Munters Group AB

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.