Munters Group AB

Welcome to the presentation of our fourth quarter and full year report for 2021. I'm Ann-Sofie Jansson, Head of Investor Relations, and with me today I have our CEO, Claes Forsström, and our CFO, Annette Kumlien. We will run through the presentation and thereafter we will take a Q&A session. For those of you who are viewing on the web, do feel free to post your questions throughout the whole presentation, and we take them in the Q&A session. And for those of you who are on the conference call, we will then open up for you to place your questions after the presentation. And with that, I hand over to Claes.

Thank you Ann-Sofie and welcome to this Q4 and full year report. Before I start, what a lovely picture showing Sweden at its best during a winter day. The quarter and I have to say the full year is really representative with record high order intake. especially driven in transformative segments such as lithium batteries and data center, but also service showed good progress. It has been shadowed with continued holdbacks in our supply chain, but that we are handling better and better as it goes. it generated a strong cash flow during the year and during the quarter. And we did strategic advancements in many areas, such in growth, such in investments, in building up production capacity and innovation. And at the end, we took concrete steps also in our journey towards becoming a better sustainable company for us and our customers. With that, the agenda of today is... My self-start, talk about highlights in the quarter, and then after that, about implementation of our strategy. Then I will hand over to Annette and come back for summary and open up for questions then. Significant progress in 2021. We delivered on our growth strategy. As I said, record high demand, driven by transitions in battery-powered vehicles and increased data traffic. Airtek, Great to see growth in prioritized segments. The ones that I mentioned, but also service. Food tech, a little bit one side growth, America's anemia, offset by a weak market in China on a strong year before. We have taken decisions to expand capacity in the battery segment with a new facility in the Czech Republic. And earlier during the year we also took a decision about expanding capacity in the data center segment. And as I said, supply chain challenges continued. We have carried through price increases through the year. To mitigate the increased cost, the majority of this will come in this year and come quarter by quarter. Strong focus on sustainability. We have worked towards our target to reach net zero emissions from our operations by 2030. We have joined UN Global Compact on gender equality initiative and we have added sustainability targets to the financial facilities. I think we take a major step on that journey. Coming back to the record high order intake. As you can see, air tech, driven by strong growth, as I said, in battery and data centers for the full year, 24% growth. And food tech, growth in Americas and EMEA. Annette will come back to more details in this. But moving over to net sales, we generated a 5% growth, And also here, battery data centers, but also service. Food tech, growth in Americas and stable growth in EMEA. And the best part of it all, we increased our order backlog with 86%. And as anticipated, we had a flattish year when it comes to EBITDA and a negative impacted by what we have said before, the raw material cost, the constraints, you can call it an increased cost pressure, generally speaking. And food tech also, margin negatively impacted by lower volumes in China on the back of a strong 2020. Being a little bit more granular, and let me start at the upper right. Americas, generating a growth of 89%. APAC, 29%, and EMEA, 32% in the order intake. And here, once again, battery data center. This story is repetitive, but also service. We're driving air tech in Americas. Food tech, climate and digital solution experience growth in America. Airtek continued also to grow in food and components to data centers. And food tech, I mean, I grew mainly from orders in climate solutions to the greenhouse and broilers market when it comes to food tech. And the same goes very much when it comes to air tech in regards to battery driving the growth in APAC. And as we have talked about earlier, the Chinese market has been weak and maintained weak during the full year. I think the summary of this, supply chain constraints continue to impact our business, is mainly three. It is sourcing challenges. It is cost challenges. But at the end, we, as many, many other companies, we are getting used to this. We are working a different way and we are mitigating the effects. But as you can see on the right side here, I mean, the trend in commodity prices across the board from a market perspective has increased. We predict that this pressure will continue until the middle of this year. But with that said, I mean, I think we also see really good progress in how we handle it with different ways of working, putting together task forces, driving certain initiatives to open up flexibility there. Coming back to the markets. transformative change is driving some of our segments. And if I should summarize Airtek, solid to very strong growth in most of the segments. And as you can see, also looking forward half a year, also the market outlook from a market perspective, we predict that this will continue in a good way. sustainability sustainability is about how we work but also how we support our customers and this is just one example of what air tech has done towards customers in the food segment here we talk about the chocolate maker in in north america and they have set a clear target to reduce their emissions moving forward our solutions help them reach that target. And it's very, very rewarding to see that they have embraced it and they move it in across the globe. Sustainable innovation for a healthier planet. I think we are really towards that market. Moving over to food tech. And I think you can summarize it and say mixed market. Stable in some markets, up in some markets, and weaker in other markets. And the major weakness has been in China when it comes to the swine segment. It has been like that during the year, and it has continued to be like that. And this is, of course, driven by the African swine fever, but then also capacity constraints, etc., in China. But on