Munters Group AB

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.