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Hello, welcome to the Dometic Q2 2021 Analyst Call. [Operator Instructions] Today, I'm pleased to present Juan Vargues, President and CEO; Stefan Fristedt, CFO. Speakers, please begin.
Good morning, everybody, and welcome to Solna, Stockholm, and the presentation of the interim report for the second quarter. If we look at the highlights for the quarter, we see that the market demand remains very strong in all segments and in all continents. We have a record high backlog for this period of the year as many other industries and many other companies -- or most companies, I would say, we still see critical shortage of components and freight capacity, and that created, obviously, challenges.We also perceive the retail inventories to be very low, which means that we expect the restocking period to be extended. We were discussing some months ago about 2021, perhaps first quarter 2022, we see now, in accordance to our customers and the rest of the industry, that it will take longer time to refill inventories.From a performance perspective, we show all-time high sales and profitability. Organic sales growth up 66% compared with a weak Q2 '22 where we went down 38%.We have also experienced a very high M&A activity and announced 6 acquisitions during this year 2021 and completed 3 acquisitions during the quarter.EBIT margin at all-time high as well, 17.2%, compared to 10.9% last year. Keep working on our innovation, and innovation index reached for the first time 24% versus 18% 1 year ago. And we keep working according to our strategy to reduce our breakeven point on continuous level.If we move over to the financials for Q2, as I mentioned earlier, 66% up organically. And then we have a negative impact of 7% coming from FX and an addition coming from M&A of 8%.Looking at EBIT before items affecting comparability, we increased our EBIT by 165%, ending up at SEK 955 million in comparison to SEK 361 million last year, reaching an EBIT margin, as I said, all time high of 17.2%. When looking at operating cash flow, strong improvement as well, ending up at plus 181%.As you all know, we had a share issue earlier in June, bringing our leverage down to 1.4 compared to the 3.1 that we were showing 1 year ago. And also a strong EPS development in comparison to last year, ending up at SEK 1.85 compared to SEK 0.42 1 year ago.If we move over to the year-to-date numbers, 41% up organically to be compared with minus 26% organically 1 year ago. The FX impact is the same, and M&A will add 4% of growth. Even here, we see that the numbers have developed very positively for us on the year-to-date numbers, ending up 115% up versus the same period last year of almost SEK 1.7 billion or 16.2% margin in comparison to the 10.4% that we were showing 1 year ago.Cash flow, 75% up versus last year, ending up at SEK 857 million and EPS ending up after 2 quarters at SEK 3.50, which is more than 3x the level that we had 1 year ago.We are obviously very[Audio Gap][ hosting ] side. We have seen now 4 quarters in a row with organic growth, and we expect organic growth to continue in the quarters to come.Looking at the different segments. Pretty much even, with Americas have been up 66%, EMEA 63%, APAC 65% and Global 70%.Looking at different application areas. We are also happy to report that we see growth all over. When looking at currency -- current currencies, we are up 72% on food and beverage. We are at the same level, 73%, on climate. Power and control, an area where we are investing quite a bit, 124% versus last year. And then other applications as well, 65%.Looking at our sales channels, we see OEM at current currencies growing 89%, while Service & Aftermarket is growing 74% and Distribution 62%. So again, all as all, very pleasing to see that both all channels, all segments are growing nicely.If we look and compare to our strategy, we communicated 2 years ago that we wanted to grow in Distribution, Service & Aftermarket faster than we were growing OEM. We see that this is really kicking in. When looking at the same period 12 months rolling number same period, Q2 2021 versus 2018, we have moved the needle from 39% to 47% coming from Service & Aftermarket and Distribution. And of course, this will bring more stability to the business, and this will also bring higher margins over time. And on top of that, obviously, most of the acquisitions that we are doing today will strengthen additionally both the Service & Aftermarket and the Distribution business.Looking at EBIT, all-time high. We are running just now on a 12-month rolling trend of 14.9%, influenced obviously by growth, giving us leverage, but also our price management compensating for raw material prices, compensating for freight costs, compensating for the negative FX evolution that we have seen. And on top of the pricing, we also have less negative impact from tariffs, even if tariffs still play a negative role in Americas, obviously, and then all the efficiency activities that we are running across the company.Looking at different segments. Americas, up 66%, growing in all the application areas, growing both on the OEM side as well as Distribution and Service & Aftermarket. And we are very happy after the completion of both Valterra -- Valterra is bringing 2 different businesses: one, which is Service & Aftermarket and then another [indiscernible], which is Mobile Power Solutions that we will mention later; and then Zamp Solar, which is 100% mobile power solutions.EBIT, up -- strong improvement, up to 7.3% coming from losses 1 year ago. And on the factors influencing is very much similar with all the other segments. So we have obviously leverage on the sales growth. We have a channel mix. We have lower impact from the U.S. trade tariffs. We have also been working hard with our price management, and we have the underlying efficiency improvements. On the contrary, we are suffering from supply chain constraints, from the raw material prices and the freight cost, which is just now impacting all over the place and then negative FX.Looking at EMEA, very similar, 63% up organically, growth