Munters Group AB

Good morning and welcome to Muntage Q3 presentation for 2025. My name is Lina Dovan and I'm Head of Investor Relations, joined here by Claes Forsström, our CEO, and Katarina Fischer, our CFO. We will begin with a presentation of today's results and we will then kick off the Q&A session. So if you do have questions from the webcast, you can post these questions throughout the presentation by using the chat function below and we will address them at the end. So Klas, let's go.

Thank you, Lina. And once again, good morning and very much welcome to this Q3 report. Let me start, as always, to give you some summarizing few words of the quarter that has passed. A very strong order intake and invoicing complemented with robust profitability and operating working capital development that pleases me very much. Data center technology and food tech very well positioned for continued strong growth in the years to come. That thanks to the strategic decisions we made and the execution of those decisions. We see solid underlying demand drivers for both business areas, data center demand and the digitalization of the food supply chain. And our offer is very well fit to capture this growth. Airtek in general is meeting a continued tough battery market and a generally tight industrial investment climate in US and EMEA. To offset these headwinds, we are resetting Airtek to be a better fit for the future. They will be well positioned to capture growth when the demand returns with modern factories, continuous sharper R&D and a clearer commercial drive across several sectors. Vietmanters are creating a business with several legs to stand on. in a world of continued tariffs, geopolitical tensions and general unpredictability. So this makes us well equipped for continued growth and market share gains. So, over to the quarter then that has passed. Strong growth and solid profitability, that is what I think is the headline of the quarter. And drilling into the different components of this, order intake, a 57% increase if I deduct the currency, it is 70% growth in comparable currency. Airtech showing growth, positive development in APAC and to some extent in Americas when it comes to order. Data center technology increased, continued strong demand in Americas and as you later will see also emerging improvements and market gains in Asia as well. Food tech increased as well. Solid demand in America as EMEA. The order backlog, 2% smaller backlog, but compensated for currency actually just 4% up. This has mainly been driven by data center technologies and the orders we receive now, that brings us into 2026 and 2027. A pleasing book to bill of 1.1. Moving over then to net sales. 17% up, 9% currencies, so that would end up in 20% in comparable currencies. Air tech, here it declined, lower sales across all regions. Data center technology, continued increase, successful execution on the backlog. And also food tech increased and were driven mainly by controllers in this quarter. very pleasing to see controllers, an area that we have allocated a lot of more resources into. Solid profitability, as I said, EBITDA margin of 13.5%, driven by DCT, the volume growth, production efficiency, still pleasing product mix and continuous lean improvements. Foodtech, strong contribution although impacted by continued investments and to some extent the product mix. As we all know, I mean a software product has a higher margin than a controller, even if controllers is also on a good level. Airtech impacted by lower volumes, unfavorable product and regional mix, as well as uneven capacity utilization. This has been to some extent offset by cost and efficiency initiatives. And in the quarter we had currency headwinds and more specifically tariff impacts in DCT. And this I will come back to later on. A fair description of how the world looks like right now. Variations in between regions and end markets. Americas represents close to 70% of our total order intake. EMEA about 20% and APEC 12%. If I divide it in between the different business areas, you can see that DCT, if I start with that, is continued to be dominated by the US market. But very pleasing to see that we have started to make inroads into Asia already now. And when it comes to EMEA or Europe I would say it is not us, it is the European weaker market that is holding our growth in Europe back. Airtek then more, even balanced, 44% in Airtek in Americas and about one third in EMEA and about one quarter, 25% in APAC then. And Foodtech then, very much American and EMEA focused on. Drilling down in America's air tech, the market remains soft pockets, though, of growth. DCT continued to rapidly expand, led by hyperscaler investments and a drive across the full sector. To some extent, definitely AI driven. Food tech, a growing market. Yes, avian flu, bird flu is controlled but a pickup will take as always after that type of outbreak some time to recover. EMEA, a mixed market sentiment across the sectors. Competitive price environment when it comes to air tech. As I alluded to earlier, DCT, slower markets with signs of picking up, focusing on energy efficiency. And that is good for us because we have the most energy efficient solution there is in the data center market. And food tech, positive market outlook driven by increased regulation and push for better practices in this sector. APAC. Signs of improvements in China, though continued high competition, Southeast Asia and India also showing growth as markets. Very pleasing to see that we are making inroads into Asia with data center. That is according to the plan, but it's always good to see that you're executing on a plan as well then. And food tech, China is not the focused market, but still we are making inroads into China and Southeast Asia. Moving over to air tech then. All in all, a stable growth situation in a challenging environment. You've