Quarterly Report • Oct 25, 2018
Quarterly Report
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| NET SALES | OPERATING PROFIT (EBIT) | OPERATING PROFIT (EBIT) BEFORE ITEMS AFFECTING COMPARABILITY |
OPERATING CASH FLOW |
|---|---|---|---|
| 4,501 | 702 | 702 | 843 |
| SEK MILLION | SEK MILLION | SEK MILLION | SEK MILLION |
| (3,399) | (648) | (482) | (667) |
| Q3 | Q3 | YTD | YTD | LTM | FY | |
|---|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Net sales | 4,501 | 3,399 | 14,204 | 10,791 | 17,457 | 14,044 |
| EBITDA | 835 | 724 | 2,644 | 1,948 | 2,924 | 2,228 |
| % of net sales | 18.6% | 21.3% | 18.6% | 18.1% | 16.8% | 15.9% |
| Operating profit (EBIT) | 702 | 648 | 2,259 | 1,715 | 2,451 | 1,907 |
| % of net sales | 15.6% | 19.1% | 15.9% | 15.9% | 14.0% | 13.6% |
| Operating profit (EBIT) before items affecting comparability | 702 | 482 | 2,259 | 1,549 | 2,569 | 1,860 |
| % of net sales | 15.6% | 14.2% | 15.9% | 14.4% | 14.7% | 13.2% |
| Profit for the period | 435 | 448 | 1,440 | 1,218 | 1,717 | 1,495 |
| Earnings per share, SEK | 1.47 | 1.51 | 4.87 | 4.12 | 5.80 | 5.05 |
| Cash flow for the period | 1,941 | 610 | 1,825 | 197 | 1,211 | -417 |
| Operating cash flow⁽¹⁾ | 843 | 667 | 1,757 | 1,192 | 2,292 | 1,727 |
| Core working capital | 4,317 | 3,057 | 4,317 | 3,057 | 4,317 | 3,376 |
| Capital expenditure in fixed assets | -100 | -84 | -305 | -218 | -393 | -306 |
| RoOC | 29.3% | 36.8% | 29.3% | 36.8% | 29.3% | 33.0% |
⁽¹⁾Net cash flow from operations after investments in fixed assets and excluding income tax paid.
All references to EBIT and EBIT margin on this page refer to EBIT before items affecting comparability
We look back on a quarter of organic growth, margin improvement and continued deleveraging. Total sales grew by 32 percent of which 1 percent was organic, with positive growth in 7 out of 8 businesses. Performance was especially positive in Aftermarket with 7 percent organic growth. The EBIT margin improved by 1.4 percentage points, mainly as a result of continued focus on pricing and efficiencies across the organization.
Americas reported flat organic growth, despite a -7 percent decline for RV OEM. The EBIT margin improved by 0.2 percentage points. The underlying margin was negatively impacted by commodity prices and a weakening of the RV OEM market. We have adjusted the organization to a somewhat slower demand in RV OEM going forward and will continue to adapt if needed. The impact from tariffs is expected to be limited during 2018 and the full impact will be seen in 2019. Dometic has already been actively looking for ways to increase efficiency by optimizing the manufacturing footprint during the last months. The tariff situation has accelerated the ongoing process in order to mitigate the potential negative effects through local manufacturing and new suppliers in other countries. These activities may lead to potential restructuring costs in the fourth quarter.
I am also very pleased to see growth in the remaining businesses in Americas, proving the importance of diversification and a focus in other segments. We have continued our investments to establish dedicated organizations for Mobile Cooling and CPV.
EMEA reported organic growth of 5 percent and EBIT margin improvement of 1.6 percentage points. The region reported growth and EBIT margin improvement in 6 out of 8 businesses. Aftermarket grew by 5 percent, driven by RV and Lodging. Activities within our profitability program continue to generate results, with improved efficiencies and better pricing discipline.
APAC reported negative organic growth of -6 percent. The EBIT margin improved by 4.8 percentage points. Sales were negatively impacted by the discontinuation of certain low margin inverter sales within CPV earlier in 2018 and a softer RV OEM market. The EBIT margin was also positively impacted by growth in Retail, Lodging, Marine and pricing initiatives.
Operating cash flow increased by 26 percent compared with the same quarter last year. Leverage was 3.1x at the end of the quarter and was negatively affected by exchange rate movements. At constant currency rates, leverage was 3.0x. We expect to see further deleveraging in the fourth quarter. To strengthen our funding base Dometic issued its first Euro bond. The bond amounted to EUR 300 m with a 3 percent all-in cost.
We still see the fundamental drivers among end-customers, with increased spending on outdoor living, growing interest from new demographics and demand for product innovation. Through the latest acquisitions, we have achieved a major strategic shift during 2018, taking down RV from 65 percent to 55 percent of sales and Marine now accounting for 25 percent of sales. We will further accelerate our focus on profitable expansion, product leadership and cost reductions to build an even more diversified, innovative and stronger company going forward.
The outlook for our combined businesses remains unchanged with an estimated organic growth in line with our target of 5 percent. With the acquisition of SeaStar, combined with continued efficiency improvements, we are aiming at reaching our target of 15 percent EBIT margin during 2018. Leverage is expected to be around 2.5x by the end of 2018.
Juan Vargues, President and CEO
Net sales were SEK 4,501 m (3,399), an increase of 32% compared with the same quarter last year. This comprised 1% organic growth, 8% currency translation and 23% M&A.
Operating profit (EBIT) was SEK 702 m (648), an increase of 8% compared with the same quarter last year. The EBIT margin was 15.6% (19.1%).
Items affecting comparability totaled SEK - m (166). Items affecting comparability during the third quarter 2017 related to the strategic consolidation of manufacturing in China.
Operating profit (EBIT) before items affecting comparability was SEK 702 m (482), an increase of 46% compared with the same quarter last year. The EBIT margin was 15.6% (14.2%). Excluding SeaStar, the EBIT margin was 14.5%.
Financial items totaled a net amount of SEK -137 m (-56), including SEK -103 m (-24) in interest on external bank loans and SEK -22 m (-8) for the revaluation of unrealized exchange gains on cash. Other FX revaluations and other items amounted to SEK -13 m (-25) and financial income to SEK 1 m (1).
Taxes totaled SEK -130 m (-144), corresponding to 23% (24%) of profit before tax. Current tax amounted to SEK -70 m (-45) and deferred tax to SEK -60 m (-99).
Profit for the quarter was SEK 435 m (448).
Earnings per share were SEK 1.47 (1.51).
Operating cash flow was SEK 843 m (667).
Cash flow for the quarter was SEK 1,941 m (610).
Financial position. Leverage was 3.1x (1.3) at the end of the third quarter of 2018.
Net sales were SEK 14,204 m (10,791), an increase of 32% compared with the same period last year. This comprised 7% organic growth, 3% currency translation and 22% M&A.
Operating profit (EBIT) was SEK 2,259 m (1,715), an increase of 32% compared with same period last year. The EBIT margin was 15.9% (15.9%).
