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Ladies and gentlemen, welcome to the Dometic Q1 report 2020. Today, I am pleased to present Juan Vargues, President and CEO; and Stefan Fristedt, CFO. [Operator Instructions] Please note that this call will have a hard stop at 11:00.Central European summertime. I will now hand you over to Juan Vargues. Please begin.
Good morning, everybody, and welcome to this first quarter's earnings call. With me, I have Stefan Fristedt, as already mentioned. And I would like to proceed immediately by looking at the highlights for the first quarter. January and February developed very much according to our expectations. Even if we had already the corona breakout in February in Asia, we did a pretty good job in mitigating the negative effects on the supply chain coming from China. But then during the first week in March, we had a breakout in Italy that expanded to most European markets during the month as well as to the U.S. So March became an extremely tough month for us.Our estimation in terms of the top line is that the corona breakout costed SEK 400 million in revenue and SEK 120 million in EBIT during the quarter. We have to keep in mind that March is, for us, normally, a very strong month. It's a preparation for the Easter holidays and that has a negative effect, especially on the aftermarket and most especially in the last 2 weeks of the month of March.When looking at performance, we acted very, very early, started to reduce capacity in all our markets. As per last week, we had more than 4,000 people in some kind of short-term work. In some cases, it's part-time. In some cases, it's full-time. I'm happy to see the performance in the EMEA region as well as in APAC, considering, obviously, the volume drop that we saw during Q1, while Americas, we suffer on the margin side. A couple of main reasons. One, the implementation of a new ERP system where we went live on the 6th of January. And that always lead to -- leads to some extra cost at the beginning. At the same time, as we also have our buildup in Mexico connected to the move from the branch in the U.S. into Mexico, which is also leading to higher logistic cost and some extra double money to secure deliveries. And then last but not least, also as compensating for some of the supply issues that we have from China in February, so we didn't miss deliveries at the beginning of March. Looking at innovation, we keep working very, very hard. We are happy to report that our innovation index ended up in the quarter 18% in comparison to 14% at the end of last quarter -- first quarter last year. We have a strong pipeline, and we expect those numbers to keep growing during the year to finally achieve the 25% target that we have for innovation index next year. We introduced our new product for residential purposes, the Dometic Mobar. At the same time, we are driving our manufacturing footprint program, our restructuring program that we initiated in Q4 last year. During the quarter, we initiated activities in additionally 4 different locations leading to a total number of locations affected so far of 14. And then last but not least, we continue to build up our Mexican operation. As you may remember, we moved the first-line of air conditioning from China to Mexico in Q1 last year. We moved another 2 lines in Q4 and just now, we are moving LaGrange into Mexico starting in February this year.If we look at the financials, we ended up the quarter at minus 10% in total growth, with a negative impact of 14%. If you exclude, in this case, the effect -- the negative effect of the corona breakout, we would be ending up a minus 5%, which is, if we compare with the situation in Q2, Q3, Q4, an improvement in comparison to what we have seen during 2019. We got indications at the end of the quarter that the RV market, the OEM market in the U.S. is starting to move to positive territory with a strong January, with a positive February for the industry. We also got a good situation in the EMEA market at the beginning of the year with less drop than we expected. But then again, March became very, very weak, both from an OEM perspective as well as from an AM perspective.EBIT came down 32%, leading to an EBIT margin of 10% in comparison to the 13.3% that we delivered last year. We see clear effects or efficiency improvements, the capacity reductions that we initiated as well. We see also pricing, specifically in EMEA, APAC and Marine while still, obviously, with pricing still in the U.S. We have positive effects on FX and then, of course, we had a negative influence of the volumes and the corona breakout as well as additional impact from the tariffs. As you may remember, the 10% tariffs were implemented at the end of 2018, having 10% full effect from January to June. And then from June, we have been suffering from a 25% tariff. So we have another quarter to go, and then we will have full comparables. I'm