Ladies and gentlemen, welcome to the Dometic Third Quarter Report 2019. Today, I am pleased to present Juan Vargues, President and CEO, and Stefan Fristedt, CFO. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a short question and answer session. Speakers, please begin.
Good morning, everybody. This is Juan speaking. I would like to wish you welcome to this presentation for third quarter. I'm very happy to have with me Stefan Fristedt, new CFO of Dometic Group. To you, Stefan, welcome to the first quarter report.
Thank you very much.
We move on immediately to the Q3 highlights. On the market, we are happy with the evolution in the EMEA region. We see that the market has been growing in most of the areas. APAC, despite the soft market conditions, we are starting to see better numbers, obviously also as a consequence of easier comps in comparison to last year. We still see a challenge in RV market in Americas. Despite the fact that Q3 was the first quarter last year where we saw softer numbers, and despite the expectations on seeing improvements during the second half of this year, in Q3, we have not seen any major improvements. We see more or less the same trend that we saw during the first half.
The reality though, when talking to customers, when listening both to customers and to some of our competitors, is that they view an easier way forward. It's clear the inventories are coming down, but it's nothing that we see in our numbers so far. In terms of growth, we had a total growth of 2% with a 6% aftermarket growth. We see good numbers in EMEA. We see also improvements in both APAC and Americas. We continue to invest in product developments, and I would say that we are accelerating. We are up 11% versus last year, and we were up also close to 5% in the quarter. We will see this acceleration continue in the quarters to come. We are also spending a lot of time on our new growth initiatives.
What I'm referring to is, on one side, growth on the aftermarket side, accelerating there, but also starting to have a number of activities on the new growth areas that we described in connection to the Capital Market Day, namely the Patio, the outdoor, and the Mobile Deliveries. If we move to performance, we continue to deliver a high profit level despite the challenging market conditions and despite the negative effects of the tariffs that were implemented from the 1st of July this year. In surpassed we are working very hard, obviously to mitigate the negative effects. We opened our largest site in Mexico back in August, being three times the size of the older factory. We are spending also a lot of time in finding ways to reduce the effect of tariffs.
Last but not least, we also launched a global manufacturing footprint program according to the strategy that we have been describing now for a number of quarters. If we move on to the financial summary. As I mentioned previously, we were up 2% totally, which 6% was organic growth, minus 6%. That was compensated by the positive effect from FX, 6%, and then we have the positive effect of the Kampa acquisition in December last year. EBIT down 12%, leading to an EBIT margin of 13.5% in comparison to the 15.6% that we had in Q3 last year. What we see here is a lot of improvements, efficiency improvements in large areas of the company. We have been obviously running contingency plans to compensate for the volume drops all over the group. I have to say that I'm very happy about how the team has been performing.
We are comparing the last day of September 2019 with 2018. We were down 1,100 people approximately. As you all know, that's difficult to achieve in such a short period of time. We have also been working very hard on the pricing side, where we see clear improvements in two out of three regions. On the markets, more of the same on the RV. It's clear. We have an outlook from the RVIA showing just now that on a good go for the last quarter, we should be a minus 10% in comparison to last year. It's yet to be seen. Hopefully, we will get the numbers from the association today or tomorrow. That will be kind of guidance for us, obviously. Then we have the impact of the new tariffs. In the quarter, we have a negative impact of tariffs of $86 million.
That explains, as a matter of fact, the vast majority of the gap in comparison to the performance last year. The EBITDA, though, is down 1% in comparison to last year. Just as a reminder, we have the amortization for trademarks, which is today having an impact there. That explains the gap between EBIT and EBITDA to a major extent. We're extremely happy to see a very strong cash flow generation. Of course, many of you will think that this is quite logical when the company at this point is shrinking. I can tell you that when looking at the KPIs behind cash flow, meaning inventories, meaning receivables, and meaning payables, all the three KPIs are developing a very positive way. We expect, obviously, to have this cash flow generation even more moving forward. We are spending a lot of time to reduce working capital.
