Morning, welcome to the Dometic Q4 Report 2020. For the first part of this call, all participants will be in listen only mode, and afterwards there will be a short Q&A section. Please note, all participants are limited to two questions each. Today, I'm pleased to present Juan Vargues, the CEO. Sir, please go ahead.
Thank you very much. Good morning, everybody, and welcome to the presentation of the interim report for the fourth quarter and the full year 2020. As usual, I have Stefan Fristedt, our CFO with me. Without any further delay, I would suggest that we move over to the presentation. The fourth quarter 2020. Well, I am happy to present what we consider to be a strong performance for the quarter. We see strong market conditions and low inventory levels on the marketplace. We saw a strong development in Americas, growing market demand in EMEA, and a very nice recovery in Asia Pacific after lockdowns back in September and October. We continue to see difficulties to get access to certain components, and we have also experienced that freight capacity has been challenging for us as for many other industries. This is not an RV or marine industry problem.
It's a general industrial problem. We see Volvo, we see Electrolux, we see many other companies having exactly facing the same kind of difficulties. When looking at performance, we are very pleased what we deliver during the quarter, 15% organic growth. I would like especially to mention aftermarket showing + 22% after a very strong Q3 showing 13% organic growth. Our order backlog has been increasing stepwise and is considerably higher than what we had when we entered 2020 one year ago. We also see clear performance improvements in our supply chain. Just now, our factories are running at full capacity internally, but again, facing delivery problems from the supply chain. Organic sales growth and profitability improvements in all the regions, which is obviously very pleasing. A strong EBIT margin improvement showing 11.1% versus 7.6% one year ago.
We're also happy to report that innovation index continues to increase. We ended up the year at 22% versus 16% last year. We introduced a number of new products to the market. Last but not least, we continue to work on our cost reduction programs. If we move over to the full year. On the market, obviously, when looking at the year, the year has been unprecedented, showing a very, very weak first half, very much impacted by COVID all over the world, while we have seen as well a strong recovery during the second half. Obviously, COVID also led to a positive impact due to the fact that staycation as a trend strengthened additionally during the year.
Again, we enter in 2021 in a situation where retailers are showing much lower inventory levels where we feel, obviously, that the market demand is going to be pretty strong in the coming quarters. Performance-wise for the year, it's clear that we are impacted by the first half. Organic sales growth was down 10%, with a weak first half, 27%. If you may remember, we were down 38% in the second quarter, while the second half has been positive, ending up at 8%, of which the fourth quarter stands for 15%. Even here, we consider that showing a 10% organic growth drop at the same time as we are delivering an EBIT of 12% is a very strong performance under current circumstances. The year has been tough to manage.
It has been very much about balancing the short-term cost reductions during the second quarter at the same time as building up capacity for the quarters to come, and at the same time as we are investing long term. If you look in the product area, we have been investing the entire year. If we look at our sales organizations, we are building up the sales organizations for new segments. Again, we are pretty happy what we achieved during the year. Cash flow continues to develop very positive. We showed a solid cash flow during the year. I am also happy to report, obviously, the leverage ended up at twice, which is also in line with our financial targets. The board of directors proposes thereby a dividend of SEK 2.30 per share.
If we move over to the financial summary for Q4, as already mentioned, 15% organic growth, negative impact by currencies of 7%. Strong EBIT improvement, ending up at SEK 466 million or 56% up. We see improvements in all the regions as we are going to see in a couple of minutes from now. EBITDA up 33%. Cash flow lower on the year on the operating side. Leverage meeting our financial targets. EPS negative of SEK 0.54, impacted by the tax provision that we are going to discuss later on. Stefan is going to bring it up. When excluding the tax impacts, EPS in the quarter ended up at SEK 0.87, to be compared with SEK 0.16 one year ago.
Looking at the sales growth, of course, it is very pleasing to see that after seven consecutive negative quarters, we turn to the positive in Q3, and we see a very clear improvement in Q4, and we expect to continue to see improvements moving forward. Americas, 22% up organically. EMEA, 7% up organically. APAC, 9% organically. As I mentioned previously, aftermarket, 22% after a strong Q3, ending up at +13%. Looking at EBIT margin improvements, we see also the positive trends. Strong Q4, impacted obviously by the volume, a strong mix towards aftermarket. We see also improvements on the tariff situation. As you know, we built up a factory in Mexico. We have been moving volumes stepwise from China to Mexico, and that's what we see now in the numbers. We are about 50% done in Mexico.
We still have 50%. It's going to take some time since we are talking about many different products, so that's why it takes a while. We continue to work on the cost savings and even the combination cost savings all over the company at the same time as we are launching new products that are more cost-efficient. It's also generating a good improvement in our margins. On the negative side, we have FX, which is playing against us, clearly, and then the freight cost that I'm sure you have read in the media. Everybody's impacted. We're looking at entire year, 10% organic growth down and a negative FX impact of 2%. EBIT ended up at 12% versus 13.2% one year ago. Of course, the year has been very much impacted by the situation on the COVID.
We have seen underlying efficiency improvements and pricing across the company. We continue to see also a positive mix aftermarket, more towards aftermarket than OEM. EBITDA down 17% by the same reasons. A negative cash flow impacted obviously by the lower EBITDA and the tax issue. If we move over, perhaps to mention, obviously, that we have a very, very nice drop-through leverage on our growth during the last two quarters. If we move over to the application areas, as you can see, we are turning the corner in all the areas. These graphs are showing 12 months rolling trends. We are going to see, obviously, stepwise improvements during the coming quarters. Moving more in detail into Americas, an organic growth of 22%, strong growth in all applications. Order backlog at all-time high.