Items affecting comparability totaled SEK - m (166). Items affecting comparability during the third quarter 2017 related to the strategic consolidation of manufacturing in China.
Operating profit (EBIT) before items affecting
comparability was SEK 2,259 m (1,549), an increase of 46% compared with same period last year. The EBIT margin was 15.9% (14.4%). Excluding SeaStar, the EBIT margin was 15.1%.
Financial items totaled a net amount of SEK -335 m (-119), including SEK -302 m (-75) in interest on external bank loans and SEK -2 m (-21) for the revaluation of unrealized exchange gains on cash. Other FX revaluations and other items amounted to SEK -37 m (-25) and financial income to SEK 6 m (2).
Taxes totaled SEK -484 m (-378), corresponding to 25% (24%) of profit before tax. Current tax amounted to SEK -242 m (-141) and deferred tax to SEK -242 m (-237). Paid tax of 13% (4%) is higher compared to previous year, mainly due to the Group's tax paying position in Canada.
Profit for the period was SEK 1,440 m (1,218).
Earnings per share were SEK 4,87 (4.12).
Operating cash flow was SEK 1,757 m (1,192).
Cash flow for the period was SEK 1,825 m (197)
Significant events after the period. There were no significant events after the period.
| Q3 | Q3 | Change (%) | YTD | YTD | Change (%) | LTM | FY | |||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | Rep. Adj.⁽¹⁾ | 2018 | 2017 | Rep. Adj.⁽¹⁾ | 2018 | 2017 | ||
| Americas ⁽³⁾ | 2,557 | 1,620 | 58% | 46% | 7,581 | 4,817 | 57% | 57% | 9,093 | 6,329 |
| EMEA | 1,530 | 1,353 | 13% | 4% | 5,290 | 4,714 | 12% | 6% | 6,539 | 5,962 |
| Asia Pacific | 414 | 426 | -3% | -6% | 1,333 | 1,260 | 6% | 6% | 1,826 | 1,753 |
| Net sales | 4,501 | 3,399 | 32% | 23% | 14,204 | 10,791 | 32% | 28% | 17,457 | 14,044 |
| Americas ⁽³⁾ | 427 | 267 | 60% | 47% | 1,236 | 705 | 75% | 74% | 1,416 | 885 |
| EMEA | 183 | 141 | 30% | 17% | 728 | 580 | 25% | 18% | 765 | 618 |
| Asia Pacific | 91 | 74 | 24% | 13% | 295 | 264 | 12% | 10% | 388 | 357 |
| Operating profit (EBIT) bef. i.a.c.⁽²⁾ | 702 | 482 | 46% | 33% | 2,259 | 1,549 | 46% | 42% | 2,569 | 1,860 |
| Americas ⁽³⁾ | 16.7% | 16.5% | 16.3% | 14.6% | 15.6% | 14.0% | ||||
| EMEA | 12.0% | 10.4% | 13.8% | 12.3% | 11.7% | 10.4% | ||||
| Asia Pacific | 22.1% | 17.3% | 22.2% | 21.0% | 21.2% | 20.4% | ||||
| Operating profit % bef. i.a.c.⁽²⁾ | 15.6% | 14.2% | 15.9% | 14.4% | 14.7% | 13.2% |
⁽¹⁾Represents change in comparable currency. ⁽²⁾Before items affecting comparability. ⁽³⁾Including SeaStar Solutions.
Sales split AM/OEM
Q3
427 SEK MILLION (267)
All references to EBIT and EBIT margin on this page refer to EBIT before items affecting comparability.
Third quarter 2018
10 000
Americas reported net sales of SEK 2,557 m (1,620), representing 57% of Group sales. Total growth was 58%, of which 0% was organic growth, 9% currency translation and 49% M&A.
Operating profit (EBIT) was SEK 427 m (267); an increase of 60% compared with the same quarter last year. The EBIT margin was 16.7% (16.5%).
Items affecting comparability totaled SEK - m (-).
Operating profit (EBIT) before items affecting comparability was SEK 427 m (267); an increase of 60% compared with the same quarter last year. The EBIT margin before items affecting comparability was 16.7% (16.5%).
For the rolling three-month period June – August 2018, US RV shipments declined by -6% to 117,932 units compared with the same period last year. For the January – August period 2018, RV shipments increased by 4% to 347,530 units.
Sales of US power boats increased by 3% for the rolling 12-month period from September 2017 – August 2018.
Total OEM sales growth was 46%, of which growth in constant currency adjusted for the acquisition of SeaStar was -7%.
Total Aftermarket sales growth was 88%, of which growth in constant currency adjusted for the acquisition of SeaStar was 15%.
RV OEM reported negative sales growth, as a result of a softer US RV OEM market.
Marine OEM excluding SeaStar reported slightly negative sales growth. SeaStar performed well with good sales growth.
CPV OEM reported slightly negative sales growth, as a result of discontinued businesses. Dometic continues to invest in increased market presence and product innovation.
Aftermarket, excluding SeaStar, reported strong sales growth driven by double-digit growth in all businesses.
Proceedings related to the putative class actions continue. After the court in California granted Dometic's requests to transfer the cases pending in California to the Southern District of Florida, the proceedings in California were closed.
Following the transfer to Florida, all the cases were consolidated into a single proceeding and a single consolidated class action complaint was filed. This consolidated case is pending in front of the same judge who previously granted summary judgment in favor of Dometic;
We remain firm in our position that the allegations in the consolidated case are without merit.
Third quarter 2018
EMEA reported net sales of SEK 1,530 m (1,353), representing 34% of Group sales. Total growth was 13%, of which 5% was organic growth, 8% currency translation and 0% M&A.
Operating profit (EBIT) was SEK 183 m (141); an increase of 30% compared with the same quarter last year. The EBIT margin was 12.0% (10.4%).
Items affecting comparability totaled SEK - m (-).
Operating profit (EBIT) before items affecting comparability was SEK 183 m (141); an increase of 30% compared with the same quarter last year. The EBIT margin before items affecting comparability was 12.0% (10.4%).
OPERATING PROFIT (EBIT)
183 SEK MILLION (141)
OPERATING MARGIN (EBIT%)
All references to EBIT and EBIT margin on this page refer to EBIT before items affecting comparability
For the rolling three-month period June – August 2018, RV registrations in the largest European markets increased by 4% to 34,780 units compared with the same period last year. For the January – August period 2018, RV registrations increased by 7% to 102,117 units.
Heavy truck registrations increased by 3% in the rolling three-month period June – August 2018, compared with the same period last year.
Total OEM sales growth was 12%, of which growth in constant currency was 4%. Total Aftermarket sales growth was 14%, of which growth in constant currency was 5%.
RV OEM reported flat sales growth. Despite inventory correction among dealers the underlying end-customer demand remained positive.
Marine OEM reported high sales growth and underlying demand remains positive.
CPV OEM reported strong sales growth and there is continued high demand in the passenger vehicle segment.
Aftermarket reported sales growth and margin improvement, mainly driven by good performance in RV AM, Lodging and Marine.
