Welcome to Dometic Q4 Report 2022. Today, I am pleased to present CEO Juan Vargues, CFO Stefan Fristedt, and Head of Investor Relations, Rikard Tunedal. For the first part of the call, all participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by pressing star five on their telephone keypad. I will hand the conference over to the speakers. Please go ahead.
Good morning, everybody, welcome to the fourth quarter and full year report for Dometic from a sunny Stockholm. Without any doubts, in some full committees that we have a lot to talk about, let us move into a presentation. Q4, challenging environment out there. It has been pretty tough on the marketplace. Retailers are still keeping inventories at a high level. In terms of performance, we showed 11% organic negative growth, with marine still very, very strong, 11% up. Service and Aftermarket continues to show hefty negative numbers, minus 22%. OEM is negative at 6%, but very much driven by the RV market in Americas, while the rest of OEM is still positive. EBITA ended up at 7% versus 11.4 last year, with clear declines in EMEA and Americas.
Igloo margins were in line in comparison to last year, and we have to keep in mind of entire group, but even more specific for Igloo, Q4 is the lowest or weakest quarter every single year. We are obviously very happy to report significantly improved cash flow. We saw already a clear improvement in Q3, and we had an even more important improvement in Q4. Inventories, we commented a couple of times before that we are working very, very hard to get them down, are starting to show that they are coming down, and that the trend will continue in the months to come. If we move over to Q4 sales, SEK 6.2 billion, total growth of 11%, but organic growth at -11%.
EBITA, SEK 430 million or 32% versus last year. We got an EBITA margin of 7% versus 11.4% for the last year. EPS at 54 ore in comparison to 98 ore one year ago. Operating cash flow, twice as much as last year, meaning SEK 1.1 billion in comparison to half a billion last year. Leverage at the same level as in Q3, meaning three times versus 2.6 in Q3 one year ago. The board has decided a dividend or will propose rather a dividend of SEK 1.30 in comparison to SEK 2.45 last year.
Moving to the full year, total growth of 38% or very close to the 30 billion, ended up at 29.8 billion with 3% negative organic growth. EBITA, even there at all-time high, 3.9 billion or 17% compared to last year, reaching an EBITA margin of 13.2% versus 15.6% last year. EPS, even there all-time high at SEK 8.32, and operating cash flow of 2.3 billion, almost 2.3 billion in comparison to 1.7 billion or +30% versus last year. Moving over to sales growth, 11% total growth with Americas -21%, and now we are talking about total growth. EMEA still 5% positive. APAC 6% positive. Marine +30%. Global +66%. Still, organic growth was down 11%.
In terms of application areas, it is really climate where we are seeing the major slowdown, and that's very much due to the American RV Industry, where we are very, very heavy on climate. Food and beverage and power and control still growing very nicely, totally speaking, very much driven by the acquisitions in those areas. Looking at different sales channels, Service and Aftermarket, down 4%, and we will get much more into detail in a couple of seconds. While OEM, as you can see, is still up, and distribution, very positive, driven by Igloo. This is an important slide. It really shows the transformation of Dometic from 2017 to 2022.
We have doubled the size of the company, which is even more important, we have also reduced our exposure to the OEM market, moving from 61%, five years ago to 44% this year. If we look at the share within OEM, the RV OEM stands today for 25%, Marine 14%, and CPV 5%. As we commented before, RV OEM Americas, which is about half of the total RV, is just now where we see a negative growth. All the rest is positive. Coming back to Service and Aftermarket, which is one of the areas having the most impact on Q4 and our margins totally speaking. What you can see is extremely important.
You see obviously that the pattern looks very, very similar year-on-year with exception of 2020, where we were hit by the pandemic in Q2, we saw a fantastic bounce back in Q3, Q4 that continued during the entire year, 2021. Worth to mention when looking at the graphs is Q1 2022, where we still saw a fantastic growth even in comparison to 2021. Meaning obviously that distributors, wholesalers were still building up inventories on the with the vision of having a strong season 2022, that obviously never happened.
If you compare on the contrary, the numbers in 2022 with the numbers 2019, if you took 2019 as a base, all of a sudden we are growing 4% in Q2, we are growing 7% in Q3, we are growing over 10% in Q4. Again, it is important really to understand what is going on on the markets. I'm convinced that most of you have already heard about the bullwhip effect. This is not my graph. This is coming from supply chain experts. This is telling you is that the small changes in demand at the consumer side lead normally to major swings, the more upstream you go. This is a very well-known situation in normal cases, but of course, that the pandemic distorted everything.