That's valid for all the segments, I would say. Extremely strong development in the aftermarket, even there in all the segments. We are happy to see that we are starting to see how the automotive OEM contracts that we were awarded a couple of years ago are starting to kick in. We saw a very nice improvement in Q4 as a continuation of Q3. EBIT up 78%. We have EBIT margin ended up at 11.4%, which is considerably higher than what we saw one year ago. I will not repeat myself. It is more the same. It's very much about mix. It's very much about lower tariffs and efficiency improvements across the line. On the negative side, we still suffer, obviously, of events due to COVID, where we have outbreaks in the factories that are contained.
Still, when you have cases, you need to isolate the area, you need to disinfect the area, and send people on quarantine. Having said that, we are extremely happy to report that we are very much in control of the situation in terms of COVID, and I'm very happy about how the entire organization has reacted on these events. As I mentioned as well, freight cost and FX is playing just now against us. On the full-year margin, 10.4% in comparison to 11.8% last year. Moving over to EMEA, we see as well a strong growth in all applications. We saw that OEM is coming back in both RV and CPV after a negative first half, some improvements in Q3, but then really coming back in Q4.
Still, I guess that you are going to say, "Yeah, but the numbers of the German Association are showing fantastic growth." Well, that's totally true, but if you are following the difference between registrations and production, I'm sure that you have observed that registrations are up 36%, while production in 2020 went down 7%. There is a gap between registrations and production. When looking at Marine, we had a negative evolution in the quarter in the OEM side, even if we start to hear positive tones from the boat builders, both the Italian and the French Beneteau. Aftermarket, on the contrary, developed very, very strongly.
EBIT up 43%, showing an EBIT margin of 5.7 versus 4.1 last year as a consequence of the sales growth, the underlying efficiency improvements and pricing. In the same way as in Americas, we're still suffering from outbreaks in our factories from time to time. I have to say, this is not just our factories, it's also our suppliers, supply chain all over. In the same situation, freight costs and FX are playing against us in the same way. EBIT margin for the year, 11.9 versus 13.1 last year impacted by especially Q2. If we move over to APAC, another area where I'm very, very happy about 9% organic with very good growth in all application areas. High double-digit growth in Asia and good growth in Pacific after lockdowns in Q3 and beginning of Q4.
We see a return of the OEM business, especially the RV side is coming very, very strongly in the quarter. EBIT, 31% up with an EBIT margin of 25.9% compared to 20.7% last year. The same, we get a very good leverage on our growth. We see efficiency improvements, and we have, on the contrary, as in other regions, a negative impact to OEM aftermarket. A negative impact geographically since we have higher margins in Pacific than we have in Asia. Even here we are suffering from the negative FX influence. Full year ending up almost at the same EBIT margin as one year ago, 21% versus 21.2%, despite the volume drop. If we look at the strategy, we continue to deliver on our strategy, a strategy that we started to implement and communicate it internally in our organization in October 2018.
We see how aftermarket is starting to show very clear improvements. We also feel very positive market conditions among our customers, both on the OEM side and on the aftermarket side. We see how the backlog continues to strengthen, which is very positive. That gives us a very positive feeling about 2021. We continue to work as well on our channels, on the implementation of B2C e-commerce, where we are going to go live with a totally new platform, a new software platform during this quarter, Q1 this year. As I mentioned previously, we have done a lot to build up our sales organizations during 2020, and we have great expectations on the results moving forward. On the product leadership, I mentioned previously, 22% for the quarter versus 16% for last quarter, last year.
A number of products that have been launched. I will come back to that. What is even more positive is that we have a very strong pipeline of new product launches during the entire 2021. On the cost reductions, we continue to work on our SKU. We ended up the year at -48% versus the baseline 2018. If we compared all the SKUs that we looked at the time, we end up at -55%. Very good improvements in reducing complexity. We announced during the last quarter that we started the implementation of a new organizational structure in EMEA, where we are going to move more from country legal entities into regional hubs, where we can expect that we are going to generate quite a nice saving that we are going to invest in strengthening our sales organizations in front of the customer.
We continue to be committed to the cost reduction target that we announced. Of course, the situation with COVID and the fact that we have travel restrictions practically all over the world is in combination with a strong demand, are delaying some of the projects that we have ongoing. It doesn't mean that we're not working. We are working very actively, but of course, it's difficult to move factories when you cannot enter a country. If we look a little bit more on the front side, we continue to see a very strong growth on the online traffic. We ended up 2020 with 50% more visitors than 2019. Of course, this is the result on one side of the underlying growing trends on staycation, but also the fact that we are investing in that area.
This is going to be extremely positive now when we are moving into more B2C closer to the customers with the new software that we are launching in Q1. The same is when looking at social media, where we also see very nice improvements. This is another area where we are going to continue to get closer and closer to the end users, the consumers, and create pull through the value chain. If we look at our outdoor initiative, this is a question that we have got a couple of times. "Guys, you are talking about outdoor, but in reality, do you have a channel? Do you need to build up new channels?" Well, what we are trying to show here is that we already are present in these channels since many, many years.
What we are doing now when launching new products for the outdoor market is really to become more relevant for many of these customers. As you can see, number of stores, we had a great growth last year. We have 15% more stores with our products than we had one year ago. 3,000 independent dealers, 30 national accounts, and we are going to grow in this area quite a bit in the years to come. The same is in terms of e-commerce. We are today serving 40 real e-tailers. You have today a combination of wholesalers that also have an e-commerce platform. In this case, we are talking about pure e-tailers.
