Munters Group AB (publ)

And welcome to this presentation of our Q2 results. With me here today, I have our CEO, Claes Forström, and our CFO, Katarina Fischer. Welcome to those of you who are viewing online and also for those who are listening in on the conference call. Please feel free to enter all questions online throughout the presentation and we pick them up in the Q&A session afterwards when we also open up for you who are listening in on the telephone conference call. So with that, I would like to hand over to you, Claes.

Thank you, Anne-Sophie. And once again, very, very much welcome to this Q2 report. As always, let me put a frame on this report. It's a quarter where we continue our strategic journey with strong progress. We deliver an all-time high profitability, strong cash flow, and building a solid foundation for future growth. Continued good underlying markets, strong long-term demand in data center technologies and markets, but also within food, service and components, just to mention a few. A weakening within battery in the near term, but still in the long run, a very strong market. Portfolio advancements. Conclusion of Foodtech's strategic review. We have the intention to sell the equipment. But also continued portfolio additions through M&As. All three like a hand in a glove. Very well fitted for future growth and profitability advancements. And finally, sustainability fully integrated in our strategy. SPTI commitment, investment to ensure delivery and net zero target continues step by step. Going in a little bit more into the details. As I said, a strong second quarter position us well for future growth. Order intake, 3% up, a solid quarter. Increased net sales and all-time high profitability. Air tech, when it comes to order, flat. Mainly weaker batteries in APAC markets. DCT, flat, but we have to remember last comparable quarter, we had a large order that skewed the comparables. Very good level within smaller and mid-sized orders, showing a strong underlying market. Food tech, really pleasing to see. Good growth across the system, driven by especially America's NMEA. And the total order backlog increased with 6% in the quarter. Net sales reaching 7%. Air tech declined. Primarily weaker battery subsegments in predominantly APAC. Strong deliveries on the other side on batteries in Americas. DCT, strong growth. Successful execution of deliveries. And I will come back to that. It has become a very good delivery machine. And food tech. grow strongly, primarily EMEA and Americas, and book to build close to one. Coming back to the profitability, a record profitability of close to 18%, 17.8%. Driven by positive product mix and deliveries in Airtek, as I mentioned earlier, but also very much strengthening effects from lean practices and other efficiency improvements, and all in all, a high utilization grade in our main factories. With that said, we continue to accelerate our investments in digitization, ways of working, and our manufacturing footprint across all our BAs. Net sales, or sorry, order intake. Americas and EMEA are main growth drivers. As you can see here, if I go back a couple of years, I mean, at that time, it was about 25% in APAC, about 35% in EMEA, and then a minor in Americas. This has flipped substantially. All in all in America, Stan, Flat development, it is good in commercials and components, but that is offset by battery and services. Data center, a strong underlying demand. Hyperscalers, and I have to repeat this, hyperscalers rely on co-location providers to grow it rapidly. Food tech, continuous strong growth in the region. Coming back to EMEA then, order intake, Airtek did grow, especially in the industrial segment. DCT, steady growth, and food tech starting to recover in EMEA. APAC, very much as it has been, weaker development, mainly in the battery segment when it comes to Airtek and food tech. A slight sign of recovery there. And if I summarize it, you can say strong in data center, strong in food tech, air tech, a little bit weaker in Americas and APAC, but steady in EMEA. You have seen this slide many times. It is the larger orders that we have communicated. I can just highlight one here, and that is now we have finalized the deliveries of one of the battery orders, as you can see. I'm super confident moving forward that, especially when it comes to data center, it will either be several medium-sized orders Or one or two larger orders. And once again, it is an erratic order intake in data center. Moving into the different business areas then. I think the main thing to bring with us here from this picture, that is, I call it a shift. It is a shift moving slightly away short term from strong order intake and a strong marketing battery to moving into other markets. And here I would like to highlight both clean technologies, service and components, but also food. So for the coming quarters, I think it's fair to say that you will see green arrows in the ones that we indicate and red or flat arrow in the battery sector. When we talk about net sales, super pleasing to see a very strong operating adjusted EBITDA driven by, as I said earlier, efficiencies, the finalization of deliveries of one large battery project. What is very pleasing here to see that is the pre-calc summed up to the end deliveries, actually a little bit better than I think it was planned. And adjusted EBITDA margin then increased. You have seen this slide many times. And I think you can take with you two things here. First of all, battery is at current weaker, but it is built up by many, many smaller orders. The second thing that is, if you start a year and a half ago and take a look on all the other segments, at least I interpret this as a very stable, slightly increasing underlying market. This is a slide that I really like. Those of you that have followed monitors over many years, you know that the fundamental monitors, that is our components, it is our desiccant wheels, it is our evaporative pads. The desiccant wheel, taking away moisture from the air, predominantly into segments like battery, windmills, storage, etc. The last couple of years, this has represented about 50-60% of our total component sales. Now it is about 40%. This quarter, it has started to flip over to evaporative pads. 60% of our component order intake is in this. And what is the driving force here? It is very much data center and some food installations, but predominantly data center. A lot of data center rely on this type of evaporative cooling. And I predict that this will continue to grow for the coming years. Coming back to windmills. We are exposed to many different industries. Electrification is not only the EVs. Electrification is cutting across. And I believe personally that