Munters Group AB (publ)

Welcome to this webcast of Muntas Q3 results 2020. I'm Ann-Sofie Jansson, responsible for investor relations. With me here today, I have our CEO, Claes Forstram, and our CFO, Annette Kumlin. We will go through the presentation and... For those of you who are viewing on the web, please feel free to post your questions throughout the whole presentation. And then we take them when we open up for the Q&A. And then we will also open up for the Q&A for those of you who are listening in over the phone. With that, I hand over to you, Claes.

Thank you, Ann-Sofie. And once again, welcome to this quarter three presentation. Let me shortly summarize the quarter. A quarter that delivered solid order intake, a strong order intake, solid operational performance resulting in good margin development and cash flow improvements. Our organization has really lived up to the dual challenge of handling the current COVID-19 business situation and at the same time delivered on our long-term journey, our strategic intent. So with that, this is the agenda today. It is the highlights of the third quarter. Myself talk also about the implementation of our strategy. Our CFO Annette come up and talk about the third quarter result more granular. Myself summarize and then of course open up for questions. And moving forward into the quarter, a strong profitable growth. Order intake increased organically with 21%, net sales up 8%, the EBITDA margin also increased 8% and resulted in 14.8% as the margin. This was driven by operational improvements and good performance in general. Very pleasing was that our leverage reached 2.5 and we are now in our medium long term target of 1.5 to 2.5. Also pleasing, we are growing in our prioritized markets. The order intake growth mainly driven by service and industrial segments in Americas for air tech and China and the swine segment for food tech. Yes, the market, we saw some improvements, but I think it is both wise to say that in current COVID-19 situation, it's very, very difficult to predict where the market is going. We continue to deliver on our strategy set forward and everything that we communicated in conjunction with the quarter two, we have started to deliver on. As mentioned then, the data center in US, expand that in Texas, leave the commercial segment with the exception of Walmart in US, and then also close down some of the operations in Netherlands as well. customer and prioritized segments is very, very important. And here is one of those examples, lithium batteries in the US. As communicated earlier, we took an order in the beginning of the quarter of 12 million US dollars. What is very pleasing that we have also received supplemented orders of around 6 million US dollars. And all this is about proven standard ultra dry climate offerings from hunters, something that we are world class in delivering. Deliveries of this is expected to take place during 2021. And in short, what do we really provide? We provide increased energy efficiency through our products. We deliver strong application knowledge at site. It is not only the product, it is what the product delivers. And on top of that, we deliver peace of mind. Our service personnel driving through what needs to be done. A little bit more granular. Order intake in Americas and Asia really improved. As you can see, 44% of our business comes from Americas, a 30-plus increase. In APEC, an 11% increase. And in EMEA, some 5% and hovering around that area. AirTech really improved. through lithium batteries, pharma sub-segment, but also through service. And I think it's worth to mention here, yes, measured compared to our net sales, we didn't increase the ratio of service, but measured towards the order intake, we were close to 17% on the service in order intake. EMEA, Airtek had a weak, somewhat weak development there, mainly through misdelimination. Foodtech, some segments and some markets were up, but in general a pretty flat development. And Asia, improving when it comes to Airtek in certain segments, but then when it comes to Foodtech, yet another quarter where China and the swine segment really delivered. So that was in brief the quarter and more to come when Annette