Munters Group AB

to today's presentation of our second quarter results for this year. I'm Ann-Sofie Jansson, and I'm Head of Investor Relations. And I'm here today with our CEO, Claes Forstam, and our CFO, Annette Kumlin. We will run through the presentation and those of you who are viewing on the webcast, you can put questions throughout the whole presentation and we pick them up in the Q&A session. And we will also open up for Q&As from those of you who are listening in on the conference call when we come to the Q&A session. So with that, I would like to hand over to Klaus.

Thank you, Anne-Sophie, and good morning, everyone. Let me first give a short introduction before we go into the webcast. It was a quarter that delivered solid growth. in prioritized and long-term growing market segments. I'm particularly proud, though, that we were able to grow in the industrial area of air tech and also showing good and strong progress in Americas for food tech. We delivered continued service growth, and that is also pleasing. We experienced raw material increases through the year, supply chain challenges, but I'm very pleased how our operations is handling the disturbances. From the beginning of the year, we have started to implement price increases and then they will deliver consecutively through the year and all the way into 2022. The strategy continues to be implemented. So what is the agenda today? It is highlights of the quarter. I will talk about the strategy, hand over to Annette for financial highlights, summarize, and then open up for Q&As. So solid underlying demands in the second quarter. Order increase by 23%. It was driven by the industrials and, generally speaking, batteries. And food tech, as I said, also growing in the U.S. Net sales increased by 13%. currency adjusted, and a similar pattern there as in order intake. But here I also have to highlight APAC when it comes to batteries. The EBITDA, pretty much in sec, flat, and slightly below last year. It was driven by constraints in the supply chain, but also changed product mix. Coming back to the constraints in the supply chain, I think this is something that is for most industries. It delivers a challenge when it comes to longer lead times for us, but what is pleasing to see is that the market accepts those prolonged lead times. Cost increases are progressing over the years, but I feel that we are mitigating them step by step. Very pleased, as I said, on our execution on the long-term strategy. Signs of that we have now started to deliver on our M&A agenda. First, IP, patent-related acquisition, and then also we are moving into service area in a good way. Foodtech has set a new strategy that is very promising for the future. Let me talk about the order intake. Growth in most markets. It is about U.S., but then also when it comes to AIPAC and also EMEA. Annette will present more in-depth areas, but generally speaking, as I said, it is Airtek that shows the strong growth, but then also rebounds in food tech Americas. Emea, also good development in Airtek and food tech delivering growth. Asia, as said, when it comes to food tech, it is a little bit reset from last year when it comes to China and as expected. And air tech also here, driven by the battery segment in a strong growth mode. When it comes to Our challenge is in raw materials and supply chains. As you are aware, this is something that concerns all the different markets and players. It represents also challenges for monitors. What do I talk about when we talk about supply chain challenges? It is replanning of deliveries. It is adjustments in production schedules. But I have to underline that our organization is handling this in a very, very good way. And we have not had any major disturbances. What is good to see, that is that the underlying operations are delivering in a very good way. Okay. So when it comes to raw material cost increases, we have through the years implemented consecutive price increases. And I'm pleased that the organization is delivering on the set agenda forward. And all in all, what is then prolonging our price implementation is very much related to that we have longer delivery times in the marketplace. Market trends. Let me come up to market trends in air tech. And here I think it is very, very important to say that if you take a look upon the arrows, they are much more green compared to a year ago. Industrials showing current growth and long-term growth, leaded by the battery segment, but also in the different undersegment in industrials. And what is clear here, this is the areas where we have predicted that we should focus on. Data center also showing strong underlying growth and components also pleasing growth in the end markets. Misdelimination to some extent flat, but here we're also changing our scope of misdelimination and moving in more to clean tech. Commercials, solid replenishment in the markets for supermarkets and services continue to deliver a solid growth. Let me drill into battery and the industry around battery. What is our long-term game here? Our long-term game is to establish the clear leader