficiencies that are brought by supply chain constraints and so forth. Again, we're still a bit away from our EBITA targets, but we are working very hard, and we are totally committed to achieve those targets.
In terms of leverage, another very important financial target for us as an acquisitive company is that, despite the growth that we have generated in the last years, we have also made sure to have the financing to move forward, and we managed to end up the year at 2.6, which is exactly in accordance to our financial targets. In 2021, again, we will end up the year, or we have ended up the year with low inventory levels. We see a strong customer demand out there. We have a strong backlog. We are happy to report that we see a good start for the Igloo acquisition, both in terms of growth and in terms of profitability above what we expected a couple of months ago.
We have the negative side, the supply chain constraints, obviously, that are an uncertainty. I have to say that I feel better today than I felt three months ago. I think we have done a terrific job in that area. On the strategic agenda, I will not repeat myself. I think we are simply walking the talk and totally committed to reach our financial targets in the future. With that, I would like to finish the presentation and move over to the Q&A session.
Thank you. If you have a question for the speakers, please press zero one on your telephone keypad. Please also try to limit the number of questions to two. Our first question is from Johan Eliason from Kepler Cheuvreux. Please go ahead.
Yes, hello, this is Johan here. Thank you for taking my questions. Just first on Igloo. Did I understand you right, Stefan, that you said the pro forma EBITDA contribution would be around SEK 110 million on Igloo?
That is correct for 2021.
2021.
Important to remember here is obviously that we are expecting a pretty significant improvement on that, and that's also what is built into the earn out that they have. What we can say is that the main driver behind this is that they have had a negative dynamic between their own price increases to their customers and the cost increases from their input costs, so to speak. They are expecting a little bit of a reverse situation of that in 2022.
Hello?
Thank you.
Is he with us?
He is not with us anymore, so I'll move on to the next question. Our next question is from Agnieszka Vilela of Nordea. Please go ahead.
Thank you. I have 2 questions, starting with the contributions from the acquisitions in the quarter. At least for me, it was surprisingly strong. You added SEK 1.1 billion to sales from acquisitions. That was SEK 400 million more than what I expected, and I think consensus was more or less where I was. The question really is, what did we get wrong? Was the season a bit stronger, or do you see very good growth at the acquired businesses right now? Or maybe that you see some stocking at the distributors right now, if you could explain that? Thanks.
I mean, we have both. I believe that out of the 9 acquisitions, 7 were completed. Igloo is diluted, and then the remaining 6 are accretive. We see nice growth in those companies. That's not the reason for the acquisitions. I mean, we are jumping into growth trends in those areas. Both outdoor mobile power solutions and service are growth areas. They have the right growth profile, and they have the right margin profile. Then we have Igloo. Igloo for us is extremely strategic, and we are totally convinced that we are going to see a very positive evolution going forward, even if we don't see that just now. We will see that in 2021.
Okay, perfect. Just to follow up on Igloo. If I calculated correctly, you had -SEK 12 million contribution from this acquisition on the EBIT, EBITDA line. The first question here is this number including any positive impact from the currency hedge gains? Maybe start there and that's probably a question to Stefan.
The specific question is related to Igloo, right?
Yes.
The answer is no. The answer is no.
Okay. That's underlying SEK -12 million in EBITDA in Q4. If I calculate it's probably like -2% or -3% EBITDA margin then underlying for the quarter, which to my understanding is better than it was in Q3. If you could explain what's driving that improvement in Q4 for Igloo. Thanks.
Absolutely. I mean, it's driven by a stronger growth in net sales than expected.
That's a combination of volume and price. Price increases are starting to come through and that will continue going forward. That is the main-
I feel that-
The main explanation, Juan.
Yeah. One of the most important KPIs that we want to follow is really the difference between growth in volume, meaning number of boxes, and growth in dollars. That's telling you really that we are moving up the ladder in terms-
Right.
In terms of innovation, in terms of penetrating new channels for growth. Higher margin channels.
Great. Maybe the very last one on the group level, just price cost dynamics and what you expect for 2022.
If we take Q4
Will you compensate for the price increases?
