Munters Group AB

Good morning and a warm welcome to today's presentation of our Q2 results 2026. My name is Lina Duvan and I'm head of Investor Relations, joined as always by our CEO, Claes Forsström, and our CFO, Katarina Fischer. So we will begin with a presentation from Claes and Katarina, and then we will have a Q&A session. So Claes, please go ahead.

Thank you, Lina. And once again, good morning and welcome. The quarter delivered exceptional order intake, both in data center technology and air tech, driven by solid underlying market and strong product offer. All setting up data center technology and air tech for substantial revenue growth 2027 and beyond. The profitability is as planned improving in Airtek while DCT was impacted by anticipated growing pain, as well as currently burdened by component shortages affecting ramp up speed and efficiency. Very pleasing also to see that the quarter showed strong cash flow and cash conversion. we are creating a sharper, more focused monitors by optimizing our portfolio and positioning food tech for the best possible future outside the Group. I'm very convinced that this will create a more focused monitors that without food tech is well positioned to deliver annual revenues well above 20 billion SEK over the coming years. So talking about the potential divestment of food tech, as I said, the portfolio optimization question, a sharper focus from hunters and creating a new ownership to accelerate food tech. The future monitors will be data center technology and act eccentric, generate focus, flexibility and enable us to allocate all efforts towards growing that part of the business. Foodtech or Speria, set up for a potential divestment, enabling growth, market position, and continue to scale. And I have to say this, Foodtech is a fantastic asset. And even if we're early in the process of setting this up, I'm very pleased to see that it is a high interest in the market, talking and understanding what Foodtech and Speria is all about. Looking into the quarter, once again, exceptional demand. External headwinds currently affecting profitability, and here I talk about data center technology. But going back then to order intake, more than 140% organic order intake increase. and very pleasing. Both data center once again showing strong growth, but also Airtek showing a very, very strong underlying growth. The order backlog improved up to 151% and the book-to-bill ended up at an impressive 2.3 times. The net sales increased with 6% organically, a little bit more. Airtek increased driven by components and commercials. DCT declined due to the planned ramp up and also damped by the current supply chain challenges. Foodtech increased both when it comes to software and controllers driven in Americas and EMEA. Modion impacted by external factors, as I said, and I will come back to that later on. DCT declined. Production is burdened by component shortages and of course also the ramp up and the product mix. Foodtech remain at the healthy level. We continue to invest and very pleasing to see Airtik improved. Higher volumes, cost saving measurements. Everything is biting in the way that we anticipated it to be. When we talk about the favorable trends, it is really cutting across all the different regions. But to be a little bit more sharp, America's very strong market and we have a strong impact in America's. EMEA is moving up to a more healthy market position. Very pleasing to see that data center, both the market and we in the market are showing clear signs of a pickup and order intake. And APAC, even if it is a smaller part of our order intake, it continues to be healthy. But of course, as always in APAC, at the slightly lower margin than the rest of the mix. Coming back then to 76% of the order intake is generated from Americas and a little bit shy of 20% EMEA and a little bit shy of 10% in APAC. moving into the different business areas. Exceptional demand in air tech. I booked a bill of 1.7. America's significantly growing and the exceptional demands is mainly coming from evaporative pads. components, but also in many other segments, including some reinstatement of a battery order that have gone in and out. EMEA generating growth, but as I said, a little bit more mixed, but moving to healthier levels. And APAC solid growth supported across the different components and sectors. This slide you have seen many, many times, and I very often come back to and say, now, battery is icing on the cake. Take a look upon where we are beside the battery. We have established ourselves cutting across many different segments, and I'm very pleased to see that Airtek has been able to reach out to several segments. Worth noting in here, as you can see, the components, i.e. the pads, are extremely strong in the quarter. And I have to underline, this is not a new normal. This is extraordinary, even with that said, that we have an underlying strong pad growth across the different sectors. But I don't expect this to be repeated in the coming quarters. All in all, a very pleasing development. And if we take a little bit closer look into this, then first of all, take a look upon 20% service, 24% components that generates of the order intake, 44% is service and component. That sets us up for a long-term delivery of components in the coming year and a half. What more to say? I'm super pleased about the good development in profitability driven by, first of all, the savings programs are delivering according to plan. And on top of that also, we are then moving up more and more when it comes to filling up the factories. I come back to one thing that I believe is super important. We will take this step by step. We are, if I say so, not in a