Under EPS, we ended up at SEK 1.26, which is about 14% below last year's numbers, very much driven by EBITDA. If we move over to the nine months numbers, more or less the same trend, 6% organic down, 6% compensated by FX, and then 3% all coming from the Kampa acquisition. EBIT minus 5%, leading to an EBIT margin of 14.7% in comparison to 15.9%. In reality, the difference between Q3 and the first half is the additional tariffs on 25% from July 1 in comparison to the 10% that we had on the vast majority of the product groups prior to July 1. Same story, lots of efficiency improvements, underlying efficiency improvements, a good job on reducing capacity and then pricing in all over the world.
Just to comment that the tariffs had an impact of $86 million in Q3 wide. For the year-to-date number, we ended up at $176. EBITDA being positive, 2%, leading to the same EBITDA margin as we had one year ago. Even there, just to confirm a very strong cash flow generation. We see that this will continue in the quarters to come. EPS ending up at SEK 4.32 or 11% down. If we look a little bit at the trends in the marketplace, we see obviously that the vertical end user segment that has been coming down is RV. Still showing flattish on the graph, obviously that's a total monthly number, so we will see this peaking south in the quarters to come. While CPV, especially marine, even retail and lodging, have been developing positively until now.
If we move over to our application areas, as you all know, this is the new way that we are going to report moving forward from the first quarter next year. Food & Beverage is obviously impacted very much by the RV situation, especially in Americas. Climate has been doing very well for us. Power & Control, where we are doing investments, is developing very nicely. Other Applications, which is a small part of the business, is no more than eight, 9%, is also developing in a very positive way. If we look at the medium time term, we see that this is the fourth quarter where we are showing negative organic growth numbers, while we see also the effect of acquisitions.
Yeah, I think that even Q4 we will see some improvement, but we will see also negative growth in Q4 as we can see just now. If we move over to innovation. Obviously one of the areas where we are working very hard on is on diversifying Dometic and investing even more in areas outside the RV OEM. What we are showing today is two new product launches, one for a Parking Cooler for trucks and specialty vehicles industry, which is very innovative. It's the slimmest product in the marketplace. Then on the right side, you have a new Minibar, which has been awarded several times due to both high efficiency, better design, and very low noise level. We will continue to see, obviously, that many of the investments that we have been doing during the last quarters will start showing in our numbers.
If we look at the different regions. Americas, 12% down organically with Food & Beverage being impacted clearly, and even Climate by the RV OEM being negative. Power & Control is flattish. Other Applications is reporting a decent growth even in this case, it stands for still a minor part of the business. EBIT, heavily impacted by the tariffs, 31% in the quarter, ending up at 12% in comparison to 16.7% that we were showing one year ago. We are continuing to work to reduce our cost base. We see on the negative side how the numbers on the RV OEM market is impacting, and I already mentioned the tariffs having a major impact for us. If we move over to EMEA, we are extremely happy to see the performance. 3% organic growth with most of the segments showing very nice numbers.
Especially happy to see a strong aftermarket business where we see all recent pieces showing positive numbers. On the profitability, very solid and continuous improvement in comparison to last year. We have seen this now for seven, eight quarters in a row. As a consequence of pricing, as a consequence as well of efficiency improvements, clear efficiency improvements. Nonetheless, also we see additional growth by effect of having dedicated organizations that we're starting to implement about one year ago. Ending up with APAC, 10% organic to be compared with the -12% that we were after six months, with Food & Beverage being negative even there as a consequence of the RV OEM. We see Climate reporting pretty good growth, as well as Power & Control. Other Applications, which is also small for the Pacific, showing a slightly negative growth.
I'm very pleased even in APAC to see that our margins are holding up very well despite the fact that we have volume decline. We have a negative geographical mix with Pacific coming down while Asia is positive, and then we have also negative influence on product mix with cooling boxes being negative in the quarter. As part, we move over more to one of the major activities that we have launching. As a part of our strategy review during 2018, we identify a number of areas, and we decide as one of those areas to reduce complexity in everything that we are doing. I have been communicating what we are doing on SKUs, what we are doing on the suppliers, what we are doing number of locations, what we are doing number of legal entities, the number of ERPs, you name it.
