Dometic Group — Interim / Quarterly Report 2019

Jul 17, 2019

REPORT ON THE SECOND QUARTER 2019

NET SALES	OPERATING PROFIT (EBIT) BEFORE ITEMS AFFECTING COMPARABILITY	OPERATING PROFIT (EBIT)	OPERATING CASHFLOW
5,329 SEK MILLION	900 SEK MILLION	900 SEK MILLION	1,417 SEK MILLION
(5,260)	(919)	(919)	(943)

SECOND QUARTER

• Net sales for the quarter were SEK 5,329 m (5,260); an increase of 1%, of which -7% was organic growth.
• Operating profit before depreciation and amortization (EBITDA) for the quarter was SEK 1,100 m (1,048), representing a margin of 20.6% (19.9%).
• Operating profit (EBIT) for the quarter was SEK 900 m (919), representing a margin of 16.9% (17.5%).
• There were no items affecting comparability in the quarter (-).
• Cash flow for the quarter was SEK -742 m (3). Operating cash flow was SEK 1,417 m (943).
• Profit for the quarter was SEK 562 m (629).
• Earnings per share: SEK 1.90 (2.13).

FIRST SIX MONTHS

• Net sales for the period were SEK 9,979 m (9,703); an increase of 3%, of which -6% was organic growth.
• Operating profit before depreciation and amortization (EBITDA) for the period was SEK 1,918 m (1,809), representing a margin of 19.2% (18.6%).
• Operating profit (EBIT) for the period was SEK 1,518 m (1,557), representing a margin of 15.2% (16.0%).
• There were no items affecting comparability in the period (-).
• Cash flow for the period was SEK 492 m (-113). Operating cash flow was SEK 1,502 m (916).
• Profit for the period was SEK 906 m (1,004).
• Earnings per share: SEK 3.06 (3.39).

FINANCIAL OVERVIEW

	Q2	Q2	H1	H1	LTM	FY
SEK m	2019	2018	2019	2018	2019	2018
Net sales	5,329	5,260	9,979	9,703	18,550	18,274
EBITDA	1,100	1,048	1,918	1,809	3,222	3,113
% of net sales	20.6%	19.9%	19.2%	18.6%	17.4%	17.0%
Operating profit (EBIT)	900	919	1,518	1,557	2,548	2,587
% of net sales	16.9%	17.5%	15.2%	16.0%	13.7%	14.2%
Operating profit (EBIT) before items affecting comparability	900	919	1,518	1,557	2,640	2,679
% of net sales	16.9%	17.5%	15.2%	16.0%	14.2%	14.7%
Profit for the period	562	629	906	1,004	1,478	1,576
Earnings per share, SEK	1.90	2.13	3.06	3.39	5.00	5.33
Cash flow for the period	-742	3	492	-113	1,525	920
Operating cash flow⁽¹⁾	1,417	943	1,502	916	3,202	2,616
Core working capital	4,408	4,633	4,408	4,633	4,408	3,986
Capital expenditure in fixed assets	-90	-127	-176	-205	-393	-422
RoOC	30.0%	32.1%	30.0%	32.1%	30.0%	30.5%

⁽¹⁾Net cash flow from operations after investments in fixed assets and excluding income tax paid.

CONTINUED SOLID EARNINGS AND STRONG CASH FLOW

Previous full year 2019 outlook (since February 8, 2019): organic sales growth estimated to be slightly positive with an EBIT margin close to 15 percent. Leverage is expected to be around 2.0x by the end of 2019.

All references to EBIT and EBIT margin on this page refer to EBIT before items affecting comparability unless otherwise stated.

The first half of 2019 was very much characterized by a continued focus on efficiency improvements and building a foundation for an even more diversified and stronger Dometic. Despite challenging RV markets and negative impact from additional US tariffs, we have managed to keep improving our cost structures and implement processes and best practices across our global organization, while investing in new opportunities.

The restructuring program launched in Q4 2018 is proceeding well, with good progress in all regions. We are well on track in expanding our presence in Mexico, and the new site is expected to be finalized in the third quarter. The SKU reduction is progressing at a good pace and we remain confident in terms of our ambition to achieve a 30 percent reduction by the end of the year. We continued to strengthen our organization, and a number of new key positions in the areas of product development and operations were added to accelerate strategic initiatives and the pace of innovation.

Net sales growth was 1 percent in the quarter with positive growth in EMEA and Asia, while conditions in Americas and Pacific continued to be challenging. EBIT and EBITDA margins held up well as we have intensified our focus on cost reductions. Given the current market situation, we are looking at additional initiatives in all three regions to protect profitability in the short term, while also building up a more efficient company in the long term.

Americas reported net sales growth of -5 percent in the quarter, of which -12 percent was organic. Despite the negative impact of volume decline and tariffs, the EBIT margin was a solid 15.3 percent. The sales decline was driven by a negative development in Food & Beverage and Climate, while Power & Control showed a strong performance.

EMEA reported net sales growth of 12 percent in the quarter, of which 1 percent was organic. The EBIT margin was 17.8 percent, positively impacted by efficiency improvements and pricing. The sales growth was driven by a good performance in Food & Beverage and Climate. The integration of Kampa is developing well and the business is performing above expectations.

APAC reported net sales growth of -10 percent in the quarter, of which -12 percent was organic. The EBIT margin remained at a high level of 22.0 percent, although impacted by unfavorable geographical and product mix. Food & Beverage grew well in Asia but growth was negatively impacted by a weak performance in Food & Beverage and Climate in Australia.

Operating cash flow was SEK 1,417 m, an increase of 50 percent compared with the same quarter last year. Leverage improved from 3.3x by the end of Q2 2018 to 2.8x by the end of Q2 2019. Our strong cash generation and extended debt maturities create good opportunities for additional acquisitions.

