Ladies and gentlemen, welcome to the Dometic Q2 Report 2020. Today, I'm pleased to present Juan Vargues, President and CEO, and Stefan Fristedt, CFO. For the first part of this call, participants will be in a listen-only mode, and afterwards, there's a short question and answer session. Speakers, please begin.
Good morning, everybody. Welcome to the presentation of Dometic's interim report for the second quarter. As usual, I have Stefan Fristedt, CFO, and Johan Lundin, Head of IR, with me. Without any delay, I suggest that we move over to the presentation. Second quarter's highlights. From a market perspective, I would like to start by saying that this has been the most challenging quarter in my professional career. In comparison to the finance crisis, the finance crisis was a piece of cake. We really felt how the light disappeared mid of March. April was extremely tough. May was tough. June, we saw a recovery, and ended up at the same level as June last year. In other words, we saw a recovery faster than we expected.
I'm happy to convey is really that we saw a very strong aftermarket coming back in the quarter, in June, despite the fact that the U.K. was still under lockdown. If we exclude the U.K. numbers, we would have been close to mid-teens in organic growth in June from an aftermarket perspective. When looking at performance, strong focus, obviously, on cost reductions and protecting our cash flow. We continue to invest in innovation and market developments, and I will come back to that. Innovation index reached over 18%. We ended up at 18.4%. We were close to 15% one year ago. We launched our new outdoor concept in Australia and in the U.S. Obviously, the impact of COVID also helped us to accelerate our activities in the digital area. We implemented nine B2C sales platforms across Europe.
In the U.S., we already implemented that in Q1 in connection to the new ERP system, we could see a strong growth coming through the online store. Of course, from a pretty low base. On the cost side as well, we continued our actions in regards to the restructuring program, adding another three locations, bringing locations that have been affected so far. When looking at the financial summary, 30% down in organic growth with no effects from FX or M&A, our estimation is that COVID did have an impact of about SEK 1.9 billion. Of course, when looking at those numbers, I'm pretty pleased in showing what we consider to be solid results when you take into consideration the tough market situation that we have been facing during the last months. EBIT before IAC ended up at SEK 362 million, EBIT margin close to 11%.
When excluding the reversal of the provision for the earn-outs of Kampa, we ended up at 8%. As I stated before, we have been working very strongly and fast to reduce our cost base. We had a number of weeks where we were below 5,000 employees, sending people home. We have, of course, also continued to work on our efficiency improvements on pricing, but it's difficult to compensate, obviously, when you see how the top line is really going down as dramatically as it did. We estimate the impact of COVID to be about SEK 600 million in the quarter, and we also had a negative impact of tariffs that ended up at SEK 33 million in the quarter, which is still an improvement in comparison to the same period of last year. EBITDA ended up at SEK 565 million.
I'm also pretty proud to show a positive cash flow compared to what we believed at the beginning of the quarter, when we saw again that the market was disappearing from us. An EPS of SEK 0.42. If we move over to the year-to-date, obviously, the year-to-date numbers are heavily impacted by Q2, ending up minus 27% in organic growth, with 2% FX impact and no M&A impact, but bringing the total impact by COVID to SEK 2.3 billion. EBIT margin, obviously, quite much down, 10.4% versus 15.2% last year. I will not repeat myself. Basically, we have the upsides is that we have done what we consider to be a very good job in mitigating the negative effects of COVID.
We have continued to work consistently on our efforts to improve efficiency and pricing. We had the U.S. tariffs ending up at SEK 109 million for the half year, and a COVID impact of SEK 720 million. Cash flow, we're looking at the half year ending up at SEK 490, which is, of course, far away to where we ended up one year ago. Still, a solid result, considering the situation. EPS of SEK 1.12. We're looking at the application areas, all of them have been negatively affected by COVID. I will not stay there obviously, because the graphs are self-explanatory. Looking at sales growth over time. Everything started obviously with inventory corrections in the U.S., moved into Pacific and Europe, we got marine during half year last year. At the beginning of this year, we got COVID.
