Munters Group AB

Good morning and welcome everyone to this quarter one report. And as already stated, you will listen in to me, Claes, and our CFO, Annette. And at the end of the call, we will also open up for questions. And before I start with the formal report, let me give a few words in general about the last quarter. I am very pleased with the dedicated work done by our employees, where we have focused on safety first for us, our partners and customers, as well as supporting system-critical industries such as food production and food processing, pharma industry, as well as communication industry for them to operate. It is also, I feel, very encouraging that our strong efforts with maintaining our supply chain, customer focus and delivery without larger and major disturbances in these challenging times have generated success. So I think this really shows the strong spirit of Munsters and our people. And with that, over to next slide and the highlights the agenda and the highlights later on so the agenda will be highlights or the quarter that has passed it will be me going through that and then of course the one result presented by annette more in depth myself coming back to strategy and sustainability reporting and our strategy moving forward and then myself summing up and open up the questions so with that then moving over to next slide as well and the highlights for the quarter And the impact was impacted by the COVID-19 outbreak. With that said, water intake and net sales had the impact. But all our production units, except two minor ones, operated without any major disturbances during the quarter. We saw a robust demand in January and February, except in China when it comes to February. in march it was negatively impacted by the outbreak in europe and america where where we saw a recovering demand coming up in china mainly driven by full strength and as i said earlier very pleasing that other industries have been regarded as system critical in most markets they have a continuous focus on improvements the order intake all in all declined with eight percent with a still healthy water backlog. Net sales declined with seven percent organically and we saw a slightly increased EBIT margin mainly due to our continuous streamlining of indirect costs and mitigations on the COVID-19 effect. Our clear focus now and moving forward is on cash and continuous improvements in the operations. I'm also very pleased that we are setting up and continuing setting up a winning team. We are represented by Pia Grant-Gärdelinder, who has been appointed president of Foodtech. Pia is joining in at latest in mid-August and will bring with her a strong and very well-appreciated leadership style. With that, changing over to the next slide. As I said, demand was impacted by the COVID-19. With that, we see still both long and short-term activities in the market and in the end-user segments. And moving over to the different regions, in Americas, we saw an increase compared to last year. In MEA, a decrease. And in APAC, a slight decrease, as commented earlier. And drilling in a little bit deeper, Dan, in Airtek, we saw a strong development in the subset segment supermarkets, commercials in US. We also saw a strong development of component sites, 2Ms, and services for Airtek in US. TrueTech had a good development in America, primarily driven by good development in Mexico and for software solutions in the US market. Emilia? At that, Airtek, weak development in primarily the industrial segments. Service in Airtek had a weak development, very much a consequence of the COVID and closing down on key and larger markets. Foodtech had a weak development, driven by a decline in Scandinavia and Italy. And here we can also talk about the COVID impact. And at the end, Airtek, at the end, Asia, Airtek had a weak development in the industrial segments. Foodtech had a strong development and a rebound to some extent in the swine segments, but also good progress in layer and broiler segments. Then moving over to the next slide. And customer first and supplying and supporting growing segments. Here we have an example of a data center water taken in quarter one. It is a digital crossroad data center in the US. It is a so-called co-location site, which is that segment continuing to grow. Our solution, very pleasing, delivers energy efficiency and is using water from the Lake Michigan. And here I can say I'm very pleased with the continued progression of Data Center North America. We talk about stability, continuous improvement, focus on the right customers, moving into growth and innovation. It was a good decision to maintain that and continue to improve Data Center North America. And with that then, customer first and a little bit outside in the market, I hand it over to you, Annette, to dig in to the details.