Dometic hosted its first capital markets day as a listed company in May, where we presented our strategic direction going forward. As part of this strategic journey, we are moving from reporting by the business areas of RV, Marine, CPV, Retail and Lodging to the application areas of Food & Beverage, Climate, Power & Control and Other Applications. Using our core technologies and competences in key application areas will allow us to significantly broaden the addressable market and truly redefine the Mobile Living industry. Given the many opportunities for growth and efficiency improvements in the coming years, we presented the following updated financial targets to be achieved over a business cycle: total net sales growth of 10%, EBIT margin before items affecting comparability of 16-17 percent, leverage around 2x and dividend of at least 40 percent of net profit.

Short term, we expect organic growth to be slightly positive during the second half of the year compared to the same period last year, despite the continued inventory reduction in primarily the US RV market and the revised full year shipments forecast from -5 to -14 percent published by the US RV Association (RVIA). Given this, and the negative impact from the additional US tariffs, the full year 2019 outlook is revised to negative organic growth and an EBIT margin above 14 percent. Leverage excluding acquisitions is expected to be around 2x by the end of 2019.

We are confident about the long term positive trends in the Mobile Living industry, the opportunities for acquisitive growth and will execute on our strategic direction to take Dometic to the next level.

Juan Vargues, President and CEO

FINANCIAL SUMMARY - SECOND QUARTER 2019

Net sales were SEK 5,329 m (5,260), an increase of 1% compared with the same quarter last year. This comprised -7% organic growth, 5% currency translation and 3% M&A.

Operating profit before depreciation and

amortization (EBITDA) was SEK 1,100 m (1,048), an increase of 5% compared with the same quarter last year. The EBITDA margin was 20.6% (19.9%).

Operating profit (EBIT) was SEK 900 m (919), a decrease of 2% compared with the same quarter last year. The EBIT margin was 16.9% (17.5%). IFRS 16 impacted EBIT positively by SEK 2 m.

Items affecting comparability totalled SEK - m (-).

Operating profit (EBIT) before items affecting comparability was SEK 900 m (919), a decrease of 2% compared with the same quarter last year. The EBIT margin before items affecting comparability was 16.9% (17.5%).

Financial items totalled a net amount of SEK -138 m (-72), including SEK -112 m (-103) in interest on external bank loans and SEK -5 m (0) for interest on leases as an effect of IFRS 16. Other FX revaluations and other items amounted to SEK -23 m (30) whereof realized accrued bank fees after prepayment of outstanding bank loans amounted to SEK -16 m and financial income amounted to SEK 2 m (1).

Taxes totalled SEK -200 m (-218), corresponding to 26% (26%) of profit before tax. Current tax amounted to SEK -201 m (-105) and deferred tax to SEK 1 m (-113). Paid tax of 25% (16%) is higher compared to Q2 2018, mainly due to the payment of withholding tax on intercompany dividend and the postponed payment of capital gains tax on the sale of real estate in China in 2017.

Profit for the quarter was SEK 562 m (629).

Earnings per share were SEK 1.90 (2.13).

Operating cash flow was SEK 1,417 m (943).

Cash flow for the quarter was SEK -742 m (3). Cash flow was impacted by extra repayment of bank loans.

Financial position. Leverage was 2.8x (3.3x) at the end of the second quarter of 2019.

FINANCIAL SUMMARY - FIRST SIX MONTHS 2019

Net sales were SEK 9,979 m (9,703), an increase of 3% compared with the same period last year. This comprised -6% organic growth, 6% currency translation and 3% M&A.

Operating profit before depreciation and

amortization (EBITDA) was SEK 1,918 m (1,809), an increase of 6% compared with the same period last year. The EBITDA margin was 19.2% (18.6%).

Operating profit (EBIT) was SEK 1,518 m (1,557), a decrease of 3% compared with the same period last year. The EBIT margin was 15.2% (16.0%). IFRS 16 impacted EBIT positively by SEK 3 m.

Items affecting comparability totalled SEK - m (-).

Operating profit (EBIT) before items affecting comparability was SEK 1,518 m (1,557), a decrease of 3% compared with the same period last year. The EBIT margin before items affecting comparability was 15.2% (16.0%).

Financial items totalled a net amount of SEK -265 m (-199), including SEK -222 m (-199) in interest on external bank loans and SEK -9 m (0) for interest on leases as an effect of IFRS 16. Other FX revaluations and other items amounted to SEK -41 m (-4) whereof realized accrued bank fees after prepayment of outstanding bank loans amounted to SEK -16 m and financial income amounted to to SEK 7 m (4).

Taxes totalled SEK -346 m (-354), corresponding to 28% (26%) of profit before tax. The total effective tax rate is higher compared with 2018, mainly due to BEAT ("Base Erosion Antiavoidance Tax), an additional minimum tax that was introduced in the 2017 US tax reform. In 2019, the BEAT tax rate has increased from 5% to 10%. Current tax amounted to SEK -310 m (-171) and deferred tax to SEK -36 m (-183). Paid tax of 26% (17%) is higher compared with 2018, mainly due to the payment of withholding tax on intercompany dividend and the postponed payment of capital gains tax on the sale of real estate in China in 2017.

Profit for the period was SEK 906 m (1,004). Earnings per share were SEK 3.06 (3.39).

Operating cash flow was SEK 1,502 m (916).

Cash flow for the period was SEK 492 m (-113).

Significant events after the period. On July 15, Dometic extended its maturity on bank loans and revolving credit facility from 2020/2022 to 2024/2025. No other significant events have occurred after the period.