walks us through this. Implementation of our strategy. You heard me talk about this many, many times. And once again, let me start from the outside of the circle. Manter solutions are in many places. we make it possible. It is about windmills, it is about food production, it is about food processing, it is about making the electrification of the car fleets around the globe possible, it is about driving data traffic in data centers. And our solutions are inside all of this, i.e. we have a very good trajectory when it comes to global trends moving forward. And the strategy that we have put aside, that is put ahead, that is customers concentrate on customer value, drive go to market models into the market innovation focus where it makes sense continue to invest and align the portfolio and prune out product that is not applicable for our industry markets deliver and concentrate on markets where we can be on the medal podium and also be firm and saying that we can leave markets that we don't believe in excellence in everything we do. For me, it's very much about the continuous improvements every day, but also there to take decisions and execute on those decisions when it comes to operational excellence. And of course, it's our people at the end. It's our organization, a more decentralized organization with the ownership of the operations in our business areas, and then also to upgrade our teams in a good way. A few examples of this. Our ambition when it comes to the markets. I talked about the medal podium. I have also mentioned several times that we aim to reach 30% of our sales related to service. And as I said earlier, we are progressing step by step here. We concentrate on certain markets, and I will not mention all of them here, but just to highlight a few, data centers and lithium batteries. But then also when it comes to digitalization in the food chain of protein production. And this quarter, as you've seen, it generated 8% sales, very much in line with what we have put ahead. Another area, innovation in this case, our firm target to reduce our standard assortment with 40%. I'm very pleased here. We have reached about 25% and I'm very convinced that we will be able to reach the 40% by end of next year. The second step here is to take a firmer grip on components. How are we building up our products? The number of screws, the number of articles, the number of spare parts, etc. And here we will set the firm target during the quarter that comes. But my ambition is clear. I foresee that in the coming three years, we will be able to reduce that with some 25%. And then, of course, the long-term journey. modularize in everything we do. All the new products that we bring into the market that can be modularized, those should be modularized. I will show you a few examples of that moving forward. Innovation. And here I'm really pleased to talk about an innovation that we recently have put into the market. It's called SciCool. It is a dry solution for the data centers. It gets a lot of credits from customers. We are in the process now to bring it into the market. that is brand new. Another area here that is an old, still very, very good performing product, Fi6, and especially the glass deck component in the Fi6. This, I have high hopes for the future in many different industries. I think this is something that we can drive to the market and it will generate a lot of customer value. And what is the customer value, Erdan? It is about reducing energy consumption. It is about providing reliability and cost efficiency, total cost of ownership. I will not go through this slide in detail, but this is an example of where we modularize our products. In the past, the product range was eight different fans. Now we bring it down to be four different fans that can be expanded and put together so it covers the customer needs, but with less components. And here the customer value is very much, once again, reducing energy consumption, reduced due to the standard components, the installation cost, and the maintenance. And at the end, really deliver improved animal welfare. With those examples and glimpses into our strategy delivery, I would like to hand it over to you, Annette, please.