If we take Q4 specifically, we see that in comparison to Q3, we have positive evolution. We have one more factor that has been kicking in the last couple of months, which is the spot buying. If you forget the spot buying and take all the rest, raw material prices, freight costs, we have more than compensated in Q4 in comparison to cost. We, during the last couple of months, as a consequence of redesigning componentry to be able to source new chips, new componentry, have been spending more money in spot buying, and we have an increase in prices during December and January. Our intention is exactly the same, to compensate. You have obviously a time delay.
We are very happy to see a time delay that we had on the underlying raw material prices is gone. Now we have a positive difference, and now we are implementing prices to compensate for the spot buying.
Great. Thank you.
You're welcome.
Thank you. Our next question is from Daniel Schmidt of Danske Bank. Please go ahead.
Yes, good morning, Juan and Stefan. Just a few questions from me. If you try to sort of calculate what the impact has been from supply chain constraints on organic growth in the quarter, what would you say that was, what kind of impact was that you think in Q4?
2-3.
2%-3%.
2-3. 25. Yes.
You're also saying that you are still seeing difficulties, but at the same time, maybe some easing in several areas. Should we interpret that as that negative impact that you had in Q3 Q4 is gonna be a bit less in Q1 than going into 2022?
That's what we are working for, Daniel. I mean, as I said, it's not that external circumstances are changing. It's really that, like other industrial companies are doing, the chip suppliers are just now betting on new chips, so they are moving the manufacturing to new chips. All of us having chips that are 3-4 years old all of a sudden do have difficulties to get access. What you have to do is to put a lot of engineering resources, a lot of sourcing resources to redesign the old componentry, so you get access to the spot markets. That's what we have done. We see, in my opinion, a better situation than we had 3 months ago. I think that the team has done a terrific job. We see light.
It doesn't mean that there are no clouds. There are a lot of clouds, but we see much lighter than we saw three months ago.
Yeah. Okay. And also, coming back to the bridge on Stefan's slides, when it came to the quarter, SEK 98 million came from volume, price, mix, cost, and other. I think you said that you had higher price hikes in Q4 than you had in Q3 and Q2. Would you dare to quantify that close to SEK 100 million? Is that basically mostly price overall or any? Could you shed some light on that?
Well, I mean, the way you know that we did quantify the price cost effect in Q3 to minus 0.4% on the margin. It's still a minus sign, but it's a smaller minus sign in the fourth quarter. Price increases are coming through. I mean, not quite double the rate, but significantly higher in Q4 compared to Q3. We also have continuous pressure on the cost. You need to keep in mind that here is coming price increases now directly from Q1 to compensate for example, for these spot buys.
It's and we as we can see them now, we absolutely need these price increases that are not insignificant coming through here now that they are going to be accurate, as you can see. We will have to. It's, you know, it's almost like a weekly monitoring of this situation. Okay, Daniel.
Yeah. Yeah. Thanks.
Thank you.
Thank you. Our next question is from Fredrik Moregård of Pareto Securities. Please go ahead.
Thank you, and good morning, everyone. First a question on the cost inflation side. I mean, you've been mentioning raw materials, strikes, and spot buying as well.
Just wondering what you're seeing on wage inflation and whether or not you've been incorporating any expectations on wage inflation to the price increases you've been announcing to your customers?
I mean, Jacob, of course that we are considering that. But if for us, as Dometic, we are heavy manufacturing. When you look at manufacturing side, it's very much about raw material.
Mm.
I don't see that as a major hit. I mean, we have taken obviously a hit this year in comparison to last year simply because we had the situation with the pandemic. Now we have already been flying for six months. A lot of people have been traveling during the second half of this year. On wages, of course, that inflation will lead to higher rates. Again, we are implementing price increases. Our ambition is to have a positive difference and not a negative difference.
Mm.
Which we have in the first half.
Absolutely. Clearly.
All right. Thank you. A second question on the restructuring program that you're running. You're saying that you're going to accelerate it in 2022.
Yeah.
Does that mean that you're pulling forward the full year impact of that you said will be implemented from mid-2023? Should we expect that to be even earlier now or is that still the main idea?
I think you should keep it as is just now, but we will do anything we can to accelerate furthermore. Again, it's not that we have not been working. We have been working a lot. It's simply as I have commented a couple of times that if you are going to move factories around, you need to have people to meet. You need to spend time in the receiving sites, and that's pretty difficult when you are banned from those countries. The situation is easing up. We see clear improvements, and we are traveling. We have been traveling now for six months.
All right. Perfect. I appreciate that. Thank you.