It has been, I would say 8 negative and very tough quarters for us. That has naturally an impact on the EBIT margins. Again, starting with the inventory correction that was initiated in July 2018. Then we got the tariffs, and lately during this year, we got the COVID-19. I think if anything positive when looking at the charts, is really that we feel that the aftermarket has been a very good cushion for us to have, and that has mitigated quite a bit of the negative impact that we had on the top line. I think it's pretty clear when looking as well at the quarter. When looking at the last quarter, if you look at the share of aftermarkets this year, aftermarket ended up at 55% of total sales in comparison to 47% of total sales one year ago.
You have to consider obviously, that the situation, both in the U.S., in Europe, and Pacific with lockdowns, really shut down most of the stores during 2 months of the quarter. Moving over to the regions and looking at Americas. Americas ended up at 41% organic growth, with all application areas being negative. There is one product group where we could see organic growth, and that was mobile cooling, part of our outdoor efforts. We launched the new outdoor program, which is on one side containing parts of the products that we acquired through the Kampa acquisition, but also a whole bunch of new products that we have been launching in the last quarter, and I will come back to that as well. We saw a very strong growth on B2C e-commerce. From EBIT perspective, down 69% and ended up at SEK 124 million.
The same, I feel good about what we did to mitigate the cost, but it's very difficult to compensate for the loss of volumes and the tariff impact. Moving over to Europe or EMEA, rather. Ended up at -37% organic growth. Same, all the application areas were negative. We had on one side, implemented the B2C e-commerce platform in nine European countries, and we have a few more to go. I'm also happy to convey that we have initiated a regionalization of the aftermarkets across Europe that will give us the opportunity as well to invest more on the field side, having more sales people in the field in order to generate growth, to penetrate the market on the new product areas. EBIT ended up at SEK 190 million or 54% down.
We continue in the same way, working consistently to improve our efficiencies, work on our pricing, and continue to adjust as well our cost. Moving over to APAC. Ending up at 21% organic growth, with Asia being much better. We had a very negative evolution in Asia in Q1. Q2 was still negative, but much less negative, while Pacific instead became pretty much negative. That's also what has a major impact on our margins, since we have pretty high margins in that region. On top of that, we also introduced the new outdoor program, and we have good expectations or strong expectations that that will help us to generate growth in the years to come. Looking at the EBIT, down 48%, very much as a consequence as well of the mix change in the regions, but also, of course, the huge volume loss.
A couple of words about staycation. I'm fully convinced that all of you are reading, are listening to these staycation trends. What we can say is that we saw the trend already a couple of years ago. We have been observing for years how the camping industry has been booming in the U.S., but also in the rest of the world, with both Pacific area and the EMEA area growing in the same way. On top of the traditional groups, we see millennials. In the same way as we have been talking about millennials in the RV industry, it's very much millennials driving these outdoor trends in other areas of the business. Of course, COVID will fuel this trend even more.
We see just now the 47, and this is pure statistics coming from outside, 47% of Americans that did plan for leisure trip will, this year instead, go camping. We see as well, 75% of Swedes spending holidays in Sweden, either by renting a cottage or also using caravans and boating industry. What does that mean for us? Well, in the short term, we don't believe that it means a lot. We see obviously that rental is growing very much. We see that it's very difficult to get hold just now on a mobile home or a motor home or a boat. On the contrary, we believe that in the medium term and the long term, this is going to have a major impact. It is clear that people planning for holidays in Thailand are going to think twice before taking the kids.
We see as well how tourism is dropping dramatically in Southern Europe, is dropping dramatically in the Caribbean, and that will be obviously for the benefit of the outdoor business. If we move over to the next slide. We believe that Dometic is very well-positioned for a strong development in the outdoor market. We have already a leading position within the RV and the marine industry. We have the knowledge, we have the heritage, and we have the trust. We have been supplying our products to the outdoor industry in different shapes for many years. What we are doing today is that we are expanding our territory. We have been observing how the automotive industry has been developing. We see how the SUV market has been growing dramatically during the last 15 years. Just looking at 2018, 28 million SUVs were registered globally.
We also know that in 2023, the SUV market will be reaching 53 million vehicles. In the same way as we operate today in the boats and we are on the RVs, we would like to participate in the growth of the SUV market. We believe that we have a good amount of products that are very much fitting into that industry, which is growing. We have been expanding, during the last 12 months, our product portfolio. We got, as I mentioned before, quite a bit of product through the Kampa acquisition. We have been developing, we have been looking for new products to introduce in the outdoor markets, and I'm happy that we are starting to see the effects of that in a number of markets.
