Munters Group AB (publ)

Welcome to the presentation of our third quarter results. And with me here today, I have Claes Forsström, our CEO, and Katarina Fischer, our CFO. And I'm Ann-Sofie Jönsson, and I'm head of investor relations and group risk management here at Montes. We will run through the presentation, and after the presentation, we will have a Q&A session. And for those of you who are listening on the web, do feel free to place your questions throughout the whole presentations, and we will pick them up afterwards in the Q&A session. And then we will also open up for those of you who are listening in on the telephone conference. With that, I hand over to you, Claes.

Thank you Ann-Sofie and once again very much welcome to this Q3 report. Before I and Katarina go into the results and the details of the quarter, let me start a little bit broader. I'm very pleased that our investments in innovation have generated results. DCT a couple of years ago were a niche upcoming business area. Now I would label it a world leading offering within data center cooling with sustainable and long-term strong demands supporting the growth. I look upon ourselves as innovation leaders and in this quarter more than 120% order intake growth. Foodtech, the journey that started a couple of years ago, creating a new market with our software offering and digital solutions. We are creating a market here and the ARR was growing once again about 50% in the quarter. Airtek, our dehumidification systems, are leading with a strong service offer. But, I mean, two super good business areas in Airtek, a sluggish demand when it comes to the battery segment. I don't think that surprises anyone from the news. But with a long-term outlook remaining strong. A strong report, strong growth. Order intake plus 21%, net sales plus 6%, adjusted EBITDA above 16%, and a growth of 21%. And very pleasing to see operating working capital in the targeted area. We will continue to invest in our footprint, in our digitalization, and also in select M&As that generates an even better future. If I go back then more in detail, as I said, strong growth and profits with a continued weak battery outlook. The mega trends are definitely driving our order intake. Order intake, as I said, grew about 21%, 18% organic. In air tech, an organic decline coming from the battery. In DCT, a strong growth. Good level of small and mid-size orders in America. And I'm very positive when it comes to the coming quarters if it follows the normal order intake pattern. But here, you know, order comes and goes in data center. Food tech decreased mainly due to seasonal effects. All in all, the backlog increased with 7%. We also saw an increase in net sales, about 6%. Airtek organically declined with the batteries in APAC and Americas. DCT showed stable and sustainable growth, successful deliveries on the large orders. Foodtech, as I said earlier, grew strongly in both climate and digital solutions. And they booked the bill in this quarter at 0.8%. Continued strong profitability, now reaching an adjusted EBITDA of 16.2%. The drivers in this quarter are clearly DCT and food tech. Strong volumes, but also efficiency gains. Airtek, positive product mix and final deliveries on large orders. Also pleasing to see that all business areas showed effect in lean practices and operational efficiencies. And as I said earlier, lower production utilization due to lower net sales in some of our factories within Airtek. DCT in Americas is the main driver of growth. As you can see here, about 60% of both order intake and net sales is represented by Americas around in between one quarter to one third in EMEA and around 15% or slightly shy of 15% in APAC. I will not go through all those details, but it's the same story as I said earlier, also in the regions. Airtech negatively impacted from the battery and battery components. Positive in Americas when it comes to industrial segments and also the commercial segments. DCT, a strong star driving growth and profitability in Americas. And food tech, somewhat weaker demand in climate solutions i.e. predominantly in the equipment side, very much related to seasonal effects and timing. EMEA, Airtech's slight growth, primarily in the industrial segments. DCT, somewhat slower development in the region, very much driven by how customers are placing orders. And Foodtech, from a seasonal effect, somewhat weaker demand in climate solutions. AIPAC continued weak in the battery segments in China and Foodtech somewhat seasonal weaker effect in climate solutions. Drilling into Airtek, if I look upon the graphs on the right side here, you can see it is one segment that is down. It's the third quarter in a row that is pointing down and all other segments are positive or stable. Investments in lower volumes are affecting the margins. Of course, it is the fill rates of our factories. It is the investments for driving efficiency. All in all, I said that I'm happy when we have a adjusted EBITDA of 13%. This was this quarter on the borderline. But I think that Airtek is doing good compared to where it used to be a couple of years ago. I think this graph shows two clear patterns. The first pattern is the blue and down. That is all segments except batteries. All segments except batteries. I look upon this graph and I say that it's stable to slightly increasing. And when it comes to batteries, I mean all of the large orders that took place a couple of years ago are now out of the system. And depending on how the development is in different markets, it is substantially