Third quarter 2018
APAC reported net sales of SEK 414 m (426), representing 9% of Group sales. Total growth was -3%, of which -6% was organic growth, 3% currency translation and 0% M&A.
Operating profit (EBIT) was SEK 91 m (240); a decrease of 62% compared with the same quarter last year. The EBIT margin was 22.1% (56.3%).
Items affecting comparability totaled SEK - m (166). Items affecting comparability during the third quarter 2017 related to the strategic consolidation of manufacturing in China.
Operating profit (EBIT) before items affecting comparability was SEK 91 m (74); an increase of 24% compared with the same quarter last year. The EBIT margin before items affecting comparability was 22.1% (17.3%).
Q3
NET SALES
91 SEK MILLION (74)
OPERATING MARGIN (EBIT%)
All references to EBIT and EBIT margin on this page refer to EBIT before items affecting comparability
For the rolling three-month period June – August 2018, Australian domestic RV production increased by 7% to 6,353 units compared with the same period last year. For the January – August period 2018 RV production increased by 2% to 15,139 units. Comparison to 2017 figures is not accurate as manufacturers have been added in 2018.
Total OEM sales growth was -8%, of which growth in constant currency was -10%. Total Aftermarket sales growth was 2%, of which growth in constant currency was -2%.
RV OEM reported negative sales growth, with a weaker demand in both Pacific and Rest of Asia.
Marine OEM reported strong development, driven by high growth in Rest of Asia.
CPV OEM reported negative sales growth, highly impacted by the discontinuation of sales of certain low margin inverter products earlier in 2018.
Aftermarket reported negative performance. Good growth in Retail and Lodging did not fully offset the discontinuation of inverter sales in CPV.
The Parent Company Dometic Group AB (publ) comprises the functions of the Group's head office, such as Group-wide management and administration. The Parent Company invoices its costs to Group Companies.
For the third quarter of 2018, the Parent Company had an operating profit of SEK 2 m (-5), including administrative expenses of SEK -42 m (-25) and other operating income and expenses of SEK 44 m (20).
Profit / loss from financial items totaled SEK 49 m (81), including interest income from Group subsidiaries of SEK 70 m (6), interest expenses to Group subsidiaries of SEK 0 m (0) and other financial income and expenses of SEK -22 m (75).
Profit / loss for the quarter amounted to SEK -2 m (-1).
For the first nine months of 2018, the Parent Company had an operating profit (loss) of SEK -4 m (-4), including administrative expenses of SEK -134 m (-93) and other operating income and expenses of SEK 130 m (89).
Profit / loss from financial items totaled SEK -470 m (210), including interest income from Group subsidiaries of SEK 188 m (35), interest expenses to Group subsidiaries of SEK 0 m (0) and other financial income and expenses of SEK -657 m (175).
Profit / loss for the first nine months amounted to SEK -7 m (-4).
For further information, please refer to the Parent Company's condensed financial statements on page 11
Solna, October 25, 2018
Juan Vargues President and CEO
Dometic Group's Annual General Meeting will be held on April 10, 2019, in Stockholm.
Dometic Group AB (publ) reg. no. 556829-4390
We have reviewed the condensed interim financial information (interim report) of Dometic Group AB (publ) as of 30 September 2018 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.
Stockholm, October 25, 2018 PricewaterhouseCoopers AB
Anna Rosendal Authorized Public Accountant
In accordance with the resolution taken by the 2018 Annual General Meeting (AGM), the Nomination Committee ahead of the 2019 AGM shall be composed of the chairman of the board of directors together with one representative of each three largest shareholders, based on the ownership structure as of September 30, 2018. More details about the Nomination Committee are available on our website. www.dometic.com
| Q3 | Q3 | YTD | YTD | FY | |
|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2018 | 2017 | 2017 |
| Net sales | 4,501 | 3,399 | 14,204 | 10,791 | 14,044 |
| Cost of goods sold | -2,962 | -2,302 | -9,529 | -7,298 | -9,599 |
| Gross Profit | 1,539 | 1,097 | 4,675 | 3,493 | 4,445 |
| Sales expenses | -569 | -421 | -1,686 | -1,330 | -1,791 |
| Administrative expenses | -213 | -163 | -631 | -522 | -667 |
| Other operating income and expenses | 0 | -14 | 61 | -40 | -52 |
| Items affecting comparability | 0 | 166 | 0 | 166 | 47 |
| Amortization of acquisition related intangible assets | -55 | -17 | -161 | -52 | -76 |
| Operating profit | 702 | 648 | 2,259 | 1,715 | 1,907 |
| Financial income | 1 | 1 | 6 | 2 | 6 |
| Financial expenses | -138 | -57 | -341 | -121 | -212 |
| Loss from financial items | -137 | -56 | -335 | -119 | -206 |
| Profit before tax | 565 | 592 | 1,924 | 1,596 | 1,700 |
| Taxes | -130 | -144 | -484 | -378 | -206 |
| Profit for the period | 435 | 448 | 1,440 | 1,218 | 1,495 |
| Profit for the period attributable to owners of the Parent Company | 435 | 448 | 1,440 | 1,218 | 1,495 |
| Earnings per share before and after dilution effects, SEK - Owners of the Parent Company |
1.47 | 1.51 | 4.87 | 4.12 | 5.05 |
| Number of shares, million | 295.8 | 295.8 | 295.8 | 295.8 | 295.8 |
| Q3 | Q3 | YTD | YTD | FY | |
|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2018 | 2017 | 2017 |
| Profit for the period | 435 | 448 | 1,440 | 1,218 | 1,495 |
| Other comprehensive income | |||||
| Items that will not be reclassified subsequently to profit or loss: | |||||
| Remeasurements of defined benefit pension plans, net of tax | 8 | 0 | 38 | -3 | 0 |
| 8 | 0 | 38 | -3 | 0 | |
| Items that may be reclassified subsequently to profit or loss: | |||||
| Cash flow hedges, net of tax | -15 | 8 | -2 | 2 | 25 |
| Gains/losses from hedges of net investments in foreign operations, | |||||
| net of tax | 55 | 39 | -29 | 80 | 66 |
| Exchange rate differences on translation of foreign operations | -244 | -293 | 709 | -699 | -502 |
| -203 | -246 | 678 | -617 | -411 | |
| Other comprehensive income for the period | -195 | -246 | 716 | -620 | -411 |
| Total comprehensive income for the period | 240 | 202 | 2,156 | 598 | 1,084 |
| Total comprehensive income for the period attributable to owners of the | |||||
| Parent Company | 240 | 202 | 2,156 | 598 | 1,084 |
| Sep 30, | Sep 30, | Dec 31, | |
|---|---|---|---|
