Munters Group AB

Welcome to the presentation of our first quarter results for this year, 2023. I'm Anne-Sophie Jansson and I'm responsible for investor relations. With me here today, I have our CEO, Claes Fosthorn, and our CFO, Anette Kumlin. We will run through the presentation, and then we take a Q&A session. For those of you who are viewing on the web, do post your questions throughout the presentation, and we pick them up afterwards. So with that, I will hand over to Claes.

Thank you, Anne-Sophie. And once again, good morning and very much welcome to this quarter one presentation. When I look upon this quarter, I see a quarter with many steps in the right direction on our long term journey. Our strategy is very much delivering. both when it comes to the investments that we have made and the operational activities that now are making a clearer and clearer imprint, and we show a solid result. And a little bit more granular, strong top-line growth in our main target segments, battery, service, data center cooling, and also very important digital solutions within food tech. We are exposed to long-term sustainable demand driven by megatrends, and we have a strong offer brought to the market. These results, as you will hear, in strong margin and profit development, driven by different components such as volume, price, efficiency, and I have to stress that, above all, a very innovative offer brought to the market. I have come out as the pessimist sometimes when it comes to supply chain constraints. But here I can say I see clearer and clearer signs of an ease up in the supply chain. But we continue to maintain a high guard and focus on this. Moving forward, we are convinced that we are doing the right thing. So we will continue to invest in innovation, capacity and efficiency, as well as digitalization, building future profitable growth. And I have to say, I'm very proud of our people and what we as a company has delivered. And with that then, as I said, stable order intake, strong net sales growth and order backlog, margin improvements in all business areas. And even though we have a drop in order intake, very much explained by very, very strong orders on the comparable quarters, I see a lot of activities in the marketplace and a lot of attractions to our main areas. It was very rewarding to see that we delivered on what we had set ahead, deliver out a good volume in DCT and a drop through to the bottom line, but also extremely good to see the good development in battery service and air tech, but also how well food tech were able to manage the lack of certain volumes then. So all in all then, coming back to the EBITDA, 93% increase and a good margin development. As I said, a stable underlying demands in all regions. Americas, it was air tech components, CT and service that generated the good growth here. DCT, continued solid market activity from the co-location market and food tech and good growth across both digital side and the climate side. EMEA, order intake, and I see here that it's order intake Q4, but we always refer to Q1 this year. Airtech components and services, a good growth. DCT, a stable demand. And I'm very happy to say also that now we're targeting to bring in Cycool in the second half of this year into the European market. Food tech, as in the past, an underlying weak market situation due to the lower investments as a reflection of the Russian war in Ukraine. And when it comes to APAC, growth in mainly batteries and components and food tech, as we said, it will be a continued tough year in China moving forward. If I summarize this bill when it comes to climate change and digitalization as strong market drivers, I would say on megatrends, I mean, we are plus plus here. We are so well exposed and we exposed ourselves to the megatrends and we can take benefits on that. And then when it comes to the current market situation, yes, there is geopolitical instability. It is macroeconomic uncertainties. And yes, it is inflationary pressure. But ease in supply chain constraints. All in all, I have to say that this area, we are used to this, and I see easing up in this sector. And consequences and opportunity in Q1 and moving forward. Everything in the first left box here, going back to the megatrends, we are super well exposed. We are picking up the market demand. And on the other side, where I have talked a lot about, I mean, we should not call it the summer before the summer is here. I am ease up in bottlenecks, et cetera. Here I have to say that I see an ease up, and I predict that the ease up will become even more ease up during the quarters to come. But we keep a strong guard here as well. I think this picture is very important to reflect on. You can see here how we have divided the larger orders that we have communicated and the spikes. And my signal to the market, I'm super confident that we are having a great attraction in the marketplace. And I'm putting at current more focus on the out deliveries, the top line growth when it comes to invoicing. And of course, It will come larger orders also in the coming quarters. But the order intake will, to some extent, be a little bit up and down. But keep a close eye on what we deliver out. I'm super optimistic on this side. And coming back then to how we see the markets, you've seen the trend lines in air tech for a couple of quarters. They continue to be green. Some are very much green for the long run. Battery as an example. There is a debate going on now. Will it be in U.S.? Will it be in Europe when it comes to where battery factories will be positioned? Of course, as a European, I would like it also to happen in Europe. But with that said, we are as strong in America as we are in Europe. So from a mantis perspective, that doesn't really matter. Food