Munters Group AB

Welcome to the presentation of our first quarter result for this year. I'm Ann-Sofie Janssen and I'm head of investor relations. And I want to welcome for those of you who are listening in on the conference call and also for you who are on the webcast. Please note that for you on the webcast, you can place your questions throughout the whole presentation, and then we take it at the end of the presentation. And then we also open up for questions on the conference call. And with me here today, I have our CEO, Claes Fossström, and our CFO, Annette Kumlin. And with that, I hand over to you, Claes.

Thank you Ann-Sofie and welcome to this quarter report presentation. Before I start, I just want to summarize the quarter. It was a quarter that delivered strong profitable growth in targeted market segments. a solid cash flow and that while we were handling a challenging supply situation in a very good way. I'm pleased with the result that we have delivered and all the efforts our employees have done during the quarter. With that, over to the presentation. And the agenda will be like this. First, highlights in the quarter by me. And then after that, implementation, our strategies, some status updates there. And then I will hand over to Annette for the quarter financial highlights, summarize it, then open up for questions. So the first quarter, there was growth driven by business area air tech. If I pick two sentences or two highlights, it was a strong growth, improved market conditions. The order intake increased some 20%. It was driven by continued strong development in industrial segment of air tech. An increased backlog of orders and a net sales increase of 14%. Also here, air tech, strong increase in the industrial segment, but also good development of food tech in China. The adjusted EBITDA improved to close to 200 million with a margin of 12.3%. A stable leverage. The improved market conditions were there, especially in the industrial segments. We had effects from the COVID-19 with shortages in the supply chain and we expect those challenges remain for the coming month. We handled it well during the first quarter and we expect to continue to be diligent in this area. The execution of our strategy continued with an optimization of our footprint in the supply chain. Here, in particular, a production site for data center operations. Also important, we have now a strategy defined for business area food tech. Going forward, we aim to accelerate implementation both in the equipment area and the digital area of the business. If I take a little bit closer look into the order intake quarter one, growth in China and US are the main headlines. Take a look upon the well-balanced share now when it comes to the three different market regions. APAC leading the pack with 66% growth of FX adjusted, but also solid growth in EMEA and Americas. Annette will come back to the details here, but if I summarize it, it is very much the industrials. It is battery, it is pharma, but it's also a bounce back of data centers, strong growth in services, and a solid development when it comes to China and its wine segment. A little bit more granular when it comes to recent market trends. The large chunk of industrials represents 37% here, battery and pharma pulling ahead. When it comes to food processing, a slight decline, very much due to the COVID pandemic, but all in all then a good growth within the industrials. Data centers, a solid growth also there, driven by digitalization. Components also driven by data center and lithium batteries. And when it comes to misdelimination, as earlier said, it is now leveling out and we see some large orders coming back, but it's still weak in marine. Services, good to see that it continues to grow. When it comes to food tech then, the largest segment, broiler, the US market is temporarily low. In swine, we continue to grow in China, but moving forward, as said already last quarter, I expect that we will level out during the year. Layer, pretty flat. And greenhouse, even if it's not large in our sales right now, 5%, it is a growth driven by increased demand. If I talk about the strategy, and you've heard me say that many times, we have our purpose for customer success and a healthy planet. It is about customers, be close to them, go market models and pricing strategies. Innovation, that is the future of a company. Continue to invest in R&D and prune out products that is not needed for the future. Markets, focus on the markets that we see profitable growth in. Excellence in everything we do. Continue to drive its step-by-step improvements in lean, but then also work with operational excellence and the footprint optimization. And people. That is very much about how we organize and how we drive our culture forward. In each and every one of those areas, I feel that we have taken good steps forward. To highlight some, very good that the markets that we have focused on, batteries, data center, service and then recently pharma as well, are really showing growth. Innovation, as I said many times, that is a driving force for increased customer value. We will continue to invest in innovation moving forward. And our solutions are so important in many, many for the customer critical processes. Very often, climate control solutions are also energy consuming and our products are reducing that consumption. When it comes to priorities, continue to work with modernization, take out the products that is not needed. When we develop product, focus them on increased energy efficiency towards the customers. And last but not least, develop connected equipment, both in air tech and in food tech. Some highlights. We have inaugurated a new R&D center in Skista. And there are efforts when it comes to sortment reduction continuing according to plan. Innovation is not only products, it is also how you go to market. This is an example of a greenhouse solution being sold in Italy. What is very pleasing with this is that it balances the sun and the cold climate during the year. So the farmers can have a balanced climate and delivering improved productivity. It is the first order, but it's very much a reference order. I hear a lot of good feedback when it comes to this type of solutions in the marketplace. Sustainability. one of our most important road maps going forward. We focus on three areas. It is about resource efficiency, responsible business, and people and society. And each of those areas during the year, last year then, we record this once a year, we made strong progress. Moving forward then, it is about integrating this 100% into our strategy. It is about setting clear goals. It is about strengthening the management, being better in analyzing and delivering on set targets. With that short update on the implementation of the strategy, I hand it over to you, Anette.