	Q2	Q2	Change (%)		H1	H1	Change (%)		LTM	FY
SEK m	2019	2018	Rep.	Adj.⁽¹⁾	2019	2018	Rep.	Adj.⁽¹⁾	2019	2018
Americas	2,603	2,736	-5%	-11%	4,844	5,024	-4%	-11%	9,578	9,758
EMEA	2,313	2,064	12%	9%	4,291	3,760	14%	11%	7,237	6,706
APAC	413	460	-10%	-12%	844	919	-8%	-11%	1,735	1,810
Net sales	5,329	5,260	1%	-3%	9,979	9,703	3%	-3%	18,550	18,274
Americas	398	475	-16%	-22%	657	809	-19%	-26%	1,319	1,470
EMEA	411	335	23%	19%	679	544	25%	19%	948	814
APAC	91	109	-16%	-22%	182	204	-11%	-17%	373	395
Operating profit (EBIT) bef. i.a.c.⁽²⁾	900	919	-2%	-8%	1,518	1,557	-3%	-9%	2,640	2,679
Americas	15.3%	17.4%			13.6%	16.1%			13.8%	15.1%
EMEA	17.8%	16.2%			15.8%	14.5%			13.1%	12.1%
APAC	22.0%	23.6%			21.6%	22.2%			21.5%	21.8%
Operating profit % bef. i.a.c.⁽²⁾	16.9%	17.5%			15.2%	16.0%			14.2%	14.7%

⁽¹⁾Represents change in comparable currency. ⁽²⁾Before items affecting comparability.

Net sales (SEK m)

Sales split AM/OEM

Q2

OPERATING PROFIT (EBIT)*

398 SEK MILLION (475)

OPERATING MARGIN (EBIT%)*

^*EBIT before items affecting comparability.

NET SALES AND OPERATING PROFIT (EBIT)

Second quarter 2019

Americas reported net sales of SEK 2,603 m (2,736), representing 49% of Group net sales. Total growth was -5%, of which -12% was organic growth, 7% currency translation and 0% M&A.

Operating profit (EBIT) was SEK 398 m (475); a decrease of 16% compared with the same quarter last year. The EBIT margin was 15.3% (17.4%).

There were no Items affecting comparability (-).

First six months 2019

Americas reported net sales of SEK 4,844 m (5,024). Total growth was -4%, of which -12% was organic growth, 8% currency translation and 0% M&A.

Operating profit (EBIT) was SEK 657 m (809); a decrease of 19% compared with the same period last year. The EBIT margin was 13.6% (16.1%).

There were no Items affecting comparability (-).

Business highlights, Q2

Total OEM sales growth was -10%, of which growth in constant currency was -16%.

Total Aftermarket sales growth was 5%, of which growth in constant currency was -2%.

Food & Bevarage reported negative sales growth, as a result of a weaker US RV OEM market. Strong growth for mobile cooling.

Climate reported negative sales growth affected by the weak RV OEM market. Aftermarket and Marine reported good growth.

Power & Control reported good sales growth driven by persistently strong demand for steering system solutions.

Other Applications reported good sales growth, supported by a strong performance for spare parts.

Proceedings related to the putative class action continue. Dometic remains firm in its position that the allegations in the consolidated case are without merit.

EMEA

Net sales (SEK m)

Sales split AM/OEM

411 SEK MILLION (335)

OPERATING MARGIN (EBIT%)*

^*EBIT before items affecting comparability

NET SALES AND OPERATING PROFIT (EBIT)

Second quarter 2019

EMEA reported net sales of SEK 2,313 m (2,064), representing 43% of Group net sales. Total growth was 12%, of which 1% was organic growth, 2% currency translation and 9% M&A.

Operating profit (EBIT) was SEK 411 m (335), an increase of 23% compared with the same quarter last year. The EBIT margin was 17.8% (16.2%).

There were no Items affecting comparability (-).

First six months 2019

EMEA reported net sales of SEK 4,291 m (3,760). Total growth was 14%, of which 2% was organic growth, 3% currency translation and 9% M&A.

Operating profit (EBIT) was SEK 679 m (544), an increase of 25% compared with the same period last year. The EBIT margin was 15.8% (14.5%).

There were no Items affecting comparability (-).

Business highlights, Q2

Total OEM sales growth was 1%, of which growth in constant currency and excluding the acquisition of Kampa was -1%. Total Aftermarket sales growth was 22%, of which growth in constant currency and excluding the acquisition of Kampa was 3%.

Food & Beverage reported good sales growth. A positive trend for mobile cooling was partly offset by a negative performance for cooking products.

Climate reported strong sales growth. Awnings sales were boosted by the acquisition of Kampa and air conditioners showed positive growth.

Power & Control reported strong sales growth, driven by new product launches and increased market presence.

Other Applications reported negative sales growth. The strong development for spare parts was more than offset by lower sales for sanitation products.

APAC

Net sales (SEK m)

NET SALES AND OPERATING PROFIT (EBIT)

Second quarter 2019

APAC reported net sales of SEK 413 m (460), representing 8% of Group net sales. Total growth was -10%, of which -12% was organic growth, 2% currency translation and 0% M&A.

Operating profit (EBIT) was SEK 91 m (109); a decrease of 16% compared with the same quarter last year. The EBIT margin was 22.0% (23.6%).

There were no Items affecting comparability (-).

First six months 2019

APAC reported net sales of SEK 844 m (919). Total growth was -8%, of which -11% was organic growth, 3% currency translation and 0% M&A.

Operating profit (EBIT) was SEK 182 m (204); a decrease of -11% compared with the same period last year. The EBIT margin was 21.6% (22.2%).

There were no Items affecting comparability (-).

Business highlights, Q2

Total OEM sales growth was -13%, of which growth in constant currency was -14%.

Total Aftermarket sales growth was -8%, of which growth in constant currency was -10%.

Food & Beverage reported negative sales growth. The decline was mainly a result of weaker demand in the Australian RV industry and a negative performance for mobile cooling.

Climate reported negative sales growth due to weaker demand for heaters and windows & doors products to the Australian RV industry.

Power & Control reported negative sales growth, impacted by a discontinued CPV business in China.

Other Applications reported negative sales growth due to a weaker performance for complementary products.

Sales split AM/OEM

NET SALES 413 SEK MILLION (460)

91 SEK MILLION (109)

OPERATING MARGIN (EBIT%)*

^*EBIT before items affecting comparability

PARENT COMPANY DOMETIC GROUP AB (PUBL)

Second quarter 2019

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 subsidiaries.

