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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome to Dometic Q1 Report 2018. Today, I'm pleased to present Juan Vargues, President and CEO; Per-Arne Blomquist, CFO; and Johan Lundin, Head of Investor Relations and Communications.For the first part of this call, all participants will be in the listen-only mode and afterwards there will be a short question-and-answer session. Speakers, please begin.
Hi, good morning everybody. This is Juan Vargues speaking. I have with me Per-Arne Blomquist, CFO of Dometic, and I would like to welcome you all to this presentation of the first quarter and thank you for your interest.Starting with the highlights for the year, Q1 became a pretty strong quarter for us with very good organic growth in all regions with APAC showing strong 16%, Americas showing also a very strong 12%, and EMEA 6%. We are also very happy to communicate that the integration of SeaStar is proceeding very well, totally in accordance with our initial plans.I'm extremely happy to see as well, our strong EBIT improvements with EMEA executing well on the profitability program that was initiated in Q3, last year. On top of that, we have been obviously spending quite a bit of time working on our pricing, and especially considering the headwinds that we see on the raw material prices, we have seen a positive effect out of those efforts.On cash flow, a good development as well, of course, this is the weakest quarter we have every year, but developing in line with expectations, and we see an improvement in comparison to last year. And then, I'm also very happy to say that we have appointed the new CTO, Anton Lundqvist, a very important decision for us, in order to increase the pace of innovation we have seen at Dometic, at the same time, as we will start working even harder on reducing complexity and increasing efficiency.If we have a look on the financial summary, sales achieved over SEK 4.4 billion, giving us a total growth of 29%, of which 10% was organic growth. We had 2% negative effect from currencies. And obviously, we have the positive effect of the SeaStar acquisition on M&A, but we also had some positive effect from Oceanair that was acquired at the end of last year, and that will be gone from Q2, 2018.EBIT; very strong, plus 53%, achieving SEK 638 million with an EBIT margin of 14.4% in comparison to 12.1% last year. Here we have a positive effect of the SeaStar acquisition affecting 0.4%, which means that the underlying EBIT improvement is a very, very solid 1.9 percentage points and that's especially the consequence of many different activities, so underlying we have obviously margin improvements. We are reducing quality cost. We have reduced logistic costs. SG&A is also developing in the right direction. So we see a lot of underlying measurements [ already ] starting to kick in.On the contrary, we see also a negative effect from currencies, as well as raw material prices and that's why it's so important for us obviously to work even harder on the pricing. Cash flow ended up on minus SEK 27 million, which is still an improvement in comparison to last year. And then EPS showed a pretty good growth of 27%, reaching SEK 1.27.If we move over to the long-term trends, we see that our sales growth has been very consistent since the company was listed. During the last 9 quarters, we have never been below 5% on organic growth. And looking at the compound annual growth rate, we are just now running on 13%, of which 9% is purely organic growth, some -- a very consistent development now for over 2 years.When looking at the EBIT trend. Obviously, here we are working very hard to improve even more and we see, again, that a lot of the activities that we initiated -- started in Q3 last year are starting to kick in. When looking at the 12 months rolling trend, we see an EBIT improvement of 1 percentage point, and even there, when we are looking at the compound growth rates, we are developing very nicely at 26%. And we maintain our target of achieving 15% during 2018, and we are working very hard to achieve that.When looking at the market situation, and of course we are very much aware that this is very much a question of the day on the RV market especially; so far so good. So, we know that we are at all-time high, both in North America as well as in EMEA region. But when looking at Q1, we are still very happy with evolution.We have to consider, in this case, that we have a negative effect from the Easter that happened 1 day in March and 1 day in April this year in comparison to the situation last year where Easter took place in April. On top of that, we have also been suffering both in the EMEA region as well as North America from the cold weather that has been, again, affecting our numbers. So in terms of Q2, what we can obviously state is that April so far looks very promising and that's obviously everything we can see so far. So, so-far-so-good in terms of the RV market.On CPV, we see a [ different ] evolution in EMEA which has been still growing at the 3% rate, while North America is developing strongly during the last months. And I have to say, I'm very happy to see what we are doing in this segment of the market where we are, just now, growing at the pace of 25%, which is very strong. And one of the reasons for this growth is that we are getting more and more dedicated resources in both EMEA and Americas and we are starting, as well, to invest in APAC to develop into that markets.Looking at Marine, the market is still growing at a 3% rates in comparison to last year. And even here, we see a positive evolution of our own company, achieving 6% organic all over the world. So again, very positive and here we see also opportunities to develop both in terms of new product categories and there SeaStar is obviously playing an important role, at the same time as we see opportunities to grow even faster outside North America in comparison to the situation we have today.When looking at the market, I was very