This is really what we are going to see we move over to the next slide. When looking at our Service and Aftermarket, we have three different channels. We have the D2C, which is very much driven by our own platforms. We also have dealers, small dealers, over the place. We have in principle about 35,000 dealers, and then we have wholesalers/distributors. If you look at the upper graph, where you can see that when we are talking about dealers, meaning companies closest to the consumers that are not building up inventories, our sales is very much in parity with 2021. On the contrary, when you see distributors, our sales is coming down after Q1, started to see. Again, distributors, wholesalers built up inventories expecting a strong season 2022 that never happened.
This is just now what is leading to this negative growth on Service and Aftermarket that we believe is going to be flushed through during the coming couple of quarters. In terms of profitability, looking at EBITA, we ended up at 13.2% for the year versus 15.6% last year. When excluding Igloo, we ended up at 14.5% in comparison to 16% last year. Looking more specifically to the quarter, 7% is very much due to the fact that Igloo is having an effect for three months this year, two months last year. As you all know, Igloo is has a dilutive effect on our margins. We have a clear negative effect of the volumes and also the product mix both in EMEA and Americas.
On top of that, we have also lower FX tailwind in some of the segments. On the contrary, marine is still performing very, very nicely and having a positive effect on our results. We have been obviously working very, very hard to reduce our cost everywhere. Having a look at the different segments, starting with Americas. Organic growth down 41% with RV OEM very much down. We got the numbers from the RV Industry Association the day before yesterday showing that Q4 was down 47% as a continuation of Q3 that was also down 36%-37%. It's tough times for the RV manufacturers and for us as a consequence. On the contrary, we see that automotive is still doing very well.
We invested heavily in building up a CPV organization during the last years, and it's showing very, very nice growth still from small numbers. Then service and aftermarket we already commented. I would say that no matter the segment, service and aftermarket is still going through this rebalancing of inventories. Negative EBITDA at SEK 60 million, with an EBITDA margin of 5.1% down versus 4.7% positive last year. Again, very much impacted obviously by the sales decline, both from an OEM perspective, but also an AM perspective. The couple of acquisitions that we completed last year developing in a nice way are contributing positively to our EBIT EBITDA margins. Moving over to EMEA. Negative organic growth of 6%.
Growth in OEM primarily driven even there by CPV, while RV OEM is stable, but even here Service and Aftermarket showing pretty negative growth. EBITDA margin 3.8%, this was for us, the major disappointment in the quarter. Very much as a consequence of high logistic cost, FX playing negative in comparison to positive in Q3 and last year. Then we have obviously a clear negative impact from product mix. If we look at strategically, we are working on the move from Siegen in Germany to Jászberény in Hungary, and we expect the entire move to be completed mid-2023. Looking at APAC. Even in APAC, we showed negative growth of 2%. OEM, same, same. OEM is still being very stable, while both Service and Aftermarket and distribution going down.
EBITA, ending up at 22% versus strong 27.3%, one year ago. We have even here a negative impact to the Service and Aftermarket, meaning Service and Aftermarket being down and OEM going up. Negative FX effects in comparison to last year and even here, slightly higher logistics cost. Of course, we're adapting capacity, especially in our Chinese factories that are feeding the Pacific area. Looking at Marine, very strong 11% organically driven by OEM, where we see that the technology shift that we have been describing now for a couple of years continues. While Service and Aftermarket is also down, but the difference between Marine and the rest is that Marine started the slowdown, in reality, already in Q3 2021.
Q4 2022 shows a lower decline than we have seen during the year. Hopefully this is giving us the indication that the Marine Service and Aftermarket is going to show improvements in the months to come. EBITA, very strong, 25.5%. It is clear that this is happening. We're improving EBIT margin despite the fact that we have a negative product mix. We completed acquisition of Treeline in Q1, and that acquisition is doing very, very well. Moving over to Global, where, as you know, the vast majority is Igloo, organic growth of 3%. In this case, the negative organic growth was driven by Residential and hospitality showing a stable development as well as Igloo. EBITA margin 0.1%, slightly lower than last year.
Here you need to consider that Igloo was with us two months, in this case, Igloo was with us three months, and they have a clear dilutive effect on our margins. Strategically, Igloo is still doing very well, developing in a nice way for us and working very much with integration, which is going according to plan. Getting a little bit deeper into Igloo, we have a performer organic growth of 16% in the year. We see also a very resilient business historically. We continue to gain market share in these markets. We see even that retailer week of sales is still at the lower levels that we saw in 2019, 2020.