We have worked for quarters to prepare ourselves, and we feel that it is time to start the execution of those plans. Of course, the situation we see on the market with lower demand and in combination with additional tariffs that were implemented in July, makes it even more important for us to accelerate the implementation of the program. If we look at the details of the program, we are expecting to get savings of approximately SEK 400 million per year. We will start seeing effects during 2021, and we will see full effects from mid of 2022. We will have a cost for this program around SEK 750 million. We booked SEK 37 million in connection with the quarter, and we will see the vast majority of the cost happening during the coming 18 months. Focus areas is really all our locations.
We have been mapping factories, we have been mapping warehouses, and we have been mapping offices. In all those locations, the 20 locations that will be affected today, we have 1,500 employees working. As we move through the executional program, we will inform you on the progress on work in this. If we move over to more the strategy execution. On the expansion side, we have seen a very positive evolution for both the SeaStar acquisition and Kampa. We have completed a number of very important positions to drive the new growth areas. Two of the top managers have already joined the company, the third to join in the coming month. We see also how having dedicated teams and specialization is starting to have an effect. We have seen the numbers in EMEA.
We see also the numbers in Americas, how we are growing rapidly on Mobile Cooling, how we are growing rapidly on CPV. We have the awards, even if the invoicing is taking a while to realize, since we are talking about long-term projects. We see as well that the changes that we have done on the after-market organization are starting also to kick in. From a product perspective, product leadership, even there we have now three new global product managers in charge of the global products as I have commented before, namely Refrigeration, Air Conditioning, and Mobile Cooling. We are increasing our investments in product developments, expanding today, 11% higher than one year ago. We see also how our innovation index, namely products that we launched in the last 36 months, is starting to grow seg-wise, but steadily.
From last year, we have improved from 12% one year ago into 16% this year. We will see further improvements. Then on the complexity side, I'm extremely happy as well with the job that we are doing. Just now we are down 40% on the number of SKUs that we sold during 2018. If you compare the number of SKUs that we have been selling in the last four or five years, we are down 37%, which is obviously massive, and this is also one of the reasons for seeing improvements in our inventories, and we will see more effects moving forward, both in terms of inventories but also in terms of cost. On the cost reduction side, manufacturing footprint has been launched. Extremely important. We also have a number of other activities to reduce the negative impact of the tariffs.
Our large factory in Mexico will have a major impact moving forward. We have also upgraded our sourcing organization with new sourcing managers in the three regions, we have a new head of sourcing for Dometic Group that are going to play a very important role moving forward. I already commented on inventory reduction, which again, I moved simply from kronor in a number of days. We are down 15 days in inventories, which is, in my opinion, a very strong improvement. With that, I would like to hand over to Stefan. Stefan, please.
Thank you, Juan. Yeah, Juan has already elaborated extensively on the trend growth, and I will touch upon some of them in the coming slides here. We're moving to the next page. This is the bridge on net sales, the different components impacting it, translation, FX effects 6%, organic growth minus 6%, and M&A plus 10% in the quarter. For the ones of you who are following us since a while, you are not surprised to see our exposure to which type of currencies. The majority is, of course, towards US dollars, and then it is euro. Not surprising. If we just move on to the next page, we will see the same for year-to-date, 6% related to translation FX, minus 6% organic growth, and a 3% contribution related to the Kampa acquisition. Moving on to the next one. CapEx.
We have been spending SEK 71 million in the quarter, 1.5% in relation to net sales, which is somewhat down to last year. Focus of the investment is in Americas and also within the IT area. In Americas, it's related to building up the structure, as Juan already mentioned around our new factory in Mexico. We're looking on product development. We are continuing to invest in product development, as was mentioned before, SEK 95 million were spent in the quarter, 2% of net sales, it's the new level that we see. As Juan also mentioned, we will continue to even increase from that level going forward. Moving on to the working capital development, which has been continuing to be very positive, continuing the trend since the second quarter.