also happy to report a strong operational cash flow ending up at SEK 181 million in comparison to SEK 84 million. We keep working on reducing inventories. We keep working on increasing payables and reducing receivables, and we had a good effect during the quarter, especially January and February. March, obviously, became much, much tougher due to the reduced top line. And then EPS ended up at SEK 0.69 or 41% down.Moving over to application areas. What we see, obviously, in food and beverage and climate is very much the impact of the RV. These are 12 months rolling numbers. Hopefully, we will see after a while that this is starting to move at least to level out in comparison to what we have seen in the last 18 months, while power and control and other applications are still developing nicely, looking at 12 months rolling number, even if we have been coming down, especially on the Marine side during the last couple of quarters. That leads to a total sales growth. As you can see, this is the sixth quarter with organic negative growth. And again, just now, we are spending a lot of time discussing COVID-19. But before that, we were talking about the contraction on the RV market worldwide.Looking at EBIT, we are running just now on 12 months rolling base on 12.4% in comparison to the 14.4% that we had one year ago. Again, I'm pleased with the situation in EMEA and APAC and even Marine while obviously, the situation in Americas is still to be much improved.Looking at innovation. We keep launching new products, and we focus more and more on aftermarket products. What we see on the slide is really a new camera that we're introducing for the CPV markets. We are, as you may know, investing to develop this professional area, both in Europe and Americas, and this is one more step in that direction. We have -- that has been very well received, and we see a nice development in the last couple of months, which is also -- which is reflected when you look at the application areas on others.Moving over to the regions, Americas, 16% down. We had -- despite a weak March, we had a nice growth on mobile cooling, but obviously, the RV markets impacted pretty negatively. And then on top of that, we also have Marine in the last quarters develop in a negative way. On the EBIT side, 64% down on SEK 93 million. We have been working a lot in order to adapt our capacity cost in the month as I already commented. We have a couple of projects that are having a negative impact. On one side, the IT implementation, the new ERP that went live on the 6th of January and then the movement from LaGrange in Indiana into Mexico, carrying some extra costs for us. And then, of course, the U.S. tariffs, where we will see another quarter, negative quarter, and then we will have full comparables.Moving over to EMEA. Showing 11% negative organic growth. Then there, we have seen both the RV industry and the CPV industry coming down very much in March. We have good positive development in Power & Control and even on the new businesses, other applications. And I have to say that in comparison to the situation we had 2 weeks ago, I feel more optimistic today. Two weeks ago, everything was about shutting down, how to adapt capacity to furlough all the shutdowns across Europe, both from an OEM and an AM perspective. Today, we see that Europe, not yet the U.S., but Europe is starting to open up. We see our CPV customers, we see our RV customers starting manufacturing. We don't know yet at which pace this is going to develop, but it is clear that the situation has changed during the last couple of weeks. On the EBIT side, considering that we are dropping 11%, I'm happy to see that we delivered a 13.2% EBIT margin in comparison to 13.5% last year. We keep working on our cost base, reducing complexity. We have, obviously, the first effects of the manufacturing footprint program. And we have also continued to work with our pricing, and we see the effects of that.Moving over to APAC, I would say, mixed bag. January and February were much better in Pacific, Australia, especially the RV side in Australia started to come back, while Asia had first Chinese New Year, difficult comparables in January. And then the corona outbreak in February. When looking at March, it's the other way around. So Asia is improving quite a bit in comparison to the situation in January and February, while Pacific is negatively impacted by the restrictions that we have just now in Australia and New Zealand. EBIT margin, 3% down in comparison to last year or 24.1% in comparison to 21.3%. What we see there is very much the effects of efficiency improvements on the SG&A side. We have been very, very active in the last 6 months. This is having a positive impact. But we also see pricing, and we as well see a positive effect of geographical mix. As I mentioned before, after 3 months after first quarter, Pacific is dropping much less than Asia, and this