For the second quarter of 2019, the Parent Company had an operating profit (loss) of SEK -3 m (-5), including administrative expenses of SEK -60 m (-54) and other operating income of SEK 57 m (49), of which the full amount relates to income from subsidiaries.

Profit (loss) from financial items totalled SEK -114 m (-312), including interest income from subsidiaries of SEK 76 m (61), interest expenses to subsidiaries of SEK - m (-) and other financial expenses of SEK -190 m (-373).

Profit (loss) for the quarter amounted to SEK -4 m (-2).

First six months 2019

For the first six months of 2019, the Parent Company had an operating profit (loss) of SEK -2 m (-6), including administrative expenses of SEK -110 m (-92) and other operating income of SEK 108 m (86), of which the full amount relates to income from subsidiaries.

Profit (loss) from financial items totalled SEK -331 m (-519), including interest income from subsidiaries of SEK 148 m (117), interest expenses to subsidiaries of SEK - m (-) and other financial expenses of SEK -480 m (-636).

Profit (loss) for the first six months amounted to SEK -11 m (-5).

For further information, please refer to the Parent Company's condensed financial statements on page 11.

SIGNATURES OF THE BOARD OF DIRECTORS

The Board of Directors and the President and CEO certify that the Interim Report gives a true and fair overview of the Parent Company's and the Group's operations, their financial position and results of operations, and describes the significant risks and uncertainties facing the Parent Company and other companies in the Group.

Solna, July 17, 2019

Fredrik Cappelen Chairman of the Board

Rainer E. Schmückle Board member

Heléne Vibbleus Board member

Jacqueline Hoogerbrugge Board member

Erik Olsson Board member

Peter Sjölander Board member

Magnus Yngen Board member

Juan Vargues President and CEO

REVIEW

This interim report has not been subject to review by Dometic Group AB (publ)'s external auditor.

CONSOLIDATED INCOME STATEMENT

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Net sales	5,329	5,260	9,979	9,703	18,274
Cost of goods sold	-3,521	-3,503	-6,709	-6,567	-12,323
Gross Profit	1,808	1,757	3,270	3,136	5,951
Sales expenses	-626	-591	-1,189	-1,117	-2,259
Administrative expenses	-232	-226	-453	-417	-855
Other operating income and expenses	24	32	40	62	61
Items affecting comparability	–	–	–	–	-92
Amortization of acquisition related intangible assets	-74	-54	-150	-105	-219
Operating profit	900	919	1,518	1,557	2,587
Financial income	2	1	7	4	11
Financial expenses	-140	-73	-272	-203	-442
Loss from financial items	-138	-72	-265	-199	-431
Profit (loss) before tax	761	847	1,252	1,358	2,156
Taxes	-200	-218	-346	-354	-580
Profit (loss) for the period	562	629	906	1,004	1,576
Profit (loss) for the period attributable to owners of the Parent Company	562	629	906	1,004	1,576
Earnings per share before and after dilution, SEK - Owners of the Parent Company	1.90	2.13	3.06	3.39	5.33
Average number of shares, million	295.8	295.8	295.8	295.8	295.8

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Profit (loss) for the period	562	629	906	1,004	1,576
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit pension plans, net of tax	-37	9	-82	30	-3
Items that may be reclassified subsequently to profit or loss:	-37	9	-82	30	-3
Cash flow hedges, net of tax	-39	-21	-34	12	8
Gains/losses from hedges of net investments in foreign operations, net of tax	-85	-19	-113	-84	-14
Exchange rate differences on translation of foreign operations	47	650	712	954	554
	-77	610	565	882	548
Other comprehensive income for the period	-114	619	483	912	545
Total comprehensive income for the period	448	1,248	1,389	1,916	2,121
Total comprehensive income for the period attributable to
Owners of the Parent Company	448	1,248	1,389	1,916	2,121

CONSOLIDATED BALANCE SHEET (IN SUMMARY)

	Jun 30,	Jun 30,	Dec 31,
SEK m	2019	2018	2018
ASSETS
Non-current assets
Goodwill and trademarks	18,801	18,193	18,203
Other intangible assets	4,620	4,455	4,507
Tangible assets	2,152	2,107	2,111
Right-of-use assets	487	–	–
Deferred tax assets	510	732	627
Derivatives, long-term	–	11	0
Other non-current assets	93	73	71
Total non-current assets	26,663	25,571	25,519
Current assets
Inventories	3,483	3,707	3,772
Trade receivables	2,576	2,520	1,705
Current tax assets	92	226	86
Derivatives, short-term	39	110	107
Other current receivables	666	577	681
Prepaid expenses and accrued income	135	126	128
Cash and cash equivalents	2,618	1,089	2,113
Total current assets	9,610	8,355	8,592
TOTAL ASSETS	36,273	33,926	34,111
EQUITY AND LIABILITIES
EQUITY	16,782	15,824	16,029
LIABILITIES
Non-current liabilities
Liabilities to credit institutions, long-term	12,301	10,457	11,217
Deferred tax liabilities	1,905	2,016	1,944
Other non-current liabilities	159	44	153
Leasing liabilities, long-term	326	–	–
Provisions for pensions	841	697	739
Other provisions, long-term	200	152	191
Total non-current liabilities	15,732	13,366	14,244
Current liabilities
Liabilities to credit institutions, short-term	–	1,141	393
Trade payables	1,652	1,595	1,491
Current tax liabilities	403	337	399
Advance payments from customers	27	38	38
Leasing liabilities, short-term	167	–	–
Derivatives, short-term	21	68	108
Other provisions, short-term	296	307	295
Other current liabilities	262	361	203
Accrued expenses and prepaid income	931	889	911
Total current liabilities	3,759	4,736	3,838
TOTAL LIABILITIES	19,491	18,102	18,082
TOTAL EQUITY AND LIABILITIES	36,273	33,926	34,111

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IN SUMMARY)