electrification is perhaps the most important question for our generation. If we cannot shift to greener electricity, I mean, then we will slowly create a world that is not better. It is worse. Taking the windmills. In each and every windmill we may have one dehumidifier at the top of the windmill and one at the bottom in the column. We are building many windmills in the coming years. Coming back to data center. Here I will be a little bit deeper in a couple of slides. But first of all, I will try to clarify something that when you take a look upon this slide, it is the transactional sales that we represented here. Very little direct sales to hyperscalers. a lot of sales through co-location that is feeding it in to hyperscalers. The predominant driver in data center is, of course, hyperscalers. But you know, it is when you buy a car, sometimes you buy it of a car dealer and sometimes you buy it directly from the manufacturer. It is the same, different ways to the market. And Here, I'm very confident that this growth in data center will continue moving forward. If we talk about Adjusted EBITDA, super pleased. Data center has become a lean producing machine. I had the opportunity to visit one of the factories a couple of weeks ago. I was truly impressed. That's the reason why you see such a great EBITDA in this. I think they have started to put themselves up at a new standard here. But all in all, it is a strong value growth. It is good effects from lean practices. It is a positive product mix. And on top of it all, high capacity utilization that is driving the profitability. With that, we are not holding back on making investments. It's super important. We believe in this market going forward and we will continue to invest. During the quarter or slightly after the quarter, but during the quarter we have worked very much with a couple of acquisitions. One then in the area of data center. This is an Italian producer. And what I think is the most important thing to bring with you here, it is a producer of chillers. Chillers are super important in liquid cooling. So you have the chiller and you have what we normally are producing, the CDUs or the indoor part. You add those together and then you have a full system. So with adding this we are actually then having a full system to sell. We are sort of doubling the potential in this arena. that in combination with a recently launched cdu unit that is open for liquid cooling on the ship that is adding chillers to this i call it it is a hand in a glove type of acquisition with this It is in Europe, which I like. It is in the right segment, which I love. And then on top of it, it is making a combination effect. So for me, this strengthen our offers towards the data center arena. Moving over to food tech, Dan. Two sides on this. First of all, we have concluded the strategic review of food tech equipment. We have come to the conclusion that our intention is to divest this. Of course, when we get the right price for it. At current, it represents about 13% of Mantis Group net sales on rolling the last 12 months after quarter two. We don't see the strategic logic to have this. We see a much greater future for monitors when it comes to controllers and software. With that said, it is a business, the equipment business, that is now improving its performance step by step. Moving over to controllers and software. Yet another quarter with an impressive growth of ARR, 71%. And I come back to what I said a couple of quarters now. We are on the journey to move towards 400 million or 500 million of ARR in this arena. Fantastic gross margins. And here I'm short term willing to sacrifice some of the profit in order to capture the growth. But also in food tech, we are pursuing the acquisition road. In this case then, a controller company in the US dedicated to layer production on and about 100 million Swedish kronor with an accretive profitability towards food tech as such. We are adding value creation parts into food tech for the future. Foodtech is turning green. In more and more areas, we can see that we are having an improved market. It is still a sluggish market in China and in Asia. But in Europe, it is starting to come back. And when it comes to North America, it is very, very strong. And we increased the order backlog during the quarter. That resulted in strong margin increase and a continued sales momentum. And also here, I think it is impressive margins that was delivered. It is very much the same reasoning behind. Good, strong net sales, positive contribution from net price here as well. On the group, on and about 45% net price increases, but stronger in food tech. Good profitability in all areas, but the underlying driver within the equipment side, it is Operation Excellence improvements. We continue to innovate also in food tech. Here it is brought forward an E-line fan. That is very much, if I simplify it, an electronically maneuvered fan that reduces the energy consumption with up to 50%. Instead of adjusting the current up and down, you can manipulate it through electronic control systems. and this delivers lower energy consumption and improved animal welfare. Service, components and software as a service, a super important arena for us moving forward. During the quarter, the order intake, we reached 25%. The rolling is 26%. What I think is important here, that is, if you see the largest contributor is on group Airtec when it comes to service. increasingly a contribution from data center and a good contribution from food tech. And here you have to remember software as a service plays a very important part. But if you come to components, I would like to go back then to what I talked about earlier about desiccant wheels and the evaporative cooling. About 40% of what you see when it comes to the evaporative cooling is actually provided towards the data center segment. It is sold through and produced within Airtek in order to drive efficiency within one factory. But I think it's worth mentioning that this is also a component slash service of the market directed to the data center arena. Sustainability is fully integrated in everything we do. Without digging into the individual numbers here, I think it's fair to say that we are step by step making progress in all areas. We are delivering great contributions when it comes to energy efficiency. We are not happy about our diversity, but we are step by step improving that. And when it comes to code of conduct, it's very simple. I mean, with our suppliers, we always strive or we always have 100% code of conduct. And then we are gradually moving in now also towards the customers and our channel partners. But more to come about this in the future. So with that, over to you, Katarina.