weaker than battery outlook. CT, stable development. Other industrials, a solid, good development. Commercials, the supermarket side in North America, but also the acquisition of Zico is making strong progress here. Components, a little bit two-folded. We are slowing down in the battery and we are, during the year, improved when it comes to the evaporative pads to the data center market. and service a solid development. Battery I also here see a two-sided coin. The long-term outlook remains valid. Electrification will take place. At the same time, I think we all have heard what is happening now in the transition of EVs around the globe. And we are anticipating for 2025 challenging conditions to remain. All in all, it is an overcapacity in the Chinese market. It is under pressure. There are overall fewer projects globally, particularly in China and US. In Europe, I see still, it is work ongoing with several larger projects, but they are pushed forward, but smaller projects are coming in. There are new entrances, new players coming in in the market and some of them have offered their help to battery factories and very, very seldom they have been able to live up to their promises. For me, that represents a positive future, i.e. some of the newcomers in here will most probably be weeded out in the future. Moving away from battery then, all the other segments here represented in Airtek by a super efficient cooling solutions for food storage in supermarkets. By using both a cooling pad solution and the normal cooling solution, a lot of energy savings can be generated. And also the vegetables actually are becoming fresher with humidity on top of that. Here it's a sign of proof where our solution can also help support existing solutions moving forward. Data center continued to deliver. Here I see several years of continued strong underlying growth. We have talked about CAGR in the marketplace in between 10 to 11, 12%. We have a very, very up-to-date innovation offer in the marketplace. We generated good level of small and mid-size order in the market. If I should go back to what normally the seasonal pattern is, then the end of this year and beginning of next year, we normally are also getting larger orders. But here you know, sometimes the larger orders are coming one quarter and sometimes another quarter. But I'm quite positive moving forward for the coming quarters. The order backlog increased. Data center are truly delivering on profitability. It's good fill rates. It's good efficiency. It is good cost control and overall a stellar performance. As I said, the volume, but also the lean practices, the positive product mix, continued good price effects. But then, of course, we continue to invest for future growth. So hampered to some extent by the investments in our new production site in Europe. But all in all, a solid performance. When it comes to larger orders and now we have also started to introduce orders that we have not published on press releases. The order pattern and the order deliveries is like this. So you can see we have a healthy backlog leaning into 2025 and on top of that also the recently closed Eoclima acquisition. Sometimes I get a question about service in the data center. We have moved up our service content currently from around 2% to now being at about 5%. We see more and more retrofit projects coming from co-location customers. It is mainly related to evaporative pre-cooling for air-cooled chillers, i.e. our wet pads. And if I include our wet pad sales, then also into data center. From a transactional point of view, we handle it through AirTech. I could add 45% on top of what we present as service within data center. So gradually, we are increasing the service level here. Moving over to our other top performer in the quarter, Foodtech. I talked about the weaker seasonal effect and timing effects. That is normal. Very often the last quarter and the first quarter are weaker. This year we saw a little bit earlier a decline from seasonal effects. The order backlog decreased to some extent, but as you can see, the majority of the segments are green. A couple of years ago, the majority of those segments were red. We continue to see strong margin increases from all regions, lean practices, volumes, software, synergies within the controller community by bringing in new companies and then generating synergies together with the already existing controller companies. A very, very good progress all in all. And talk about new companies. Hotraco, that we recently signed with. An annual turnover of about 41 million euros. Headquartered in the Netherlands, one of the food tech hubs in Europe. Employees about 140. This generates a much stronger footprint in Europe. 45,000 controllers installed globally. That will generate data that we then can bring into our ecosystem. It's an acquisition that is 100% in line with our M&A agenda to grow the digital and the software part of food tech. And it's expected to be completed during the last quarter of this year. Our conclusion remains, we will divest the non-intelligent equipment business. At current, it represents 13% of Manters group sales. It is making strong progress in profitability, but strategically, it is still a clear view that it do not belong within Manters. Also, I said it a couple of times, the continued growth of food tech software. 52%. I said that first we will double this and then we will double it again. Now we are on about 300 million in ARR with healthy profitability supporting that. With that, I hand over to you, Katarina.