in all the application areas, growth in the OEM side of the business but also equally on the Distribution and Service & Aftermarket. And in this case, we have not completed any acquisition, but we announced the Front Runner acquisition back in June and then Büttner that was announced and completed in July, beginning of July.EBIT, SEK 343 million. Looking at the EBIT margin, 16.7% versus 12.9% 1 year, and I want to repeat myself basically is exactly the same factors as we saw for Americas with exception of the tariffs. So we have leverage, we have price management, and we have underlying efficiency improvements. And playing on the -- against us, we have, obviously, still there, the supply chain constraints. We have raw material prices and freight costs, and on top of that, FX and M&A transactional costs.Looking at the APAC. In a similar manner, 65% organically up, growth in all the application areas, growth in all the sales channels, all-time high backlog, and we completed another exciting acquisition, Enerdrive, which is also 100% mobile power solutions.EBIT margin at all-time high, 29.5%. Two factors. On one side, we have the net profit by the sale of a warehouse in Hong Kong. At the same time, as we have negative transaction costs of SEK 13 million against those SEK 21 million of net profit. And then if you exclude for those 2 EBIT margin, would have ended up at 25.5%, which is still a very, very high level. And then on the factors, exactly the same factors as for EMEA and the rest of the segments.The Global segment, 70% up, growth in all application areas. We have an all-time high in marine, but we also have an all-time high in residential. Hospitality is turning back to growth. We see also mobile deliveries where we are finishing off our field test, and we are opening for orders, and we are optimistic about that vertical market moving forward.In terms of profitability, ending up at SEK 370 million or an EBIT margin of 22.9% versus 18.2% 1 year ago, and the same factors influencing. So we have leverage. We have efficiency improvements, price management and then, against us, the tailwinds we have -- sorry, the headwinds we have, the supply chain constraints, raw material prices, freight costs and then our mix.If we move on, we continue to deliver on our strategy. As I mentioned earlier, we see a very nice movement, with Distribution and Service & Aftermarket growing faster over time and the OEM business and standing today for 47% versus 39% a couple of years ago. We have announced 6 acquisitions year-to-date, and we keep working on that area. And we also see a rapid growth on our B2C channel. Still small numbers, but we are too high as much as we were 1 year ago.If we look at our product leadership, innovation index on 24%, all-time high. And what is even very pleasing to see is that we are continuing to launch new products. And just as a reminder, on one side, we are revamping all the existing product areas that we have historically at the same time as we are launching new products for new vertical markets. And we expect we have a strong pipeline, and we expect the product launches to continue.From a cost reduction, keep working very, very hard. SKU -- the number of SKUs is down now 57% versus the level that we were showing in 2018. But it's not only that. We are working on supply reduction. We had 25% fewer suppliers. We are working on space, 13% down and so forth. We have also announced the closure of one more site, and we are totally committed to our cost reduction target that were introduced in connection to the Capital Market Day.Looking a little bit on the growth side. We pay a lot of attention to our website. We have implemented a new website. We see in the quarter an organic growth of 18%. And this is important for us, obviously, since we are trying to communicate more and more with the consumers. And this is also one of the fundamentals to enter into the B2C channel.If we look at social media, we also show a similar progress, 19% versus the situation 1 year ago, with a nice evolution on all the different medias. And the same, this is going to be crucial to develop new ambassadors to have more traffic on social media for our B2C channel.Looking at outdoor. We launched our new cooling boxes and drinkware in both EMEA and Americas during the quarter after the introduction that we had in Australia 1 year ago. And this is a very important area for our future, moving the perception from high-tech discretionary spend into low-ticket discretionary spend.We also launched a new generation of mini bars and in this case is not just for lodging business but also for the health care business and the elderly care. And what I think is impressive is that we managed to improve performance at the same time as we are reducing energy consumption by 40%.We are finishing off the field test on our deli box, the food delivery -- on the food delivery market. We are receiving very positive feedback from potential customers, and we expect to start getting orders very, very soon now.We are investing in introducing ourselves into more outdoor channels. What you see on the slide is really our presence on the Liverpool Outdoor Show that took place between June 29 and July 1 where we are showing our activity-based vehicle outdoor approach. As you can see, we have rooftop tents. We have the hubs. We have the coolers. And we are going to be launching a totally new generation of products during the first quarter next year.Looking at acquisitions. We have been very active. We continue to be very active. And what I would like to mention is, obviously, that we didn't start working with acquisitions the 1st of January. This is really the consequence of 1.5 years where we built up the organization, where we have people in the different continents, and we are starting to see -- we are starting to harvest the hard work that we have been spending.Looking at what we are looking for, for acquisitions is very much on the distribution side and on the service and aftermarket. On the left-hand side, you have the residential business, which is a distribution business. Then we have