Annual and Sustainability Report 2017

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This is Munters .................................................... 4

Corporate Governance Report ........................... 66

Events during the year.......................................... 6

Board of Directors ............................................ 76

Comments from CEO............................................ 8Group Management ......................................... 78

Megatrends ...................................................... 10

Our history........................................................ 80

Strategy, outcomes and value creation.................. 12

Auditor’s Report................................................. 82

Sustainability..................................................... 15

Board of Directors’ Report.................................. 83

Innovation......................................................... 23

Financial Reports ............................................. 88

Production......................................................... 25

Notes............................................................... 93

Global sourcing................................................. 28

Assurance....................................................... 125

Employees......................................................... 30

Auditor’s Report.............................................. 126

Business Areas

Definitions....................................................... 129

Air Treatment................................................. 34
Data Centers................................................ 41
AgHort........................................................ 47
Mist Elimination............................................ 52
Service............................................................ 58
Risk Management............................................. 61
The share......................................................... 64

Financial calendar

Munters will release its financial reporting for thefinancial year 2018 according to the following schedule:
26 April, Interim Report Q1
17 May, Annual General Meeting is held at 3 PM, Clarion HotelSign, Östra Järnvägsgatan 35 in Stockholm, Sweden
18 July, Interim Report Q2
25 October, Interim Report Q3

Production: Sthlm Kommunikation & IR

Note:
Because all amounts in this report are rounded, rounding differences can occur.
This English version of the Annual Report of Munters Topholding AB is a translation of
the Swedish original. The Swedish text is the binding version and shall prevail in theevent of any discrepancies.

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MU N T E RS

Your Perfect Climate
Munters is a global leader in energy efficient and sustainable air
treatment and climate solutions. Using innovative technologies,
Munters creates the perfect climate for customers in a wide range
of industries, the largest being the food, pharmaceutical and data
center sectors.

NUMBER OF EMPLOYEESNET SALES~3,900 ~7SEKb

Munters has been defining the future of air treatment since 1955.
Today manufacturing, sales and service are carried out in morethan 30 countries. We have about 3,900 employees, including
temporary workers and an annual net sales of about SEK 7
billion. Munters is listed on Nasdaq Stockholm.

NUMBER OF OFFICESY E A R S O F I N N OVAT I O N

N U M B E R O F FAC TO R I E S

55

62

18

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MU N T E RS

700
700

8000

Munters is a truly global company with 18 manufac­turing
plants, six assembly hubs, and 55 sales and service
centers around the world.
Business Areas
Munters operates in four business areas:

NET SALES
SEKm

OPERATIN G PROFIT AND
500
M A R G I N 500

6000

EBIT, SEKm

2017 — 6,604

92017 — 453/6.9
200
200
2016 — 577/9.6
100
100
2015 — 384/7.1
02014 — -104/-2.5 0

2000

6
3

2015 — 5,399

NET SALES PER BUSINESS AREA

NET SALES PER REGIONDATA CENTERS
Munters Data Centers business is a world leader inenergy-­efficient climate systems for large and medium-­
sized data centers where capacity, reliability and availability are mission critical.

SEKm

SEKm

AGHORT
AgHort is one of the world’s leading suppliers of innovative, energy-efficient climate control solutions for livestock,farming and greenhouses, as well as, of software forcontrolling and optimizing the entire food production
value chain.
MIST ELIMINATION
Mist Elimination is a globally leading provider of solutions
for mechanical gas and liquid separation, as well as,
mass transfer. Munters cleans flue gases mainly from coal
power plants and ships around the world, as well as,protect equipment in process industries, wind turbines,
gas turbines and on ships.

2014 — 4,216
0

12

400
EBIT margin, %400

AIR TREATMENT
Air Treatment is a global leader in energy-efficient air
treatment for industrial and commercial applications, suchas dehumidification and cooling in pharmaceutical andfood production, as well as, in stores and central distribution centers.

2013 — 3,791

15

300
300

4000

2016 — 6,040

18

600
600

2013

2014

2015

2016

2017

2013 — 77/2.0-100
-100

0
2013

2014

2015

2016

2017

-3
-6

Mist Elimination
406 (6%)
AgHort
1,837 (27%)
Data Centers
856 (13%)

Region Asia
1,349
Air Treatment
3,588 (54%)

Region EU
2,857

RegionAmericas2,935(Other -536)

G L O B A L P R E S E N C E W I T H S A L E S A N D M A N U FA C T U R I N G I N M O R E T H A N 3 0 C O U N T R I E S

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Events 2017

S T R AT E G I C A C Q U I S I T I O N S
During 2017, Munters acquired MTech
Systems in the US and Edata in Brazil,
two companies offering software
solutions for the food productionindustry. Munters will now be able
to provide full control of the supply
chain for poultry and swine production
including services such as advanced
data analytics.
Munters also acquired Kevin Enterprises
in India, a company engaged in design,
manufacturing, supply & installationof mist elimination, mass transfer andseparation equipment. The acquisition
secures a world-leading offer forcustomers in the process industry.

HISTORIC ORDER

IPO
The Munters Group AB shares were listed on Nasdaq Stockholm May 19, 2017,
under the ticker MTRS. Price per share in the Offering was SEK 55, whichcorresponded to a total value of the number of outstanding shares in Munters of
SEK 10,098 million. Munters CEO John Peter Leesi commented, the listing: ”We arevery happy and proud of the significant interest shown in Munters during the listingprocess. It is with great pleasure that we welcome new and old shareholders to takepart in this next step in our journey – to develop Munters in a public environment.”
At the end of the year Munters had 6,514 shareholders.

During the year, Munters received
its largest order in history to provide
climate solutions for two Facebook data
centers in Europe. Munters is at theforefront of a technology shift in the data
center market, with indirect evaporative
cooling enjoying exponential growth, as
it gradually replaces old, less energyefficient, compressor-based coolingtechnologies.

FIN AN CIALR APPORTS

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Y EA RPRODUCT RELEASE
Munters made several product launches
during the year. One example is the
Platinum Touch Controller which provides
an entirely new user experience. The
Touches’ screen brings together mission
critical data in one large screen,
designed to be easy to read and use.
The sophisticated interface is intuitive,
enabling a simplified set up.

N E W M A N U FA C T U R I N G P L A N T I N C H I N A
A larger manufacturing plant was completed in 2017 in Jiang Yin, China, to serve
the Asian market. The expansion was made to meet the continued strong growth in
Asia. The production of rotors, cooling pads and fans started in October. During
2018, products for the data center market will also be produced.

AWA R D :E N E R G Y I N N O VAT I O N S
Munters received the ”Industry Energy
Innovation” award at 2017 Europe
Datacloud Awards, showcasing
innovation, inspiration and excellencein data center and cloud. The award
referenced primarily the Indirect
Evaporative Cooler Oasis™.

At the same time, the unit is built towork in the rigorous conditions foundin barns. The Platinum Touchs’ software
package enables management andcontrol over all poultry and swine house
functions.

GLOBAL SERVICES
Munters provides a range of services
for its products, including installation
supervision, commissioning, spareparts sales, repairs and performance
optimization. Munters Service businessbecame an entity of its own in 2017.
The business grew with 11 percent
during the year driven by further
penetration of our installed basewith our existing service solutions
including service contracts, as well as,
introducing new upgrade and rental
solutions.

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L EE S I

We are building aneven stronger MuntersW

e are 3,858 people in Munters and weare on a mission. Climate is what weare, what we think about and what keeps
us going. We have a long tradition of
offering solutions to make our customers more efficient.
One in seven meals served on this planet is facilitatedby Munters equipment. One fifth of all electricity produced every day is cleaned with Munters equipment. We
reduce the energy needed for cooling a data center by
65 percent on average, compared to traditional coolingsolutions. We take a lot of pride in doing this.
Our brand promise is to deliver “Your Perfect Climate.”
In the early days of our history, we delivered units fordehumidification. Today, we help our customers to create
the perfect climate for their processes in which climate
control is mission critical. We do this by investing intechnology and industry knowledge, as well as, having a
deep understanding of our customers’ specific demands.
We do this because in a world that has surpassed
seven billion people, resources are getting more scarce.
We work along with thousands of other companies tomake sure our planet is better tomorrow than it is today.
Our core values run deep. Our passion for results, ourbelief that there is always a better way, our team spirit
and focus on sustainable value creation define our culture– and we know culture defeats strategy not once, nottwice, but every time. In the perspective of time, we exist
between two eternities; the past and the future. In thissliver of time, we have a responsibility to make Munters abetter company tomorrow than it is today.
What we do and the development during 2017
Group net sales grew by nine percent to 6,604 SEKm,of which six percent organic. Operating profit decreased
to SEKm 453, mainly due to lower profitability in Data
Centers, corresponding to an adjusted EBIT margin ofseven percent.

In Air Treatment, we provide solutions for a number ofindustries ranging from electronics and pharmaceuticals
to commercial applications. At the center of our solutions is dehumidification and related technologies, often
based on our own inventions. Our early involvement inmany lithium-ion battery production projects has resulted
in significant orders in all regions. The market for Air­Treatment is expected to show healthy growth and,during 2017 we grew this business with nine percent.

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In Data Centers, we provide cooling solutions to amarket with great potential. Our business grew by 25
percent in 2017, however, large orders caused somedelivery problems late in the year. We have for many
years developed cooling technologies based on evaporative cooling, offering massive energy savings. We win
contracts with big digital data center operators, as wellas, co-location data center customers.
In our Agricultural & Horticultural (AgHort) business,
we offer solutions for food producers in poultry, swine,
dairy and green houses. A controlled climate is criticalfor food safety, production efficiency and last, but notleast, animal welfare. We grew sales in this businessby eight percent in spite of a cyclically weaker market.
We received an order for process control in the broiler
segment based on Echo/Sonar, our new connectivity
solution.
Our Mist Elimination (ME) business faced headwinds
during the year and Sales dropped with seven percent.
This was driven by a structural change in the market forflue gas desulphurization. We are therefore accelerating
our shift toward the mass transfer and marine exhaust gas
cleaning markets where we see more sustainable andhealthier growth levels.
Historically, we have seen the service business as asupport for our equipment business, but here we havea great potential to drive growth and long-term relation­
ships. During the year, we established Global Services asa business in its own right providing service and support
to our customers. Our efforts in growing services have
involved providing existing service products, as well as,
developing new service solutions. Global Services grewby 11 percent during the year.
Our acquisitions strengthen our offering
During the year, we announced three strategic acquisitions that add valuable capabilities and will broaden

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our offering. In AgHort, we acquired MTech Systems in
Atlanta, USA and Edata in Sao Paulo, Brazil. This helps
us transition from a climate equipment provider to a connected software solutions provider in the food industry.
This is quite transformational and very exciting.
Within Mist Elimination we acquired Kevin Enterprises
in Mumbai, India, to strengthen our foot-print and help ustransition into the mass transfer and process markets.
Our challenges
During the year we struggled with our manufacturing
efficiency in two areas. Our evaporative pad production in Monterrey, Mexico, faced challenges in yield and­efficiency. We have taken a number of actions resulting
in clear improvements. We are developing a new production process for our glass fiber based products andinvesting in a new production development lab in the US.
The Data Center business is characterized by significant lumpiness in timing of orders and we were also hit
by delays in orders. In addition, the orders are bigger
than we have ever experienced before, with complex
engineering and development work. Production start-up
costs have consequently been higher than expected. We
are on a steep learning curve, and getting better.
In an era of high focus on renewable energy sources,
there are less investments in the coal fired power industry.
This has negatively impacted our Mist Elimination business with our solutions for exhaust gas cleaning andreducing SOX emissions.
Our road to continued growth
Looking into 2018, we expect continued favorable market conditions in most of our market segments and theprograms we are running will improve the company´sperformance during the year. We remain confident inthat the steps we are taking will result in us achieving
our mid-term financial targets.

In our strategy, called Munters Ahead, we increasingly
focus on an outcome based business model and bringing
sustainability even more into what we do and who weare. Our customers want a sustainable climate for their
mission critical activities. We will offer a whole newrange of solutions where we connect our equipment
through our Internet of Things (IoT) capabilities. This istruly exciting.
We build a network of competent suppliers and otherpartners to deliver energy savings and help our customers
to be more sustainable. Even if we are contributors interms of sustainability, we will also work on our internal
activities to assure these are done in a more sustainable
way. Sustainability will be a natural part of everything
we do.
With 2017 behind us, we look forward with unabatedoptimism. Munters is present in more than 30 countries.
We are 3,858 employees with different capabilities andexperiences. This diversity is our greatest strength and I
thank all of you for your great work. I thank our customers for you trust in us. I thank our suppliers and partners
for your support. And finally, thanks to all old and newshareholders for believing in us.

CEOJohn Peter Leesi

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Megatrends
Munters benefits from a number of global driving forces
and trends, in all our markets, that support the use ofadvanced solutions for climate control.

Energy and resource efficiency
Increased focus on climate and environmental impact,
scarcity of resources as a consequence of global popu­
lation growth, and a growing urban middle class that
consumes more protein and drives demand for energy
and resource-efficient solutions.
On the whole, Munters has the most energy-efficientsolutions in the market.
• Data Centers: 65 percent energy savings comparedwith traditional cooling.
• AgHort: Exact climate control in livestock farming
optimizes resource consumption in the form of foodand water.

Sustainability – an integrated part of our business
There is an increasing demand globally for sustainable
solutions. Achieving the UN’s sustainability objectives
adopted in September, 2015, requires major efforts; an increasing number of companies are taking responsibility forsustainability throughout the value chain with a focus on theenvironment, ethics, and social issues. Many are promoting
sustainability as an integrated part of their operations.
Munters offers solutions that in general strengthen ourcustomers’ sustainability profile:• Mist Elimination: Major players prioritize separation of
ecologically hazardous substances.
• Air Treatment and Data Centers: Major customers
often have sustainability programs that Munters candeliver against.
• Air Treatment: Increased focus on sustainability issues
has created great demand for electric cars. Munters
contributes to this transformation through sales ofclimate equipment to companies that manufacture
lithium-ion batteries.

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Increased digitalization
Increasing data traffic, greater use of cloud services anda larger number of connected devices are driving growth
in industries that are exposed to digitalization.
Digitalization also opens doors to new ways ofcreating value, interacting with customers, and offering
connected service and support.
Munters services support digitalization through, ­	among other things, efficient data center cooling and
IoT solutions.
• Data Centers: Increasing demand for cooling of data
centers.
• All business areas: Connecting devices enables newservices and long-term potential for selling climate
control as a service.

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Strict requirements for production environments
Heightened standards for quality, intensified competition,and increased understanding of the impact of indoor
climates on productivity and product quality, increase thedemand for advanced climate solutions.
Munters offers exact control of climate, which meets
our customers’ requirements for better control of theirenvironment.
• Air Treatment: Increased demand, for example, fromthe food industry, where hygiene requirements arebeing tightened up.
• AgHort: A good climate in livestock farming isimportant both for the animals’ well-being and for theemployees’ work environment.

Strict regulations
More rigorous laws and environmental standards drive
demand for solutions to reduce pollution from exhaustand flue gases. Moreover, the requirements for efficientdehumidification in public buildings, in the US for­example, are being tightened up.
Munters has many solutions to meet customers’ needs forcomplying with new regulations:• Mist Elimination: Requirements for purifying emissions
from coal-fired power plants and vessels with Munters
mist eliminators.
• Air Treatment: Munters portfolio of DedicatedOut­door Air Systems (DOAS) solutions are the mostefficient in the industry with regard to moisture 		
removal efficiency.

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Em p l oye e sStrategy, outcomes and value creation
MUNTERS S TRATEGYYour Perfect Climate: We deliver precise, reliable and sustainable climate for our customers’ mission critical processes.

YOUR PERFECT CLIMATE
1

4

5

6

DigitalServitization

MII –Munters
Intelligence Inside
2

3

Deep
Application
Knowledge

New Go-To-Market Models

Scalable and Cost Effective Organization

One Munters

1

We provide new offerings and improved solutions based onconnected equipment and data analytics.

2

We drive development of leading technologies to generate sustainable
offerings with better performance and lower resource consumption.

3

We deepen our application knowledge in selected segments, aiming tounderstand the customer applications better than the customers do themselves.

4

We complement our existing sales model with new, digitally enabledmarketing and sales channels.

5

We drive operational excellence in all functions and develop processes andtools to build a scalable and globally aligned organization.

6

We promote a “One Munters” culture based on our core values
and a sustainability focus throughout our operations.

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MUNTERS OUTCOMESF I N A N C I A L TA RGE TS

Net sales growth

Achieve an annual organic sales growth of between 7–10 percent, supple­mented by selective
acquisitions.