heard me say many times that I have predicted that the battery segment would be in between 10 to 20% in the coming quarters. And now we were at the low end of 10%. And I will come back with some outlooks on the battery and what is happening there later on. Beside that then, About 50% of Airtech's markets do have a slight positive outlook moving forward. So you can see the blue arrows then in about 50% of the total market of what we have today that is slightly positive. The order backlog decreased, highlighting here that is clean technology generated good growth in volatile organic compound area and that has been supported by good executions of the acquisitions we have done. And then in other areas, as I said earlier, battery remained at the flat level in all regions, but not at the lower level. This is one of my favorite pictures, and you can have different views on this. If I take it on the long term, I would say that it's a fairly flat, solid demand across the segments. If I go into a couple of other inroads here, one inroad that you can see, if you compare quarters to quarters, i.e. quarter three over the years, I see a small uptick in each and every quarter and this is a currency adjusted graph done and then if you see then last year compared to this year I will also say in general a slight up pick on the total of the year so to speak. But if I summarize this, then batteries still being in this 10 to 20 percent, clean technology continue to slowly increase, creating another leg to stand on. and the other industrial fairly stable but a weaker investment climate in America and that I think is something that you have heard from all industrial companies that it's a damped industrial economy in America at current. Moving over to sales then, lower volumes and profitability. I'm not pleased with the profitability that we generated. It has been affected with some not strong enough execution on move of factories and how we have been able to work with our internal areas. I'm not worried about this. I mean, I look upon this as a quarter or a quarter and a half delay on certain of that, but I'm not really pleased with this. The other side of the coin, that is that it is also a continued weak market as such. I would have anticipated that we would have seen somewhat of an uptick then. And all of this is also leading into that we then, as I will talk about later, are increasing our traction on how to reset Airtek for the future. Also very important, something that makes me very proud, that is how do we drive innovation. Innovation can be driven by that we only innovate internally. For me, innovation is more and more about collaboration, collaborative work. This can be done with academia, this can be done with companies, this can be done by co-investing in certain areas. And here you see a couple of examples where we have over the last couple of years made minority investments in different companies to fuel our innovation. Some highlights, Suracore, DCT, being very, very close to the ship and how to handle that. AgriWeb and PharmC in food tech, when it comes to how to drive digitalization and software in different areas. and Capsule, the latest addition, where we started to invest a little bit more than a year ago, and we have now invested even more. And now we talk about carbon capture and moving forward in clean technology. For me, this shows that we can co-innovate with others, not only inside our own house, so to speak. Coming back then to Airtek. We have come to the conclusion, and this is something that is needed to be done, that we need to reset Airtek. That means that we will intensify our cost out and how we work with Airtek. The market demand is lower than expected and I foresee that it will continue to be flattish, especially when it comes to batteries moving forward. So we need to reset Airtek, position Airtek to the right level at current, but continue to keep it ready for a strong recovery when the market returns. What are we doing then here? We adjust on investments. We drive footprint optimizations. We are more selective on where should we then fuel certain investments. We are optimizing the workforce. We are balancing capacity while safeguarding core competencies. And all in all, we expect here to have an impact of some 200 positions globally. we drive increased efficiency. And you may say, I mean, OK, you don't have enough load in the factory, but you continue to drive efficiency. Yes, that is the never ending story you have to do. Because when the market returns, you have an even more modern, even more efficient factory layout that can then have a very, very positive drop through on the way down. and we're on top of that also driving our commercial activities to reach out in a wider sector. All in all then, this will generate a net cost saving of about 250 to 300 million Swedish krona at the end of 2026. It will generate a restructuring charge of about 150 million Swedish kronor, the majority taken in Q4 this year and some of it taken in Q1 next year. This is on top of the previous announced cost savings that are delivering according to plan. It is about resetting and be fit for the future when it comes to Airtek. What about battery? As you saw, today we announced a battery order. And I think this is really telling the story about the battery sector. First of all, there is a battery sector. It is not dead. But it's a sector where decision processes are taking much longer time. I can take this as an example. This project that we then recently received, we have been discussing, working, talking about this for about a year. And then they put the thumb on the green button, so to speak, and they released it. I think that tells the story about the battery sector right now. We are working with three, four different projects of some 100 million sizes moving forward. But what is clear, what earlier took perhaps