position. And it's pleasing to see that that is what our customers are telling us, that we are a clear technology leader in the battery segment. And what is the long-term plan? That is to put us in the leaderboard and then also to put a position for continuous service deliveries. And what are we delivering? It is lower energy consumption. It is better climate. It is, at the end, a more predictable and strong production environment. And coming into service, I think here is one example. Since years, we have been very, very strong in China. And now we have revisited quite a few of the earlier installations. And as you know, in China, then it is very much about price. But here, we are able to upgrade already installed installations. And by new fans, in this case plug fans, we can improve the energy consumption, something that is very, very important also in China going forward. And as you can see, it is a payback time that is about two years. So the long-term game when it comes to battery, that is to own the market and then start to service the market. Moving over to food tech. It is a mixed market here. But what is good, that is, it is clear signs that the U.S. market is picking up. But it's also good to see that it's greenhouse and dairy is moving forward as an underlying market. And all in all, I think that there is a solid outlook for this market segments. So if I summarize, where are we at the market? We are gaining momentum in the areas that we have decided to focus on, where we can see long-term growth. We are building platforms, especially in the industrial area, to service the market even more. Very much in line with our strategy. So implementation of our strategy. If I go in there, customer, what has happened during the quarter? We have implemented long-term strategies for more efficient pricing. We have started to deliver clearly on the raw material challenges. I'm not 100% happy, but we are moving in the right direction, and that is very promising. Innovation. Innovation is not only what we do. It is also about acquiring innovations. And here it's a first sign that we can also acquire innovation and deliver better solutions to our customers. And the portfolio alignment, product portfolio alignment is well on track and we will meet our targets there. When it comes to markets. We have expanded in service into two new markets. We decided not to acquire service companies. Instead, we said it is better that we set up the service there ourselves. And as said several times here, we are growing in the prioritized segments. When it comes to the implementation of a long-term strategy, it is progressing well on track, and I'm pleased to see the efficiency measures taking place in air tech and food tech. And, above all, we continue to generate a solid cash generation. People, at the end, it's about culture. And we are moving our culture to become even more forward-looking. It's through change management trainings. It is about management when it comes to sustainability and so on. We are setting the organization in line with our strategy. So at the end. Once again, we deliver on a long-term strategy. In air tech, it is growth in prioritized market and strengthening of technology. And in food tech, it is setting the next steps moving ahead. Expansion in service, misdelimination, moving into clean technologies. We will go deeper into that in the next quarter. What we mean with that, but that is to expand it and make it wider. We have secured a frame agreement with a larger data center hyperscaler that gives us the opportunity to also deliver recurring revenues in this segment. There are decisions to delay some of our strategy implementation and the main reason here is we need now to deliver on the demand out in the marketplace. Food tech, digital solutions, accelerated growth in IoT and SaaS solutions, concentrate on climate solutions, i.e. the normal industrial play, increase value-based selling, increase continuous improvements and innovation. And clear signs of that, especially the organization has started to be connected here. We have a new head of connected farms appointed, and I see a lot of positive signs in this area. Climate change is a driver, a major driver for Munters, and I'm so pleased that both in what we deliver to our customers, in helping them to improve their operations, lowering the energy consumptions, making them more sustainable, but also what we deliver when it comes to sustainable energy. As you know, we have set the target to strive for zero emissions in our own operations by 2030. And here you can see one very clear sign that we are walking the talk. In Manters Lansing in the U.S. now, we have 100% renewable power sources delivered into the facility. When it comes to quality, we are moving ahead and setting more and more ISO standards. We are setting a better and better way of working. I'm pleased with the progress. And when it comes to governance, a solid governance in how we deliver on sustainability, KPIs, and we are training our people. I'm very, very positive for this area. So with that, I leave over to you, Annette, moving forward.