Thank you very much. If we turn to page seven, if we look at our performance this quarter compared to last quarter, last year, and also the midterm target, yes, we have been impacted by COVID-19. And the next phase is down 7% as well. They made it due to the industrial segment within air tickets. If you look at the EBITDA margin, we're at 8.3% compared to last year's of 8.1. And this is a consequence of the continued work with driving cost down and optimization, also the COVID-19 activities that we have been working on. That being said, when you normally look at monthly performance during the year, the Q1 is normally a bit slower and a bit lower, and then it starts to increase quarter by quarter. Hence why when you look at comparison to the mid-term targets, Q1 is usually a bit lower than that. When it comes to leverage, we have been able to drive down leverage quite a bit compared to Q1 last year, coming down from 4.3 to 3.1. And this is really the ability to turn profits into cash and also making sure that the working capital situation is being driven in a good way. The work is continuing with that. That being said, though, when you compare to December 2019, we have a slight increase, but that increase is mainly due to the ethics impact with the US dollar, impacting the debt package that we have. If we turn to the next page, at the end of the day, yes, demand has been impacted by COVID-19, and we have an order intake which is about 8% lower than last year, mainly driven again by the industrial segment. If you look at Airtek, it's about 11% lower, and generally you see most of the geographies being down. If you look at Zootek, there's been a good development, particularly in America, but also in China, that picks up after the COVID-19 situation. Net sales is down 7%, again mainly driven by Airtek's industrial segment. Lower sales in most geographies within Airtek, and when it comes to Zootek, again, APEC is weak, obviously, because coming out of COVID-19 takes a bit of time from a net sales perspective. The US is weaker in all segments within Fintech, whereas Europe is flat. If we look at services in total during Q1, it was about 15% of net sales. If we turn to the next page and look into Airtek, yes, we have a weak demand in the industrial segment, which basically impacted Airtek, coming down to an negative development of order intake by 11 percent on the other hand when you look at it you have been strong development when it comes to the commercial segment so this is an also state of components so yeah which has shown good uh good progress if you look at data centers in the us it declined a bit and also a missed elimination net sales is down seven percent for air tech again industrial segment is driving this whereas if you look at things commercial segments In the US, it's performing very well. And when you look at data centers, very good development in Q1, whereas risk elimination has declined basically in the marine segment, and also the power segment in India has been a bit weaker. If we turn to the next page, food tech. Food tech has had good demand in spite of the COVID-19 outbreak, and China has picked up quite nicely in March. Basically, we had a flat order intake where we had strong development in America from Mexico and also from the software solutions in the US, whereas Asia has been growing particularly when it comes to China where we have seen some nice development in swine, particularly picking up after the African swine fever that impacted us heavily since the end of 2018. We also have strong growth in EMEA and the boiler segment. EMEA, we have seen a bit softer demand. Net sales down 7%, all regions down except for EMEA, where the development was flat. Again, APEC had a weaker development due to the COVID-19 outbreak in China, which mainly hit China in February. And Americas again. experience we can say is in all segments, and there we have seen the overcapacity in the swine segment, which has been hurting us for the past year or so. When it comes to our Ibiza, if we turn that into next page, we had a slight improvement in Ibiza, and this is the continued work from last year when we resized the organization, plus also that we have been working on mitigation activities when it comes to the COVID-19 outbreak. And when you look at Airtek, slight weaker margin basically caused a lower gross margin where we had negative product mix, which partly was offset by lower indirect costs. Fulltech, on the other hand, seen a slight improvement, so we're up to 11.8%, basically driven by a slight improvement in the gross margin and also lower indirect costs. Slipping over to the next page when we look at cash flow and and how that has been going. We can see when we look at the cash conversion, which is basically adjusted above the cash flow from operations, that we have increased the level from a sort of like 35% during end of last year to a level from 55% during these months in the Q1 situation. Again, when we're looking at cash flow from operating activities, they have been slightly impacted by inventory build-up under the COVID-19 outbreak in order for us to make sure that we handle our sourcing flow correctly. And when we look at the net cash refund period, yes, we have been impacted basically by also the assets impact in the US dollar. If we turn to the next page, as again said, the work that we have been doing in turning the property into cash and also making sure that we work with the working capital has made us come down to a level of 1.3. The increase during the last quarter again was related to the U.S. dollar impact. When it comes to our available cash, they remain strong at the 1.7 billion cash. Over to you, Claes, to talk about strategy.

