Munters Group AB

to the presentation of our full year results for 2023. I'm Anse Fjernsson, and I'm head of investor relations and risk management at Munters. With me here today, I have our CEO, Claes Forsström, and our CFO, Katarina Fischer. For those of you who are viewing on the web, do feel free to enter your questions throughout the whole presentations, and we pick them up afterwards during the Q&A session. And for those of you who are listening in on the conference call, we will open up for questions after the presentation. So with that, I would like to hand over to you, Claes.

Thank you, Anne-Sophie, and once again, welcome and good morning to this Q4 and full year 2023 presentation. It has been a record year for Monters, the strongest year in our history. And we ended up the year with a solid finish, confirming that we are targeting the right growth and business drivers, such as battery, data center cooling, service, lean working principles and digitalization, just to highlight a few. We, as many others, have become avid navigators in a world of geopolitical stress and challenges. We have a strong team, and I'm very confident that we will continue to navigate well. Through our strategy execution, we have created a strong platform. We will now continue to invest ahead of the curve, both in current drivers, but also in the next ones, such as volatile organic compounds for clean rooms and semiconductor industries, carbon capture and software as a service. Just to mention three of those. As most of you are aware of, this quarter we released our preliminary result ahead of today due to a ransom attack at one of our hosting providers, C2 Every. The reason for this was that we couldn't guarantee that our preliminary result for the quarter was fully remaining confidential. Nothing indicates that it has leaked, but better to be safe than sorry. Going in more in detail to the quarter and the full year. A strengthened market position and a strong year result. Stable long-term growth trends, good development on order intake, plus 82% organically in the quarter, driven mainly by DCT, but also good development in food tech. When it comes to net sales, plus 16%, it is the eighth consecutive quarter where we grow about 10%. Also, this has mainly been driven by DCT, but all other regions and business areas have supported in a good way. Food tech, all regions contributed to the increase, air tech being more flattish. Book-to-bill at 1.5% for the quarter and for the full year, 1.4%. EBITDA margin 12.18, a 54% increase compared to the same quarter last year, driven by DCT, but also good efficiency improvements in all business areas. Also, what is pleasing to see contribution for net price adjustments still kicking in. America's the main driver and growth. Those of you that have followed us for many years now may remember where it was roughly one third, one third, one third. Now a much larger exposure, a positive exposure to North America. Order intake representing 74%, net sales around 60%. And the others then, Europe around the 20% level and APAC quite below that. All in all then, Airtec in Americas. A weaker development, very much driven by order pattern shift as order plays closer to delivery time. Components still showing good order intake growth. DCT, a very active market, a market that continues to drive forward. A combination here of larger orders and smaller orders received from both co-locators and hyperscalers. And food tech, a continued good underlying market with a slight growth in climate solution driven from swine and layer. Digital solutions, stable development. And here we have to remember that we had some very large orders on comparable quarters then. Moving to Europe. Summarize, a stable quarter, a stable market in Airtek, repeating the message that I started to send last quarter, orders being placed closer to the delivery time, but service continues to show good growth. DCT, I'm very pleased here. Good development, several small orders from co-locators and we continue the journey. First double and then double again. Foodtech then, recovery in all segments, which is pleasing to see that what we have done and started a few years ago is now paying off. APEC then, as I said, a couple of quarters. Normally, China, sometimes it expands and sometimes it contracts. At current, China is contracting in the battery segment. We have a solid order backlog, large orders supportive into 2025. As you know, order intake for months is to some extent fairly volatile. Some quarters very strong, others quarters a little bit weaker. All in all here, I think the most important thing that is, if you take a look upon the two at the bottom, here we have now when it comes to, in this case, data center, orders that brings us into 2025 and actually in some cases stretches into 2026. Going back more general to Airtec then, order intake decreased with some 31%. If I exclude the larger battery orders then that we received in quarter four, still a small decrease of 8%. Not to repeat myself, but it's weak in the APAC driven by China. I see a two-sided coin in Europe and China. It is the shorter lead times, the smaller orders at current. On the other side, if I look one, two years ahead of what is boiling in the market, a lot of activity is going on there. Components flat due to a weaker battery market in China, but also affected of some component replacement that is not kicking in at current. Service growth in EMEA somewhat offset in America's APAC. All in all then, I think it's a few highlights here. We see a lot of continued activity in the market. What is pleasing to see that is service and components from an order intake point is still at the fairly impressive 40% level. And here you have to remind yourself that in this quarter, we do not have any larger orders. When it comes to the margins, simply put, it is a change of business mix that is affecting margin, but still we are above 14% and keeping it up. What more to say about this? I think it is battery strong growth in America from net sales. It's very much a similar message as on order intake. America's fairly strong, Europe okay to good, and Asia, read China, weaker. What is interesting to see here now, we have balanced it out also with India, and that gives us support for the future. I think this picture is somewhat interesting. We have started to present this now since a couple of quarters and you can see then the very light yellow then at the top, the larger battery orders that we communicate. When I look upon this, I see two pictures. We are lacking some larger orders, but we have a very stable, slightly increasing ordinary