That's also growing dramatically, and you can see during the second half of the year that we could see an organic growth of 30%, which is very strong. The third channel that we are developing is what I already mentioned, the e-commerce B2C channel. If we move over to the products, a lot of things going on. I already mentioned 22%. Products are critical for many different reasons. On one side, it's really about giving our sales organizations the opportunities to show up innovation when meeting the customers. At the same time, we should not forget that with every single product that we are launching, we also have very clear targets in terms of sustainability, in terms of cost reductions, in terms of delivering, serving more features to the market.
We see innovation as one of the keys to reduce environmental impact and improve resource efficiency across the entire value chain. We are revamping the entire product range for the traditional products, the traditional industries where we were in. At the same time, as you know, we are also entering new markets. We are fully convinced that we are going to reach the 25% target on innovation index that we have in 2021. When looking at some of these new products, we are introducing a totally new generation of air conditioners for the RV industry. It's the first generation of air conditioners that we are launching, which is totally modularized. We are reducing the number of decibels by five decibels, which is a lot in terms of noise. We are increasing cooling capacity by 10%. We are reducing weight by 14%. We are reducing SKUs by 50%.
In reality, what we are doing is delivering more for less. Another product that we have great expectations on is our new food delivery box on the mobile delivery side to be installed in mopeds and motorcycles. We introduced this product to the market. We showed the product to the market in combination with CAKE, our partner in this project, and got very positive impressions. We are in a situation just now where we are talking to all the major delivery companies, food delivery companies in the Nordics just now. At the same time, we're also talking to a number of vehicle manufacturers. The product will be available for sales during the second half of this year.
On the outdoor side, which is one of the areas where we invest in, we introduced the new range of passive coolers, the new Patrol ice boxes, which is complementing, obviously, the active side that we have. We have always been in passive, what we are doing just now is that taking passive just to the same level of importance as active, especially in the U.S. market, which is typically a passive cooling market. We have great expectations now when we are building this outdoor organization, that is an important step to become more relevant for customers. The product is available from December last year. Coming to Twin Eagles. We were extremely happy to announce the acquisition yesterday. This is for us really not just a company, it's a growth platform for residential in the largest market in the world, the U.S.
As you know, we launched MoBar a few months ago. We have been developing the distribution organization in the U.S. We have today 250 different distributors signed just for MoBar, which is a fantastic development. We're starting to get very nice orders. Of course, all of a sudden, we are acquiring a company having a strong brand name, a strong reputation, very good products, and a distribution network of another 400 distributors across the country. On one side, looking at the company as such, it's a fantastic company having very nice growth, very nice profit margins. At the same time, we see as well that Twin Eagles is going to help us to get pull to MoBar and the new residential products. Two main brands, Twin Eagles and Delta Heat, 130 employees, and annual sales $34 million.
As we communicated yesterday, EPS accretive from start. Moving over to the cost side, the restructuring program. No new locations affected in the quarter, but a number of employees from the existing locations were affected during the quarter, ending up at totally so far, close to 880 people. We booked SEK 18 million more in the quarter, ending up or giving us SEK 232 million booked so far since we initiated the program in Q3 2018. With that, I would like to leave over to Stefan, please.
Thank you, Juan. Starting off, commenting on the COVID-19 impact. For the full year, on the net sales, we of course have seen a significant impact, but mainly related to the first half of the year. EBIT-wise, a notable impact on profit, but that's of course also mainly related to the first half of 2020. We saw significant lockdowns during Q1 and Q2, and then we have seen a very strong demand coming back in the second half. We have not seen any significant impact from the lockdowns in parts of Europe during Q4. However, we have seen a recovery, as Juan mentioned, in the Pacific area after the lockdown of parts of Australia. If we go over to government grants and other support measures, you can see that they have been very small in the fourth quarter.
14 million in government grants. You have to take into consideration that we, every quarter, have had a certain level of government grants also in the past. Other support measures, it's almost insignificant. The government grants and the other support measures, they were to its absolute majority related to the second quarter 2020. If we look on the key activities, as you have heard before, we had closed factories and sales offices during the first half. We took measures to address our cost base, ended contracts with consultants and temps, immediate hiring freeze. We did the agreement on the new loan facility, as you know. We have been managing supply chain and inventory buildup. The second half was a total different picture. Staycation was driving a very strong market demand, as you know.
We had to work very focused on increasing capacity in our supply chain. We have also had outbreaks in our own operations, which we have had to handle, and which we have handled in a good way. We have managed the second and third wave market lockdowns in Australia and parts of EU in a good way. Moving on to items affecting comparability and taxes. If we start with items affecting comparability, they are positive SEK 48 million in Q4 compared to -SEK 60 million in Q4 last year. Behind that, we have a gain of SEK 66 million related to a sale of fixed assets. It is a sale and lease back transaction. The Q4 cash impact of that transaction is SEK 436 million, as you can see a little bit further down our cash flow statement.
Related to the global restructuring program, which is the normal content in items affecting comparability, it was -SEK 80 million in the quarter. Moving over to tax. As you have all noticed, we have a significant negative tax cost in the quarter. That is driven by that we have put in a provision for an ongoing foreign tax dispute. It is related to previous periods, and it is of a one-time nature. That is important to underline. We have based the provision on the most likely outcome. It's an ongoing dispute. We have used internal and external expertise to arrive at this number. We expect the cash impact to come sometime in the first half of 2021. This means that we end up with a full year tax rate of 67% compared to 28% last year.
