Munters Group AB

Welcome to the presentation of our first quarter report that was released this morning. My name is Ann-Sofie Jansson. I'm Head of Investor Relations at Muntus. With me here today, I have our CEO, Claes Forsström, and our CFO, Annette Kumlin. We will run through the presentation, and for those of you who are viewing on the web, please put your questions throughout the presentation. And then we open up for Q&A, also for you who are listening in on the conference call. So with that, I hand over to Claes.

Thank you, Ann-Sofie, and good morning and very, very much welcome to this quarter report for the first quarter. In short, the quarter comprised record high order intake driven by transformative megatrends and software as a service wins, creating new technologies for the future. It also is a strong order backlog that gives good volume growth moving forward, comprising of continuous price increases, giving strong support for our mid-term targets in the coming years. We also invest in structure, enhancing efficiency areas as innovation and production capacity. And then during the quarter, we have learned to just linger through the continuous supply chain challenges there is. With that, Growing megatrends drives record high order intake. And as I said, a continued strong order intake, building a backlog and future net sales. Price increases partly coming through. And if we drill down into the strong order intake, what is that then? 107%, organically 87%. Acquisitions in Edpack generating growth. Emtech software as a service orders generate the new profitable markets for the future. And a cycle, split order, innovation brought to the market. The net sales, 32%, of which organic 16. And then, as I said earlier, and border backlog that is about 130%. The EBITDA margin at 9.5%, positive effects from customer pricing coming through. It's offset by supply chain challenges from the tragic war taking place in Ukraine and continuous investments for the future. Once again, what a tragedy with the war in Ukraine. Montes that we have, about 1.5% are net sales and no employees in Russia. They have taken some ISEs of about 30 million that was identified in Q1 related to the war. 18 million recorded as provision and 11 million to be taken as incurred. You will hear more about that later on. But it's also important to say that there are indirect effects, mainly related to increased material prices and some logistical routes, cut-offs in Asia and Europe, i.e. no train transportations through Russia anymore. It has also an effect on our food tech efficiency programs and lower our expectations for the mid-term gains there. As I said, strong growth in Americas for both business areas. 49% of our total order take is in America, 77% growth. Air tech mainly driven within data centers, but also positive news from food tech, good growth within both climate and digital solutions. EMEA, 28% of the total order intake, 46% growth. Airtek growth within most areas, battery subsegments, as well as supported by the Edpak acquisition. Foodtech, then, More depressed, negatively impacted by the effects from the war in Ukraine. And then APEC, 23% are total order intake, 2% up growth, primarily with a battery sub-segment, but also service, which is very important. Foodtech then, as said earlier, continued weak Chinese wine market and lingering pandemic is affecting especially the Shanghai area in China. We continuously adapt our operations to facilitate growth. The macro environment, I think you all are aware of that, the lingering effect and the tragedy in Ukraine. And what do we do then with our operations? We work constantly with working with the deliveries and our supply. We continuously increase prices. We adapt our value chain with different sourcing and different regionalization alternatives. And then, of course, we expand our production facilities and drive efficiency here to enable sales and growth moving forward. And last but not least, we also invest in digitalization to create a more digitalized and efficient way of working. And all in all, I think we continuously have to live with supply chain challenges for the coming future. Going in a little bit to the markets, air tech. All segments are more or less green. Strong demand within data center, but also when it comes to battery. Those are of course then casting a shadow of other segments, but in general, all segments except commercial is showing solid market growth. cycle, a record order of 1.1 billion Swedish krona starting to a small part deliver at the end of this year and then carry through 2023 and the first quarter of 2024. What is this done? It is the contribution to our customer, high energy efficiency, zero water consumption, a reliable solution that is scalable and is very easy to maintain and give service support to. This is innovation at its best. Moving over to another very, very fascinating area, carbon capture. more and more important supports our purpose for customer success and a healthy planet. As you know, certain industries are generating a lot of carbon dioxide that can then be captured and built, transferred and stored. And in essence, this is what our technology solutions generate, a possibility to create a greener future. Moving over to food tech, a tougher market, continued weak in China, but also impacted in Europe when it comes to the Ukraine war. The positive thing that is that we see growth taking place in North America and in the US in particular, but also very, very encouraging, that is that we can see that digital solutions and software as a service is growing. Here we really can create a market that is profitable for the future. One example here. In the past, we had a more mainframe type of solution that a lot of customers bought into. We called it Protein. Now, one of the largest customers have upgraded to the cloud-based Amino system. And the interesting part here, that is, it was a very, very easy implementation. It was fastly done. It was a plug and play set up. And this is really something that shows that we can really change the market moving forward, both at existing customers, but even more also with new customers controlling the full value chain of chicken production. Sustainability is integrated in every aspect of our business strategy. And here are some examples that support for customer success on a healthy planet. We have started to report measurable scope 1, 2, 3 emissions in accordance with the greenhouse gas protocol. Very encouraging, that is that the EU taxonomy directive, 35% of our net sales is eligible. We are training both our employees, management and board, and we have started to develop a new energy and water saving strategy, setting ambitions for the future. All in all, we are becoming more and more sustainable. With that, over to you, Annette.