We had a contribution of SEK 587 million related to working capital in the month, and you can see working capital in percent of net sales on its way down, currently on 23%. Moving over to the next slide, you see how it is distributed among the different components in working capital. Improvements in all areas, but the most significant contributions coming from a reduction in inventory since the beginning of the year, but also a reduction in accounts receivables, as you can see. Moving on to the next page, summarized in our operating cash flow, you see that we did generate SEK 1.3 billion of operating cash flow in the third quarter, and that is equating to a cash conversion rate of 157%, which is a very good number. Moving on to the next. Our leverage ended at 2.68 at the end of Q3.
It's impacted by the currency with approximately 0.1, which means that in constant currencies, the leverage would be 0.1 turns lower, so around 2.58. We are coming back to the outlook here. Let's continue to the next one. We have a pretty significant amount cash on hand, SEK 3.6 billion as of the end of Q3. That is, of course, then creating some flexibility for M&A activities going forward. On top of that, we also have an unutilized revolving credit facility of EUR 200 million. Moving over to our debt maturity profile, which is a very strong maturity profile with maturities pretty far out on the time axis. It's a pleasure to take over such a maturity profile as a new CFO of the company. The debt portfolio on an average is carrying a financing cost of around 3.5%.
Moving over to the final slide here, looking on our financial targets communicated on the Capital Markets Day, and then comparing it to the last 12-month number as it stands after September. We see a net sales growth of 7%, of course, on its way down compared to 10%, an EBIT margin of 13.7% compared to targets 16%-17%. An FFS EBITDA leverage of 2.7, where the long-term target is 2 times. With that, Juan, I'm handing over to you to make the summary.
Thank you, Stefan. First of all, I do understand that we had some technical problems in the first part of the presentation. I'm really sorry for that. Of course, we will answer any kind of questions that you may have later on. If we try to summarize Q3. Sales, we are very happy with performance in EMEA. Obviously, we still see the challenges on the RV markets, especially in Americas. We keep on working on building up our acquisitive pipeline. Profitability-wise, we are holding a high profitability level despite the current conditions. We see strongly improved profitability in EMEA. We see a strong profit level in APAC. Of course, we are impacted in Americas, and we keep accelerating our efforts to reduce the negative impacts.
Underlying, obviously, we have a lot of very good activities that are not shown in the numbers, but we see on the KPIs, while we are following this on daily basis. We are clearly adapting on capacity. I mentioned previously, we are 1,100 people down versus the situation last year. If you compare that we are on a 6% organic growth down on almost 40% the number of employees when excluding Mexico and excluding the additional Kampa employees. I think we have done a terrific job in mitigating the negative effects of the volume drop. Our factory in Mexico will obviously be key to mitigate the tariffs. We have already moved one product. We are just now moving additional products from China into Mexico, and we will continue to do so.
Last but not least, important to us to start execution of the restructuring program that will also, on one side, mitigate the negative effects of the market situation and the tariffs, but also help us take the company to a totally different profitability level in comparison to where we are coming from. Last but not least, I am very proud about the cash flow generation, and again, define the cash flow generation. We have all the KPIs pointing in the right direction. We move over to the outlook. We saw the RV Industry in Americas association coming down again with a new outlook for 2019 at the end of August. They reduced the numbers again. If we combine the negative impact of the volumes according to the new outlook and on top of that, the tariff situation, we expect to see negative growth this year.
We expect to see an EBIT margin around 14.5% at the end of this year, a leverage around 2.4, influenced obviously by the EBITA developments during the quarter. With that, I would like to open for questions.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad. We have a first question from Fredrik Mogard from Pareto Securities. Please go ahead.
Good morning, everybody. A couple of questions for me on the restructuring program to start with. Can you tell us something more about how you see the restructuring program playing out across the regions? Where should we expect most of the savings of SEK 400 million annualized to come through, and where should we expect the cost from the SEK 750 to break out?
You will see in reality, this will affect the three regions, but the vast majority of the savings are coming from the two regions in West, meaning Americas and EMEA. If we are looking at the cost, it will be more or less the same answer. It's going to be very much about Americas, and it's going to be very much about EMEA.