Thank you, Claes. Then let's dive into the performance for the third quarter. Just to give a bit of a summary, Growth. Yes, we had good growth in the third quarter, which actually has left us now almost just below year to date. When you look at the margin, improved quite a bit. And as you will see, both areas, business areas have done it. And that has left us now year to date reaching almost 13% margin. And then when it comes to the leverage, as Claes said, we have reached now two and a half. So it took us about five quarters to lift margins and also improve the leverage. Because at the end of the day, it's about growth. It's about turning growth into profits and also turning the profits into cash. Looking at order intake, it was very strong, so FX suggested it was about 21%. Driven by Airtek, where we had good growth when it comes to the battery segment, we had good growth when it comes to the data centers, and also good growth when it comes to the pharma and also services. However, when you look at missed elimination and data centers in the US, that was slower in the third quarter. Foodtech continued good growth in China, particularly in the swine segment. And that's really a pickup after the African swine fever that occurred in 2018. And there was just a bit of a hiccup in the beginning of this year due to COVID-19. Then when you look at US and Europe in foodtech, it's a bit slower there or continued slower there. When you look at year-to-date figures for order intake, yes, we are above the market. Obviously, we have been above last year. Obviously, we've been impacted a bit by the COVID-19. But at the end of the day, we're about 3% above. And if you look at the handling of COVID-19 also, it has been a bit mixed when it comes from a demand point of view. Net sales, yes, the quarter was very good, and particularly when it comes to the areas of air tech, looking into data centers, where our services was a bit flat. We had, looking into our regions, obviously just a bit flatter in Europe, mainly, but also in Asia. When you're looking at food tech, growth is really driven by China again, offset to a certain extent by then Europe and America's. Year-to-date, yes, we're still a bit below, but coming back to COVID-19 and the handling of it, it has been managed quite well by the company. And today we are more or less only 2% below from an FX point of view. If we turn to the next page, then we can look at Aertec in particular. So if we look at Airtek, we have then a growth of about 15% and current suggested about 22%. Demand really driven by the lithium batteries, and Claes had previously talked about the orders that were received, but also the pharma segment is working very well. Services had a very good order intake in Q3, and that's in spite of actually COVID-19, where we do also, as we have earlier talked about, have introduced a virtual service offering also. If we look at year-to-date, then the weak development in misdelimination comes true, and it has gone through during all the quarters, but we have also seen that the market has come down, as most of you have seen. But when you look at the rest of the segments, like data centers, lithium batteries, pharma, very strong. So at the end of the day, we're plus 2% versus last year. When it comes to net sales, again, very strong quarter. Strong quarter for the whole group, but when you look at the sales for Airtek, we were just behind last year, basically. But if we took away the currency effect, we're talking about plus 6%. Data Center has grown during the whole period and has had continued good, strong growth also in Q3, but obviously it has been offset by Europe and also by Asia. Services, flat in the quarter. If we look at missed elimination, again, it has throughout the year been weaker. And we can also see that we had had a weaker development in India, obviously. Again, impacted by COVID-19. If we look at year to date, slightly behind last year, currency adjusted about 4%. And again, it's the missed elimination impact that comes true. But it's partly offset by the growth that we have in the data center in U.S. Fitting then, we have talked about China actually picking up already during end of last year, and that has continued throughout this year, except for obviously in the beginning of the first quarter when COVID-19 broke out. So looking at the Q3 results, we actually had a growth of around 12%. And if we take away the currency effect, it's actually already up to 20%. And year-to-date, when you look at order intake, it's still a continued growth for food tech, again, impacted by China. If you look at net sales, again, the order intake has come through in the sales side. And again, it's the China that's driving it, whereas we can see that US are continuing throughout the negative development, although it might be so that we can see a bottoming out from an order intake point of view in the end of this year. The COVID-19 outbreak obviously have impacted us. But again, if you look at China, the African swine fever had a bigger impact and there is a pickup now because of the need of food at the end of the day. And if we look at year to date, then we do have a positive development versus last year. Small, but plus 4% at least. So coming in then to the adjusted EBITDA, the pickup during Q3 obviously part of the growth that we have seen in certain areas, but also by the continued improvement from a margin point of view. And the program that was launched during last year obviously have impact for us. So at the end of the day, we reached almost 15% in total. And looking at the year-to-date figures, we're talking about almost 13%. If we look at our strategy and our implementation of the strategy, you remember that we announced in Q2 that we would look at our footprint optimization and customer offering. And part of it was obviously to take down the non-Walmart commercial business in the US and also make sure that the expansion that we saw in data center actually was introduced from a manufacturing point of view in one of our units in the US, in the Texas plant. and also about making sure that we consolidated our operations in the Netherlands. Those activities have continued throughout Q3, and as you see, we've taken some costs related to it, and those were already incurred during the second quarter. Again, when it comes to the outlook of this full program, we're talking about a cost of around 188 million, and once implemented, we see an impact of about 70 million from a profit point of view. If we look at the cash flow, again, the growth that we have turned into profits has also been turned into cash. So we are continuing our good cash conversion ratio. And that is really what we needed to do. And that has also led that we have actually come down to a leverage of about 2.5. And with that, I would like to hand over to you, Klaas, to talk about the summary.