positively surprised by the work that we have been doing during the last quarters. It was very pleasing to see that we published that the first E-Magazine in Australia, and this is a way, obviously, of reaching the end users. It's a way of creating demand. The first number of this magazine reached [ 110,000 ] individuals in the Pacific region, and we are evaluating just by the results, in order to investigate whether we should also go and do exactly the same in another regions.At the same time, we keep working hard on our One Dometic. We have had a number of shows with great attendance all [over the] place and we are getting more and more consistent in the way we are introducing ourselves to the market. So I'm glad to see that as well.A number of product launches during Q1 as well, with Americas launching a [indiscernible], especially for the RV market while EMEA we have been focusing on quite a bit on the CPV market. We have a new control with new software and we are also introducing new inverters, especially for the truck industry. And in APAC, we have a new series of refrigerators having a narrow design and much-improved aesthetics.I have to say, this is an area where we are going to see [indiscernible] investments. I believe that we have a lot of potential to increase the pace of innovation to have more launches more often, at the same time as we work on reducing the cost on our products and become more efficient as an organization. So that's one of the reasons again for investing in a new CTO. And just now we are doing our job in mapping out where we have the resources, how many resources we have and how we increase our efficiency.If we look at the different regions, Americas did show a strong growth, organic growth of 12%, with the RV market still developing in a very positive way. As I mentioned previously, SeaStar is performing well according to the plan, even I'd say better than we expected from the beginning. And we see good evolution both on the CPV market where we are putting together a dedicated team to develop that part of the market, at the same time, as we have also been investing in building up a team working on the retail segment and we have seen as a very strong evolution during the first quarter this year.Great EBIT improvements in Americas, where we see reduction -- cost reductions in logistics and distribution. We have seen also a positive -- a slightly positive FX effect in Americas. We also had a positive effect of class action, giving us SEK 22 million in reimbursements that also impacted our numbers. At the same time, we also have a negative impact from the raw material prices that are affecting all over the regions, obviously. But I'm very pleased to see the evolution of the America markets.On EMEA region; more of the same, very strong growth in Germany, good growth in Southern Europe despite the cold weather and the Easter effect. EBIT; very positive evolution reaching 12.3% in the quarter versus 10.6% last year. There we see is primarily 2 effects; one, what we have been doing on the efficiency program that we have been running in EMEA is running very well. We have achieved 95% of the reduction, the headcount reduction that we were looking for. We have a few people to go and we see already, obviously, the savings in our numbers.At the same time, as we have being compensating the commodity price increases through pricing, selected pricing in a number of products in a number of markets. We see, in EMEA obviously, a negative effect of the commodity prices. We will continue to work very, very hard to compensate for, unfortunately, [ still ] increases in commodity prices.If we move over to the APAC region, very, very solid growth, 16%, with good [ evaluation ] on the RV market both in Pacific and in Asia, and the same is valid for the retail markets. As you all know, we are huge in the Pacific and we have been investing in Asia and I'm very happy to communicate that China did show a 49% organic growth in the quarter. But not only China, the Rest of Asia also did show a 38% organic growth rates, with most of the segments developing very, very strongly.EBIT, on the contrary, and the fact that we are obviously growing in Asia in comparison to Pacific or much stronger in Asia than Pacific has had an effect on our margins in the region. And even there, we are just now working very hard to compensate the commodity price [ aren't ] affecting us and we have new price increases in the pipeline as we speak.If we move over and look a little bit at the most important areas where we are working on the growth, we are talking a lot about the RV market, but the reality is that when excluding RV, we have an organic growth of 9% for the entire Dometic Group. We are also working hard on developing the aftermarket, and we saw a pretty good evolution during in the quarter and there is more to do there.And we see also that through the additional focus that we are paying to CPV, retail and lodging, we have good opportunities to develop those segments moving forward and we will see more of that moving on.On innovation, I already talked about the CTO. The target there is, obviously, to start working on our fragmentation. We have a very scattered setup in terms of sites -- RV sites and product development. We want to move more into global products and develop a number of platforms all over the global, at the same time, as we also look at the number of shared technologies where we will put together a number of resources to increase that pace of innovation.At the same time, as we're working on reducing our cost all over, we have seen a good evolution of SG&A, as mentioned previously; logistics; quality and we also are spending quite a bit of time looking at what we can do more on digitization where we -- even there we had a very fragmented setup and Per-Arne and his team is doing a great job and are starting to really put together a strategy for the future. So, a lot of attention into operational excellence.With those words, I would like to hand it over to Per-Arne.