Okay. Do you see any difference with regards to timing between those two markets? Is EMEA, so to speak, a few months or few quarters ahead of the Americas, or how do you see that playing out?
I think, obviously, I would say that you have two partial answers to that. Obviously, we were working very hard in EMEA since we know that we have a lot to do there. The situation with the tariffs also kind of makes us accelerate our plans in Americas. I would say that both are equally important. If you look at the profitability level we have today, both are very important to us. You have to take away Marine. Marine is doing great. If you look at the RV Americas and then EMEA, site-wise, they are pretty similar. Profitability-wise, they are not far away. It is important to improve profitability in both of them.
Yeah, sure. The SEK 37 million, I think it was in this quarter, was related to the restructuring program. Should we expect those expenses going forward to be reported as items affecting comparability as well, or will they be included in the adjusted EBITDA figure?
No, the cost related to this program will occur in items affecting comparability.
Okay. Thank you. That's it for me right now. I'll get back to the line.
Thank you.
Thanks.
Thank you. We have a next question from Klara Jonsson from SRLL . Go ahead.
Yeah. Hi, this is Klara Jonsson from SEB. Hi, Juan.
Hi.
Hi, Stefan as well. I have a few questions on tariffs and then on the restructuring program, and I will start with the tariff questions.
You saw a step-up in tariffs in Q3, and I guess they will be quite tough in Q4 as well.
Your full-year guidance of 313.5% margin has, you will go from basically 200 basis points during your EBIT margin contraction this quarter to basically almost flat development during Q4.
the additional tariffs. What is that?
You have a number of things. Obviously, you have higher price percentage, but at the same time, you also have less reduction on the volumes. Keep in mind that Q4 is a weaker quarter for us. At the same time, we also see that other segments, we foresee improvements in comparison to Q3. You see also that APAC, which is also an important part of our business, having high profitability, is not dropping as much as we have seen during the year. We still expect a good situation in EMEA. Altogether, keep in mind also that on the Q3, we had an extra impact as well on the tariffs because we were not moving fast enough. Keep in mind that the tariffs were meant to stay at 10% up to pretty late in the second quarter.
As you know, we started to work on our restructuring programs many quarters ago. We had a different order. When we were building our factory in Mexico, we were taking some products from China into Mexican factory. We were also starting to work on some other products coming from the U.S. to Mexico. As we were planning, all of a sudden, the new tariff situation appeared with 25%. We needed to replan again. That cost us a number of months. We have a number of things going on that we believe are going to support our fourth quarter.
Yeah. Okay.
Nonetheless, Klara, I have to say, it is tough. You cannot take 25% tariffs on a lot of products we are bringing from China overnight. That's why we are celebrating. Yeah.
Sorry. That's why I feel that you're moving your production to Mexico. That's my next question. What does this mean from a tariff perspective? Will you move everything that you produced in China to Mexico now? If everything will be moved, when will you start to see the impact from that?
You will see a stepwise approach. We have started with one product. One of the products we have is fully manufactured in Mexico today. Now we are moving another two products. That will take place in Q4. I'm not talking about planning, I'm talking about moving. Really up and running during Q4 and beginning of Q1 next year, at the same time as we are planning with the next moves. You will see changes over time.
Right. Could you say anything about tariff impact next year? I know you had 10% all of 2019, you will have 25% going into next year.
Correct.
It should be some SEK 100 million or so, is that correct?
The first half is going to be tough. As we are working, we expect to see clear improvement in the second half.
All right. Also, I have another question, if I may, on the restructuring program. It's quite large. It's running over 18 months, costing money. Are you still comfortable with doing acquisitions next year?
Yes, I am.
Okay. How far could you stretch the balance sheet? You will be left with 2.4 times EBITDA by the end of next year. Could you go up to 3 times and still be comfortable?
I think the precondition to get into three times is you have a major acquisition. As you know, the market doesn't open for many companies turning SEK 200 million or SEK 300 million. Most of the companies in our industry are EUR 40 million, EUR 50 million, EUR 60 million. If we consider acquisitions that size, it will cost us SEK 21 to SEK 2,015.
Yeah.
