Munters Group AB

Welcome to the presentation of our Q4 and full year results for 2020. I am Ann-Sofie Jansson and I'm Head of Investor Relations. I want to say welcome to those of you who are viewing on the web. those of you who are listening in on the telephone conference. And I would like you, the ones that are listening in on the webcast, to know that you can post your questions throughout the whole presentation, and we will take them afterwards. And with me today, I have Annette Kumlin and Claes Forsström, our CEO. And now I hand over to Claes.

Thank you, Anne-Sophie. And once again, very, very much welcome to this quarter four and full year presentation. Before I start, I would like to say like this, that Q4 concludes a year that in many ways have been unprecedented in society, for business and for Manters in regards to COVID-19. In summary, Manters has delivered Solid business performance, operational improvements, while supporting our customers, resulting in improved profit and a strong cash flow generation. All in all, creating a stronger base for our future growth journey. With that, let's move into agenda. The agenda is highlights for the full year. Myself will present that, as well as implementation of our strategy and the progress that we are making there. I will hand over to Annette to talk about the fourth quarter and the full year 2020 result, summarize and then open up for Q&As. a stronger base for the future growth year. If I talk about the year, order intake increased, FX adjusted by 2%, and net sales increased with some plus 1%. We had an EBITDA adjusted improvement of close to 5%, reaching 906 million Swedish krona, and that despite of an increasingly stronger headwind from currency during the year. Both Airtek and Foodtech showed good progress and we ended up at close to 13% adjusted EBITDA margin. What was very pleasing was that the leverage went down from 2.9 down to 1.9 during the year. Also, I'm happy to say that the board proposed a dividend of 0.7 Swedish krona per share for 2020. The year has been challenging in the market conditions. The pandemic had mixed impact for us. The most and largest impact has been during the second and the fourth quarter. There has been delays in deliveries to customers and postponed investment by customers. All production units have been operational during the year except one minor unit. With this I would like to say as well that our focus when it comes to production units that is to keep it safety first, i.e. have a safe workplace for our employees. So on and off we have closed some production units and then open up after clean up and so on. And there is still a low visibility in the market demand due to lingering COVID-19. And what I can see during the quarter that it's more and more constraints, both in customer supply chain and also in our supply chain. But now we're entering the next phase of our journey. We have an organization set up with clear responsibility and accountability in place. I feel that we have achieved growth in the prioritized areas with great focus. They're moving ahead with the product rationalization and investments in R&D. And we have created a better way of working. Now, it's a strong focus on turning Mantris into a more customer-centric company with zero impact on the planet and growth drivers to be captured. A little bit more granularly into the quarter four. If I summarize it, it's the decline in Americas and growth in EMEA. Data centers in the US had a weak order intake on the back of a strong 2019. That was partly offset by good development in pharma, lithium batteries, and supermarket subsegments. I'm very confident that data centers is on the right track. It is. That is the area where we have the largest project type of business, and one quarter will be lower than other quarters. But I see strong progression and have strong trust in all things we do in data centers U.S. What was very pleasing was that service had a positive development in U.S., You will hear me speak later on about long-term targets, but I am pleased both with the parts of service, the size of service, and also the result that it has delivered to the bottom line, in particular in the US. Foodhack had a weak development, mainly driven by an overcapacity in the swine market in the US. Nothing has changed there. EMEA, Airtek, weak development by missed elimination that was partly offset by the lithium subsegment. Foodtech, some weak development from the effects of the COVID. It was customers that didn't open up for us into the farms, etc. In Asia, we had growth in APEC driven by strong performance in pollution control connected to missed elimination. And food continued to deliver stable development in the swine segment in China. And if I summarize it, growth in EMEA and APEC and decline in Americas. More detail will come later on when Annette talks about the quarter and the full year. The implementation of our strategy. You have heard me speak