business. The business that is the pulse of Munters. Super pleasing. New products brought to the market are getting a lot of attractions and winning a lot of orders. For me, this is really something to be extremely proud of. How many products that is brought to the market can say we are delivering a 30 to 45 energy savings compared to comparable products? How many products can state that they have a 40% smaller footprint versus industry standard? And also in combination with this, you can use different type of energy to drive it, so to speak. And on top of that, being modularized so you can expand it and increase it. And just to give you a little bit of comparison, take a look on the small door that you can see there. That is roughly a man height, around 180 meters then. So all in all, this is the size of a living room that is being delivered. DCT, the driving order intake and business star at current. Interesting here, if I move to the right, that is, you've heard me talk about we have three transactional segments. And what I mean with transactional, that is paying directly on the products we are selling. And here you can see the co-locator is still the very large sector that is both supporting hyperscalers and other type of customers. But in this case, in this quarter, also some good direct orders from hyperscalers, moving it up to 22%. And all in all, the two larger orders that we communicated represented a 2.2 billion order value. But beside that, very pleasing, also quite smaller to sub-large orders from different customer categories. And I would like to repeat something that I said earlier. I mean, it's also great to see that we are now starting really on the journey Double in Europe and then later on double again. Order backlog increased and that is very pleasing. I will not repeat this. I think most of you have seen it. But coming back to net sales increased with 81%. And we have a strong backlog kicking in for the coming years. EBITDA margin increased. continue to move ahead. Here I would like to say that, I mean, do not expect that this will never-ending upturning curve. We need to invest in this arena. We need to drive forward customer support, etc. But I'm very confident that we will continue to be in the range of 14-15% EBITDA. Also here, Very encouraging to see the continued nice traction from customers on our new products being brought to the market. SciCool, you have heard me talk about SciCool for many quarters now. I talked about this future proof. It will both be for air-chilled type of solutions and for liquid-chilled type of solutions. And now we have received the first order on liquid cooling using SciCool as the product. And this picture schematically just shows how it could be done on on the looking in on the right side. You can see air cooled, i.e. blowing air through the data center using the same type of. rooftop retractors and then on the left side you see a similar solution but in this case then liquid cool solution driving a liquid coolant into the data hall. Cycle works for both type of solutions. We are expanding. We are expanding our offer into data center. And I can confidently say that we are taking market share. This is just one example of what we are bringing to the market. In this case, for hyperscalers, a modular shield wall where we use water as a cooling and then This can be expanded in different versions, very much modulized and pleasing to see that our offer has widened over the last couple of years. Those units that I talk about here, they will be delivered during 2025. Super pleasing to see that food tech now, the market on the right side, has started to show improvements also in the climate solution arena. Those of you who have followed us, you are used to have more red arrows than green and gray arrows. I think it's a little bit too early to say that all of them will kick in to become green in the future, but they are slowly but surely starting to move upwards. Digital solutions continue to develop very, very good. And the order backlog in food tech increased. Pleasing to see all regions contributed to significant margin improvements. We have been now fighting against the headwind for quite a few quarters, but now our efforts and the market is starting to turn in our way. Another very, very exciting product brought to the market. You have all heard about the different flus that is moving around in bird population. Here, we have brought a product to the market that is both cleaning the air from potential dangerous and flu bacterias, but then also on top of that, also handle ammonia. I cleaning it out from that point of view as well. Something that we have developed together with a very important customer and has started to gain a lot of traction. Once again, innovation brought to the market and in this case, very much so, supporting our purpose for customer success and a healthier planet. Another area of great importance for us, that is our journey to increase the software as a service ARR deliveries. And as you can see now, once again during quarter, delivering an impressive growth in this case close to 70%. And not to over-repeat what I said about Europe and DCT. It is sort of the same mantra we have here. I mean, first we drive it to double, and after that we drive it to double it again. And if you would go into the mid of 2022, Q1, Q2, I mean, we have made the first doubling. Coming back to the purpose of Manters, for customer success in a healthy planet. Talking about sustainability. Sustainability, what we bring to the customer when it comes to energy efficiency. when it comes to animal health, when it comes to efficient cooling. But if I turn it inside instead, and how do we work inside then? Really pleasing to see that recycling rates are moving up step by step. Energy efficiency, i.e. how much energy are we then using per produced unit, is becoming lower and lower. And really encouraging when it comes to renewable electricity, now up at 80% of our energy being consumed. All this then supporting our net zero emission target for 2030. Health and safety. Safety is always at the top of our mind and I can proudly say that now we are one of the leaders in our industry when it comes to the zero accident journey forward and at 1.2 then when it comes to lost time in your frequency. Diversity. This is an area where we cannot say that we are super proud. Here we need to step by step improve. Our target is to have 30% of women in leading position by 2025. It is a stretch to reach there, but step by step we are moving in that direction. With that then, walkthrough on different aspects. I would like to hand it over to Katarina.