I think it's very difficult for me to say when it's going to happen because, of course, if we do two or three of those, then we will need to start considering, okay, should we take next one or not?
Yeah.
If something big came in our way, then we need to think in a different way, and then we will need to take a position.
All right.
What is clear, Klara, is that we are working our pipelines. We are adding resources to our M&A team. We are hiring people in Americas, we are hiring people in EMEA, and we are strengthening organization as well in Stockholm. Also keep in mind, Klara, if we take Kampa as an example, as you of course, have the ability to add the BTA coming in with new target, Kampa was adding 0.1 turns on our leverage when we did that acquisition. That's maybe something to keep in mind.
Sure. I'll hand over any questions to the other participants on the line. Thank you very much.
Thank you.
Thank you. We have a following question from Agnieszka Vilela from Nordea. Please go ahead.
Thank you. I have a couple of questions. Maybe starting with a follow-up on tariffs. Can you just remind us what's the total exports today from China to the U.S.? I think that you said before that it is about $1.5 billion on an annual basis. Is it correct? How much of that exports could you locate in the end to Mexico?
If we go back to 2018, we were talking about $250 million of exports from China to Mexico. We are just now, in comparison to the same period last year, 44% down, which is telling you, obviously, that we have done a number of things to reduce the impact. You have, obviously, the volume drop, but you also have the activities that we have been able to realize until now. That's my point, that of course, you have two things moving at the same time. Just now, we are moving from 10 to 25, but at the same time, we are also accelerating some of these movements. When it's going to be zero? I think that will be very much depending on whether there is an agreement later on or not.
With some of the products, one of the questions that you need to think about is, okay, if the tariffs stay at 10%, are you better off by moving more from China to Mexico, or are you better off by starting to move more from a high-cost country to a low-cost country? At 25%, it's clear that I need to prioritize China. At 10%, it is not.
Okay, perfect. Thank you for the clarification. Just a follow-up also on the restructuring program. Of the SEK 400 million that you expect in savings, how much is related to the pure layoffs of personnel, and how much is related rather to consolidation of the factories and bringing down the fixed cost base?
It's very difficult to say in one go, but you have a number of things even there. One of the things, the most important areas that we will do is that we are not just consolidating sites. We intend to outsource non-core activities. That's a very important parameter. Today, we're extremely vertically integrated. When you consider the perceived cyclicality in the business, but especially the real seasonality in the business, that has a major impact. I wouldn't dare to tell you one number here and now. Let us look at that and come back to you. This has been a part of the plan.
Yeah. I can imagine that the personal reduction savings that you can probably calculate in a way by just taking.
Absolutely. We have it. We have it as part of the program.
Just keep in mind the number that we are mentioning, number of FTEs, that's basically the gross number of the people affected.
Yeah.
Okay. The next number would be lower?
Yeah. Absolutely.
All right. I know that you tend to talk more about the kind of product categories or technology categories that you have, but I would appreciate still probably some comments about the end market. If you could give us some coloring on the RV market in the U.S., but then also in Europe, how do you think the new CO2 emission rules will affect the demand? Also what you see in the marine business and commercial and passenger vehicle business, given that there are worsening somewhat. Thanks.
We look at the RV industry. I'm sure that you have the numbers from American Association talking about 3.5% down next year. Europe is also flattish. We have seen Europe so far performing better than I expected one year ago, I have to say. Of course, when you read papers every single day, you have to think what happens. RV, I don't think it's going to fly next year. I think that if anything is going to be negative, again, just looking at the numbers from the American Association, keep in mind that this year, the initial outlook was about 470, then in February, it went down to 460, in May from 416, and in August to 401. They have not been very good at forecasting. Let's put it that way. Now they are talking about 3.5.
It's clear that when talking to customers, when I'm talking to customers, some of them are public, and you get exactly the same access to information as I have, they are pretty bullish about the situation of inventories, that now we should be starting to see growth. If we look at European business, it's not many weeks ago that we had one of the main customers across Europe, I'm sure that you know who I'm talking about, also being pretty positive about the quarters to come. What I can do, obviously, is listening to the market, listen to my customers, and staying very close. I am a little bit more cautious than they are. Simply because I have seen how the numbers have been coming down so far.