Very good EBITA improvements in comparison to what we saw, and we are happy to report that we have higher margins than what we announced at the time of the acquisition in September last year. As we already commented, we got a lawsuit from the former owners of Igloo, and we are fully convinced that it lacks merit and that they have no case. Moving over to another positive area, Mobile Power Solutions, where we see very, very strong trends. We have seen a very strong trend until now. We see even stronger trends moving forward, where we have completed six acquisitions and ended up the year at 2.3 billion SEK in revenues and high margins. This is an area, obviously, that where we will keep investing in heavily moving forward. From an innovation perspective, we continue to invest in our products.
Marine is launching now a new series of electric actuators for inboard applications. We have been launching many actuators for outdoor. We're also moving into the inboard side and then launching as well our Marine Gateway integrating all the devices that we have within Dometic Marine. We're also launching a new patented heat recovery system that will become the entry product in our air conditioning program that we believe very much in. Looking to the cost reductions, the third strategic block. We have two ongoing programs all together adding up to 600 million in savings and SEK 900 million in total restructuring costs.
We booked 20 million in restructuring costs in the quarter, which means that we are now running at SEK 870 million, totally speaking, as restructuring costs and a run rate on savings of 325, which means that we still have 275 more to go. We continue to drive our strategic agenda. 2022 ended up showing total growth of 38%, organic growth down 3%. We have changed totally the channel mix in the company, and we ended up at 56% when you combine distribution and Service and Aftermarket.
Very strong growth organically and acquisitively in Mobile Power Solutions, and also investing in developing our D2C channel, where we ended up the year at 6% in a market that, as you know, is slowing down and has been slowing down for a while. From product leadership, we ended up last year at 26%. We had difficulties in launching new products because of the component constraints that we were suffering from the last 18 months. Q4 showed again the first step to recover, and we are fully confident that we will get back to our target of 25%. We're also happy to see obviously that innovation is also reflected in the number of IP rights that we are filing, which are more than double in the last 4 years.
Cost reductions, as you know, we have these two restructuring programs that we are running. SKUs are down 65% in comparison to the situation we had 2018, and we will see these numbers coming stepwise additionally as we are introducing new products. Comparing to the situation at the end of Q4 last year, we are 1,600 FTEs less, which is obviously a reflection that we are adapting our capacity to a new situation during the last months. From an ESG perspective, I'm also happy to report that we continue to do a lot of progress. Looking at injuries, we are down 35% in comparison to the target, sorry, to the situation that we had one year, and we are already over the target that we had for 2024.
Female managers, that's the area where we have had the most difficulties. We went down to 23% in Q3. We are back to 24%. Again, this is an area where we work very, very hard, but where we so far have not seen the results that we were expecting. On the contrary, on CO2 reductions, a lot of job and good success. We're also paying a lot of attention, obviously, to suppliers, and happy to report that we have audited 100% of our suppliers. With that said, Stefan, please.
Yeah. Thank you, Juan. Starting off with our Q4 EBITDA bridge. On the organic plus FX side, the main drivers in that is the decline mainly related to Americas, where the volume is the main driver, -41% organic. EMEA, where it is mix FX, logistic cost and inefficiencies in our manufacturing operation. Overall, we have a negative sales mix, -22% organic sales decline in Service and Aftermarket. We have had cost reductions that has contributed positively in the quarter. Concerning FX, we still have a tailwind, but the tailwind is not as strong as it has been in previous quarters. It's approximately 100 million less tailwind in Q4 compared to Q3.
On the acquisition side, Igloo margins, they are in line with last year. As you know, they are consolidated from November 2021. The other acquisitions, which is Cadac, MDF, and Treeline, they are all accretive to Dometic margins. Really happy to be able to report a strong end of the year in terms of operating cash flow. We ended on a little bit more than SEK 1.1 billion in operating cash flow with a cash conversion of 167%. That really completed a strong second half in terms of operating cash flow for the group.
If we look on the different components in working capital, we see that accounts payable is stable around 60 days, where we have seen a gradual improvement over time. The same thing to be reported around accounts receivable, stable around 45, 46 days. We obviously have the inventory development, which where we have seen that the inventory in absolute terms has started to come down here in Q4. If we take a look on the inventory, we have a total increase of SEK 2.3 billion. SEK 2.2 million of that is related to acquisitions. We have an FX part around SEK 1 billion.
