Munters Group AB (publ)

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.

Thank you, Annette, and great to listen in to what you have created and what we are having ahead of us in the area of finance. Let me then shortly summarize what we have achieved this quarter. Major strategic progress in the first quarter, that is the heading. And what do I mean by that? We started to invest in innovation. We started to invest in building up production capacity. We were, as I used to say, we were ahead of the curve. And that we started a couple of years ago. And now this has started really to trickle through. IE, significant growth and strength and margin. Strong improvement and profitability growth. But the lesson learned from this, that is, in order to make this happen over and over again, we will continue to drive strategic investments for future profitable growth. So with that, let's end the presentation part of this court report and move into Q&As.

Okay, great. Thank you. With that, I would like to open up the conference call, the telephone conference, to see if we have any questions there.

Thank you if you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Gustav Berneblad from Nordia. Please go ahead.

Yes, good morning, everyone. It's Gustav here from Odea. Just to dig in on the data center here, you commented on a somewhat dampened data center market in the report. However, we reiterate that the underlying demand remains strong. Can you give a bit more color on what you see in the data center market in general? And also, are you seeing less data centers being built now than compared to a couple of quarters ago, would you say?

Thank you, Gustav, for the question. And let me put the color on this. As you know, we concentrate mainly on what we call co-location market. We continue to see a lot of strong activities in that. But as always, when it comes to this, of course, some quarters you have projects and other quarters you do not have projects. With that, I think we're also now starting to trail into a situation where in the past, during COVID and during the very, very tough side of the supply chain crisis, Customers were ordering, let's say, 15, 18, sometimes 24 months ahead in order to secure the deliveries. Now I predict that we will move more and more to perhaps a year ahead ordering. So in that period of shifting. Orders may be lower, but the activity, I can tell you, I see that very much in the marketplace. So it is sort of two sides of the coin. But the most important thing, that is, our solutions... I'm so happy that we have widened the customer base and added a few customers, smaller size customers when it comes to SciCool. I'm so happy when it comes to we are bringing SciCool into the European market the second half of this year. So perhaps the word is not right, but I put it. I have no worries for the continued activities in the marketplace.

Okay, perfect. And then sort of stay on the data center here. You had a very strong sales growth also. Is there any reason to believe that you deliver faster than expected on the larger orders, would you say?

I think I answered in the past a little bit like this when it comes to the first large order. We delivered a little bit last year, and then I have generally said, I mean, divide that into four pieces, i.e. 25% each and every quarter. And generally speaking, we are on the trail of that. Some quarters will be a little bit up and some quarters will be a little bit down when it comes to quality, the spread of it. The interesting part there is I'm so happy to see that what we saw end of last year, we continue to see this quarter, that efficiency in the factory we have put in place are delivering up the promises.

Is that factory fully up and running today, would you say?

It's a good question. A factory is never fully up and running, but you can say it's fully operational. And then, of course, we are bringing in more and more production into it. So the answer is yes, it is fully up and running. If the answer on can we push in even more in the factory, the answer is yes on that as well.

And there are even rooms for a bit more efficiency in the factor as well. But it's started on a very good level now in Q1.

Perfect. And then just the last one here on the cash flow and in terms of the working capital in the quarter. You have said before that the larger orders will be very volatile, but you aim to sort of balance these out by balance out the working capital in how you deliver on these larger orders. And just looking at the Q4 and Q1 here, would you say that it's more difficult than you had initially thought?

No, it's not more difficult than we thought. But if you remember, if you concentrate on DCT or data center, there are two large orders. And obviously with the first order, that's where you see the more negative stress on the working capital. When we get into the second order, the first order will counterbalance the second order, so to say, deep. Because we're never really fully cash neutral during the project's lifetime. There is also always a certain point when it goes a bit negative before we start the full deliveries out of the factories.

So in a way, it's as expected, I would say. And isn't it fair to say, Annette, that on the second half of this year, we really see that it will start to bite on the operating working capital as well?

Okay, given that you start to deliver on the battery and... Yeah, but remember now that the order is rather big, the first one, 115, and the second one also. So once you get through a certain... through a certain level in the delivery schedule, it starts to balance off and we get the positive sides of it. So that's where you're sort of looking into having Q2 as one of the sort of lower levels before we get into the stronger deliveries. And then obviously that first order will balance off the effects of the second order that comes later.

Okay, perfect. That's all for me. Thank you.

Thank you. The next question comes from Carl Bockvist from ABG Sundal Collier. Please go ahead.