Thank you.
Thank you. Our next question is from Henrik Christiansson of Carnegie. Please go ahead.
Yes, good morning. Two questions, please. First one on the strength in APAC. It continues to deliver very strong number. What is driving the strength, and is that sustainable?
There is a couple of things. I mean, first of all, you have the reality of the market. The market has been growing very, very nicely for us despite pandemic. By the way, as one more comment, additional comment to the organic growth in Q4, we need to remember that Omicron has started to kick in already in Australia in December. December and January are the strongest months for that region of the world, right? But again, apart from that, if you forget the pandemic, the growth has been fantastic. Secondly, you have a mixed situation, where APAC is growing faster than Asia. You know how the situation looks like in China, but also in Korea in terms of lockdowns as soon as they have one case. That gives you a geographical mix difference.
Thirdly, we have the fact that service aftermarket and distribution is growing faster than OEM, even if OEM is growing. All those factors together do have a positive impact on the margins. Is this sustainable? I mean, we have been running at a 20+ now for a number of years. Is 26% sustainable? Things move. I mean, our intention is to keep investing in high margin areas, not just in APAC, but in the rest of the world. But in APAC specifically, we have clearly a geographical mix positive impact.
Great. The second question. I noticed the headline here on the newswire where you say that you will definitely be able to increase margins in 2022. I mean, what are the main drivers there in improving margins year-over-year and, you know, especially given the dilutive Igloo acquisition.
Underlying.
How are-
Henrik, I was talking about pro forma. Of course, that the Igloo is coming in, and they are bringing down our margins pro forma, right?
Mm-hmm.
Our intention is to pick them up quite a bit in comparison to that pro forma number.
Mm.
It's not that we are going to move from the 15.6%- 17%. That's not going to happen next year. The first target is obviously to get back to the 15.6%, since we are starting much lower.
Great. Thank you.
You are welcome.
Thank you. Our next question is from Lucie Carrier of Morgan Stanley. Please go ahead.
Hi. Good morning, gentlemen. Thank you for taking my question. A bit of a battle to log in after all of the cancellation. I will start, first of all, to try to reconcile what we see in terms of organic growth, which seems to be decelerating in the quarter. I think this is consistent obviously with some of the consumer leading indicators that we are seeing, which are also kind of decelerating. At the same time, we are seeing a massive buildup of inventories, which have gone from SEK 5 billion in the third quarter to SEK 7 billion in the fourth quarter, when usually the fourth quarter is seasonally down a lot. That seems to be a bit counterintuitive. I appreciate the M&A addition, but the inventories have gone much higher than the M&A addition to sales.
How should we understand the decelerating organic growth and the buildup of such massive inventory?
I think first of all you also have to take into consideration that there is a value component to the inventory as we are, as you know, seeing cost increases. You also need to take into consideration that it is the first quarter where we have Igloo included, and Igloo have a seasonal inventory build up in front of the high season that typically starts late March, beginning of April. That is a normal pattern that we are seeing. We also see that the lead times are more than double on the shipments from China to the rest of the world.
I think there are basically the main explanations.
Thank you, Stefan. If I can just quickly follow up on that. If the lead time of components take much longer, how come the inventories is much higher? I would think that, you know, effectively, if you cannot procure the parts, you would have, you know, your inventory shouldn't be going so high.
No, but I mean, we have approximately the double goods in transit compared to the normal situation.
I see. So they are kind of accounted for that. Okay, understood. That's clear. Just also, I was hoping you could maybe update us around the savings you were expecting, the pace of the savings you were expecting for 2022 and 2023, and how does that compare, you know, to what you have done in 2021? Do you again coming back to some of the question around price cost, how do you stack that with the cost inflation and also the price effect? Shouldn't we be seeing an element of, you know, the price cost or the overall cost being truly kind of offset by all of that?
Okay. Starting with the savings program. We are progressing here on that. We are not quite yet on SEK 200 million since the start of the program, but we are close to. That is a progression over the year and also over the quarter. I was not quite sure on your second question here. Maybe you could elaborate a little bit more.
Yes.
If you want to do that.
Yes. I guess what I'm trying to understand is versus the initial target of savings that you had announced back in 2019, how much
Yeah.
Has been already achieved? How much is there to come?
Yeah. Okay. Okay.
How do we compare that with overall cost inflation?