Thank you, Claes. And as Claes has already mentioned a couple of times, we had two business areas delivering really strong results in the quarter. So that was data center technologies and also food tech. In air tech, we saw a weaker development due to the market situation in battery. I have now been with Mantus for about a year and I'm really impressed by the whole organization and how we always not only live our values but also strive to deliver and ensure the highest quality of service and also the levels in the customer service. But at the same time, the organization is also very quick to adapt to change and also to drive change. So I think that is very positive to see. And also during the year, we have seen fantastic progress being made in the implementation of our lean initiatives and also the manufacturing footprint and also how we work with innovation and we have delivered really strong growth and increased profitability. So looking at the quarter here we saw the net sales increase and this was mainly driven then by data center where we continued with the successful deliveries on the large orders and then we also saw this really strong growth in food tech both in climate solutions and digital solutions, and we saw the annual recurring revenue increase over 50% in the quarter. So that success story continues, as Claes alluded to. The adjusted EBITDA margin improved and this was also driven then by Data Center and Foodtech and they both had record margins in the quarter and they have both done a fantastic job in driving profitability improvements. Airtek saw a weaker development where we had a lower production utilization in all regions. Looking at cash flow, we saw that a little bit lower in the quarter, and here we had a negative impact from operating working capital. So this was then driven by a consumption of advances, mainly in project completions in Airtek. Our operating working capital to net sales ratio was at 11.3%. So this is well within our range of the 13 to 10%. And here it's positive to see that all business areas continue to focus and really drive the operating working capital management improvements. Our net debt increased due to the acquisition and closing of that acquisition in the quarter for AEI. And we also included lease liability for the new factory in Ireland. But our net debt decreased, the leverage rate decreased to 1.9%. We reached a very impressive profitability margin then of 16.2% in the quarter. When I started a year ago, we had the 14.1%. I thought that was a really great margin, but apparently we can do even better. So it's a really impressive margin. And one factor driving this is of course the strong net sales growth in data center and food tech, also in combination with a high factory utilization. in several of the factories then in data center and food tech we also saw product mix contribute in airtech and data center and also net price increases across the business areas we continue to see strong contribution from operational excellence so that is also really positive to see and then i want to highlight that we continue to make strategic investments for scalability in the business and here some examples are investments in digital competences and system support. Looking at cash flow then and this was then a little bit lower in the quarter and affected by the change in customer advances where the project completions in Airtek reduced the customer advances. We have received no new large advances in the quarter. And then we also closed the acquisition of IE and also we had the second installment of the dividend payment in the quarter. Moving over to investments then, as we have stated in prior quarters, we saw now in this quarter the capital expenditure increase to 7.9%. And we will also see this continue in the coming quarters as we continue to work with our new site in Amesbury, the new large factory. there. We also make other investments of course in innovation and in IT and digital linked to our prioritized areas. And then I should also mention that the operating working capital has a slight uptick in the quarter then and that is due to the consumption of the advances mainly in tech. We have maintained a stable leverage ratio, so it's 1.9, and we closed the acquisition then and also paid the dividend. Do note also that during the third quarter, we announced the acquisition of Geoclima, the Italian company that the data center has bought, and that one will close in the fourth quarter. And also yesterday we announced the acquisition of Dutch Hot Rocco that we also expect to close in the quarter. Now I would like to turn to our sustainability KPIs. So we have set targets for scope one and two to be net zero by 2020. And this is the journey that we have been on for several years, of course, and we have made good progress, but we also have some way to go. And as you can see here, the renewable electricity in our factories is then 79% in the quarters, slightly down. This is due to the recent acquisition. So if we exclude that, the number is about 81%. We also work hard with our scope 3 emissions that we want to reduce and the use of our product is of course the largest emitting factor for us. So here it's very important for us to make sure we have as energy efficient products as possible and it's a top priority in our innovation and product development work. On the social side, we want to increase diversity and we know that that is a factor for stronger innovation and a factor for a more inclusive culture and also for employee engagement. And the target we have set here for ourselves is to then have by 2030, 30% of women in the workforce and also as leaders. And here we have numbers of 23 and 22% now in the quarter. And if you exclude recent acquisitions, those would improve to 25 and 23, respectively. Looking at the governance side then, we want to highlight the code of conduct. We work with the code of conduct for employees, suppliers, and then we are also developing a customer code of conduct. And in the quarter, we had 98% of our suppliers signing the supplier code of conduct. And here it's good to note that in every quarter we always have some suppliers in and some out. So there could be a timing effect to why we are not at 100%. So we could have a slight deviation in the quarters. Also on the sustainability note, I wanted to talk a little bit about the service ambition. And service is, of course, a very important factor in making sure that we improve the energy efficiency in our installed base, hence to reduce to use the scope three emissions and how we define service is the aftermarket service in all business areas and then we add the food tech software as a service revenue to that we also measure components of course and we have set an ambition for the group to have service and components together to be more than one third of the group's net sales And the number in the quarter was 23%. And then if you look at the last 12 months, it was 25%. I should mention that we have seen a slight impact on the component side due to the weakness in the Asia battery market. All in all, we are doing very good progress on service. So we're very happy to see that. And with that, I would like to hand it back to you, Claes.