processing, sometimes shadowed by the large battery sector, but this is also growing step by step. Components. You have heard me talk about components, and you heard me talk about that This is a second defense line. And what I mean with that is if we lose a system order, we can still grab the component part of that order because we deliver also to, let's call it, competitors of us. Clean technologies. I have high hopes in the long run on clean technologies. And what is interesting to see, that is that we are getting more and more success in clean technologies, in smaller projects here and there, and especially in America. And then services, 21%. What I have to remind ourselves on that is, yes, it is actually, as Annette will talk about later on, a lower percentage compared to the invoicing, but a much higher total value. And coming back to clean technologies, we are aiming for the future, and we are a very sustainable company in what we do, and what we deliver. And take a look upon this. When it comes to e-methanol, To deliver e-methanol solutions, you need to capture carbon dioxide. You need to bring it into the e-methanol, and you need to do that in a sustainable way. And our components, the mist elimination components and technologies, is making that possible to purify it to 98% carbon dioxide. And this is also very interesting for the future. All in all, if I remember it right, we are in different carbon dioxide projects, exposed to smaller projects, around 10 projects the last few years. Data center technologies. Co-location is our clear focus. And hyperscalers, sometimes we fill up the system when we see it's needed to fill up the system, but the focus is on co-location. And here I think it's clear to say that there is still a lot of activities in the co-location area. And we are now winning more and more attention towards the cycle solution. And I'm very confident that I don't promise next quarter, but in the quarters to come that we will continue to deliver good order intake in this area because I see the order pipeline and what we are working with. Also important, why are customers so happy when we talk about some of our products? LCAs, as an example, super important moving forward. We are conducting LCAs now. We have done 10 of our product families, ISO certified LCAs by an independent third party verified. And this is playing a more and more important role, not only how we work internally, but also proof on what it will mean for the customer as such. And when it comes to sustainability, it is fully integrated in our way of operating, in our strategy, delivering innovative, energy efficient solutions that contributes to the customer sustainability targets. Food tech. U.S., showing a strong demand, both when it comes to equipment, the climate side, and also when it comes to the digital side. Swine, driven both predominantly by China, still very weak. And all in all, I think it's fair to say we don't see any large differences in this market. Continued good growth in U.S., Weak in China and challenging for sure in EMEA. And then the shining star, digital solutions. I mean, our future focus area. We are delivering a 40% growth when it comes to ARR, the second quarter in a row. Very, very inspiring to see and hear. We should remind ourselves that the equipment side is also extremely customer focused. It delivers superior energy efficiency. It delivers, in this case, the need of less number of fans. That gives a better energy consumption, a better climate, and at the end, also thanks to our application specialist, a better environment for the livestock in the plant. Last quarter, I started to show this picture and it serves a couple of purposes. Of course, it is on a high level to identify our portfolio of different solutions. And I talked about data center technology. The most important thing is to move up profitability. And this is what we have started to do this quarter. I'm very pleased with that. I also indicated that Airtek, step by step, gradually continue to work with growth in targeted areas and work with efficiencies and how we operate to bring out even better profitability. I'm happy to say that we have delivered on that this quarter as well. And then, in all due respect to the tough situation in food tech, a dual challenge. One, the growth story, driving innovation into the market, creating a market, and we being a market maker, bringing growth and future profitability into that arena. I, the digital side. And two, What I used to say, I mean, the continuous improvements, how can we be more efficient? How can we work with price, et cetera, et cetera, in food tech that has a more damp market situation? And in both areas, I think we made a strong and healthy progress this quarter. Let me talk a little bit of Airtek as well and try to separate out the different businesses. You remember the slide where we have different arrows, et cetera, and there we talk about, I mean, what about the coming half year? In this case, then, if air tech in general is the bubble in the center, then service, of course, has a higher profitability. And we push ourselves to increase the service content day after day. And even if the percentage compared to the invoicing was lower this quarter, it was a healthy growth of some 30% in the service business. Components, closely linked, you can say, to what I said earlier. The systems, but also as a backup if we lose system sales. And you can also say, to some extent, linked to service in one way or another. Also, a better, generally speaking, margin than the average of Airtek. And here we show healthy growth. And that is the mantra forward. Try to capture as much as possible in that arena. And then, of course, battery. Slightly lower margin than the average of Airtek. But