Thank you, Klaus. So, as Claes mentioned, 2023 was a year of strong growth and improved results. I have now been with Manters for about five months, and I'm very impressed by the growth we have achieved and how we have positioned ourselves for the future. If I reflect on the good earnings in the quarter, I am even more impressed by the focus we have had on continuous improvements and also how we are able to manage the daily challenges at the same time as we are really pressing on to deliver on our long-term agenda. I truly believe that Mantras has a very agile operations with a strong business focus. In the year DCT, they grew significantly then on order intake and net sales, and they managed to have a very high production utilization. And this is also, of course, due to that they delivered very well on the large orders. Airtek had a strong year with a mixed development in Q4, as Claes mentioned. Very encouraging to see that food tech continued to strengthen both digital solutions and climate solutions in the quarter. Our net income was lower in the fourth quarter. This was mainly due to an impairment of deferred tax assets of 80 million on losses carried forward. Our full year net income increased 37%. Cash flow was managed well in all business areas and we managed to decrease the leverage. So all in all, we really had a record 2023. Looking at the margin development here we improved the margin as you can see in the quarter and the main factors affecting this was the strong volume increasing which was mainly driven by data center then we also had net price increases and here we saw continued positive improvement and also food tech contributed well to this. All business areas delivered very well on the operational excellence. And even though we managed to increase the margin this much, we also continue to invest for the future in our manufacturing footprint, digitalization and innovation. The cash flow improved from operating activities, and we also managed to reduce the working capital. So if you look to the right in the table, you see the different components of the operating working capital. And here you can see that we had a decrease in the advances from customers. And this is due to that we have not yet received the advances from the large orders that we took in Q4. And we have worked on the advances then on other orders. And as we talked about last time, our cash flow... will be a little bit volatile due to the higher share of the large orders. The investing activities was negative then, of course. And as you know, we in the quarter closed acquisition of Seco. And that was partly financed by debt. And that is why the finance activities is contributing positively. In recent years, our investments in property, plant and equipment and intangibles has increased, but we have a flat development as a percentage of sales. During 2024, we will continue to invest in upgrading our manufacturing footprint. And the one project that we started in 2023 was to build a new facility in Ainsbury, US for Airtek. And this project will continue into 2024 then, and we aim to be up and running then in the beginning of 2025. We will also upgrade our manufacturing facility in China. And for data center, we will expand in Europe to support the European market where we will introduce more products. I also want to point to the development of the operating working capital. As you can see, it has increased as a percentage of sales. And this is, of course, driven by our strong growth. And we will continue to work on reducing operating working capital and improve the cash flow. One of our areas that we have prioritized for growth is M&A. And as you know, we have done several M&As during the past two years. This is one of my focus areas where I really work to ensure that we have both an efficient and good process for managing acquisitions and making acquisition, but then also have a strong way of ensuring the value creation from our acquisitions. And key in this is, of course, the integration process. And here we have a very well structured process in the company where we plan ahead even before we close the transaction. So we put together a strong integration plan. And once we close, we start to implement and follow up against that plan. And we also work in three dimensions then. So one is, of course, to really deliver on the business case, the value creation, but we also work on people and culture and operational processes. We decreased the leverage ratio in the quarter, and that was mainly due to the improved earnings. Our net debt increased then due to the acquisitions we have made during the year, which was partly financed by debt. And then we had a slight increase in lease liabilities as well. And then we can also mention that the financial net is more negative in 2023 than due to higher interest rates and increased debts. So with that, I would like to hand it over to you, Claes.