Of course, we have our product quality, we have our design, it's also clear that we are one of the brands in this outdoor market, gaining more awards whenever we participate in any exhibition or context. What we mean in reality with vehicle-based outdoor activities is really that we have a lot of people spending one day with the kids. The kids are playing football or soccer. There are a lot of people using an SUV to get out for one day. We believe that we have a number of products fitting that need, a specific need. We are talking about the staycation, where we are putting together a product range for that specific purpose. We have vacation for more than three days. We have a number of product categories already that we are selling and that we believe that are anchor products.
We have been talking for a number of years about our mobile cooling, the power mobile cooling. We got inflatable tents through a Kampa acquisition. We have the rooftop tents now, the outdoor cooking, more products to come. Which is a little bit of a summary that you can see on the next slide with more than 600 products on the market that are driven through the outdoor business. We have the question of the channels. Do you need to build up a new channel? The reality is that we have been participating on the retail channel for many years. We are in most of the well-known premium chains all over the world.
If we talk about REI, which is one of the drivers for the outdoor industry in the Americas, we came into the stores already one year ago and got seven stores as a pilot. We are just now working on 36 stores. Just looking at REI, they have 156 premium stores in the U.S., and we have good hope that we will see the number, our penetration growing over time. We see just during the last 12 months that we have been growing considerably, beating 300% in that period of time. As I mentioned today, on one side, we have the physical stores, but we also want to be a digital company. We have been working on the B2B side all over the world for a number of years without being a part of our strategy in reality.
This is becoming a part of strategy during the last 12 months, and we see that on one side, B2B is growing very much in North America, and after the B2B implementation. We see as well that B2C, as I mentioned before, we launch in the U.S., now we are launching in Europe across nine different countries, and we will continue to develop in the same way. If we move over to the Pacific area, exactly the same. We have a strong presence already today among the outdoor retail chains in the country, and we are working today to conquer more of the stores that we are lacking today. We are today present in about 500 stores of all the premium brands. Again, more to do moving forward.
One of the areas that we have not been talking about a lot, but what we also believe is extremely important and is very much connected to digital and very much connected to the B2C online channel, is the heavy traffic that we have to our website. We're expecting this year to reach 10 million visitors. We have seen a steady growth during the last couple of years. Again, moving from being a sub-supplier into being a brand on our own, for our own reasons. We have seen a growth during the last 12 months of 40%, and as I mentioned, we expect to reach 10 million visitors at the end of this year. If you just take a comparison, if you look at some of the other companies in the outdoor market, we have a very strong presence.
That presence we will again utilize to promote our B2C channels moving forward as well. You see on the right-hand side, you can see what happened in April when COVID kicked in, and you see the number of visitors growing dramatically from April and moving forward. We had a growth in comparison to last year, but the growth just multiplied after a couple of weeks. We see as well how our visitors are looking 88% more to this year than last year for the dealer locator. That's also telling you about the new needs that are popping up in connection to COVID. Moving over to the restructuring program. We keep working, and as I mentioned during the last quarter, we would accelerate the program. That's what we are doing. We added another three locations.
We are affecting another 230 employees around the world, and we are making a cool SEK 61 million in the quarter, leading the total amount to SEK 261 so far. On the strategy, more of the same. Obviously, COVID is not changing our strategy. We believe in what we are doing. We believe, and this is nothing new, that we need to become much more of an aftermarket company having an OEM presence than being an OEM company having an aftermarket presence. This is, of course, as well, one of the reasons for launching new product areas. One of them is outdoor, and now we are up and running. The same is valid with the channels. We believe in the B2C channel, and we will see more investments coming in to generate traffic and to generate sales in that channel.
From a product perspective, I'm also very happy with the evolution. We are at 18.4 after two quarters. We believe that we are going to be at the 20% mark at the end of the year and 25% at the end of next year. What is good is that we have a very strong pipeline of products to be launched during the remainder of 2020 and 2021. From a cost reduction perspective, more of the same. I already mentioned the restructuring program. The move or the awning factory from LaGrange in the U.S. to Mexico has been completed in record time, which I'm very happy about. Then we continue to work on the complexity reduction, and we are just now running a 39% lower number of SKUs in comparison to the situation we had when we started at the beginning of 2018.