Thank you, Annette. So a brief summary of the quarter that has passed and then we open up for questions. And as said in the beginning, a quarter summarized by strong order intake and good operational performance driven predominantly by the industrial segments in North America and food tech in China, the swine segment. We have generated profitable growth. We have strengthened the financial position and the market has improved. But once again, it is a lingering situation due to the COVID-19 development here. So it's very difficult to predict the impact of COVID-19 moving forward. We are well aligned with future growth trends, and I'm very, very optimistic that we step by step will be able to implement our strategy and over the years improve our performance as well. So with that, we open up for questions.

Thank you very much. So then I would first like to open up for questions for those of you who are listening in on the telephone conference.

Thank you. Ladies and gentlemen, if you wish to ask a question over the phones, please dial 01 on your telephone keypads now to enter the queue. So far, we have two questions on the line. The first is from Max Fuden of Danske Bank. Please go ahead, your line is open.

Hi, good morning. Thank you for taking my questions. The first one is on EBITDA margins. If you look at the gross margin improvement, I get it to some 40 basis points year-over-year, and then you have lower selling and lower admin-related cost. I assume part of the sales cost reduction is related to the current situation we are in.

um but then so basically my question is how large part of the cost reduction do you deem sustainable going forward in a sort of normalized world and that i think it's an excellent question for you too i think it's actually hard to say how much is uh how much will stick and how much will increase obviously as as i think most companies have ended up in is that there's no traveling basically at all we are doing our virtual meetings So the way that we're going to work going forward after COVID-19 or living with COVID-19 most certainly would mean that part of it will stay, whereas partly it will increase again. But I think it's also when you look at actually the margin improvement, it comes also from actually resetting the base that we did last year. So there are other marginal improvements that have caused us to deliver better results.

And Max, just to end it up, I mean, we are still, this quarter, we outbeat our mid-term targets when it comes to adjusted EBITDA. And with that said, we are still very, very confident that we will continue in the long run then to reach those levels more sustainable.

Yeah, that's clear. If you look on a comparison basis, I assume that the savings program, some of that should be structurally taking out costs, if you compare to Q3 this year compared to last year. Is that correct?

We have definitely moved in if we go back to the old, if I may say, the old and full potential program. Some of those costs are gone and will be gone forever. But then, of course, I mean, when it comes to current situation with less travel, et cetera, a large part of that will come back. Not all when we are back in normal business operation.

Let's see how many teams meeting we'll have in the future. Just another follow-up question there on the EBITDA margin. If there's a mix effect here that we should be aware of. If you look at AirTech, you see the data center is growing. And what I, to my understanding, data center used to have a lower margin group at least. But anything there that can help us with either service having a larger share, but higher profitability, et cetera. But it's boosting the margin a little bit.

You see, you see a mix of impact also in in airtex margins. Yes.

And then and then perhaps you can add also, I mean, China in food tech, yes, that is driving a positive mix. And on the other hand, we see a very good development in how we operate data centers, I would like to say like this data center now compared to three years ago, is a more solid operated business.

Yes. Alright, final one. The SciCool product, data center cooling without the need of water, has that changed the potential addressable customer reach for you?

I look upon it like this. I mean, now we have a portfolio of different solutions. We are very, very strong since the past in what we call the Oasis solutions then. And now we're complementing our offer with this type of products. So that for me gives a comfortable feeling that we can address different needs depending on customer and market situation. Beside that, as I mentioned, the FI6 type of products that is exposed to many different categories, data center being one of them. I think this is a good example on a untapped potential of previously driven innovation that we now need to take to the market in a better way.

Thank you so much.

So I think we have some more questions from the telephone conference.

Thank you and we have one side question on the phone so you will need to unmute that.

Hello, is it my turn? Yeah, perfect. Sorry, there's some disturbances on the line. Good morning, Claes, Annette and Ann-Sofie. It's Carl here from ABG. So first question, it has to do some part with what Max was asking. I seem to recall that in the past you mentioned that when you sell a bit more controllers, for example, it's been positive for margins. So my question is simply, have you seen a continued good development for these kinds of products?

When you look at the food tech offering, obviously the digitalization actually triggers these type of things. So yes, we do see positive improvements on that side. But again, as Claes said earlier, also when you look at the mix effect we have, there is impacts from the geographical mix also that comes into play, but also from a product side. And also when you look at our SAS orders, they are increasing a bit, although from a very, very small level, but we can see that there are mixes coming in.

And to be a little bit more concrete on the SAS order, it is roughly than 1% of food tech's turnover than to be a little bit more granular. And he has to emphasize on what Annette said on the controllers. We are more and more convinced that the controllers as such is one of our main benefits in the food tech market. And we get more and more interest around that.