Thank you, Claes. And as you have heard Claes talk about already, we reported a strong second quarter with an impressive profitability. Data Center and Foodtech saw continued strong growth in net sales. For Data Center, we saw this in the continued deliveries in the quarter. And with good deliveries, they also reported and delivered a very strong margin. In food tech, they saw gradually strengthening of the markets in Europe and the US. And this then fueled growth in these areas. And here I would also like to emphasize what Claes said about the digital solutions in food tech and the sauce business. We saw an impressive growth in the sauce business in the quarter of about 71%. And this volume growth also then increased. contributed to the improved margin for food tech. Airtek had a weaker net sales, and this was mainly driven by the battery subsegment in APAC. Despite the slightly lower volumes, Airtek managed to increase their profitability through ongoing efficiency measurements and also the product mix in Americas, where we delivered on those volumes. Large orders, those were finalized in the quarter. All business areas worked on improving their ways of working. And we see very good progress, as Klas mentioned, in our lean processes and also in other initiatives. One of these is the working capital management. And here we are very pleased to see that we have been able to reduce the ratio of operating working capital to net sales to 12.5% in the quarter, which is now within the range. that we had a target range of 13 to 10%. Our net debt decreased in the quarter despite the fact that we closed the acquisition of AirProtect and we are now at the leverage of 1.8%. As we said, we delivered record high profitability in the quarter. A very strong driver of this was, of course, the volume increase. And here we had a high utilization of the production capacity at many of our sites. I would like to mention, though, that we had a slightly lower utilization in a couple of areas in Asia and in Europe. And this was then linked to the demand situation for some of the market segments in these regions. Product mix contributed strongly. And there we have already mentioned Airtek and the delivery of those large orders there. Also Data Center had a strong product mix. Foodtech also continued to deliver on net pricing. So that, of course, contributes a lot as well. And then we have the operational excellence initiatives contributing in all regions for us. And we continue to make investments in our strategic initiatives. And what we mean by this is that we continue to invest in the digitalization of our ways of working and also to build a strong platform for system support so we can continue to deliver with high quality and speed to our customers and stakeholders. Looking at the cash flow, it improved in the quarter due to the stronger operating earnings and also a positive contribution from a reduction in working capital. And as in the first quarter, we saw some larger customer advances from mainly from the data center orders. And this is visible in the slide where you see this. And as we have pointed out before, and as you know, the data center market can be volatile from an order perspective. meaning how customers place the orders. And this means then that the order intake can vary between quarters. And then that can also have an impact on how we receive the customer advances, depending on the cash profile on these orders. In the quarter, then we closed the Airprotec acquisition and we paid with that with cash. And we were also able to amortize on some of our loans in the quarter. Looking at capex then, so we continue to increase our capex spending in the quarter. However, it stayed from a percent of net sales point of view. Over the coming quarters, we will continue to increase our investments and we will see a peak here as we finalize the production of the new facility in Amesbury in the U.S., Also data center, they are expanding in Europe. And here the build of the new production site in Cork, Ireland is progressing according to plan. Capital allocation is, of course, a very important topic for us and for me, and I have a high focus on this. And over the coming years, monitors will need to continue to invest in different areas. So we will continue to invest in R&D and production and also in our own facilities to make them ready and for us to reach our net zero emission target for 2030. We are, of course, also focusing on our M&A agenda that we are now driving with higher speed to capture the growth opportunities. And here, after the close of the quarter, we announced two new acquisitions. Looking at M&A more in detail, you can see that so far in 2024, we have closed the acquisition of Airprotec. We have also acquired Automated Environment and also Geoclima, the Italian manufacturing company that produces the air and water cooled chillers. We have also done a couple of minority investments in AgriWeb and Capsol. And these acquisitions and investments, they are covering three of our important growth areas. So that is the food tech digital business and then also clean technologies and also data center technologies. And as I have stated many times before, it's very important for us to make sure that we integrate the companies we buy in a good way. And we have a very structured approach how to do this. And then also one example of the good synergies delivered in the quarter, where we saw some very good synergies from Innobram, where we saw some great sourcing synergies. As the cash flow improved and the earnings improved, we managed then to decrease the net debt and also managed to lower the leverage ratio to 1.8%. And for us, it's very important, of course, to work on constant deleveraging and also make sure we have a strong balance sheet. And in the second half, we expect to close the acquisition of GeoPlima. And going forward, our net debt and leverage can vary depending on the M&A transactions that we make. And with that, I would like to hand it back to you, Klaus. Thank you.