I'm very thankful for the efforts that the entire team is doing to take away complexity. With that said, I would like to hand it over to Stefan, please.
Thank you. I would like to start to talk about the COVID-19 impact, which has been mentioned shortly here earlier in the presentation. We have implemented a number of activities to reduce the effect, including the closure of factories and sales offices during parts of the second quarter. We have had people on short-term work, furlough, Kurzarbeit, or forced vacation during the quarter. At its peak, sometime during April, we were close to 5,000 employees who were impacted by these kind of measures. We have naturally been having a hiring freeze. We have also been ending contracts with consultants and temps. Also, the group and regional management have contributed by a reduction in their salaries.
We have been managing the supply chain and the inventory buildup, which is, as you appreciate, a very difficult task in these times when you have limited visibility to how the demand will develop. We have also been balancing accounts receivables and accounts payable in a way that I'm really happy with. We have been strengthening the balance sheet in terms of that we have, as you know already, renegotiated the financing agreement with our banking group. We have also, during the quarter, made an agreement with a bank on an EKN-backed facility, which I'm going to come back to. If we look on the effects, as Juan already mentioned, we are estimating on net sales the effect of COVID to be SEK 1.9 billion in the second quarter, and approximately SEK 600 million on the EBIT level.
This takes us on a year to date basis to SEK 2.3 billion in net sales, a little bit above SEK 700 million on the EBIT level. We have, of course, been making use of various types of programs that have been offered by governments around the world. We are making a distinction between government grants, which is support measures that has been recorded directly in our income statements, which is making up SEK 31 million. We have taken other support measures, which is the majority is related to short time work and furlough which has been making up SEK 143 million. A total of SEK 174 million year to date, where the majority, of course, is related to the second quarter. On top of that, we also have SEK 95 million, which is positively impacting the cash flow, which basically means deferral of payments of various taxes and social security fees.
Moving on to the next slide. We're talking about working capital. Negatively SEK 90 million in the quarter. I would like to say that in the light of the exceptional situation we have had during the quarter, we are okay with it, which would not have been the case under normal circumstances, of course. Moving on to the next slide, you have the different components of working capital. Up on the left-hand corner, DPO, we have been able to extend payment terms with suppliers around the world, working with our suppliers and working with other tools in the toolbox to increase the days. DSO, I'm really happy to see that we have been managing the situation during the second quarter here in a exceptionally good way, I would say. We have been very proactive working with our customers and managing the payments from them.
We're actually even a slight lower than what we were at the same period last year with 47 days. Importantly enough, 52 days to our suppliers, 47 days from our customers, it's of course a good balance to have. Looking at inventory, 112 days is of course a situation under normal circumstances that we would not be happy with, but you need to appreciate as I mentioned before, that it is exceptional times. It is a very challenging task to manage the supply chain when you have a limited visibility to where the demand is going to end up. Keep in mind that when we went into this year, we were planning for ramping up to a normal high season, and that high season has been pretty significantly compromised by the COVID-19 situation. Moving on to CapEx and product development.
I would like to say, and label it that you can see, we have been careful in how we are spending both CapEx and product development resources and have been reducing them compared to last year, but also to the sequential quarters. I would still like to say that we have been selectively offensive. We are really trying to pick very carefully the projects where we are investing money here, exactly as Juan has been alluding to earlier in the presentation. Moving on to cash flow. Still SEK 311 million compared to SEK 1.4 billion at the same period last year is of course not a nice comparison. As Juan mentioned before, in relation to our expectations, we are satisfied with how the operating cash flow development has been evolving during the quarter. Moving on to the next.
Our net debt leverage ended at 3.15, which is lower than what we actually did expect. That has been fueled, of course, by the fact that we financially have been performing better than what our original expectations actually were. The one news that we have in our debt portfolio is that during the quarter, we have signed a new EKN-backed credit facility on SEK 2 billion which has a maturity going over 3 years. This is a measure to basically maintain flexibility for the times to come, and also being able to be offensive in the areas where we actually choose to be. Moving on to the next. The maturity profile is, of course as I've said before, a very nice profile to have in these days.
What has happened during the quarter is that we have used an option to extend one of the US dollar tranches with one year, so that is now maturing in 2025. Even that is then improving our maturity profile. With that, I'm handing back to you, Juan, to summarize.