Thank you, Annette. Flipping over to strategy and sustainability reporting and changing slide immediately. Implementation of a refined strategic direction. In today's situation, it's all about acting in today's market, at the same time driving improvements for the future. And Munters is very well positioned in a long-term growing market, driven by climate change, energy efficiency and digitalization. And as said earlier, and proven during this period. We support and act in industries with system-critical functions and or industries with solid growth fibers behind them. So despite the great attention on managing current situation, we are also moving forward with respect to touch. And here we will put even longer attention on how to align future product assortment and pruning out products that we don't need, and optimizing our manufacturing footprint. So it's all about acting today and setting us up for the future. And moving into that then, for customer success in a healthy planet, that's the purpose for us. And it all starts with innovation. It is focusing on the future, on the right products for the future. driving them to modernization, be able to use bits and pieces and puzzle them together, not just inventing a larger assortment. It is about replacing two products with one new, driving energy savings and supporting growth trends. But it's also about markets. It is to act in the right areas. It could be geographies, segments, or it could be sub segments as well but even more it is about being customer centric and here i think we really show that that is at the heart in current environment it is to work with them in the right way it is about driving service it is about value selling it is about getting their attention for what will make customers more successful into the future. But even more so, it is about excellence in everything we do. It is the everyday improvement in every part of the organization. It is also about sometimes to reduce, on and off to stop or exit. That is very much the mantra. And when you can turn this into spin with innovation, markets and customers supported with excellence in everything we do, in the core then, it is about our people. It is about setting leadership. It is about creating business understanding in the right type of organization with a mandate very, very close to where the business decisions needs to be taken. It is about the culture and people development. And all this then, we will continue to drive, even during this business environment. A few examples. Launch of a new controller in Foodtech. I think this is something that proves what I talked about earlier. I see it as the best of two worlds. A better and a more user-friendly product, that is at the same time reducing the assortment. This product replaces several sub-products from the past. It has started to sell well and it has been well received with positive feedback. One example of innovation and digitalization. And if we move over to the next slide then, it is about customers and markets. We have accelerated our remote assistance to merge reality in order for our service personnel to be able to serve customers either at the premise, supported with experts sitting in offices or around the globe, or even so moving forward, be able to support customers without us being there in the premises. also here the best of two worlds driving efficiency and customer support at the same time two more examples and one is our continuous increase on on sustainability it is for our customers it is for us it is actually for the coming generations and our sustainability framework is divided into two parts resource efficiency responsible business practice and people and society and some examples on on the KPIs that we have green electricity moving from 31 percent of total consumption to 40 percent last year safety first total recordable incident rate moving from 3.4 to 2.7 And then diversity and inclusion, the proportion of female leaders moving from 20% up to 25%. And here, this is just the beginning of our journey. We have started to build up even more ambitious goals to set the agenda moving forward. So walk the talk. successful improvements in our operation i think this is a good example to show what we're driving right now this is from monterey in mexico that mainly produces evaporative cooling pads in the past it struggled very much with both deliveries and quality what is fascinating to see here and i think that's the tone that's moving forward that is It includes leadership changes, teamwork, a constant focus on lean, resulting in stability and efficiency. Both a higher output and improved quality and lower energy consumption. A good example on the path that we have put ahead. So with that then, let me just shortly summarize and open up for Q&As. we, on the market moving ahead, we see a continued challenging business environment in the coming quarters. At this time, it is difficult to see the visibility of the affected outbreak, and it's limited. With that said, we have a healthy order backlog, but of course, it's depending on the length and the severity of the outbreak that is currently ongoing. And it could be as earlier stated, risk for increased product delays. At the same time, we are well positioned in the long-term growing market, and our strategic journey continues. And I see clear evidence that the strategy is also delivering in time of crisis, because it's the same triggers that we need to work with. So with that, Moving over to Q&A and open up for you on the other side. So, have you received any questions?