Front Runner, which is a 100% outdoor company. Valterra, on one side, is a service and aftermarket business, but they also own Go Power!, which is 100% mobile power solutions. And then we have 3 additional acquisitions in the same area, mobile power solutions.So why is mobile power solutions interesting to us? Well, it is clear that we see sustainability, electrification trends that are leading to increased end user demand for off-grid products. We have seen -- we have observed a number of these companies growing very, very fast, showing very nice margins. And this is very, very appealing because we believe that the underlying trend of people deciding to spend more time in nature is going to continue to grow. At the same time, nobody today wants to give up the convenience that we have at home. So that's where we play around.And of course, in the future, with electric cars, it's going to be even more important to have access to electricity, and you will not be able to take that electricity or that power out from the car. So that's why when we are talking about solar panels, when we are talking about battery packs, when we are talking about generator, power generation is extremely important for our future. On top of that, we see obviously that the more electronics you have, the shorter product cycles you are going to experience and the higher margins we are going to have. So very, very interesting to us.Sustainability. We are totally committed to lead the sustainability in our industries. As you know, we have 4 KPIs that we are following on a continuous basis and we are communicating. In terms of injuries, we are down 23% towards the same period of last year. We are spending a lot of time to increase the number of female managers in the organization. We cannot show that in the numbers yet, but we will see it. We are implementing our 3 years plan to get -- to elevate those numbers.In terms of audits, in low-cost countries, we have moved to 84% versus 77% 1 year ago despite, as you are aware of, the travel restrictions that we still have around the world. And then we're also investing in renewable electricity, and we have a reduction on our consumption of CO2 tonnage of 12%. We have as a target 5%, but we are investing faster to get -- to accelerate the progress in that area.In regards to restructuring program, we announced the closure of one more site during the quarter, which means that we are down to 22 sites affected so far. Another 26 employees will be leaving us for a total of a little bit more than 800 employees so far. On the cost side, SEK 24 million accrued in the quarter or SEK 266 million since the beginning of the program. And again, we hope now when the travel restrictions start to ease up that we will be able to accelerate our program.And with that said, I would like to hand it over to Stefan, please?
Thank you, Juan. Starting off with the bridge for the second quarter. And as you can see from this, currency continues to be a negative impact for us, SEK 34 million in the quarter on EBIT. Then we have the M&A transactions that we have been completing. I'm coming back a little bit to more details here in a second. But total in the quarter, we have SEK 270 million of net sales included related to M&A and an EBIT of SEK 39 million.Then we have the last column, which is, of course, a combination of a number of different things. And it's -- obviously, sales growth is an important part in this. Juan has already talked about price management, which we have been -- successfully been implementing to mitigate some of the negatives, which is related to raw material prices and freight costs. Then we have continuously less negative impact from U.S. trade tariffs, not in absolute terms but in relation to the business volume. Obviously, operational leverage and cost savings are important factors driving our profitability. And then except for raw material and freight cost increases, we also are obviously facing, as the rest of the world, supply constraints and increasing lead times.Moving to the next. Here, we have some more details on our acquisitions. As I said, SEK 270 million of net sales related to 8% growth from M&A. So if we look on this before amortization of intangible assets, which comes with all acquisitions, we are showing an EBITDA margin of 18.9% for the acquired companies and 18.6% for Dometic as an average. We are -- we have also taken a decision to handle M&A transaction costs of bigger materiality and book them as item affecting comparability, and that is a total of SEK 29 million.Then in the box below, you have the acquisitions we have done, just to help you understand when we are announcing them and when they actually are included in our accounts. So Twin Eagles was announced in February and included from February as well related to the Global segment. Valterra, announced April 22 and has been included since May. I should, however, highlight it since the last week of May. So it's not a full month of May we are talking about. Valterra is belonging to the segment Americas. Enerdrive, announced on May 18 and included from the 1st of June, related to the APAC segment. Front Runner was announced May 20 and has not yet closed and is expected to close in Q3. And this acquisition is related to the segment EMEA. And then we have Zamp Solar, announced on May 26 and is also included from the last week of May and belongs to the segment Americas. And then we have the latest announcement of Büttner Elektroniks, July 2, and will also be included in our accounts from July and belongs to the segment EMEA.Let's move on. Going over to the operating cash flow. Satisfying development in the quarter, SEK 875 million in operating cash flow, 80% cash conversion rate. And so we are -- the cash flow is making a bit of a comeback, we could say. So that's nice to see and expected as well.Moving over to the next page to talk a little bit about the different components in working capital. Starting with accounts payable. As you can see, number of days are moving up and we have been driving in China especially a program using bank promissory notes, but also the rest of