Many of these customers are probably notoriously optimistic about the industry.
That's a little bit of my point. I do believe that what Dometic has done in a very good way, in my opinion, is that we have acted extremely fast. We have protected our margins extremely fast in a totally different manner than the rest of the industry. Simply because I cannot just count on forecast when I see that the track record is not great. We have been fast capping in advance. We will keep doing so as soon as we see some signals. If you look at Marine has been showing a fantastic development for us for quarters. I'm not talking just about the SeaStar acquisition. I also think about the underlying Dometic Marine business. We have seen Q3 being weaker on the OEM side, much stronger on the AM side.
When talking to our own guys, they are still very optimistic about 2020. They don't see any kind of numbers as we were discussing on the RV side. I believe as well, that it is clear that when you are reading media, when you are seeing what's going on around the world, obviously, if you are going to make a major investment, you will think twice before pushing the button. On the CPV, I think it's a different story. I understand that the truck market is coming down, keep in mind that our product is a pretty new product. What we see in our numbers so far is the other way around. We see that the job that we have done in Americas in the last two years is starting to bring a lot of awards, as we communicated during the Capital Markets Day.
We have seen also some nice awards in Q3. We see that EMEA has been developing so far very nicely. We don't see signals of the region. Again, keep in mind that for us, we are selling a pretty new product to that market. The penetration rate is very low. Even if the market went down 30%, I don't believe that we are going to be heavily affected.
Thank you.
Okay. Thank you so much.
The last question from me, if I may. The 6% aftermarket growth in the quarter, it is the reported growth, yes? What would be the growth if you adjust for the Kampa acquisition and the currencies?
Flattish for totally with negative growth in Americas, with very positive growth in EMEA and even excluding Mobile Cooling in APAC, very fast positive growth. We are seeing very good growth in many areas. Unfortunately, for Americas, RV aftermarket is huge, and that has been negative in the quarter, but much better than we saw in Q1 and Q2. We are getting close now.
Great. Thank you.
I forgot to mention that we have a new organization in place in Americas.
Perfect. Thanks.
Thank you. Our next question is from Olof Cederholm from ABG Sundal Collier. Please go ahead.
Yes. Hi, it's Olof Cederholm with ABG. Just a follow-up on Agnieszka's question on the Marine side. If we're not talking about the market, we're talking about you and your Marine business, how resilient should we think this business is if the market is weakening? Let's say the market is down 5%. How would your business develop in that kind of environment?
What we have seen in the last years is that if you look at Marine, leisure Marine, leisure Marine has been growing at a 2%-3% pace in the last four or five years. We are talking about engine, the engine builders, we are talking about leisure Marine, as I mentioned previously. We have been growing something between 8%-12%. We have been growing two and a half to three and a half times faster than market. If the market goes down 5%, I should expect that we could be flattish, slightly positive or slightly negative. That's kind of the frame that I would expect. We see as well, in comparison to the RV side, that Marine aftermarket stands for a bigger portion than RV aftermarket. That also supports, obviously, both on the top-line side, but also the margin side, that is heavier.
Okay. That's great. If we're talking about raw material cost, et cetera, steel prices coming down, plastics should come down. Could you give us an early look of what we can expect for 2020 over 2019?
We see obviously what we have this year, right? Do you want, Stefan?
We of course seeing positive effects of the raw material. No doubt about it.
We have to keep moving on there as well. We have, on one side, positive effects of raw material. At the same time, something that we are not talking about is obviously that we are buying components to our American factories, as part of those components, they have Chinese imports as well. Of course, that we have what we call foreign direct tariffs kicking in as well. They are not fully offsetting the savings that we have on material, but they are also costing us a bit of money. Raw materials have been coming down, and we see still all the KPIs for raw material pointing south. We should see additional savings.
Okay, great. Thanks. That's all for me.
Thank you.
Our next question is from Johan Eliason from Kepler Cheuvreux . Please go ahead.