Thank you, Juan. If we take a slightly longer look than just the quarter and move into the Dometic Group trends, you could see that and also [indiscernible] been following us know that we have had a good sales growth year from -- actually our IPO. This has continued and we will say improved the results from the IPO until the first quarter last year. That was a tough quarter. We had a lot of commodity pricing affecting and also we were a bit late in pricing deals and we increased the efforts to improve efficiency and also to be more strict on pricing when it comes to just commodity increases.You can see now from the third quarter last year that the trends is now sort of moving upwards both when it comes to the EBIT margin and the EBIT in absolute terms. That's a good trend and it is something that we will pursue and make sure that we can continue to show also in the coming quarters.Operating cash flow has been good and we'll continue to show a very positive development. This is a highly cash generating company and even after the acquisition of SeaStar, we have a good underlying cash flow.If we look at the trends of the different businesses; very often, a lot of discussion is around the RV business, yes, it's growing. We are happy with that; 14% in constant currency [ on ] 12 months rolling is good. But we can also say that we have a marine business growing with 82%, even if you exclude the SeaStar acquisition we have posted there. Retail & lodging, we have been talking very much about this part of retail business and the mobile cooling business is growing at 23%.CPV; slightly below these growth numbers. We had a big project when it comes to AC stations during '16 and '17 which has not been repeated. But we can now see in the quarter that we are now picking up the growth, as Juan mentioned before. So, if you just take the quarterly growth, CPV is now close up to 5%.The split of the different business areas has also slightly changed. Before we had an RV business of 65%; now it's down to 55%, and the marine business now is close to 25%. So I will say overall it's a good growth in the different businesses and we are not only relying on the growth in RV.If we look at the pace that we have right now and go back to last 5 years, we have become a much bigger company 2013, we were roughly at SEK 8 billion; today we have passed SEK 15 billion. If you take the last 12 months rolling in turnover, an increase of close 93%, more importantly, so that we have increased the EBIT with close to [ 119%. ] This is a part that we will continue to pursue to make sure that we have a profitable growth going forward.Looking at the key ratios, I mentioned some of these, but you can see also if you compare Q1 this year with last 12 month and last year that we are very close to 10% in the growth which it should have been for quite a while. The EBIT is now up to 2.1% and we are pacing now at 13.8% in EBIT margin. And of course, we still have our ambition to reach to 15% and it is a good way [ almost ] to the 15%.[indiscernible] also the EBITDA is now above 16%. EBITDA is important for us when it comes to cash generation and this is also a number that we look at very closely even though that we might not discuss this so much in the different calls. Core working capital, slightly higher than last year, come back to that later on because the underlying development has been good. Cash flow, as I said, continue to be good and earnings per share up 27% and we are now pacing at EUR 5.32.If we take then the net sales bridge, yes, we have had some effects from currencies, but it has been different effects. In this quarter, we saw a negative development on the U.S. dollar compared to first quarter. If you recall, a year ago, we had a dollar that was more than 8.80 and the average rate that we are looking at right now is 8.30. I would expect them to have a less negative impact going forward because the dollar has been strengthening in the last couple of weeks and the last months. Euro has also been strengthening and that will strength even further and so we'll see even more positive effect on the translation effects in the Dometic Group.If we then look at the regional results, Juan has already mentioned about the margins, but I would like to emphasize that especially EMEA which had a tough quarter last year. Actually, it's increasing in a very, very good way and you can see the efficiency programs that we initiated in the third quarter now is yielding result and we also expect that to continue going forward.Even though Americas had the [ SEK 22 million ] that we mentioned before, it's a good margin improvement and we also had a cold weather, 1 day less in the month, so I'll say that the increase that we see here is not affected by the reimbursement as such, but we have a good underlying performance in the America region.Earnings per share. with the 27%, we have a slightly higher taxes this quarter. You can see that the tax paid is up to 19%, we have been around 7%, 8% on an annual basis last year, and the first quarter we were at minus 1%. The reason for the 19% is that we have a withholding tax in Hong Kong for a dividend that we took out that we had to pay for. And we have generally higher taxes paid in Canada. We have one of the biggest entities within SeaStar has