the group is now moving up terms in the agreement. So that's a nice development.DSO starts to come down to levels we have seen historically. So I think on the DSO situation, we see things stabilizing here.DIO are obviously higher, especially if you look on the graph, that is the short-term view of DIO. And that's driven by -- that we need to build the inventory to secure deliveries, and we also have new product introductions that we need to build up inventory for. And then we also have significantly increasing lead times, especially from Asia to the rest of the world. So if we look on a total level, we are actually -- working capital in relation to net sales on a historic low level.Moving on to the next, talking about CapEx and research and development. As you can see, and what we also basically have been communicated, we are hovering around the level between around 1.5%, equating to SEK 77 million in the quarter. And even though we are doing more things, we feel that we are doing different things and that we are getting higher efficiency out of the investments that we are doing.Looking specifically on the research and development spend, 1.8% in relation to net sales, SEK 102 million. And as you can see from the development on the innovation index, the investment that we are doing are certainly driving and renewing our product portfolio.Next up. Cash flow for the period, some highlights. I already mentioned the operating cash flow improved to SEK 875 million. We have done acquisitions of around SEK 1.6 billion in the second quarter. And then there has happened a couple of things within financing. As you know, we did the directed new shares issue here in the beginning of June, which brought almost SEK 3.4 billion. And then we have also paid out our dividend of SEK 680 million.Looking on our debt portfolio. There has been one change in the quarter, and that's the SEK 2 billion facility provided by EKN, which has been extended with 2 years to 2025. Then we also have our undrawn revolving credit facility of EUR 200 million.So looking on our net debt, as was mentioned before, it has been coming down to 1.4, obviously driven by the directed new shares issue. And as you also have noticed, we have changed our target to be around 2.5x over a business cycle, so basically taking that to the level where we have seen it on an average for the last couple of years. So this obviously means that we certainly have capacity to continue to execute on our M&A strategy going forward.So with that, I'm handing back to you, Juan.
Thank you, Stefan. So let's summarize the quarter. So on the business side, all-time high sales and EBIT. We feel confident about the future. We have an order backlog which is record high. We continue to see strong underlying market demand. Again, we see that with that backlog, with the underlying demand, we see that we have a positive outlook for the coming quarters. And we also believe that it's going to take longer time than initially expected to refill the inventories on the market side, on the dealer side.Looking a little bit more internally. We continue to work on our innovation index, and we are improving quarter-by-quarter. We have a very high focus on our costs and efficiency improvements. We are very happy to see how the company is reducing our exposure to one single segment by increasing on Distribution, increasing on the Service & Aftermarket side, standing close to 50%. And as I mentioned previously, with the new acquisitions, once we are reporting all of them, we are pretty convinced that we will be close to 50%. Six acquisitions announced year-to-date, and we keep working on more acquisitions, more opportunities out there. And we are happy, obviously, about the share issue giving us the muscles to continue that journey.And with that said, I would like to open for the Q&A session. Yes, by the way, I forgot to mention, obviously, that we have a Capital Market Day. We are going to have a Capital Market Day on the 30th of November in Stockholm. So please save the date. And now we open for the Q&A session.
[Operator Instructions] And our first question comes from Daniel Schmidt, Danske Bank.
Just 2 questions from me and starting with sort of the operating leverage in Americas. All regions are basically back to the margin levels that you had in Q2 '19 or even above, apart from Americas. And I, of course, appreciate what you said in terms of the impact and maybe the impact from the U.S. dollar and the mix is probably bigger in Americas than in EMEA and other parts of the world. But is it also fair to say that the supply chain issues continue or has been bigger problem in the Americas than in the other regions?
Yes, I would say so, but you have a couple of components more. I mean keep in mind that we are talking about Q2 2019. The 10% tariffs was implemented during the second half of 2018, was also -- we were building up inventories at 10% tariffs that we were consuming in the first quarter of 2019. And then during the second half of 2019, the 25% tariffs started to kick in. So in reality, we are also, still today, penalized by that. And then you have a clear mix. And as -- I feel we have mentioned a couple of times that RV OEM is the lowest-margin area that we have, and we are growing faster on RV OEM in Americas and lower margins that we are driving on the rest of the world. That has an impact. If you look also at the weighting, the weighting of RV OEM in Americas is higher than for the other regions. So you put everything together, it's very much mix driven.Then we have, as you just said, some more impact on delays. We know that a number of manufacturers started to run longer weekends during the last 6, 7 weeks. So we expect to see a little bit more leverage in the quarters to come if everything goes as we expect.
Yes. And is it fair to -- you also said that you're totally committed to the cost reduction target and you hope that to be able to accelerate the cost-cutting program once now sort of travel restrictions are easing. Is this more related to Americas than the rest of the group? Or is it equally distributed in terms of your focus?