half a year to decide, in current... capital squeezed market, especially in the automotive sector, that can take up to a year, sometimes even longer. My other point here that is we have the best products in the marketplace. Here we talk about I mean you that are nerds into dehumidification then you know a minus 78 degrees Celsius that means that we can extract humidity at a very very low temperature, a high performing type of product. All in all this generated a 30 million US dollar towards a US battery cell manufacturer and the planned delivery is for mid and end of 2026. Moving over to another reality. I'm so pleased to see that our strategic initiatives, our execution of those, are delivering order intake where it should be. So an order intake that generated a book-to-bill of close to 1.4 in the quarter, orders that will be delivered during 2026 and into 2027. We received it across the full product portfolio and I think this is something that is extremely important. We have widened our assortment and even if I'm a little bit biased I still say we have the widest and in my book the most competitive product offering in the cooling market of data centers. EMEA did grow, especially driven by cross and service offer. APAC started to show good growth as well. So all in all, when it comes to orders, I'm very pleased. And I'm also looking forward. I am very optimistic for the underlying market. But as always, you know, some quarters are very, very high in orders and others could be lower. But with that said, I'm continuous, very optimistic moving forward. If we move over to the other side then, net sales increased, successful deliver on the backlog, Cycool CDUs crossed the full assortment. Something to highlight, this is the last quarter with Cycool, so that will generate some product mix changes moving forward. We generated an adjusted EBITDA margin that continued to be strong. We had some tariff headwinds of two percentage units in the quarter and here I can say I'm not happy to have this but I'm not too disappointed either because what we have that is the most innovative and efficient chiller product in the market and at current we cannot produce that in US. We are building up capacity here and I'm happy that we take and receive orders. So this tariff headwinds I'm willing to eat and I know that also data center because we gain market share moving forward. So all in all, we invest in strategic growth initiatives. We had solid volume growth in the quarter and also high production utilization. So a very strong quarter in all aspects in data center this quarter. And here you can see that we are filling up and this is just examples of publicized orders and other orders of significant size that and how they are delivered moving forward. In summary you can say the majority of the orders we receive now that is for 2026 and 2027. Now I have to balance here in between trying to explain this is in as simple words as possible and at the same time when I return back to De Manter's headquarter also get good enough grades from my experts then saying that I was not short-cutting this too much. But if I try to balance that then Liquid cooling is about the full scheme. It is the large loop. Liquid cooling is about dissipation, capture, transfer and release. You can say in simple terms that this consists of two different loops. One loop that is in the dissipation, that is close to the ship, very, very close to the heat source. That is one loop then. And then you have the larger loop, the loop where we are the market leader in. That is the capture, transfer and release loop then. Let's call one technology loop and let's call one facility rejection loop. And the thing here that is we have all the products in the facility loop and we have the products that creates this plug and play in between. It is the connection in between the CDUs and the LCDs that created this link. So I think what we should remember that is when we talk about liquid cooling it is two loops and those loops are connected and they work together. And we have solutions to whatever is happening in the technology loop, we can attach and we can capture, reject and transfer it out. And then on top of that, we are also collaborating with the key players in the dissipation area. So I'm super excited about the different technologies that are here and I'm super proud of what we have delivered when it comes to innovation and collaboration in this area. On the other side then, but I'm also very very happy about that is I think that we have started to be the trend finder. I think we have started to be the trend setter. I think we have started to be the trend innovator. And what do I mean by that? We brought to the market side cool split, the first and very energy efficient type of non water coolant solution. We brought new seed use of never before seen efficiency to the market. And we decided that either we develop the best chillers in the market or we acquire the company that provides the best chillers in the market. And we decided to do the second. So we acquired Geoclima. We spotted the trends on where they were going. We developed that and we brought it to the market. And I can tell you that customers are really saying that we are leading the innovation and technology game here. So that brings me to another trend. A trend that is emerging. I call it modularity in a different way. You have heard me talk about modularity many times. Then we talk about components that can be used in different type of products and that drives efficiency internally. But when it comes to data center, it's another type of modularity. Look upon this as a little bit of Lego blocks that you put together subsystems, and then you can build those subsystems. You can have one, two, or many together then. This is a trend that will complement other trends. And I can just tell you that we are also