its base in Canada. So we will expect that we will have a higher paid tax going forward. We have been below 10%, but I always said that we will be around 10% or slightly north of that number.CapEx and product development, nothing dramatic. We continue to invest roughly at 2%, both in CapEx and also in product development. CapEx is usually, a bit seen at the beginning of the year. We will increase CapEx at the end of the year, purely due to the effects of the peak seasons in some of our major regions. So we have tried to invest more during the second half of every year.Working capital, negative compared to Q1 last year and [ the EUR 25 million ] is coming from the SeaStar acquisition. But you could see, if we exclude SeaStar, we would have gone down to 21.6%, and I would expect the working capital or the ratio for the core working capital to improve during the year. And that is also based on the development, especially on the inventory side. We have increased working capital SEK 900 million, but roughly SEK 650 million or SEK 660 million of that is from SeaStar.We had a slower start on the aftermarket both in Europe and in Americas, which have not taken down the inventory levels as we have expected, but we will expect to see lower inventories coming out now with the sun shining outside right now. So we will see effects, both in Americas and Europe in the coming 4 to 5 months.Cash flow, slightly better than last year and we should now expect to see more or less same pattern that you could see in Q2 to Q4 for '17 now coming up in the coming 3 quarters for Dometic in 2018. Leverage, same pattern as last year, we went up 1 -- say 1 notch just from 3.3x to 3.4x. This is sort of according to our plans, and you will also see a deleveraging process starting and we will be around the 2.5x at year-end.Finally the financial targets, we are beating the long-term net sales growth targets. We are now doing upwards towards the 15%, and we are slightly above our net debt target, but we will see, as I said before, a pretty quick deleveraging process coming up in the coming quarters. Juan?
Yes, so altogether I'll summarize Q1. We are very pleased with evolution. We have seen a very solid organic growth of 10%. We have also seen a very strong growth outside the RV market, achieving 9%. We see good profitability improvements across many lines. We are pleased with the SeaStar integration. We believe that we have a great team and we are very, very optimistic about evolution moving forward. Again, the CTO will have a major impact moving forward in our company. And just now management is working very, very hard to improve operational performance. So we are looking at different areas to keep on developing our margins in a positive way.In terms of the outlook, we stick to our initial outlook 5% growth -- organic growth, as a consequence of the lifestyle trends. We still see positive consumer confidence. We are investing in product development, we will see more of that moving forward. And we are also spending a lot of time to expand outside the RV markets.In terms of profitability, we will achieve 15% during the year, and we will also achieve a leverage of 2.5x times EBITDA. So all in all, we feel confidence that we will achieve our targets for the year.And with that, I would like to open the session for Q&A.
[Operator Instructions] Our first question is from Erik Karlsson, Industrial Equity Partners.
I would like to discuss the first sentence of your report please, where you said Dometic has had a positive start to the year with our efficiency and pricing initiatives beginning to generate results. Would love to break that up into efficiency and pricing. What have you done on efficiency so far and what's left to do? And then on the pricing side, how much pricing have you taken gross and what have you achieved, net?
Yes, I mean when we are talking about efficiencies, obviously, we are working on many different lines. It is impossible just to have a one-liner. If you force me to choose a one-liner, obviously, I will say EMEA. There we had a specific -- very specific program that was communicated at the end of Q3 or in the report of Q3 and we have started to see the effects in Q4, and we have seen a lot of effect during Q1, obviously and we will see additional effects moving forward. In terms of -- and obviously, that's not the only thing that we are doing. We are working [ over ] just now not just to work on the short term but also on the long-term to start seeing consistent improvements during the coming years. In terms of pricing you are very much aware of the commodity prices, we have started to increase prices at the end of last year, we continue to increase prices during Q1 this year and we see more prices coming through simply as a consequence of the commodity prices coming up. So our target is in the first place to compensate for that. And the second place is obviously to start looking at products variances where we will have volumes [ in hand ] and we're willing to be a little bit more aggressive, obviously. I don't have a number to give you just now. I believe that what we see just now is that we are well compensating for raw material prices all over, and we are compensating as well for the currencies -- the negative currency effects that we see.
