Strong underlying demand, organic net sales growth with solid cash flow generation

October-December 2022:

• Strong order intake in business area AirTech driven by the battery sub-segment. Strong order intake for business area Data Center Technologies (DCT), offset by a cancellation of orders for evaporative cooling solutions of MSEK 465. The cancellation is caused by a whole project being stopped or redirected and is not related to Munters as a specific supplier. Business area FoodTech declined as EMEA and China remained weak, partly offset by good growth in Americas. Excl. the cancelled DCT order, order intake grew +20% FX-adjusted.
• AirTech and DCT had strong organic net sales growth, whereas FoodTech had a flat development with growth in the US, offset by weak development in EMEA and China.
• Price increases contributed to approximately +8% of the organic growth.
• The adj. EBITA margin was lower due to lower volumes in FoodTech, a changed business mix in DCT partly offset by an improved margin in AirTech because of good volume and efficiency improvements. Strategic investments for scalability in digitization and automation increased in the quarter.
• Leverage decreased from 3.0x at the end of September to 2.9x because of increased operating earnings and improved operating working capital, partly offset by the acquisition of Hygromedia and Rotorsource.

January-December 2022:

• Very strong order intake driven by the battery sub-segment in AirTech as well as DCT. FoodTech had good growth in Americas, offset by a weak development in EMEA and China.
• In the first quarter Munters suspended all business activities with Russia due to the war in Ukraine.
• AirTech and DCT had strong organic net sales growth, whereas FoodTech had a flat development with growth in US, offset by weakened market in China.
• Price increases contributed to approximately +6% of the organic growth.
• The adj. EBITA improved in AirTech, offset by a lower margin in DCT and FoodTech. Strategic investments for scalability in digitization and automation increased.
• The higher cash flow from operating activities is mainly related to an increase of operating earnings compared to last year. Cash flow from changes in working capital had a negative impact of MSEK -84 (-175) mainly driven by the strong order intake. 
• Leverage increased mainly due to the acquisitions of Edpac, Hygromedia and Rotorsource, increased IFRS 16 leases for new factories in Virginia, US, and the Czech Republic and the dividend payment, partly offset by increased operating earnings.  

Events after the close of the period: 

• The Board of Directors propose a dividend of 0.95 SEK (0.85) per share totaling a dividend of MSEK 175 (157). This represents 30% (30%) of net income in 2022.

CEO Comment:

Strong organic net sales and a strengthened position in our prioritized segments

During the quarter, demand for our innovative, energy efficient climate solutions continued to be strong. In business area AirTech order intake increased by 32 per cent organically. The single largest orders were two contracts in the battery segment covering deliveries to the US and Canada. In Data Center Technologies (DCT) the order intake showed strong growth, however offset by a cancellation of orders received during the year for evaporative cooling solutions. The customer cancelled these orders as they are looking to rescope projects and is not related to Munters as a specific supplier. Business area FoodTech continued to see a very weak swine market in China as well as a weak market in EMEA for the equipment segment Climate Solutions, somewhat compensated by good development in Americas for the segment Digital Solutions. In the quarter, Digital Solutions signed an important Software-as-a-Service (SaaS) contract with one of North America’s largest poultry producers.

As a result of continued good demand, our strong position and our price increases during the year, net sales grew 26 percent organically in the quarter, driven by business areas AirTech and DCT, partially offset by the development in FoodTech. The annualized recurring software revenues from our SaaS business in FoodTech increased by 44 per cent in the quarter.

Increased investments in digitization and automation to create enhanced future efficiency

Our focused work to create a more efficient and scalable company continued according to plan with increased investments in digitization and automation. In the quarter, several initiatives were scaled up and prepared for the roll-out of the system support to update ways-of-working in 2023. FoodTech invested in the Digital Solutions business, at the same time as lower volumes in the segment Climate Solutions led to a decreased margin in the quarter. DCT also had a lower margin compared to last year. As anticipated, it improved compared to last quarter. AirTech’s margin improved as a result of increased manufacturing efficiency. The inflationary pressure and supply chain constraints continued, albeit at a lower level and with less bottlenecks and components shortages. We continued to work on optimizing our manufacturing and during the quarter DCT finalized its production site relocation in the US while AirTech is working on the US production optimization blueprint.

Leverage improved slightly in the quarter as we generated good operating earnings and cash flow. At the same time, we delivered on our M&A agenda with both acquisitions and minority investments in innovative start-up companies. Acquisitions are an important part of our growth strategy. In AirTech we acquired Hygromedia and Rotorsoure, strengthening our position as a leading supplier of desiccant dehumidification technology. In FoodTech we announced the acquisition of a majority share in InoBram, a Brazilian manufacturer of climate controllers for farms and food producers, where we are still awaiting the antitrust approval to close the transaction.

Strong foundation for continued profitable growth

Over the last year, we created a strong foundation for continued growth through a number of focused actions. Among other things, we have increased product standardization, invested in research and development as well as digitization and automation in combination with a decentralization of the organization. As a result of our achievements we updated our financial targets in December to reflect the strong value-generating growth we see for Munters in the coming years.

We have also taken major steps ahead in the areas of sustainability during the year. Internally we have made great efforts in mapping our emissions and worked with life cycle analysis of our products. With the life cycle analysis, we become even better at helping our customers reduce their emissions. Our contribution to a better climate is a strong driving force for us in our daily work. As I look back at 2022, I am very proud of the record order intake, strong net sales and the cash flow we have achieved. I look forward to continuing to strengthen our market position together with all employees in 2023.

Klas Forsström, President and CEO

Information about the webcast:

You are welcome to join a webcast or telephone conference today, February 9 at 9:00 AM CET, 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-q4-2022

Conference call

If you wish to participate via teleconference, please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference.

https://conference.financialhearings.com/teleconference/?id=5006707

This interim report, presentation material and a link to the webcast will be available on https://www.munters.com/en/investor-relations/

Contact persons:

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

Line Dovärn
Director Investor Relations 
Phone: +46 (0)730 488 444
E-mail: line.dovarn@munters.com

This information is information that Munters Group AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07.30 AM CET on February 9, 2023.

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 3,900 employees carry out manufacturing and sales in more than 30 countries. Munters Group AB reported annual net sales of more than SEK 10 billion in 2022 and is listed on Nasdaq Stockholm. For more information, please visit www.munters.com.

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