Munters Group AB

Warm welcome to today's presentation of Muntters Q2 results 2025. My name is Lina Duvan and I'm Head of Investor Relations, joined here by our CEO Claes Forsström and our CFO Katarina Fischer. So we will, as always, start with a presentation from Claes and Katarina, and then we will open up for Q&As at the end. If you are listening to the webcast, I will remind you that you can ask questions throughout the presentation, and we will address them at the end. So, Claes, please go ahead.

Thank you, Lina, and good morning. Let me open up with some opening remarks and a few words about a quarter that has passed. a solid quarter, really showing our capabilities. And I feel that we deliver growth across all business areas, generating an order intake growth of 22% and an overall robust margin of 13.6. Both data center technology and food tech delivers on all aspects, and Airtek takes a step forward as planned. Extra pleasing to see that is that our latest M&As are delivering growth and profit really from day one. Foodtech has now repositioned their portfolio from an equipment driven company to a 100% software and control and IoT driven entity. A portfolio shift that I feel is quite unique. The data center market is strong and I entered the second half of 2025 with a strong comfort in our offering and having a market that also show robust strength. The quarter also showed continued delivery on our operating working capital, now clearly down below the target of 10%. So if that was the very high level, let us move into the details then. As I said, solid growth and a robust margin. increased order intake, steady net sales growth and the robust profitability. And to go into some more details here, 22% growth order intake with a 10% headwind in currency. Organically 12% and structurally the new M&A is really showing strong growth. Airtech, organic growth, very positive sign and a positive development in APAC when it came to order intake. DCT continued to increase, one of the strongest first half years I would say. Strong demand in Americas. Foodtech, as I said, overall strong overall performance. The order backlog decreased from 13%. Please remind yourself on here we also have a currency effect. Book the bill slightly above one this quarter. Coming into sales then, 11%, where of 10% is organic and a headwind of currency here, that is also about 10%. Airtek declined, lower sales in the battery market, but I would like to say that the battery market now has started to really reach the bottom. DCT increased very much so, and the execution of backlog in Americas continued. Food tech grew, driven by controllers. Moving over to the robust profitability. I mean, in a fairly complex global environment, I'm very pleased to see that we deliver a margin of 13.6%. solid volume growth driving margin in DCT, production efficiency, product mix and lean improvements. Pretty much the same story as we now have established quarter by quarter. Airtek lower volumes as well as product and regional mix, but cost saving measurements are progressing as planned. And coming back to food tech, then healthy contribution from all the aspects, although impacted by product mix and investments. And as I mentioned, and you all are aware, this was done in a currency headwind. If I take a look upon the regions, the very short summary that is strong in DCT, strong in food tech, and unchanged in air tech. But a little bit more detail, regional and end market divergence. And if you take a look into America, we now represent some 60% of our total order intake, EMEA 26, and APEC then around 15. This story is very much as in the past. There are some uncertainties in air tech in America, but there are also pockets of growth that we see is picking up. DCT, continued strong underlying market, shillers is really starting to gain traction. Food tech, a strong market, the avian bird flu is now controlled in the marketplace. The pickup will come time after time over the coming months and quarters. Moving to EMEA, continued mixed sentiment across the, but I mean nothing that has become worse on the country, pretty much as in the past. DCT, there is an active killer market, but I reiterate that the market in Europe is definitely slower than in Americas. And Foodtech then, a positive market outlook, very much driven by regulations and push for better practices. APAC, Airtek, here we saw improvements in China when it came to battery, and we also saw some growth in the Southeast Asian and Indian markets. We are not large in ECT when it comes to Asia, but we can see that when we now slowly start to enter, the market is definitely strong. And when it comes to food tech, China is a market that is mature and there is high competitiveness in the market, but we make good strides into that market. Airtek then, as I said, stable quarter with organic growth, very pleasing to see. And if I go down to the different sub-segments then and highlight the few then. I said several times that I expected that battery would be in between 10 to 20% of the total Airtek order intake, and it was this quarter at 11%. I also have indicated and I still have that view that it could be in quarters ahead of us where it will pick up to be perhaps about 25. But our outlook that is now the battery has reached the bottom and then continued I'm cautiously pessimistic that I don't see a pickup but in reality no real change. Long term I definitely am more optimistic. Also to mention here you can see clean technology and service and components are definitely showing that the market has an underlying growth traction here. Worth to mention when it comes to components it is a steady strong underlying growth but it has been a mixed change there. So in the past we had more desiccant wheel i.e. airtech or battery and dehumidification type of components now it is more pads than wet pads more data center driven just to you so you are aware of that and all in all I mean I will come into the details but a book to build pretty much on one then. battery and I will not go through all those details but if I sort of summarize it in the bottom left corner there is from now until 2030 a continued strong belief that the market will grow in a CAGR in between 10 to 15 percent picking