Understood. And then really on data centers in the U.S., and you mentioned that it's been slightly weaker this quarter. I understand the visibility problem here, but do you think that it's perhaps just a temporary weakness so that we might see demand returning in Q4? I think you mentioned earlier in the year you had good order intake here. Or do you think that there is something that has happened in the market that has made more customers more hesitant to place orders in this segment?

We are very confident in that the market will continue to grow in the way we expected it. I double-digit growth year by year, the coming quarter, so to speak. And as you know, data center is one of our more predominant project-driven type of businesses. Some quarters it's up and some quarters down. But on the average, I mean, we have a healthy backlog and we don't foresee any worries when it comes to this.

the end of last year we had some good orders coming in almost earlier this year so it's about it's it's it's the flow it's comparables and it's flow in the market basically and when you see also the throughput that we have from a sales perspective it's coming out now also which means that we see the increase in the net sales so it's it's it's movements understood two more questions from me first of all asia if you would please just uh

remind us here how much China accounts for of the Asian region today, and perhaps in comparison to how it was earlier in the year, because I can imagine that, as you say, China is the standout region here in terms of growth.

China is the largest part of Asia. You could say that I don't have the number exactly on top of my mind, but it's the definite larger part of the region. When it comes to food tech, and here I have to remind each and every one of us that Normally, the second quarter is always the strongest quarter for food tech. We had a good third quarter as well, but normally the second quarter and normally the fourth quarter is always the weakest. And this is due to seasonal effects. I mean, it's wintertime, et cetera, when you can install it and so on. But China is the larger part of Asia. Anything to add on?

Yeah, and also please remember again that if you have followed us for some time, then you know also that in 2018 and up to the third quarter in 2019, China was on a decline because of the African swine fever. So again, when you look at what has happened this year, it's a pickup and it's a longer pickup because it's not COVID-19 related really. It's back to the 2018. So again, comparable narrative comes into place.

But in general, our view on the Chinese market is that the market is strong in the segments that we operate in.

Yeah, and if you look at, I mean, food production and swine production in particular over the years, it dropped quite a bit, but it's picking up again because at the end of the day, people need the animal proteins to eat.

Understood. So final question has to do just with how... how do you believe one should think about it going forward because food tech margins have been very very impressive to say the least but do you think there's more room to grow profitability wise in food tech or should we perhaps have higher expectations on continued margin improvements stemming from from air tech

I look upon this and I mean, Annette can supplement here also with her view, but I look upon monitors as such. We can divide it into two buckets and one bucket is that is what I call Gnet. The many, many small improvements year by year, quarter by quarter, month by month that will continue. And a very good example here is the way we have been working with operating working capital. It was a project that was installed and now it has started to sit in our DNA, so to speak, and that type of activities will continue. Then, of course, I mean, Airtek is a larger part of our business. Of course, the opportunities for further improvements, both on top line in absolute numbers and on bottom line is larger within Airtek.

But I would say also, if you look at the story that we have been working on since last year, it's really that we reset the base, which made some improvements, obviously, on our margins. But then a lot of the activities that we're doing now, which we have embedded in the strategy, they are longer ones, like, for instance, pruning out of products. making sure that we have an innovation cycle that turns out products faster, but also obviously making sure that we platform-based them. And as Claes said, also with the working capital, which means that we streamline operations to make sure that is as lean as possible. All of those things will come into place as well, but they take longer time to implement. It's not a one month activity, then we're on the go. So that has to come into play also when you look at us.

And as communicated earlier, I think we have elaborated on that quite a few times then, we need to continue also to invest in an innovation, in our market position, etc. But so far, I see no worries about that those investments will not bear fruit, I mean, gradually over the coming years.

All right, sorry for this, my final question had to do with SKU reductions you were talking about, run rates 20-25%, 25% perhaps, and then you target 40%. So I can imagine there are some pieces here that are a bit more, let's say, low-hanging fruit. So do you think that we will continue to see, you know, 25%, 30%, 35%, 40% or should we perhaps see 70% SKU reduction in the near term, and then the final 30 will happen throughout the remainder of 2021, just so we get an understanding.