at the end, fueling future services business. fueling future component business, and generate a lot of, call it, customer benefits for a healthy planet. And then food processing, sometimes hidden in between everything else, but also that, a healthy margin, now recovering step by step after the COVID, call it, slowdown, but something to keep an eye on. And here, not to over-exaggerate for the coming years, but I see clean technologies having great possibilities to be what batteries today, about five years ahead. I generate growth opportunities in carbon capture. and generate growth opportunities in VOC businesses. But more to talk about that for the coming years. But it's important to always be ahead of the curve. What are the future growth opportunities? Our purpose for customer success in a healthy planet Some of this is updated, some of it we only report once a year. But on the left side, the updated after quarter one, I'm super pleased to see that we are continuing to advance when it comes to renewable electricity. This is how we operate. I'm super excited, as you heard me say, when it comes to the service content, even if it was a lower percentage, the growth was impressive. Some other areas where we have to work more, that is, we have a low number still in total recordable incidents, but I mean, the aim to be at one. And then, I mean, when it comes to diversity, here we can continue to work very much moving forward. And the only other one I would like to highlight this presentation, that is energy efficiency. Last year, we produced more, but per produced component system, we consumed less energy. And I think that is a matter of walking the talk very much. With that, this being your last quarter report, Annette, the floor is yours.

Thank you very much, Klaas. So let's dive into the figures. And as you can see, trailing down on the back end of great order intake last year and actually building up a big order backlog, we're starting to deliver now to the customers. So you can see then the first quarter, we had good deliveries out, sales high, almost 40% up. And then also, as we have spoken about earlier, the margins are starting to come true, both from a... perspective, but also from a net price perspective, including also efficiency improvements. And then when it comes to operating working capital as a percent of net sales, we are within the frame that we have set out to be, and also given then the high net sales we have, we keep it within the limits. But again, we are in a growth agenda. That's also why we are so focused on making sure that we are staying focused on operating working capital. Looking then into what the group has delivered, yes, as Claes talked about, we do have a decrease in our order intake, but it's basically because we had a very high order intake in the first quarter last year, both when it comes to DEC when you exclude the big order that we got, but obviously also because of the digital order that we got in food tech. Again, the underlying demand and discussions in the markets shows that there is a good trail out there. When it comes to sales again, 40% increase is very strong in the focus areas and particularly in DCT and the batteries that are delivering. And obviously also when it comes to services, yes, we're at 13% of net sales. The same period last quarter was 14%. So, in a way, you can say that we have not increased the sales percentage, but given the high increase in net sales of 40%, that means actually that there is a growth, and you will see that in the air tech figures as well. When it comes to EBITDA margin, yeah, it has increased in all areas, and particularly when you look at DCT, there's been good delivery because of volumes, but also because of making sure that the new factory is running right, and also looking into that the old orders with the low prices actually have been delivered earlier on, as we talked about. And then also when it comes to air tech, same thing, they're trailing on with good volumes and net price increases. And then when it comes to food tech, it's a stable margin, actually. Then when it comes to the cost that we have talked about, strategic investments, it will take a bit of our margins out, obviously, as we have said. And that's about 0.8% of our EBITDA margin that goes into that one. Operating working capital, I said, it's about... It's about just below 13% of sales, and that comes out of high deliveries here in the quarter that helped out the relative levels. But obviously, when you look at the absolute numbers, there is an increase, yes. Looking then into what has happened with the margins, our first quarter last year, we had around 9.5%, and we're delivering now at 12.3%, as you can see. Volume is picking up. We have good net price impact. All of our business areas are delivering a net price positive. The operational efficiencies that we had issues with last year, they're gone. And also when you look at DCT, for instance, the new factory is starting to get into a more steady state. Supply chain, as Klaas talked about earlier, we're starting to see an ease of it. Yes, there's still work around it, but it's starting to ease up a bit. And then when it comes to regional mix, yes, we do have, as Klaas talked about earlier, the weak markets in food tech when it comes to China and EMEA that is tying us down a bit. And again, we're putting part of our profits actually into making the company a resilient company for the future. If you look then at Airtek, Airtek had also a stable order intake in this quarter. And that's particularly when it comes to EMEA and Americas, where we had good growth in services. It was slightly offset here by APAC. But when you look at the component side, it's delivering good growth. Net sales up very much. And then it's