the other side, then, we start to see improvements in the marketplace when it comes to broiler. We start to see improvements in the marketplace when it comes to greenhouse. So more a mixed bag here. Really interesting for the future, digital solutions. As you can see, 6% of our turnover. This is a trend that will continue to grow over the years, both in percentage value for us, but even more so when it comes to how we influence the market with our solutions. Coming to implementation of the strategy. Customers, innovation, markets, excellence in everything we do, and people. We have clear targets for each and every focus area, and let me give you a couple of examples from each and every one, what we've done and what we would like, what we will aim to do during this year. When it comes to customers, setting up center of excellence for battery, enabling closer cooperation with customers, this transformative segment, we are very close to the customers and work to make them even more successful. Here we will continue to work with the targeted segments that we identified. Innovation. We put up a target a couple of years ago to reduce our product assortment when it comes to standard products with 40%. That is done, and we will continue to work with this. But we have also launched several new products. And without mentioning them all, I think SciCool in data center and Amino software in food tech, that is two really, really interesting solutions for the future. Moving forward, bringing R&D and innovation even closer to the market, working closer with our customers. In markets, food tech strategy launched. Strategic market segments, as I said, generated strong growth. And this we will continue. But here we will also start to spice it up that acquisitions is an important part of our future growth. Excellence in everything we do. We continue to expand capacity. We continue to work with a more regionalized setup. But also important here, that is, the progress that we have done in operating working capital has paid off in a good way. This year, price-threatened execution, secure capacity to mitigate supply issues. And then when it comes to people, As I said earlier, joined UN Global Compact Gender Equality Initiative. We have also a new head of HR sustainability, Greta, that has just joined. I have a lot of really good things, or we have a lot of really good things in that area. And what it's all about, that is about continued leadership development, also to implement an HR system, but of course driving sustainability further on as well. Yesterday we made a press release about a sauce contract targeted and put in place for one of the largest integrators in the food chain. This is for us evidence that what we developed is appreciated by the customer and what is even more encouraging that is In the coming year, step by step, this will generate more and more recurring revenue. It puts us really into the end tagline here. Manters Foodtech, contributing to feeding the world in a more sustainable way. You will hear more about this as we move on during the year. We also acquired Edpack. and strengthen our European presence. And what is this all about? It is about having a strong manufacturing footprint that can manufacture our solutions. It is to have a close collaboration, cooperation with the customer base. And it's about bringing in our knowledge from North America into the market. I think that we are really set here to create a solid base for continued growth in this prioritized market segment in Europe. Sustainability. We have put a very, very stiff target Net zero emissions from 2030 from our operations, and we have taken steps in that direction. So moving from 50% green electricity to 53%, step by step, we will continue to do that. When it comes to the social side, increased proportion of women in the management positions. But also when it comes to code of conduct for suppliers, 100% of them have signed and live up to what we demand from them. And we are moving in the right directions when it comes to females in management positions. Then what is great to see, that is we have added then sustainability targets into our loan facilities moving forward. We jumped up in recordable incidents, but still we have, if you look a few years back, moved in the right direction. With that, I hand it over to you, Annette.

Super. Thank you very much, Klas. So let's dive into the financial performance. It's very easy to drive in the noise of the battery side, but actually it's very interesting to see that all of our focused areas are growing. So we ended up actually with a 10% growth for the full year and also in the quarters. We had a good churn in the quarter. Adjusted EBITDA margin, yes, it is down, as we have spoken about several times during the year, and it's the same reason that we have spoken about earlier. And as we have said also, we foresee the time lag of the prices working through the first half of the year as well. If you look at the capital structure, yes, a little bit increased compared to last year in 2020, but half of that increase is actually related to inflation. effects changes. And the other one, yes, we're growing. And obviously, when you're growing, you need a bit more working capital to run it. And also, the supply chain restraints have put a bit of a limit to it. So if we dive into the order intake, it is a record quarter. As you see, basically, Airtek, we have 77% order intake growth compared to last quarter, last year. Battery, data centers, services, yes, that we have spoken about before. But also, as I said, the prioritized segments like food is growing. And we can also see that clean technologies actually had a growth in Q4, which is really promising to see. If you look at food tech from that point of view, a bit lower, but still we're up 11% compared to last year in the quarter. And it's nice to see that Americas are coming up and EMEA is also growing for the reason we have talked about before. Americas both when it comes to climate and digital solutions. And in EMEA, we are particularly seen in broiler and also good to see the greenhouse segment, which is obviously a smaller segment for us, but a growing one. APAC, yes, declined. It continued during Q4, and that has actually impacted food tech to stay just above a 2020 delivery and order intake. Whereas obviously the high order intake that we saw in air tech of 77%, for