Adjusted EBITA Margin

An adjusted EBITA Margin of 14 percent in the medium-term.

Capital structure

A ratio of Net Debt to Adjusted EBITDA of 1.5x to 2.5x, and may temporarily exceed this level(e.g. as a result of acquisitions).

Dividend policy

According to the dividend policy decided by Munters Board of directors, Munters should aim to pay anannual dividend corresponding to 30–50 percent of its consolidated income after tax for the period.
The pay-out decision will be based on the Company’s financial position, investment needs, acquisitions
and liquidity position. There can be no assurances, however, that in any given year a dividend will be
proposed or declared.

OP E R AT I O N A L O B J ECT IVES

Outcome 2017

Outcome 2016

Outcome 2015

6%

8%

12%

10.2 %

12.9%

10.1%

3.5

3.2

4.3

0.30 SEK*

–**

–**

Outcome 2017

Outcome 2016

Outcome 2015

1.15%

1.31%

–***

Energy efficiency in our
production

A continuous reduction of the electricity consumption in our production (electricity
consumption in Mwh / production value in TSEK).

Electricity from renewablesourcesContinuously increase the share of electricity coming from renewable sources.
We mea­sure the electricity consumed in our production facilities.

29%

–***

–***

Accidents in our production

Continuously reduce the number of accidents in our production and we measure Total Recordable Indicent Rate (TRIR), which we calculate as the number of accidents where the employee has had to seek
medical attention multiplied with 200,000 / number of hours worked.

3.5

3.1

–***

* Proposed dividend by the Board of Directors.
**Munters was listed in May 2017. No dividend was paid 2015 and 2016.
***New metrics - historical information missing.

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M U N T E R S VA LU E C R E AT I O N

E X T E R N A L FAC TO RS

BUS IN ES S MOD EL• Energy and resource
efficiency• Sustainability – an integrated
part of the business• Increased digitalization• Strict requirements for
production environments• Strict regulations

Brand promiseYour Perfect Climate

KEY TECHNOLOGY
AREAS

MissionGlobal leader in innovative,
efficient and sustainable climate
solutions for mission-criticalprocesses

D E E P A P P L I C AT I O N
KNOWLEDGE

WIDE RANGEOF PRODUCTS

Competitive edge
• Deep technical expertise andmarket leading components• Extensive understandingof customer applications &production conditions• Close relationships withcustomers and their decision
makersS TRATEGY

CREATED VALU E

Key themes
The strategy for profitable growth
in a rapidly changing world
includes a number of key themes:• Digital Servitization• Munters Intelligence Inside• Deep Application Knowledge• New Go-To-Market Models• Scalable and Cost Effective
Business Operation• One Munters

Customers• 65% energy savings related to data centercooling• 40% energy saving in supermarkets• 40% fan energy savings for forced ventilation at farms• 99% reduction of SOx from coal-fired
power plants• Helps customers comply with laws andenvironmental requirements

SERVICE AND
SUPPORT

Geographical presence & employees• ~3,900 employees, including
temporary employees• Sales in 180 countries• 18 production facilities, six assembly
units, 55 sales and service centers

Resources• Human capital• Financial capital• Natural resources• Relationship capital• Structural capital

Solutions• Cooling• Heating• Dehumidification• Humidification• Energy recovery• Mist elimination• Pollution control & VOC abatement• Building comfort systems• Ventilation

Employees• Career opportunities• Skills development• Salaries and benefits• Programs to increase diversity and genderequalitySociety• Innovation• Job opportunities• Solutions that help to reduce climate impact
Owners• Stable return• Sustainability integrated into operations
Suppliers & Partners• Commitment to sustainability in the
supply chain• Long-term relationships

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Em p l oye e s

Sustainability at Munters
At Munters, we see sustainability as an important partof strategy, and one of our most fundamental values is
Sustainable Value Creation. In all our business areas,
we furnish products that promote the reduction ofcustomers’ environmental impact, with a primary focus
on our products’ energy efficiency. There are many
examples of this in the descriptions of the business areas
and the customer presentations in this Annual Report.
Beyond helping customers become more sustainable,
we are also working on our own operations having as
little environmental impact as possible, on being able tooffer our employees a safe, inclusive work environment,
and on ensuring that we act responsibly and ethically.

According to the Annual Accounts Act, Munters is­required to prepare a sustainability report. Such a statutory sustainability report has been prepared according tothose requirements and is presented as an integrated partin this Annual Report, see pages 15–22. Reference is also
made to pages 61–63 Risks, and 70 Diversity.
With this Sustainability Report, we wish to createtransparency around our priorities, our activities, ourchallenges and our aims in the field of sustainability.
This Report covers the operations of the entire Group.

SARA PUNKKI, GROUP VP
CORPORATE SOCIALRESPONSIBILITY
SARA.PUNKKI@MUNTERS.SEM U NT E R S

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MUNTERS SUS TAINABILIT Y AGENDA

Sustainability is a fundamental part of Munters long-term
strategy and value creation. To verify that our strategic
priorities in the field of sustainability are correct, we get
information and draw inspiration via various channels.
For example, we monitor which macro-trends – both longand short-term – are the most important. Another sourceof valuable information is monitoring the work of the UN
and other countries around Agenda 2030. We communicate continually with our most important stakeholders –business partners, employees, and the capital market – inorder to understand which issues they are prioritizing in
the field of sustainability.
Based on the materiality analysis, we have defined
Munters Sustainability Agenda, and in 2017, we began
the work on setting goals, activities, and metrics for oureight areas of focus. This work will continue throughout
2018.
Initially, we chose to prioritize the work on the focus
areas connected to the parts of the value chain where wefeel we have the greatest possibility of exerting our own

influence, such as product development, sourcing, sales
through own employees and own manufacturing. There
are other areas in the value chain where we have lesspossibility of direct influence, for example, how the customer uses and recycles the product, and transportation– especially when customers or suppliers are responsiblefor it. These areas are also important in order for us to beable to reduce the environmental impact of our operations and we will, therefore, work further on also setting
goals, activities, and metrics in these areas.

Our Eight Areas of Focus

RESOURCEEFFICIENCYRESPONSIBLE
BUSINESSPR AC TICESPEOPLE& SOCIETY

1. Sustainable products and offerings

2. Sustainable production

3. Sustainable transportation

We strive to offer our customers energy- andresource-efficient solutions so that they can
reduce their environmental impact.

We reduce our own environmental impact throughenergy- and resource-efficient production units.

We limit the environmental impact of all the transportation
we utilize.

4. Sustainable, profitable operations

5. Business ethics

6. Like-minded Collaboration

We create value for our stakeholders, such as
shareholders and employees, by carrying out asustainable and profitable business.

We conduct our operations ethically, honestly, and incompliance with the law. Sound decisions and ethicalchoices in our daily work build confidence in eachother, as well as, our customers and collaborating
partners.

We expect our collaborating partners – such as suppliersand distributors – to observe the same business ethics guidelines that we have pledged ourselves to.

7. An equal and inclusive work environment

8. Community involvement

We offer a fair, safe, and inclusive workplace toa workforce with robust diversity.

We conduct a dialogue with our stakeholders and withthe local communities where we operate.

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MUNTERS SUS TAINABILIT Y EFFORTS – GOALS AND FULFILLMENTArea

RESOURCEEFFICIENCYRESPONSIBLE
BUSINESSPR AC TICES

Goal

Outcome 2016

Outcome 2017 Activities 2017

Planned Activities 2018

Our objective is to continually
reduce electricity consumption
in our production sites. (MWh/production value, TSEK).

1.31%

1.15%

Increased monitoring of the manufacturing companies’ compliance with our internal EHS Policy,
in which energy efficiency is a focus area.

Create a forum for exchange of experiences. Set
up a workgroup that reviews our existing goals,
metrics and activities in the field of the environmental area for the purpose of both further clarifying the goals and putting more focus on the issues.

Our objective is to continually
increase the share of electricity
from renewable sources. We
measure the electricity consumed
in our production facilities.

–*

29%

Implementation of the new metric and dialogue
with the production units to understand the current
situation.

Dialogue with the production units concerning thepossibility of switching to electricity providers who offer
electricity from renewable sources. Ensure that we
include the renewable energy as a requirement in conjunction with procurement of new leasing contracts.

We strive to continually
increase our rate of recycling(i.e. the proportion of waste
reused or recycled out of thetotal amount of waste).

48%

57%

Increased focus on monitoring our production
units’ compliance with our internal EHS Policy, inwhich waste management is an important issue.

Begin the work on developing internal instructions
concerning waste management for the purpose of
ensuring uniform management and increased know­
ledge of these issues.

Proportion in percent of ourmost important suppliers who
have signed Munters new
Code of Conduct for suppliers.
The goal is 100 percent.

–**

–**

A Code of Conduct for suppliers has beendeveloped and communicated via our website.
Previously, different versions were used in different
regions and many suppliers have signed one ofthem.

The Code of Conduct will be sent out to our mostimportant suppliers, and they will be encouraged
to confirm in writing that they are following theseguidelines. An effort has also been initiated to
produce a list for self-assessment concerningobservance of the Code of Conduct, as well as, achecklist that our purchasers can use for evaluationin conjunction with visits to suppliers.

Proportion in percent, ofMunters salaried employees
who have undergone online
training concerning our Codeof Conduct, and other importantinternal governing documents.
The goal is 100 percent.

–**

–**

All employees with an e-mail account have been
­instructed to confirm that they are following
Munters Code of Conduct. An online training
course has been produced that covers the subjects
touched on in the Code of Conduct and also otherimportant internal governing documents.

The online training course was sent out to allsalaried employees in Munters on January 22.
At the end of February, 74 percent of theemployees had passed the course.

*A new metric that was introduced during 2017, hence, there is no information available for 2016.
** A new metric that will be reported for the first time in the Sustainability Report for 2018.

An external whistleblower service has been launched.

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MUNTERS SUS TAINABILIT Y EFFORTS – GOALS AND FULFILLMENTArea

PEOPLE& SOCIETY

Goal

Outcome 2016

Outcome 2017

Activities 2017

Planned Activities 2018

We strive to increase theproportion of women as a percentage of the workforce. The
goal is 23 percent by 2020
and 30 percent by 2025.

18%

18%

The recruitment process has been revised for the purpose of attracting more women to Munters. Directors
and HR staff have been trained in increased awareness, with a particular focus on gender issues.

Work on ensuring that the tools and processes
developed in 2017, are implemented and usedthroughout the organization.

We strive to increase the proportion of women leaders. The
goal is 23 percent by 2020
and 30 percent by 2025.

17%

17%

In 2017, two women were added to Munters Boardof Directors, and one woman to Munters GroupManagement. One additional woman has been
hired to Group Management, and she will begin her
employment during the spring of 2018.

Increase monitoring and communication concerning issues of equality and our goals in thisarea, so that the issue is given focus in our daily
business operations.

We continually strive to reduce
the number of workplace
accidents and we measure the
Total Recordable Incident Rate
(TRIR), which is calculated as
the number of accidents where
the employee needed to seek
medical treatment multipliedwith 200,000/number ofhours worked.

3.1

3.5

A global safety manual (the Munters Occupational
Health and Safety Program), was launched. A set of
Munters-specific visual standards for safety instructions was launched. A questionnaire for carrying out
audits of our production plants, in which safety is an
important area, was developed.

Working further on ensuring that our production
plants implement the tools and routines developed in 2017, and placing additional focus on
the issue of safety through, for example, introducing safety as a standing item in the quarterlyGroup Management meetings.

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OVERVIEW OF MUNTERS S TAKEHOLDERS

During the year, we carried out a number of activities
as part of the dialogue with stakeholders in order to
identify their most important issues: business partners,

employees, and the capital market. The table below
shows the results which formed the foundation of oursustainability agenda.

Stakeholders

Channels for dialogue

Important Issues

Business partners• Customers• Question lists and surveys from customers
regarding environment, health and safety• Distributors• Annual customer survey• Compliance in environment, business ethics, andsocial issues such as labor legislation and humanrights• Suppliers• Continual improvement in our products’ energy andresource efficiency

Employees• Annual employee survey• Diversity and inclusion• Current
employees• Surveys conducted in conjunction with
employee meetings and conferences• Health and safety• Potential
employees• Employment interviews

The capital market• Individual meetings with owners• Shareholders• Investors• Information regarding responsible investments on our owners’ and investors’ websites• Analysts• Nasdaq’s guide to ESG reporting• Lenders• Road shows and investor meetings• Results from various types of studies• Annual General Meeting• Queries and questionnaires from investors• Discrimination and harassment• Further improvement of our products and customer
offering from an environmental perspective• Compliance in environment, business ethics, andsocial issues such as labor legislation and humanrights• Sustainability strategy and focus areas• Net Sales, profit and market development

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MUNTERS CONTRIBUTION TO AGENDA 2030

In 2015, heads of state and government from the UN’s
193 member countries signed the 17 global goals forsustainable development known as Agenda 2030. For
these global goals to become reality by 2030, all partsof society – governments, organizations, the business
community, the public sector and private individuals –must get involved and contribute.

Munters supports the goals of Agenda 2030, and has
analyzed what they mean for our operations and whichgoals are the most relevant to us – the ones where
we can contribute and make the greatest difference.
Three of the goals can be clearly linked to the products
Munters sells, and it is, therefore, in these areas that
Munters contributes the most.

Apart from these goals, we are working actively on
different projects – both in our own operations andtogether with our suppliers and distributors – to produce
six additional goals.

These are the goals where Munters has great possibilities for major impact through direct links to our product range

2: Zero Hunger

7: Affordable and Clean Energy

12: Responsible Consumption and Production

Munters delivers products and services – including climate
equipment for animal farming, greenhouses and grocery stores– to many companies that are involved in the manufactureand distribution of food. In these industries, a perfect climate
results, for example, in an increase in productivity, better animal
welfare and less food waste in stores.
The AgHort business area recently launched a service called
Echo/Sonar, in which IoT technology is used to link poultry
farms to food producers’ data systems, thereby ensuring fullcontrol throughout the entire delivery chain. The benefits are­increased efficiency in production and more food for theworld’s growing population.

Indicator 7.2 aims at increasing the share of renewable energy
in the global energy mix, and indicator 7.3 deals with improving energy efficiency. Munters strives to be a world leader insupplying energy-efficient solutions for air treatment, and energy
efficiency is something we put a great deal of focus on, both inproduct development and in our own operations.
Cooling data centers is an energy-intensive process, andcooling represents 40 percent of the total energy consumption
in a data center. Munters evaporative cooling technology usedin its Oasis™ product line is an extremely energy-efficient cooling method. In addition, Munters offers solutions for using waste
heat from data centers in district heating networks.
We have begun measuring electricity from renewablesources in our production plants and have the goal of working
actively to increase its share over the next few years.

Indicator 12.3 concerns reducing food waste along the entire
food production and supply chain. Munters offers a number of
products and services to companies along the entire food andsupply chain, and a proper climate is extremely important for
improving productivity and reducing food waste. An additional
indicator relevant for Munters is 12.5, which concerns effective
waste management aimed at reducing, reusing, and recycling
waste. As part of our environmental policy, we are working­actively on reducing and handling waste in all production
plants.

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MUNTERS CONTRIBUTION TO AGENDA 2030

Additional goals where Munters actively contributes

4: Quality education

6: Clean water and sanitation

9: Sustainable industry, innovation and infrastructure

One of the indicators is building and upgrading education facilities so that they are suitable for learning. Munters Air Treatment
business area offers climate equipment specifically for school
environments.

One area of focus in our environmental policy is reducing water
use in our production; this is an ongoing effort in our production
plants. Since some of our customers are located in areas wherewater is in short supply, the demand is for technology that
requires little or no water for cooling. We are carrying out various development projects to meet these customers’ needs. .

Indicator 9.5 deals with upgrading the technological capabilities of industrial sectors by encouraging innovation andincreasing the number of people working in research and deve­
lopment. The number of employees at Munters has increased
35 percent since 2014. Over the same period, the number of
employees in research and development increased 50 percent.

5: Gender equality

8: Decent work and economic growth

16: Peace, justice, and strong institutions

Indicator 5.5 aims at ensuring women’s full and effective parti­
cipation and equal opportunities for leadership at all levels ofdecision-making in political, economic, and public life. Munters
works actively on issues concerning equality, and has set up
tangible goals for more women in the company – both in­general, and the number of women in leadership roles.