| SEK m | 2018 | 2017 | 2017 |
| ASSETS | |||
| Non-current assets | |||
| Goodwill and trademarks | 17,959 | 12,222 | 17,016 |
| Other intangible assets | 4,394 | 923 | 4,260 |
| Tangible assets | 2,083 | 1,573 | 1,952 |
| Deferred tax assets | 623 | 998 | 897 |
| Derivatives, long-term | 6 | 1 | 1 |
| Other non-current assets | 73 | 59 | 65 |
| Total non-current assets | 25,138 | 15,776 | 24,191 |
| Current assets | |||
| Inventories | 3,628 | 2,704 | 3,350 |
| Trade receivables | 2,045 | 1,541 | 1,485 |
| Current tax assets | 202 | 42 | 180 |
| Derivatives, short-term | 110 | 71 | 90 |
| Other current assets | 615 | 313 | 418 |
| Prepaid expenses and accrued income | 112 | 95 | 132 |
| Cash and cash equivalents | 3,020 | 1,763 | 1,159 |
| Total current assets | 9,732 | 6,529 | 6,814 |
| TOTAL ASSETS | 34,870 | 22,305 | 31,005 |
| EQUITY AND LIABILITIES EQUITY |
16,064 | 14,028 | 14,514 |
| LIABILITIES | |||
| Non-current liabilities | |||
| Liabilities to credit institutions, long-term | 11,338 | 4,011 | 9,810 |
| Deferred tax liabilities | 1,972 | 634 | 1,901 |
| Other non-current liabilities | 44 | – | – |
| Provisions for pensions | 670 | 527 | 687 |
| Other provisions, long-term | 183 | 114 | 131 |
| Total non-current liabilities | 14,207 | 5,286 | 12,529 |
| Current liabilities | |||
| Liabilities to credit institutions, short-term | 1,366 | 326 | 733 |
| Trade payables | 1,356 | 1,187 | 1,459 |
| Current tax liabilities | 363 | 329 | 371 |
| Advance payments from customers | 35 | 21 | 23 |
| Derivatives, short-term | 80 | 58 | 45 |
| Other provisions, short-term | 250 | 241 | 289 |
| Other current liabilities | 303 | 174 | 264 |
| Accrued expenses and prepaid income | 846 | 655 | 778 |
| Total current liabilities | 4,599 | 2,991 | 3,962 |
| TOTAL LIABILITIES | 18,806 | 8,277 | 16,491 |
| TOTAL EQUITY AND LIABILITIES | 34,870 | 22,305 | 31,005 |
| YTD | YTD | FY | |
|---|---|---|---|
| SEK m | 2018 | 2017 | 2017 |
| Opening balance of the period | 14,514 | 13,977 | 13,977 |
| Profit for the period | 1,440 | 1,218 | 1,495 |
| Other comprehensive income for the period | 716 | -620 | -411 |
| Total comprehensive income for the period | 2,156 | 598 | 1,084 |
| Transactions with owners | |||
| Dividend to shareholders of the Parent Company | -606 | -547 | -547 |
| Total transactions with owners | -606 | -547 | -547 |
| Closing balance of the period | 16,064 | 14,028 | 14,514 |
| Q3 | Q3 | YTD | YTD | FY | |
|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2018 | 2017 | 2017 |
| Cash flow from operations | |||||
| Operating profit | 702 | 648 | 2,259 | 1,715 | 1,907 |
| Adjustment for other non-cash items | |||||
| Depreciation and amortization | 133 | 76 | 385 | 233 | 321 |
| Adjustments for other non-cash items | 30 | -150 | 99 | -152 | -99 |
| Changes in working capital | |||||
| Changes in inventories | 22 | -71 | -76 | -188 | -361 |
| Changes in trade receivables | 433 | 351 | -477 | -542 | -151 |
| Changes in trade payables | -202 | -97 | -170 | 226 | 296 |
| Changes in other working capital | -175 | -6 | 42 | 118 | 120 |
| Income tax paid | -21 | -31 | -257 | -70 | -105 |
| Net cash flow from operations | 922 | 720 | 1,805 | 1,340 | 1,928 |
| Cash flow from investments | |||||
| Acquisition of operations | 0 | -10 | 16 | -197 | -7,482 |
| Investments in fixed assets | -100 | -84 | -305 | -218 | -306 |
| Proceeds from sale of fixed assets | 1 | 138 | 68 | 139 | 139 |
| Deposit | 0 | – | -233 | – | – |
| Other investing activities | -1 | -1 | -3 | -3 | -4 |
| Net cash flow from investments | -100 | 43 | -457 | -279 | -7,653 |
| Cash flow from financing | |||||
| Borrowings from credit institutions | 2,736 | 5 | 3,174 | 41 | 6,301 |
| Repayment of loans to credit institutions | -1,483 | -113 | -1,717 | -229 | -229 |
| Paid interest | -100 | -24 | -287 | -75 | -99 |
| Received interest | 1 | 1 | 3 | 2 | 5 |
| Other financing activities | -35 | -22 | -90 | -56 | -122 |
| Dividend paid out to shareholders of the Parent Company | – | – | -606 | -547 | -547 |
| Net cash flow from financing | 1,119 | -153 | 477 | -864 | 5,308 |
| Cash flow for the period | 1,941 | 610 | 1,825 | 197 | -417 |
| Cash and cash equivalents at beginning of period | 1,089 | 1,169 | 1,159 | 1,599 | 1,599 |
| Exchange differences on cash and cash equivalents | -10 | -16 | 36 | -33 | -23 |
| Cash and cash equivalents at end of period | 3,020 | 1,763 | 3,020 | 1,763 | 1,159 |
| Q3 | Q3 | YTD | YTD | FY | |
|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2018 | 2017 | 2017 |
| Administrative expenses | -42 | -25 | -134 | -93 | -133 |
| Other operating income and expenses | 44 | 20 | 130 | 89 | 130 |
| Operating profit | 2 | -5 | -4 | -4 | -3 |
| Interest income subsidiaries | 70 | 6 | 188 | 35 | 50 |
| Interest expenses subsidiaries | 0 | 0 | 0 | – | – |
| Other financial income and expenses | -22 | 75 | -657 | 175 | -77 |
| Profit (loss) from financial items | 49 | 81 | -470 | 210 | -28 |
| Group contributions | -54 | -77 | 466 | -210 | -157 |
| Profit (loss) before tax | -2 | -1 | -7 | -4 | -188 |
| Taxes | 0 | 0 | 0 | 0 | 2 |
| Profit (loss) for the period | -2 | -1 | -7 | -4 | -186 |
| Sep 30, | Sep 30, | Dec 31, | ||
|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2017 | |
| ASSETS | ||||
| Shares in subsidiaries | 16,622 | 13,563 | 16,622 | |
| Other non-current assets | 5,528 | 22 | 5,116 | |
| Total non-current assets | 22,150 | 13,585 | 21,738 | |
| Current assets | 2,043 | 1,936 | 893 | |
| TOTAL ASSETS | 24,193 | 15,521 | 22,631 | |
| EQUITY | 10,232 | 11,027 | 10,845 | |
| PROVISIONS | ||||
| Provisions | 39 | 18 | 27 | |
| Total provisions | 39 | 18 | 27 | |
| LIABILITIES | ||||
| Non-current liabilities | 11,338 | 4,011 | 9,810 | |
| Total non-current liabilities | 11,338 | 4,011 | 9,810 | |
| Current liabilities | 2,584 | 466 | 1,949 | |
| Total current liabilities | 2,584 | 466 | 1,949 | |
| TOTAL EQUITY AND LIABILITIES | 24,193 | 15,521 | 22,631 |
Dometic Group AB (publ) ("Dometic") applies International Financial Reporting Standards (IFRS), as adopted by the EU. This consolidated Interim Financial Report has been prepared in accordance with IAS 34 'Interim Financial Reporting'. The Swedish Annual Accounts Act and RFR 2 Accounting for Legal Entities, issued by the Swedish Financial Reporting Board, have been applied for the Parent Company. The interim report comprises pages 1-20 and pages 1-7 are thus an integral part of this financial report (IAS 34.16A).