the full year we ended up with 42%. Same reasons that we have spoken about before. Battery and data centers, and obviously they're drawing being the component side, but also then food and services coming in. So when you look at then the whole group, the order intake was almost 60 percent. And that we haven't really seen before, actually. And for the full year, 30 percent. And when you look at the book to bill, yes, it is on a record high also, basically because also we have had some supply chain constraints that have continued. But as we saw also when we looked into the invoicing side of it, our net sales increased. our net sales increased with 10% versus than the last year, both for the quarter and for the full year. And you can particularly see in the air tech segment that we actually had some churn, so we got the products out. 17% growth for the quarter and 14% for the full year. And again, to note that when it comes to the quarter, data centers, clean technologies, battery and human control services are driving it, whereas when you look for the full year, it's really battery and pharma for air tech. Again, data center is a project business. So when you look at the full year for data centers from a net sales perspective, it's a bit down. But again, project business. And when you look then at food tech, obviously impacted negatively by the development in China, which is the same reason as we have talked about earlier on, swine segment weak in China. So all in all, when you look at the group, 10% growth, which is really good to see during these type of times that we have been in. That means, obviously, that our backlog are record high. You can just look at Airtek where we have basically a doubling of the backlog. And when we look at also then churning the products out, it's really to make sure that we drive then the supply chain activities in the right way. And there's a lot of people that are working hard to make it happen. And it's nice, again, as I said, to see the 10% coming out of sales during the quarter and during the year. And also when you look at food tech, the backlog has increased. There's some growth driven by the climate solutions, obviously with America and Maya. And that means also that they're up about 35%. So all in all, backlog up from 2.2 to 4.2 billion Swedish crowns during 2021. When we look at the results then, or the margins, I mean, it's the same story that we have talked about before. Yes, we have impacts from the supply chain activities that have hampered us and made us work a lot more. But there's a lot of people that are working to make it happen, to make sure that we have a stable margin that we pull through. So in a way, when you look at the price increases, yes, they are coming true. We can see them quarter by quarter increasing, but But again, if you remember, when you have the raw material prices increasing, that time lag to get it out is still in the play that we're working on. Then when you look at the full year, I mean, given that we had a very good start in 2021 with particularly air tech being strong, that meant that basically for the full year, we only had an 0.8 percentage drop in the margin. And when you look at the business areas, obviously then, air tech, even or despite of those difficulties that we have had during the year, the margin is actually up for the full year. Again, the Q1 will play into that book very strong. Whereas when you look at obviously in the quarter, We're a bit down. But again, prices are coming through and we will see that the time lag will pan out during the first half of 2022. And we look at food tech, same issues there. China obviously having a negative impact and also then with the supply chain restraints making the margins coming down. But more or less the same communication and the same reasons that you have had earlier on. So not a surprise from that perspective. That means that when you actually look at our quarterly margins, how they roll through during the year, as we have said, we have trends. Usually Q1 is the lower quarter, whereas Q2, Q3 should come up. And for food tech particularly, you have Q1 and Q4, which are coming down. And as you can see from the air tech trends, Q1 2021 was unusually strong because of the order book that we had during 2020, basically. But again, normal trends usually prevail in the company. So it's just to watch out for. If we look at our strategy implementation as Klaas was talking about, we are on track. We have two programs, one which we started in 2020. As we have talked about earlier, we have some operational efficiencies that we are working through, but they were delayed earlier on because of the corona pandemic. incidents throughout the world, but we expect them to be implemented by 2023, as we have talked about earlier. And then obviously when it comes to food tech, the plan was put in place in May last year in 2021, and that is on plan, but still early days. If you look at cash flow, continued strong cash flow. And I think the important thing is to understand that the culture of how to work with the cash conversion has really come into the organization. And that means also that during a situation that we have been under for the past one and a half, two years, actually has made that we have been able to counteract by actually working as diligently as possible. So still, when you look at the cash conversion during the year, we end up with around 60%. And with a company that has an order intake that high as we have, and also an invoicing increase of 10%, this is really good. And that means also that the culture sticks from that perspective. So when we look at the leverage, as I said earlier on when we started, yes, we ended up a little bit higher than during 2020. But half of it is caused by FX rates. And the other half is related to actually a growing business in a supply chain restraining ecosystem. As Claes also talked about, sustainability is very important for us. And for us, it was very easy to start to talk about also connecting our debt facilities into sustainability loan. So we did that together with the banks. So it's quite nice to see. And again, we're looking into gender diversity. Very important to have a diverse organization. Renewable electricity, obviously, and then also services, which is part of making sure that we have a sustainable ecosystem. So with that, I would like to hand over to you, Claes.