Important to mention here is that going forward, we estimate the effective tax rate to be somewhere around 27%. Okay? Moving on to cash flow. Operating cash flow. You can see we had a cash conversion in the fourth quarter of 103%. It was positively impacted by the improved profitability, obviously. Working capital has been, on the other side, negative, and it's very much driven by the buildup of the inventory to be able to safeguard our delivery performance. If we look on net cash flow for the period, we have, as I mentioned before, the SEK 536 million as a positive impact, and we also have had lower CapEx, as I will come back to in a second. Let's move to the different components in working capital. On the DPO side, you can see a significant increase of number of days ending up with 67.
It is the result of that we have been focused on working on extending our payment terms. The most important contribution to this is that we are using bank promissory notes in China. Moving over to DSO. Here we have ended slightly higher than the same period last year on 41 days. That's very much driven on the mix effect that we have had a higher share of aftermarket where we typically have longer payment terms than to the OEM side. DIO ends on 103 days and is underpinning what I just said that the priority for us now has been delivery performance and meeting the strong demand, and that has ended that we have had higher inventory levels than what we have seen in the past. Okay, moving over to CapEx and product development. CapEx ended on SEK 72 million in the quarter, 1.7% of sales.
I think we have been prioritizing hard how we have been allocating the capital expenditure resources. We feel that we have been able to invest where it matters. We don't feel that we have had to compromise significantly here, but we have had good effect on the CapEx that we have been spending. Looking on product development, ending on 2.4%, SEK 102 million. You can see that we have gradually been increasing product development spend during the year. I really think that we have had a high effect on the spend, which is underpinned by the increase in the innovation index. Moving over to net debt and leverage. You can see that we are now down to a leverage of 2.0, which is exactly on the financial target that we have. It's driven by the strong profitability improvement, both in Q3 and Q4.
We have had a decent cash flow, in these periods as well. We have had some help of the currency. The acquisition of Twin Eagles is going to increase the leverage with not quite 0.2x , between 0.15 and 0.2x . Moving on to the debt maturity. You are familiar with this. The only thing that is close in time is a bond denominated in Swedish krona, which is maturing in February. We are in the process of deciding what we're going to do with that. We also have an unutilized revolving credit facility of EUR 200 million. We also have an MTN program established and ready to be used if we see the need of that. Moving on.
We have been communicating, and we also had to delay it, because of the COVID situation here, the implementation of the financial reporting related to the new organization. As earlier communicated, that will happen from Q1 2021. We are going from three regions to four sectors, and that is totally aligned, of course, with the organizational changes that was announced in February 2020. We are, as I have also mentioned earlier, in terms of sales channels, the OEM channel is going to remain as it is. What we have been calling aftermarket, we are going to divide that up into two parts. The first one is distribution, and that's basically equipment sales through distribution channels. It's outdoor hospitality, residential, and mobile deliveries.
We have what we are calling service and aftermarket, which is related to maintenance, subscription services, spare parts, accessory, upgrade kits, and replacement products. The sales distribution is approximately 55% on the OEM side, around 10% on distribution, and 35% related to service and aftermarket. We are also going to make some other changes in the classification in the income statement. Up to now, we have had outbound logistic costs sitting in SG&A, and we are now going to move that up into the gross profit margin. R&D or product development, as we call it within Dometic, they have been sitting up in the gross margin, and we are going to move them down to SG&A, which is following what most companies actually are doing. It will not have any impact on EBIT.
For your information, we are going to, of course, restate previous periods, and we will be distributing historical numbers around mid-March so that you will have some time to review them and potentially ask questions. When we're publishing our Q1 report on April 23rd, then we will do that according to the new structure. Last point, it's the dividend proposal. As Juan mentioned, it's SEK 2.30 per share proposed by the board of directors. That's equivalent to 38% of the combined net profit of 2019 and 2020. This proposal takes into consideration the current market conditions as we see it, and also the prioritization of a continuous solid balance sheet to support growth ambitions. With that, I hand back to you, Juan, to make a final summary.
Thank you, Stefan. During Q4, we have seen how market demand continues to be very strong. We ended up at 15% organic sales growth and a very strong order backlog. We see the end user appetite for staycation and other activities continue to be strong and therefore, consequently, we see and foresee coming quarters to be strong. Strong margin improvements driven by aftermarket, also lots of efficiency improvement activities that we have across the company. Leverage hitting our financial targets of two and supported by a solid cash flow as we are used to. As Stefan mentioned, a dividend proposal, SEK 2.30. Strategy-wise, we continue to move according to a strategy that we introduced a couple of years ago, and we see how KPIs are supporting our evolution in a number of different areas.
We continue to be fully committed to the strategic agenda and the financial targets that we communicated in connection to the Capital Markets Day in May 2019. With that, I would like to open for the Q&A session.
Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you do wish to withdraw your questions, you can do so by pressing 02 on your telephone keypad. Please note, all participants are limited to two questions each. Our first question comes from the line of Daniel Schmidt from Danske Bank. Please go ahead. Your line is open.
Good morning, Juan and Stefan. Two questions from me then. Last time we spoke in connection with the Q3 report, you did provide some numbers when it came to the order backlog, and you also provided some numbers when it comes to sort of lost sales due to supply chain issues. Would you care to do the same this time?
To my knowledge, we never provided we lost sales. On the contrary, we discussed the backlog and the backlog situation. The backlog I can comment is very much in parity with what we have seen on the market and what our customers are communicating. Both, I would say, on the RV side and on the marine side. If anything, it is stronger in Q4, at the end of Q4 than it was at the end of Q3.