Thank you and good morning. My first question is on, and correct me if I'm wrong here, but if we exclude food tech, I believe prior comments on 2023 have been that both deliveries or sales and margins should be a kind of gradual ramp up throughout the year a bit going back to Gustav's question given that the first quarter now seemingly is very very strong is that still valid or should it could we see a bit of a more volatility than perhaps what you previously said about a gradual ramp up every quarter

A very good question. I mean, as I said, and Annette has talked about, we are very pleased with what we've seen this quarter. If I go to data center, I reiterate what I've said. At the end of this year, I expect us to be at the 14%. Now, it started very well. I have no... It gives me even, call it, more confidence in saying that run rate at that time, it will be 14%. When it comes to the others, I think it's fair to say I don't expect, we don't plan. I'm not worried for, call it, volatility. But... If I say like this, the first quarter has been good. I don't foresee that it will be the same boost in the coming quarter as we had in the first quarter. But it's a good start of the year.

Understood. And on food tech there, if we just look at the kind of level there on food tech compared to if we're a bit short-sighted here, the prior quarter just and then kind of sales level roughly similar. Is it fair to assume that the profitability improvement is really as you write about the digital part or do you see other parts of food tech that has also improved on profitability?

I can start here, and then I also hand it over to Annette. But it is yes-yes on the question, small yes on both. What we have to remember on the digital side, that is, we continue to invest. And the big profitability in digital, that is, of course, when you have balanced out the resource that you continuously allocate into that, but it starts to show good progress. Secondly, I'm very happy with the very hard and very tough GNET work or continuous improvement work that has happened within the equipment side, especially in Europe. Annette, any thoughts?

Yeah, and just to add, obviously, that big order that we got last year, a digital order, that is a delivery schedule over three years. So you will successively see how it actually comes through in the P&L. So that's a big part of the digital improvement. And then obviously, when you look into the equipment side, as Klaus was talking about, some of the units that we had where we had... Issues in last year, they are improving on a smaller scale. So all of those contributes then to the margin being a bit better than it was in the first quarter last year.

All right. Thank you.

Reiterate this as well.

We don't foresee as you saw in... The next question comes from Gustav Osterberg from Carnegie. Please go ahead.

Gustav, before I let you in.

Thank you, operator, and good morning, everyone. I think my first question is on the high profitability level in Airtek. I mean, I appreciate the slides with the bubbles and the direction of where you're going, but can you just clarify, is there any mixed changes driving the high profitability here? There's two quarters in a row now with 16% margin. Just trying to understand the stability in the drivers of that.

Good question, Gustav. And before I answer that, just let me summarize on food tech then, because I was just in the middle of when it comes to equipment side in China and Europe, we don't foresee a market that will recover the coming two, three, four quarters, so to speak. But coming back to your question, a very good question. I mean, it's a couple of ingredients there. One, of course, we had a good service level, especially in North America. The other part is, as you heard earlier, we have had challenges with operation efficiency also in America, in a factory that we were solving end of last year, and it shows continued good progress. And then the third part is, We have now balanced the pricing and the cost inflation, so to speak. So all in all, those two different points. It is a very, very strong first quarter for Airtek. But once again, I shouldn't say that we should expect the same percentage improvements in profitability for the coming quarters.

And I would say also, I mean, all of those things that you're seeing is what we have talked about already last year, that we were foreseeing that it would come true. And this is coming in now. So it's nothing unusual from that perspective.

But just to summarize, I mean, Airtek shows stability. Yeah, definitely. And very pleased with that.

And a follow-up just shortly on that. How important is the service and component segments to the profitability level here in Q1?

I mean, it's having a positive effect. The real size of the positive effect that is difficult to sort of pinpoint. But what is also important to say, that is the projects that we took a couple of years ago, we took them to deliver on or about then our medium, long-term EBITDA target. And I'm very happy to see that they are starting to deliver on that or in some cases slightly about it.

Okay, perfect. Those were all questions from my end. Thank you very much.

The next question comes from Mats Liss from Kepler Tjevro. Please go ahead.

Hi, thank you. A couple of quick questions. First, coming back to the orders. You have probably a tender backlog out there. Customers are looking through the need to place an order. and of course you have competition also but so I guess my question is more related to the tender backlog there if it's sort of in line or with last year or if the need to make orders among customers are less sort of important now so they are sort of holding back on those and also regarding market share if you are feel that you take the but sufficient amount of orders to keep your market position.