Well, I think Americas -- yes, yes, I mean is obviously high cost country driven. We are sitting with a number of factories in Americas, and we have, still today, a few factories in Europe as well. But of course, we are talking about priorities, Americas for us is a priority because we see that in the numbers clearly. So we want to get to the same average numbers that we have in EMEA. There is no reason for not believing that we should not be delivering that. But then we also need to work on the mix, as I said. We have more exposure to the RV OEM business in Americas than in the rest of the segments.
Good. And then the second topic, you talked about prolonged period of restocking. And of course, we've heard this for some time, but it does sound like you are sort of highlighting this yourselves a little bit more. What are you seeing sort of in terms of retail demand? It's one thing that, of course, inventories are low entering '21 and there's been some supply chain issues. What are you seeing in terms of the end market demand as we enter Q3 and during Q2?
Still very positive, and that's what is driving our assumptions. But obviously, the demand is still there. It is clear that dealers, the OEM dealers, are not refilling the inventories at the pace that it was expected before. And because of that, when you have the combination, higher demand will continue. At the same time, as you have inventory levels that are not growing at the pace that was expected, that means that the period that it will take to refill is going to be longer.
Yes. And do you feel that sort of is an equal impact in terms of supply chain issues and higher demand than expected that are keeping inventories low? Or do you have any sort of -- shed some light on that?
No. I think that you -- we still have -- I mean it is clear that people are still not taking a flight to the Caribbean or to Thailand. I think that this is obviously supporting the industry without any kind of doubts. I mean if you look at camping in Sweden or camping across Europe or in the U.S., it's difficult to get to the space. They are fully booked. And I don't think that's just going to go away either. I mean, of course, that we will see sooner or later that we cannot be at these levels forever. But I see it as an acceleration of the underlying trends for outdoor life and lifestyle that we have seen in the last 10 years.
And our next question comes from Lucie Carrier, Morgan Stanley.
I was hoping you could help us understand how much price increase you were able to pass in the second quarter and how much you estimate the impact from raw materials and, I guess, also a supply chain constraint to remain a tailwind in the second half, please. Because I think you would help us to understand whether you see maybe an acceleration of that headwind or maybe a deceleration.
It's Stefan here. So what we can say about that is we -- if we see the net of these effects, obviously, the price increases that we managed to pass through less the raw material price increases and the inbound freight increases, I would say that we -- it's more or less even. So we were a little bit below in the first quarter and now we are a little bit above in the second quarter. So, so far, so good.But I mean this is things that is evolving almost day by day, week by week here. So it's -- we know that there will have -- are going to come more price increases here a little bit further into the year here and to mitigate, yes, the continuous cost pressure that we have from different sites. So I would say, so far, we are satisfied with what we have been managing to do here.
So just to be clear, our intention is to be ahead. That's our clear intention. And it's, of course -- I mean what you can see is our prices are increasing and the cost is increasing. And then we need to increase prices again and then cost continues to increase as for any other industry.
Understood. So basically, what you're saying is, actually, in the second quarter, you were able to kind of mitigate the headwinds. So the margin overall was not disproportionately impacted by the headwind, basically.
Correct. Correct.
My second question was around M&A and the M&A envelope. I mean I appreciate that M&A depends on timing of closing of acquisition, discussion with targets and so on. But are you expecting something equivalent to be achieved in the second half versus what you've done in the first half in terms of spend or something higher or something lower? What can you give us on that at the moment?
What we can give you is that we keep working exactly the same pace as we have been working in the last, I would say, 18 months. We got the pandemic in between, so we started -- restarted our activities again in Q3 last year. And during the first half, we harvested some of that, and we keep working exactly the same pace. So it is clear that this is crucial for us to accelerate our journey, our transformation journey to become less exposed company to one single segment. That's the target. We want to see less exposure, and we want to see higher margins.
Understood. And just on the point on the margin, the new reclassification you are making from M&A costs into items affecting comparability, is that a new classification on -- for one, that you look at acquisition by acquisition? Or is that when you look -- when you see that the total M&A cost is exceeding a special threshold, you are making the reclassification? Because, obviously, that makes it a little bit more difficult to compare EBIT margin versus history.
Yes, no, correct. But I mean -- so if we take the acquisitions we have done now, the acquisition that qualifies to be taken as an item affecting comparability is Valterra. So it's that size of acquisition. But it, of course, has to be evaluated case by case. But then the rest of the M&A costs, they are included in EBIT because we also believe that this is going to be a part of our normal business. It's, of course, going to be a little bit up and a little bit down, but it's a part of our strategy.So -- then you obviously have to add. I mean everyone knows that you don't have 100% achievement of all your M&A efforts. So of course, sometimes there will be something that is sunk. And -- yes, so -- but depending on the materiality, then it will be included in items affecting comparability if it's more material. So that's the way we have decided to do it.
