Munters interim report Apr-Jun 2022: Strong growth in a quarter marked by continued challenges

April-June:

• Strong order intake driven by business area Data Center Technologies (DCT) in Americas and in Battery and Service in business area AirTech.

• Net sales increased driven mainly by DCT in Americas and by good growth in Battery and Service in AirTech, offset by a continued weak market in China for business area FoodTech.

• In adj. EBITA our price increases compensated for inflationary pressure, however offset mainly by costs due to component shortages, business mix change in DCT, lower volumes for FoodTech in EMEA and APAC and operational challenges.

• Leverage increased mainly as a result of the increased working capital resulting from strong volume growth, dividend payout and exchange-rate effects as the SEK weakened against several currencies.

• Strong order intake led to an increase of working capital and lower cash flow from operating activities. This is driven mainly by preparations for project deliveries over the coming 18 months in the Battery sub-segment in AirTech and DCT.

January - June:

• Order intake increased mainly driven by DCT and in Battery and Service in AirTech. DCT signed Munters largest order ever received in January. FoodTech had good growth in Americas and signed a large SaaS deal in the subsidiary MTech in the first quarter.
• In the first quarter Munters suspended all business activities with Russia due to the war in Ukraine.
• Net sales increased in all business areas with strong growth in AirTech and DCT. FoodTech experienced weakened markets in EMEA and China, slightly offset by growth in the US.
• In adj. EBITA our price increases compensated for inflationary pressure, however offset mainly by costs due to component shortages, business mix change in DCT, lower volumes for FoodTech in EMEA and APAC and operational challenges.
• Leverage increased mainly due to the acquisition of Edpac at the beginning of the year, working capital build-up as a consequence of the strong volume growth and the exchange-rate effects.
• Strong order intake led to an increase of working capital and lower cash flow from operating activities.

CEO comments:

Strong growth in a quarter marked by continued challenges
The second quarter showed solid growth as we continue to benefit from the strong megatrends of digitization, electrification and increased demand for sustainable solutions.

Growth was mainly driven by DCT and Battery and Service in AirTech. Lockdowns related to Covid-19 outbreaks in China impacted both AirTech and FoodTech. A continued weak Chinese swine market also had a negative impact on FoodTech.

Price increases implemented in previous quarters compensated for inflationary pressure. We continue to adjust prices in all regions to secure coverage for increasing costs. Simultaneously efforts to secure components have intensified during the year and more work goes in to manage lead times. This is particularly noticeable in DCT where we also had a negative business mix in the quarter. Lower volumes for FoodTech in EMEA and APAC had a negative impact on the margin in the quarter. The operational challenges in a production unit in AirTech, that started in the fourth quarter last year, continued to have a negative impact on the margin. Operating working capital increased as the order backlog includes some larger orders received in the first half of the year with deliveries scheduled to start in the fourth quarter this year.

Increased investments to capture market opportunities
To lay the foundation for an effective execution of our growth strategy and become more efficient and scalable, we are continuing to increase our strategic investments into digitization and automation. Focused investments are made to reduce costs, decrease lead times, improve quality and become more scalable. These investments will enable Munters to improve and align processes, systems, information flows and master data management.

To meet growing demand, we are also expanding our capacity with two new manufacturing plants this year, which will be inaugurated in the third quarter. One is dedicated to the battery segment, located in the Czech Republic, and one in the US for business area DCT.  

Execution on long-term strategy for value-creating growth
DCT has experienced strong growth in recent years and entered Europe at the beginning of this year through the acquisition of Ireland-based Edpac. Continued investments in scalable production and innovation builds for profitable growth in this area and as of June 30, it is reported as a separate business area.

It’s encouraging to see the increased demand in especially the battery and data center areas and the dedicated work of our employees to balance global market challenges while enhancing our operational efficiency. I’m confident in Munters’ ability to deliver on our growth strategy and proud of all employees’ constant ambition to exceed customer expectations.

Klas Forsström, President and CEO

Information about webcast:
You are welcome to join a webcast or telephone conference today at 9:00 AM CEST, when President and CEO Klas Forsström, together with Group Vice President and CFO Annette Kumlien, will present the report.

Webcast
https://tv.streamfabriken.com/munters-q2-2022

Conference call
Please, dial-in using one of the numbers below and the pin code:

SE: +46 8 505 163 86
UK: +44 20 319 848884
US: +1 412 317 6300
Pin code: 2556601#

Contact person:
Ann-Sofi Jönsson
Vice President, Investor Relations and Enterprise Risk Management
Phone: +46 (0)730 251 005
Email: ann-sofi.jonsson@munters.com

This information is information that Munters Group AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, at 07.30 AM CEST on July 15, 2022.

About Munters Group
Munters is a global leader in energy efficient air treatment and climate solutions. Using innovative technologies, Munters creates the perfect climate for customers in a wide range of industries. Munters has been defining the future of air treatment since 1955. Today, around 3,700 employees carry out manufacturing and sales in more than 30 countries. Munters Group AB reported annual net sales of more than SEK 7 billion in 2021 and is listed on Nasdaq Stockholm. For more information, please visit www.munters.com.

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