up more in the coming years, but now being slow. In the regions, there are differences. I don't see any differences compared to when we talked last quarter, but it is competitiveness in APAC, but signs of a recovery. It is pockets of activities in EMEA and Americas, especially in labs and smaller projects. And this is really our sweet spot when it comes to that. At the end, I would sort of summarize it that this is a market where the fittest will survive. I can see clear signs in definite Americas and to some extent in EMEA that weaker competitors are now being moved out from the market and leaving the market as such. This you have seen, and I have a couple of comments on this. One pattern that is clear, that is you can see that there is a somewhat a seasonal effect in between a little bit lower in Q3 due to the different call it buying patterns and Europe being close. So that is one call it sign. Another sign that is take a look once again on what I call then the blue and below. we have a very stable and strong, call it base market outside battery. And when I look upon this, I see a continuous steady up pick, not quarter by quarter, but the general trend. So I go in then and saying we have a stable base market and then we will balance the battery on top of that. Worth highlighting, I will come back to Citi. I see more and more activities happening in that type of market. Pleasing to see that we have delivered what we put ahead of us to deliver, a gradual improvement of the margins step by step. And also pleasing to see there is, as I talked about, a net sales that is slightly organic. And then when it comes to net sales, yes, it is a decline. But I mean, very soon that is compensated and reached. the average of order intake. The adjusted EBITDA margin declined, but pretty much on what we expected. And as you can see there on the dots on the bars, it has started now to turn around when it comes to margins. And our view forward is very much a continued step-by-step improvements on the margins moving forward. Super important, super happy. We have now a state and the art factory manufacturing flagship inaugurated in the Boston region, Amesbury. Why is that so important? First of all, it's a modern facility, up to date when it comes to smart manufacturing, how we use electrification, how we use solar panels, etc. Really a green factory. You can say it generates, as we've talked about, some short-term hurdles because we have had, and we will have a little bit into the second part also, some dual production with other factories before we have closed them fully. But it generates a fantastic opportunity for the future. Being in America, delivering and selling and producing for America. I talked about clean technology. I talked about innovation. I think this is something that excites me very much. We talk about DAC, direct air capturing of carbon dioxide. Here we have one in the US. A first project of hopefully several more to come. It is... our products, the components that we deliver, and by using those components the total capturing of carbon dioxide is 500 000 tons, the equivalent of 110 000 petrol powered passenger vehicles. And why do I talk about this then? If I take a look upon this customer, not only this installation, but this customer, what the potential could be. The potential, if they implement it in all their facilities, it could be a 7 billion Swedish krona potential. Of course, that will not come immediately, but I think it sends the clear signal. Manters and Airtek have many different growth vehicles to come. If I would add then, other facilities or other companies across the globe. I mean, then we are closer to a potential of 10 billion than 5 billion. So very exciting for the future. I think a first strong proof point that even in today's America, we can generate wins in the green area. Moving in then to data center. The short one that is order intake increased. It has been one of the best first half years in our history. Yes, or the backlog decreased. Some of it is of course driven by currency. I continue to reiterate that I'm very comfortable with us moving forward into 2026 and I will talk more about that. And as you can see, it's also pleasing when it comes to product mix, that what we have said we should develop, what we have acquired, that is also the type of products that are growing in demand. data center really delivered on all different cylinders i mean strong net sales one of the best order intakes for the first half year substantially about last year drop through to the bottom line then i can also say i'm impressed at how they handle capital then All in all, when it comes to the sales and the increase there, it is the backlog, strong execution in Americas. Really good to see that the demand for chillers through GeoKlima has really started to pay off from day one. The ASTID EBITDA margin came out about 20%, and that makes me very comfortable in saying that we will be in this high teens moving forward. Then with that said, we will continue to invest. There are some challenges across the globe, but all in all, I go into the next quarter with a lot of comfort. This slide you have seen, and I think you have used it, it indicates when are the larger orders to be delivered. We have added one at the bottom here. It is a 47 million US dollar Schiller order to be delivered during 2026 and the rest of the backlog, and don't take this as an exact number, but a backlog that you cannot see here, about 50% so far is then for 2026. And that's the reason why I feel so comfortable that we will go into 2026 with a strong backlog fill moving forward. I already talked about chillers then. You may remember the day or very soon after we announced that we acquired Geoclima, we also announced that we will put up an expanded manufacturing facility in Virginia. I call it a smaller twin to what we have then. directed into chiller manufacturing. And now we have started to do that. It is set to start to deliver in the second part of the first quarter 2026. And what we will produce there is very much some of the chillers that you can see here. Here we talk about really high performing chillers. When I listen around in the market environment, when I hear feedback from customers, up