Indicator 8.5 relates to full employment with decent work andequal pay for work of equal value. Munters is located in many
places around the world and our operations have grown rapidly
over the last few years. This has enabled us to employ more­people. At the end of 2017, we had 3,900 permanent employees, which can be compared with 2,600 permanent employees
at the end of 2014. We are also working actively on conducting
wage and salary surveys for the purpose of ensuring that weoffer equal pay for work of equal value.

Indicator 16.5 aims at reducing all forms of corruption andbribery. At Munters, we have a clear policy against all typesof bribes and corruption, and we place the same stringent
demands on our suppliers and distributors.

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ORGANIZATION AND GOVERN AN CE

Munters Board of Directors adopts the sustainability strategy and evaluates our success in this area. Responsibility isthen delegated to the CEO, who ensures that the sustainability strategy is linked to the overall Group goals andintegrates the responsibility into the working tasks of thecommercial directors. The Group VP for Corporate Social
Responsibility is responsible for developing proposals concerning priorities and strategy in the field of sustainability,
coordinating and planning Group-wide sustainability
efforts, and monitoring established goals, as well as,
regularly communicating the results of these efforts to theBoard of Directors, Group Management and the parts of
the organization concerned.
The Group’s basic position on various issues in thefield of sustainability is described in a number of policies
and governing documents. The two most fundamental
documents are our Code of Conduct, and the special
Code of Conduct for Suppliers. These documents are built
on the ten principles in the UN Global Compact and theUN’s Declaration of Human Rights, and describe Munters
basic view of issues concerning the environment, social
responsibility, and business ethics. We strive to conduct

our operations ethically, honestly, and in abidance of thelaw, because we know that sound decisions and ethicalchoices in our daily work build confidence both internally and externally in our customers and collaborating
partners.
We expect our collaborating partners – such as suppliers and distributors – to observe the same business ethics
guidelines that we have pledged to ourselves.
We inform and follow up on our policies and guidelines in different ways. In 2017, we developed an online
training course on the Code of Conduct and a number ofother important policies. This online course was sent out
to all salaried employees and Board members in Munters– approximately 2,350 people – in January 2018. The
goal is for all of them to have finished it during the spring2018. We also monitor the implementation and observance of our policies every year at the Board Meetings ofthe Group’s companies.
The sustainability risks are surveyed and evaluated aspart of the yearly risk assessment process. For more information on the principal risks in the area of sustainability
and how we handle them, refer to page 63.

THERE ARE A NUMBER OF POLICIESIN THE FIELDS OF ENVIRONMENT,SOCIAL RESPONSIBILIT Y, AND
BUSINESS ETHICS
The most important are:• Code of Conduct• Code of Conduct for Suppliers• Fraud• Anti-corruption• Gifts and promotional gifts• Whistleblower policy• Observance of competition rules• Observance of sanction rules• Data protection policy• Environment, health and safety• Insider policy• Social responsibility

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Em p l oye e sInnovation is the heart of Munters
Munters was founded over 60 years ago by one of
Sweden’s foremost innovators of all time. We are proudto carry on Carl Munters tradition every day. We work
continuously to improve our products so that we can provide our customers with smarter, more efficient climate
control solutions. In a crucial way, we promote moresustainable operations and a more sustainable world.
Munters products and solutions are often part of missioncritical processes, where they promote “Your Perfect
Climate” with exact control of temperature and moisture.
This provides guaranteed climate quality in our customers’
processes, with reduced energy consumption and lower
emissions.
Our objective is to understand our customers’ needs
and applications better than our customers do themselves.
We have deep knowledge of specific applications and access to unique technologies we often developed ourselves.
During 2017, we invested SEK 167 million (138) inresearch and development, equivalent to 9.8 percent(9.0) of the company’s operating expenses.
Shared function for Innovation & Technology
In 2017, we created the Innovation & Technology
function, a new Group-wide function with responsibility
for development of Munters central technologies. I&T
works closely with the business areas development teams
and product managers, as well as, our production andsourcing organization. The function is also responsible fordeveloping completely new technologies for the future.
We occupy a leading position in our central technology
areas and have a long tradition of technical advances
and innovations: 212 patents and 50 patents pending.
Many product launches over the last few years havebeen based on patented technologies.
Our internal and external global cooperation, ourorganization, and our profound competence are thefoundation for our continued ability to innovate.
Munters central areas of innovation
Close collaboration between teams from Munters andour customers both facilitates and enhances the efficiencyof our innovation efforts. Within Munters, there is close
collaboration between research, sales, and production,
so as to improve our ability to develop products that meet
specific customer needs. New technologies and insights
are thus quickly introduced into more product groups andapplications.
Our basic technologies cover:• Dehumidification rotors• Direct evaporative coolers• Indirect evaporative heat exchangers• Mist eliminators• Controllers for monitoring production climates• Fans for agriculture• Humidifiers
In addition to these basic technologies, Munters has beenYour Perfect Data

With a wireless sensor technology and an innovative software solution, Munters new IoT solution gives full control
over the whole value chain from farm to fork.

developing software for several years that enables ourtechnicians and partners to quickly configure optimized
solutions.
One example of this is our Genesys software. Previously, many different software programs were needed tomake the complex calculations that constitute the basis

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for the technical specifications of a customer solution. We
have now gathered these into a powerful program thatcreates schematics, blueprints, and notes on included
components. This enables better, faster interaction withour customers and a higher level of process quality.
Work with the IoT (Internet of Things) intensified during2017. By acquiring MTech Systems, for example, Munterscompetence in controllers for agriculture has been efficiently combined with insights into data analysis. This enables
new service offerings and improved food production.
Innovation based on customer needs
The orientation of our research and product development
is governed by changed customer needs, as well as, ourknowledge and position in various areas of application.
Each business area is responsible for research and development within their respective product areas, with technology centers close to our customers. We use a shareddevelopment model: the Munters Product Development
Model (MPDM), which is a multi-disciplinary model withclear control points. This model leads to the development
process being based on individual creativity, disciplined
innovation, and direct insight into customer needs.
Innovation for increased sustainability
We are continually developing our products for higher
levels of sustainability. Characteristic of our products isthat they enable our customers to both attain the perfectclimate for their production and reduce climate impact.
Munters has increased its focus on proactive maintenance and improvement of installed products. We areproviding our customers more and more with information
and a basis for decisions, rather than simply a product.
This increase of servitization is extremely important. It entails new business models where our innovative products
enable both ourselves and our customers to collaborateclosely on achieving “Your Perfect Climate”.

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We do this by gathering performance data and providing
preventive service. The data is used to propose upgradesof installations so as to achieve a greater degree of energy
efficiency and better sustainability. We strive to come toagreements with our customers regarding guaranteedclimate quality. All this is enabled through intensified innovation in connected controllers and advanced software.
Innovation structure and results in Muntersbusiness areas
AIR TREATMENT• R&D centers located in Kista (Sweden), Beijing(China), and Amesbury and Selma, (US).
• Important innovations during the year:o An increased number of products have beenequipped for remote monitoring. Dehumidification
systems have been delivered with wireless monitoring of climate from remote facilities in Europe andreal-time monitoring of systems for Moisture Removal
Efficiency (MRE) in department stores in the US.
o Reduced energy consumption in solutions for lithiumion battery dry rooms.
o Solutions for Dedicated Outdoor Air Systems (DOAS)
have been further developed for new markets suchas schools and hospitals.
DATA CENTERS• R&D centers located in Dison (Belgium) and Buena
Vista (US). At the production plant in Dison, there is asophisticated testing facility for simulation and acceptance testing.
• Innovation efforts are focused on developing global
platforms for products with low energy consumption
for data center cooling.
• Important innovations during the year:o Products approved for use in earthquake-prone
areas, in Asia and beyond.

oN ew technology for high-performance heat exchangers for non-water based, low-energy cooling.
oN ew evaporative cooling media (DATAdek™).
AGHORT• R&D centers located in Chiusavecchia (Italy), Horstmar(Germany), Petach Tikva (Israel), Queretaro (Mexico)and Lansing and Atlanta (US).
• Innovation efforts are focused on design and development of mechanical and electrical efficiency. Certain
centers work primarily with software development.
• Important innovations during the year:o Munters Drive, a development of Munters energy-­
efficient, direct-driven fans with new sizes and adaptations for various countries.
oS olutions for integrating software across the entire
supply chain in chicken farming. Various IoT units
enable sophisticated analysis and improvement ofenvironment and production results.
MIST ELIMINATION• R&D centers located in Aachen (Germany) and Ambernath (India). Product testing is also conducted in both
locations.
• Innovation efforts are focused on:o Further development of technology for flue gas desulphurization (FGD) scrubbers for the market in IndiaoM ass transfer of technology to other regionsoD evelopment of new products for mist elimination in
the processing industry. This is part of TERESA, a program with partial funding from German government
authorities.
• Important innovations during the year:o Improved design with lower cost for vanes in gas
turbines and air intakes.
oN ew cyclonic separator for smokestacks and tubing.

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Munters global production platform
Munters has 18 production sites and six assembly units,
strategically located near its most important markets. The
entire production platform is built on the Munters Production System, which is based on Lean principles*, and thecompany is investing in increased resource efficiency andsafety in the production process.

MUNTERS PRODUCTION SITES

Tobo

Global network
Munters is striving to optimize the global network of
production sites and assembly hubs. Since 2013, 11
production plants have been consolidated, sold as­divestments, or relocated. During this same period,
Munters has expanded with eight new plants, five ofthem through acquisitions.
The current structure is designed to balance the requirements for proximity to customers – which facilitates
adaptation and service, and reduces lead times – with
global cost advantages and reduced logistics costs.
In general, Munters facilities in the US and Europe
specialize in products within one of its business areas,
whereas facilities in other parts of the world manufacture and assemble products for more than one businessarea. This reduces Munters exposure to changes in local,
regional or global trade policies.
The vast majority of Munters products are manufactured and assembled at the company’s own plants.
*Lean is an ideology aimed at maximizing customer benefits while minimizing waste ofresources through different types of efficiency and rationalization.

HorstmarLansing

Selma
Monterey

Amesbury
Buena Vista

Dison

HruskyBeijing

Chiusaveccia& Pieve de Teco

Jiang Yin

Tel Aviv

Ft Mayers

ChashanMumbai(Ambernath)Araucaria

Investments
The production platform is continually evaluated in theeffort to increase efficiency and flexibility in the production process and to improve delivery times.
A larger manufacturing plant was completed in 2017,
in Jiang Yin, China, to serve the Asian market. A smaller

manufacturing plant has been closed down and production has been moved to the new plant. Munters has also
prepared for production of Data Center products in 2018.
The acquisition of Kevin Enterprises, with productionin Mumbai, strengthens Munters offering in India andcomplements its products for the processing industry.

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During the year, Munters also invested in a new production line for CELdek® cooling pads in its manufacturing
plant in Italy in order to reduce delivery times and shipping costs to customers in EMEA.
One of our production lines for evaporative pads
in Monterrey, Mexico has encountered challenges in
production return and efficiency in 2017. It has caused
delays and been costly. Our improvement measures
have been successful and production returns have
gradually improved. In order to cope with the highmarket demand and further improve efficiency, we
have decided to d
­ evelop a new production process for
our fiberglass-based products and invest in additional­manufacturing capacity in the United States to meet thehigh demand in the market.
Continual improvements
Munters production process is customer-oriented andfocused on quick and efficient delivery of quality pro­ducts in accordance with the customer specifications.
The Munters Production System (MPS) is used to monitor,­organize, manage and document production. Since
its start in 2012, MPS has been fully integrated into
12 ­facilities. A number of facilities are preparing andtraining for the introduction of MPS, and the goal is toimplement it in all manufacturing plants by 2019.
Munters strives to identify and spread best practices
the entire network of production sites and assembly hubs.
The Company continually monitors and ana­lyzes pro­
cesses for production, distribution and after­market, anduses the information collected by MPS to identify areasof improvement.
In 2017, parts of the fan manufacturing in Italy wereautomated in order to perform monotonous work and to
improve safety. Parts of the CELdek® pad manufacturingin China have been upgraded for better efficiency andreduced energy use. In the US, the Company has invested

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in processing equipment for rotor production and in enhancing the efficiency of production for Data Centers.
Sustainability in production
Munters works actively to improve resource efficiency inproduction. The Environmental, Health and Safety Policy(EHS) applies to all units in the Group.
In 2017, a new work method to promote safety andhealth at Munters workplaces was launched: the Occupational Health and Safety Program (OHS), which covers:• A global health and safety program.
• Visual standards for work functions based on safety
and risk analysis.
• Audits in which the safety of personnel is a key component. Munters will supplement OHS by educating
and training personnel to build safety into all company
processes.
Munters is also working on systematic risk evaluationof its production units for the purpose of preventively
reducing environmental impact while increasing focus on
health and safety. Other areas covered by the risk evaluation include fire safety, waste and chemical manage­
ment, as well as, overhaul of electrical installations. All
units are assessed on a rolling three-year schedule. In
2017, risk evaluations were conducted on eight manufacturing plants which resulted in an action program forfurther improvements.
Workplace accidents
Reducing the number of workplace accidents is one of
Munters highest priorities. Systematic health and safety
work is part of MPS. This includes incident reporting,continual visual inspections, and mitigating areas of risk.
The objective is to continually reduce the number ofworkplace accidents.
All accidents are reported and the facility where the

FREQUENCY OF ACCIDENTS
IN PRODUCTION
100100

55

80 80

44

60 60

33

40 40

22

20 20

11

0 0
Accidents

2013

2014

2015

2016

2017

0

0

Accidents in relation to production value, %­accident occurred is responsible for presenting and t­aking
measures aimed at preventing a repeat occurrence.
84 accidents were reported in 2017, which is anincrease compared with 2016 when 69 accidents werereported. The increase is largely due to the inclusionin the statistics of two newly-acquired production sites.
Production volume also increased by approximately 18
percent in 2017, so if the number of accidents is put inrelation to production volume, the accident rate is at thesame level as the last two years.
EnergyClimate impact from our manufacturing units comesmainly from energy for heating, ventilation, cooling andM U NT E R S

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production processes. Munters is working actively to­enhance the efficiency of its production equipment withnew technology, installation of LED lighting, and the useof residual energy that arises in connection with various
processes.
The objective is to reduce energy use and to makethe manufacturing plants and processes more efficient.
­Munters monitors its energy efficiency by putting the­electricity consumption in relation to production value.
The results of these measurements are reported in the­section on sustainability.
Waste
Munters is working continually to reduce waste from its
manufacturing plants and to improve the recycling rate.
In 2017, the rate was 57 percent, which is an improvement compared with 2016, when it was 48 percent.
The objective is to continually reduce the portion ofwaste that cannot be re-used or recycled.
Water
Reduced water consumption and water purification in
Munters production processes are an important part of
the Company’s contribution to reduced environmental
impact. Munters separates both chemicals and particles
in the waste water from its facilities.
The objective is to gradually reduce water consumption
in the Company’s manufacturing plants and processes.

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MUNTERS PRODUCTION SYSTEM

The Munters Production System (MPS) is largely
based on the Lean principle and is aimed at
improving earnings from the production sites –and productivity – by reducing cassation, focusing
on standardization and quality, and improving
both production processes and production
technology.
MPS monitors a number of key figures on amonthly basis including workplace safety,
accidents, delivery reliability, cassation, nonproductive work time, customer complaints, andcapital tied up.
It also provides detailed information on eachindividual production site and enables Munters tomonitor the results of implemented initiatives andactivities, as well as, to identify and apply bestpractices throughout the company. Significant costsavings have been realized, including changes
to production processes, improvements in work
efficiency, elimination of bottlenecks, and reduced
cassation.