The remaining SEK 1 billion is a mix of that we have seen reduced demand, especially on the Service and Aftermarket side. We have raw material prices, and we have also taken certain strategic decisions to secure critical components. We obviously have had longer lead times as well. If we take a look on our CapEx and R&D spend, normally Q4 is a large CapEx quarter. We ended up on 3.3% in relation to net sales. The investments, they are focused around Mobile Cooling and Marine in the quarter. If we look on an average for the full year, we are on 1.9% of sales.
As you know, we have communicated that the ambition level is 2%-3%, so we are in the lower part of that span. The R&D spend for Q4 is 2.4% of net sales, and that includes capitalized development of SEK 23 million, also very much focused around the marine segment. The full year average 1.9%, which is also in the lower span of our ambition level of 2%-3%. If we take a look on our financial leverage, it ended up at 3.0, which is the same as we had at the end of Q3. The strong cash flow has contributed positively on the cash position. We have seen a positive effect of the revaluation of our debt.
The rolling 12 EBITDA has been coming down somewhat, and that is then making the leverage stay flat versus Q3. As you know, our target is to be around 2.5 times, which we are committed to move towards. Taking a short look on our debt maturity profile, we have, as you know, a bond expiring in September 2023. We have an average maturity of 2.8 years. We also have our undrawn revolving credit facility of EUR 200 million. We obviously are continuously working with our financing, as we always do. We end the year with 4.4 billion on hand cash.
We are expecting a continuous strong cash flow development in 2023. Obviously, we are continuously evaluating various external sources of capital. Moving over to the dividend proposal, as Juan earlier mentioned, the board is proposing a dividend of SEK 1.30 compared to SEK 2.45 last year. That is equal to 23% of the 2022 net profit. When the board has been considering this proposal, they have taken the current uncertain market conditions into consideration, as well as that we are coming from two rather extensive years in terms of M&A activities. As you know, our dividend target is that we should pay a dividend of at least 40% of net profit over a business cycle.
Dometic stays firm to that dividend target over time. We take a little bit of an overview of how the financial development is moving due to that we are driving our strategic agenda. We can see that the net sales ended up on SEK 29.8 billion. That's equal to a CAGR of 16%, and the average annual organic sales growth is 2%. In terms of the EBITDA, we end up on 3.9 billion in EBITDA, equal to 13.2% EBITDA margin in 2022. If we take out the diluting effect of Igloo, we would have been on 14.5%. We obviously, compared to 2017, have a negative impact from tariffs of approximately SEK 170 million.
In terms of net debt leverage, as mentioned before, we are on 3.0 at the end of the year. The increased working capital has been driving that. I mean, if we would anticipate some type of normalization of that would impact the leverage with somewhere 0.5-0.7 times. Obviously, as I also mentioned before, we are coming from a two year period where we have completed 10 acquisitions. With that, Juan, I hand the word back to you.
Thank you, Stefan. Summing up, we see a challenging macro environment affecting consumer demand. We have experienced during Q4 the RV OEM drop in Americas. We believe as well that the RV OEM situation will continue for the months to come. At the same time, we also see a stepwise recovery in Service and Aftermarket during the coming quarters, we are expecting as well distribution to be stable during the coming quarters. Our focus just now is obviously on cash flow, reducing our working capital, increasing cash flow, and reducing by that our leverage. Again, we are extremely happy to report twice as much operating cash flow as we had one year ago. We are taking additional measures to address the situation in EMEA and Americas.
The board has proposed a dividend of SEK 1.30. Strategically, I would like to start by commenting that we have doubled the size of the company in the last 5 years. We have doubled the profits of the company in the last five years, and we are running at a lower leverage level than we had five years ago. A lot of things have taken place. We are a more diversified and resilient company than we were five years ago. We are just now experiencing the Service and Aftermarket, but we have to remember that this is a new and unique situation that we have never seen before in the history of the company, and it's very much driven by the pandemic.
We are optimistic about the trends, the long-term trends in the Mobile Living industry, and we will continue to drive our agenda. At the same time, obviously, as we will adapt our capacity to the new situation as it comes. With that said, I would like to open for the Q&A session, please.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. Please limit yourself to only two questions. The next question comes from Gustav Hagius from SEB. Please go ahead.