is lifting -- helping us to lift our margins. If we move over to the restructuring program, 4 more locations in Q1. That brings the total number to 14 locations. And as you may remember, we are talking about factories, but we're also talking about warehouses. We are also consolidating sales offices in a number of markets. In terms of employees, we have added another 300 during the quarter, bringing the total number so far to 500 employees affected. And we took SEK 23 million more in cost during the quarter, bringing a total number to SEK 139 million. And we will see, obviously, progress during the year and much more, obviously, even next year. What we are doing just now as a consequence of the situation and the COVID breakout is looking at the different plants worldwide and finding ways to accelerate the program even more, so we can reduce our cost base even faster.Looking at strategy. Strategy doesn't change because of corona. We keep investing on the aftermarket side, developing organizations, launching more aftermarket products, looking at different channels, how to penetrate new channels as well. And last but not least, looking at -- I wouldn't say a totally new channel for us, but perhaps looking much more from a strategic perspective on e-commerce. And this is also something that we have seen in the last weeks, how -- as the physical retail has been dropping dramatically, e-commerce has been developing in a pretty positive way in most markets. We keep also working developing our new vertical end markets. We see residential, and we have a number of products to be launched in the coming months in the residential area. One of them is Mobar that we introduced in the quarter. We have been spending a lot of time on mobile deliveries and developing products as well for that area. And we will see that during the year. And outdoor is also one of the prioritized areas that we have in front of us, where we will see more things coming through in the coming months. And as already mentioned, e-commerce, we launched a new platform in Americas linked to the ERP implementation back in January as well as a new workshop implementation in EMEA where we started in Sweden to start with -- and France and will be brought out to the rest of EMEA during the year.In terms of products, I'm very proud about the progress, 18% versus 14%. But I also see that is not just the final numbers, also how we are changing activities. We have moved from running 172 different projects, smaller projects, into a total today of 77 projects having a much, much higher impact than the ones that we were doing before. And this is already now leading our innovation index to develop in a very positive way as well as reducing complexity, and we will see more as well in the future.And then on cost reductions, a lot of attention to adapt our capacity on the short-term, on the corona situation, but also keep rolling out our restructuring program and even accelerating that. Mexico, we are happy in the way Mexico is developing. We have -- we are running now air conditioning at exactly the same pace with the same efficiency levels that we were doing in China after 20 years. And then we keep working on reducing also our inventories, so we can strengthen our cash flow even more.Then a little bit more specifics about corona. Obviously, major effect, especially in March. We estimate that April is going to be tougher, much tougher than March. In March, we had -- the first 2 weeks were quite okay, while the 2 last weeks were extremely severe for us, both on OEM perspective and especially from an aftermarket perspective. We see April, after these weeks, that it has been practically shut down until now. We see our first customers opening up this week. And that will have obviously a negative impact for the quarter. We expect May to be better, and we expect June to be better than April has shown until now. As I mentioned previously, I see -- I feel -- we feel positive signals today in comparison to the situation we had 2 weeks ago. And then on the medium term, it's extremely difficult to know what's going to happen. That depends on how the outbreak is developing over time. What we do, we put together a crisis management team already in February as we understood that China might be expanding to other areas. First and foremost, it's very much about protecting our employees, but also about adapting our capacity to the new situation. And again, as late as last week, we had over 4,000 employees on some kind of short-term work. We are also spending time in prioritizing our investments or CapEx all over. And as -- a very important aspect of this has been, obviously, to make sure that we keep working our cash flow -- strengthening our cash flow despite the tough situation and looking for a solid financial position, and Stefan will come back to this in a couple of minutes.And with that said, I would like to hand it over to Stefan.