Yeah.
We continue to see-
If I remember correctly, you said that the backlog was up 20% last time.
No. You need to multiply by 10. About.
Okay.
I'm sure that you are, Daniel, following the Thor's of the world and the Hymer's and the Trigano's, and our backlog is very much in parity with their backlog.
Okay. Clearly sort of improving then, and that's of course encouraging.
Yeah.
In terms of the supply chain issues, I do remember actually you saying that it had an impact on invoicing. If you wouldn't had that, sales would've been up 10% in Q3. Would you give any quantification on that today?
It's less than we could see at the end of Q3. It is clear the situation is improving, not at the pace that we would like to, and this has nothing to do with our factories, it has to do with the access to the components in the same way as many other industries.
Yeah.
We see no capacity issues in our factories at this point.
No.
It's important to underline that we are entering 2020 with a backlog that is significantly above the backlog that we had when we left 2019.
Yeah.
Yeah. Absolutely. If I got it right, improving sequentially as well.
Yeah. Correct.
The second question on Twin Eagles. Is this a product that you will bring to Europe or the rest of the world, or is this very much a U.S. product?
As it is very often, I see Twin Eagles giving us a product range that, of course, we are going to introduce. At the same time, we have different tastes in Europe and in the U.S. I do believe that we need to do both. We need to try the Twin Eagles products organically in both continents, but we also need to look for Twin Eagles lookalike companies in two continents.
Yeah. Okay.
We need to get residential. All these markets that we communicated 18 months ago are important to us, and they're important to us globally.
Yeah.
The difference between the new Dometic and the old Dometic is that the new Dometic tries to build up global operations and global businesses. I want to see residential everywhere. You are going to get critical mass. Whenever you have a number one in Australia, it's difficult to be the number one in Australia just importing a product from the U.S.
Yeah. Good. A follow-up on that. You haven't done a lot of acquisition. It's been two now in 26 months. Do you feel that this year is going to be different given what you already communicated the other day?
Yes.
Yeah. Okay, good. That's all for me now.
Thank you.
Thank you. Our next question comes from the line of Viktor Trollsten from DNB. Please go ahead. Your line is open.
Yes. Hello, Juan and Stefan. I hope all is well.
Good morning.
Yep, absolutely.
Yes.
Good morning. My first question is regarding the drop-through in the different regions. I think on a group level, you had around, call it 26% drop-through, but where APAC was exceptional at around 70% drop-through. Just looking through your bridges in the presentation, I can note that the main deviations is regarding, I'll call it freight cost and negative FX. Is it anything going forward that should say that you can't get higher drop-through in the other regions, or is 26%, call it, normalized level on a group level?
Our ambition is obviously to improve all the time. I believe that of course, when looking at the drop-through, you need to compare our performance this year, but also to look at the performance last year. Of course, things happen all the time. I think that there is more to do. APAC is the region where it's going to be the toughest, simply because we have the highest margins as well.
We have, and we need to have, higher aspirations in Americas, and we also see opportunities to elevate our margins in Europe.
That's also a combination of geographical mix, it's a combination of product mix. You know that we have a clear strategy to get aftermarket to grow much faster than OEM. We need to follow the situation with OEM globally. At the same time as the growth moving forward has to come from distribution, and it has to come from aftermarket, where we see even more potential than on the OEM side. That will generate higher margins by default.
And just a quick-
Concerning Americas, we have to keep in mind, of course, with the delivery situation that we have had some extraordinary costs.
Okay.
With the supply situation.
No, that's clear. I just trying to What I'm after is that, if we take away all the freight cost and negative aspects, is it anything that is saying that you can't have the same drop through in MEA and Americas as in APAC?
Again, I'm coming back to the same. If you look at APAC, you are on, if I remember well, just now the number 53%-54% aftermarket, and 44%-45% OEM. If you look at Americas.
It's the other way around. In Americas, we have 30%, which is aftermarket, and 70%, which is OEM.
That's why we are preaching so much about the aftermarket.
Yeah.
Aftermarket is for us critical.
No, that's clear. Just my second question, in terms of the innovation index now at 22%, could you comment a bit on pricing and costs on those 22% compared to older products and maybe just give some sort of indicative quantification of that? Is it 5% higher pricing or?
Nah, 5% is pretty difficult, but I would say the mid-single digit price increases depending on the feature level. On the cost side, we have clear targets that we have not communicated externally. Of course, when looking at our margins in Q3 and Q4, it is clear that the new process are starting to kick in.
No, that's interesting. Thanks a lot. I'll step back.
Thank you.
Thank you.
Thank you. Our next question comes from the line of Lucie Carrier from Morgan Stanley. Please go ahead. Your line is open.
Hi. Good morning. Thanks for taking my question. I will go one at a time. The first one, I was hoping if you could give us some guidance on how you see the balance between raw material inflation, logistic inflation that you have spoken about already in the presentation, and also FX impact as you look into 2021, so we can have a better sense of how the bridge builds up on those type of metrics.
They clearly show that we are seeing a pressure on the raw material side, also mentioned on the, at least temporary, on the logistic side. Our clear ambition here is to, with a combination of pricing and also efficiency gains, that we are going to mitigate that. That's our ambition.
Sorry, and FX, please. How do you see this playing out?
We can hear you really, but you're very quiet. If you I don't know.
Oh, sorry. Are you able to comment on how you see the FX playing out in 2021 on your profitability?