to 20% more energy efficient than any competitors in the marketplace. That gives me comfort that we are in the premium segment when it comes to chillers as well. Going to food tech. Before I start to talk about what they deliver, I would like to reiterate what a tremendous execution by our team doing a portfolio shift. Being a company that is driven by old-fashioned type of equipment now being fully digitalized and software driven. Many talks about doing this shift. Pia and her team has really delivered on that. So we have reset it. A very strong order intake and the best order intake in history for this type of segments. controllers and software. Book to bill 1.45. ARR increased 11%. If we would adjust it for currency, because the large majority of this is in US dollars, it would be 18%. So that gives me the comfort of saying we will continue to deliver, not quarter by quarter, but in the long run, what we have done in the past, 20% to 40% on average on CAGR over the years. Also very pleasing here to see, in the same way as Geoclima started to deliver growth from day one, also our controllers, especially Hotraco, the latest addition from day one, generating growth and generating profitability. Of course, a lower profitability than software, but still about the average of monitors. You can talk about organic growth and you can talk about what a new M&A drives when it comes into a company. What is interesting here, both in DCT and in food tech, it is our strength in munters. the receiving end that supports the newcomer, the new family members in driving order intake. They could not have done this by themselves. So a fantastic new family member coming in to Manterstern. The two legs, controllers and software. Here I have two examples of the progress that we are doing here. One is from China, a major egg producer in China. We talk about controllers. A contract signed for the future. It is 100% delivered controllers installed within active connectivity. I completely connected for the future. Now those are not combined, but I think it gives you the two orders that I talk about here. But I think it gives you an example how well this connectivity, capturing data, use in software. Also super happy to see that we during the quarter signed a contract with one of the world's largest leading egg producers with Emtek then. And this is also, call it a breakthrough in that area. So I reiterate that in the last five years, food tech evolved from a traditional ventilation equipment business into a global leader in optimizing the food supply chain with digital solutions. With that, let's dig in a little bit more to the numbers, Katarina.

Yes, thank you, Claes. So I would like to start by saying that I am very pleased with the strategic acquisitions we made across business areas last year. They have really further strengthened our market positions. The integration is going swiftly and we already now see clear synergies contributing both to growth and to operational momentum. In the second quarter, the strategic acquisition had a significant impact, so they added 21% to the order intake and 10% to the net sales. And this was also complemented by solid organic growth that complemented then 12% to order intake and 10% to net sales. However, then we also had the negative currency impact of minus 10%. The adjusted EBITDA margin remained robust at 13.6%, although lower than the exceptionally strong margin that we had last year of 18.2%. Data Center continued to develop a very solid profitability. And then also food tech delivered a very healthy margin despite ongoing investments. And I think this really demonstrates resilience and operational discipline in food tech. The Airtek margin improved sequentially, so it improved versus Q1 margin, although the margin in this quarter then was of course lower than prior year. And this was mainly driven by the lower volume in Americas and also an unfavorable mix impact from a regional and product mix. And here there was an impact from the competitive market in APAC. Moving then to a major achievement in the quarter is the operating working capital to net sales. So here we have improved our ratio down to 9.1%, which is now below our target range of 13 to 10%. And this is really a result of a strong focus that we have and really diligent execution by all our employees across the organization. Our net debt increased, and this was then due to the higher lease liabilities, especially the new Amesbury factory that Claes talked about, but also due to the recent acquisitions that have been financed through debt. Looking at the margin then, it is a robust margin, although it was a very tough comparison, of course, compared to last year. We had volume growth, especially in data center and food tech, whereas we had lower volumes in air tech than in Americas. Very pleasing to see that we continue to have positive net price increases in data center. However, then what we did see was this negative product and regional mix. So for Airtek, there was a negative regional mix, and that is due to a shift towards more Asia-Pacific sales than in prior year. And for Foodtech, it was about the product mix where we had a higher share of the controller sales in the quarter compared to prior year. And this is due to the acquisition of the Hotraco company. From an operational excellence aspect then, the underabsorption in Airtek weighed on the margin, while the factory utilization in data center was very strong, so that provided some offset. Another offset was the continued strong lean improvements across all the business areas. And then as discussed in prior quarters, we continue to invest in our strategic initiatives to scale the business really for the future. So there are many examples within food tech and also in data center for this, how we continue to invest in digitalization and automation and so on, and also in our global footprint. And then finally, as Claes also mentioned, we also had a negative currency impact in the quarter. Yes, looking at cash flow then, if we look at the bigger picture here on the year-to-date movements, you can see that the operating cash flow was lower than in prior year and this was then mainly due to the lower earnings and also a less favorable impact