Yeah. Hi, this is Johan. Just a question on this Mexican plant that you mentioned. You move manufacturing from China to Mexico, but I would assume you would still import the components from China and just do the assembly part in Mexico. Is that really such a big positive driver for getting around the tariffs, or am I missing something here?
Yeah, you are missing something there because obviously we are not just moving labor. We are also looking at component suppliers in Mexico, and we are looking at component suppliers south of Mexico. You have obviously moves that you have to do stepwise. The first one is to reduce the tariffs. The second one is also to get low-cost country, so we avoid the freight cost and the lead times.
Okay, good. The reason why tariffs hurt now was obviously that, as you mentioned, you moved.
Twenty-five.
Yeah, exactly. Pricing then can also move. Would you prefer to be more cautious on pricing and await the benefits from the manufacturing move rather? Is that?
Well, no. I have to say, we had a good effect on pricing in the first half that compensated partially for the tariffs. What we have seen in Q3, that obviously a market which is still down, even if we see easier comps. At the same time, as higher tariffs are kicking in, there are limits also for how much, how aggressive can you be in such a market condition. We will do anything we can to move prices outwards, and that's what we did. We also have a competitive environment, and we will see a lot of competitors moving prices. Just now, Sorry, because that's an important one. Aftermarket is also important, so it's always a balancing act. We were aggressive, and we calibrate. We will become aggressive again, and we will calibrate again. You understand my point?
Yes
It's always a balancing act because we have an aftermarket. If we had one transaction, that would have been a different story.
Yeah.
For the aftermarket, it's important to have the install base. You need to put some limits for how much you can lose on share.
Coming to the share, how has that developed in the U.S. or in Europe, Asia Pacific?
I have to say that I'm happy that we are holding our share. Obviously, we have many different products. In some products, you might be losing 0.5, 1 percentage point of share. On the next products, we are gaining 1% of share. We see on our numbers and when talking to customers and looking at the volumes that we are very much in parity with markets. Again, it doesn't mean that it's one to one for every single SKU. If you look at the total product portfolio, it's very similar.
Okay. Thank you very much. That was all from my side.
Thank you.
Thank you. We will be taking our last question with Harry from Handelsbanken. Please go ahead.
Yes. Thank you. Harry from Handelsbanken. A quick follow-up on the restructuring program or just a collective clarification first. Did you say that your headcount in September was down 1,100 compared to last year full time?
Yes.
Okay.
Yes.
All right. Okay, can you then maybe to some extent quantify the impact on costs from this and then maybe compare that to the restructuring program that you announced today? Frankly, a SEK 400 million saving from a sizable program like this sounds rather low. What is the cost impact of actions that you already have taken in relation to this that you are now embarking upon?
If you look at the savings that we have on the capacity reduction that we saw during the last 12 months, I would say is close to some SEK 200 million altogether. Again, now we are talking about something different. We are talking about people, but you will not see 1,500 people leaving the company. It's far from that. What we are stating in our communication is that we will affect 1,500 employees working in 20 locations. That's not going to be a net number. One of the reasons for that is that at the same time, we also need to invest. We want to be more innovative. We are investing in IT, we are investing in tool development, and that will eat up part of that. It is important that we do those other things.
We have investments that we are going to pay depreciation for. Of course, a bulk of those monies, the 400 million, is people. It's not just people. We have a lot of complexity with all those factories that are working 2 quarters per year, and where we have a lot of inefficiencies, 2 quarters every single year. You cannot just take the number of people, put a number of SEK per month, and then get into the 400. That will not work out. It's a little bit more complicated than that.
All right. Just a quick clarification on that. The SEK 750 million number is probably not all cash. There will likely be some impairments and write-downs there as well, right?
Yeah. You can assume that approximately 20% of that number is non-cash.
All right. Okay. Thank you. That's very helpful.
Thank you. Anything else? Should we close? I would like to thank you all for your participation. Yeah, now we start working on the next quarter. Thank you.
Thank you.
Thank you. Ladies and gentlemen, I would like to apologize for the technical issues encountered during this call. This call is now over. Thank you all for your participation. You may now disconnect.