again, it's the battery that we talked about, but also the component side. And here you can really see what's going on when it comes to services. It's actually 24 percent of this quarter. And if you look at last year, we've been trailing around 19, 20 percent. So there's a really good increase here, particularly in the Americas, in the EMEA area. When it comes to adjusted EBITDA, again, you can see volume coming through. You see the positive contributions from our manufacturing efficiencies that we did have issues with actually in one of our factories in the first quarter last year. And also that the net prices are coming through, although there are still some of the old orders that are there. But again, if you look quarter by quarter, air tech is improving quite a bit. DCT then. Yes, order intake declined. But if you have an order of 150 million US dollar in the first quarter last year, that's quite hard to beat to take another one one year after. And then you can say, yes, still, when you take that away, there's still a decrease. But again, remember that DCT is a project business. The last year, first quarter, it was a strong growth, even if we took away that big order. But the market activities are continued good. And also we should remember that our customers last year also placed orders early to make sure that they will get the capacity to them. When you look at net sales, orders are now coming through, so it's quite a big increase. And you can also see how that is coming into the EBITDA margin. When the volume is coming into the margin, you have net price increases. All the old orders are gone, basically. And then also you have the efficiencies in the U.S. that comes into place. When it comes to... When it comes to then how we handle the supply chain for the future deliveries, there is a lot of focus that is placed on securing the components still. However, when we look at the easiness of the supply issues we had before, we think that they will sort of have trailed out towards the end of this year. Looking at food tech then, it's very much the same way as you have seen earlier quarters. So there are still issues when it comes to APAC and EMEA. America is turning out good in certain areas, particularly the digital area. And actually, if you take away the digital order last year, actually order intake was positive. So that was good to see. When you look at net sales, it's trailing a little behind last year. But again, we are coming out now with good SaaS orders. So the growth there is around 40%. And if you looked at the booked SaaS orders we have today, it's trailing in the level of $24 million. So it's quite nice to see this increase. When you look at the margin, again, FUTEC has been very good working with the net prices, so they have been very positive for a long time and they still continue to be that way. But obviously then when it comes to the size of the business, there are still activities that need to be handled with the losses of the volumes that we got in EMEA in the backtrailing of the Russian war. And again, when you look at the digital solutions, we are seeing the profitability coming through now in the back end of the net sales deliveries. So then when we look at the operating working capital and the cash flow and the leverage, When you look at the cash flow, you can actually see now the profits coming through in the cash flow. Again, we are a growing company, and with that comes also then that we need to make sure that we plan ahead so we can deliver according to the schedules we set up with the customers. So yes, there is an increase in operating working capital, and particularly this is pertaining then into the DCT area, but also a bit to the air tech area. But it's on the back end of actually planned activities for future deliveries, which will come through within short. If you get leverage, we have been able to reduce the leverage a bit with the performance we have made you in the first quarter. So we're down to the 2.7 times down from about three that we had before. And as Klaas said, I am then leaving, as most of you know. So what have I been doing? What has really been my focus? And I think I've guessed it. At the end of the day is to make sure that Manta has become a resilient company. The rough diamond and try to make it shine. So a lot of it has been around. How do we make sure that we get the performance management running? Setting a strategy, making sure that we start to deploy the strategy, what we say we do and what we do we say. The other one is looking into best practices also. At the end of the day, there's a lot of good best practice that we can make use of as well. Growth, a lot about where our focus areas, both from an organic point of view, but also, as you've seen, working a lot, looking into what are the holes that we should fill by actually acquiring businesses that could fit nicely into our portfolio. And you have seen some of them. And then when it comes to profits, again, it's about making sure that we secure a scalability and also increase the efficiency that we have in the group. And you can see part of that also coming through in the Q1 result this year. And last but not least, to get roads, we actually need to make sure that we're capital efficient and generate cash. So a lot of the focus has been on operating working capital. And there's been good trajectory there. And there are still ideas of what we can do to improve it further. And then last but not least, at the end of the day, we're living in a digital world. And actually to give the best offering to the customers, digital is part of it. And that's also what we have been focusing on. So some nice ideas coming out of it. So with that, thank you very much, Klaas. And I'll hand over to you the last time.