Thank you very much, Katarina. Moving forward to a summary then. Let's see if the clicker works here. We continue to progress towards our long-term financial targets. Those are financial targets that we aim to hold over a business cycle. Currency adjusted growth in this quarter resulted in a 7% growth. Certain areas, if I look forward, I predict strong underlying growth patterns moving forward. Data center in both regions across the different product assortments. Food, both food processing and digital food support. Strong growth. As I highlighted earlier, components and service is also a strong growth driver moving forward. Then short term, battery will be weaker. I think it is logic to some extent. Sometimes when you do a large transformation, that is then slowing down during certain periods and then start to take up. I always ask myself the question, do I believe it will be substantially more EVs five years ahead than today? And I always come to the conclusion, yes, of course, it will be like that. So long-term growth drivers. Electrification as such, if I leave EVs, is also a very strong growth driver moving forward. It is everything from transmission towards and back from the windmill parks. And as I said earlier, electrification and green electrification, I believe, is the largest question to solve for our generation. Then we can talk about carbon capture and others areas like volatile organic compound. My point is there are several growth patterns that works in our hands. Adjusted EBITDA margin. I'm so pleased and so proud of all our people in order that they could deliver well above our target 17.8%. What we have to remind ourselves that is this is our business cycle. We always strive to deliver the highest and best possible adjusted EBITDA each and every quarter, but it's the long-term progression that is important. And then coming back to what Katarina said, we have the target to deliver an operating working capital through net sales that is in between 10 to 13%. Super pleasing to see that our machinery here is also starting to work. But on top of that, also, of course, fueled by advances in this case in data center. So, to summarize the quarter, all-time high profitability and a strong foundation for future growth. Many markets have a solid underlying demand. We advance in our portfolio adjustments. Conclusion to sell the equipment part of Foodtech. But also three very important M&As moving forward. All three in my book targeted to the right region, the right segment, the right growth areas. And then... Sustainability is 100% integrated in everything we do. We set the target now, and we have the SPTI commitment, and we are delivering on that step by step. So with that, over to Q&As and back to you, Ann-Sofie.