Thank you, operator. Thanks for taking my questions. Two questions then. Firstly, if you could give us a little bit of an update on the recent development in the markets, not so much about the channel inventories, but end demand. How has that sort of changed if you compare it a few months ago, how you felt about end demand, as of lately and into Q1? Thanks. That's my first question.
I mean, I have to say, that this, that's what we are kind of trying to show on one of the graphs on the Service and Aftermarket. You look at dealers on the Service and Aftermarket, they are the closest to the end users. As you can see, they are running still at the same levels than 2021, despite the fact that we have inflation, that we have concerns about interest rates. We don't see the consumers from a Service and Aftermarket having an issue. We still see obviously that we have an inventory built up. I think that the closest you can get to the consumers is really retailers and dealers. There we are in parity with 2021, so no changes from that perspective.
I believe the challenge here is when are the inventories at distribution side going to be flushed out? You have the situation in Americas, obviously, when we are talking about RV, meaning discretionary high ticket, discretionary spend, where the RV manufacturers really pushed for volumes during 2021 and part of 2022, where we are seeing a major correction, obviously. I do believe that it's going to be very much dependent on inflation rates and interest rates, how consumers react in the months to come. The expectation is that retail in the RV industry is going to go down about 15% in 2023, while shipments are going to go down 20%-25%. That's very much RV.
We are talking about Marine still we see good push on, in the value chain. We are looking about distribution, still very positive. I think it's again, keep in mind that, as we said, RV is 25% of our business. Out of the RV OEM Americas is about 50%. Obviously, the market is dropping 47%. By default, that's 6%-10% down organically for the group. We cannot just say that everything is black because it is not. It is defined into two different areas. RV OEM Americas and Service and Aftermarket, where we are optimistic that we will see Service and Aftermarket coming back in a number of months from now. The question is when exactly.
We know that we had a very strong Q1 in 2022, we know as well that Q2 2022 was down 16% versus Q2 2021. I think Q2 will be critical to really estimate when are we going to go to be through this trough.
Thanks. One more question then. I assume there was a discussion on what to prioritize and not with the board. Could you give us. Stefan said that, in a normalized working cap situation, we're looking at 0.5 to 0.7 XD leveraging on method EBITDA. Is that sort of the base case for you? Are you looking at, just to be clear, is the normalization of your working cap your base case and all else equal, that's your expectation, 0.5- 0.7 times the leveraging 2023?
We, we-
Yeah, yeah.
Yeah.
Go on.
No, no. About the... Absolutely. Obviously we also have to take into consideration that we have some other commitments during 2023 as well in terms of the earn-out payments and, what you see that we have recorded in the books now for the end of December, then that is what we believe is going to be the maximum. That, can it be lower? Yes, it can be lower. Absolutely, the 2023 is holding a working capital release, no doubt.
Just to be understand, the earn-outs are in that direction of 0.5-0.7 sounds EPS.
No, no.
net at the.
No, no. That was working capital only.
Okay, that's clear. Thank you, guys.
Thank you.
The next question comes from Rizk Maita from Jefferies. Please go ahead.
Yes. Yes, good morning, gentlemen. I'll start with the follow-up on the Service and Aftermarket. What we see here is a geographical or maybe a business unit divergence in the sense that you said Marine Service and Aftermarket started to behave a little bit better. It looks like on Americas especially and even Europe, you've seen a leg down versus Q3. Just perhaps can you talk about the reasons why? You know, if my calculations are correct, we're seeing something in the decline of high 30s in Americas on the Service and Aftermarket versus high teens in Q3. Why have we seen that weakness? What gives you the confidence that we should see a normal behavior here in the next season of fall.
I mean, two things. I mean, I think perhaps I expressed myself in the wrong way or you misinterpreted. I didn't say that Service and Aftermarket was flying. I said that it was better than it was in Q3, meaning that they faced a slowdown on Service and Aftermarket earlier than the rest of the business, and they seem to be getting through earlier than the rest of the business. If you look at Service and Aftermarket in Europe, Americas, or Pacific, they are all negative, and marine is negative, but less negative that they are coming from. While the negative side in the rest of the areas was emphasized in Q4, marine went the other way around.
Our interpretation is that they again enter the slowdown earlier, and they are starting to show more positive signals. Why do I feel confident? Because I see, as I mentioned a couple of times, that dealers, which are the closest that are to the consumers, are flat in comparison to a situation of 2021, and they have been flat during the entire 2022. The problem has been wholesalers. Wholesalers build up inventories and of course, at the pace that we are talking about -16%, -17%, -22%, we believe that they are going to come through in the coming months. Hello? Are you still there?