Yeah, we have obviously seen a gradual negative effect coming in during 2020 here, Q3 and Q4 in particular. Yeah, depending on what is going to happen with the currencies. If we take the current state, there will, of course, be a negative effect related to currency here. We have a total negative effect during 2020 of approx SEK 70 million on the EBIT level. They have mostly been occurring during Q3 and Q4.
In other words, we don't know what is going to happen moving forward, but it is already there in Q4.
Yeah.
Clearly.
Yeah.
Sure. Understood. Thank you for the quantification on the FX. Would have been great to have it potentially on logistic inflation and raw mats, we'll go with that. Just a second question I have was around the inventory level. You've mentioned how you've built up inventory to safeguard level of services. Does that inventory build up have had any impact on your margin in the quarter, considering that it was production that you, at the moment, have not sold yet? When you talk about the low inventory level at distributors and the fact that they want to restock, how much visibility do we have in terms of that versus underlying demand? In the past, we had seen the distributors having very high level of inventories, which were not always matching underlying demand.
Concerning your first part of the question, I don't see that we have had any outstanding effects because of that, in terms of the production volume. I'm not totally sure I fully followed your question, actually. If you want to repeat it.
Yes, of course. I guess if you're building up inventory internally-
Yeah
you're producing, but you're not yet selling those items.
Yeah
It benefits on your cost absorption.
I mean, we are, of course, following the proper accounting principles. We are eliminating any type of profit that we have made internally, as we have not yet shipped the inventory. That is something that we are following proper policies on how we are dealing with that. That profit will come when we ship the products and not when we produce the product.
Okay.
In regards to the second-
Yes, thank you, Juan.
Yeah. In regards to the second question, transparency, how much visibility do we have into the numbers? Of course, that we are talking to our customers. We are reading anything that we can get hold on. What we see is that the inventory levels just now at the end of the year 2020, both on the RV side and on the marine side, are around 40% of what they used to be during, as an average, in a normal cycle. It is clear, the expectation just now is that we will see a clear restocking, and that's what we see in our backlog just now. Of course, RVIA is just now forecasting 20% growth for 2021. Of course, that is still a forecast. What we see is a high demand, we see low inventories, and we see that the orders are coming in.
Are we going to see the orders coming in at the same pace in November this year? I don't know. We have a clear forecast and a much better situation than we had one year ago. That's something that is clear everywhere. Did I answer your question, Lucie?
Yes. Thank you. I'll go back in the queue.
Thank you.
Thank you. Our next question come from the line of Rizk Maidi from Jefferies. Please go ahead, your line is open.
Good morning, gentlemen. Thank you for taking my questions. I'll take them one at a time. Thanks for commenting on the backlog, up 200%, which is in line with, as you said, the other RV OEMs. Can you just comment on the duration of that backlog? You think most of it can be converted into 2021? The other question here is, can you comment on your order intake growth in Q4? I think you've given us this information. Q3 will be helpful to get that in Q4 as well. Thank you.
When we are talking about the backlog situation, normally what we see is backlogs of two weeks. Just now we see a backlog of two to two and a half months, everything to be invoiced in 2021, as we can see just now. I'm sorry, the second question was?
It was the order intake growth in Q4.
Yeah, yeah. Sorry for that. We have seen a similar order intake level in the U.S., while we have seen clearly improved order intake levels in both EMEA and APAC on the OEM side.
Okay. Thank you very much. The second question is on EMEA specifically. I'm quite surprised that now it's the second quarter in a row where the numbers do not match the registrations. You flagged that production in Europe is down 7% at a time when registrations are up-
Yeah
I think in the 30s. We already at a very low inventory levels. Why do you think we're still drawing down on more inventories? When do you think we're going to catch up with the level?
Yeah.
Sorry.
No, I fully understand your question because that's also our question, is try to understand really the dynamics of the marketplace. What we see clearly is that if we go back about two years ago when the European industry was talking about high inventory levels, while we saw numbers coming through, especially from two or more main customers, public companies, we saw that we will continue to deliver, right? They were down quite a bit. Now we see the opposite. It is clear to me that on one side you have inventories on the retail side, but you also have inventories on the OEMs. That's the combination we see. Again, to me, it's a massive difference when registrations, again, these are not my numbers. These are the numbers from the German industry. Registrations were up 36% in 2020, while production was down 7%.
We are not talking about some minor numbers. It's big numbers. That's the delay that we see. The good news that I can tell you is that we see the order intake coming in. Now the OEMs are starting to move.
Okay. Understood. Maybe the last one, and I go back in the line, is on the capacity utilization at your factories currently. I think you've added some capacity in Q4, despite demand being 10%-15% below its prior peak, how should we think about capacity additions in 2021?
Our problem at this point is not capacity in our factories, it's getting suppliers.
To catch up is really, as we said, it really doesn't matter if we have people in the factories, if we are prepared, and we have 95% of the components, if we are lacking one component. Just now is exactly the same as for many other industries, is really to get the entire supply chain to come back to the levels that we had prior to COVID. It takes a while, especially on electronics. On electronics, very often you have lead times of nine months. Of course that we, as a company, like the rest of the players, were very careful back in March when we saw how the world was turning negative. It takes a while before they catch up.
Okay. Thank you very much.
I don't feel, by any means, that this is a Dometic issue. Talking to customers, they are telling me that they have problems everywhere.
Understood.
Looking, again, at the reports that we have seen coming from Volvo or Scania, all of them are commenting exactly the same. I think it's simply very difficult to pull the brake, as the entire world did, and then to catch up when the world opens up again.
Brilliant. Thank you very much.
Thank you.
Thank you. Our next question come from the line of Fredrik Moregård from Pareto Securities. Please go ahead. Your line is open.