Yeah, great. Thank you. Before we open up for the telephone conference, I would like to start with a question that we have received from the web. And this is related to the data center orders in Q2. And since they were about flat, are there any concerns that we see on the level of the data center order intake Q2 period?

Yeah. The very short answer is no. The little bit longer answer, if you look, zoom out a little bit. Last year, we announced in the same quarter, we announced a larger order on and about, if I remember it right, 80 million USD. This quarter, we didn't have any substantial large orders. So from my perspective, I see this as a sign of a very strong underlying growth. And I say it once again, some quarters, we will have substantially high order intake and others lower. Take a look. Once again, I'm pleased to see the continuous progression of the deliveries out of our factories.

Perfect. Thank you very much. So with that, we can open up for questions on the telephone conference call.

The next question comes from Adela Dashian from Jefferies. Please go ahead.

Good morning. A few questions from me. The first one, I guess, piggybacking on the data center order pattern question just asked. I think you've previously said that in your core orders, the underlying orders, the small to medium-sized orders, in this segment typically range from, you know, anywhere between 300 to maybe 600 million in a quarter. But it was substantially greater than that in this quarter, despite any larger orders. So would you say that given the underlying momentum in the end markets that the core order size or magnitude

is increasing and that we should expect i guess this level to be a more normalized level versus what you've historically recorded in the segment uh thank you for a great question and and i think my honest answer is whatever answer it may be wrong but to be a little bit more clear i see this as a strong indication that the data center market is improving So it is a high probability that we will have a continued strong underlying market with medium size to smaller orders. And then depending on the customer, some customers decide to bundle together and others to release it step by step. But I see it as a clear sign that we have a very, very strong underlying demand in the data center segment.

Got it. And then maybe also if you could just touch on what type of customers, I know they're the co-locators, but is it European co-locators or US-based co-locators that you're seeing the most orders from during the quarter?

The majority of our orders are still from U.S.-based, U.S.-owned, and the majority of the orders are coming in the North American business. We are making progress step by step within Europe. I'm very pleased on this. As you know, we are building a factory. But I also need to highlight the recently announced acquisition. I look upon this from at least three perspectives. First of all, it is targeted very much to one super interesting area and that is liquid cooling. Today we are making by ourselves one part of the liquid cooling system. It could be a Psi-Cool or it could be a CDU. One part. The chiller, the one that takes the heat away, so to speak, we are not manufacturing ourselves. We are bundling it together from subcontractors. Now we will have this in our own hands, so to speak. So that will deliver a strong growth driver moving forward there.

And with this acquisition, do you feel like you now have the comprehensive product offering that is the most optimal or do you see opportunities to expand the portfolio even further?

I mean, with this, I think we have the width as good as any other players in the marketplace. I think we are well positioned in the different regions. And then I talk about North America and Europe. This acquisition also opens up, to some extent, sales offices in Asia as well. So maybe when we are ready, further ahead, we can start to advance also into Asia. But from a product perspective, I think we have a very strong base to work on. And then, of course, we will always fuel it up with new innovations being brought to the market.

Great. Thank you for that. And then lastly, just on the divestment process for food tech, could you specify where you are within that process and how is that evolving? Are we talking about one-on-one conversations that you're having with potential buyers or is it a bidding process that you're considering? And also the timeline would be great to know. Thanks.

As I talked about during the capital markets day, we had started to haste appetite in the market. Now we have come to the conclusion that we have the intention to sell this. We are entertaining dialogues with some very interested parties. And then I know that if I say a specific date when this will happen, I'd be most probably wrong. But I'm very confident that this will move on in a good way then. And we communicate when we are ready, so to speak. But I see this as being moving in the right direction.

Great. Thanks, Klaus, and congrats on the quarter.

Thank you.

We take another question from the conference call.

The next question comes from Gustav Bernablad from Nordea. Please go ahead.

Hi, it's Gustav here from Nordea. Just to build on the data center question, I mean, if we take DCT in Europe specifically, based on sort of your dialogues with customers, do you feel like there is a hesitancy in placing somewhat larger orders among your customers as you still sort of have a couple of quarters left until the new facility in Ireland is finalized. And so could there be a pickup in orders once you have finalized it? Or what would you say there?