Thank you, Katarina. And let me start to summarize the quarter then, before we move into Q&As. We have three financial externally communicated targets. It is currency adjusted growth in total of above 14%. This quarter we reached 10%. It is over a business cycle to be above 14% adjusted EBITDA. This quarter we reached plus 16%. and the operating working capital to be in a range of 13 down to 10 percent and this time we were closer to the 10 than the 13, 11.3 percent. So two out of three and we continue to work with all three moving forward of course. So on a larger scale then, the quarterly highlights then. First of all, I mean a super strong result and demand in two of our business areas, food tech and data center. And then also in most of the end user segments within air tech. The battery outlook, the battery market continues to be short-term weak. But the long outlook is that the CAGR for towards 2030 is in between 10 to 20 percent, 25 percent per year. We have for sure strengthened our market positions through M&As and partnership that is both in food tech this quarter and also within data center. We showed a solid growth and robust profits driven by strong net sales. So all in all, I'm pleased with the quarter result. With that, over to Q&As and welcome Anna-Sofie.

Thank you very much, Claes. Yeah, so now we will go over to Q&A. So for those of you who have been viewing on the web, please just post your questions and we will take them up here as we go. And I know that we have a few questions on the conference call, so I suggest we kick off with a question from the conference call.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Joan Sundmark from SEB. Please go ahead.

Good morning and thank you, Claude and Catelyn. So starting off with a question on Arctic regarding the negative organic growth of minus 4% on orders. Could you please give us some more color on the price volume on this and perhaps the trend we see next in the quarter?

Okay, it was a little bit difficult to hear the question, but it was about air tech. It was about volume and price mix at current then, if I heard the question right then. I mean, as we presented, I mean, in most areas, subsegments, we saw a stable growth in the order intake. We saw a positive price increase. effects in those segments. The only segment that we saw a clear negative and that is for the third quarter in a row and here we anticipate it moving forward that is then in the battery sector. There, if I go back a couple of years, that represented in order intake about 40% or some quarters even more. And now we have moved it down in order intake to be around this quarter, shy of 10% in orders. I hope that was answering the question that I didn't really hear.

I think the question was also about the future, what we see in the battery market.

Let me just allude on that then. I mean, if I take the long outlook, I mean, that is for sure. And I think you've heard it from other presenters during the last couple of weeks that the long-term outlook for EVs and batteries is still strong. At current, in definitely two of the regions, North America and China, it continues to be weak. And in Europe, definitely weaker, but still some activities going on. And our outlook is that we anticipate it to be weak for 2025.