Thank you very much, Stefan. In summary, a very tough quarter, even if we saw June coming better than we expected. I believe that we have demonstrated that we are good and working on reducing our cost and doing that rapidly. Time is of the essence when things turn. We are working hard to reduce our tariff exposure. As you all know, we are expecting to have a much better second half than we saw one year ago. All in all, I believe that we are delivering solid results despite an extremely tough market situation. Moving forward, we are aware, we are talking to customers, obviously. We are getting feedback. We see just now a lot of push in the short term.
Of course, we need to remember that we are coming out of a situation where markets were locked down, where manufacturers were shut down for two months. The question we see just now, is it underlying demand? How much is underlying demand and how much is a catch-up effect? Keep in mind that COVID really kicked in at the beginning of the season. Our expectation is, again, much less effect from COVID in Q3. Q4, still to be seen. I think it's too early to judge just now how Q4 is going to look like. From a strategy perspective, it's more of the same. We continue to work on the growth areas, what we consider to be growth areas for us moving forward, outdoor, residential, more deliveries, at the same time as we continue to protect our position in existing areas.
We believe that there is a space for these new product areas, but also for channel development. This is one of the reasons for entering now the B2C channel, with a quite considerable number of products. We feel good about what we are doing in terms of complexity reduction. We see that. We see also the innovation, how this is kicking in now quarter by quarter. It feels very consistent. I'm also very good, obviously, that after nine months running the restructuring program, that we are very much on time, and now we see how the cost reductions are starting to kick in the areas where we already initiated some months ago. I also believe that we did a pretty good job on the financing of the company when, again, the light was switched off at the beginning of March.
I think that Stefan and his team have done a terrific job thus far. With that, I would like to open for the Q&A session.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad now. Our first question comes from Daniel Schmidt from Danske Bank. Please go ahead. Your line is now open.
Yes, good morning, Juan and Stefan. A couple of questions from me. Starting then with the short term here with the trend in the quarter. You're saying that, of course, you had a dreadful start, and then it looks like, I think you said that it was basically flat in June with aftermarket being up and hence OE being down. If you would exclude the U.K., the aftermarket, as I understood it, would have been up like 10%-15% in June. Just so I got that right, please confirm that. What are you seeing entering July, given what you said about the U.K. and sort of the reopening of that country, and what has that done to your performance entering Q3?
We feel good about July. We hear our customers talking about the push, talking about retailers asking for deliveries from OEMs, and OEMs asking deliveries from us. We see that there is an order book. As you are aware of, our order book, our backlog is normally two to three weeks. What we can see, it looks good at this point. If we try to summarize Q3, we feel good about Q3. Again, my question is it underlying demand or is it still catch-up? Keep in mind that we didn't have positive growth in June. We just matched last year's numbers. At the same time, we feel the push. Our concern just now is much more Q4 than Q3.
Yeah.
Q4 is more of the unknown.
It sounds like you're saying that so far it's been a very short time period, but so far you're seeing positive numbers for Q3. Is that correct?
I never said that, but I see much better numbers than what we saw at the beginning of Q2.
Okay.
We hear our customers talking about retailers asking for more deliveries.
Okay.
We hear our customers talking about low inventories, both on the RV side and on the marine side. Still, we need to see that coming in, coming through.
On that subject, if you look at the U.S., there's comments from dealers and maybe also OEMs, that inventories are too low and that basically dealers don't have vehicles to display on their lot and the season is moving on. Do you feel any risk that you're not going to be able to supply to the dealers, that they will miss out in terms of selling to the end consumer just because they don't have the goods?
Daniel, I'm talking to our customers obviously in the same way as you are reading, I'm talking to them. They are expressing more or less the same. At the same time, if we look at the retail numbers of May, that are the only numbers that are public, retail was down 25%. Manufacturing was down 29%. Let's wait until we see the numbers from June, and then we will see really if the underlying demand is there. May, the latest numbers we have that are public, are showing minus 25%.
Okay.
On the cost, I have to say as well that everybody seems to be very positive. We will see that coming through the numbers. So far, we don't see it.
No. Okay. Good. Moving on. You mentioned these four major product categories within vehicle-based outdoor products that you've launched in the past 12 months. Could you give us any indication how big a part of sales that is today and what you think that will be in a year's time?