trendsetters, trendspotters, and working actively with the ones that are driving those trends in the market. So once again, I think we are ahead of the curve in this area as well. Super excited about this. If I then go into another area, food tech, here I think we have something that we can really be proud of. We have made a transition of food tech from a more classic old equipment driven company to be now a fully fledged digital and software company. Many, many companies are talking about this change. Here we have done this. And this is just in the beginning of what this can deliver. So when it comes to order intake, it increased. Software is growing. Controllers, the new acquisitions and what we had inside our own house are generating good order intake. Synergies is worked in between the old controller companies and the new controller companies. And the order backlog increased in a good way. When it comes to ARR we are continuing to increase in between 20 to 40 percent quarter by quarter. Here we have decided to show this in US dollar to take away the currency effect because now we have definitely currency headwind but here you can see more volume driven type of increases and apples to apples. Super excited about this and we are just in the beginning of this trend shift. So what about artificial intelligence? Artificial intelligence are driving data center growth, yes. But what can a company get out of artificial intelligence using it? Let me introduce two of our recently new employers. One, Calvin, that are driving internal efficiency and one, Clarity, that is driving how to work with our customers. Calvin That is, how do we program in a better way? How do we automate? How are we doing code reviews? How are we becoming faster and more efficient in developing software? And I'm amazed to see how much efficiency and how much innovation can be driven by this new employer of Aston. Controllers. The other area, not software. Here we have clarity. An agent that is a virtual assistant, that is driving training for us, that is driving training for customers, that are generating customer support online and so on. And look upon those. Yes, it is perhaps not tens of thousands of customers, but for Manters and Foodtech, there is an increasingly large amount of the users that we have. 1,300 users have joined Manters Academy. We have more than close to 200 training videos. We received more than 3,000 inquiries that was answered by Clarity and we support 20 languages with our new digital driven agent Clarity. So two examples of what we do with artificial intelligence to drive efficiency and customer satisfaction. With that, I hand it over to you, Katarina, and please take us through the numbers.

Yes, thank you, Claes. I'm pleased to talk about the continued strong performance for the group. In the third quarter, organic growth contributed with 56% to order intake and 15% to net sales. This was complemented by non-organic growth of 14% and 11%, respectively. At the same time, we continue to experience negative currency effects of minus 13.9%. Worth highlighting is also the order backlog that currency adjusted developed well and then increased about 4% in the quarter. The adjusted EBITDA margin remains solid at 13.5%, although lower than prior years exceptionally high level. Here, Data Center and Foodtech continue to deliver very strong margins, so really demonstrating operational discipline across the business. As you heard Claes say, the margin in Airtek declined, both compared to prior year and also slightly versus prior quarter, and this was due to lower volume. unfavorable product and regional mix, and then also continued dual site costs for the transition into the new factory in Ainsbury, which has taken longer than anticipated and is expected to be fully operational by the end of the year. A key achievement in the quarter was the continued improvement in operating working capital. Here we have reduced to now 8.3% of net sales, which is well below our target range of 13 to 10%. So this is a clear result of very disciplined work across the organisation. Our net debt increased and this is mainly reflecting then the acquisitions made through debt financed acquisitions and also the higher lease liabilities due to the new facility in Amesbury. Looking at the margin development then, as mentioned, the margin remained solid then at the 13.5%, even though it was lower compared to the tough comparison last year. The different factors then, volume, volume growth for data center and food tech had a positive impact on the margin. And for air tech, it was a negative impact from volume obviously then. I'm pleased to see that we continue to drive positive net price increases, mainly in data center and food tech. We also saw negative mix impacts both for air tech due to the high mix from APAC and also product mix, regional mix from food tech. Also then as Claes has highlighted we had negative impacts from tariffs in DCT with the two percentage points and this is something that we anticipate to remain until the US production of US chillers is up and running then in the US. On the operational side, the underabsorption in Airtek weighed on the margin, although there was a positive offset from the high factory utilization in data center. And then it's worth mentioning also that all business areas continue to drive very strong efficiency improvements. We also continued to invest in our strategic initiatives, as we have mentioned in prior quarters, and this has to do with building digital capabilities, system support and further strengthening our footprint across the globe then. And then finally, the currency had a negative impact for this quarterly result. Turning to cash flow then, if we look at the main cash flow movements, cash flow was strong for the first nine months, although slightly lower than prior year, and this was due to slightly lower