Great. All right. Thank you. Thank you. Then second question on data centers sort of competition wise. Are you seeing competition picking up in this space or what's sort of your view on this going forward within data centers?

I think like this, I mean, it is a quarter where you definitely see, I go back to some businesses being weaker and then other businesses being stronger. And now we talk about the business that is definitely strong. I'm super impressed, first of all, with what data center is delivering. And of course, very often you focus on the bottom line, but here I talk about actually everything what they do. I'm so impressed how fast they are to go to market. Interaction with the customers, the demands that the customers are coming in with. And just to give you a glimpse, I think that many customers now are moving towards what we then refer to as liquid cooling. Here I see tremendous progress, both in collaboration with Sudacore as an example, but also how we work with DCUs as an example. So all in all, I'm very positive for the continued both growth and the market attractiveness in the market. And when it comes to competition, maybe I'm too bold when I say this, but I stand for it. I think we are the innovation leader in the data center cooling at current.

All right. Thank you so much. That's all for tonight.

Great. We take another question from the conference call.

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

Yes. Good morning. It's Gustav here from Nordea. Maybe just to start off here on to build on the battery segment here and you comment on increased competition. Can you just clarify a bit on what sort of players you are seeing entering the market? Is it companies that sort of has been active in close related niches or and then also maybe is it Chinese players given that their market is weaker or you can say anything there?

Good morning and a good question. I think this is a question that has a couple of answers. I mean, one type of competitors that are coming in, that is competitors that are not really established in this marketplace. And here I have to say that they have then been driving price down and at least what we see, very seldom then later on been able to deliver on what they have promised. A few of the cancellations that has not affected us, has actually been in projects with that type of players. So that is one then for us. Here I think, and maybe this is too harsh when I say it, but I think they will be weeded out as time goes. So from that perspective it's good that it's a little bit lower activity in the battery market. Another type of competitors, that is, of course, then, Chinese competitors. At current, we don't see Chinese competitors in many European markets, with the exception, I would say, they are active in, if I call it, refer to it, former Eastern Europe, then, that type of region. But beside that, it's more European players in Europe. And in North America, it is more the domestic players as such.

Perfect. That's very clear. And then maybe on the margin for Airtek. And then I have just two questions. The first one, is it possible to give any sort of guidance or not guidance, but sort of split out how much of the boost effect is from the finalization here of the large order? That is for the complete margin of Airtek. And then also now that you don't have any larger orders left to deliver on within batteries. What are you doing to sort of mitigate this over capacity and do you see the risk to these 14 to 16 percent margin target?

Good question and if I start with the second part of this I mean as you know we have a decentralized business model. The business is driven and owned by the business area heads. I have full confidence in them that when business is moving up they accelerate and when business is going down they decelerate so to speak. but to give you a few flavors on what is happening and of course we are we are increasing the cost out in design type of activities i.e it is then how you design and how you make them more manufacturable at a lower cost we are driving lean in in our factories We are reallocating Salesforce activities to other growing segments. And then on top of that, we are also looking across the different business areas to see, can we transfer products from one business area to another to increase the utilization grade there? And we have had shown a couple of examples in the past when we have moved data center products from one factory into another factory in Sweden. So that is a couple of examples done. One thing to highlight that is in beginning of next year, we will also put in place our new factory in Amesbury in a similar manner as when we inaugurated the factory in Virginia. I mean, we will operate with two factories, the old factory and the new factory. And that of course will be a transition period for let's say a couple of months in the beginning of the year. But all in all, I mean, we are doing many different activities to mitigate this.

Perfect. That was all for me. Thank you very much.

Great. We take another question from the conference call.

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

Hello, thank you for taking my questions. Just a couple ones from me. Maybe if we can start on the data center. segment here. I mean, I think we all fully understand the underlying tailwinds and trends within this market, but they still have a bit hard time understanding why we haven't seen any large orders come through this year. I mean, I understand that there is fluctuations quarter to quarter, but still 2024 is the year with very robust commentary about this industry and yet no large order. So can you maybe go a bit into more detail of why that is? Is it something that has to do with your existing customer base? I appreciate the color on competition and the progress that you're making on liquid cooling, but could there be any any weak spots in your product portfolio? Essentially, why haven't we seen any significant orders yet in 2024 despite the underlying positive environment? Thanks.