hurry when it comes to spiking up profitability. And what I mean with that is We will deliver diligent on the savings. And then when we have a couple of more quarters with 2 billion and above in order intake, we will also then gradually fill up our factories. And at that time, after a couple of quarters with this, I mean, then I expect us to be where we should be, i.e. in the range of 13%. But it will take a couple of more quarters to reach that level. data center technology. Once again, the continued order intake. For me, it is a clear sign on this is what we present to our customers is very much appreciated and we see no signs of any slowdown in the demand as such. several different types of orders, cutting across all the different product categories. We announced one significant order of 2 billion in the beginning of this quarter, and the order intake continued to increase. And now we are talking about that we are deliveries mainly for 26 and 27, but we are also starting to fill up 28. I'm super confident in the order backlog that we have. a book-to-bill of 3.6. Net sales declined. Part of it is very much as expected, the planned ramp-up of US shillers in the production, but then we have spiced it up, sadly, with also some current supply chain constraints that has brought us down a little bit more. I would say that if we would have not had this supply chain constraint, I would have expected us to be about 300 million more in net sales in the quarter. So that is holding us back for sure. And I will come back a little bit more how I look upon the future in this area. The margin declined. It has changed in the product mix. As we have communicated earlier, it is the planned production ramp up. Nothing strange with that. And then we have added on then the supply chain constraints. The tariff headwinds is estimated to be about three points higher than the norm. The order backlog then, and of course, this is not all the orders we have. We have added two just to give you a flavor of what we see. It is one then the two billion that we talked about, but it is also very pleasing to see that we have added a EMEA co-located order across and CDUs. And if I take a look upon this, I mean, it is clear, as I said in the beginning, I mean, we are setting up data center technology to deliver an increased and accelerated revenue growth starting in Q3, accelerating in Q4, and then carry us through 27 and 28. a healthy, strong order backlog. You may have seen this schematic view on how you ramp up new production, the curve on the right side. Let me start with an obvious statement. What do you need to have to generate success when you're building new factories, when you're ramping up, when you're investing? First, you need to have the factories, facilities in place. Then you need to have the people, bring them in, train them and let them shine. And then on top of that, you need to have materials in the supply chain in a good order. I'm very pleased. We are spot on when it comes to the build of the factories, the training of the people, the hiring of the people. And as you can see, this is quite an accomplishment. We are doubling the production output. We are increasing the floor space of 60%. So this is something that I feel that our people can be extremely proud of. On the other side, if I simplify, I say I'm not happy in regards to where we are when it comes to the material and supply. And my unhappiness is, of course, we didn't fully see this coming. And now we have to work ourselves out of this. But the unhappiness is also supported by a very, very strong conviction that we will work ourselves through this. And that takes me to the curve. You know, you start down in the bottom left, you build a factory, you increase the production volumes, you start to practice, you put in lean methods, etc. And at a certain point, let's call it a tipping point, the inflection point, when you have practiced enough, when you have had enough volume in the factories, then you start to move profitability up. My view is that we, according to plan, should have been a little bit below the inflection point at current. But now we are about one quarter behind the plan. But in the coming quarter, we will continue to move up to the inflection point, and then thereafter, we will continue to move up towards the profitability. And you can say, what are we doing to mitigate this? We are increasing our stock levels. We are putting in more suppliers. We are sadly then supporting it also with some more production in Europe that is hitting us on the... on the tariffs, but all in all, we are mitigating this in a very good way. And if I take a couple of quarters outlook, if I take a year outlook, I mean we are set up for success and a record delivery from those factories. Food tech. For me, this is a fantastic asset. And as I said earlier, it is not due to that we don't believe in food tech. We believe very much in food tech. But we need to focus our efforts on the core. Food tech, strong backlog, some delays in projects during the quarter, but still a book to build a 1.1. I'm super comfortable with this. I see that now it is full speed ahead on separation and full speed ahead on delivering orders. And I know P and the team, they are super excited to put this in place. Order intake goes both for controllers, but it's also when it comes to ARR. A little bit disappointed in the quarter when it came to the ARR development, but I'm very confident that we will be back on track in the range of 20% to 30% growth in the coming quarter. So for me, food tech is set up for success in the future, and it is just to push the accelerator and moving forward here. With that, Katarina, let's dig into the numbers.