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Global sourcing coordinated and streamlined
Munters sources raw materials, components and finished products from around the world for delivery to its
manufacturing plants and assembly units. The Company’s
supplier network is valuable and strict requirements areplaced on quality, efficiency and sustainability in the
supply chain.
Munters has a global sourcing organization that­sources goods and services from approximately 2,000
suppliers in 28 countries. A new organization with aregional category structure was introduced in 2017, inorder to coordinate sourcing and enhance its efficiency.
The purpose is to achieve increased standardization andconsolidation of the sourcing volume to fewer suppliers.
The Company also sees major opportunities to deliver
added value through specialized engineers and has added a new function; Project Sourcing Managers, which is
aimed at sourcing needs in complex customer projects.
Partnership for innovation
Munters sourcing organization is focused on creating
innovative power together with the Company’s strategic
partners. During 2016 and 2017, six Supplier Innovation Workshops were conducted in which suppliers
from around the world gathered to focus on “rethinking”
and finding valuable improvements that enable increased
efficiency and sustainability throughout the supply chain.
A cross-functional approach with other functions
such as R&D, Product Management, Production Tech­
nology and Sales generates product improvements

Munters Supplier Innovation Workshops gather the Company’s suppliers from around the world. Together, they find valuable
improvements that enable increased efficiency and sustainability throughout the entire supply chain. The starting point issharing efficiency gains between both parties on every generated idea that is implemented. The picture is from a workshop in
Horstmar, Germany, on September 6, 2017.

that benefit Munters, its suppliers, and its end customers.
Munters supplier base
The supplier base is fragmented and the 10 largest directmaterial suppliers by volume represent 17 percent of thetotal sourcing volume. The objective is to reduce the num-

ber of suppliers by 10 percent per year over a businesscycle. In 2017, the number of suppliers was reducedby eight percent, including new suppliers that had been
added in connection with business acquisitions.
At the same time, Munters is intensifying its work on
identifying capable partners and suppliers in low-costM U NT E R S

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S u st a ina b ilit yInnova t i o ncountries. The objective is to increase sourcing in eastern
Europe, the Baltics, China, and Mexico from the current
25 percent to 50 percent by 2020. This objective may
be revised, however, depending on amended trade
tariffs and other obstacles to trade.
Efficient sourcing
Margin improvements and shorter lead times are priority
areas for Munters, and large parts of its sourcing volume
are negotiated on an annual basis.
The work on risk assessment and risk reduction was
highlighted in 2017. The Munters Critical Component List
has been revised and a detailed plan has been developedfor each individual manufacturing plant. One of thegreatest challenges is ensuring quick, secure deliveries
through several main suppliers in each product group.
The global sourcing organization will be a driving force
in this work, together with the local plant managers.
Responsible sourcing
Munters works to ensure sustainability throughout theentire supply chain and all suppliers are expected tocomply with the Company’s ethical guidelines. A revised
version of the Munters Code of Conduct will come into
force starting in 2018. It will now be communicated andsigned by all Class 1 suppliers, as well as, a number of
selected Class 2 suppliers. The Code will also be signedby all suppliers in what are termed “high risk” countries*.
Observance of the Code of Conduct will be monitored
through visits and audits carried out by Munters or a third
party. In the event the supplier does not meet the requirements, an action plan will be drawn up. If the schedule is
not followed, the relationship will be terminated.

* China, Mexico, and European countries not affiliated with Schengen.

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Munters has also increased its focus on sustainability andthe environment with its supplier base. During 2018, theCompany will continue working to reduce its environ­mental impact by working with suppliers in shipping thatare upgrading to more fuel-efficient vehicles and arefocused on measuring and reducing CO2 emissions.

TOTAL PRODUCT COS T

Other costs 33%

Sourced raw material
Direct material represents approximately two thirds ofthe total cost of a product – and raw materials represent
30 percent of that. Copper, the most important raw mat­erial, is part of electronic components and fan motors.

Purchased raw
material 30%

Other material
costs 37%

N ON PRODUCT -REL ATED
SOURCING

Munters spends approximately SEK 800 million
per year on Non Product-Related Materials andServices. For the past several years, Munters
has worked with other Nordic Capital portfolio
companies and collaborated on joint sourcing
initiatives to leverage our volume and create amore economically beneficial agreement for allparties. The last joint sourcing event with Nordic
Capital portfolio companies on Freight delivered
significant savings for Munters.

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Confidence and team spirit create success
The culture in Munters is based on our confidence in eachother’s abilities and collaboration across boundaries in
multicultural teams. A colorful mix of engaged, competent employees make Munters an innovative company
focused on quality. Munters has manufacturing and sales
operations in more than 30 countries. We are 3,900
employees, including temporary workers, and we are
growing every day.

Munters has a rich and wide mix of employees with individual strengths and drives. We welcome and encourage
this diversity and individuality. We know that different
perspectives provide us with valuable insights which help
us improve our company and our offering. Our internalambassadors are responsible for continually improving
this confidence and the communication among teams
and divisions around the world.

The Munters culture is built on shared values to ensure wedeliver the promise of our brand – “Your Perfect Climate”– to every customer, and that all our employees areengaged, doing well, and developing. We work on thebasis of four values:• Sustainable Value Creation• Passion for Results• There is Always A Better Way• Team Spirit

Equal and inclusive
We know that the best way to fulfill our brand promiseand to build long-term customer relationships is by offering a stimulating, inclusive working environment. That is
why we work in different ways to increase diversity in thecompany and strive to recruit people of different genders,
nationalities, ages, backgrounds, skills and experience.
Since 2016, we have revised our recruitment process,training managers and HR personnel in increased diversity
awareness with a focus on gender. In 2020, the number of women employees must total 23 percent and thenumber of women executives must also total 23 percent. In
2017, the number of women employees was 18 percent
and the number of women executives was 17 percent.
Our sustainability efforts are built on the UN’s Global
Compact and prescribe matters such as how all employees must be treated equally, having equal rights andopportunities. Since 2017, our leadership program has
included training around unconscious biases, so that
we all become more aware of them and know how to
identify and handle them.

We try to follow these values every day, in everything we
do. Together with our Code of Conduct, they govern our
attitude towards each other and in our relationships withour customers and other stakeholders.
We have an important task: all Munters products andsolutions result in major environmental and economic
advantages for our customers, thereby contributing to along-term sustainable society.
Multifaceted, multicultural teams
Munters operations are built on confidence and collaboration in global teams, to reach shared goals.

Name:
Lisa Sato
Where do you work
today?
I work for the AgHort
Business Area in Italy.

How can we at Munters make a difference?
Munters can continue making a difference by being
proactive. Currently, I am working with a newly acquired company, MTech Systems. Connecting our products
on farms to the MTech software allows us to see live
data and use it to pick up on issues, trends, anomalies,
or patterns. This is crucial, not only to improve ourbusiness, but also to provide a service of information
to our customers. This allows us to help our customers
learn more about their farms and the interaction between the environment and their livestock. Even more,this helps our customers improve their current situationto achieve a healthier, safer and more sustainable wayof working.
What about the future?
My next challenge is how I can best support the teamin adding value to our customer and/or to the market
by connecting our farms with the Internet of Things.

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Salaries and compensation must be objective and fair.
The global salary survey conducted in 2016* showed
only a few cases of gender-based differences.
A few cases of discrimination or harassment wereformally reported in 2017. The results from the employee
survey, however, show that we have not yet reached thegoal of being a workplace that is 100 percent free of
discrimination and harassment. Five and six percent of
our employees still feel they have been subjected to discrimination or harassment, respectively. Preventing this is,therefore, an area of focus in the activity planning fromthe employee survey.

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Our employees can also anonymously raise an alarm
regarding serious improprieties in the Group through aspecial ‘whistleblower’ function. During 2017, we introduced the opportunity for anonymous whistle­blowing via
a web-based channel furnished by an external contractor.
Development and career paths
We have a strong focus on innovations and continual
improvement, and we encourage our employees to takeresponsibility and challenge themselves in new worktasks that promote their development.
We are always looking internally for talent and all­ ositions are announced internally. We focus on develop
ping and supporting all employees in having an individual career path.
The annual performance review with an immediate­supervisor is the foundation of every employee’s indivi­
dual development. Personal objectives are monitored
here and a development plan is produced. 100 percent
of our employees had a performance review in 2017,with their immediate supervisor.
“Munters Quest”, a program that enables being
stationed abroad for brief periods up to a maximum of
90 days, was launched in 2017. The program aims at

Name: Yusuke Kasai

Name:
Britney Minto

Name:
Diogo Felipe Santos

Where do you work
today?
I work for Group HR
as Performance andRewards Specialist
based in the USA.

Where do you work
today?
I work for the AgHort
Business Area based 		in Brazil.

How can we at Munters make a difference?
Recently, I had the chance to launch Munters Quest,
which added another channel for employee development both professionally and personally. Programs andinitiatives like this one will continuously strengthen the
One Munters culture and will make a difference in ourdaily lives.

How can we at Munters make a difference?
We can make a difference by delivering the best safe
energy-efficient climate solutions for our clients. Whatmakes me most proud is to know that we are closely
linked with most parts of the food production chain.

How can we at Munters make a difference?
I am proud that Munters takes Corporate Social Responsibility (CSR) seriously. I participated in a CSR project
where the teams in Japan and China worked together. It
made me proud of working for Munters.

I’ve been involved in a dairy cattle farm climate project,
and right from the very beginning the client noted thatmilk production rates had started to increase.

What about the future?
My focus is to sell more! I am surrounded by very nicepeople which, I think, is one of the most important factors
in continuing to work at the same place.

What about the future?
I see the future Munters as even more diverse than it istoday. Driving and rewarding the performance of thatdiverse workforce is a challenge I have accepted. Let thehard work – and fun – begin!

What about the future?
My next challenge will be developing and implementing
at least two new products by year-end in Munters Brazil,that will help increase sales and make us unique in thismarket.

* The survey covered approximately 50 percent of all employees, and was carried out through comparisons of wages for men and women in identical roles.
We have defined a global wages survey process that will be carried out every other year; the next time will be in 2018.

Where do you work
today? I work for the Air
Treatment Business Area,
based in Japan.

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promoting inter-function collaboration and increasing
understanding of the diversity of cultures in Munters, aswell as, the employee’s personal development.
Coaching and mentoring are good ways of developing. Women have priority in our global mentor program,which began in 2016, but employees at all levels havethe opportunity to be given a personal mentor in thecompany. Mentorship runs for a year and a new round
opened in December 2017. The mentor program is also

Name:
Zara Pedersen
Where do you work
today? I am a Mechanical Engineer – Technical
Product Manager at R&D,
based in Sweden.

How can we at Munters make a difference?
I am currently working on several development projects,
in which I always aim to deliver innovative and userfriendly products that solve problems for Munters customers. If we continue to nurture and develop our solutions,
we will continue to make a difference for our customers
and to achieve more sustainable development.
What about the future?
I see many future possibilities in Munters as a company,
but also for my own personal goals and my own development. I look forward to the coming years at Munters, andtaking an exciting career journey through all its businessareas. Another challenge – which most technology
companies have – is attracting more women engineers.
I would really like to see more smart, driven women for
greater diversity at Munters.

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a way for us to strengthen the culture and inter-function
collaboration we call, One Munters.
Managers with skill and ability
We expect that managers at Munters will promote an inclusive work environment in which all the employees’ differences are welcomed. Our managers must create trust,and motivate and inspire their employees to form effective
work groups. Managers must also support employees’

Name: Jozef Reddington
Where do you work
today? I work for Global
Services as Regional
Service Manager North
America, based in theUSA.

How can we at Munters make a difference?
The Munters team can continue to make a difference byoffering innovative solutions that make our customers’ processes better, more efficient, and more reliable. At Global
Services, we are responsible for making them sustainablethroughout the life cycle of our equipment.
I find it very rewarding when friends, or family, or eventhe news, talks about how one of Munters customers has
this great product, or that Munters is the leader in theirfield, or has revolutionized the industry, and knowing that
our solutions make it possible.
What about the future?
My next challenge is the same as my current challenge:to grow the Service Organization in terms of capabilities
and profitability.

development by setting clear goals directly linked to ourbusiness strategy and through regular feedback.
Most of our managers are internally recruited and weoffer various development programs for improving theirskills and strengthening important leadership abilities.
We strive to increase the proportion of women leadersand continually modify our recruitment profiles to obtaina broader candidate base.
All new managers participate in a two-day introduction program. During 2017, we also started the Munters
Leadership Development Program, in which we place particular importance on inclusive leadership. This includes
special activities for the purpose of strengthening thevisibility, self-esteem, and networks of women managers.
For first-line managers, above all in production and services, we have started a special Supervisor Development
Program. The program strengthens the ability of thesemanagers to engage their employees by creating a goodwork environment with clear goals and expectations.
Health and well-being
Munters has a policy for safety, health, and the envir­
onment which applies to all employees. We have a
Vision Zero plan for work-related accidents and strive tocontinuously improve safety at our work sites. As part ofour sustainability efforts, we monitor the Total Recordable
Incident Rate (TRIR), which is calculated by putting thenumber of accidents in relation to production volume. For
additional information, refer to pages13 and 18.
To perform and develop, people must feel happy andat ease. A good balance between private life and working life is important. At the end of 2017, we decided
on a global policy that encourages managers to offer
their employees the possibility of flexible working, suchas working from home and using flexible working hours.
We believe, that this will be appreciated by our employees,
especially working parents.

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EMPLOYEE SURVEYT H E VA LU E S T H AT B U I L D O N E
MUNTERSThe annual employee survey provides us with a very good overview of the organization’s strengths and areas of improvement.
Most important, however, is not the result itself, but the actions for improvement each group and executive take based on the
results. Over 1,000 actions for improvement are taken every year and have resulted in the following improvements:

To ensure satisfied customers, the highest possible quality in our
products and services, as well as, engagement and well-being
among our employees, Munters operations are built on the following values:

Benchmark

2011

2012

2013

2015

2016

2017

Response frequency

83

76

96

98

97

97

98

Employee index

86

77

79

87

88

97

93

Leadership index

71

64

68

72

74

78

78

Engagement index

77

64

75

78

79

80

80

Net Promoter Score

7

-12

-12

-3

3

16

10

Every executive receives a report with the results for their own unit and support from HR forworking on the most important areas for improvement.

Below benchmark

Above benchmark

EMPLOYEES BY GENDER

Women, 18%
EMEA, 40%

Americas, 40%
Men, 82%
Asia, 20%

S U S TA I N A B L E VA LU E C R E AT I O N
We create sustainable, lasting value in everything we do.
HOW WE ACT:PA S S I O N F O R R E S U LT S
We deliver what we promise and we strive to be the best.
HOW WE THINK:T H E R E I S A LWAY S A B E T T E R WAY
We are innovative and continually improving.
HOW WE WORK:TEAM SPIRIT
We honor different perspectives, and share ideas and common
goals globally.

The employee survey is conducted by our external partner, Netsurvey.
No employee survey was conducted in 2014.

EMPLOYEES PER REGION

WHAT WE CREATE:M U NT E R S

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Air Treatment
Air Treatment is a global leader in­energy-efficient air treatment forindustrial and commercial fields ofapplication. The business area offers
climate solutions for mission-criticalprocesses that require exact control
of moisture and temperature. Munters
climate systems provide increased
security, air quality, and production
efficiency.