Our next caller is Peter Reilly from Jefferies.
I've got 3 questions please. And firstly, can you give us a bit more detail about your new product initiatives? I'm thinking particularly of active cool boxes and SUV coolers and the CPV in the States. And then secondly and sort of related to that, I'm interested to know more about the priorities of the new Chief Technical Officer? On the one hand, you talked about needing more modularity, great proficiency, too much fragmentation, but also you want to have more innovation that gives you better pricing at better gross margin. So just interested to understand a bit more about his priorities and how long you think it is going to take before you start to see some -- any meaningful impact from that. And then lastly, I'd like to know a bit more about APAC, how big Australia is today? How big China is? And whether you think they're just at the start of a longer period of growth in China? Because I think APAC has taken most people by surprise over the last couple of years, been generally better than expected despite a pretty strong and not very fast growing Australian RV market. So if you could run through those, that'd be great.
Yes. So we'll start with cool boxes. We have seen a fantastic evolution all over, [ I have ] to say. Obviously, we have different weight in the different regions. We have historically been very, very strong in the Pacific area. We have been also strong in EMEA while we were not existent in North America. In North America, we have been building up an organization over the last, I would say 6 months. It is still early days, very early days, but we see already now that we are getting into a number of stores, we are getting into a number of retailers, very important retailers in the markets that are trying us and we foresee major improvements moving forward. We have seen a fantastic evolution of mobile cooling in EMEA and our ambition is to have even more dedicated resources across the EMEA region. While APAC, both Pacific but also Asia is developing -- continues to develop in a very positive way in that area. So that's clearly one of the areas where we want to invest a bit more. We believe that we have very, very competitive products. We have a very competitive product range and is much more about developing [ as an ] organization with fully dedicated resources, in line with what I have been doing before. If we are talking about the CTO, you have short-term activities and you have long-term activities. On a short-term activities is really to map out, on one side, the complexity we have in terms of SKUs, in terms of similar products that are still not the same. In terms of where we have resources, how many engineers do we have, mechanical engineers, electronic engineers, software engineers, how we can get from this fragmented setup that we have today? I mean just to give your sample, we have today 28 factories, 22 factories in the old Dometic. We are developing fridges today in 4 different factories in 3 different continents and the question is obviously, if we need to have that setup or if we need to start kind of beefing up and creating Centers of Excellence in line with any other global organization. So again, this -- we as a company, we are doing a good job but I believe that we have become much more industrial or industrialized than we are today. Just now again, on the short-term is number of SKUs, how do we reduce number of SKUs? How do we reduce the complexity we have? How do we improve our competitiveness, at the same time as we have reducing our inventories, obviously? On the long term, it is much more on the generation planning. So we want to focus a lot on generation planning, on common platforms and on modularity which means exactly the same. We cannot have 50 people developing electronics in 25 different countries. We need to have Centers for Excellence. Obviously, that will take a longer while. So on the short-term activities, we are taking those kind of activities as we speak. On the long-term activities, you will not see a new generation [ or thoughts ] in 2.5 years. It will take somewhere between 2.5 to 3 years, and we are talking about the long term. So that's we need to work in parallel on both. And then on the weighting, APAC is --
I can take that. I mean we are taking about roughly 75% is New Zealand and Australia, and we see a good growth in China. We are growing [Audio Gap] in the quarter with more 50%. But it's still a very small portion of that. But we'll see a very, very good development in the Australia market. We are probably taking market shares, which is good but we also would like to protect our margins. So we are focusing on profitable growth, but we have done very well in the Australia market which has been [indiscernible]. But we should not forget the aftermarket [ retail ] business as well. Talking about the cooling boxes, this is one the best markets or this is the best market for compressor [ driven ] cooling boxes in the world and that also helped us now with new launches on your products, help us to grow the business double-digit in Australia.
And if I can come back, please, on the active cooling boxes. Obviously, in the U.S. you coming potentially from a zero and the market didn't really exist because it was just plastic boxes where people put ice in. What do you think in terms of the growth rate? Actually, you've got very high numbers there, percentage there, but it's still relatively small. I guess the product is still not very well known. So do you think that the percentage growing rate can accelerate because we get quite a market recognition or do you think the percentage growth rate slows down just because the numbers get bigger and it takes time to penetrate, what is [indiscernible] be in the market?