	H1	H1	FY
SEK m	2019	2018	2018
Opening balance for the period	16,029	14,514	14,514
Profit (loss) for the period	906	1,004	1,576
Other comprehensive income for the period	483	912	545
Total comprehensive income for the period	1,389	1,916	2,121
Transactions with owners
Dividend paid to shareholders of the Parent Company	-636	-606	-606
Total transactions with owners	-636	-606	-606
Closing balance for the period	16,782	15,824	16,029

CONSOLIDATED STATEMENT OF CASH FLOW

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Cash flow from operating activities
Operating profit	900	919	1,518	1,557	2,587
Adjustment for other non-cash items
Depreciation and amortization	200	129	400	252	526
Adjustments for other non-cash items Changes in working capital	10	97	-32	69	122
Changes in inventories	387	157	413	-97	-41
Changes in trade receivables	-117	-286	-807	-910	-112
Changes in trade payables	85	-20	194	32	-80
Changes in other working capital	42	74	-8	218	36
Income tax paid	-191	-139	-328	-236	-313
Net cash flow from operations	1,316	931	1,350	885	2,725
Cash flow from investments
Acquisition of operations, net of cash acquired	–	16	–	16	-492
Investments in fixed assets	-90	-127	-176	-205	-422
Proceeds from sale of fixed assets	11	2	12	67	70
Deposit	–	–	–	-233	-233
Other investing activities	0	-2	-2	-3	1
Net cash flow from investments	-79	-111	-166	-358	-1,076
Cash flow from financing
Borrowings from credit institutions	3,208	-104	4,702	438	3,183
Repayment of loans to credit institutions	-4,419	–	-4,473	-233	-2,849
Payment of lease liabilities related to lease agreements	-35	–	-77	–	–
Paid interest	-94	-100	-175	-187	-376
Received interest	1	1	2	2	7
Other financing activities	-4	-7	-34	-53	-88
Dividend paid to shareholders of the Parent Company	-636	-606	-636	-606	-606
Net cash flow from financing	-1,979	-817	-692	-639	-729
Cash flow for the period	-742	3	492	-113	920
Cash and cash equivalents at beginning of period	3,363	1,066	2,113	1,159	1,159
Exchange differences on cash and cash equivalents	-3	20	13	43	34
Cash and cash equivalents at end of period	2,618	1,089	2,618	1,089	2,113

PARENT COMPANY INCOME STATEMENT

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Administrative expenses	-60	-54	-110	-92	-171
Other operating income	57	49	108	86	166
Operating profit	-3	-5	-2	-6	-5
Interest income subsidiaries	76	61	148	117	259
Interest expenses subsidiaries	–	–	–	–	–
Result from shares in subsidiaries	–	–	–	–	528
Other financial expenses	-190	-373	-480	-636	-777
Profit (loss) from financial items	-114	-312	-331	-519	10
Group contributions	113	315	323	520	510
Profit (loss) before tax	-4	-2	-11	-5	516
Taxes	–	–	–	–	1
Profit (loss) for the period	-4	-2	-11	-5	517

PARENT COMPANY BALANCE SHEET (IN SUMMARY)

	Jun 30,	Jun 30,	Dec 31,
SEK m	2019	2018	2018
ASSETS
Non-current assets
Shares in subsidiaries	16,228	16,622	16,228
Other non-current assets	5,778	5,575	5,573
Total non-current assets	22,006	22,197	21,801
Current assets
Current assets	635	758	1,825
Total current assets	635	758	1,825
TOTAL ASSETS	22,641	22,955	23,626
EQUITY	10,108	10,234	10,755
PROVISIONS
Provisions	56	34	42
Total provisions	56	34	42
LIABILITIES
Non-current liabilities
Non-current liabilities	12,301	10,457	11,217
Total non-current liabilities	12,301	10,457	11,217
Current liabilities
Current liabilities	175	2,230	1,611
Total current liabilities	175	2,230	1,611
TOTAL LIABILITIES	12,532	12,721	12,870
TOTAL EQUITY AND LIABILITIES	22,641	22,955	23,626

CONDENSED NOTES

NOTE 1 | ACCOUNTING PRINCIPLES

Dometic Group AB (publ) and its subsidiaries (together "the Dometic Group", "Dometic" or "the Group") 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 accounting and valuation principles in this interim report correspond to principles applied by the Group in the 2018 Annual Report and should be read in conjunction with that Annual Report, available at www.dometic.com.

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 1-18 and pages 1-11 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.

New and amended accounting principles for 2019 adopted by the Group

IFRS 16 Leases

IFRS 16 Leases came into effect as of January 1, 2019. The Group has adopted IFRS 16 Leases and it is applied by the Group since January 1, 2019. This supersedes all lease requirements under IFRS.

For the IFRS 16 transition, Dometic decided to apply the simplified retrospective approach and has not restated comparative amounts for 2018, the year prior to first adoption. All right-of-use assets are measured at the amount of the lease liability on adoption, and are adjusted for any prepaid or accrued lease expense.

The Group uses the practical expedient for non-lease components, which means that each lease component and any associated non-lease component will not be treated separately but accounted for as one. Leases with similar characteristics can as a practical expedient be treated under the so-called portfolio approach. Dometic Group does not use this practical expedient but will account for leases on an individual basis. Dometic Group is using the recognition exemption for short-term leases and lowvalue leases and classifies all IT and office equipment as lowvalue assets and hence does not include them in the balance sheet.

The impact on the Group's consolidated financial statements was an opening balance increase, deriving from a lease liability and right-of-use asset of around SEK 500 m, each adjusted by the amount of prepaid or accrued lease payment. There was no effect in equity. The details below illustrate the link to recognized IFRS 16 opening lease liabilities from the previously classified operating lease commitments of IAS 17 Leases.

Future minimum lease charges for operating leases at nominal value on December 31, 2018 amounted to SEK 698 m. This amount is reduced by short-term lease agreements of SEK 164 m, low-value asset lease agreements of SEK 16 m, increased by lease term extensions of SEK 25 m, and reduced by the impact

of discounting of SEK 26 m. This results in an opening lease liability of SEK 517 m for January 1, 2019.