Still very small. It is obvious that we have been introducing step by step, of course, that COVID even stopped our plans quite a bit. I'm fully convinced, and we are fully convinced as a company, that this is one of the areas where we will see a lot of progress moving forward. Again, we have already a channel. It's about becoming much more relevant than we have been until now. Until now, basically, we were in this channel with our cooling boxes. Just now we are moving from active cooling, we will be on passive cooling, we will be on drinkware, we are already on the rooftops, we are already on inflatable tents, we are on the cooking. We believe that this is going to be kicking in more and more in a couple of years. Again, we will see a progress evolution.
It's not a big bang here and now. It takes us, as I said, if you look at REI, we were in seven stores one year ago. We are on 36 stores today. They have another 120 to go.
Yeah.
We will see it growing over time.
Is it fair to assume that half of Kampa maybe and your mobile cooling revenues, is that what you're referring to that you have today? Of course, that will be probably much more in a year's time. Is that the starting point?
Absolutely. I would say that if what we call before for retail stood for somewhere 9%-11%, depending on the quarter, and you add the Kampa and all the new products that we are adding, I would be surprised if that business, the outdoor business, doesn't make up 20%-25% of the company in a couple of years from now.
Yeah. Okay, good. Back to the cost side, obviously you've done much better with cost reductions than what market expectations were implicitly thinking. At the same time, you've had this B2C platform, e-commerce rollout in EMEA. Has that been a costly exercise, would you say?
No, it has not. The reason for that is that we have already a software that we were using in one country, and we have expanded that into a number of different countries. That's, for us, also a first step. We have another program in place that we are going to be implementing in the coming 12 months, which is a global platform. We want to have more customers interacting with each other no matter where they are. What we have done just now is that we have taken a shortcut in order to create traffic, to connect it to our website, and to learn ourselves so we can really start moving. Then it will be a second phase where we will implement a second phase of this with a new global platform that we are already working on, by the way.
Finally on the cost side as well, Leif, you mentioned tariffs, they were still a headwind, of course, in Q2, but if I get it right, that should be a tailwind in Q3 and onwards, is that correct?
Yeah. For the second quarter, obviously the tariff cost has been impacted by the volume drop. We are basically following the plan as we have been communicating earlier that compared to the quarters last year, that we are going to see an improvement during Q3 and Q4. Of course, depending on how the world will develop, but we are sticking to that.
On a like for like basis, they should be an improvement, of course.
Yeah.
Yeah. Keep in mind that we are moving a number of products from China, that we started already one year ago, and they kicked in. Now what is going on is obviously the efficiency numbers are coming up, are climbing dramatically in the last weeks as well.
Yeah.
Even with the factory, it takes a while before you get efficiency. We are getting efficiency gains now.
All right. Good. Okay, that's all from me. Thank you.
Thank you.
Thank you. Our next question comes from Lucie Carrier from Morgan Stanley. Please go ahead. Your line is now open.
Hi. Good morning, gentlemen. Thanks for taking my question. I will go one at a time. I just wanted to follow on your new range of product that you've been launching. It looks to me to be a bit more what I would call light camping equipment versus what you were doing more historically on the mechanical or more heavy components for outdoor vehicle. I was just trying to understand a little bit your positioning in this area, because you've spoken a lot about premium positioning, throughout the presentation, but also it seems that you think the growth is more going to be targeted to millennial type of customers. I was just trying to understand how we would reconcile these two areas.
I think, historically, we have been into both in the boating industry and the RV industry, supplying devices to those customers. That's good, and we will always be there. We also believe that we need to be much closer and our development moving forward, if you look at how the RV industry is developing over time, from peak to peak, the growth on the market, the underlying growth, if you look at the boating industry, peak to peak, underlying, we need to find other ways of growing the company. We believe that outdoor gives us the opportunity to do that. Is it a dramatically different products? Well, to some extent, some of them are. We were not into inflatable tents, but then we had the Kampa acquisition and became one of the global players, we're now saying the global player on inflatable tents.