And our next question comes from Rizk Maidi, Jefferies.
So the first one is really on the supply chain, both mix and the component shortages. So if I look at your organic revenues excluding FX and M&A, it looks like it was sequentially stable from Q2 to Q1. It does feel that those headwinds are actually getting worse. I'm just wondering if you could comment on this on whether you can assess what could have been your organic growth if you were able to deliver or ship your products.
I feel you could have added a couple percentage points more without any kind of doubts. And I have to say that this is not just one segment. We see that in all the segments. We don't see that in one product. We see it more or less in all products. So I mean, again, we are not vaccinated against what is going on around the world, like many other industries. It is tough. It is tough to deliver 66% up organic when you are chasing every single day. And again, we are talking about componentry, but we are talking about containers. The price for our container today -- first of all, you need to get hold of the container. Then you are paying 10x more than you were paying 1 year ago, just to -- for you to get a feeling. So it is [ as strong ].At the same time, I also believe that we, like the rest of the companies, are becoming better and better, I guess, that we are getting used to live with this pandemic and the consequences of the pandemic. So I mean this is kind of the fourth quarter now in this situation.As you know, you can read immediately, obviously, that the electronic suppliers are building up new factories. They are building up factories in Asia. We also have Europe, which is starting to invest in that area. We have Americas. But it will take a while. So I'm not expecting the situation to -- easing dramatically in the coming weeks. I hope that it becomes easier at the end of this year.
Understood. The second one is really a follow-up on Lucie's question on raw material and freight costs. It were helpful last quarter to actually assess those. I think you talked about SEK 80 million sort of headwind with pricing roughly under 1.5%. I was just wondering if you could sort of give us those same numbers this quarter and whether you comment, Juan, on you're willing to be ahead as well as the target also applies to Q3 where I think we should get the peak headwind in terms of raw mat.
I think that's kind of our job. I mean, of course, we are looking at those curves every single week. We are following what is going on in steel prices, aluminum prices, plastics, all that kind of stuff. And we are reacting as soon as we see that we are moving to the next level. So we have been increasing prices, already started in Q3 last year. We have been increasing prices in Q4. We have increase in prices in Q1, in Q2. Now we see the raw material prices stabilized during the last couple of weeks. But we don't know what's going to happen in 3 weeks from now. So if we see prices coming up on the raw materials side, we will have to increase prices again.
And it's not the only raw material price, it is also freight. Freight cost is also going up to quite extreme levels.
So even here, I do believe that the pandemic has created an extreme situation. And when you have these kind of situations, you also need to behave accordingly, which means that we need to be on our toes and we need to be very, very fast on adapting our pricing to our cost. And so far -- I think that so far, we have done a decent job in doing so.
Okay. And then lastly, the mobile power solutions sales of SEK 1 billion, what sort of normalized growth rate should we -- are you seeing in this vertical?
We are seeing 2 digits and we are seeing 2 digits for years.
And our next question comes from Agnieszka Vilela, Nordea.
So starting with kind of 2 questions that I have. Number one is about what do you feel about your sales in Q3 on kind of absolute level? I mean, traditionally, when we look at Q3, it's usually slower than Q2 given holidays, et cetera. However, now I noticed that you did build SEK 0.5 billion of inventories in Q2 versus Q1. And the question really is do you plan to kind of ship this inventories now in Q3? Or do you feel you need to have this elevated inventories for quite some time?And also, when I do my calculations, I do expect that acquisitions will probably add something like SEK 200 million more in Q2 -- in Q3 compared to Q2. So do you feel that you have kind of potential to actually exceed sales in Q3 versus Q2? That's my first question.
It had not been calculated in such a way. It's -- I mean if we -- just considering how I'm going to answer you here. But I mean we are looking positive into Q3 and yes, also versus what we achieved last year. So -- and obviously, M&A is also going to help up here. And what did you say?
On inventories, maybe if you can just elaborate. I mean you raised your inventory level by SEK 0.5 billion this quarter. Is this inventory to be shipped out in Q3? Or do you feel like you need to keep kind of high inventory level?
It's both, it's Q3 and Q4 because keep in mind that we have quite a bit of inventory on the sea. So it takes about kind of 60 to 80 days to reach...
Increasing. Increasing.
So in both Q3 and Q4. I would say it will be the second half of Q3 and Q4. That's the reality.
I said that in Q1 that we have never had so much inventory on the sea, and I can say exactly the same in Q2. So it's -- the lead time in the sea is really...
But that's why, I mean, that we are optimistic because we see the backlog, we see our inventories, and it will come out. The question is only when, which week or which month.