operating earnings and also less favourable development in working capital. If we look at the individual business areas, data center continued to deliver very solid cash flow supported by customer advances and strong profitability. And in air tech there was a negative cash flow then due to the weakness in the battery market and also they continued under absorption. If we look at cash flow from investments, you see that the main part there is that we earlier this year bought the remaining shares in the software company Emtech and also the continued investments in the manufacturing footprint and mainly in Innsbruck. Also, this slide is showing the continuing operations. If you look at the discontinuing operations, you will also see the one billion SEK that we received for the divestment of the food tech equipment business earlier this year. And we of course continue to maintain a very strong focus on cash management and I'm very pleased to see the positive effects of all the efforts that we have ongoing to increase operational efficiency and also the capital discipline across the group. Looking at investments then, we maintain a highly disciplined approach to the capital allocation. We focus our investments in the areas that generate the strongest long-term growth and also support profitable, sustainable growth. In the third quarter, the ratio capex to net sales was 3.9%. And if you look 12 months rolling, it was 6.7% then. So although the quarterly level was a little bit lower in Q3, in the near term, we expect it to be somewhat elevated above the historical levels. as we continue to invest in automation and innovation and digital capabilities. And an example of this, of course, in the coming quarters is the ongoing expansion of the Virginia site for data center, where we are setting up chiller production then in the US and also investing in a new test lab. And these investments of course strengthen our technological capabilities and also the regional manufacturing footprint. So we are very well positioned then to remain and be able to capture future growth in this area for Americas. Looking at leverage, the leverage ratio was 2.8, which is then unchanged compared to the second quarter. If you compare to Q3 last year, it's somewhat elevated then, and this is due to the acquisitions made recently, and then also the increased liability for Amesbury. And in the coming quarters, I want to highlight that we will be paying some holdbacks relating to some acquisitions made recently, including GeoKlima and EmTech. And we maintain our ambition to keep leverage within one and a half and two and a half percent. And we are comfortable staying above this level temporarily since this is due to these strategic investments that are so important for us to really further develop our competitive position and support our long-term growth. I also want to mention that we in the third quarter issued our second green bond. So now we have more access to the credit market and we have been able then to diversify our funding beyond the bank, traditional bank loans. Moving to service then, so expanding service is of course a key priority across all our business areas. And in the quarter we had an organic growth of 6% for service. And of course, here we want to keep our systems running for our customers in a very efficient and sustainable way through the whole lifecycle. But of course, also for monitors, it creates a stable and recurring earnings base for us. So that is also important. And service is defined as aftermarket service across the business areas and then also the software revenue for food tech. Components has also developed well in the quarter. And this is, as you know, sold mainly within Airtek. So here we have the dehumidification rotors and evaporative pads as growth drivers. And the group's ambition for service and components is to be above one third of group net sales. And in the quarter, we were at 24%. And also, if you look 12 months rolling, it was on 24%. And then if we look to the individual business areas, you can see that both Airtek and Datacenter increased their service shares. So Airtek is at 22% and Datacenter at 5%. Foodtech here has 21%, which is a decline compared to last year, but that has to do with this year we have a higher mix of controller sales and they don't have as much service. So going forward, we will continue of course to build on our growing installed base and continue to invest in smarter and more connected and even more energy efficient products that creates value for our customers and make our products even more reliable. And then looking at our sustainability initiatives here. So here we continue to make very meaningful progress. Circularity is something that is part of our daily operations. And one example of this is the circularity program that we have been running them with Combient Pure. So this is about how we can increase circularity within Airtek with regards to their processes. and product. So it's about designing for reuse, recycling and do it more efficiently. And here we have identified opportunities for even higher materiality circularity with 15%. And there is also a possibility then to further reduce scope three emission by developing our service offering more broadly. Just recently we also announced a very interesting collaboration around innovation, so here the residues from our rotor production will be reused for plasterboard manufacturing. So this is really innovative initiative where we will turn waste into new material and really strengthen our regional circular value chain. So I think two really good examples within circularity. And of course, this is a continued focus for the group. We will further expand this across the organization and we will also deepen the supplier engagement further going forward. With that, I would like to thank you and hand it back to you, Claes.