about this and we are here for the long run. Everywhere in many, many customer critical operations, Mantris is part of the success. It is about innovation. It is about both driving the right markets and services to the market, but also to take out non-well performing products and lower the assortment. In the markets, we focus on markets where we can gain market share and we can generate profit. And customers, it's all about value selling. And then the continuous improvements and when needed, cut off non-value contributing parts. People is at the center and setting them in the right organization. And all of all, it delivers on the purpose, customer success and a healthier planet. I will not go through all of those details, but let me highlight on this slide that I see good progress in each and every one of those areas. For the long-term ambition, I'm confident that we will deliver on those, especially when it comes to innovation. I see good progress in the portfolio reduction. We are now above 30%. The ambition is now set to reduce the components with 25% end 2023. And here we talk about fasteners, metals, electronic components, etc. And if I summarize this, this is a three-part type of story. It is about driving innovation and products. That is done by cleaning up the non-important product portfolio, taking out and simplify the components. And then when you develop products, have them modulized and make them then easy to use for the customer. When it comes to markets, excellence in everything we do in people, let me drill in a little bit on the coming slides. You have heard me talk about the need for customers to trace their food, i.e. from the small chicken all the way to the McDonald's or the Kentucky Fried Chicken. I'm so happy that we have joined with JBS Pilgrims, the largest animal protein producer in the world, to implement an artificial intelligence supply chain system. The platform will provide centralized end-to-end planning, and you can follow what a chicken eats, how the chicken moves, and you can predict the weight of the chicken and thereby generate a lot of customer value to the end user. I think here we have the opportunity to jointly with industry change that industry moving forward. It is setting the base for traceability in the food chain. You've heard me talk about expanding our service offer, and that has happened during the pandemic. Our long-term ambition is to reach 30% of our net sales. I see strong progression here. We reached 14% of net sales for the full year, and we landed on 17% of net sales during the fourth quarter, and that despite the challenges with the pandemic. And as I said earlier, I see strong progression in North America and US, both when it comes to how much of the sales is driven from service, but also development in the profitability. And also here, it is a three pronged approach. It is about having a better mix with more service, securing a more stable long term company, but it's also about generating improved profitability from the service that we have. focus on excellence and efficiency it is about creating a playbook it is about creating systems introducing leading ways of working and that has happened during the year it is about commit and deliver on decisions that we have taken so all the measurements that we announced when it comes to sharpening the customer offering and the footprint optimizations are delivering according to plan and implementation will be completed during 2021. But very pleasing is also that it generates good results. The move in operating working capital going down from 14% a year ago to 10% now sends the signal to me and to our organization that we are delivering on what we have committed to do. I'm very happy here. And the new organizational structure is completed now. It is a clear ownership in the business areas when it comes to the business. It is about supporting them with different areas of strategic importance, like strategic operation, like innovation, and like commercial excellence. I think we have a team set to deliver for the coming years. Sustainability. Sustainability is fully integrated in Manters' strategy. It is about resource efficiency. It is about responsible business practice, and it's about people and society. Resource efficiency, how we use our own resources and how we help customers to deliver on their targets. During the year, we have set higher ambitions that we will start to deliver on during 2021. We are focused on understanding and analyzing from where are we going and what do we have to do, especially when it comes to carbon dioxide emissions and safety, diversity and general environmental work. And what is pleasing that is a company is based on their people. And the belief in what management says. And here I think we have made good progress. I'm so happy to see that our people tells us that they see what we see. With that, I hand over to Annette to deep drill into the fourth quarter and the full year.