I'm okay. Interesting. The second one is maybe on the profitability on EMEA. Maybe can you help us with the. Yes, can you hear me?
Yes. Yes, we can.
Yes, can you hear me?
Yes.
Yeah.
Can you hear me?
Yes, we can.
Hello?
Hello. Yes.
Yes. Second one was on the profitability of EMEA. Can you perhaps help us with the extraordinary logistic costs...
Yeah.
-and the inefficiencies in operations? Just to separate what's could be perceived as sort of extraordinary versus-
Yeah.
the underlying profitability, please.
Yeah. It's two things primarily. On one side, we have again, the situation on Service and Aftermarket. As we were expecting, and obviously our customers were expecting a strong season 2022, we order thereafter. We saw the slowdown coming from distributors and wholesalers in Q2, Q3, and Q4, meaning that we are sitting on high inventories in instead for having a couple locations, we have too many locations just now holding material that should have already been sold, obviously according to our provisions one year ago. That's leading to a lot of inefficiencies. That's the first factor. The second factor is that we are moving from Siegen in Germany to Jászberény in Hungary. Of course, that when you are moving a factory, you have always additional inefficiencies.
We are hiring people, we are training people, of course we cannot expect that they are just as efficient as people that have been working for the company for the last 10 years. Those are the two main factors. On top of that, you have FX having a negative impact on the EMEA numbers. Those are in reality. You have obviously the size mix. We are still growing on OEM at low margins, and we are dropping quite a bit on Service and Aftermarket where we have very high margins. Those are the factors. Of course we have a short quarter. For us, for entire Group, I commented before that Igloo is even more extreme.
For the entire group, Q4 is about 20% of our annual business. Any deviation will have even more impact percentage-wise in Q4. Hello?
Understood. just quickly, the sales of the group has more than doubled over the first.
Hello?
About five years. You've done a lot in terms of manufacturing footprint, reduction of SKUs, et cetera.
Yeah.
Juan, what's your approach, in terms of divestments? Is this something on the agenda?
Yes
...a way to actually improve the sales mix within the group and also reduce the leverage?
Correct. We are working on that. We announced that about one year ago, and that's still part of our agenda. Of course, is two things having an impact just now. On one side, obviously you have multiples. Market has been coming down. Sellers, in this case, we are sellers. We're expecting to get well-paid while buyers are still a little bit, you know, bargaining on prices. That's kind of having an impact. The second impact is that part of the businesses that we are going to divest have been integrated for years. You need to carve out and put together a business before you can sell it out. We are working very seriously to divest areas that are not interesting anymore.
Without any kind of doubts, that will happen. Hello?
Okay.
Yes.
Understood. Thank you very much. By the way, there's a massive lag. That's why we couldn't understand ourselves. Thank you.
I understood. Thank you.
The next question comes from Kari Rinta from Handelsbanken. Please go ahead.
Yeah, thanks for taking my question. Following up on the on the aftermarket. Sorry about that. can you give us a number on how much of your total aftermarket business comes from marine, where you do sound like you expect sales growth for 2023? Will this be then enough to sort of offset the what most likely will be a decline in the non-marine aftermarket business in 2023?
I mean, if you look at... I cannot give you a number here now, if you look at marine is about $560 million-$570 million. About that is about 42%-45%-ish Service and Aftermarket.
Mm-hmm.
As we commented, we see that Q3, Q4 was down minus 14%. Sorry, Q2, Q3 was down minus 14%. Q4 is minus 8%.
Mm-hmm.
They started the slowdown, as I said, already in Q3 2021.
That.
All right.
That means then that the Service and Aftermarket portion in Marine is larger than-
Absolutely. It is
on the RV side. Yeah.
It is.
All right, great. I can do the math. Secondly, this just wanted to clarify that this lawsuit from the sellers of Igloo that's related to the earn-out.
Mm-hmm.
I wanted to understand what is the timing of, for this earn-out? Is it based on which year's numbers? When will this become sort of...
So the-
You need to pay this if you would need to pay this?
The earn-out was for the year 2022. From that perspective, it's over. You need to audit the numbers before you pay the earn-out. Normally it would be during the second part or the first half, so I would say from April and forward. Now we have this claim, as we are commenting as well, we have filed a claim to dismiss their claim. Our opinion, obviously, that it will take a while. I mean, these kind of cases are lengthy, so it's impossible to me to say when exactly it's going to happen, but it's not going to happen in the coming couple of months, that's for sure.