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NET SALES

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AgHor tB US I NE S S

OPERATIN G PROFIT

billion SEK

SEKm

4000

4 000

11000
000

3000

3 000

750
750

2 000

500
500

2015 — 3,364/433
1000
2014 — 2,312/248

1 000

250
250

2013 — 2,349/209 00Operating profit

S E RV I CE

CO RPORATE00

IN F ORM ATIONFIN AN CIAL

MARKETSSUB SEGMENTS

APAC 20%

Commercial 14%

R APPORTS

Components 16%

Q1 — 3,416/793

11000
0 00

3000

3 000

750
750

2 000

5500
00

1000

2250
50

3000

3 000

750
750

2 000

500
500

1 000

250
250

Q2 — 3,675/1,037
1000
Q1 — 3,560/95000

Q4 (2016) — 3,385/840
01000

Q4 (2016) — 3,294/961
0Rolling 12 month

4 000

1 000

Quarter

0

Q4
Q1
Q2
2016 2017

Q3

Q4”Munters facilitates 45 percent of lithium-ion battery
production in the world”

SEKm

Q4 — 3,787/862
2000

Q3 — 3,765/938

Rolling 12 month

1250

4000

4 000

1000

1500

O R D E R I N T5000
A K E 12 M O N T H S A N D
PER QUARTER

4000

Q4 — 3,588/988
2000
Q3 — 3,561/876
Q2 — 3,527/931

6000

1500

N E T S A L E S 5000
R O L L I N G 1 2 M O N T H S A N1250D
PER QUARTER
SEKm

Industrial 51%

Service 19%

6000

1500

2013 2014 2015 2016 2017

AND

EMEA 36%

N E T S A L E S 5000
A N D O P E R A T I N G P R O F I T1250

2017 — 3,588/511
2000
2016 — 3,294/437

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Americas 44%

million SEK

6000

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Q2
2016 2017

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M ist El i mi na t i o nImportant events 2017
• Strong global growth in the important Industrial segment(food, pharmaceuticals, and electronics). Characteristicof this was the growth in the lithium-ion battery market,
with a 39 percent increase in order intake and 33
percent in sales.
• Continued phase-out of products in the commercial
segment with a low degree of specific technologicalcontent (MII – Munters Intelligence Inside) and lower
margins in general.
• Continued strong growth for OEM component sales in
APAC, with underlying growth in pollution control ofvolatile organic compounds (VOC) and the lithium-ion
battery market.
• Full-scale implementation of the web-based sales and­estimation system, Genesys, which enables a more
rapid and more precise response to customers.
• The business area reported additional costs for manufacturing humidification materials owing to productiondifficulties in the manufacturing plant in Mexico.
The past year
• Order intake during 2017, increased by 12 percent
and 13 percent organically. The Industrial sub segment, led by pharmaceutical and electronic applications, was the main growth engine for the businessarea in 2017. Demand from the Supermarket end-­
market also increased substantially, but overall orderintake in the Commercial sub-segment was in line withprior year as a result of existing lower value-added
product offerings. Services and Components showedstable growth in orders for the year.
• Net sales for 2017, grew by nine percent, all organic.
The revenue growth was generated by increased deliveries to industrial customers in food, pharmaceuticals,
electronics, transport and aerospace industries. Revenues from Services grew in all three regions. Deliveries

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to OEMs were strong in Americas and Asia, which
contributed to growth in the Components sub-segment.
• EBIT increased to SEK 511 million (437). Two non-­recurring items affected earnings positively: a final­estimation of a contingent purchase consideration
which resulted in a gain of SEK 53 million and profit
from the sale of a building of SEK 7 million. The
production difficulties in the Mexican facility during theyear had a negative impact on earnings.
Priorities for 2018
• In the Industrial sub-segment, there is currently a number of smaller industries and areas of application thathave great potential to develop into future focus industries as our technology becomes more established. In
2018, for example, the Aerospace market is expected
to continue to grow and has become a focus industry.
• The launch of two new products in the Commercial
segment in 2018. The American Society of Heating,
Refrigerating and Air-Conditioning Engineers (ASHRAE)
in the US is strengthening the guidelines for Moisture
Removal Efficiency (MRE). The aim of our products is
to further secure our leading position in this segment,
which has great potential for growth.
• Broaden the product portfolio for less reliance on
the FMCG (Fast Moving Consumer Goods) market,
as larger businesses in this market are undergoing atransformation owing to increased e-commerce.
• Continued development of our IoT offering. Munters
goal for 2018, is to offer our customers productsthat are connected to the Internet. This is so we canoffer analysis of outcomes, as well as, needs-oriented
outcomes.
Markets and trends
The market is driven by global factors such as growth inpopulation and GNP, industrialization and an increased ­BUSINESS AREA PRESIDENTS C O T T H AY N E S
ON THE YEAR AND THE FUTURE

In 2017, Air Treatment intensified its strategy of ­focus­ing and investing resources in a number of priority
segments and industries with strong underlying growth(food, pharmaceuticals, and electronics). We also
took a strategic decision to phase out products with
low technological content in the Commercial sub segment. These measures will promote a better platform
for long-term profitable growth. With an ever-stronger
order backlog, a number of new product launches
and continued strong underlying growth in our priority
markets, we look forward to 2018 with confidence.

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M ist El i mi na t i o nstandard of living. The demand for advanced air
treatment is also supported by regulations and industry
standards, a strong focus on production and energy
efficiency, and stricter requirements placed on quality
and sustainability.
Air Treatment has a leading position in its core markets, which are characterized by a current consolidation
with a small number of global participants. Growth isstable and the market is expected continue to grow. The
demand for lithium-ion batteries, which are an effective
technology for storing surplus electricity and are sometimes used in electric cars, is expected to show good
growth.
Fast Moving Consumer Goods is currently undergoinga transformation as e-commerce increases. In 2017, we
saw increased awareness and a shift from traditional“brick and mortar” stores to e-commerce, causing slowdowns in new store construction and in some cases store
closures. To offset this, Munters has boosted its investment
in MII Dedicated Outdoor Air Systems (DOAS) products
for the Commercial sub segment.
Stricter requirements from ASHRAE and an increased
use of energy-efficient HVAC (Heating, Ventilation, and
Air Conditioning) solutions are driving demand for
Munters DOAS technology*. Munters believes that
this technology, which is more energy-efficient, has thepotential to expand both geographically and into otherareas such as schools, hospitals, offices and restaurants
where the requirements for indoor air quality and energy
efficiency are increasing.

*Dedicated Outdoor Air System (DOAS) is an energy-efficient technology
for roof ventilation that contributes up to 40 percent energy savings forgrocery stores and other applications (commercial buildings) comparedwith conventional air conditioning systems.		

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Munters creates theperfect climate forchocolate production.

Customers
Munters prioritized customer segments for the businessarea are the food industry, the pharmaceutical industry,lithium-ion battery manufacturers, as well as, supermarkets and commercial venues. Markets with lower priority
are being monitored and classified as potential areas of
future growth. The aerospace and chemical markets, forexample, are currently in this phase of development.
Air Treatment has three sales regions. The percentageof net sales in 2017 was as follows:• Americas: 44 percent• EMEA (Europe, Middle East and Africa): 36 percent• APAC (Asia-Pacific): 20 percent

Approximately 19 percent of sales relate to OEM components – that is, customers who use Munters products
and technology as part of their solutions. Munters targets
the OEM industry in growing markets, such as lithiumion batteries, pollution control and direct evaporative
cooling.
All three Air Treatment sales regions sell into threecustomer segments. The percentage of net sales in 2017
was as follows:• Industrial: 64 percent• Commercial: 17 percent• Component: 19 percent

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Products and services
Air Treatment offers innovative solutions that provide anumber of different climate control functions. Different
technologies and components are combined to customize
solutions that are optimized based on the customer’s
specifications and needs.
This work often takes place with Air Treatment’s applications experts working with the customer’s process owners. The most important product groups are dehumidifiers,
VOC abatement systems and direct evaporative cooling.
Munters is seeing increased interest in real-time datacollection and climate data analysis, and is developing
connected solutions for our product portfolio. The goal is
to further enhance our product development and services
we can offer our customers. Advanced IoT solutions(connected solutions) also promote increased productivity
and energy efficiency, better customer service, and lower
costs for service and maintenance.
In 2017, the Cirus product was launched offering Air
Treatment’s first connected units. The Cirus products area great step forward in Air Treatment’s work with theInternet of Things (IoT).
Technologies and innovations
Air Treatment’s solutions cover several central technological fields, mainly in dehumidification rotors and evaporative media.
Dehumidification systems use Munters rotor technologies, dehumidification rotors and patented sorption rotor
technologies designed to offer energy-efficient, customized and mission-critical solutions that can be used in arange of different applications. VOC abatement systems
remove harmful volatile organic compounds (VOCs) suchas chemicals and petroleum products from the air.
Munters systems can absorb 99 percent of targeted
VOCs, which are then heated up and converted towater vapor and carbon dioxide using a small oxidizer.

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Munters DryCool® ERV-Focus™ combines desiccant dehumidification with total energy recovery. This combination allows
for reduced heating and cooling requirements in the treatment of the delivered outside air. The unit also eliminates theinefficient over-cool reheat process utilized by traditional direct-expansion systems.

Direct evaporative cooling is based on Munters coretechnologies, in which warm air is cooled when it ispassed through high-capacity evaporator pads designed
to be weather-, algae-, and mold-resistant and to tolerate
extreme wear. These solutions yield high efficiency incooling while they manage high-speed conditions andchanges in pressure, with minimal cleaning and main­
tenance.
Focus in R&D operations is currently on further improving dehumidification efficiency, as well as, developing
system software. With our customer’s continued focus
on sustainability, R&D is currently working with patented
Munters technologies that will increase the dehumidi-

fication system’s efficiency. We are also continuing to­develop Munters Genesys software. The Genesys productconfiguration program allows Munters sales ­engineers to
select complete solutions for our customers in minutes(selections that previously could take weeks). The Genesys
software is also linked to the production system, whichallows customized solutions to begin production in acompletely automated process.

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A I R T R E AT M E N T C A S E S T U D Y
CHAM, DONGGUAN, CHINA

Energy-efficient
production
CHAM has since its establishment in 2003, been dedicated to the R&D, manufacturing and sales of 18,650 typecylindrical lithium-ion battery. The factory in Dongguan, insouthern China, produces approximately 300,000 lithiumion batteries per year.
The use of lithium-ion batteries has many advantages, suchas maximized energy output, faster energy-efficient charging, lighter weight, cleaner and more environmentallyfriendly energy.
In 2010, in response to government order, the Company
transformed its new strategic business focus from 3c productbattery to automotive power battery, for the growing electric
car industry, which required stronger technology and facility
support.
The manufacturing process is very sensitive to exterior influences. Batteries must be produced in environments with lessthan 1 percent humidity, since lithium reacts with water vapor to form lithium hydroxide, hydrogen and heat. Exposure
to moisture levels greater than 1 percent results in poorer
battery quality, performance and shelf life.
In 2016 CHAM purchased Munters GreenDry™, a dehumidifier which guarantees a perfect control of the dew point andthat is specially developed for lithium-ion battery production.
Munters solution was chosen on the base of more stableperformance and lower energy consumption.

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A I R T R E AT M E N T C A S E S T U D Y
N H L , N AT I O N A L H O C K E Y L E A G U E , U S A A N D C A N A D A

Environmental
partners
The National Hockey League (NHL), the world’s largest
hockey league with 31 teams in the US and Canada, ispursuing several projects to promote sustainable development. The league is one of the largest purchasers in the
US of green electricity and is on the Environmental Protection Agency’s “Top 100” list. NHL Greener Rinks is an
initiative to reduce the climate and environmental impactof ice rinks.
A hockey arena has to work for both the players and thespectators, with minimal downtimes. A constant climate
with controlled humidity is therefore a must. Too highhumidity results in fog, condensation, mould and poor ice
conditions, all of which compromize skater performanceand spectator enjoyment. Humidity also increases the loadon the ice refrigeration system, resulting in higher energy
costs than necessary.
The NHL has named Munters a “Preferred Supplier”.
Munters patented desiccant dehumidifiers have been
installed in more than 1,000 ice rinks in North America.
The NHL recommended standard is 15.5˚C and 40 percent relative humidity, which corresponds to a dew pointof 1.7˚C.
Munters climate system reduces energy
consumption by up to 40 percent andguarantees perfect control of humidity,
even at low temperatures, which improves ice quality.

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Data Centers
Munters Data Centers business is aworld leader in energy-efficient cli­mate systems for large and mediumsized data centers where capacity,reliability and availability are missioncritical. Munters systems provide precise control of temperature, humidity
and air quality.

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OPERATIN G PROFIT

900 -13
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APAC 3%
Americas 46%

EMEA 51%

Co-locations 40%

Digitals 60%

million SEK
250

1500

1500

200

N E T S A L E S 1250
AND OPERATIN G PROFIT
SEkm
1 000

150

750

750

100

2017 — 856/-13
2016 — 685/54 500
2015 — 294/-23
2014 — 220/-29
2013 — 0/0
Net Sales

150

1000

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250

0

0

Operating profit

50

0

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-50

-50

2013 2014 2015 2016 2017500

O R D E R I N T1500
A K E 1 2 M O N T H S A N D P E1000R
QUARTER
SEkm

1000

1 000

400

750

750

300

500

200

250

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Q4 (2016) — 685/352
0

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SEkm

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N E T S A L E S 1250
R O L L I N G 12
MONTHS AND PER QUARTER

Q4 — 856/288
500
Q3 — 920/115
Q2 — 962/200
Q1 — 848/253

Rolling 12 month

Quarter

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100

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Q4
Q1
Q2
2016 2017

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1800

600

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1 200

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800

900

90 0

600
600

60 0

400
400

300

30 0

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200

Q4 (2016) — 919/187
00

Q4 — 1,261/519
600

Q3 — 929/20

Q2 — 1,164/558
Q1 — 763/165

Rolling 12 month

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Q1
Q2
2016 2017

Q3

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”Data Center cooling consumes almost one percent of global electricity and Munterssystems can reduce this by up to 65 percent when compared to traditional technologies”

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M ist El i mi na t i o nImportant events 2017
• Formerly part of Air Treatment, Data Centers was­established as an independent Business Area beginning January 1, 2017.
• SEKm 275 order received in May from a major digitalclient in the US.
• Containerized version of Oasis™ launched in Singapore in September, targeting growing markets in
Africa and APAC.
• SEKm 450 order received in November for two Facebook projects in Denmark & Ireland.
• Operational challenges during the year, with project
postponements, production delays and high costs impacting margins. Activity plan to improve Data Center
profitability launched in December.
• VP Sales APAC appointed in December, with an objective of driving growth in the region.
The past year
• Order intake for the full year 2017, increased by 37
percent, all organic. This increase was primarily the
result of an increase in orders in Europe from a large
digital customer, as well as, minor increases in orders
from customers in Americas and APAC.
• Net sales in 2017, increased by 25 percent, of which
24 percent was organic growth. Currency effects had
a positive impact of one percent. The increase was related primarily to; sales to large digital and co-location
customers in the US and Europe and was, partially
offset by a decrease in sales to co-location customers
in APAC, and by the delayed production of a large
project in Europe.
• EBIT for the year was SEKm -13 (54). The decrease wasdue to low net sales volumes in the second and third
quarters of the year, with low factory utilization and a
production delay of a large project as well as higher
project startup costs in the third and fourth quarters.

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Priorities for 2018
• Activity plan for increased profitability underway in
our European manufacturing plant, improving business
controls, production workflow and greater operational
flexibility.
• Global Alignment Program (GAP) underway, involving
the creation of a global product platform and theadoption of standardized, best-practice procedures
across Data Center Business Units worldwide.
• A dry cooling system – SyCool – to be launchedduring the second quarter of 2018.
• Manufacturing of Data Center cooling systems to beestablished in Munters factory in China.
Markets and trends
Global data traffic is increasing significantly, driven by
the increased use of cloud services, video consumption, and linked services (the Internet of Things, or IoT).
Society is becoming increasingly IT dependent, drivinga global program of data center construction. With data
centers now thought to be consuming around two percentof the world’s electricity, a combination of cost pressures and environmental concerns is driving a growing
demand for energy efficient cooling solutions. Coolingis typically responsible for up to 40 percent of the total
electricity consumption for a data center and is the largest single operating expense.
Up-time availability is business critical in data centersand service deficiencies can lead to major problems.
Electronic equipment is sensitive, and exact control oftemperature and humidity is crucial for reliability, functionality and availability. Servers must also be protectedagainst pollutants such as salt, dust, or pollen.
According to a comprehensive market study, themarket for data center cooling is expected to show strong
growth in the coming years. The new generations of IT
equipment require ever more efficient forms of cooling,

P R E S I D E N T, B U S I N E S S A R E A DATACENTERS, NEIL YULEABOUT THE YEAR AND THE FUTURE

2017, was a challenging year from a profitability pointof view for the newly formed Data Centers BusinessArea. Previously operating as a Segment within the
Air Treatment BA, the business has continued to lead a“technology shift” in the Data Center cooling market,
away from compressor-based cooling systems andtowards more energy efficient air economizers.
The large orders secured from Facebook and anothermajor digital client helped deliver another year ofstrong growth.
In 2018 net sales is expected to grow and we will
launch a new technology that responds to a demandfor dry cooling solutions.

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and having led the technology shift towards air economizers over recent years, Munters is recognized as aleading innovator in this field.
Air economizers accounted for over 95 percent of
the Data Centers Business Area’s sales in 2017. These
solutions use outside air to provide at least some of thecooling effect, either by passing the outside air directly
through the data center, or indirectly through a heat exchanger that cools a separate flow of air that then passes
through the facility. In both cases, the cooling effect canbe boosted by incorporating the evaporation of water.
Depending upon the climate, direct evaporative
cooling is generally recognized as the most cost effective
way to cool a data center. Indirect systems however,while marginally less energy efficient, have the advantage of keeping the outside air away from the servers,
eliminating the risk of contamination from air pollen,
pollution, etc.
Munters is a market leader in both direct and indirect
evaporative cooling systems for data centers, with a
global share of approximately 33 percent of the indirect
evaporative cooling market and 10 percent of the overall
air economizer market.
Munters is one of only a few companies able to compete on a global scale within the targeted market. Significant competitors include Schneider, Vertiv and Stultz,
all of whom have developed their own air economizer
solutions. On a local level, Munters competes with a number of smaller regional players.
The substantial, sustained growth of the air economizer market stimulates a drive for constant innovation.
Product life cycles are, therefore, significantly shorter inthis market than, for example, those seen in the industrial
markets served by the Air Treatment business area. Minor
enhancements are being implemented on an almost
constant basis and significant upgrades typically occur
every two to three years, requiring a higher proportion

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S e r v i ceof revenue to be invested in R&D than is the case in the
more mature markets served by Munters.
Customers and distribution
Data Center operators can be categorized into threesegments:
Digital Operators – comprising large corporations
for whom “computing” in its various forms is the corebusiness, including many global digital brands such as
Google, Facebook, Microsoft, etc.
Enterprise Operators – comprising large organizations
for whom computing is not a core activity, but are of sucha scale that their IT requirements can justify building andrunning their own data centers.
Co-Location Providers – for whom building and running data centers is a core activity. These firms build andoperate data centers for enterprise customers, providing
advantages that can include economies of scale, flexibility and operational expertise.