I mean, now I turn into a little bit speculation, just to make that clear. Before we built the large facility in North America, of course, we entertained dialogues with customers and we started to build that ahead of the curve, as I used to say. I mean, to some extent, you can look upon Europe in the same way. Now we have also, even if it's a completely different segment, completely different products, we have also announced that we will enlarge our footprint in Europe then when it comes to chillers. i do believe that that combination will be a very strong point for us in europe but i also would like to underscore that your klima is not only selling in europe it is also providing sales in many other regions so to speak so it is this perfect complement so to speak yes yeah okay thanks and then

Just on the data center margin, it's very strong. I mean, can you just help us understand a little bit more? I mean, it looks like the 14% to 16% that you're guided for, and you're obviously guided for the upper end of that range, but it seems rather outdated. Is there something we are missing here? I mean, you have comment on pickup investment activities as well and so forth. Are they not seen in the numbers yet, or?

I mean, some of it may not be seen in the numbers yet, but I have to say like this, I am truly impressed on the progression that the data center team is doing. I mean... I hate to say that I'm surprised, but what I mean, when we talked about driving efficiency, they have outpassed what I believe they could do. And I asked reference to when I visited one of their facilities in the US a couple of weeks ago. It is a very strong lean machine. So with that, instead of talking about where do I have my expectations, I put it as simple as this. My expectations is always rising on those that performs. So I have high expectations on them moving forward. But I'm very satisfied with where they are at current. And I think that covers it.

Okay, and then just the last one on the food tech margin. I mean, can you give some sort of indication of how much is seasonality? And also, do you expect food tech to sort of perform in line with your financial margin target, even despite you sit on the equipment part for the full year?

Normally, I will come back to what I mean normally. Normally is always the last and to some extent the first quarter in food tech on the equipment side weaker. But with that said, sometimes if the market is going up, then that is a little bit bridged because the market is going up. And sadly, then when the market is going down, then in a region, I mean, it's a double hit, so to speak. So from that, I think the best estimate that I can give you, that is normally the second half, especially the fourth quarter, is normally seasonality weaker than that. We have good progression in all areas of food tech at current, but I just want to reiterate that we are not shying away from investing in growth of the software moving forward. I mean, there it is the ARR growth that is the most important. We know that we have a fantastic gross margin there. But all in all, at current, food tech is performing very nicely.

Okay, that's all for me. Thank you very much.

Can we take another question from the conference call?

The next question comes from Karl-Oskar Wikström from Burenberg. Please go ahead.

Hi, good morning, everyone. Just to start off, I continue with more question on this DCT orders. You've come to quite a few points. I was just wondering when you now add these CDUs and also with the addition of Geoclima and enhancing the portfolio, providing full-scale liquid cooling solutions, Do you have a sense on how much this would sort of expand your addressable market or how much more of the actual capex that goes into the data center are you able to capture here relative to what you have been up until this point?

I think both Katarina and myself need to come back to a very precise answer on that. But in the arena of, let's say, where a customer is buying both a CDU or an indoor part and a chiller, you can say that the size of the indoor equipment is is sort of equal to the size of the chiller. So in theory, on a specific project where you have the both components, you can say it is twice the size of total sales on that. But then it is a more granular answer. I mean, it depends upon what type of products, etc. But a ballparkish measurement is that.

Sir, that was very helpful. Thanks a lot. And I guess, I mean, Going back to the first question on the call is sort of this run rate, ordering take and so forth, and you mentioned the market is quite hot and so forth, but presumably then it could be quite confident maybe in a sort of a pickup of this underlying rate of orders once this is added on, let's say. Would that be your assumption?

I have learned that it's very difficult to pick a precise order number per quarter but I say like this I see the order pipeline and I'm very confident that in the coming quarters we will continue to have medium to small size orders at the healthy margin and I would not be surprised if we would have orders that is also larger size. I am as confident now as I've been the last one and a half year when it comes to order patterns in data center. I see actually a continued strong underlying growth for the coming years. Data center will not slow down as a market and our intention is not to slow down in that market.

Sure. And I guess just another sort of final point on this discussion, you know, you're quite clear in highlighting that the co-locators are sort of catering to the hyperscalers and so forth, and they're linked together. But I was just wondering, with this sort of complete liquid cooling solution, do you see To use your analogy, do you see the hyperscalers going straight to the manufacturer as opposed to the car dealer, let's say, going forward, i.e., do you see more direct sales to the hyperscaler cohort going forward?