Totals quoted in tables and statements may not always be the exact sum of the individual items because of rounding differences. The aim is for each line item to correspond to its source, and rounding differences may therefore arise.
The Group has adopted IFRS 15 Revenue from Contracts with Customers. This supersedes all current revenue recognition requirements under IFRS. The Group has chosen to use the full retrospective transition method. The standard came into effect as of January 1, 2018. The Group concluded that comparative figures for the 2017 financial year do not need to be restated since the impact is immaterial, which is why there is no effect in the first nine months of 2018. Consequently, no transition provision was required to be disclosed at the end of December 2017. The accounting policies for the Group's main type of revenue are described below.
The standard IFRS 9 Financial instruments is also adopted and came into effect as of January 1, 2018.
As described above, the accounting principles applied correspond to those described in the 2017 Annual Report, with the exception of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments, for which there are changes to Dometic's accounting and valuation principles compared with the principles described in Notes 2 and 4 of the 2017 Annual Report.
The detailed description of the accounting and valuation principles applied by the Group in this interim report are to be read in addition to descriptions found in Notes 1, 2 and 4 of the 2017 Annual Report, available at www.dometic.com.
The following information should be considered in addition to the description of the new accounting standards and related activities provided in the 2017 Annual Report, Note 2.
Dometic is currently assessing the impact of the new standard. Contracts have been collected and imported in the Group's consolidation system where further analysis continues throughout 2018. Some impact is expected on financial reporting as of 2019. Note 8 in the Annual Report discloses the future cash flows for current operating leases. These cash flows, discounted to present value, may provide an indication of the
increase in assets and liabilities that the Group will see in the balance sheet.
The Group is not able to quantify the impact on its consolidated financial statements at this stage of the project.
For the IFRS 16 transition, Dometic has decided to use the modified retrospective approach.
The standard is effective as of January 1, 2019. Dometic will not adopt earlier application.
Accounting principles to be read in addition to the descriptions in Notes 1, 2 and 4 of the 2017 Annual Report
Revenue recognition in Dometic Group is based on IFRS 15 – Revenue from Contracts with Customers. This standard specifies the requirements for recognizing revenue from all contracts with customers, except for contracts that are within the scope of the Standards on leasing, insurance contracts and financial instruments.
Dometic is in the business of manufacturing and selling a diverse range of products within Climate, Hygiene & Sanitation, Food & Beverage, Power & Control and Safety & Security. These products are primarily for use in Recreational Vehicles, pleasure boats, work boats, trucks and premium cars.
Products in the area of Mobile living are sold via the two sales channels Original Equipment Manufacturer (OEM) and Aftermarket (AM).
The new revenue model is made up of a series of steps required to help entities determine when and how much revenue to recognize.
In the first step of the revenue model, the Group identifies the contract with a customer. This is then followed by the second step, in which the various goods and services that need to be accounted for separately, or distinct performance obligations, are identified. In the third step, the Group determines the transaction price, which is the total amount to which the Group expects to be entitled, and then in the fourth step the transaction price is allocated to the distinct performance obligations. Finally, the amount of revenue allocated to each distinct performance obligation is recognized either at a point in time or over a period of time, depending on when the customer acquires control over the promised goods or services in that performance obligation.
Purchase orders from the customer, which is the most common way of ordering goods, qualify as an IFRS 15 contract, including all enforceable rights and obligations required.
The promises are all distinct, since the customer can benefit from the goods on their own and the service (if included in a contract) together with the readily available goods. Each promise (performance obligation) is accounted for separately.
In the rare cases where the Group offers installation services, revenue for that performance obligation is recognized over the
contract period during which the service is provided. At present, the service part of the Group's revenue is immaterial, which is why revenue over time is not separately presented in the disclosures.
Sales are recorded based on the price specified in the customer agreements, net of the estimated discounts and returns at the time of sale. Accumulated experience is used to estimate and provide for the discounts and returns. If the consideration includes a variable amount, the transaction price includes an estimate of what the entity will be entitled to receive. Estimated discounts are accounted for at the time of the sale and simultaneously reduce external revenue. The amount is estimated by using either the expected value or the most likely amount.
The revenue estimate is included in the transaction price only if it is highly probable that there will not be a significant reversal in the amount of cumulative revenue recognized.
Revenue is recognized when the Group has fulfilled its performance obligation, which means the Group has transferred the promised good or service to the customer. The goods or service are regarded as transferred when the customer has obtained control of the good or service. Revenue from the sale of goods and services is recognized in a pattern that reflects the transfer of control of the promised goods or service to the customer, and this takes place when the customer has obtained the ability to direct the use of the goods and obtained substantially all remaining benefits from the asset.
Control either transfers to the customer over time or at a point in time, and this is determined at contract inception. The assessment of whether control transfers over time or at a point in time is critical to the timing of revenue recognition, since revenue is recorded when or as control transfers.
The Group has a limited number of arrangements where the performance obligations are satisfied over time, including some services but also a small volume of customized goods constructed for customers. To achieve valid revenue timing, progress toward satisfaction of a performance obligation must be measured.
Indicators for the transfer of control at a point in time for goods are if the Group has a right to payment for the goods or if the customer has legal title to the goods. Other indicators which the Group considers are if the Group has transferred physical possession of the goods and if the customer has the significant risks and rewards related to the ownership of the goods.
Additionally, the Group considers whether the customer has accepted the goods in accordance with the customer acceptance clause.
International commercial terms are important as a checkpoint, to determine when control transfers to a customer. The Group must use judgement to determine whether all relevant IFRS control factors collectively indicate that the customer has obtained control before recognizing revenue.
If the timing of the payment of the consideration is in advance or deferred and the timing provides a significant financing benefit, the payments are adjusted for the time value of money. However, since sales are normally made with a credit term of 30- 60 days, which is consistent with market practice, no element of financing is considered to exist.
Revenue is not recognized for products expected to be returned in cases where the customer has a contractual right of return. A liability for the refund (refund accrual) and an asset plus a corresponding adjustment to cost of goods sold for the right to recover products from customers on settling the refund accrual is recorded.
Dometic offers a standard warranty, normally of between two and three years. In some cases, an extended warranty may be offered to the customer. The standard warranty is recorded as a provision and a warranty cost in the income statement, whereas the extended warranty is a separate performance obligation. The portion of the transaction price in the contract that is allocated to the extended warranty is accounted for as revenue over the term of the warranty period.