Thank you very much, Klaas. So if we look from our performance point of view and look at our mid-term targets, we had a growth of 14% excluding FX. We had a margin of 12.3% and we had our leverage remaining on 1.9% compared to end of last year. When you look at the performance of Munters, bear in mind from a growth perspective, obviously that China closed down in the first quarter last year and opened up towards the end of it. We do have, as we said also in last year, Q2 and Q4, those quarters were mostly impacted by actually a customer pushing out their investments. And then if you look at it from this year, then obviously the issues when it comes to freight, both from a capacity point of view, but also from a pricing point of view, impacts us. So if we go into the growth side, we had a growth of 20% when it comes to order intake, FX adjusted, mainly driven by Airtex when you're looking at the battery segment, looking at the pharma segment and also data center. Remember now, as we are always saying, is that data center is a project business, which means that from time to time it's up, from time to time it's down compared to the same period last year. The one business that is remaining with a bit of a struggle is obviously mist elimination. And that's particularly linked to the marine side. Food tech continued with good growth in the swine segment in China. And also, which was quite nice to see, was actually that the swine segment in the U.S. is picking up. From an Netflix point of view, FX suggested we had a growth of 14%. So you can see it's trailing on from the order intake side. Services is now approximately 14% of the group's total sale. And as you can see also, order backlog remains healthy with a healthy growth of 11%. Diving in then to Etik, as we said, the growth was really good. It was 23%. Part of it is actually, as I said, we did have last year in Q4 a bit of a hesitance from a customer side placing orders. And we can see that picking up into the quarter this year. Battery is remaining good and had a very nice growth, obviously. And then we also see... DC coming back on trail. And if you look at services as a percent of air tech, obviously it remains a bit higher. It's about 18%. If you look at net sales, healthy growth, 17%. Again, driven by the services side, also driven by data centers. We also have the battery in pharma, obviously with a very nice turnout to the customers. And again, one thing to remember when you look at the order intake side, impacted by customers coming with orders this year that probably were delayed from last year. If we move into food tech, continued good growth in China. We also had a very nice growth, as I said, when we looked into the swine segment in the Americas and the dairy segment in the layer. The one thing that remains a little bit sluggish is the broiler market, and that is backtrailing from the high timber prices. Obviously, building new houses when timber prices are high is something that is being setting on the backlog. Also, what is nice to see is actually that EMEA is picking up from a greenhouse segment point of view. So when you look at it, growth in food tech from an order intake perspective, 12 percent. And also the backlog, very healthy growth of around 15 percent. If you look at net sales, however, this is where, as I said, you know, we need to remember looking at how COVID-19 are impacting us. And food tech was more impacted by actually the delivery situation than air tech was because of the transportation issues, as we can see in the supply chain. If you look at America's good growth in the equipment side, again, it's the swine layer and dairy business that are driving it, whereas the broiler remains a bit sluggish. It may have a bit weaker development, but that's basically because of the weaker side on the broiler side in the US market where we have controller sales not picking up that much. If we look at EBITDA, as Claes said, we do have a solid improvement. If we compare to last year, we have a margin of 12.3% compared to 8.3%. FX impacted, yes. So basically, if we didn't have the FX impact, we probably would have been almost 1% higher. Airtek is the one that are leading the or driving the change. And it's basically because of the good growth, but also because of the strategy implementation that has been going on since last year and continued, obviously, cost control. If we look at food tech. margin dropped a bit but here again to remember we did have an fx impact and food tech the gap between this quarter compared to last year probably is half of it fx and then as we talked about also transportation costs coming out and we did have a mix of impact also from the controller sale with the sluggish development on the broiler side in the us moving then into delivering on our strategy journey as you remember we did implement a program mid last year aiming to sharpen the customer offering and footprint optimization it is running according to plan in total we're expecting cost of almost 180 million swedish crowns with an annual saving once realized of about 70 million we're basically halfway through so a bit more than a half of the half of the savings impact has has been put into effect although annualization comes next year obviously Given that development of the good profit, but also continued focus on cash flow, we had a good cash flow development. Again, remembering now that COVID-19 is impacting us from a supply chain point of view, which means that part of the increase that we see in our cash flow is then being offset by increased inventory to make sure that we can manage the supply situation towards our customer in the best way possible. That means that when you look at cash conversion, that remains on a high level. Again, when we looked at end of last year, we had a very good December month that took us to the peak. But in general, if you look at turning in almost 90 percent in cash conversion, that's very good from a company that has taken one and a half year to clear things up, which means that we're down now to 1.9. We have been able to remain on 1.9 since end of last year. even if we have been hit by effects in the wrong way, and even if we also have to manage an increased inventory because of the COVID-19 situation. So the financial stability of Monters has picked up over the past one and a half years, and we are very pleased with the development from the company side. So all in all, if you look back at it, good growth in the quarter. Good impact from the strategy deployment, meaning margins are moving up. And again, meaning also that at the end of the day, leverage is coming down. With that, I would like to hand over back to you, Klaus, to wrap up.