Thank you, Juan. Here we go. So due to the weakening in Swedish krona, we have seen favorable translation effects, especially versus U.S. dollar but also Euro. So that makes up 4% positive effect on our net sales. Minus 14% in organic growth. And as we mentioned before, if we take into consideration the effect that we are estimating to be SEK 400 million related to the corona situation, we would be on approximately minus 5% excluding that.Moving on to the next page. The CapEx in the month ended with SEK 74 million and 1.8% in relation to net sales. The main components of CapEx in this first quarter is around our MFP program and the execution of that. It's also related to IT investments and the go-live of our new ERP system. And then product development, which is included with SEK 6 million. Product development ended up 2.3% in relation to net sales. In absolute terms, it's on the same level as the first quarter last year. And in this number, we have included SEK 6 million that has been capitalized for 3 major platform projects.Looking into working capital. We can see that we are continuing to improve. The first quarter is, in this view, our weakest but it is improving versus last year, as you can see. And so we are now on a level of 21.6% in relation to net sales on a last 12-month basis.When moving into the different components of the working capital, we see that the DPOs are up to 48 days. And we are proactively working with our supplier base. As you know, we are working with reducing the number of suppliers, but we are also actively working in improving the terms and conditions with the supplier base. DSO is up somewhat 47 days, and it is related to basically a mix in geography but also mix between AM and OEM. And then we also saw, at the end of March, a slight delay in receiving payments. DIO is continuing down 109 days. However, we need to, of course, highlight due to the slow sales in the 2 last weeks of March, we have seen an increase in the inventory levels due to that.Moving onto cash flow. SEK 181 million in operating cash flow. It's approximately SEK 100 million better than the first quarter last year. And as a consequence of that, the cash conversion ratio has ended on 29% for the quarter. The net debt leverage and net debt details. Our leverage ended on 2.82 in the first quarter. I think the biggest news here is, as we have been sending out or been writing the report and also sending out a separate press release, we have proactively worked with our bank group to amend our financing agreement. And we believe, with this, that we are achieving necessary flexibility and covenant headroom for the coming 4 quarters. And I would also like to mention that I'm pleased with the cooperation we have had with our bank group in this process.Moving onto the next page. You can see the debt maturity profile and only maturity that we have in the near-term is a bond denominated in Swedish krona of SEK 1 billion, which is maturing in February next year. We also need to take into consideration that we ended the quarter with a cash level almost SEK 4.5 billion, which is almost at the same level as we ended Q4. And on top of that, we have our undrawn revolving credit facility of SEK 200 million.So with that, I'm handing back to Juan.
Thank you, Stefan. So we sum up Q1 challenging situation, or very challenging situation, I would say. But I would also like to comment once again that we see some positive lights during the last week, I would say, with a number of our customers starting to open up manufacturing. We will see at which pace still to be seen. We had still the negative impact of the tariffs. There, we have another one quarter. And then at the same time, as we are working in Mexico, ramping up, we will have full comparables. So that's also positive.I'm very proud of the way we adapted to this new situation. It came very, very rapidly, and it didn't take many days before we were taking decisions about how to reduce our cost. I'm also happy with cash flow. We will continue to work very, very hard to maintain it at good levels. At the same time as I'm also very, very happy in the way we treated the agreements with the banks. I think that Stefan and the team have done a fantastic job to get it done.On the strategy, we believe, obviously, that the breakout is impacting us big time just now. Having said that, we also believe that in the long term, this will impact our businesses. I believe that just now a lot of people are thinking on how they are going to spend the holidays. I don't believe that it's going to go away for the coming couple of years, and that should benefit anything having to do with outdoor close to home. And you think about what we are doing for living. The auto business, RV, Marine, it is very much about doing that. When we look at the statistics during the last years, most of campaign takes place within 200 kilometers from where you live. And I believe that this is going to increase even more in the coming couple of years. So what I'm trying to say with that is that I -- we see, obviously, the negative on the short term, and we believe as well, that it will benefit our businesses in the long term.Strong execution, both in terms of reducing complexity and improving innovation that will have a major impact in the long term for this company and then executing on the restructuring program.And with that, I would like to open for question and answers, please.
[Operator Instructions] And as a reminder please note that this call will have a hard stop at 11:00.Central European summertime. Our first question comes from the line of Daniel Schmidt from Danske Bank.
Juan and Stefan, a couple of questions from me. And starting with Americas, and you mentioned special projects that sort of burdened profitability in the quarter, ERP systems implementation by the start of January and also the move from LaGrange to Mexico and some sort of deliveries from China to start in March. How do you see all those 3 sort of developing into Q2? Is that about an easing? Or is it about the same as it was on average in Q1?
Yes. So I mean, the IT situation, of course, in the first weeks were tough. That's over, I would say. So I do believe that there will be much easing moving forward. Already in March was better than January and February. We see also LaGrange, we announced at the end of January. That takes always some turbulence in the first weeks, that means express deliveries and things like that. And then we have the situation with China. Obviously, what happens when China is opening up at the same time as the U.S. is shutting down is that we are building up the inventories, and we have some more time to ship over without needing to fly material from China to the U.S. So of course, we will see some effect in Q2, but it's not going to be at the same extent that we saw in Q1.