IFRS 9 Financial instruments addresses the classification, recognition, measurement and impairment of financial instruments and hedge accounting. The standard replaces the earlier IAS 39 standard and is effective from January 1, 2018, although early adoption is permitted.
Dometic will apply the new standards effective from January 1, 2018, with no comparative historical adjustments as permitted by the standard.
Dometic has reviewed the standard during latter 2016 and 2017 with the conclusion presented in the Annual report 2017 that the new rules regarding classification and valuation have an immaterial impact on Dometic Group. As a result of this, no material transition effects have been identified and no transition effect is recorded in the group financial statements on December 31, 2017.
Dometic determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under IFRS 9.
Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit and loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired and substantially all risks and rewards of ownership are transferred. Regular way purchases and sales of financial assets are recognized on tradedate, the date on which the Group commits to purchase or sell the asset.
Dometic classifies and measures its financial assets in the following categories: Amortized cost and fair value through profit and loss.
a) Amortized costs: The Group's financial assets at amortized cost comprise trade receivables and other receivables as well as cash and cash equivalents in the balance sheet. The objective of holding these financial assets is to collect the contractual cash flows, thus the "hold to collect" business model. The cash flows from these assets are solely payment of principal and interest, and are therefore measured at amortized cost. Selling or trading these financial assets are not part of the business model. If a sale would occur, it would be incidental and low frequent.
Trade receivables within this category are amounts due from customers in the ordinary course of
business. Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.
b) Fair value through profit and loss: Financial derivatives that are not subject to hedge accounting are always recognized at fair value through profit and loss. Valuation of financial derivatives at fair value is done at the most recent updated market prices. Gains or losses arising from changes in the fair value of the "financial assets at fair value through profit or loss" category is presented in the operating result or financial net in the income statement depending on the nature of the economic relationship with the underlying asset.
Assets are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current. Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities later than 12 months after the balance sheet date.
The Group has revised its impairment methodology for financial assets subject to IFRS 9's impairment model for financial assets leading to a so called expected credit loss model. With start on January 1, 2018, Dometic recognizes expected credit losses over the expected life of the trade receivables. Historical information by legal entity is used regarding credit loss experience and ageing to forecast future credit losses. In addition, current and forward-looking information by legal entity is used to reflect current and expected future losses. To support and harmonize the organization, a calculation matrix for calculating expected credit losses has been developed by headquarters and distributed to the relevant functions throughout the Group.
Dometic applies the simplified approach to measure life time expected credit losses for trade receivables to provide for losses each closing. The new model changed the loss allowance immaterially.
Financial liabilities are recognized initially at fair value, net of transaction costs incurred. Liabilities to credit institutions are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates. Liabilities to credit institutions are classified as current liabilities unless the Group has the right to defer settlement of the liability for at least 12 months after the balance sheet date. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
Financial assets and liabilities are offset and the net amount reported in the balance sheet, when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability.
Derivative financial instruments and hedging activities Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The derivatives in Dometic hedge a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. Amounts accumulated in equity are accounted for in the income statement in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings are recognized in the financial net. The gain or loss relating to the ineffective portion is also recognized in the financial net. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income statement.
Dometic applies hedge accounting for net investment in foreign operations. Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss within other income or other expenses. Gains and losses accumulated in equity are reclassified to profit or loss when the foreign operation is sold.
As all businesses, Dometic is exposed to a number of risks that could have a material impact on the Group. These risks are factors that impact Dometic's ability to achieve established Group targets. This applies to both financial targets and targets in other areas outlined in Dometic's business strategy. Dometic performs an annual risk analysis by assessing each defined risk's likelihood and impact in a risk register, resulting in global and regional risk maps presented to Group management and the Board of Directors and used as a foundation for the control activities within Dometic. The risks that Dometic is exposed to are classified into four main categories (business and market risks, operational risks, compliance and regulatory risks and financial risks) where each category has underlying risks. These risks can be both internal and external. Internal risks are mainly managed and controlled by Dometic whereas external risk factors are not caused nor can be controlled by Dometic but the effects can be limited by an effective risk management.
Dometic is subject to transaction risks at the time of purchasing and selling, as well as when conducting financial transactions. Transaction exposure is primarily related to the currencies EUR, USD and AUD. As the majority of the Group's profit is generated
outside Sweden, the Group is also exposed to translational risks in all the major currencies.
Efficient risk management is a continual process conducted within the framework of business control, and is part of the ongoing review of operations and forward-looking assessment of operations. In the preparation of financial reports, the Board of Directors and Group management are required to make estimates and judgments. These estimates and judgments impact the income statement and balance sheet, as well as the disclosures. The actual outcome may differ from these estimates and judgments under different circumstances and conditions. Dometic's future risk exposure is assumed not to deviate from the inherent exposure associated with Dometic's ongoing business operations. For a more in-depth analysis of risks and risk management, please refer to Dometic's 2017 Annual Report.
Dometic uses interest rate swaps to hedge senior facility term loans to move from a floating interest rate to a fixed interest rate. The Group also uses currency forward agreements to hedge part of its cash flow exposure.
The fair value of Dometic's derivative asset and liabilities were SEK 116 m (Q3 2017: SEK 72 m) and SEK 80 m, (Q3 2017: SEK 58 m). The value of derivatives is based on published prices in an active market. No transfers between levels of the fair value hierarchy have occurred during the period.
For financial assets and liabilities other than derivatives, fair value is assumed to be equal to the carrying amount.