Of these, the Digital Operators account for the largest
share of Munters data center revenue, closely followedby the Co-location Providers. Enterprise Operators tend
to have only occasional needs for additional cooling
capacity and are not, therefore, generally targeted on a
pro-active basis.
The business area provides solutions to data center
operators across the Americas, EMEA and APAC, witha substantial share of its revenue being generated bycustomers within whom it trades in more than one continent. Sales and service personnel operate from multiple
locations worldwide, while manufacturing has typicallytaken place at two regional production units in Dison,
Belgium and Virginia, USA. Additional manufacturing
capacity is available at factories in Brazil, USA and theCzech ­Republic. Data center production will start in China
to serve the growing market in APAC.
EMEA accounted for 51 percent of revenue in 2017,with the Americas contributing 46 percent and APAC

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3 percent. A characteristic of the data center market
when compared to the other markets served by Munters
is the large scale of the projects into which the products
are applied. One benefit of this is the high level ofrevenue that can be generated for a given investment insales resources. A downside, however is the impact on
operational effi­ciency created by the volatile nature of
the demand.
Products and services
The Data Centers business area focuses on the growing
market segment for advanced air economizers. Highcapacity, reliability, and energy efficiency are businesscritical for the customer, and the systems offered provide
exact control of temperature, humidity and air quality.
Alongside a range of standard units, customized solutions that meet specific requirements are configured inclose collaboration with the customers.
An example of this in 2017, was a special version of
the Oasis™ Indirect Evaporative Cooler developed for
Facebook in Denmark, that incorporated a unique Waste
Heat Recovery (WHR) System. Facebook data centers areamongst the most advanced and energy efficient in theworld and the facility is powered by 100 percent renewable energy. The WHR System will capture the excess heatgenerated by the servers and recycle it into a local district
heating system operated by Fjernvarme Fyn. Whencomplete, the heat recovery infrastructure is expected torecover up to 100,000 MWh of energy per year, which
could produce enough heat to warm up to 6,900 homes.
Beyond product supply, the business also provides arange of on-site services, including installation, start-up, commissioning, routine maintenance and breakdown support.
Technologies and innovations
Data Centers products and solutions incorporate a rangeof core technologies, including Munters patented EPX

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polymer heat exchanger, GlasDek™ evaporative media
and desiccant dehumidification rotors. These technologies are incorporated into packaged air handling units
and sub-assemblies, ready for on-site installation.
Munters is one of the pioneers in the market forindirect evaporative cooling. According to independentstudies, the Munters Oasis™ system can provide energy
savings in excess of 65 percent when compared to traditional compressor-based cooling systems. 2017, saw thelaunch of DCiE – a version of Oasis™ that is designed
to be shipped around the world in standard shipping
containers, providing Munters with access to markets thatwere previously difficult to access.
In the market for direct evaporative cooling, Muntersprovides a variety of solutions, ranging from loose media,
through self-contained cooling modules with framed­media and water circulation circuit, to a range of complete packaged air handling units.
R&D News
Another example of the type of patented technical solution that has helped Munters position itself as a leading
innovator in data center cooling, is the Mineral RemovalMedia (MRM) System. This system uses a sacrificial
section of Munters media to evaporate waste water thatwould otherwise be discharged to drain, providing asmall cooling boost, a reduction in overall water consumption, and the potential to eliminate charges for
waste water drainage.
Listening to the voice of the customer and responding
to the need for an energy efficient air economizer that
does not require a water supply, Munters has also developed and patented a new technology, called “SyCool.”
Based on the concept of a thermosiphon, incorporating a
refrigerant circuit that can be driven simply by a combination of the waste heat from the data hall and the cool­ing capacity of the outside air, SyCool is able to provide

According to independent studies, the Munters Oasis
system can provide energy savings in excess of 65
percent when compared to traditional compressor-based
cooling systems.

a reliable, energy efficient, dry solution. Aimed at thosemarkets where water is expensive, of poor quality or inshort supply.

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D ATA C E N T E R S C A S E S T U D Y
S A B E Y D A T A C E N T E R S , Q U I N C Y, W A S H I N G T O N , U S A

Efficient cooling of
hot data centers
Sabey Data Centers designs, constructs, and operates
data centers for clients of all sizes. In Quincy, Washington, one of the world’s most energy-efficient data centers
has been constructed. The facility, which covers just over
400,000 m2, is located close to the mighty ColumbiaRiver and uses inexpensive, environmentally friendly,
and reliable hydroelectric power from one of the largest
hydro­electric power stations in the US.
Its energy consumption is 33 percent lower than the
average for data centers in the US. Intergate.Quincy iscertified under the EPA’s Energy Star standard, and hasreceived the highest level of certification for four years
running.
The combination of low energy costs and a cold, dry
climate is perfect for efficient evaporative cooling.
Inter­gate. Quincy has installed Munters Oasis™ Indirect
Evaporative Cooling System on its roof. Evaporative
cooling uses the same cooling principle as when humans
sweat: heat evaporates and cools down the system. The
air recirculates and the little outside air taken in is filtered and adjusted to indoor air. The air inside the data
center is kept completely separate from the air outside.
Munters patented Oasis™ technology saves approximately 65 percent of energy consumption compared with acon­ventional system.

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AgHort
AgHort is one of the world’s leading
suppliers of innovative, energy-efficient
climate control solutions for livestock
farming and greenhouses, as well as,
software for controlling and optimizing
the entire food production value chain.
Munters solutions increase productivity
while enabling sustainable food production in which strict requirements areplaced on quality, animal health, andfood safety.

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2000

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400
400

1500

1 500

300
300

1 000

200
200

500

100
100

Net Sales

Operating profit02013 2014 2015 2016 2017

Americas 37%

IN F ORM ATIONFIN AN CIALR APPORTSÖvrigt 3%

00

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3000

N E T S A L E S 2500
R O L L I N G 1 2 M O N T H S A N750D
PER QUARTER
SEKm

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2 000

600
600

1500

1 500

450
450

1 000

300
300

500

150
150

Q4 — 1,837/450
1000
Q3 — 1,798/482
Q2 — 1,786/502
Q1 — 1,748/404500

Q4 (2016) — 1,705/411
0Rolling 12 month

Layer 15%

Broiler 43%

Swine 30%

Asia 20%

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0

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EMEA 43%

N E T S A L E S 2500
A N D O P E R A T I N G P R O F I T500

2015 — 1,363/167
500
2014 — 1,002/103

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MARKETS

600

3000

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Greenhouse 5%

million SEK

2017 — 1,837/225
1000
2016 — 1,704/276

ARE ASS e r v i ce

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1.8

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0

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00

”Food in 1/7 of all meals is grown in installations
where Munters provides climate control”

900

3000

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SEKm

2000

2 000

600
600

1500

1 500

450
450

1 000

3300
00

50 0

1150
50

Q4 — 1,866/394
1000

Q3 — 1,855/442
Q2 — 1,787/561
Q1 — 1,746/469

500

Q4 (2016) — 1,704/382
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750

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2016 2017

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M ist El i mi na t i o nImportant events in 2017
• Acquisition of the MTech Systems software company in
the US, and Edata in Brazil.
• Rapid growth in the swine end-market in China.
• Temporarily lower demand in several major markets
such as the US, the Middle East, and Russia.
• Development of a new IoT offering that gives customers increased control over the entire value chain.
The past year
• Order intake in 2017, increased by 10 percent of
which two percent was organic. Strong growth wasseen in Asia, primarily driven by the Chinese swine
market. Order intake in Americas, excluding structuraleffects, declined compared to the same period 2016.
• Net sales in 2017, increased by eight percent compared to 2016, primarily driven by the acquisitions. The
organic growth was minus one percent. However, theslowdown in end-user investments, which started in thethird quarter 2016, has reduced the demand in manymarkets. The global footprint enabling the fast growthin Asia, and the expanded exposure to five different
markets segments, lowered the negative impact for
Munters from the market slowdown.
• During the fourth quarter, AgHort won its first orderinvolving the combined software and connectivity
solutions enabling customers to control the entire value
chain based on MTech Systems solutions. This is ofstrategic importance and holds the potential of transforming the industry; enabling increased efficiency
and control throughout the broiler production chain.
• During the year, the largest item affecting comparability compromised of the effect from the early Reventaacquisition earn-out of SEKm 30. In addition to themargin pressure and cost increases seen in the fullyear result, earnings included cost of SEKm 7 related
to the acquisition of MTech Systems and Edata, as well

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as, costs related to the production issues in Mexico.
The shift of net sales volumes from the US (Layer subsegment) to China (Swine sub segment) has led to­additional costs for building up the AgHort organization in China and a less favorable sales mix.
Priorities for 2018
• Continued focus on selling complete climate control
solutions and offer more product families to existingcustomers.
• Launch of new solutions for data collection and analysis to optimize production.
• Product development with a focus on selected areas –both to broaden the product portfolio and to update
and improve the existing product offering.
• Additional acquisitions in our defined market segments.
Markets and trends
Demand in AgHort’s various customer segments is driven
by GDP and population growth, as well as, increased
protein consumption, but also by increased demand foradvanced climate control solutions. The latter is driven
by factors such as demand for decreased use of antibiotics and for relocating vegetable production closer to theconsumers, which increases the demand for advanced
greenhouses. An increasing number of consumers careabout the well-being of animals and are placing strict
demands on proper livestock farming. This has resulted ina shift towards more free-range chickens, which together
with increased demands for food safety, sustainability,
and increased production, drive the need for new or
upgraded stalls with advanced ventilation solutions.
Increased traceability of food is a rapidly-growing
need that leads to increased demands for data collection
and analysis throughout the entire food chain, including
feed production, stalls, production facilities and transportation all the way to the store. Together with increased ­PRESIDENT, BUSINESS AREA AGHORTPETER GISEL -EKDAHLABOUT THE YEAR AND THE FUTURE

AgHorts’ strategy balanced sales across the various
segments of the business area and geographic markets– played an important role in 2017. Healthy growth in
Asia compensated for temporarily decreased demandin the US. Becoming more global and having a presence in more segments makes the business area lesssensitive to temporary fluctuations in local markets.
In January 2018, AgHort launched a new solution forconnecting farms to Munters cloud-based software.
Being able to offer food producers data and analysis
in real time based on machine learning will take theentire industry a great step forward and, is thus, an
important area of growth for AgHort. A breakthroughoccurred in the area in December 2017, when AgHort
won a deal in the US covering more than 400 connected broiler houses.

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Evaporative
Cooling Pads

Heating
Solutions

Air Cleaning
SystemConnected
Controllers

Fresh Air Inlets for
all Climate Zones

High Efficiency
Fans

A modern, efficient unit for climate control usually
makes up 15–20 percent of the total initial investment
for chicken farming, and can reduce operating costs by
10 percent.

demands for productivity, this has led to rapid development of the software used by food producers. Throughits acquisition of MTech Systems, Munters is now a world
leader in the software market in the Broiler and Layer
sub-segments.
The AgHort market is expected to show good growth
the coming years. Growth varies from year to year, due
to factors such as the ratio between the market price forfeed and the market price for eggs, which affects profitability and investment levels among the producers.
AgHort has further strengthened its market position
during the year through acquisitions, the launch of new
products, and closer collaboration with larger distributors.

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Customers
AgHort is one of the world’s leading suppliers of advanced climate control for various agricultural segments,
with a particularly strong position in the layer market in
the US and Europe, as well as, in the broiler markets,primarily in the US and Brazil. AgHort is also one of
the leading players in the swine farming market witha strong position in the US, and is active in dairy andgreenhouses.
Efficient climate control is one of the most importantfactors in profitable, sustainable production. International
companies and independent growers are among AgHort’s
customers. Through the acquisition of MTech Systems,
AgHort has many of the world’s largest food producers
in the poultry market as customers, since these use MTech
software for planning and monitoring their operations.
AgHort sells primarily through distributors, with a presence in local markets. Software solutions are most often
sold directly to food producers. In certain geographic
markets and segments, climate control products are also
sold directly to the end customer.
Products and services
AgHort offers complete systems for controlling theenvironment in stalls, including equipment for ventilation,
cooling, and heating, as well as, various types of control
systems. The product portfolio also includes software,
aimed mainly at food producers active along large partsof the value chain.
Our offering is built on long experience and innovative
products that are reliable and sustainable. We collaborate with end customers and resellers to optimize and tailor
our units for customers with regard to moisture content,
temperatures, emissions and energy consumption.
We are seeing increased interest in real-time data collection and analysis. Digitalized processes are becoming
an important factor for being able to optimize produc-tion, increasing the integration among various players,
and strengthening the food production value chain.
Through the acquisition of MTech Systems in February
2017, AgHort strengthened our offering in connectedclimate control solutions. In early 2018, a new solution
was launched comprising both new hardware, such as
sensors and gateways, and new software for presenting
and analyzing data. We see great potential in thesesolutions, but competition is stiff and requires investments
in new organizations and technology. We believe it willtake a few years before we see any major financial effectfrom these investments.
Technologies and innovations
AgHort’s offering covers a range of different products forclimate control and data analysis. For example:• Controllers and advanced software regulate climate
and other functions such as feeding, lighting, theanimals’ weight, water consumption and air quality.
Status updates are provided in real time.
• Circulation and extraction fans especially developed
for animals and greenhouses. The latest generationof fans with Munters drive motors can reduce energy
consumption and increase productivity by adapting
ventilation in a more exact manner than was previously possible with traditional motors. Examples of otherequipment that AgHort offers are heaters, air intakes,
and cooling systems.
• The portfolio also includes software adapted for foodproducers that controls the entire value chain including
feed, eggs, medicines and optimization of logistics
and production.

According to the “Chinese Consumers Ready for High-Welfare Pork” study,nearly 90 percent of consumers are willing to change their purchasing
behavior in order to get swine farmers to give their pigs better lives, and75 percent are prepared to pay for better livestock farming.

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AGHORT CASE STUDYK I N N A R D FA R M S , W I S C O N S I N , U S A

Sustainable milk
Kinnard Farms has been at the same location in Green
Bay, Wisconsin since 1948. Today, it is run by thesecond generation of the Kinnard family. There are
7,000 dairy cows here; every day, they provide a totalof 343,000 kilograms of high-quality milk to stores.
Kinnard Farms does more to care for its animals andthe environment, going further than the law requires toensure that the dairy farm manages the land, water, air,animals, and people sustainably.
In 2015 a new, modern facility was built where thecows have plenty of space to lie down and rest. Herethey are given feed and fresh water, and are protectedfrom the cold Wisconsin winters when the temperature
falls to nearly -30˚C (-20˚F).
To get the very best indoor climate, Kinnard Farms selected a high-quality climate control solution from Munters.
In addition, they gained higher reliability and lower
costs. And happy dairy cows.
The climate control solution from Munters in the free stall barn comprised 225 VX 55-inch fans, 463 m of CELdek™ cooling pads (corrugated paper pads), a cooling frame and one controller to manage all of
the equipment.

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Mist Elimination
Mist Elimination is a leading providerof mechanical gas and liquid separation as well as mass transfer. Munters
mist eliminators are key components in
scrubbers to clean emissions from power plants and ships across the world.
These highly efficient mist eliminators
also create optimum operating conditions and protect equipment in processindustries, windmills, gas turbines andships.