from the changes in working capital. And that effect was really strong in last year. As I want to point out, it's still a healthy level that we have, but the last year was extremely strong. From a business area perspective, data center continued to deliver very strong cash flow, positive cash flow, whereas Airtek had a negative cash flow impacted by the battery market and then also the under absorption. The cash flow from investments, the 1.3 billion here, is of course a significant number, and the increase here compared to last year is driven by our acquisition of the remaining shares in Emtech, and it's also a result of the increased investments in Amesbury and Cork. It's also important to note here that we had the proceeds from the divestment of equipment also, but that is reported under discontinued operations. This slide is only showing the continuing operations. Yes, of course, we continue to have a very high focus on cash management. That is always very important. And I'm very pleased to see the progress we are making with operational efficiency and also the capital discipline across the business. If we look at investments, so our capital allocation strategy remains highly focused and of course we direct investments towards those areas that drive growth and value for the future. In the second quarter, the capex net sales was 5.5%. And that was then a little bit lower than in prior quarters. But I would like to say that going forward, we will maintain a somewhat higher level of capex in the near future. And looking at the rolling 12, we are at the 7.9% of net sales, as you can see in the graph. And this further points to this, that we remain very committed to our strategic priorities and we will continue to invest in those areas that will further strengthen our competitive position and drive the long term growth. And one good example was when Claes talked about the expansion in the Virginia factory, where we will then be able to support the Schiller production in the US and also have a test lab that will support fast-growing DCT market in Americas. Looking at leverage, the leverage at the end of the second quarter was 2.8. So that is a higher level than last year when it was 2.0. And as I commented earlier, this is then due to the increased lease liabilities for the new factories, but also the acquisitions made in the second half of 2024 and also in the beginning of this year. And while we do not have any fixed leverage target, we have an ambition to be in a range of 1.5 to 2.5x. And while we are now a little bit above, we are not concerned about that because we know the reasons for us being there is due to these very important strategic investments that are really building us for the future. I would also like to mention that we during the quarter has taken many steps towards a diversification of our funding base and really strengthened that. So we have refinanced our sustainability linked loans. We have also issued commercial paper and we have established a medium term note program for the Swedish market. So I think this is a very important strategic step for us, and for us also to have it linked and backed by the green bond framework is very important. Yes, and then if we move into service, this is of course a very important area for us and every business area has this as a very important priority to continue to scale this and grow our installed base. And you know that we define this as the aftermarket service in all regions and then we also add the software as a service in Foodtech, the ARR. And then we also measure components closely and the components are what Claes talked about earlier. It's the dehumidification rotors and also the evaporative pads. So all of this we measure closely and we have an ambition for the group for those two combined service and components to be above one third of group net sales. And in the quarter, the number was 25%. And if you look at the rolling 12, it was 24%. And this then represents an organic growth for service of 4% and for components of 5%. So we remain focused on driving this further. So for Aertec, of course, really growing the global installed base, making the continuous improvements, having more AI enabled controls, enhanced connectivity and also, of course, making sure our products are much more energy efficient. And we are also improving our system where we increase the monitoring capabilities, the remote support and also make sure that it all runs much smoother. So the whole thing is, of course, to make sure we have higher reliability and create more value for our customers. Turning then to sustainability. So here I'm very pleased to report that we are making very good steps towards our strategic agenda in sustainability. So I talked a little bit about the MTN program that was established. The size of the framework is 5 billion SEK and then in the beginning of June we issued our first bond and those are then green bonds and that framework is aligned with the ICMA green bond principles. So we issued 1 billion SEK and it was a three-year bond of 200 million and a five-year bond of 800 million. So this really supports us going forward and we will also then direct the capital towards more sustainable investment, which is very much in line with our strategy, of course, to make Manters a very sustainable company for the future. So the green framework will enable how we finance things. But then, of course, what really makes the difference is how we operate in our facilities. So one very good example during the quarter is our Foodtech Innebram entity in Brazil. They are the first ones to be zero CO2 emissions, so they have a very high share of solar panel energy and then they complement that with renewable energy. So I think that is a very good example where that entity has had a good planning long-term strategy to really improve and reduce their energy consumption. Then we have also been engaged in other industry conversations, so to say, so we participated in the International Energy Agency annual conference, and that focused on industrial decarbonisation and also scaling the global energy efficiency. But rather than me talking about this, I would like to hand it over to Claes who attended the conference for a few comments.