The detailed description of the accounting and valuation principles for leases applied by the Group in this interim report can be found in Note 2.1.1 Changes in accounting policies, New and amended accounting policies for 2019 and later, of the 2018 Annual Report.

IFRIC 23 Uncertainty over Income Tax Treatments IFRIC 23 – Interpretation 23 Uncertainty over Income Tax Treatments is effective as of January 1, 2019. The transition has no impact. The Group has applied IFRIC 23 as of January 1, 2019.

NOTE 2 | RISKS AND UNCERTAINTIES

Risks are part of any business and Dometic is no exception. As a global Group with production and distribution all over the world, Dometic faces risks that can impact its ability to achieve established goals, including financial targets. Effective risk management of business and market risks, operational risks (including sustainability risks), compliance and regulatory risks and financial risks creates opportunities and effective risk protection.

Dometic works according to an established risk management process with risk identification, risk assessment, risk prioritization, risk response and monitoring. The risk universe together with global and regional risk registers, risk assessments, risk maps, risk owners and the Risk Committee constitute the cornerstones of the Group's risk management. Risk responses could be avoiding the risk, reducing the risk, sharing the risk or accepting the risk. Examples of risk responses are internal control frameworks, internal quality programs, whistle blowing functions, insurance programs and crisis management procedures for offices and management, as well as for local factories and warehouses, as part of business continuity plans, and also to follow the development of external risks in order to be able to act quickly. Risks and risk responses are assessed annually and documented in a risk register that generates risk maps on Group and regional levels. These risk maps are the foundation for the Group's operational risk ownership and also serve as a foundation for the Group's control functions, such as Internal Control and Internal Audit, for their prioritization of focus areas. Dometic's risk owners are members of Group senior management as well as specialists and functional heads of departments. Risk owners assess their respective risks in terms of likelihood and impact and discuss and approve risk responses in terms of risk mitigating activities.

The Risk Committee is the operational forum on Group level with the purpose to discuss and make decisions on risk-mitigating activities and is represented by Finance, Operations, Product Development, HR including Health and Safety, Legal, Quality, Internal Control and Internal Audit. The CFO is the chairman of the Risk Committee. The main tasks of the Risk Committee are to assess Group risks, discuss recent risk-related issues, facilitate input from Risk Committee members and review riskrelated reports and evaluate and approve risk mitigating activities. Formal minutes with agreed actions are recorded and

reviewed in the next meeting. The work of the Risk Committee is regularly reported to the Audit Committee and the Board of Directors annually.

Financial risks are risks associated with Dometic's global presence and can influence the profit and financial position, as well the ability to achieve established goals. Financial risks are managed in accordance with the Finance Policy approved by the Board. Financial risks are divided into currency risks, interest rate risks, liquidity risks, financing risks, credit risks and tax risks.

As Dometic is a global Group with operations in many countries, Dometic is exposed to both transaction risks and translation risks. Transaction risk arises where assets and liabilities are stated in different currencies and certain net sales and costs arise in different currencies. Translation risk arises when the Group's financial statements are consolidated, and the currencies differ from the functional currency of certain operating subsidiaries. Changes in interest rates can impact the Group's profit and cash flow. Liquidity risk refer to the inability to meet payment obligations due to insufficient funds or inability to meet payment obligation without significant higher financing cost. Maintaining the Group's capital structure and reducing the cost of capital through optimal capital structure are crucial for the Group's ability to continue to generate returns for shareholders. Failure by counterparties to meet payment obligations can have a negative impact on the Group's profit and financial position.

Changes in tax laws could increase Dometic's tax burden or otherwise have a material adverse effect on the Company's business, financial position and profit. The cancellation or restriction on the use of the Group's tax loss carry forwards may have a significant impact on the Group's tax burden, including a potential imposition of tax surcharges, and could have a material adverse effect on the Company's business, financial position and profit. Dometic's tax burden could increase if tax authorities consider that Dometic does not act in accordance with applicable rules on transfer pricing. Dometic´s risk and risk management are described on pages 67-71 and on pages 97-100 of the 2018 Annual Report.

NOTE 3 | FINANCIAL INSTRUMENTS

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 values of Dometic's derivative assets and liabilities were SEK 39 m (Q2 2018: SEK 121 m) and SEK 21 m, (Q2 2018: SEK 68 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.

TABLE TO NOTE 3 – FINANCIAL INSTRUMENTS

Jun 30, 2019	Balance sheet carrying amount	Financial instruments at amortized cost	Financial instruments at fair value	Derivatives used for hedging
Per category
Derivatives	39	–	9	30
Financial assets	5,954	5,954	–	–
Total financial assets	5,993	5,954	9	30
Derivatives	21	–	1	20
Financial liabilities	14,373	14,373	–	–
Total financial liabilities	14,394	14,373	1	20