And concerning the acquisitions. I'm just coming -- keep in mind that Valterra and Zamp Solar, they were coming in the last week in May. So it's not -- they were not in the full month of May. And Enerdrive is 1 month included. And then, of course, Twin Eagles is there fully in the quarter. Büttner is going to be almost the full quarter, Q3. And then Front Runner is a little bit depending on -- we are waiting for some decisions to be made by authorities out of our control here. So -- but we expect it to close in Q3, but we are not 100% certain exactly when in Q3.
Yes. Well, that's my point, that you should see like a stronger contribution from M&As in Q3 versus...
Yes, yes, yes, absolutely. Absolutely.
And then my second question, can you just help us to understand what are the kind of building blocks for you for improving margin in Americas? What can you do?
We have to do a lot. I mean one side is obviously the mix. It is crystal clear. It is clear that we have activities to reduce our cost as well. But I think one of the main contribution factors that we have in Americas is the mix. It is too much RV OEM. And as you know, RV OEM -- I mean it's no secret. We have communicated it several times. But that's where we have absolutely the lowest margins in comparison to anything else.
And that's obviously both Valterra and Zamp is obviously addressing that and helping up, but even with them compared to the other segments, still more weight towards OEM.
So we are investing in building up our Service & Aftermarket business. We're investing in developing our outdoor business where we have very nice margins. So it's very much about exposure. Americas has historically been for Dometic very much about one segment -- one vertical market segment, if you compare both with APAC and EMEA where we are much more fragmented, which means that we are obviously reducing exposure. As I said, we are working a lot on reducing the tariff effects, and that's coming step by step. And we are obviously reducing on top of that -- in reducing our cost base, our infrastructures.
Great. And if I may, very short kind of housekeeping questions. Did you have any costs for the directed share issue in your financial costs this quarter?
No, that is netted down. So it's according to existing accounting principles.
All right. And then also on the CapEx guidance for the full year, what can we expect?
But I think you should -- you see the levels that we have been hovering around for quite some time, maybe with some lower levels last year. I mean, I think you should expect us to stay around these levels. We don't have any plans to take that up in any dramatic direction.
And then the last one on the amortization of PPA, if you could guide us there. What kind of run rate should we expect, say, per quarter in the coming quarters and years?
I mean that is obviously going to be a little bit depending on the various acquisitions. They look slightly different. And we -- yes, you can see yourself that it was SEK 12 million in the second quarter related to acquisitions. So obviously, that is not the full quarter for Valterra and for Zamp Solar. So -- but I think if you -- the acquisitions to come, are they going to be significantly different? No, they're going to hover in the same ballpark in terms of amortization. So I think you can use this information that we have provided with you combined with when you know that they have been coming into our accounts here to make your view.
Yes. And just looking at the purchase price allocation that you have in note 10 in the report, I can see that you have trademarks of SEK 67 million and then other intangibles of SEK 621 million for the 4 acquisitions. And maybe to ask a question a bit different, like what's your accounting principle when it comes to amortizing these kind of PPAs? How many years you should amortize that?
It's between 2 to 15 years. And trademarks, it's depending on, 2 to 4 years typically. Customer relationships, 10 to 15 years typically. And technology, that could really vary. But let's say, 5 to 10 years depending on what we are talking about here.
Our next question comes from Johan Eliason, Kepler Cheuvreux.
This is Johan. I was just wondering, with all these acquisitions you have now done, you've added dealers, could you sort of mention how big your dealer network is today versus where you were at the beginning of the year?
We -- I cannot tell you just exact numbers simply because we are just now in the process of integrating the companies. We still need to know exactly how many dealers each of these companies do have. But if we started on somewhere around 36,000 dealers around the world, I would assume that we are today adding another 1,500 or so. When looking at the companies and looking at information that we have received during the [ DDs ], that will be my assumption, 1,500 more.But what's important there -- what is important is that the vast majority of the dealers we had in the past, obviously, were more on the RV aftermarket side. Now we are adding stores. We are adding distribution. So we are opening a channel. If you look at Front Runner, that's an outdoor company, a pure outdoor company with a pure outdoor channel that we are very interested in. At the same time, obviously, as we are organically working with the REIs of the world, with [indiscernible] Company, with Globe-Trotter, with all these outdoor companies around the world.
But also keeping in mind that some of the acquired companies actually have a rather high share of business to consumer.
Absolutely. So just to give you something that you might be interested in, if you look at this company, Front Runner, they are 50% B2C.
Good. Then one thing. Obviously, the acquisitions you highlighted came with quite good margins already in the quarter. A number of those have centered basically around, to my understanding, at least the same technology in the solar space. Will you be able to take out synergies basically from common technologies going forward on all these smaller acquisitions you are making in the solar space?