Okay. The reason that why you still have this 1.9 billion SEK in the books is because it needs to be audited. It's not,
Well, it's First of all, it's because it's not just for Igloo, right? We have some more earn-outs.
Mm-hmm.
Secondly is that it's our obligation to have a careful approach to that.
Mm-hmm.
We have considered, after a lot of thinking and discussions, we have considered that the right amount to have is still in the books.
Yeah. You should consider that to be the max?
Absolutely.
Okay. Finally, I think this was already discussed, but I missed it. Is this part of your net debt or not?
No. It's a current liability.
Okay. All right. Thank you very much.
Thank you.
Please state your name and company. Please go ahead.
Fredrik Ivarsson, ABG.
Morning.
Hi, Fredrik.
Morning. Sorry, there was something weird with the operator. Sorry if I'm making you repeat yourself. I came in a bit late here. But to get back to the dividend and I guess some might argue that actually paying a dividend could be a bit aggressive given the current leverage ratio and also the limited visibility into this year. Could you help us understand how you sort of communicated with the board around the cash flow and EBITDA projection for this year?
I mean, we can obviously not in any kind of detail, you know, refer to how we have been communicating with the board. What I absolutely can say is obviously that, this aspect has also been taken into consideration. You have to see 450 million, that's approximately 0.1 of leverage.
Okay. Fair. Thanks. Then second one on Igloo and the synergies. I mean, you have a quite ambitious synergy target for Igloo that you communicated when you bought it. What have you done so far, and what can we expect to be done in 2023?
I mean, we have done a lot. We have an integration team working on Igloo as part of the business. I mean, everything from product innovation, where we are working together with in the entire Mobile Cooling, so that means looking at Igloo, looking at Dometic products and what we can do together. We have decided to invest in Katy, Texas, to start building up as well Dometic products in the Igloo factory. We are, as we speak, establishing a European Igloo sales organization. We are of course working on sourcing. I think that we have some 32, 33 different work streams with people in charge of different streams working together.
That way maybe we should also mention that a part of these synergies was standalone improvements in Igloo. From that point of view, we are, we are on a good track.
Yeah
on the standalone improvements.
So far so good.
Okay.
Yeah.
Yeah. Would you care to try and take a stab to quantify this?
It's very difficult to give you exactly a percentage, right? When we are discussing internally, our estimation is that we are through about 10%.
Okay. Thank you.
Thank you.
Yeah. Okay. I'll step in here with a few questions on the web. First one, do you intend to continue a high focus on acquisition, acquisitive growth, or should we expect a slowdown on such activities now?
I can answer that question in two ways. Obviously, this is not the time to be aggressive. We keep working on acquisitions. At the same time, we know that it's also a discussion about multiples. Just now, our most important focus is to increase cash flow and reduce leverage. That doesn't mean that we are stopping all activities. Not at all. We keep working.
Second one, how do you intend to address your debt maturity profile with significant steps to re-refinance in the short term?
No, I mean, as I mentioned before, the work with our financing is a continuous process, going on all the time. What we know is that we have our cash on hand. It's SEK 4.4 billion at the end of this year. We are seeing that the cash flow for 2023 is going to continue to be strong. I just want to remind the audience on that Q1 is typically not our strongest cash flow quarter. That is going to continue. As I also mentioned, a part of that is obviously a release of working capital.
We are also evaluating different external sources, as we always do, you know, to be a part of this equation. Not to forget, we also have an undrawn RCF of EUR 200 million.
Thank you. Okay. Operator, back to you for more telephone questions.
The next question comes from Douglas Lindahl from DNB Markets. Please go ahead.
Hello, gentlemen. Thanks for taking my questions. You talked already about a lot of stuff, but on Marine OEM, do you have any additional color you could add to that? You seem to be quite optimistic in general, is my feeling. What sort of gives you that confidence?
Well, we see obviously that the orders are still coming in. We see that still the technology shift that we have been talking about is still there. We know that, on every step when we are moving from mechanical products to hydraulic, you have a factor of five, and when you are moving from hydraulics into electronic steering, you have another factor of five. We are still confident. Again, we have not seen any slowdown in the demand. I fully understand where you're coming from, right? We have also consumers, and you have consumer sentiment and all that kind of stuff, but I cannot tell you anything that we don't see.
You think that the technological shift is basically offsetting potentially the slowdown from consumers?