Thank you for the question. If I go back then to just give a little bit of flavor, where are we versus last year then in order intake? We are For the first nine months ahead of last year's order intake, last year and in many years, we saw that it is the latter parts very often of the year that larger orders are coming. From a competition point of view, from a performance point of view, I truly see, as I said earlier, that we are in the prime circle, so to speak. Here it is very much up to customer preferences. I remain very very calm when it comes to how I look upon the data center. As you saw in one of the slides we have a pretty strong or very strong backlog delivering into 2025. We are filling up some parts in 2025 and we are starting to fill up 2026. So the only thing I can say that is I remain very, very confident and then some quarters may be weaker compared to what perhaps the view of the market is and other quarters are substantially stronger. That is the only guidance I can say. I am confident.

All right. Thanks for that. And then also on the margin trajectory, especially here in Q3 in the data center segment, I mean, in Q2, you kind of guided for cost-based expansion due to the investment needs, especially in the European markets. But yet we still saw uh i would say a significant improvement in the the dct margins um here as well so uh yeah maybe you know what is it still higher production utilization that's true and and how do you view that now with the i mean the yes the order intake is still higher than what it was last year in the first nine months but still with the absence of the large orders, there could be some pressure then on margins going into maybe not 2025 when you're still delivering on this high order backlog, but in coming years after that. So what's your view on that?

I mean, as you know, we tried to frame away from giving detailed forecasts. What I can say that is I'm super pleased with what they are delivering. I sort of become more and more confident that they are step by step increasing a sustainable bar for profitability. In the coming quarter then, a little bit like in Airtek, we are putting a new factory in place in Europe. That, of course, will drive investment costs. But on the other side, and I say this with a smile, I mean, we show continuous progress in data center in North America. When it comes to the future, I would say like this. The... Product with the highest margin is SciCool so it will be some mixed adjustments moving forward but still I foresee that we will have a strong margin without making any predictions in data center for the coming future.

Maybe if I rephrase the question just slightly, have your investment needs in DCT been the same in Q1, Q2, and Q3 this year?

The investment needs when it comes to the built in Ireland that has continued during the year it has accelerated when it comes to the other parts of the investments that is more referred to as ANS sales cost street feet on the street etc etc and that has continuously accelerated so We are growing, but at the same time, efficiency gains in our factories are improving the margin. Katarina, anything to add on that from your side?

No, I think you covered all the aspects. And the product mix is strong in the quarter, of course, as well. And that price increases as well.

Got it. That's great. Maybe just quickly and lastly on... the seasonal effects that you saw in food tech in Q3. Was there any type of similar seasonal effects in air tech also in the order intake between Q2, Q3, and then also going into Q4? Is that also like typically a seasonally weak quarter because you have the holiday season or does that not really add into things?

If I generalize, the business area where we have the clearest seasonal effects are that is in food tech and generally speaking more from what we call then the equipment side, the climate system side and that is due to when the install in farms etc. this year I would say that the season started a little bit earlier why is that I cannot say maybe it is hurricane season in North America or other things I frame from speculating but it is always somewhat weaker during Q4 and Q1. In the other business areas, there are no clear seasonal effect beside the one that I alluded to in regards to data center. We have seen the last couple of years a stronger order intake pattern during the fourth quarter, and sometimes that spills over in the first quarter. But that is not seasonal from climate. It's more customer preferences.

All right. I'll leave it there.

Thank you very much.

Thank you.

Thank you. Then I will take a question from the web to follow on to the discussion about DCT. We have a question from Justin who is wondering what the timeline for the geoclima integration into DCT is.