Okay, good. Is it possible at all to quantify the special project effect in Q1?
I tell you could -- you would most probably think about SEK 40 million to SEK 45 million.
Okay, okay, good. And then on tariffs. And of course, you say that we're reaching full comparables in Q3 when it comes to the cost of tariffs. But at the same time, you did move even more production from Mexico -- from China to Mexico in the end of '19. Shouldn't that lead to maybe even a net positive effect, if you see what I'm saying, entering Q3?
Daniel, it's Stefan here. I mean, this is in line with what we did communicate around the Q4 report that it will look like this, that Q1 and Q2 will be more tariffs versus the same situation last year. Now we, of course, have to, in the end, take into consideration what the volume is going to be, of course. But that was based upon our original assumptions here. And then Q3 and Q4 is going to show positive effects versus last year. And I mean, that is driven by the effect that at the beginning of next year, we were 10%, and now we are 25%. So -- and then, of course, as the measures we are taking are getting more effect than that is the way it's going to pan out, of course. But the volume is going to play a certain role here as well. No doubt.
Yes, then you have as well, as you just said, I mean, we moved the 2 lines at the end of Q4 but then it takes a while before you get efficiency.
Yes, yes, yes.
So that was also what I feel very, very good about is really that it took us about 6 months to get full efficiency at the same levels as we have in China, in Mexico already for first line. So we will see sequential improvements during the coming months.
Yes, very good. And then sort of a final question on the long-term effects of this virus, which is, of course, we're still in a very, very early phase of it. But I totally subscribe to sort of the staycation effect. Is there any early signs of that at all in terms of sort of U.S. people canceling European holidays? I think it's an obvious one. But in terms of secondary market for boats or anything like that, have you any data on that at all?
Not really more that everybody is talking about that. I mean, no matter who you talk to. I mean, even just in our Stockholm office, when you're asking people what they are going to do for holidays, nobody is telling you that they are going to fly to Thailand. Today, it's difficult to book an RV in Sweden. So we have a couple of colleagues who were discussing during the week. They were planning to rent an RV for holidays, but it has been extremely difficult to find. So I think it makes a lot of sense. I mean, cruising, who is going to do cruising today?
And I mean, the FX is not only going to be related to this year, I think.
No, no.
We could probably assume that this pandemic is going to change people's travel patterns in a more fundamental way than what we have seen before.
Yes, absolutely. All right.
Please don't include that in your calculation for Q2.
No, I won't.
Our next question comes from the line of Fredrik Moregard from Pareto Securities.
First of all, a question on the amended bank agreement. Could you say something about the level of headroom that you have, I guess, with regards to net debt, EBITDA and interest cover ratios that are the relevant covenants here?
I will not comment in detail on that. But I can say that we are, of course, playing through a number or quite many different scenarios here, taking all different possible developments into consideration. And in the light of that, we are satisfied. And we certainly believe on the 2 covenants that you were talking about that we have the flexibility that we -- and the headroom that we need for the coming 4 quarters. But I will not comment in any more details than that.
Okay. But it should be fine even though -- even if things would turn out worse than your base case at the moment with the terrible April and improving May and June as well?
We have had scenarios that is better than our base case, and we have scenarios that has been worse than our base case. And in relation to that, we are satisfied.
Okay. That's good. And I mean, obviously, the U.S. RV markets are concentrated to just a few clients, whereas Marine in the U.S. and RV in Europe and so on are more fragmented. Has this -- have you seen any impact or any different sort of impact on these different markets depending on fragmentation with regards to the extent of shutdowns in March and going into Q2?