We are talking about coolers, we already are market leaders globally on passive and active coolers. We believe that if we are really going to become relevant in the American market for coolers, we also need to be on passive coolers. That's one of the areas where we are working. On cooking, we have always been in cooking. We have products, even if you have an RV, you can cook inside, but you can also cook outside. We are doing is that we are adapting products from the inside to the outside. I wouldn't agree that it's totally new, but we are not going to deliver, obviously, a fridge, a standard fridge, to somebody that is going to put it in a vehicle. These are different products.
Coming back, Lucie, to what we explained during the Capital Markets Day, what we are using is our core competencies. We are good at cooling, we are good at heating, we are good at the steering systems, and we are good at air conditioning. It's a lot of stuff more that we can do based on those competencies.
Thank you for the color. Apologies if my question was a bit unclear, but I guess I was more around to understand the strategy you have now on these new outdoor products, because it seems you're positioning them quite a lot on the premium side of things. At the same time, you were also highlighting that a lot of the demand is coming from the millennial community. Obviously, according to a lot of studies, the older one were probably going to be the most hit by the aftermath, I would say, of COVID-19. Just to give a simple example, in the U.K., where some of your chairs are retailed at about GBP 80 or GBP 90 versus camping chair, elsewhere at about GBP 20, this is quite a big difference.
I just try to understand a bit more the positioning you're taking versus the trends you're seeing in the market.
Even among millennials, there are people that can afford buying premium products, and there are people that buying other products. You have a very good example. If you follow a company called YETI, you will see that they are attracting millennials, and the prices are not low. They are buying a brand. They are not buying a product, they are buying a brand. We want people, we want our customers to buy a Dometic brand. That's why we are communicating more and more to end users. That's why our websites, our default channels, as well, are going to be so important to us. We want to create a brand, not being part or supplier to another brand.
Okay. Very clear. Thank you. My second question, I was hoping if you could maybe give us some details around the government scheme that you have been subscribing to or accepting. Does that require from you any type of commitment, in terms of potential redundancies in the future, plant closure or even dividend payment, considering you have taken this government program in a lot of different places, I guess?
No, in the big scheme of things, no.
What do you mean in the grand scheme of things?
Yeah, we can skip the first, but we don't have anything that is going to compromise the plans that we have.
Okay. What you're saying is you could take that help without giving any counterpart or without having to give in the future any counterpart?
Yeah. Correct.
Okay. Thank you very much. Just also, if we could come back to the refinancing, can you maybe provide us with the updated condition on the refinancing, maybe notably on your covenants as part of the new refinancing deal that you've secured?
That is basically a pure extension of the lines that we have and the conditions in that is very much following along with our current agreement with the bank group. If I give you the average financing cost for our total portfolio now is moving below 3%, a couple of tenths below 3%. That's where we basically stand with the financing portfolio now. The reason to do with this is to continue to be in a good position to be able to be selectively offensive in all different aspects. We have been talking about that we also have developed products, we have new products in the pipeline. We also need to be able to continue with our manufacturing footprint program.
We also know, even though that's maybe not exactly where we stand right now extremely active on the M&A side, but we believe that is something that could pick up again later in the year. That's the back to it.
What is your covenant on that existing plan or on that plan again? Is it still around 4x or?
This covenant program, as you know, we did amend our financing agreement in April. This new line is basically following along with that. We have been creating some flexibility for the 4 quarters or up to Q1 next year. That is basically following along with what we have agreed with the bank group there. We have not exactly disclosed how that look like. We have only said that we are satisfied that we have a good level of flexibility and that's basically going to be the comment that we have for this one as well.
Okay. You cannot disclose the covenant, the net debt to EBITDA covenant, basically.
We are happy with the covenant level that we have. That's the comment.
Okay. You wouldn't be giving a number. Fair enough.
Correct.
Okay. Just maybe my last question around the differential in margin between aftermarket and OE. You made clear during the presentation that you are quite keen to push further the aftermarket sales that has been the strategy for a long time. I understand there's a lot of very different businesses within aftermarket and also a lot of very different businesses within OE, but are you maybe able to give us, on a normalized basis, what is the difference or maybe a range of difference in terms of profitability for the aftermarket versus OE across the portfolio, please?
More than double. Aftermarket brings more than double margins than the OE side.
Would that be suggesting that OEM is close to zero?
No, absolutely not. Are you looking at a quarter or are you looking at a normal business?
Yeah, this is why I was asking on a normalized basis.