That's our belief. So obviously, it takes a while. These companies are not companies having big factories and big infrastructures. But our expectation is, obviously, that we don't need to have 4 different set of suppliers when we are supplying to the market similar kind of products. So it will happen over time. And we don't feel that we are done by any means. I mean that's the good news, being a new market and being a fast-growing market. What happens, obviously, that you are getting new start-ups. So we see this area as a very interesting area moving forward for the years to come.
Excellent. And what's the strategy with all the brands you're acquiring? Are you keeping them? Or are you implementing dual branding?
You got it right. So we are implementing double branding within the coming 6 months. I have already seen the logos -- the new logos.
And our last question comes from Karri Rinta, Handelsbanken.
And the first question is a follow-up of the previous question. It's -- broadly, it's about your post-acquisition strategy for companies that you acquire. Do you have a certain process that is pretty much the same for all companies? And then there's, of course, always company-specific variations. And the reason that I'm asking is that at what point do you start to have sort of constrained bottlenecks either in terms of managerial resources or your systems, either financial reporting or IT systems?
So if we take the first one. I mean it is clear that we have a number of people -- I mean Stefan is coming from an acquisitive company. I'm coming from an acquisitive company. We have a number of people coming from that kind of environment. So we have the experience and the means to do that. Secondly, we have a clear plan. I mean I see -- it is difficult to be a one-brand company when you have a strong position. So I don't see Dometic having one single brand, but I don't see Dometic having 20 brands either. So I see Dometic having one main brand, which is Dometic.So if we look at Front Runner. Front Runner will become Front Runner Dometic. If we look at Go Power!, it's going to be Go Power! Dometic. If we're talking about Zamp Solar, it's going to be Zamp Solar Dometic. And then what happens over time in 5 years, 10 years, still to be seen. But they are going to be Dometic identified because, again, we are buying nice companies, very nice companies in new markets to build up a Dometic brand on the outdoor. Then the question is more, okay, but what happens if you buy a different company being sizable and where -- in areas where you already have a very strong position? Well, 1 plus 1 will never be 2. So that's when I see, obviously, that we might need, over time -- I know the brand to attack the better segment, but we are not there at this point.Then if we are talking about systems, I mean, this is not about Dometic. Remember, we're now coming from -- I mean we didn't have one single ERP. And of course, whenever you are acquiring a company, you need to have a plan on how are you going to integrate these companies from a financial perspective, from an IT perspective, from a legal perspective. We need to reduce number of occasions. We need to reduce number of legal entities. We need to reduce number of ERPs. Again, I think that I had a pretty good education on that -- in that area. I think Stefan has a pretty good education as well, and we have a few more people that are used to do it.And keep in mind that we are not buying global companies. So if we are buying a company in Germany, that acquisition will impact the German organization and the EMEA management that has nothing to do with the U.S. If we are acquiring a company in South Africa, that has very little to do with American business. So that's the other one. I mean it's not just me running the company or Stefan running the company. We have some people out there that need to be in charge of integrating these companies. And that's very much about building our competence. We can -- that's why we need to be decentralized. And that's why we have decentralized the company since I joined it because I don't believe in being acquisitive and being centralized. It is impossible. You become the bottleneck, as you just said.
All right. Fair enough. And then a question related to decentralization. And maybe you gave an example of some component suppliers have started to sort of reshore or build up production closer to end markets. So your plan for manufacturing footprint, is that still 100% intact compared to what it was before the pandemic? Or have you made some sort of pandemic-driven adjustments in -- where you want to be in 2 years' time when you are done with that?
I think that is quite similar, which is basically what you are talking about, I mean, already pre-pandemic. I mean the entire process started with the U.S. tariffs. I mean with the U.S. tariffs and the way that China is developing during the last -- during recent years, it is clear that political decisions have an impact in the way we are doing business nowadays. And we believe that we need to have assembly plants in Americas and we need to have assembly plants in Europe and we need to have assembly plants in Asia. Then the question is how much -- how do you get also critical mass when you are purchasing? So I think that you have the componentry side and then you have the heavy manufacturing side.As you may remember, one part of our manufacturing strategy is that we want to add less value in our factories. We want to become much lighter, which means that we are outsourcing more. And as we're outsourcing more, we are going to outsource more close to the main markets. So I see our factories in China having less impact in the future than they have historically. And that process already started 2 years ago or 2.5 years ago and will continue.
And this concludes our Q&A session. I will hand back to the speakers.
Well, thank you very much for your attention, all of you. We are not obviously unhappy with our results. We are -- we will never be totally pleased. We know that it's more out there. We know that, obviously, the shortages did have an impact in our numbers. And we will continue to work very, very hard to deliver on our targets and to deliver on our strategy. And it is coming. That's what we see, and that's something that we are happy about, that we are really walking the talk and making our strategy in reality. So thank you very much for your attention. And those of you going on vacation, enjoy your vacation, and we'll see you soon. Thank you.
Bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.