Not really. I mean, I can't comment on the following. The U.S. association of RV dealers run a survey between the 10th and the 13th of April. And the questions were 2. Has your solid business been affected so far? So that question, 26% of dealers responded that they dropped more than 75% of the business. And 61% of the dealers responded that they lost more than 50% of the business. If we look at sale of new units, 44% responded that they lost more than 75% of the sales. And 65% responded that they lost more than 50% of the sales. So there has been some business, but it has been a major, major drop. Which is very much in class with what you see really in the automotive industry. If you look at European numbers in Europe, automotive went down -- registrations went down 55%. If you look at Americas or U.S. rather, registrations in the automotive industry went down 43% in the month of March. If you look at Europe, year-to-date, they are down 27%. If you look at the U.S., they are down 13% year-to-date. If you look at registrations of caravans in Europe in March, the number is minus 18%. And then you have Germany only down 4%. So when looking at the number from the associations, it's very, very clear which markets have been locked down formally and which are not. So even if I'm talking about 18% down in the month, you have Germany, only 4%. You have Holland -- Netherlands is positive in the month, plus 1%. Sweden is positive, plus 3%. But then you have France, minus 51%, you have Italy, minus 56%, you have Spain, minus 36%. So I mean we are talking about big numbers. So again, it's not totally gone, but is very much gone. Did that answer your question?
Yes because -- then I guess that you mean that industries with the more fragmented production structure relocated in many more countries in Europe with the RV OEMs more widespread, there should be a lower level of shutdowns so far than you've seen in the U.S. That's helpful.
Well, what you have -- what you have in Europe that you need to remember. I think that you have one parameter there that you need to keep in mind. In Europe, we are much more into CPV than we are in Americas. And we are talking about companies like Volkswagen, we are talking about companies like Mercedes or Volvo, and they are pretty good at shutting down soon. They are very, very early. So on one side you are totally right that the RV market is more fragmented, that the marine market is more fragmented. But we are much more heavy on CPV in Europe than we are in Americas. And that's kind of counterbalancing the fragmentation that you have in Europe in comparison to Americas.
Yes, yes. Obviously, taking into consideration the mix there. Just a final question on aftermarket. Could you comment anything about the run rate of growth that you saw in aftermarket at the end of Q1?
I can tell you that Q1 -- I'm sorry, January and February were okay, March was a disaster. Again, if people cannot shop in France or in Germany or in Spain or in Italy, then you don't sell anything. And I think I shared with you the numbers from the American Association of Dealers responding that more than 61% of the businesses lost more than 50% of the aftermarket business. So when you look at our aftermarket numbers, we are in a decent position in comparison to others.
Okay. That's helpful.
I think the problem is that people cannot shop. The problem is that the stores are shut down.
And I mean when the dealers will start to be able to open up again, of course, this is going to look different.
Yes, yes, definitely.
So I think just to comment on that because that's an interesting one. So if we look at the 2 last weeks in March, we lost more on the aftermarket than we lost on the OEMS. The OEMs were running for a little bit longer than the stores shut down. And that will obviously move to the opposite situation as the countries are opening up and allowing people to go out and shop.
Our next question comes from the line of Rizk Maidi from Jefferies.
I have a couple questions here, and I will take them one at a time. So firstly, were you surprised by the pace of the organic decline in Q1, talking here specifically about Europe and North America in light of the industry data?
No. As I mentioned previously, I think January and February were very much according to our expectations, really. I think that what -- and even the first 10 days of March were very much developing as we expected and communicated earlier. I think that the decline happened after -- sorry, second week of March. Then it was very, very, very hefty. When both countries are starting to lock down at the same time, as factories started -- stopped to produce. I cannot say that the first 2.5 months were worse than we expected. That's not the situation. On the contrary, we got positive signals from the markets. I mean, on one side, we saw that even if RV retail was still negative in January, we saw the manufacturers started to improve in comparison to the same period of last year. I personally visited the show in Miami on the 13th of February. And the sentiment was very, very positive for the year. Everybody was expecting a weak first half, but a very positive second half. People took -- so our customers took orders during the show. There was an optimism before the breakout in the middle of March -- or the beginning of March.
And then maybe -- sorry to come back to this again. I know you've shared some of the data on the survey from North American RV association, but it will be very, very helpful if you could let us know what's the exit rate in the last 2 weeks of March and the pace of decline you've seen in your business in the last 2 weeks of March?
It's massive. As I said, I mean, it's not on the base the association is telling you, but not far from that. The 2 last weeks of March were extremely tough for us. And April is extremely tough for us.