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Americas 38%

Process 28%
Power 65%

EMEA 26%

500

500

150
150

375

375

100
100

250

50
50

125

125

00

0

0

Operating profit

CO RPORATESUB SEGMENTS

APAC 36%

SEKm

2013 2014 2015 2016 2017

S E RV I CE

Marine 5%

N E T S A L E S 625
A N D O P E R A T I N G P R O F I T200

2013 — 273/10

AND

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250

750

2014 — 320/-17

ARE ASS e r v i ce

Other 2%

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2017 — 406/34
2016 — 437/69 250

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-50

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PER QUARTER
500

500

200
200

375

375

150
150

250

100
100

125

125

50
50

Q4 (2016) — 437/116
0

0

SEKm

Q4 — 406/110
250
Q3 — 412/96
Q2 — 422/107
Q1 — 421/93

Rolling 12 month”Munters equipment cleans 1/5of all electricity globally”

Quarter

Q4
Q1
Q2
2016 2017

Q3

Q4

00

300

750

ORDER INTA
K E 12 M O N T H S A N D
625
PER QUARTER

250

500

50 0

200
200

375

375

150
150

Q4 — 394/83
250

250

100
100

Q2 — 422/111

125

125

5500

Q4 (2016) — 416/950

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Q1 — 414/100

Rolling 12 month

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Q1
Q2
2016 2017

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M ist El i mi na t i o nImportant events 20172017, was a year of change for Mist Elimination causedby both internal and external events.
• Successful acquisition of Kevin Enterprises enabling
future growth in the process industry and less dependency on the coal-fired power industry.
• The slow-down in the Chinese Coal FGD retrofit market.
• Changes within the management team with a new
business area president and new management teammembers.
The past year
• Order intake for the full year 2017, decreased by five
percent with no currency impact, but positive structural effects of six percent (Kevin acquisition). The main­reason for the weak organic order intake during 2017,has been the slowdown within Coal FGD in China.
• Net sales for the full year, 2017, decreased by sevenpercent with no currency impact, but positive structure
impact of seven percent. The main reasons were lower
full-year Coal FGD volumes in the US and in China.
• Mist Elimination is in a transition period where new
business opportunities other than Coal FGD are being
actively pursued, for example, within Marine (emission
gas cleaning for ships) and Process industries. To support this, the acquisition of Kevin Enterprises was madein April 2017.
• EBIT for the full year was SEKm 34 (69). The key
reasons for the accumulated decline are unfavorable
mix impacts, with lower volumes of high-margin FGD
projects in the US, and the limited volumes of Coal FGD
projects in China in Q4. A set of low-margin projects
in Europe, mainly in Q4, also impacted full year results
negatively.

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Priorities for 2018
Main priorities will be to continue the transformation of
the business area in order to reach a state of sustainableprofitable growth. Key strategies to achieve this are:
• Strong focus on selected core geographies; US, Europe,
Middle-East, India and China.
• Growth in the Process sub-segment by globalization of
the acquired mass transfer offering outside India.
• Successful implementation of a technology center of
excellence in order to turn local expertise and specificapplication knowledge into a global competitive
advantage.
Markets and trends
Power: Around the world, stricter environmental requirements to reduce hazardous emissions are being introduced. Coal-fired power stations that cannot meet the newrequirements risk being shut down; this is why the technology that Mist Elimination offers to remove sulphur oxides
from flue gases has become mission critical for customers of this business area. The mature markets in North
America and Europe are driven primarily by replacement
installations, while newer, stricter laws affect both new
construction and after-market installations in China andIndia. Munters is the leading player in North America interms of supplying mist eliminators used to separate SOx
in FGD systems, and also enjoys strong positions in Asia
and Europe.
The competitive landscape in terms of mist elimination for Coal FGD consists of a small number of global
players and many smaller manufacturers locally, thelatter especially in Asia. In the Autumn of 2017, a
weaker market situation in China regarding projects forflue gas desulphurization (FGD) was noted, with fewer
after-market installation projects in Su-Clean, as well as,a low level of market activity in Europe.
Wind turbines require clean air to function efficiently,

PRESIDENT, BUSINESS AREA
M I S T E L I M I N AT I O N
WOLF -MARKUS FRANKABOUT THE YEAR AND THE FUTURE

Mist Elimination conducted their annual customer
survey in Q3 2017, and results were positive in all
regions; 87 percent of interviewed customers claimed
to have Munters as their first choice supplier and customer satisfaction index is highest ever at 90 percent.
I feel proud when I see the good results from the customer survey. It means that our people in the field, as
well as, supporting roles are really adding value to thecustomer. We will continue to focus on customer excellence going forward, as we see this as a key successfactor for us in the global market arena.

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S e r v i ceand Munters mist eliminators purify intake air of dust andparticles thereby protecting and prolonging filter lifetime.
Wind power is increasing its share of electricity production and the underlying wind power market is expected
to show solid growth in the foreseeable future fueled bycurrent environmental macro trends. Munters enjoys astrong position, especially in the European market wherea set of larger wind turbine manufactures are located.

China and India through a broadened product portfolio
and expansion in selected areas of application such as
wind power, the process industry, and marine scrubber
systems. Kevin Enterprises was acquired in April 2017.
The main strategic rationale of the acquisition was toenable accelerated growth in the process segment bybroadening scope of supply through adding mass transfer components to the portfolio. Secondly, the acquisition
also strengthened Munters footprint in the fast-growing
Indian market.
Products and applications

Process: Pulp and paper, steel and metal, the chemical and petrochemical, as well as, refining industries,
constitute a stable growth market with regional variations
driven by increased streamlining and stricter environ­mental requirements. Munters mist eliminators are used to
manage a range of problems that drops of fluid would
otherwise cause, such as reduced efficiency, damage tocomponents, and loss of product and processing fluids.
Munters is focused on a set of specific niche applications, where it holds strong positions. The mass transfer
business which Munters acquired into during 2017, isdominated by two large companies Sulzer and KochGlitsch.

Marine: The marine market is driven by growth in international shipping traffic and increasingly stricter regulations of marine emissions. The UN’s shipping agency,
the IMO, has decided that by 2020, shipping must limit
its sulphur emissions and reduce the sulphur content offuels from 3.5 percent to 0.5 percent, or alternately filter
emissions to an equivalent degree. This is expected toresult in an increase in shipping companies’ investments
in modern scrubber systems in order to become compliant, which in turn will have a positive impact on the mist
eliminator market within marine.
Customers
The power industry – primarily coal-fired power plants
in China and the US – was responsible for 65 percent
of business area sales in 2017. The processing industry– including also the new mass transfer business – was
responsible for 28 percent, and the marine industry forfive percent of external sales (two percent in Other). Thechanged mix between segments was caused by the lessfavorable market development in Coal FGD coupled withthe acquisition of Kevin Enterprises.
Mist Elimination is focused on continued expansion in

Mist Elimination offers products for different types ofapplications, but all with a high degree of precision andperformance. The product offering consists of a large
set of different types of vane mist eliminators available
in various materials (e.g. steel, plastics etc). These aremainly used for emission gas scrubbing applications andfor protecting subsequent equipment at air intakes.
Munters also offers a full set of so called mass transfer
components and services used mainly in mass transfer
and separation processes in refining and chemical plants.
All products and solutions are durable and dependable, and can be designed to handle extreme operating
conditions where needed. They are customized for specific industries and customer needs, and are often criticalfor customers’ operations.
Technologies and innovations
Mist elimination: Vane type mist elimination is, no matterthe application, a process where droplets get separated
away from a gas stream when passing through a set ofstacked profiles.
In essence, the entering gas is forced to make a sharp
bend and the droplets in the gas form a liquid film on the
profile surface when they hit it, after which the liquid isdrained by gravity.

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The Munters range of mist eliminators consists of approximately 50 different profiles for vane type mist elimination, each optimized for specific operating conditions
and drop sizes.
Munters has been the leading provider of vane type mist
eliminators for many years, setting the industry standards
in terms of developing and tailoring optimal mist eliminator
configurations for customers in a variety of industries.

Clean gas

Flue gas

Flue gas absorberwith typcal verticalflow setup

B US I NE S S

M ist El i mi na t i o n

Mist eliminatorsfor gas and liquid
separation in processindustry

Mass transfer: Munters provides a complete range ofmass transfer solutions and equipment typically foundwithin towers/columns at petroleum refining, chemical,
petrochemical and fertilizer plants world-wide. Components are typically categorized as tower packings (random and structured), fractionation trays, mist eliminators(normally mesh), and all other column internals.
By selecting and installing the optimal set of masstransfer equipment the distribution of the liquid flowing
down, and the gas flowing up (inside the column), canbe controlled. By controlling these flows, the interaction
and mass transfer between the two phases can be improved and the process efficiency enhanced.
Developing and delivering state-of-the-art mass transfer
solutions in order to meet customers’ requirements interms of both energy and process output efficiency willcontinue within Munters going forward.

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M I S T E L I M I N AT I O N C A S E S T U D Y
CHINATo clean the air
we breathe
The demand for power in China has increased over theyears and as many power plants are fired with coal, thishas resulted in problems with air pollution. Sulfur emissions from power plants create what is called “acid rain”
and is a much debated environmental problem in many
countries. The Chinese authorities have, therefore, introduced stringent regulations to reduce this type of emissions.
By cleaning flue gases from coal power plants, the amountof environmentally hazardous emissions can be sharply
reduced. Mist elimination from Munters is a critical part ofthis process. More than 95 percent of the contaminating
substances are eliminated.
The leading power industries and power engineering­companies in China are using Munters mist elimination
technology in their flue-gas cleaning process. Their reason
for doing so is that there is no room for error. They ­requirea reliable and advanced system to ensure emissions are
below limits.
Munters has more than 50 years of experience in thisarea and has made about 1,500 installations globally.

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Service optimizes and expands our offering
We offer our customers a broad selection of services,primarily in the Air Treatment and Data Centers businessareas. Our service organization can offer everythingfrom installation and monitoring, to maintenance, spareparts and upgrades, ensuring that Munters solutions are
optimized for the customer’s needs.
Service is a vital part of the Munters offering. With
solutions based on the specific needs of each customer,
it is the best guarantee of getting optimal results from theequipment. Service operations represented 11 percentof the Group’s net sales for 2017. At the close of 2017,
Munters had 40 service centers around the world andoffered services via a large global service network. Our
local presence makes close customer relations and rapid
support possible.
Customers in the Air Treatment and Data Centers business areas currently represent the majority of sales, andMunters installed base of approximately 200,000 products means a great deal of potential. The self-con­tained
service organization was built to develop a complete
service offering with customizable solutions targeted atboth new and existing customers.
Service makes use of its deep knowledge in applications and its understanding of best practices to provide
customers continuous service and support – and valuable
upgrades that reduce energy consumption, ensure quality
and environmental performance, and extend the economic life of the products.

Broad service offering
We offer our customers a comprehensive selection ofservices such as, installation monitoring and startup, performance checks, upgrades, maintenance and repairs, aswell as, spare parts sales. All in all, this helps customers
achieve reliable, effective and sustainable results fromtheir Munters solutions.
Installation monitoring or commissioning support isincluded in the majority of sales agreements.
Munters service agreements for preventive maintenance and inspection are also offered in connection
with new sales. The service contracts are adapted to thecustomer’s needs, but are usually multi-year and cover arange of scheduled services such as on-site training,planned maintenance, and monitoring of performanceand performance history.
Regular inspections ensure efficient operation
All Munters products are manufactured from high-quality
parts and undergo comprehensive testing. Our solutions
are often operation critical, and certain components –sorption rotors, for example – require regular capacity
checks to ensure efficient performance.
Our service technicians have the knowledge, thetechnology, and the tools needed to measure andanalyze performance of the core components of theequipment. Special equipment and software is required
to carry out capacity testing and to calibrate and optimize performance.

SEBASTIEN LEICHTNAMPRESIDENT GLOBAL SERVICESR APPORTS

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S e r v i ce

SERVICE OFFERING –EIGHT C ATEGORIES
Installation – installation services for all products andequipment.
Commissioning/Start-up – usually offered and frequently
sold in the original sales contract.
Performance Checks and Inspections – to assess thecondition of the equipment and to optimize the results.
Reconditioning/Repairs – either at a specialized service
center or on-site.

New services increase penetration
The objective remains to increase penetration by increasing sales of service contracts in connection with salesof new equipment, but also to reach out with attractive
offers to existing customers.
Service continuously expands its offering by developing more service products providing customers with“peace-of-mind”. During the year, a new rental solution
was launched to accommodate customers with time-­
limited needs or those who, for other reasons, do notwish to own the product. Service continues to work on
creating more products in which Munters can agree
on increased responsibility in the relationship with thecustomer, thereby being able to deliver more complex
services.
Historically, services have been offered primarily to
the Air Treatment and Data Centers business areas, but­Service is also expanding its offering to increase penetration among Mist Elimination and AgHort customers. In
2017, companies were acquired that strengthen the pro-

duct portfolio in both of these business areas, and thus
opened doors to new possibilities regarding Service.
Connected services
Within the whole of Munters intense work is ongoing tobroaden and improve the selection of connected solutions, thus being able to furnish more advanced services.
Many years of experience, in combination with modern
technology, provide the opportunity to diagnose andoptimize the performance of equipment remotely. The
technology behind the Internet of Things (IoT) facilitatesmonitoring and troubleshooting the equipment’s performance, heightening the effectiveness of services.
In 2017, an advanced service offering was introduced to customers covering energy optimization, remotemonitoring, and control. Currently, a number of projects
are ongoing to make more efficient use of skills for thecustomers benefit through connected solutions.

Upgrades/Retrofits – component and system upgrades
give the customers access to latest technology, andcan thereby improve energy efficiency and equipment
performance.
Spare Parts – original parts, or adapted for customers in
different geographical regions. Also offer finished spareparts kits for all types of installations.
Training – of customers’ technicians, both on-site and intraining centers.
Rental Solutions – for customers who have temporaryneeds, not willing to stop operations during a main­
tenance period, want a proof-of-concept, or wish to rent
instead of purchase.
Service Maintenance Agreements – cover scheduled
performance checks, training on site, maintenance andmeasures as well as, monitoring of equipment performance history. Usually multi-year.
Maintenance – service technicians are also available forcustomers who choose not to sign a service contract.

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IN F ORM ATION

Audit or ’s Repor t”More than 95 percent of the sulfur in emissions fromcoal-fired power plants is eliminated with Munters solutions”

FIN AN CIALR APPORTS

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Proactive risk management

The Group’s activities are directed at customers in allindustries and market segments. Munters has production
plants and sales in some 15 countries, and sales-only
offices in another 15. All together, this provides Munterswith favorable underlying risk diversification.
Responsibility
Managing risks is an important part of internal control,
The Board of Directors has final responsibility for theGroup’s risk management. Group Management identifies, evaluates, and manages risks in their respective
areas of responsibility, and the CEO reports to the Audit
Committee and the Board. The Group Vice President for
Corporate Social Responsibility CSR is responsible forcoordination and the annual risk evaluation.
Annual risk evaluation
Every year, Munters conducts a Group-wide risk evaluation as a link in its strategy process. Group Manage-S P E C I A L LY P R I O R I T I Z E D R I S K S , 2 017
543
LIKELIHOOD

Risks are a natural element of all business operations,and effective risk management at all levels in the company is crucial for Munters to achieve its business goals
and to pursue long-term successful operations. A properly
defined process for identifying, evaluating, managing
and reporting risks enables, among other things:• A competitive customer offering• Compliance with laws and regulations• A healthy, safe work environment• Long-term sustainable profitability and performance

2
4

1

3

2

1
1

2

3

4

IMPACT

5
1 Price competition
2 Forecast errors

Risks identified are assessed based on the likelihood they will occur (1–5) and the impact on thecompany if they do occur (1–5). For all risks with a risk value higher than 12, a person in charge isappointed to develop and pursue an action plan. Risk value = likelihood × impact.

3 Volatility
4 Bribery andcorruption

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C o r p o ra t e Gover nance Re p o r tment identifies and evaluates risks based on probability
and potential impact on sales, earnings, and financial
position.
Risks are divided into four categories:• Strategic risks• Operational risks• Legal and regulatory risks• Financial risksThis concerns both general risks due to political andmacroeconomic trends, and specific risks directly related
to the Group’s operations. A number of risks lie outside
Munters direct control, while others can be controlled.
For high-value risks, an action plan is developed. The
results are reported to the Audit Committee and to theBoard of Directors. In addition, major incidents arereported on a continual basis.
Specially prioritized risk areas
A total of 96 risks were identified in this year’s risk
evaluation.
Four risks were deemed to possibly have significant
impact on the Group as a whole:
1. Risk of increased price competition
2. Risk of forecast errors that negatively impact allocationof resources and reporting for the market
3. Risk of high volatility in demand, primarily in Data
Centers
4. Risk of corruption and bribery
Financial risks
Financial risks mainly consist of currency, interest andfinancing risks. None of these were deemed to be aparticularly major risk in this year’s risk evaluation. A
description of the financial risks and how they are monitored and managed can be found in Note 3.

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Sustainability risks
The Group is also exposed to risks related to the fieldof sustainability, for example, risks concerning environ­mental issues, health and safety, respect for humanrights, bribery and corruption. The only sustainability risk
deemed to be a particular priority is the risk of corruption
and bribery.
Insurable risks
Munters works actively with insurance solutions, andGroup-wide insurances are governed by central guidelines. This includes general liability and product liability,
property, business interruption, transportation, crimes
against property, the liability of Board members and theCEO, and employment practices liabilities.