NOTE 4 | SEGMENT INFORMATION

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Net sales, external
Americas
OEM	1,629	1,811	3,287	3,542	6,736
Aftermarket	974	925	1,557	1,482	3,022
Americas net sales, external	2,603	2,736	4,844	5,024	9,758
RV	1,397	1,620	2,589	2,990	5,595
Marine	1,092	1,012	2,058	1,850	3,757
CPV	53	58	101	109	229
Other (Lodging and Retail)	61	46	97	75	177
Americas net sales, external	2,603	2,736	4,844	5,024	9,758
EMEA
OEM	965	955	1,958	1,879	3,532
Aftermarket	1,347	1,108	2,333	1,881	3,173
EMEA net sales, external	2,313	2,064	4,291	3,760	6,706
RV	1,083	900	2,160	1,756	3,180
Marine	243	224	467	415	805
CPV	569	555	997	963	1,769
Other (Lodging and Retail)	417	385	667	625	951
EMEA net sales, external	2,313	2,064	4,291	3,760	6,706
APAC
OEM	203	233	396	448	857
Aftermarket	210	227	448	471	954
APAC net sales, external	413	460	844	919	1,810
RV	225	258	444	479	925
Marine	28	24	65	57	112
CPV	42	44	75	89	153
Other (Lodging and Retail)	117	134	260	294	620
APAC net sales, external	413	460	844	919	1,810
Net sales, external
Americas	2,603	2,736	4,844	5,024	9,758
EMEA	2,313	2,064	4,291	3,760	6,706
APAC	413	460	844	919	1,810
Total net sales, external	5,329	5,260	9,979	9,703	18,274
Operating profit (EBIT) before i.a.c.
Americas	398	475	657	809	1,470
EMEA	411	335	679	544	814
APAC	91	109	182	204	395
Total operating profit before i.a.c.	900	919	1,518	1,557	2,679
Items affecting comparability
Americas	–	–	–	–	-34
EMEA	–	–	–	–	-57
APAC	–	–	–	–	-1
Total items affecting comparability	–	–	–	–	-92
Operating profit (EBIT)
Americas	398	475	657	809	1,437
EMEA	411	335	679	544	756
APAC	91	109	182	204	394
Total operating profit (EBIT)	900	919	1,518	1,557	2,587
Financial income	2	1	7	4	11
Financial expenses	-140	-73	-272	-203	-442
Taxes	-200	-218	-346	-354	-580
Profit (loss) for the period	562	629	906	1,004	1,576

DOMETIC INTERIM REPORT – Q2 2019

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Net sales, external
Americas
Food & Beverage	477	598	926	1,139	2,135
Climate	981	1,095	1,794	1,991	3,797
Power & Control	922	850	1,744	1,558	3,161
Other applications	223	194	380	336	664
Americas net sales, external	2,603	2,736	4,844	5,024	9,758
EMEA
Food & Beverage	919	883	1,629	1,578	2,662
Climate	1,088	881	2,079	1,607	2,986
Power & Control	156	143	305	292	522
Other applications	149	157	279	283	536
EMEA net sales, external	2,313	2,064	4,291	3,760	6,706
APAC
Food & Beverage	193	219	403	454	937
Climate	178	196	351	363	685
Power & Control	6	7	15	24	38
Other applications	36	38	74	78	150
APAC net sales, external	413	460	844	919	1,810
Net sales, external
Americas	2,603	2,736	4,844	5,024	9,758
EMEA	2,313	2,064	4,291	3,760	6,706
APAC	413	460	844	919	1,810
Total net sales, external	5,329	5,260	9,979	9,703	18,274

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 2018 Annual Report. As part of the strategic repositioning of Dometic presented on May 28, 2019, Dometic identified four application areas. Dometic will during a transition period from Q2 2019 to Q4 2019 report net sales by application areas, business areas and sales channels. As from Q1 2020, regions will remain as segments and net sales will be reported by application area by region and by sales channel.

Inter-segment sales were as follows.

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Americas	103	109	215	209	389
EMEA	100	145	201	275	464
APAC	678	805	1,340	1,744	3,165
Eliminations	882	1,060	1,757	2,228	4,017

NOTE 5 | ITEMS AFFECTING COMPARABILITY

	Q2	Q2	H1	H1	FY
SEK m	2019	2018	2019	2018	2018
Restructuring charges	–	–	–	–	-101
Relocation China	–	–	–	–	9
Total	–	–	–	–	-92

The table below lists items affecting comparability by function.

	Relocation China				Restructuring charges				Total
SEK m	Q2 2019	Q2 2018	H1 2019	H1 2018	FY 2018	Q2 2019	Q2 2018	H1 2019	H1 2018	FY 2018	Q2 2019	Q2 2018	H1 2019	H1 2018	FY 2018
Costs of goods sold	–	–	–	–	9	–	–	–	–	-66	–	–	–	–	-57
Sales expenses	–	–	–	–	–	–	–	–	–	-6	–	–	–	–	-6
Administrative expenses	–	–	–	–	–	–	–	–	–	-29	–	–	–	–	-29
Other operating income and expenses	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
Total	––	–	–	–	9	––	–	–	–	-101	–	––	–	––	-92

NOTE 6 | AMORTIZATION OF ACQUISITION RELATED INTANGIBLE ASSETS BY FUNCTION

SEK m		Amortization Trademarks	Amortization of Customer Relationship Assets	Amortization of Technology	Amortization of intellectual property	Total
Costs of goods sold
Q2	2019	–	–	-12	-6	-17
Q2	2018	–	–	-11	-6	-17
H1	2019	–	–	-23	-12	-35
H1	2018	–	–	-22	-11	-33
FY	2018	–	–	-44	-23	-67
Sales expenses
Q2	2019	-9	-46	–	–	-55
Q2	2018	–	-37	–	–	-37
H1	2019	-24	-90	–	–	-114
H1	2018	–	-73	–	–	-73
FY	2018	–	-152	–	–	-152
Total Amortization of acquisition related intangible assets
Q2	2019	-9	-46	-12	-6	-74
Q2	2018	–	-37	-11	-6	-54
H1	2019	-24	-90	-23	-12	-150

NOTE 7 | RIGHT-OF-USE ASSETS

Right-of-use assets information is specified below:

Depreciation and amortization of SEK 400 m includes depreciation of right-of-use assets of SEK 86 m.

	Depreciation and amortization
	Q2 Q2 H1 H1
SEK m	2019	2018	2019	2018	2018
Depreciation and amortization	-200	-129	-400	-252	-526
Add back depreciation related to right-of use assets	44	–	86	–	–
Total	-157	-129	-314	-252	-526

Right-of-use assets

SEK m	Jun 30, 2019	Jun 30, 2018	Dec 31, 2018
Buildings	444	–	–
Machinery, equipment and other technical installations	43	–	–
Total	487	–	–

NOTE 8 | TRANSACTIONS WITH RELATED PARTIES

No transactions between Dometic and related parties that have significantly affected the company's position and earnings took place during the first half of 2019.

NOTE 9 | ACQUISITIONS AND DIVESTMENTS 2019

Dometic has not made any acquisitions or divestments during the first half of 2019.