Thank you very much. So let's dive into the financial highlights. Again, strong growth on the back trail of the demand curve that we have seen earlier, and also the demand curve continuing during Q1. Margin, 9.5%. From a seasonality point of view, it's actually a good level. But as we know, it has been tied down by the supply chain restraints that we have seen and the chase for price increases. And then the capital structure, 2.6, yes, increased. And a big part of that is actually the acquisition of ETPAC that we did earlier in this quarter. And the second part of it is coming back to that we have a high demand curve, which means that we need to ramp up for future deliveries. So diving in then to what's going on, order intake, as we talked about, it's record high. And if you look at the order intake, 1.3 billion of what we received is basically just two orders, the biggest one being the DC order and the other one being the order in food tech that we announced earlier in this quarter. If we look at net sales, both areas actually have good growth, although it's air tech that drives it mostly in the battery and in the digitalization part, as we have talked about earlier on. And if we look at EBITDA, I mean, the EBITDA margin, as I said, is seasonally strong. However, if you look at Q1 2021, that was an exceptionally strong quarter, actually, so comparably lower. The war in Ukraine has impacted us negatively, both from a mid-term perspective, when we look at the realization of our strategy program, where we're taking down the result improvement spectrum from 70 to 50, and then when we look at the short-term impact, writing down inventory and so forth, then we're looking into 29 million impact that we've done IRC during the first quarter. And again, as we talked about, we are ramping up and making Mantra scalable. So we are investing in resources and investing in digitalization the way we are working. So that is also part of the margin change. If we look then at Airtek specifically, again, record high. If we would exclude the DC order, then the order intake is still 60% above last year. So you can see that it is growth in all areas, particularly when you look at the batteries. We have the DC, we have also talking about services, and we're talking about even cleantech, one of the smaller segments within Airtek, but it actually has a good growth, which is nice to see. Sales. back trail of what we have seen from the demand. Yes, it's higher and services is continuing to grow. And if we look at it, it had a growth rate around 20%. And if we look at it, it's about 19% of the total net sales in air tech area. And again, when we look at adjusted EBITDA margin, yes, positive impact from volumes, obviously, and positive impact from the consequently price increases we have made throughout this period of COVID, obviously, and now also with the war in Ukraine, we will continue with the price increases. But obviously also when you look at short term, the war in Ukraine will have a further dampening effect on the margin when you look at it from an increase in supply chain costs. Then when you look at also our plant in the US, we have one of them which has had some operational difficulties, which we are working out, and it's still impacting the margin a bit in the Q1. If we look at food tech, then we're talking about good order intake. We announced very early in this quarter the digital order that we got, which was about $20 million. And then we also can see now small orders coming in. But again, the digital solutions and the digital strategy we are talking about is actually the way forward. If we look at net sales, yes, increased 10%, mainly driven by the Americans, where we see good growth both in the digital and the climate solutions. However, as we have talked about earlier, there is a dampening effect, obviously, from the continued sluggish development in the swine segment, particularly in China, which is lingering from the pandemics, but we can also see now that food tech is a bit impacted by Ukraine. At just the beta margin, yeah, it's low. It's 4% compared to the 9% we had in Q1 last year. And we can see here again that in spite of the growth that we have had in the Americas, it's actually so that China's shift and negative development has both a negative volume impact, but it also has a negative mix impact on the margin. And then again, if you look at the two business areas, food tech was the business area mostly impacted by the war in Ukraine, although as a whole for the group, the impact from the war in Ukraine is quite small. If we look at then our prices, as we have been speaking about, and the margins and how actually our margin is moving with the various components, I mean, volume is quite good compared to what we looked at in Q1 last year. Pricing, if we look at from a net perspective, the price increases we have made counteracted by the cost increases that we have seen from the input material. It's more or less giving us a neutral position. If you look at the business and regional mix, where China's swine market has a high impact, that has taken it down a bit. Supply chain, as we have spoken about, the difficulties to maneuver and actually make sure that we counteract the difficulties in getting materials in. It costs a bit for us to run it, but we have managed so far quite good. If we look at operational challenges that we see in one of the factories in Airtek, yes, it's still tying us down, both in Q4 last year, but also Q1 this year. But on a whole, that makes us having a margin of around 9.5% compared to the 12.3% that we were talking about last year. If we then look at the cash flow development, we have always been talking about making sure that we have a good cash conversion, and there's been a lot of good work done in the company over the past two and a half years, and we can see the impact of it. And that has helped us now when we go into M&As, because obviously when we do buy something, we need to use our funds to secure the payments for that. And then also the demand growth that we have seen, and you have seen also over the past periods, well, that also means that we need to ramp up our production, make sure that we have material coming in so we can deliver to our customers. And those are really the two major impacts that you can see why leverage has gone up to 2.6. So with that, when we look at the measures for our strategy implementation that we have worked on since 2020, you can say that the program is more or less on track. Yes, we have a little bit of higher cost related to supply chain restraints in delivering our operational efficiencies in certain factories where we have issues getting access to in an efficient manner. And then when we're looking at food tech, particularly here, as we spoke about, the war in Ukraine is mid-term affecting actually the deliver of the performance that we expected out of it, taking it down from 70 to 50 million. So that's all, but all in all, still on track. With that, I would like to hand over to you, Klaus.