Super. Thank you very much, Claes. So let's look into our performance versus last year and our midterm targets. As Claes said, we have had a very good performance in spite of COVID-19 impacting us. There's been a lot of hard work obviously behind it, but all in all good. So we have grown, particularly if you look at Q4, it was very strong and also which led to then that we had a full growth during the whole year of 2020. When you look at the margin, we're at above 13% in the quarter and almost 13% for the full year. Now we do have a negative FX impact, which actually would have led to almost a 1% higher adjusted EBITDA margin in the quarter and above 13% for the full year. We have worked very hard also to make sure that we make Mantos financially strong. So leverage has now come down below two times. If we look at the growth in the business, it has been rather good. And it comes basically from China and food tech, where we have had a growth during the quarter in the order intake, which was quite substantial. And also, if you look at air tech, it has shown good performance. If we look at the FX adjusted order intake for Q4, it was just below last year. And one of the impacts was obviously that we had data center in the U.S., which had a very strong quarter in 2019. So that impacted in the wake of this. And then also we have actually taken out, as you know, the commercial non-Walmart business in the U.S., which also had a slight impact. If we look at the full year, it was actually above last year. It was mainly driven by air tech industry for US and also China, then for food tech again. And when you look at the impact that we have had from COVID-19, actually the biggest impact has been during Q2 and Q4. So all in all, when you look at the demand side of it, and also if you're looking at the backlog, it's been quite strong for us during the year, in spite of COVID-19. Sales in the wake of the order intake has been good, obviously, particularly when you look at the food tech side, continued growth in China. And we have also seen some growth when it comes to EMEA and the broiler segment. When we're looking at air tech, we're again coming back to where service is having a good performance, for instance, and also lithium batteries, just to mention a few. If we look at the net sales for the full year, as we said, slightly above last year, again, services is actually having a good development. And we can see now that services in the quarter was 17%, which led that it grew one percentage, basically, compared to what we have seen before. If we particularly dive into air tech, one can say that one of the areas that have grown a bit also is pharma, and that is kind of like in the circumstances when looking at what's going on with COVID-19 and the testing, where we have seen a demand coming in from our side. Obviously, when you look at air tech, we have missed elimination, which has been coming down quite a bit during 2020 because of the market situation, although we had a nice order intake coming in in the Q4. When we look at the full year, basically same level as last year. Again, we have lithium batteries and services and also industrial, which had a good performance. And then again, also remember that we're taking out non-core commercial segment in the U.S., which actually has an impact of a couple of percentages, as said before. If we look at sales then, above for the quarter, good growth in, for instance, pharma then. Also services in the supermarket segment in the US was very good. And again, weak mis-elimination and also data center declined a bit. Again, in the wake of having a good performance in 2019. And if you look at services then for the full year, actually, if you look at it in the air tech setting, it's about 20% of net sales. If we look at food tech, again, the performance is, as you have seen earlier, good growth when it comes to China. And you have seen also that the broiler in the EMEA is coming up, whereas when you look at America, it's been sluggish, so to say, and also that in the wake of the COVID-19 pandemic. Order backlog also for FTSE quite good going into 2021. And hopefully we see that coming true later in the year. And then when we look at the net sales side, again, very strong in quarter two, again, China driving it. Although what we can see now is that the growth rate in China is coming down compared to what we saw in Q4 2019. And full year again, very strong performance with plus 8% in spite of the COVID-19. But also remember that this is in the wake of also having the African swine fever coming in in 2018 and particularly impact in 2019. If we look at EBITDA then, again, I mean, we have worked quite hard, as Claes have been saying, to make sure that we set the foundation for future growth and also working with improvements in our value chain. So part of that is coming through now when you look at 2020. And then obviously also when you look at, for instance, FUTEC for the full year, you also see obviously that the volumes are coming through. Again, we had a big FX impact during Q4 2020. Basically, the whole FX impact we had for the full year actually happened in the fourth quarter. And it took down our performance for the year with 0.3% basically for the full year. So it's about 20 million that was cut off from us. What we have been doing is obviously that in the wake of setting up the strategy during the early spring, we're also obviously starting to deliver on it. And we took also in Q2, if you remember, a decision to sharpen our organization and also to take out some non-value-added businesses like the non-Walmart commercial business in the U.S., That whole program was estimated to cost about 188 million Swedish crowns with about 136, which was IRC. And when we look at the performance during the year, we have been able to implement certain measures. And also in parts of it, we can see that the cost was a bit lower than what we expected from the beginning. So we're down to the 124 instead of 136. At the end of the day, as earlier said, also we're looking into a savings of around 70 billion being fully implemented then by end of, at an annual run rate end of 2021. So we're all in all delivering so far according to the plan. Again, very strong cash flow development. It has continued and it's about getting into the DNA on how we work with operating working capital, which is setting through. So Q4 was extremely good and we have come down. So operating working capital is about 10% of our net sales compared to about 14% in 2019. Yes, in the wake of actually having a negative FX impact on profits, we had a slight headwind actually on the development of the debt valuation. But again, the biggest impact when you look at how we have performed on leverage is really coming down to our own work of setting the right DNA in working with financial balance sheets. So cash conversion, very good. As you can see, we were actually quite high, the highest we have seen. And we have particularly certain areas that were delivering good on the American side. The leverage, as we have talked about, has consequently come down to 1.9. And this is really also about setting the foundation for the future growth, which is not only related to obviously organic growth, but also making sure that we can prepare ourselves for also M&As further on. So with that, I would like to hand over to Claes to do the summary and also conclusion.