I think that these are very, very early days. So what we have seen, as you just mentioned, we are growing big time from a small numbers. We will continue to grow big time for a number of quarters. Again we have a team that we put together in the last 6 months. It takes a while before you understand the pros, you understand the market and start selling. At the same time, I believe that we have a great potential. And then, of course, we foresee organic growth and we will also start looking for opportunities on that side. That's a segment that we are very interested in developing into the future.
Our next caller is Rasmus Engberg from Handelsbanken.
So I was little bit curious about how you think about the growth rate. I mean you are doing roughly 10% organic growth in this quarter. As you move forward, do you think you'll continue to grow throughout this year or does the sort of 5% organic growth, does that imply that there might be a negative quarter towards year-end or how do you think about that with whatever plans and visibility you have?
I will love to have a crystal ball. But I mean, what we can see is, obviously, how the market will grow in Q1. We can see, just now, how April looks like, it looks promising. We don't see anything as at this point of any slowdown and of course that we are just as curious as you are, so we are following these every single week. We are looking at the numbers we are getting. We are looking at the order intake. We are looking at registration, especially in the RV market. We are looking at the stock levels. So the only thing we can do obviously is what you are doing, is to look at that and to be prepared. At the same time, it is exactly the same, I mean we cannot stop selling when the market looks as it does. We don't see any signals just now for a deterioration. On the contrary, of course, that we are working on contingency plans and they are ready in other regions.
And as you know Rasmus, I mean the second quarter is the biggest quarter for us, so while we have [indiscernible] then we would know much more how year-end will look like. So I think it's too early to say anything whether we will exceed or not.
If we look at the routine -- again coming back to the RV market which is still today the most important market for us. We will look at the statistics from European Association and we look at statistics from America Association, they're still talking about the big numbers and if we look at Q1 and April, we still see good numbers.
We have a very good start [indiscernible] in the second quarter.
And sort of a related question, I know this is a very difficult question, when you're just trying to sort of big picture understand it, like this 10% growth in Q1, how much would you guesstimate is price? And how do you see that trend? Do we -- I would assume that we require more and more price hikes throughout this year to offset raw materials, right?
I'm fully convinced. I mean, I don't see any signals just now that commodity prices will slow down and our job is obviously to protect our margins. So we are not prepared to grow at any price and I think that's a very, very clear statement.
But I will guess that, I mean if you have a 10% growth, I would say that the majority is volumes anyway.
Yes, sure. But it's a couple of percent price or something, that's what I'm trying to understand?
Again, we don't know about what that price is. I would consider we are doing about 1.5% perhaps [just not]. But again, that's a moving target. The problem Rasmus is that that's a moving target. If you ask me that question [indiscernible], I would tell you, most probably, a different number.
Yes, Sure. I'm just trying to big picture understand how this turns out through the year. And just a final question on the growth, is it fair to assume that Easter and the weather is kind of a more negative thing in EMEA than it is in the Americas?
Yes. I will say the Easter, yes. Weather, I am not too sure, I don't know because [indiscernible] we have snow storms in...
Chicago, outside Chicago.
So I think weather is the same but the Easter [indiscernible] celebrating time in the U.S.
So you have a double effect in EMEA, meaning that weather plus Easter, while in North America, it is much more the weather than Easter.
[Operator Instructions] We have another question from Erik Karlsson, Industrial Equity Partners.
Would love to hear your reflections on SeaStar now and how the integration process is going. Anything that is going a little bit better than planned and anything that is a little bit slower than planned, perhaps?
We see -- I guess in most areas, we are a very optimistic. We have seen some more growth than we expected. Of course, the question is always there, okay, where there was management [indiscernible], but we see weather affected growth, EBIT margins are developing well. This is a very innovative company working very, very hard to [ grow ] developments. So we like that a lot. Cultural-wise we are very similar as companies. So we have a very good feeling and obviously, we spending a lot of time understanding the company on how can we support the company to grow additionally. At the same time, as we are also looking at how do we get their products to be sold across EMEA at a higher levels as well as in APAC using our organizations? So we feel very good, we feel very comfortable.
And [indiscernible] haven't seen anything negative on the contrary, I would say, and they have performed very well in the first quarter, but they also had issues with sort of cool weather and it's very difficult to put down the [ bowls ] if you have snowstorm and ice on the leg still. So it's something -- given that, they have performed well.
We have a question from Joshua Bretherton from Morgan Stanley.