My view is like this, as I think you can hear. I'm very confident and very pleased about how the organization has acted. We have strong performance in product management in many other places when it comes to this continuous work. And I would be disappointed if we would not by end of this next year be on 40% or in the closeness of 40%, plus or minus a few percent. So I'm very confident there. Then when it comes to the other steps, I mean the one that we're talking about components, etc. That is a more gradual work that has to be done also step by step. But as you can see, I put an ambition here of 25%. We will work granularly with that and see if that needs to be reduced or maybe it can even be improved. But I'm very pleased with the way we're acting and delivering on this.

All right. Thank you. Best of luck in your continued gnet.

Thank you.

thank you we've had a few more questions come through on the phones the first is from the line of matt's lease of kepler chevro please go ahead your line is open yeah hi thank you uh well just to well follow up i guess on orders there i mean very strong figure and i just wondered could you see some sort of catch-up here from the second quarter and or is it all about underlying market improvement that We should expect to continue into the post-quarter and going forward.

If we talk about the order intake, I think we can divide it into different pockets, so to speak. And one pocket is, of course, as you've seen, we have taken larger projects, lithium batteries and data centers, etc. What is the lead time of such an order? It could be in between half a year up to a year, depending on where in the construction phase the customer is. And then we have others in the, let's say, more normal industrial or the normal construction food tech arena, there we talk about normally it's a quarter, a quarter plus lead time on it. So with that, I mean, it was a very pleasing order intake, but some of it was project related. And as I said in the beginning, I mean, we were strong in lithium batteries and somewhat weaker than in data centers during this quarter. But Annette, anything to add?

No, no, but again, as Klas is saying, the project orders, they come true and that's And that obviously makes things go up or go down depending on when they're coming. But the baseline when it comes to food tech, that's coming from basically non-project business. But this will happen. And again, if you look at building data centers or building lithium batteries, it's a capacity increase that goes stepwise. So depending on when the capacity is being built, then obviously we will receive orders as well.

And maybe I could add one thing. I'm also pleased to very pleased in how we have been able to conduct the transfer from the commercial side in North America and bring in data center products, more standard related products into the factory and the facility that earlier produced commercial products only. I think also that is something that has shown that our organization is really up to the speed in handling change in a good way.

Great. And about the, I mean, you're certainly trading now about the EBITDA margin target and I guess could you, well, it seems more like a floor now than a target. Is that

right or was it sort of a... I can give a brief comment and please, Annette, here as well, compliment. It is, I mean, we have set long-term, medium-term targets. We are now in two of the targeted areas. We are delivering on those targets, but this is one or in some cases two quarters. At the same time, we will continue to invest in certain areas. So Whenever we feel ready to adjust or upgrade or change, I mean, then we will communicate on that. But at current, I mean, we continue to reach a more sustainable performance towards those targets.

Yeah, and to add also is obviously what we have talked about before is the seasonality that we have during the year, where normally for FUTEC, quarter two is the best one, followed by quarter three. And then if you look at air tech, it increases over the year. But we need to meet those mid-term targets sustainable throughout the whole year. And there we have a bit to go.

Okay, great. Thanks a lot.

Thank you. And the next question comes from the line of Anders Roslund of Ferritus Securities. Please go ahead. Your line is open.

Yes, good morning. I have a question regarding food tech. and this structural change here with the strong China and weaker US and Europe. Do you think that demand in Europe and US is below sort of normal demand and there will be a catch-up effect or is it just depressed markets? Do you have any sort of idea of where we are in Europe and the US?

If we take US then to start with, I mean, the market in North America has been depressed or let's say compressed is perhaps a better word for a few years actually. We see some signs of improvements in the marketplace, but at the same time, we cannot say that it is really picking up. And this is... connected to an overcapacity in some of the areas, especially the swine production area. And then, of course, also related to the, call it the trade wars or the conflict to some extent in between China and the US then. In Europe, I think it is more fair to say that that is a little bit also driven by current market situation. China, it has really picked up. But with that said, I mean, don't expect that it will be 20% plus every year in China. That is perhaps a good view on that market.

No, nothing to add. It's long-term trends that we have seen kicking in. And then when it comes to Europe, yeah, Europe has been impacted, I think, more by COVID-19 than what we have seen in the other regions.