I think we entertain dialogues with hyperscalers and a couple of quarters ago, we have had a fairly large share of our order intake towards hyperscalers, if I remember right, in the range of 30-40%. So, I mean, we are not shying away from any one of those. It is very much depending on the customer preference. How would they like? And we work with both partners. We collaborate in certain areas with hyperscalers and some of the very, very well-known brands on the market in ship manufacturing, et cetera, et cetera. instead of talking about exactly what collaborations we have I can just say that I'm happy to see the collaboration taking place and if it is direct to a hyperscalers or through a co-location at the end it really doesn't matter what I can say that is we have seen that the acceptance of new technology the last couple of years have been higher within co-location arena But we are open for all parties here. And I think they appreciate us, all parties as well.

Yeah, no, that's fair. Thank you. Thank you very much. And then maybe just finally, if you could give us a little bit of color on the Airtek margin, which was quite strong. You mentioned, you know, final delivery of this larger project. I'm just thinking... How would you think about this going forward? Presumably maybe with a somewhat weaker battery market, utilization might be a bit lower. I mean, is this margin something we should consider more as a one-off, let's say, in Q2? Or how should we think about that for the rest of the year?

And I mean, Katarina, maybe you can talk a little bit about margins. I mean, we're talking here the full... Yeah, yeah, no, sure.

No, but as we have said... The margin in Airtek in this quarter was exceptionally high to the very high utilization in the factories and so on. So, you know, we normally talk about 13 to 16 percent range for Airtek. And right in this quarter, they were in the upper end of that range.

Yeah, OK. Thanks a lot. That's all for me. Thank you.

Next question from the conference call.

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

Thank you. Good morning. My first one is on batteries here. I believe after the first quarter report you talked about then that the second half could show an improvement in battery activity. What do you think has changed since then? And also, can you expand a bit when you say that competition has picked up?

Let me talk it through on regions and regions. You have heard me say a couple of times more than a year that it is a call it consolidation type of setting in Asia that has not, or read China, that has not really changed. We believe it has bottomed out, but it's not moving up. When it comes to Americas and to some extent Europe, what is clear that is that some of the investments that have been announced, they are pushed forward. And Some of the projects that we have lost, we have had a win rate of in between 70% in America down to 30% depending on call it quarters. The last quarters we lost a few of the larger orders there. The main reason for that was that some of the battery makers, they wanted to pursue with other players, not that well positioned, but at the lower price. So that is what I mean with a higher competition. Some of those players, they are doing well, and some others of those players, they are not able to deliver this into the marketplace. Some of the projects that we have lost, they have later on been delayed. None of the projects that we have been winning has been delayed. So I think it is at the end. It has been a very interesting market. Then parties are coming into that and dip their toes into that. And now when we have a more damped market due to that, some of the automotive makers are saying we push this ahead a little bit. I think then the winners will be singled out. And I'm very confident that we are one of the winners, or if not the winner. But it's a more damped battery market. On the other side then, what is interesting to see that is, Now it starts to come back some smaller replacements in China when it comes to components, etc.

Understood. And my final one is on the acquisitions that have been announced. Can you say anything about the profitability of these two?

If I take all three then, because I think all three serves the air protect, you can say that has a average lean towards Katarina here. It is not a creative. It is average. And we will work, of course, with that. But it has a strong growth potential as such to the right segments. If I take then advanced equipment, if I remember right, any theory?

Automated.

Automated equipment. Sorry for that then. Shame on me. And North American player towards the layer segment that has an accretive profitability both compared to food tech and towards group. And then on geoclima, I think it is too early to say what we will end up in that profitability. But let's say it is average on group.

Okay, understood. The final one now, restructuring costs. Now, when you say you have more or less concluded the strategic review, can we expect these to come down?

Yeah, I mean, we are still in the process, so gradually it will come down.

Are you referring to EICs or restructuring costs?

Yes, well, the total amount included in that line item, but I understand it includes a couple of things. But the total as a whole would, of course, be helpful to understand where that direction is.

Yes, exactly. So at the total level, it will come down over time as we finalize the divestment of equipment.