A couple of questions, if I may. Can you just quantify the raw material and FX impacts in Q1, and then give us kind of your expectations of the impacts full year '18?
Yes, if we look at the impact so far this quarter, we'll say that we have a net effect of [ SEK 15 million to SEK 17 million ], negatively. And I would guess that we will be roughly at SEK 60 million to SEK 70 million at year-end with the present prices.
Okay, and was that FX and raw materials combined?
That's only raw material. FX is a bit -- we have some effects on the FX, but at the same time, we have hedges that are covering this. So I think you see more effects on the translation than on the transaction right now. So even though we have had, especially when it comes to renminbi strengthening towards U.S. dollar that has been an effect. On the other hand, we have had positive effects on strengthening of euro versus dollar as well. Overall, it's pretty neutral, but you have a positive effect, you could say, in Europe, negative effect in the U.S.
And secondly, so I think you benefited in your EBIT from a SEK 20 million reimbursement in 1Q. Were there any other one-offs and are you expecting more reimbursements in the quarters -- in 2Q, 3Q?
No, I think we will see reimbursement. We did not have any positive effect -- I will say rather we have all opposite and more negative effects on 1 day less in the U.S. business and also the cold weather and then also to some extent, there was a tougher facing [indiscernible] on sales in the U.S. So it's -- so I would say that you should not regard the American result [indiscernible] on the contrary, but you will see less of this kind of reimbursements going forward. There will be, but how much? I don't think that will be this magnitude.
And one final one, if I may. So, you mentioned you're constantly monitoring the market numbers, how are the inventory -- the inventories of RVs looking at kind of U.S. dealers?
They are little bit higher than what they used to be 4 months ago, 3 months ago. But still, when talking to the players, they are still stating that they are under control and they are still placing orders. So we don't see, again, any dramatic changes so far.
But this is also, of course, something that we are following because we also say that there are slighter numbers in the inventory levels, but the question is what is what, how much is the impact from cold weather? I mean we had snow storms just a week ago in Madison and Wisconsin. So it's difficult to know what is what. But we are following this very closely.
I go back to Per-Arne's comment, I do believe that we need to have Q2. Q2 will give us a very good indication about the numbers moving forward.
[Operator Instructions] We have one more question from Peter Reilly from Jefferies.
Just 2 follow-ups, please. Firstly, could you help us understand the SeaStar seasonality a bit, I mean Dometic itself is very seasonal. It looks like, from what I can work out from your numbers, SeaStar is a bit less seasonal. So just to try and help us model what happens during the course of the year, maybe you could provide some color on that. And then secondly, sort of philosophical accounting question, your EBIT margin now, you got a significant negative impact from PPA amortization, about 110 basis points in Q1. Why report EBIT after PPA, when it's a sort of non-cash quasi-goodwill amortization charge, especially when you're comparing with a 15% margin target that was set when you had a minimal PPA amortization burden? So wouldn't it be better for everybody if you maybe do a pre-PPA basis both for your targets and for your reported numbers.
First off, because I don't think that you need to include sort of all the things that you have [indiscernible] both the company and you will hopefully [indiscernible] and I don't like what I call the EBABS numbers, that's Earning Before All Bad Stuff. The PPA, it's a part or the result that we have and we need to be able to cover that. I don't think it is good time to look at the EBITDA because that's sort of a cash flow statement as well. So we will keep [indiscernible] to take this away, but it's for me, we need to cover this as well even though we have all this stuff.
And really, when we are talking about seasonality, there is a slight difference, but I don't think there are major difference. What we see at SeaStar is obviously that their share of aftermarket market is slightly higher than we have for -- as an average. So again, no major effects. I don't think you should calculate with any major effects on seasonality.
Okay, that's very helpful, and I guess we can always do the PPA adjustments ourselves anyway so where we can choose how we -- which number to look at.
Yes, I mean it's up to you. I mean as long as we are transparent about it, you can look at it. I mean, so for me, at the end of the day, it boils down to what we can create on the EPS, but it's difficult to take it away on EPS level.
There are no further questions at this time. Please go ahead, speakers.
Okay. Then I would like to thank you all for paying attention to us. Again, my final words is that we are very pleased with our report. Obviously, a month doesn't make a summer and quarter doesn't make a year, but we are very pleased with the first part of the year. So thank you very much all of you and talk to you soon. Thank you.
Thank you. You may now disconnect your lines.