On a normalized, it will not. You have a percentage on OEM, and what I'm saying is that the margins for the aftermarket are more than double up the OE margins on the RV specifically. That's probably for the marine. Marine is much more profitable than RV.
Yeah, on average, you say it's more than double than OEM for the group?
Yes.
Okay. All right. Thank you very much.
Thank you.
Thank you. In the interest of time, can we please keep our questions to one question? The next question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is now open.
Yes. Thank you. This is Johan at Kepler Cheuvreux. Just coming back a little bit on expectation and midterm demand, et cetera, going forward. Obviously, right now there's a positive and consumers probably have had money to buy new RVs or marine equipment. Global GDP growth looks to take a hit, and I expect in a year's time the positive mood might be less among the consumers. I think rentals could still be a bright spot in the midterm. As you point out, instead of taking a package trip, they might do a rental back home with an RV or a boat, et cetera. How big share of the end market in your OEM business do you think rental is normally? Not saying this quarter, but sort of normally. Is it 10% of the RV, 5% of marine, or?
We believe that is somewhere between 10%-12%. Of course growing.
10 and 12?
Yeah. Of course growing in a situation like we are seeing just now. The question is how will the rental market be influenced over time? Due to this. Obviously, if you are, as somebody said, a millennial and feel, so to say, uncertainty about whether you are going to keep your job or not, you're not going to buy an RV. You will most probably rent an RV instead of going to a holiday abroad. We believe that on the medium term Again, I think very much the uncertainties are just now linked to COVID and the fact that there is no vaccine. Once the vaccine is there, we will see what happens.
Just a final question.
Yeah. Sorry, go ahead.
Raw materials. Do you think there will be a significant tailwind coming for you in the second half or 2021?
If we look at it, the raw material prices, normally there is always a link between growth, market growth, and raw material prices. We have seen raw material prices developing in a positive way for us, obviously. We see the numbers in May and the numbers in June were still positive for us. Of course, now the situation is changing in the last couple of weeks, and we will see what happens. Just now it has been positive for us. I think even there, COVID will be decisive for what happens with raw material prices. So far, so good.
Okay. Thank you very much.
Thank you.
Thank you. Our next question comes from Fredrik Molgaard from Pareto Securities. Please go ahead. Your line is now open.
Good morning, everybody. Just one question on budgeting and product development. You said, Stefan, that you have been cutting some costs with regards to product development, which we also saw in the presentation. Can you tell us something more about what sort of development projects have been postponed? Are you going to accelerate that going forward once markets normalize? What has the reasoning been in deciding which products you should postpone or which should be continued throughout the crisis?
I think that we have, of course, been looking on which trends are the strongest right now, and we have been sure that we have been allocating resources in the best possible way there. Now depending First of all, we ended better than what we expected in the second quarter, and now we, of course, have to adopt also the investments that we are doing going forward so that we are matching the development. I said that we would like to be selectively offensive. That is exactly what we are trying to be, that we are harder than usual prioritizing the projects that we have on the table. We're spending quite a lot of time in managing this process in the best possible way.
A project generation, if you look at our new project generation, it takes somewhere between two and a half to three and a half years to launch, from the start of the project to product launch. Of course, you have a pipeline, so you're working on a number of projects. What we are doing just now is obviously pushing through, moving forward on the products that we were expecting to be launching in the coming 12 months. We have been a little bit more careful, obviously, on the products that are more long-term. That's a reality. We knew that we were entering the tunnel, and it was very much about reacting fast.
Again, on product development, the cost reduction is not coming from the products that we were intending to be launching in the months to come, but more the ones that come in two years from now, where we can still catch up, obviously.
Okay. It's rather down prioritizing products which have a long lead time rather than specific application areas.
Correct.
On the development side. Well, sorry, I lost my train of thought.
No worries.
I'll have to get back on that one. Thanks.
Thank you.
Thank you.
Thank you. I'll return the conference to the speakers for any closing remarks.
Thank you very much, all of you, for your attention. It has been a very tough quarter, but the quarter is over now, and I feel very proud about the team, the efforts done by everybody. I would like to thank the entire team for the support, for the commitment. Now we are in Q3, and we will keep fighting to improve our results. Thank you very much, everybody, and enjoy your holidays.
Thank you.