Yes, thank you, Claes. Okay, so you have heard Claes talk about the results a little bit. So the Q2 then demonstrated good growth in Airtek and Foodtech net sales, while the data center net sales was lower then due to the production ramp up and also the supply chain constraints that impacted the throughput in the factory. Q2 also demonstrated resilient profits, so net income still increased, and also strong cash flow generation and further improvements in operating working capital, which is now well below our target range. Looking at the margin a little bit, so we talked about this, that we are ramping up, so we are supporting our growth initiatives, of course, and then we have some external factors. If we look at the volume development, it was a mixed picture. Airtec's volumes grew while DCT's volumes decreased then due to that the throughput was impacted in the factory by the supply chain constraints. We also had profitability negatively impacted by product mix in DCT, which we have talked about many quarters, and then also the tariff impact. At the same time, we are continuing to implement price increases across the Group, and these will come through, but it will be a gradual benefit to profitability as we have longer lead times in part of the business. On the operational excellence side, here we then also felt external supply chain constraints that affected the throughput and also the efficiency, of course, in the factories in the US due to the planned ramp up. And then we also had the continued underutilization in Airtek weighing on the margin. We remain committed to our strategic initiatives, so we are continuing to invest to scale the business in automation, digitalization and so on. And also, of course, expanding the footprint. Positive support from RTX cost savings programs that I will come back to. And then if we look at the sequential, how the margin has developed sequentially, it has improved somewhat then, driven by increased volumes and cost savings in Airtek. And then Airtek, you know that we are working on implementing these cost savings programs. They are progressing very well. The 2025 program has been completed and delivered more than the expected savings. Now we are continuing to implement the 2026 initiatives and here we have delivered over 100 million so far and we expect to deliver at least 250 million at the end of the year. And these initiatives, as you know, include investment adjustments, workforce optimization, and also increased efficiency. And the whole aim is, of course, profitability, which is happening, and then also make sure they are more efficient and have a scalable platform for future growth. Looking at the cash flow, in the second quarter we delivered a very robust operating cash flow, and this was primarily driven by customer advances in DCT, but also very disciplined cash management across the Group, of course. Investing activities increased and this is of course because we are continuing to invest in our business and also this includes the recent acquisition of Optifarm within Foodtech. This was partly offset by a positive proceeds then from the sale of a US production facility in the quarter. And then we paid out the dividend in the quarter which is part of the financing activities. Year to date, same picture, strong cash flow driven by DCT. We continue to invest, of course, in our business and also strategic investments, like buying out the remaining part of the Emtech shares that happened in the first quarter. Talking about investments then, in the quarter we had 7.2% capex as percent of net sales and a rolling of 5.9%. So still not as high as prior year at this point during the year, but still we continue to invest, of course, mainly in our Virginia facility where we are ramping up the production capacity for the Virginia campus. but also some investments for component production within Airtek, of course. And talking about full year outlook for CAPEX, that remains, so we expect it to be at the same level as prior year. Working capital, we talked about that a little bit before, very, very low, 5.2%, very good execution across the Group. Leverage slightly up from 3.1 in the first quarter to 3.2 now. This is mainly driven then by decreased adjusted EBITDA. Offset partly then by strong cash flow. And while we do not have a fixed leverage target, we do have an ambition, which is 1.5 to 2.5. We are comfortable being above this level since this is due to the acquisitions we made and also the strategic investments in our factories. Looking ahead, we will see leverage gradually improve as we see higher earnings and of course also very disciplined continued cash management within the Group. Turning to ESG matters. In the quarter, we reported our green financing report. This is a report that dives into how the proceeds from the green bonds are allocated and what towards project and what environmental impact those are making. So right now we have 2 billion SEK in outstanding green bonds across three maturities and we have 1.4 billion allocated right now against climate change. And of course these projects are extremely important for us because they will then drive environmental benefits. So a few examples, then we continue to drive lower emission manufacturing where we use more renewable electricity and fossil free heating, and that supports growth then while reducing operational emissions. In our product portfolio, we have AI powered dehumidification solutions that optimizes dehumidifier operations and remote monitoring improves efficiency and performance. and then we are also advancing digital solutions Food tech and here we have data driven feed optimization that improves accuracy through data and predictive analytics, reducing emissions, energy use and cost. And these investments and then they demonstrate that our green financing framework supports innovations that benefits both our customers, but also, of course, our own operations and really reinforcing that sustainability is really a key enabler for profitable growth and long value creation. So with that, I would like to hand it back to you, Claes.