| Sep 30, 2018 | Balance sheet carrying amount |
Financial instruments at amortized cost |
Financial instruments at fair value |
Derivatives used for hedging |
|---|---|---|---|---|
| Per category | ||||
| Derivatives | 116 | – | 14 | 102 |
| Financial assets | 5,753 | 5,753 | – | – |
| Total financial assets | 5,869 | 5,753 | 14 | 102 |
| Derivatives | 80 | – | 18 | 62 |
| Financial liabilities | 14,364 | 14,364 | – | – |
| Total financial liabilities | 14,443 | 14,364 | 18 | 62 |
| Q3 | Q3 | YTD | YTD | FY | |
|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2018 | 2017 | 2017 |
| Net sales, external | |||||
| Americas ⁽¹⁾ | |||||
| OEM | 1,669 | 1,146 | 5,211 | 3,415 | 4,576 |
| Aftermarket | 888 | 474 | 2,370 | 1,402 | 1,753 |
| Americas net sales, external | 2,557 | 1,620 | 7,581 | 4,817 | 6,329 |
| RV | 1,472 | 1,394 | 4,462 | 4,112 | 5,341 |
| Marine | 970 | 136 | 2,821 | 437 | 651 |
| CPV | 63 | 58 | 171 | 166 | 208 |
| Other (Lodging and Retail) | 52 | 32 | 127 | 102 | 128 |
| Americas net sales, external | 2,557 | 1,620 | 7,581 | 4,817 | 6,329 |
| EMEA | |||||
| OEM | 770 | 686 | 2,649 | 2,350 | 3,154 |
| Aftermarket | 760 | 667 | 2,641 | 2,363 | 2,808 |
| EMEA net sales, external | 1,530 | 1,353 | 5,290 | 4,714 | 5,962 |
| RV | 686 | 605 | 2,442 | 2,180 | 2,821 |
| Marine | 191 | 162 | 606 | 547 | 725 |
| CPV | 450 | 392 | 1,414 | 1,250 | 1,553 |
| Other (Lodging and Retail) | 203 | 193 | 828 | 737 | 863 |
| EMEA net sales, external | 1,530 | 1,353 | 5,290 | 4,714 | 5,962 |
| APAC | |||||
| OEM | 207 | 224 | 655 | 631 | 847 |
| Aftermarket | 207 | 202 | 678 | 629 | 907 |
| APAC net sales, external | 414 | 426 | 1,333 | 1,260 | 1,753 |
| RV | 221 | 240 | 700 | 688 | 921 |
| Marine | 30 | 27 | 87 | 81 | 109 |
| CPV | 31 | 42 | 120 | 120 | 160 |
| Other (Lodging and Retail) | 132 | 117 | 426 | 371 | 563 |
| APAC net sales, external | 414 | 426 | 1,333 | 1,260 | 1,753 |
| Net sales, external | |||||
| Americas ⁽¹⁾ | 2,557 | 1,620 | 7,581 | 4,817 | 6,329 |
| EMEA | 1,530 | 1,353 | 5,290 | 4,714 | 5,962 |
| APAC | 414 | 426 | 1,333 | 1,260 | 1,753 |
| Total net sales, external | 4,501 | 3,399 | 14,204 | 10,791 | 14,044 |
| Operating profit (EBIT) before i a c | |||||
| Americas ⁽¹⁾ | 427 | 267 | 1,236 | 705 | 885 |
| EMEA | 183 | 141 | 728 | 580 | 618 |
| APAC | 91 | 74 | 295 | 264 | 357 |
| Total Operating profit before i a c | 702 | 482 | 2,259 | 1,549 | 1,860 |
| Items affecting comparability | |||||
| Americas ⁽¹⁾ | – | – | – | – | -58 |
| EMEA | – | – | – | – | -61 |
| APAC | – | 166 | – | 166 | 166 |
| Total i a c | – | 166 | – | 166 | 47 |
| Operating profit (EBIT) | |||||
| Americas ⁽¹⁾ | 427 | 267 | 1,236 | 705 | 827 |
| EMEA | 183 | 141 | 728 | 580 | 557 |
| APAC | 91 | 240 | 295 | 430 | 523 |
| Total operating profit (EBIT) | 702 | 648 | 2,259 | 1,715 | 1,907 |
| Financial income | 1 | 1 | 6 | 2 | 6 |
| Financial expenses | -138 | -57 | -341 | -121 | -212 |
| Taxes | -130 | -144 | -484 | -378 | -206 |
| Profit for the period | 435 | 448 | 1,440 | 1,218 | 1,495 |
⁽¹⁾Including SeaStar Solutions.
Segment performance is primarily assessed based on sales and operating profit. Information regarding income for each region is based on where customers are located. Management follow-up is based on the integrated result in each segment. For further information, please refer to Note 5 of the 2017 Annual Report.
Inter segment sales exists with the following split.
| SEK m | 2018 | 2017 | 2018 | 2017 | 2017 |
|---|---|---|---|---|---|
| Americas ⁽¹⁾ | 100 | 77 | 309 | 291 | 357 |
| EMEA | 97 | 114 | 372 | 369 | 464 |
| APAC | 747 | 755 | 2,491 | 2,151 | 3,029 |
| Eliminations | 945 | 946 | 3,172 | 2,811 | 3,850 |
⁽¹⁾Including SeaStar Solutions.
| Q3 | Q3 | YTD | YTD | FY | |
|---|---|---|---|---|---|
| SEK m | 2018 | 2017 | 2018 | 2017 | 2017 |
| Relocation China | – | 166 | – | 166 | 166 |
| Acquistion-related costs SeaStar Solutions | – | – | – | – | -58 |
| EMEA profitability improvement program | – | – | – | – | -61 |
| Total | – | 166 | – | 166 | 47 |
Below follows a table of items affecting comparability specified by function.
| Relocation China | SeaStar Solutions | Acquistion-related costs | EMEA profitability improvement program |
Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK m | YTD 2018 |
YTD 2017 |
FY 2017 |
YTD 2018 |
YTD 2017 |
FY 2017 |
YTD 2018 |
YTD 2017 |
FY 2017 |
YTD 2018 |
YTD 2017 |
FY 2017 |
| Costs for goods sold | – | – | – | – | – | – | – | – | -34 | – | – | -34 |
| Sales expenses | – | – | – | – | – | – | – | – | -18 | – | – | -18 |
| Administrative expenses | – | – | – | – | – | – | – | – | -9 | – | – | -9 |
| Other operating income and expenses | – | 166 | 166 | – | – | -58 | – | – | – | – | 166 | 108 |
| Total | – | 166 | 166 | – | – | -58 | – | – | -61 | – | 166 | 47 |
| Amortization of customer | Amortization of intellectual | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| relationship | Amortization of technology | property | Total | ||||||||||
| YTD | YTD | FY | YTD | YTD | FY | YTD | YTD | FY | YTD | YTD | FY | ||
| SEK m | 2018 | 2017 | 2017 | 2018 | 2017 | 2017 | 2018 | 2017 | 2017 | 2018 | 2017 | 2017 | |
| Costs for goods sold | – | – | – | -33 | – | -2 | -17 | -17 | -23 | -50 | -17 | -25 | |
| Sales expenses | -111 | -36 | -52 | – | – | – | – | – | – | -111 | -36 | -52 | |
| Administrative expenses | – | – | – | – | – | – | – | – | – | – | – | – | |
| Other operating income and expenses | – | – | – | – | – | – | – | – | – | – | – | – | |
| Total | -111 | -36 | -52 | -33 | – | – -2 |
-17 | -17 | -23 | -161 | -52 | -76 |
No transactions between Dometic and related parties that have significantly affected the company's position and earnings took place during 2018.
During Q1 2018 the goodwill in the preliminary purchase price allocation has been adjusted with SEK +13 m. In Q2 2018 a repayment of the purchase price consideration held in escrow of SEK 16 m was received and adjusted against goodwill (reducing goodwill with SEK -16 m).
Acquisition of IPV and Oceanair Marine Limited The purchase price allocation of IPV and Oceanair Marine Limited are considered as final. No changes have been made.