Okay. Understood. The other question that I had is on the aftermarket. And just your -- if you could just share with us what's the typical contract? And more importantly, how much of it do you think is discretionary because if we think about countries coming out of this at some point, a portion of that aftermarket will come back. Just wondering what do you think is the percentage of aftermarket, which is discretionary here?
The discretionary of -- most of it is discretionary if you are not entitled to shop. Then of course, once things open up, I believe that what we are going to see is very, very similar to many other industries. I believe that if people are little bit concerned about what is going to happen this fall, they would spend a little bit more on the aftermarket upgrading the existing installed base. If the economy improves in the coming months, I think we will see an aftermarket, which develops normally in the same situation that we used to see. So I don't think -- I believe it's very much dependent on what will happen with the economy in the coming months.
I think we can also say in the countries, which has been a little bit more open, like Sweden, for example, we have seen a continuous good demand on the aftermarket side, also in March. So I think that's -- so it has to do with the level of shutdown that we have seen.
Okay. I think we can comment on that. Stefan is totally right. So if we look at Sweden, Sweden has been positive big time on the aftermarket, but Sweden has been a very open country in comparison to many others. The same situation we have in the Netherlands which has also been pretty much open in comparison to many other countries and where we had positive sales in March. But then of course, you have France, extremely negative. You have Southern Europe, extremely negative. You have the U.K., extremely negative. You have U.S., extremely negative. Germany, extremely negative. So unfortunately, the countries that are not locking down can never compensate for the countries that are locking down. Then you have a mixed situation, which is hefty.
Our next question comes from the line of Lucie Carrier from Morgan Stanley.
Apologies if some of them maybe have been answered. I got into the call a bit late. The first question I have is around the financial viability of some of your customer. And because a lot of the -- whether this is some of the dealers or even some of the manufacturers having done quite a lot of M&A over the last few years or coming into this crisis quite levered. How much of the visibility do you have on the financing situation of some of your customer considering the downturn that we are facing right now?
No, I mean, obviously, during the last 4 weeks, we have been doing a lot of analysis on all our main customers, both on the RV industry, on the marine industry. We are pretty close to them. And at this point, and I have to say, I want to reemphasize, at this point, we don't see any issues. But of course, that depends on for how long time this is going to be maintained, right? So we are following very, very closely.
And then we also, of course, have to see that if it would be needed, I mean there is support programs also available for them, of course. And -- but as Juan says, we are very, very close to them. And so far, it's okay.
The second question I had was around the kind of medium-term to long-term opportunity around people doing more local holidays, which I think make complete sense considering the current care with COVID-19. But when you think about the fleet available for rental, for example, it's been -- for example, on the RV side, it's been a big market in Europe. But historically, rental of RV was not necessarily as prominent in the U.S. or Australia versus ownership or similarly on speed boat, which, of course, also requires the permit to be used. How do you -- how long do you think the industry can move from being an industry which was essentially selling this vehicle to the consumer to be an industry that actually is going to be able to rent the vehicle to the customer, also considering that from a financing standpoint, the financing of the fleet is a very, very different burden than just basically getting in from the manufacturer and selling it. How long do you think we can get structured on that?
I think there's nothing that happens overnight, but I definitely believe that there is a discussion. It has been already at least since I joined the company. On meeting the OEM manufacturers, it is clear that they see the opportunity. They all realize that the entry barrier for the RV industry is the price of the vehicle. So -- and of course, this will have a major impact. I don't know if you were here when I mentioned that just in our Stockholm office, a number of people have been looking in last weeks to rent an RV, and it has been extremely difficult to find. So that's telling you that the demand and especially the demand through COVID-19 is going to increase dramatically. That's our opinion. Then how much are we going to see in Q3 this year, impossible for me to say. But I believe that this, in the long term, will have an impact. We don't have any kind of doubts. I don't know if you can fill in, Stefan.
No, but I also think that if we look on the demand side for rentals, I think with people going to spend vacations more in the closer geographies compared to before, I think there is also going to come up new target groups that maybe before didn't even consider to actually spend vacation in an RV. And some of these target groups will probably not be open to actually acquire an RV or they would rather look for renting it. So I definitely believe that the demand for being able to rent RVs is going to increase automatically going forward.