I think-
Have we not really seen the slowdown in consumers yet?
I do believe that you will. I mean, in theory at least, we should see a slowdown on the consumer sentiment. At the same time, we also know that inflation. You know, in the marine business, we are very dependent on American market, the U.S. markets.
Mm-hmm.
The good news is obviously that the U.S. market inflation has peaked and now is starting to move downwards. We see obviously that we are starting to get very, very close to the peak also in interest rate increases. I believe that we have been benefiting, the marine industry in the U.S. has been benefiting by a high backlog because of the problems with component supplies for years, right? After the pandemic. What I can see, again, we don't see any slowdown in demands. We have very, very good discussions with our customers. By the way, I'm going to visit Miami, the Miami Show in February, and I guess that I will be able to answer the questions in more detail, but so far so good.
You have another consideration, which is obviously that on the contrary to the OEM, the aftermarket side for marine has also been suffering like for everybody else.
Mm-hmm.
We are starting to see the first indications that we might be seeing some improvements in the coming months. If OEM
Yeah.
Down same time as Service and Aftermarket comes up and we have high margins on Service and Aftermarket. That should be beneficial for us.
Yeah. Thanks for that answer. Coming back to, question that was asked previously, but, focusing maybe on different area, the lawsuits? I mean, should we start to include some sort of lawyer fees here going forward? Or, what can you say about that? Also you seem quite, confident that this lawsuit lacks merit. What gives you that confidence?
Yeah, I mean, of course that we have our advisors, we have our legal counsels and, we have gone through all the cases. We are fully convinced that they don't have any case. In terms of the fees, we don't see the fees until now. Of course, that depends a little bit on how, the court, decides now in the coming months. We feel very, very confident.
You said over the coming months, what's the timeframe, if you have that?
I wish I could tell you. We believe that it's not going to happen during Q1. Most probably we might be getting something in Q2.
Okay. That's it for me. Thank you.
Thank you.
Okay. Operator, I think we've taken the last question.
The next question comes from Agnieszka Vilela from Nordea. Please go ahead.
Can you hear me?
Yes.
Yeah.
Yes, we can.
Perfect. Great. Thank you. I just wanted to dig in into EMEA a bit more. Actually looking at the quarter, your total sales in EMEA were up by some 80 million year-on-year, but EBITDA dropped by 160 million. Definitely very negative operational leverage here. I understand when you talk about the sales mix and logistics and moving factory from Germany to Hungary. Could we just get a bit more quantification for it? Because probably, I mean, some of these costs will not be there in Q4 2023. Start there.
Agnieszka Vilela, if we take a look on the extraordinary logistic cost, that's north of 3% units of the margin drop here. The under recovery in factories is around 1.5%. There you have two of the important factors here.
Perfect. Thank you. Then maybe also on a more, more on the group level when we think about 2023. Obviously we can have our own idea about the demand and what will happen with the markets. Could you help us on any kind of tailwinds and headwinds to the earnings that you see in 2023? What will get better you believe profitability-wise and what could still get worse? Thanks.
We have seen clearly. I mean, first of all, we have our own efforts, which means what we are doing to reduce capacity, what we are doing in terms of becoming more competitive, with the move from Germany to Hungary. We have, obviously we are looking at additional measures to reduce our capacity. From a external perspective, we have seen clearly the raw material prices are coming down quite a bit. We see also the freight cost is coming down dramatically. Of course, that since we have been sitting on these inventories, it takes a number of months before they can flush through the, to the P&L, right? Those are positives that will be kicking in without any kind of doubts.
Yeah.
Of course the mix is, has a major impact on our numbers. As just as a reminder, I mean, we have the lowest margins on the OEM. We have the highest margins on the Service and Aftermarket. If you look, the RV OEM Americas is negative.
Mm-hmm.
The others are still positive. Our Service and Aftermarket, where we have very high margins, is very negative.
Mm-hmm.
We should see this turn into positive during the year.
Mm-hmm.
Perfect. Thank you.
You're welcome.
That was the last question at this time, so I hand the conference back to the speakers for any closing comments.
Thank you very much everybody for your attention. This has been a tough quarter, I would like just to finish off by saying that we had all-time high in sales, we had all-time high in profits, and we are totally convinced about the future and the positive trends that we have in Mobile Cooling, even if we have dark clouds just now. The good news is that after the rain, the sun always shines. Thank you very much for your attention. Goodbye.
Thank you very much.