Thank you, operator, and good morning, everyone.
Good morning.
Obviously, you've had some delays with regards to the global restructuring program, and that's understandable given travel restrictions and so on. I was hoping you could maybe enlighten us somewhat on how far out these initiatives might have been pushed and how large share of the SEK 400 million annual savings that you're looking at.
As mentioned, due to the significant increase in demand, but also in relation to the travel restrictions in relation to COVID, we are looking at two, three quarters later execution of the program compared to what we communicated in Q3 2019. What have we been realizing so far? If you relate it to the SEK 400 million, approximately, we have realized around 30% of these savings on a run rate basis when we are standing here today. We have been happy with the execution so far. As we also have communicated, we have a couple of larger projects still to run to arrive at the SEK 400 million. This project is now what will probably be two to three quarters delayed. We are staying with our ambition that we're going to realize SEK 400 million in saving. It's more about when in time they will come.
That will be, of course, very much depending on COVID. We're extremely keen in proceeding. At the same time, as I said, with these travel restrictions, it's not easy.
Sure. Thank you very much.
Thank you.
Thank you. Our next question come from the line of Agnieszka Vilela from Nordea. Please go ahead. The line is open.
Thank you. I have some questions. I will ask them one by one. Starting with the outlook. Before the pandemic hit, you usually ventured an outlook for full year, both when it comes to the sales growth and the level of EBIT margins. Now, obviously, we have much better visibility for your industry. The question is, why cannot you provide us with more detailed outlook for the year?
A company like us, as I mentioned, Agnieszka, we have normally a couple of weeks in our backlog. Now we have two months in our backlog. Two months is one-sixth of the year. I simply believe that we need to be careful, and we need to see the stability, and we need to see that the vaccine is in place, and that we are going to be able to commit a little bit more. It's nothing more than that. What we can see is what we have in our backlog and the feeling that you have talking to your customers.
All right.
To talk about how the second half is going to look like, to me, I think that we would make a mistake because there is still so much uncertainty.
All right. We could hope in the future for an outlook from you for the full year as well? We'll never return to that given the nature of the business?
At this point, it's nothing that we are discussing. Should we give a formal outlook or not? We don't have that topic on the agenda at this point. We don't see the stability. We have a lot of uncertainties, and I think we would get the market confused by giving more details in such an uncertain market. I believe that we are very open in talking to you and answering your questions whenever you raise them. An outlook is a different story.
Right
communicate what we think, and this is what we are doing.
Great. Thank you.
If you read between the lines, we are pretty optimistic about the coming quarters.
Yes. Perfect. I'm a bit interested in the solutions that you have for the vaccine transportations. Can you help us and tell us if it affects your numbers in Q1 at all? How big this business can be, and will it be supportive to your growth in 2021?
We see that companies are using some of our products in some markets, but I have to say that we have not developed any product specifically for these vaccines or any other vaccines. If you may remember, we used to have a medical business that was sold a couple of years before I joined the company. On the contrary, the product as such is very, very good, and of course, in a critical situation as we are seeing worldwide, companies are using our products in some occasions, but it's nothing that we are doing on purpose.
Yeah.
At this point, we have no decision, we have no intention in moving into that market. We have so many other areas where we can grow. I mean, to put together a business just now to see what happens in the coming 12 months, I think it would be wasting our resources.
Understood.
It doesn't mean that we might not be back into medical in due time, but this is not the right time.
Yeah. That's perfect. Just a planning question. What do you plan for CapEx and R&D spending in 2021?
I think you should look on where you have seen historically, and that's the levels that we are going to return back to. You can already now see on product development cost that we have gradually been increasing it over the year, and we are starting to come back to the levels that we have seen in the past. If we see that it would make sense and that we believe that that is going to be positive return, we could also consider increasing, for example, product development spend. As it is right now, I think you should consider the run rate and a little bit the fluctuations over the quarters as well. I think we are happy with the effect of the investments that we are doing right now.
I feel that the reason, Agnieszka, if I may support a little bit the answer, is really that we are getting so much more out of our investments.
Yeah. Yes.
As I said, we are revamping the entire product range, the historical product range, as well as we are launching products for totally new areas. We are getting much more for the same spend.
Great. The last one, very short one on the Twin Eagles acquisition. Is there any earn-out associated with the acquisition?
Yeah.
Also, what does good margin mean?
Do we have a good margin, Agnieszka? What is a good margin for you?
Yeah. If you reach your target margins, it would be quite good. Is it in line with your kind of target?
What we can say is that they are extracting margins that is above the Dometic average.
Okay. Earn-out, you mentioned there will be some, yeah?
Yes. It is an earn-out. It's a nice earn-out. We like to have nice earn-outs. We get also the deliveries.
Yeah. Can you quantify it at all, or?
No, we have not. The problem when you are acquisitive is that you don't want the coming companies to know how much we are paying and how we are paying.
Yeah. We'll probably see the cash outflow for acquisition in the next report.
Absolutely, but I don't need to make it easier for potential sellers.
Yeah. All right. Thank you.
You know how to find the information.
All right.
Family companies have so more difficulties to find it.
All right. I understand. Thank you so much.
Thank you.
Thank you. Our next question come from the line of Johan Eliasson from Kepler Cheuvreux. Please go ahead, your line is open.
Yes, good morning. This is Johan here. Just short question. I think you mentioned previously when we were talking about the Chinese tariffs that you had local competitors in the U.S. that didn't need to raise prices as you needed to offset the tariffs, and that's why you couldn't.