I mean, the savings target, as you know, was SEK 400 million. We are not quite half the way, but we are moving in that direction.
Okay. Could you just maybe
Okay.
If I can ask a quick short one around the backlog. Are you able to maybe tell us kind of how much higher it is, but also whether that includes M&A and FX or whether this is just the growth on the backlog is fully organic?
It's fully organic.
Any indication on by how much?
We have not commented that so far. It is all-time high, and it's quite a difference. Okay, Lucie?
Okay. Thank you.
Thank you.
Thank you. Our last question today will be from Rizk Maidi of Jefferies. Please go ahead.
Yes. Good morning, guys. Glad I made it into the Q&A. The first one is, it's just a big picture one, Juan, on just the RV market. It's quite an interesting dynamics that we're seeing at the moment. On one hand, we see the-
Yeah.
The wholesale figures going up, and at the same time you see retail demand measured by registrations on both sides of the Atlantic sort of coming down. Like, what's your read on those patterns, and do you think this is all due to supply chain issues or is there an element of demand starting to normalize after the COVID boost?
I think it's basically a timing issue. I mean, if you look just at the European numbers, it is clear that registrations were extremely high in 2020, while production was down, if I remember well, 7% or 8%. You have the numbers in 2021 are the other way around. Retail is increasing, but production is up big time. Now, the expectation, and as you most probably have read about, manufacturers do have issues just now in getting material, especially from the chassis suppliers. And that of course lead to delays. I mean, what I hear, what you read today, still today, is that consumer demand is still there.
What you can say, when you can talk, when you talk to dealers, they are still telling you that it's there. Of course, we are comparing with a Q4 2020 that was simply massive. We are going to have a Q1 which is also massive in comparison to Q1 2021. I mean, the effect of the pandemic is clear. It was there. Keep in mind that we were coming from two months without production at the beginning of the season, and then you get this fluctuation. It's timing. The other question that you are raising is also it's much more related to inflation and potential interest rate increases. That's, I guess, the one in the medium term that we need to understand what the impact will be.
Consumer demand, as we can see it just now, is still there. Today.
Okay. Interesting. Perhaps the last one, if I could just come back to Igloo. Obviously you showed some very strong increase in prices there. If I look at the retail sales in the U.S., I think it was something up 14%. Can you just tell us what's the historical pricing that Igloo was able to implement historically? If you could just remind us of essentially the rate of growth that we should assume for 2022 or maybe what are you seeing there in Q4. Perhaps a reminder of the seasonality of this business as well, please. Thank you.
Yeah. If we start with last one, the seasonality is very, very clear. It's very similar to the pattern that we have for Dometic , otherwise, even if it's even more pronounced. They have a slow Q4, they have a slow Q1, a very, very strong, massive Q2, and a strong Q3. That's on that one. If we are talking about prices, you have to keep in mind that you have a new management team in place since the end of 2018. That's where they started to invest in innovation. That's where they started to work on the pricing. You look at the last couple of years, they have seen both a very nice growth profile and a very, very good profit improvement.
You get into 2021, where you have storms at the beginning of the year having an effect on resin producers not being able to deliver. As a consequence, resin prices went through the roof. Igloo took a couple of months to establish resin prices. You have a price difference. Prices have been implemented. We should start to see clear improvements from Q1 this year. Again, 2021 was exceptional if you look at the performance of the management team that we have in place. They have done very, very well in the last 3 years since they joined the company. Innovation. What they are doing in innovation is really to get many more models, to start moving also from a channel perspective, from being merchandise and doing merchandising and sporting goods.
They are investing in B2C. That has also obviously higher average prices. There is no one silver bullet. There are a number of activities leading to what we're expecting to see moving forward. We have, by the way, what they have shown during 2019 and 2020. From our perspective, we see 2021, they have a negative effect from the resin prices.
Mm-hmm.
We are expecting to see a very, very clear improvement in 2022.
Okay, Rizk.
Great. Thank you. Thank you very much.
Thank you.
Thank you. There'll be no further questions at this time, so I'll hand back over to our speakers.
Well, thank you very much for your attention. We are very happy to see strong numbers in the quarter, and we will work very, very hard, obviously, to keep moving towards our strategy, implementation of our strategy, and to the fulfillment of our financial targets. With that said, I wish you a wonderful day, and enjoy your time. Thank you.
Thank you.