2018

Acquisition of Kampa

H1 2018 – -73 -22 -11 -105 FY 2018 – -152 -44 -23 -219

On December 3, 2018, Dometic acquired Kampa, an innovative provider of Retail and Aftermarket products based in the UK. Kampa significantly broadens Dometic's Retail and Aftermarket offering in EMEA, with good potential for further expansion and profitable growth.

The cash purchase price was GBP 50 m on a debt and cash free basis excluding potential earn-out elements. The total cash purchase price amounted to GBP 57.9 m including earn out elements of GBP 8.5 m. GBP 8.5 m has been accounted for as a non-interest-bearing liability to the sellers.

If the acquisition had been consolidated as of January 1, 2018, the effect on proforma net sales would have been GBP 40 m and EBITDA of 7 m. Aftermarket sales account for 100% of revenue. The business operates with a small fixed asset base, which requires limited Capex each year.

The summary of value adjustments recognized as a result of the preliminary purchase price allocation of Kampa totals SEK 512 m, including goodwill of SEK 309 m, trademarks and tradenames of SEK 16 m, customer relationships of SEK 208 m, other intangible assets of SEK 1 m, operating assets of SEK 222 m, cash of SEK 31 m, other non-current liabilities of SEK 47 m and operating liabilities of SEK 229 m.

Goodwill is justified by new potential customer relationships and market position. Acquisition-related costs in the consolidated income statement for Q4 2018 amount to SEK 10 m. Sales and cost synergies are expected to be limited. The acquisition has affected consolidated net sales with SEK 12 m and operating profit of SEK -3.5 m, including step-up inventory of SEK -2.6 m.

NOTE 10 | SIGNIFICANT EVENTS AFTER THE PERIOD.

On July 15, Dometic extended its maturity on bank loans and revolving credit facility from 2020/2022 to 2024/2025. No other significant events have occurred after the period.

RECONCILIATION OF NON-IFRS MEASURES TO IFRS (ALTERNATIVE PERFORMANCE MEASURES)

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 the company's 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.

Core working capital

Consists of inventories and trade receivables less trade payables.

EBITDA

Operating profit (EBIT) before Depreciation and Amortization. Depreciation also includes depreciation of right-of-use assets as from January 1, 2019, when IFRS 16 Leases came into effect.

EBITDA margin

EBITDA divided by net sales.

Leverage

Net debt excluding pensions and accrued interest in relation to EBITDA before items affecting comparability and including acquisitions proforma. Any cash deposits with tax authorities are treated as cash in leverage calculation.

Net debt

Total borrowings including pensions and accrued interest less cash and cash equivalents.

Operating cash flow

Cash flow from operations after investments in fixed assets excluding income tax paid.

Organic growth

Sales growth excluding acquisitions/divestments and currency translation effects. Quarters are calculated at comparable currency, applying latest period average rate.

RoOC – Return on Operating Capital

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.

DEFINITIONS AND KEY RATIOS

AM

Aftermarket.

Capital expenditure

Expenses related to the purchase of tangible and intangible assets.

CPV

Commercial and Passenger Vehicles.

EPS – Earnings per share

Net profit for the period divided by average number of shares.

FY 2018

Financial Year ended December 31, 2018.

i.a.c. – items affecting comparability

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.

Interest-bearing debt

Liabilities to credit institutions plus liabilities to related parties plus provisions for pensions.

LTM

Last twelve months.

Net profit

Profit (loss) for the period.

OCI

Other Comprehensive Income.

OEM

Original Equipment Manufacturers.

Operating capital

excluding goodwill and trademarks

Interest-bearing debt plus equity less cash and cash equivalents, excluding goodwill and trademarks.

Operating profit (EBIT)

Operating profit (EBIT) before financial items and taxes.

Operating profit (EBIT) margin

Operating profit (EBIT) divided by net sales.

RV

Recreational Vehicles.

Q2 2019

April to June 2019 for Income Statement.

Q2 2018

April to June 2018 for Income Statement.

Working capital

Core working capital plus other current assets less other current liabilities and provisions relating to operations.

YTD 2019 Year to date. January to June 2019 for Income statement.

YTD 2018

Year to date. January to June 2018 for Income statement.

PRESENTATION OF THE INTERIM REPORT

Analysts and media are invited to participate in a telephone conference at 10.00 (CEST), July 17, 2019, 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 42 706

UK: +44 333 300 9032

US: +1 646 722 4903

The webcast URL and presentation are available at www.dometic.com

FOR FURTHER INFORMATION, PLEASE CONTACT

Johan Lundin Head of Investor Relations and Communications Phone: +46 8 501 025 46 E-mail: ir@dometicgroup.com

CONTACT DETAILS

Dometic Group AB (publ) Hemvärnsgatan 15 SE-171 54 Solna, Sweden Phone: +46 8 501 025 00 www.dometic.com Corporate registration number 556829-4390

This information is information that Dometic Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 CEST on July 17, 2019.

This document is a translation of the Swedish version of the interim report. In the event of any discrepancy, the Swedish wording shall prevail.

FINANCIAL CALENDAR

OCTOBER 24, 2019: Interim report for the third quarter 2019 JANUARY 31, 2020: Year-end report 2019

ABOUT DOMETIC

Dometic is a global market leader in branded solutions for mobile living in the areas of Food & Beverage, Climate, Power & Control and Other Applications. Dometic operates in the Americas, EMEA and APAC, providing products for use in recreational vehicles, pleasure and workboats, trucks and premium cars, and for a variety of other uses. Our motivation is to create smart and reliable products with outstanding design. We have a global distribution and dealer network in place to serve the aftermarket. Dometic employs approximately 8,000 people worldwide, had net sales of SEK 18.0 billion in 2018 and is headquartered in Stockholm, Sweden.

DISCLAIMER

Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly commented upon, the actual outcome could be materially affected by other factors, (a) changes in economic, market and competitive conditions, (b) success of business and operating initiatives, (c) changes in the regulatory environment and other government actions, (d) fluctuations in exchange rates and (e) business risk management.