Yeah
completely offset them. Is this also an issue now when you might have a bit more complex supply chains in order to fulfill the strong demand coming in North America right now, or are you sort of missing out?
No
some opportunities because of that?
As we said, our ambition is clearly to compensate for both the raw material price increases and the freight increases. It's very much about timing, obviously. We had already raw material prices. We have not seen that in Q4 because you have the inventories in between, while we are talking about freight cost, we already saw freight cost in Q4, clearly. Again, we are increasing prices as we speak all over the world, including U.S. Even in the U.S., what I commented before, the previous quarters, is that we have quite of a difference when looking at marine and RV. RV is much more price sensitive than marine. We have been putting across price increases in marine to compensate for the tariffs to a much higher degree than we did on the RV side, simply because it's a different market.
Now we are doing that on the RV industry as well, both OEM and aftermarket.
Excellent. Stefan, your guiding for tax is going forward 27%. This. You saw lower taxes in the U.S. some time ago when Trump lowered those, and now it looks like Biden is aiming at hiking those. What sort of impact on your group tax rate would it be if the U.S. tax rates goes up by 5 percentage points again or so?
To be totally honest with you, the tax reform driven through by the previous president was not favorable for us actually, because it also contained a minimum taxation. We also had another, it's called the GILTI, where you basically have to pull in earnings from other countries into the taxation in U.S., and that's actually what they are changing now. That's also why we're seeing, we had 28% in 2019, we are now seeing 27%. It's too early to say. We have to see what the new president is going to come up with here to be able to assess that. Obviously, U.S. is a big market for us. It's not the place where we have paid the most taxes so far.
It will, of course, depending on how it is going and what the actual outcome is going to be for us. Everyone thought that what Mr. Trump was doing was going to lower the tax rate for everyone right off. Because of minimum taxation and this GILTI regulation, that actually did not really happen in the same way for us. Let's see. We will have to come back to that when we know more.
Okay. Talking about new products. I'm actually mainly excited about this food delivery product you talked about to improve the soggy pizzas, I guess, at my front door. Have you tried to quantify any potential impact from this area? It's on these bikes we saw, but I guess also cars could have some sort of-
Yeah
more advanced equipment.
Not yet. Of course, we have internal targets, but it's very difficult because a totally new market. As we commented on the press release as well, our intention is obviously not to compete with the people that are delivering pizzas or China food. It's much more obviously on the premium side. As soon as we submitted the press release, we got a lot of attention from all major food delivery companies, and we are in discussions with all of them. We got a lot of attention, both in Sweden and internationally. For us, it's extremely exciting. This is something that we are good at. As you know, this is an extremely highly growing, fast-moving market, so we want to be part of it.
We have introduced a product, but we are just now working on a number of new products so we can really have a complete product range. More to be communicated in due time.
Excellent. Many thanks for that.
Thank you.
Thank you.
Thank you. We have a follow-up question from Lucie Carrier from Morgan Stanley. Please go ahead.
Oh, thank you for taking my follow-up. One, I was trying to understand a little bit the free cash flow dynamic going into 2021. Because if I look at the balance sheet, you have a level of payable, which is particularly high. Obviously you've also mentioned the cash impact of your tax provision. I was trying to understand how much cash out could that represent as we go into the beginning of 2021. My second question, I was hoping you could maybe give us some quantification around how much as a percentage of sales or your new outdoor product and also when you think about your online sales, how much does that represent now in the total sales that you report?
Okay. Taking your first question, as I mentioned, the payable side is something that we have been working with a clear focus. By using what you call bank promissory notes in China, you can actually extract the payment terms to 70, 80 days. It's not that it is a one-time effect that is going to go away. It will swing with the seasonality, of course, but accounts receivables and inventory will do that as well. I think from a free cash flow, the coming year here is where you need to consider the inventory. When we are starting to approach the end of 2021, I think we can return back to, in a better way, starting to capture potential of improving on the inventory levels again. It needs to go hand in hand with the demand and our delivery performance, obviously.
As I said, the tax provision that we have done, we estimate the tax effect of that to come during the first half of 2021. It's around half a billion, if we all sum it up.
Thank you for that.
Yeah.
Regarding the exposure to outdoor and online sales, please.
Yeah. On the outdoor, we are a bit above 10%, so our total revenues is outdoor. As you know, we launched a range of outdoor products in the Pacific area back in June. We are launching new products in EMEA and Americas. That's an area where we expect clear growth rates moving forward as we are becoming more relevant for our customers. We have put together an organization for outdoor worldwide. On the second question, how much is B2C? Today is very small numbers. We are talking about single digits, I would say low single digits. At the same time, as I mentioned as well, we have been working in a very fragmented way where companies in different countries were setting up their own platforms.
We are going live with a global platform during Q1, and we are going to roll it out in the rest of the year. Our expectation is that we are going to have the same platform all over before year-end this year.
Thank you very much.
That's going to be, just to finish off, is going to be primarily the outdoor segment on one side. We also see a lot of growth potential on B2C on the new service and after market business, where we have many thousands of small customers today that we are serving through our organizations that are, so to say, high maintenance, and where we expect to have both lower cost and higher margins through the B2C channel.
Thank you.
Thank you.
Thank you. Sorry, we are not able to take any further questions due to the time restriction. I will hand you back to our speakers for any closing comments.
Thank you very much for your attention. As we mentioned previously, we are very happy with our results in Q4, and we are optimistic about 2021. Looking forward to talk to you during the coming days, and of course, in three months from now again. Thank you very much for your attention, everybody. Goodbye.
Thank you.