I can start and then also going over to Katarina, because I mean, you can say when you integrate something, you have different timelines. And I will explain why. I mean, we have closed it now. Every sales, every order intake, every profitability krona is monitors. Then of course, when you embrace a company like this, you buy a company due to that you believe it is strong. so then it's about integrating certain call it more business follow-up procedures and I will leave that to Katarina to talk about but then it's also I mean how can we sell together etc. I can say that already after we signed and until close we have started to operate in sales in progress there as one company. But I mean perhaps some more flavors on what is the typical integration of our companies that we acquire.

Yeah. And we have a very structured process for integration. So it actually starts already when we do the acquisition because we activate our integration teams very early on in the process. So they own the business case and also have very detailed plans early on for how to proceed with integration. And then we have regular follow-ups, of course, to see how we are proceeding on each of the different work streams. And those are, of course, very detailed on finance and sales and operations and so on. So, yeah, a very comprehensive plan is in place to deliver on this integration.

And I just want to add one thing. I always say a little bit like this to our business areas. The best way to show that you're doing integration right, that is to outbeat the business plan for the first year. It doesn't always happen, but that is the target. And I see that we are becoming better and better at that.

Great. Thank you very much. And with that, we will take another question from the conference call.

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

Good morning.

Good morning, Anders.

I have a question. Yeah, I have a question regarding data center again and the large orders versus the smaller orders or medium-sized orders. Now you're in the second phase. A quarter in a row, you have roughly almost $1 billion. You had $1.2 billion last quarter and now almost $900 million. Should we expect sort of a higher level than the $300 to $600 going forward now? That's one question. And then, of course, your comments about the expected large orders towards the end of the year or the beginning of this year. Is this what you usually expect, or do you know that you are in such processes that this should be possible? I guess those type of orders are not just coming in from one week to another, that some sort of process is preceding such an order. And then, thirdly, about data center, you have now, since the third quarter last year, you reached 950 million in sales, and you had a little bit above 1 billion. It seems that you now have a plateaued around a billion sec in sales in data center. As I see it, you need to lift that level quite substantially if you are going to deliver according to your order intake. How should we see about the delivery pace in data center? They all get together, those three questions.

Okay, let me see here. The first question was about, just to remind me, because I have had the answer on my... Yes, small and medium-sized orders, they are on a higher level now. Yes, and I think like this, Anders, and you have heard me say sometimes that I regret sometimes that I said this, we have a base business. But if I reframe from that then, I say I see it as a clear indication on our strength in the marketplace and the market as such, that we are continuing now to deliver, call it, without any substantial large orders, around a billion every quarter. So I see it as not to establish a new plateau or a new level, but I see it as it is a strength in the market and it's a strength in what we deliver. So yes, we have ticked it up to some extent. Then if I go back then to the larger orders and Here I have to be clear. That is that we are constantly working with all our customers when it comes to when and how would they like to place orders. That is, of course, driven by what they win in the marketplace. Some of them are then bundling together larger orders in one. Of course, we then have a much lengthier, call it, discussion because then it's also about I mean do we have the manufacturing capacity etc etc so that is a more long taking discussion and then in some cases I mean I shouldn't say it's short discussion but it pops up within a couple of months those medium-sized orders. When I say that I'm confident that larger orders will come in some quarters, that is, I see it as a pattern. I don't hear any indications from the market that we are not doing what we should do. Then, of course, at the end, I mean, I cannot promise anything for each and every quarter, but I can just say that I'm confident that larger orders will come and in some quarters they will not. And then to the last question then about that was... Sales.

The sales level has hovered around roughly one billion now for a year.

And here I can say, I would be pleased if we could have ticked it up. Last quarter, we had it around 1.1 billion. Now we were a little bit shy of that. I would have been pleased if we could have moved it up slightly more. But I don't see any sort of worries in that we have too low capacity, etc. The only thing I can say is that we are gradually moving this up in line with when the customer would like to have what they have ordered.

Is it any reason to believe that clients do want to postpone a little bit the delivery here

We don't see any signs of that. I can say like this, that of the larger orders, some of the order palais has actually, if we take the different installations, have been delivered ahead of the original plans and others then slightly behind. And this is the beauty with having a larger order portfolio then of similar products. So from that perspective, no, I have not seen it. Maybe then, and we haven't taken any orders in Europe, but if I generalize in Europe, the legislation and the permits takes longer time for our customer to get to build a data center. But I mean, the majority of orders are in Europe. Katarina, anything that you have on order patterns or?