Well, maybe some of you is pretty often that I get the question yet, but are you really happy about renting? Or are you concerned that, that will drive down the number of equipment that you can provide to the industry? I do believe that it's going to be the other way around. I do believe that renting will drive our aftermarket quite a bit in comparison to the OEM. And if you think about our margins, obviously, from aftermarket perspective, I do believe that, that will benefit us quite a bit.
I guess I was trying to see whether you had kind of a bit of a time frame for the industry to kind of adapt to that change also from a financing standpoint, considering the current condition. And I guess my last question is around the e-commerce and -- because obviously, historically, again, for -- on the OE side, most customers were going to see the RV or the boat and so on. And so how do you -- how much do you think the e-commerce infrastructure and also simply the preference of the customer all there to kind of move from a model where basically, maybe similar to what we've seen in China with elevators, people or contracts are being signed and purchased or being made for -- across a large part of your business and not necessarily only the consumables based on e-commerce? And how catered or you to do this? Would that be done via your distributor? Or would you be doing this directly?
I think you have a question in 3 different parts. So you have -- on one side you have the OEM side and you have the aftermarket side. On the OEM side, I do believe that it's going to take a while. I don't think that will happen overnight. On the contrary, what we are doing that is, obviously, on one side, implementing software platforms, so we can run B2B e-commerce, but especially EDI, when we are talking about some of our main customers on the OEM side. Then you have the aftermarket where on one side, you have dealers, you have wholesalers, that already using themselves e-commerce towards B2C. At the same time, as we want to link down to us by B2B e-commerce. Then you have the B2C side that we are implementing just now in Europe, where we see very nice opportunities, especially in new areas like outdoor. So we see, I would say, digitalization from a customer perspective in 3 different layers. EDI, that's going to be very much OEM manufacturers. It's difficult to ask Volkswagen to use our e-commerce platform. That's not going to happen. They are going to ask us to link ourselves via EDI. Then you have B2B to distributors and wholesalers, and then you have B2C to end users. And we are running today -- just to give you a number. We are running e-commerce B2B, B2C. We just started to B2B. We are on around 7% to 8%.
And I think it's also worthwhile mentioning that with the new platform that we have been implementing in U.S. now as of 6th of January also consists of a new platform, both for EDI communication and for B2B e-commerce. And the U.S., actually, the increase is notable that we can see in the first quarter versus the first quarter last year.
So I think you're totally right, Lucie, don't get me wrong. I do believe that we are talking about a major investment in a capital good like an RV or a car, it will take a while before you get really a B2C e-commerce. For us is the aftermarket. And then from a B2B, it's much more about really being good on B2B. The B2C has to be handled by the RV supplier, not us.
And just one last question very quick. Have you quantified the FX benefit on the EBIT in the quarter, please?
Yes.
Yes, we have. But we normally don't comment on that. But of course, it's not -- it's quite a positive effect. So if I should mention the number, it's in the magnitude of SEK 50 million to SEK 60 million.
Okay. So almost offsetting the tariff impact that you had close to that at about SEK 15 million delta.
We will now take our final question for today, and that is from Carl Ragnerstam from Nordea.
It's Carl here from Nordea. Many of my questions has already been answered. So I just have one. MarineMax commented on its conference call that the saw their trend turning more positive in April? Have you seen similar trends for your marine segment?
Not really. I mean, I can comment on the official numbers from the associations. If we take the American association, and they have not published the numbers about boating, but they have published the numbers about engines and engines were down in March, 23% and year-to-date, 20%. Of course, for us, we have a couple of businesses in the U.S. that are so-called business essential where we have activities, but I cannot say that April looks fantastic by any means. I think it's, for us, early days.
And as that was our final question for today, I will hand it back to our speakers for the final comments. Please go ahead.
Well, first of all, I would like to thank all of you for your attention and participation in this earnings call. Finalizing, again, very, very tough quarter. We have another very tough quarter in front of us. At the same time, I am a little bit more optimistic today than there was 2 weeks ago. And by that, again, thank you very much, and I talk to you soon.
Thank you very much.
This now concludes today's webcast. Thank you all for attending, and you may now disconnect your lines.