Understood. Thank you.

Okay, the next question from the conference call.

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

Good morning. I had just one question regarding the margins again in data center. You seem very bullish about the outcome here. Why should we expect significantly lower margins than those 22%? What is sort of extraordinary in the quarter? You mentioned the product mix, but I mean, I guess you will see that for the product mix shouldn't be extraordinary. I mean...

I can start and please, Katarina, pitch in as well. I mean, the product mix is very much driven by, I mean, you have Cycle. Cycle has a higher profitability on average than the, call it, average profitability within data center. With that said, also the other ones have greatly improved its profitability. So, Simply put, the more cycle we are producing or selling in a quarter, that has a positive side effect. But then also the fill rates. Some of our products are called easy to mass produce, if I use that expression, and some others are more, let's say, more tailor-made to some extent. So that is the other part of the mix as such then.

I can just add that data center continues to invest also. So their investment will gradually go up as well.

So that may have a sort of dampening effect on margins that you increase the investments here.

It will have a somewhat dampening effect on the margins. That is right.

Excellent. And then finally the margins in Airtek. You indicated here that those margins may come down when the product mix, when you have finalized the large US orders here. I expect that margins will come down.

And as Katarina reiterated, Katarina and myself, we are pleased if it is in between 13 to 16. And I used to say something like this, if it's above that, I'm super happy that which we are at current. And then it could be quarters that will be slightly below, and then we will not be happy. But 13 to 16, I mean, that is what I think could be a baseline, so to speak. And then, of course, that could be spiced up or that could be damped, depending on product mix or loads in factories and so on and so on.

And finally, the food tech disposal, any timeline for that? deemed to be completed.

As I said earlier, Anders, this is difficult to set a precise timeline on. We have started to entertain dialogues with potential buyers. If I put it like this, at current, I don't think any of us is in a hurry. I mean, it's a great business at current, but I mean, the strategic intent is to sell that off. And the main reason, as we have talked about, that is... We don't see the strategic connection anymore, and we would like to allocate money to other growth patterns. But that's the best I can give you. But we keep all turtles on.

Okay. Yeah, that's all questions for me. Thank you.

Thank you.

Thank you, Anders. I think we have one more question on the conference call.

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

Hi, thank you for taking my question. First, I mean, there's a lot of follow-ups, I guess, but looking at data center there and your climate acquisitions, I just wondered, have you sort of met earlier on these large data center projects and sort of maybe partly cooperated before? How well do you know the company?

A good question. We have entertained the relationship over quite a long time now. We know them fairly well. We have a view on where they should concentrate and where they are doing great. As we said, we will sort out some legal matters before we close, etc., We see it as being a very good fit, or I should say a perfect fit in the glove, that their products are complementing our products. And by doing that, we have a more complete solution than anything, Katarina, that we have gone through. I mean, we have been thinking on these acquisitions for long now. It's like giving birth to a child, you know, to some extent.

No, I think you've covered it very well. Okay.

Thank you. Yeah, and in the process of sort of building a data center, do you sort of meet, well, I guess there is a contractor on top and then you sort of have, for the customer, are you sort of making a step change now and broadening the offer and, well, is it something that's changed in that process?

Our belief is that the majority of the customers that we have that are interested in call it this type of solutions, they will truly appreciate that we now can deliver them when being closed a complete offer. Of course, we will already now from day one start to offer this jointly then. Okay. I think this is, if a growth driver is the right word, but it's definitely a super strong complement to our offer.

Okay, great. And just a final one on Airtec and the larger project deliveries. Will this be more limited in the second half?

Sorry, Mats, we didn't hear the last... No, I mean, you had some large projects that was...

finalized during the second quarter and there will be less of those in the second half is that right?

Yeah if I remember it right then from the slide we have one larger project still to be delivered out but after that we do not have any very large orders then it's more let's say medium size and smaller orders that will fill up our plants.

Okay great thank you.

So thank you for that. Thank you for all the questions that we received and for everyone that have listened in to this presentation. With that, I would like to thank Claes and Katarina as well. And thank you for today. And we look forward to see you again at the presentation of our Q3 report in October. And until then, please reach out to us at Investor Relations if you have any questions. Thank you very much.

Thank you.