No, just on the net sales. It is the timing, you know, when the customer wants the delivery. So that plays into it, as you said. Great.

And then finally on the data center again, you mentioned Europe here. When will we see orders coming in Europe on sort of a larger scale?

As you know, Anders, I cannot make promises there, but I see now we have soon a factory built that can handle larger orders. And that is the way we did it in North America. And as soon as customers are placing larger orders, we will welcome them as such. We are working diligently in starting to receive smaller larger orders in Europe. The complement of Geoclima, maybe I should add on this as well. First of all, it gives us a larger footprint in Europe. Secondly, it complements our product assortment tremendously. You remember when we have talked about craws in North America and the orders we are taking there. If you take a craw and you add a chiller, literally you're doubling the order value. pending on that we of course can deliver both cross and chillers but now we have it in our portfolio and i think that generates a tremendous strength okay great thank you very much

Thank you very much. We're running short on time here, but I would like to take another question from the telephone call, telephone conference. And I would appreciate if you could only ask one question with the respect of time.

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

Hi, good morning. Thank you for allowing me the final one, Ervan. So on the order intake in Airtek, if we exclude batteries and components, it looks to have been quite stable during the year. We can read what you write about the markets. It's just in general, what are your thoughts on demand here when we also consider the kind of lower or more uncertain general industrial activity?

Thank you, Carla. And would you like to answer? Because I've been talking all the time. Then I start then. I try to sort of share the exposure here in the best possible way. But generally speaking, we don't see any weakening in our general, call it business, the normal industrial business. And that goes for both Europe and Americas. In China I would say that it is a in general weak market but that has not changed compared to previous quarters. So a stable to slightly positive and that is what we indicated in the outlook then on the green arrows then as such. It will be a shift, I perhaps should say that, I anticipate that, in components. A weaker component driven towards the battery, i.e. the dehumidification, the desiccant wheels, and most probably a stronger component when it comes to the evaporative pads driven by data center industry.

Understood, thank you.

Great. Thank you very much. I think we have actually room for one more question now from the conference call. So we take another question from the conference call. And if you can hold that to one question as well, that would be fantastic.

The next question comes from Matslis from Kepler. Please go ahead.

Hi, thank you for taking my last question. Well, just coming back to data centers, one more. I mean, you mentioned the European capacity sort of being implemented early next year. Has the lack of capacity in Europe been a constraint for you to gain orders in Europe?

Thank you Mats. I have to say, not really. It is It is great that we have the capacity now. It is great that it's not the new build, that we have the chiller capacity. But if I generalize, no, that has not. It is more the, call it, our footprint in Europe. And also, if you go in and take a look upon where is... data center growing, it is a substantially higher market growth in North America compared to in Sweden. But I think with a new footprint we now are establishing, both the acquired and the built, we are really set up to drive growth in Europe. And perhaps I also should add When we are building new factories, we are also building them in a way that whatever we produce in North America, we can also produce in our new built factory in Europe. If we need to balance support North America or support Europe.

Great and just to add one other question and that's regarding food tech there and you have the Hot Taco acquisition. I mean, are you sort of fully prepared now to grow the software as a service business or should we expect more acquisitions to be needed there to fully be up and running?

I think like this very much now. If not all, the majority of tools that are there to work with are not now provided within food tech. Now it is for them, and I am very confident that they will show that. They will generate software growth and they will generate synergies and they will generate controller growth. And then when that is established, then we should come back and see if we need to add more.

Great.

Okay, great. Thanks.

Thank you very much, Mats. And thank you, Claes, and thank you, Katarina. And thank you for everyone who has listened in, those of you on the conference call, and for those of you who are viewing us on the web. Do feel free to reach out to me or the rest of the IR team, Line or Daniel, if you have further questions. And we look forward to see you again at the presentation of a full year result at the beginning of February. So have a nice day. Thank you. Thank you.

Thank you.