Thank you very much, Claes. So let's dive into the performance of the quarter and the year to date. If we look at it today, growth is ticking in. I mean, we are riding on the megatrends that digitalization and, for instance, sustainability is showing. So 13% up year to date. If we look at the margins... We are trading well when it comes to the mid-term targets that we set out a couple of years ago. So we are at year-to-date 13.3%. And then when it comes to leverage, we have maintained leverage during the quarter in spite then of paying out dividends and also having some increased inventory due to the sourcing situation. So when it comes to order intake and net sales, yes, it has been strong. I mean, FX suggested in the quarter we had a growth of more than 20%, and it's particularly in the area of air tech where we're seeing the battery segment delivering in APAC as well as in the Americas. When it comes to food tech, it's really nice to see actually that the Americas is picking up as that has been trailing earlier on a very sluggish levels, but it's picking up. And also EMEA, when it comes to greenhouses, is picking up for food tech. When it comes to sales, again, on the back trail of the strong order intake that we have seen earlier, we are FX adjusted plus 13% in the quarter. And again, it's the same segments that we have seen earlier, also then including services. When we look at the year-to-date figure, again, we show strong growth during the whole year with an adjusted FX of around 22%. And then when you look at the changes that we have done in the strategy by taking out the non-commercial Walmart business, there's a smaller uptrail when it comes to the year-to-date figures for order intake. And obviously, net sales is more impacted by that we took it up. And in spite of that, we're growing 13% in sales. If you look at the backlog, strong growth, we're up more than 20% year-to-date. And also when we look at the services today, it represents around 14% of sales. If we go into air tech, you see the same figures, but a stronger development. And again, it's driven by the battery segment in APAC in Americas. And also services are showing good growth with all the improvements that we have made and changes on how we're driving the service businesses. Also, NET says, again, strong growth. And again, remember that we have taken out the non-commercial Walmart business in the U.S. So that is actually meaning that we have a stronger growth in the underlying segments than what we are showing. And again, services, when you look at Airtik, it's about 20% of their business. And when you look at the year-to-date, you see the same picture as you see in the quarter. And again, if you look at book-to-bill, we're at 1.2%, which is very good. And order backlog up 24%. Going into the food tech business then, the good growth in the U.S. has been offset by the decline in China, but in spite of that, we're actually up 5%. And also, as we talked about earlier, EMEA has grown, and particularly when it comes to also the greenhouse segment, but not only the controllers in the U.S. and the broader segments. APEC, as I said, declined, and that's actually in the wake of the strong growth that we had last year in the swine segment. FX adjusted when it comes to sale is more or less on the same level, plus 7%, and it's coming from the back trail of the order intake that we have seen earlier. And then when you look at the backlog, in all, we're up 12% versus last year. Coming then into our margins, we have more or less flat margins compared to last year, a little bit lower, impacted by the sourcing activities going on and also impacted by the raw material prices that you have seen earlier. But one should remember that what we have done during this year is done consecutive price changes. And that's all in the area of around 78 percent that then will roll into our performance as these new orders are delivered as well. If we look at air tech, we have improved margin. And again, we have had a very strong growth so that economies of scale are coming in. But that is obviously offset a bit by the constraints in the supply chain and also by the increased raw material prices. But again, consecutive price increases have been made throughout the year. Food tech, yes, we have had a weakened margin in Q2 and also year to date. But it's also an impact, obviously, of the sourcing situation and the raw material and freight costs that we have had. But also, once you remember, the last year in Q2, we had a strong growth and a strong margin, basically because of the growth in the same markets in China. But again, when we're coming to the margins, consecutive price changes have been made that will roll in as the orders are delivered. And that will obviously depend on the lead times that we have in our supply chain at the moment. If we look at delivering our strategic journey, you have heard us talking earlier about what we did in 2020 and also the newly implemented strategy for FUTEC that we did in 2021. The early communication is more or less the same when it comes to delivering of the values once we have executed the programs and also when it comes to how much it will cost. The change that we have made, as Claes mentioned, was that actually when it comes to the Airtek program, we have pushed out the full implementation towards end of 2022 or early 2023 in order to manage the situation today with the increased demand. But all in all, it's trailing according to the plans that we set up from the beginning, except for this latest change. If we look at cash flow, I mean, the work that we have done over the past two years have really focused not only on growth and profits, but also making sure that we have a strong cash conversion. And that's continuing. Yes, we do have some changes when it comes to the inventory in the wake of the sourcing situation we have today. Again, with the changes that we have made, actually, we have an organization that delivers on it also, which makes that in spite of the sourcing situation, we're actually at a leverage that is around 1.9, basically delivering what we have seen before. As you also have seen from the report is that we have refinanced the group. So we have settled a new five-year financing facilities in place, and it's all on the same levels that we had before. We have also changed the focus on the agreement, so it has become more of an LMA standard. And also we have more baskets that are dynamic in order to make sure that the refinance supports the growth and the strategy that we have implemented. So with that, Claes, I would like to hand over to you to do the summary.