Okay, excellent. Just a question regarding your strategic overview. You are set and done with all the different parts of your business, but I'm thinking of missed elimination. Are there any reasons to believe that you could sort of change your strategic overview, or is it set for the time being?

I mean, we have been very clear and we are still clear that every year we will review our business portfolio. And it's, generally speaking, three different call it grids that we are using. First of all, it's the strategic fit. link to our business? Second is, can we be on the medal podium, i.e. be the market leaders in that? And thirdly, do we also foresee a long-term profitable growth that generates cash? And if that grid is coming through, and we still believe that when it comes to misdelimination, it is a set in the market driven by the oil prices and driven by the existing business climates, so to speak. But if we eventually, and that goes not only for misdelimination, it could be another area as well, we will come to the conclusion that, I mean, it is not ticking the criteria. Of course, then we will re-evaluate our decisions in that segment. Annette?

No, I mean, it's like we did when it comes to the non-Walmart commercial business, which we thought were subscale. So, again, this is a yearly cycle that we work with.

Okay. And then my last question also regarding strategic overview. What do you think about data center in Europe? Are there any possibilities of coming back to that market again?

I think I said already at my first quarterly presentation roughly a year ago then that the strategic intent with data centers both in North America and Europe, that was absolutely right. And then you heard me talk about, I mean, what went wrong and we shouldn't dwell about that in Europe. We said we concentrate now on North America and we deliver according to plan. And actually we are to some extent ahead of that plan. If we would be ready to move outside North America, I mean, then we will do it in a more diligent and, let's say, waterproofed way and take it step by step. So to summarize it, when we are ready, then we will also start to move into other markets. But at current, we concentrate on North America.

Excellent. Okay. Thank you for me.

Thank you. And we have one further question on the phones. That's a follow-up from the line of Max Rubin of Cancer Bank. Please go ahead. Your line is open.

Yeah, thank you. So first, just if you could confirm that the service share of order growth was some 70%. And secondly, if you could give any guidance on the profitability on service you have.

As I said, and take this as a ballpark number then, it was in the closeness of 17% in the quarter and actually to some extent driven by the decision of exiting the commercial business in North America but maintain the business related to Walmart. Then when it comes to profitability levels, the only granularity we will give that it's definitely above the average. And I look upon a service business that it should deliver in the line of when it's really up and running in the line on 30 to 40%, not saying that that is what we are delivering, but when we are fully up and running in the way we should, that is where we should be. Annette?

No, nothing tight. It's more profitable. But again, we don't really give guidance.

Yeah, but is there anything structural to them? I mean, if you look at the best in class industrial companies with high service shares, it's the average.

That's a good question, Max. And it is a stepwise approach. One is the attachment rate to the existing business. That is all the way from, as I said earlier, I mean, bring in a service agreement when you take an OM business. come back and work with it if you haven't got it. So it's attaching services from the beginning. And here it is a structural change that we are moving forward. We have a new service manager. I see good performance taking place there. The other part that is more long term, that is how can we servitize this? How can we digitalize it? And a good example is especially in food tech when it comes to the sauce waters, etc. A similar progress will take place also in air tech, i.e. we will sell more and more quality sensors connected to our hardware, so to speak. And the third part, that is this feet in the street, to simplify it. I mean, organically, but also in a string of pearls, step by step then, when it comes to service companies and acquire that. And by doing that, I mean, As I said, the ambition is 30%. That is high for our type of companies, but I don't see that that should be out of line. But I'm not talking about next year or the year after. This is a long journey. But if we can climb by a percent per year and some year, perhaps 2% units, it is not too far away.

Okay. Thanks so much.

Thank you. Once again, if there are any further questions on the line, please dial 01 on your telephone keypad now. OK, there seem to be no further questions from the phones at this time.

Perfect. Thank you very much. And for the moment, we have no further questions from the web. So with that, I would like to thank you who are viewing us online and thank you for those who have listened in to the telephone conference. We are looking forward to seeing you again when we present the Q4 results in February. in a webcast and telephone conference. So thank you very much.

Thank you.