Matt, two very good questions. If I take the two largest segments that we are having received large orders on during the last couple of years, if I take batteries, I'm very pleased to see the tender backlog, so to speak. And I have said that in the range of 20 projects or in the long run backlog in 2020, 20 about in North America and 20 about in Europe in regards to battery projects. And then, as you know, it's a debate, will some of them go to America or not? But at the end, we are strong in both areas. I'm very confident that we maintain what I said, the technology share in the battery sector on or about or sometimes about 50% of the orders ends up in our pocket. And then when it comes to data center, really strong attention from the market when it comes to our new innovative products, Cycle in particular. And then, as I alluded to earlier, there is a shift going on that has nothing to do with the market itself. when demand but in the past they were ordering substantially ahead in order to secure deliveries now it's moving more let's say from 18 to 24 months ahead to perhaps step by step 15 12 months with that said i think we have a very strong tender backlog there as well it's a matter of is it a quarter this quarter next quarter or the quarter thereafter

uh great answer thank you and and then about the price increases i guess you have implemented price increases gradually and would you say that you have catch up with with the cost increases uh or are there more more sort of to do that and also this uh well impact of the supply chain constraints if you still see that those erode the margin or or are we sort of in there

balanced situation now i think that you know so far we're in a much more balanced situation than what we were before but and a lot of it is obviously due to the um the delivery of the old orders that were taken some time ago those were still lagging lagging um the results last year when it comes to air tech there's still some some orders left that should be delivered out during the next quarter but otherwise dct has come clean and when you look at food tech they've been out of that for a long time ago and that is only a little bit left in dct in air tech So, but again, when you look at then how you work with prices, obviously, you always need to look into what's going on with the material cost situation. So that's kind of like constant focus that we have learned how to work with compared to previous. And then when it comes to the component or metal prices, I mean, those are being constant monitored as well because they are moving a bit. So we need to stay focused on them and make sure then that we are agile enough to act on it when they change.

Okay, great. Thank you very much.

The next question comes from Anders Roslund from Pareto Securities. Please go ahead.

Oh, yes. Good morning. I have one question regarding the delivery pace here. Given that you have a couple of other large orders being implemented next year, will we have exactly the same step change that you will see sort of a big step change in the first quarter next year or is it something that you try to sort of gradually increase or how should we look upon the production pace going forward?

Hi, good morning, Anders. A great question. Let me use the two largest DCT orders and use them as an example then. The first 1.1 billion that we are delivering now, I mean, as I said, we had a little bit at the end of the year, last year, and then... conceptually 25% per quarter, but it can be 1% or 2% up or down per quarter. And then at the end of this year, the 1.8 billion order will start to deliver in a similar manner as we talked about the first one. But then more evenly spread, 20% or 25% per quarter, but with a little bit of overlap into the first quarter, 25% as well then. And our focus now, sometimes perhaps people or you may perceive me too relaxed when it comes to orders coming in. We are always attentive to that. But really what we need to start to fill up, that is actually everything. for the end of 2024 and filling up for 2025. But I'm really pleased with the efficiencies that we have in the factory. That gives us opportunities that if we have a short-term win, we can also act on that. But I mean, that is no promises.

Okay, and then a general question here. The fact that you now are proceeding according to plan, Is that already so expected or are the clients gives this room for more orders thanks to that you can deliver the existing ones?

I come back to, I mean, it's a great question. We are always, I mean, we have balanced the production site in Virginia, and we have the backup site in Texas that is co-shared with Airtec, when I talk about data center then, to be balanced on, I call it one shift plus. So if we need to, when we have... ramp this up and it's running smoothly of course we can always add more capacity by adding people etc etc so I think I've said something like this there is always opportunities for about 20% more orders to squeeze in but at the end I mean we need to attract the customers we need to work with the customers but so the short answer is yes we can add orders into the system excellent

And this European ramp-up, will that be produced in Ireland, or is it something you may deliver if orders come in in Europe?

The idea is we are moving forward to having the cycle approved fully for the European market the second half of this year. We are working with the clients in the market. We see good results. attention from them they are very interested in the product and we aim to produce that in in ireland then if we need to rush a product just for the sake of showcase it etc of course we can transport that from us over to europe just to see that you can start to take orders in the second half of this year and and then hopefully deliver later on that that sort of a

You're planning here.

Exactly. Have that as a timeline. And then, of course, you never know when orders may come, if it takes a quarter or even longer. With that said, I mean, we are already pre-selling the concept into the European marketplace.

Do you have any idea about the size of the market here or?

I don't have it on top of my mind, but I mean, the reason why we decided to come back to the European market, that is that our view on the European market and in particular the co-location area was that it was a market where we could take a lot of progress. I cannot size this compared to the US at current because then I have to go into the fact sheets, etc. But it's a substantial market and it's a market where we do not have much market share at current.

Excellent. So that's all questions for me. Thanks.

There are no more questions at this time. So I hand the conference back to Anne-Sophie.

Thank you very much. And with the questions that we've had on the conference call, we have actually covered all the questions we have received today on this report. So with that, I would like to hand over to you, Claes.

Thank you very much, Anne-Sophie. And instead of wrapping up the conference, I will take the opportunity to say thank you very much, Annette. This is your last conference. A fantastic support to me, a fantastic support to Munters. And I can promise you, I mean, the journey will continue and we can always improve in all areas. But I think it's hug time then also on the conference like this, you know. So thank you very much, and thank you to every one of you out there.

Thank you very much. See you back in July when we present our half-year report. Thank you.