Acquisition of SeaStar Solutions
On November 22, 2017, Dometic announced the acquisition of SeaStar Solutions, leading provider of vessel control, fuel and system integration systems to the leisure marine industry. SeaStar Solutions is based in North America and employs 1,250 people. The transaction was closed on December 15, 2017 after all approvals from relevant competition authorities was obtained, and Dometic has consolidated the company as of that date. The total cash purchase price amounted to USD 868 m (SEK 7,286 m). The summary of value adjustments recognized as a result of the preliminary purchase price allocation of SeaStar Solutions amounts in total to SEK 7,361 m, including goodwill of SEK Q3 Q3 YTD YTD FY
3,361 m, trademarks and tradenames SEK 1,376 m, other intangible assets SEK 3,365 m, tangible assets SEK 347 m, other non-current assets SEK 1 m, cash SEK 1 m, net operating assets and liabilities SEK 686 m and provisions and other noncurrent liabilities of SEK -1,777 m.
Goodwill is justified by new potential customers and new future technologies with SeaStar Solution's leading position in vessel control, fuel systems and system integration and strong relationships with manufacturers. Acquisition-related costs amount to SEK 58 m, reported as items affecting comparability in Q4 2017. Sales and cost synergies of USD 20 m per annum will be fully realized within 3 years. The acquisition has affected consolidated net sales from the date of the acquisition by SEK 108 m and operating profit by SEK 5 m, including step-up costs for fair value revaluation of inventory of SEK 9 m. If the acquisition had been consolidated as of January 1, 2017, the effect on pro forma net sales would have been USD 320 m and EBITDA of USD 85 m.
While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, the purchase price allocation for acquisition is preliminary for up to 12 months after the acquisition date and is subject to refinement as more detailed analyses are completed and additional information about the fair values of the assets and liabilities becomes available.
Acquisition of IPV and Oceanair Marine Limited On December 22, 2016, Dometic announced the acquisition of the assets of IPV, a Germany-based aftermarket provider of
coolers and other outdoor products. The acquisition strengthens Dometic's position in the EMEA market for mobile coolers. The purchase price was EUR 3.5 m, and the transaction was closed on January 3, 2017. On February 7, 2017, Dometic acquired Oceanair Marine Limited, a UK-based market-leading manufacturer of marine blinds, screens and soft furnishings for the Leisure Marine and Super Yacht segments. The acquisition strengthens Dometic's presence in the marine market and broadens the product portfolio. The company reported revenues of GBP 11.4 m for the 2015/2016 fiscal year. The initial purchase price was GBP 14.0 m in cash, with an additional earn-out consideration of a maximum of GBP 2.5 m subject to the achievement of certain performance-related targets over the next 16 months.
The summary of value adjustments recognized as a result of the acquisition of Oceanair amounts in total to SEK 160 m, including goodwill of SEK 80 m, other intangible assets (trademarks and customer relationships) of SEK 100 m, and a deferred tax liability of SEK 20 m. Acquisition-related costs expensed in the consolidated income statement Q1 2017 amounts SEK 2.5 m.
The total purchase price consideration in cash for the transactions (IPV, Oceanair), less cash and cash equivalents, amounts to SEK 197 m, including earn-out paid in the third quarter 2017. The acquisitions did not have any significant impact on operating profit during 2017.
There were no significant events after the period.
Dometic presents some financial measures in this interim report, which are not defined by IFRS. The company believes that these measures provide valuable additional information to investors and management for evaluating the company's financial performance, financial position and trends in our operations. It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies. These non-IFRS measures should not be considered as substitutes for financial reporting measures prepared in accordance with IFRS. See Dometic's website www. dometic.com for the detailed reconciliation.
Consists of inventories and trade receivables less trade payables.
Operating profit (EBIT) before Depreciation and Amortization.
EBITDA divided by net sales.
Net debt excluding pensions and accrued interest in relation to EBITDA.
Total borrowings including pensions and accrued interest less cash and cash equivalents.
EBITDA +/- change in working capital excluding paid tax, after capital expenditure.
Sales growth excluding acquisitions/divestments and currency translation effects. Quarters calculated at comparable currency, applying latest period average rate.
Operating profit (EBIT) divided by operating capital. Based on the operating profit (EBIT) for the four previous quarters, divided by the average operating capital for the previous four quarters, excluding goodwill and trademarks for the previous quarter.
Aftermarket.
Expenses related to the purchase of tangible and intangible assets.
Commercial and Passenger Vehicles.
Net profit for the period divided by average number of shares.
Financial Year ended December 31, 2017.
Items affecting comparability are events or transactions with significant financial effects, which are relevant for understanding the financial performance when comparing profit for the current period with previous periods. Items included are for example restructuring programs, expenses related to major revaluations, gains and losses from acquisitions or disposals of subsidiaries.
Liabilities to credit institutions plus liabilities to related parties plus provisions for pensions.
Last twelve months
Net profit Profit (loss) for the period
Other comprehensive income.
Original Equipment Manufacturers.
excluding goodwill and trademarks
Interest-bearing debt plus equity less cash and cash equivalents, excluding goodwill and trademarks.
Earnings before financial items and taxes.
Operating profit (EBIT) divided by net sales.
Recreational Vehicles.
July to September 2018 for Income Statement.
July to September 2017 for Income Statement.
Core working capital plus other current assets less other current liabilities and provisions relating to operations.
Analysts and media are invited to participate in a telephone conference at 10.00 (CEST), October 25, 2018, during which President and CEO, Juan Vargues and CFO, Per-Arne Blomquist, will present the report and answer questions. To participate in the webcast/telephone conference, please dial in five minutes prior to the start of the conference call:
| Sweden: | +46 8 566 426 66 |
|---|---|
| UK: | +44 20 300 898 02 |
| US: | +1 855 831 5944 |
Webcast URL and presentation are available at www.dometic.com
Hemvärnsgatan 15 SE-171 54 Solna, Sweden Phone: +46 8 501 025 00 www.dometic.com Corporate registration number 556829-4390
Dometic is a global market leader in branded solutions for mobile living in the areas of Climate, Hygiene & Sanitation, Food & Beverage, Power & Control and Safety & Security. Dometic operates in the Americas, EMEA and Asia Pacific, providing products for use in recreational vehicles, trucks and premium cars, pleasure and workboats, and for a variety of other uses. Dometic offers products and solutions that enrich people's experiences away from home, whether in a motorhome, caravan, boat or truck. Our motivation is to create smart and reliable products with outstanding design. We operate 28 manufacturing and assembly sites in eleven countries and sell our products in approximately 100 countries. We have a global distribution and dealer network in place to serve the aftermarket. Dometic employs approximately 8,800 people worldwide, had net sales of SEK 14.0 billion in 2017 and is headquartered in Solna, Sweden.
This information is information that Dometic Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 CEST on October 25, 2018.
This document is a translation of the Swedish version of the interim report. In the event of any discrepancy, the Swedish wording shall prevail.
Johan Lundin Head of Investor Relations and Communications Phone: +46 8 501 025 46 E-mail: [email protected]
FEBRUARY 8, 2019: Year-end report 2018 APRIL 10, 2019: Annual General Meeting APRIL 26, 2019: Interim report for the first quarter 2019 JULY 17, 2019: Interim report for the second quarter 2019 OCTOBER 24, 2019: Interim report for the third quarter 2019
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