Munters

IN F ORM ATIONFIN AN CIALR APPORTS

Audit or ’s Repor t

Munters Loss Prevention Standard
Munters Loss Prevention Standard (LPS) is a system forworking preventively to minimize the risks found in a fire,
the work environment, and health and safety. LPS is built
on the Group’s standards, but also local laws and otherrules, as well as, insurance requirements. LPS is used in
the risk evaluations carried out by our production plants.
The objective is for all production plants to be evaluatedover a three-year cycle. LPS is also used for evaluations
in conjunction with business acquisitions, investments,
and construction.
Read more about internal control in the Corporate Governance Report, pages 66–75.

Group requirements(LPS, etc.)

External demands• ISO• Insurance• Others

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S P E C I A L LY P R I O R I T I Z E D R I S K A R E A S A N D R I S KS I N T H E F I E L D O F S U S TA I N A B I L I T Y
Risk area

Description

Management

Risk of increased competition and pricing pressure can impact
Munters financial position negatively.

Focus on high rate of innovation and continual development of new products in close collaboration with customers.
Benefit from our global presence, with a leading position in most customer segments.
Each business area has a customer segment organization in close proximity to the customers, and a unique knowledge ofapplication.
Monthly follow-ups of market and sales trends, including price trends, enables rapid measures.

Strategic risks
Price competition

Continual work on reducing product costs through sourcing initiatives, “cost out” programs and initiatives in Lean.

Forecasts

Risk of forecast errors that negatively impact allocation of resources
and reporting to the market.

Monthly updates and careful reviews of forecasts enable rapid measures.
The forecasts are analyzed on several levels in the organizations – regional, business area and Group – before they are
published and reported internally and externally.

Volatility

Sudden changes in demand can impact the Group’s sales andearnings. Munters Data Centers operation is linked to projects
where the base comprises relatively large deliveries to customers.
Lead times from delivery to installation are relatively long and vary
between periods. Quarterly variations of delivery volumes exist.
This impacts net sales and quarterly earnings to a great degree.

Flexibility on the supplier’s side and increased outsourcing.
Flexible manufacturing enables rapid adjustment.
The possibility of producing several different products in the same production plant.
Properly diversified sales with customers in different geographies and industries.
Increased aftermarket share with sales of spare parts and service.

Health and safety

Sick leave, accidents and workplace incidents can negatively
impact productivity and damage Munters standing as an employer.

A global safety manual (the Munters Occupational Health and Safety Program) and a set of Munters-specific visual standards
for safety instructions were launched during the year.
A questionnaire for carrying out audits of our production plants, in which safety is an important area, was developed during
the year.

Environmental risks

The Group’s production plants risk impacting the environment negatively through emissions or hazardous waste. Insufficient regard forthe environment can result in fines and other sanctions, and involve
major costs for cleanup and environmental investments. This could
also negatively impact Munters standing.

Munters operations affect the external environment through measures such as the handling of chemicals and waste, andtransport of input goods and finished products to and from Munters manufacturing plants. Through its Environment, Health &Safety (EHS) policy, Munters ensures that the organization is always attentive towards the environmental impact of its operations, and continually works to push through improvements in its environmental efforts in the locations where it operates.

Sustainable suppliermanagement

The risk of suppliers not acting in accordance with Munters Code of
Conduct for suppliers, and that this will result in impaired standing
and a weaker financial position for Munters.

New global Code of Conduct for suppliers has been produced and communicated on the Company’s website. The next stepis to send the Code out to our most important suppliers and ensure that they certify they are complying with the guidelines it
describes.

If the Group’s employees and distributors do not comply with laws
against bribery and corruption, this could have both legal and financial consequences and the Group’s standing could be damaged.

There are policies in the area in the form of the Code of Conduct and a specific anti-corruption policy. Online training course forall salaried employees in Munters rolled out in January 2018.
Contract with distributors contains paragraphs stipulating that the distributors must comply with anti-corruption laws and regulations.

Operational risks

Laws and regulations
Bribery andcorruption

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The share
Shares in Munters have been listed on Nasdaq Stockholm since May 19, 2017, and are traded under the
ticker MTRS. The introductory price was SEK 55. In
2017, the share price dropped 16 percent at the sametime as the OMXS 30 index on Nasdaq Stockholm dropped three percent over the same period and the Capital
Goods industry index increased one percent.
The closing price on the last trading day of the year
was SEK 55.25, which was equivalent to a market
capitalization of SEK 10.1 billion. The highest price paidin 2017, was SEK 84.75, and the lowest price was SEK
49.02.
Trade in Munters shares
During 2017, a total of 63.8 million shares were traded,
at a value of SEK 4.08 billion. Average trading volume
over the year totaled 408,781 shares per day.
Dividend and yield
Under the dividend policy the Board of Directors adopted, Munters aims to pay an annual dividend corresponding to 30–50 percent of its consolidated income for theperiod. Decisions on any dividend proposals are takenby the Board in consideration of the Company’s financial
position, investment needs, acquisitions and liquidity
position.
The Board of Directors has proposed a dividendof SEK 0.30 per share to the 2017 Annual General
Meeting. This is equivalent to a total dividend of SEK 55

million, and a yield of 0.5 percent based on the priceat year-end. The proposed dividend is equivalent to 32
percent of net profits for the period.
Share capital
At December 31, 2017, the number of shares andvotes in Munters totaled 183,597,802. Each share has
a quota value of SEK 0.03, and share capital totaled
SEK 5,507,934.06. Munters share capital is composed of one share class, in which each share has thesame number of votes and yields the same right to a
dividend. Under the Articles of Association, the numberof shares may not fall below 150,000,000 and notexceed 600,000,000. The Company’s share capital
may not fall below SEK 4,500,000 and not exceed SEK
18,000,000. The Company’s shares are registered with
Euroclear Sweden AB, which administers the Company’s
share register and records the shares for individual persons. Munters holds no shares in treasury.
OwnersAt December 31, 2017, the number of shareholders
totaled 6,514. There are shareholders in a total of 25
countries, and the proportion of shareholders outside
Sweden totaled 67 percent at year-end. The ten largest
individual shareholders had 86.3 percent of the sharecapital at that time. At the end of the year, the members of Munters Group Management held a total of
3,417,330 shares in Munters. Members of the Board of

Directors, excluding the CEO, owned 678,999 sharesat the same point in time. Total Group Management andBoard of Directors holdings in Munters shares corresponded to 2.2 percent of total shares outstanding in the
Company.
Nordic Capital was the largest shareholder, with 50.1
percent of the share capital.
Analyst coverage
At the end of 2017, analysts from Carnegie, Goldman
Sachs, Danske Securities, Nordea, Kepler Chevreux andJefferies were actively following Munters.

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THE MUNTERS SHARE

IN F ORM ATIONFIN AN CIAL

KEY FIGURES

Omsättning aktier (tusental)

SEK

Trading volumes per ’000

15,00015000

Number of shares at year-end (millions)

184

SEK

Market capitalization at year-end (SEKm)

10.1

90

Number of shareholders

6,514

Share price at year-end, SEK

55.25

90

12000

80

80

12,000Earnings per share, SEK

1.45

P/E ratio at year-end

38.05

Change in share price during the year, %0.45

Regular dividend, SEK/share

0.30*

9,000
9000

70

6,000

6000

60

Proportion of shares owned by the ten largest
shareholder groups, %

3,000
3000

50

50

* Proposed dividend

70
60

00 MayJune

R APPORTS

Audit or ’s Repor t

July

Total volume

Aug

The introductory price on May 19, 2017 was SEK 55.

Sep

Closing price

Oct

Munters share

OMX

Nov

OMX Stockholm 30

Dec

Dividend as a percentage of earnings per share

21

Total dividend yield (price increase + dividend), %1.00

Proportion of shares in Sweden, %

33.20
86

40

40

Number of shares traded

THE TEN L ARGEST SHAREHOLDER GROUPSNameSHAREHOLDING, SIZE DIVIDED
Holding
1–500

Number ofshareholders

Holding %Votes %

Holding

Holding %OWNERSHIP DISTRIBUTION PERCOUNTRY

Nordic Capital
FAM AB

91,999,607
20,967,907

50.11
11.42

Finland 1.3%

AMF – Försäkring och Fonder

12,724,802

6.93

ALECTA Pensionsförsäkring,Ömsesidigt

9,190,000

5.01

Första AP-fonden

8,327,387

4.54

CGML PB Client Acct-Sweden Treaty

5,507,933

3.00

CBNY-Norges Bank

3,461,432

1.89

JP Morgan Chase Bank N.A.

2,542,040

1.38

Catella Fondförvaltning

1,908,453

1.04

Leesi, John Peter

1,823,829

0.99

5,479

0.33

0.33

USA 4.8%

501–1 000

368

0.17

0.17

1 001–5 000

417

0.54

0.54

UnitedKingdom 6.7%

5 001–10 000

82

0.35

0.35

10 001–15 000

15

0.10

0.10

15 001–20 000

20

0.19

0.19

20 001–

133

98.31

98.31

Denmark 1.1%

Luxembourg 51.8%
Sweden 33.2%(Other 1.1%)

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BOARD

2017, an exciting year for Munters
Munters had an exciting past year highlighted by its
return to the capital markets as a publicly listed company
this past May. There was a great deal of work on thepart of many employees and our advisor partners who
made the event a success and set the stage for the next
phase of the company. We should also take note that theperiod of time that the company was under the private
ownership of Nordic Capital had a very positive effecthelping shape and position the company for the future.
As we look forward, we are positive about the prospectsof the company as we are active in markets where theunderlying growth is strong, our technology and innovation helps our customers be more efficient and the impactof our solutions is a positive force to do great things forboth business and society. A powerful combination that
motivates our employees each day.
GovernanceTo strengthen our corporate governance, we were fortunate to recruit three highly skilled directors to the board
to complement our existing team adding to the depth ofexperience and diversity of the board. While our “centerof gravity” corporately is Sweden, our board has atruly global outlook which is most appropriate given theinternational potential of the company. We support theboard’s work through two standing committees (Audit
and Remuneration), while engaging the full board on
matters of strategy and policy beyond the charters of thetwo committees.

Munters ahead
Today, the Board and management are focused on insuring the near term performance of the company advances
while also reaching our longer term potential. As such,
we as a Board promote a balanced discussion between
our support, guidance and challenge of management
today and how we execute, while at the same time,­discussing how the company evolves to meet a market
that will undoubtedly work at a faster pace and where
the competitive intensity will increase. This work has resulted in a visionary agenda that management will sharewith our investors and other stakeholders as that program
will be the blue print for how we evolve the business tomeet our future objectives. The agenda focuses on theways in which our company works to insure that we
provide an outstanding customer experience while also
insuring that we “scale” our business efficiently, as firstand foremost, Munters is a growth story.
The Board and management has worked closely
together during the year and we look forward to ourcontinued close collaboration in order to meet the fullpotential of Munters.

Chris Curtis
Chairman of the Board

IN F ORM ATION

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Corporate Governance Report
Munters Group AB (Munters, or “the Company”) is a
Swedish public company listed on Nasdaq Stockholm.
Corporate governance is primarily regulated by the
Swedish Companies Act and other Swedish legislation,
by Nasdaq Stockholm’s rulebook for issuers, and by the
Swedish Corporate Governance Code (“the Code”).
Munters has applied the Code starting from May 19,
2017, when the company’s shares were admitted for
trade on Nasdaq Stockholm.
THE MUNTERS CORPORATE GOVERNANCESTRUCTURE
1 Shareholders
2

95

GeneralMeeting

External
Auditor
Audit
Committee

3

4

Board ofDirectors

8

CEO

Group

7 Management

6

Nomination

Committee

Compensation
Committee

Observance of rules
External governance systems
The external governance systems that constitute theframework for corporate governance at Munters consist
primarily of the Swedish Companies Act, the Swedish
Annual Accounts Act, Nasdaq Stockholm regulations,and the Code, as well as, other applicable regulations
and relevant legislation.
Internal governance systems
The Articles of Association adopted by the Annual General Meeting (AGM), the Munters Board Rules of Procedure
adopted by the Board, the instructions for the CEO andthe instructions for the Compensation and Audit Committees constitute the key internal governance systems.
In addition to this, the Group has a number of policies
and instructions with rules and principles for the Group’s
operations and employees, for example, the Code of
Conduct, the Policy against Bribes and Corruption, andthe Insider Policy.
Deviations from the Code
The Code applies to all Swedish companies whose
shares are listed on a regulated market in Sweden, andshall apply from the first day of trade. The Code indicates a norm for good corporate governance at a higher
level of ambition than the minimum requirements of theSwedish Companies Act and other rules.
The Code is built on the “comply or explain” principle.
This means that the company does not have to observe

every rule in the Code at all times, but can choose othersolutions deemed to better respond to the circumstancesin the individual case provided that the Company openly
reports every such deviation, describes the solution
chosen instead and indicates the reasons for this in thecorporate governance report.
Munters deviates from Rules 9.7 and 9.8 in the Code
Munters deviates from Rule 9.7 in the Code with respect
to the warrant program introduced in connection withlisting the Company’s shares on Nasdaq Stockholm.
Pursuant to the terms of one of the two warrant series,
participants may exercise such warrants to subscribe
for shares after a two-year period, a shorter period thanthe minimum three years prescribed by the Code. The
other warrant series entitles participants to exercise thewarrants to subscribe for shares after a three-year period.
The offering of warrants with terms of exercise after two
and three years, respectively, is considered to be in linewith Munters long-term business plan, strategy, and financial targets. In future, Munters intends to implement only
three-year programs.
Munters deviates from Rule 9.8 of the Code in that the
CEO’s total entitlement of fixed salary during notice period­and severance pay upon the Company’s termination of
his employment will amount to three years’ fixed salary,which exceeds the two years’ fixed salary prescribedby the Code. During the notice period (12 months) andthe period when severance pay is paid (24 months), theCEO will be subject to a non-competition undertaking,M U NT E R S

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C o r p o ra t e Gover nance Re p o r twhich the Company considers to be in the interest of theCompany and its shareholders, and thus motivates thedeviation from Rule 9.8 of the Code.
Munters Articles of Association
Munters Articles of Association were adopted at an
Extraordinary General Meeting on May 7, 2017, andwere registered at the Swedish Companies Registration
Office on May 19, 2017. The complete Articles of Association can be found at the Munters website.
1 Shareholders
Shares in Munters have been listed on Nasdaq Stockholm
since May 19, 2017. The number of shares in Munters
Group AB totaled 183,597,802 at year-end. All shares
are of the same type, and have equal rights in every
respect.
On December 31, 2017, Munters had 6,514 shareholders. The largest shareholders were Nordic Capital(50.1 percent of votes) and FAM (11.4 percent of votes).
Additional information on the share and shareholders
can be found on Munters website.
2 Annual General Meeting
Pursuant to the Swedish Companies Act (SFS 2005:551),
the Annual General Meeting (AGM) is the Company’s
supreme decision-making body, where the shareholders
exercise their voting rights.
Shareholders who are recorded in the share registeron the record date who have registered for the AGM
within the time period indicated in the notice to attend
have the right to participate in the AGM, either in personor by proxy.
At the Annual General Meeting, each share carries
one vote, and shareholders are entitled to vote for the
total number of shares held or represented, without limitation of the voting powers.

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Decisions at the AGM are normally decided by simple
majority. On certain issues, however, the Swedish Companies Act prescribes a qualified majority of votes, andin certain individual cases a certain portion of shareholders present, as well, in order to achieve a quorum.
The AGM is charged with appointing Board members and the Chairman of the Board, selecting auditors,
deciding on the adoption of income statements and balance sheets, and appropriation of the Company’s earnings, as well as, discharge from liability for the Boardand the CEO. The AGM also decides, where appropriate, on issues such as changes to the Articles of Association, the adoption of principles for the composition andwork of the Nomination Committee and guidelines forterms of compensation and employment for the CEO andother senior executives.
The AGM must be held within six months from the endof the financial year. Munters AGMs are held in Stockholm,
Sweden, every calendar year before the end of June.
Pursuant to the Articles of Association, notices convening Annual General Meetings are issued throughannouncement in Post- och Inrikes Tidningar (the Swedish
Official Gazette), as well as, on Munters website.
­Announcement to the effect that a notice convening a
AGM has been issued shall be made in Svenska
Dagbladet.
Apart from the AGM, Extraordinary General Meetings
may be held if the Board considers it to be necessary,or if Munters auditor or owners of at least ten percent of
total shares in the Company requests one.
All shareholders who are directly recorded in theshare register maintained by Euroclear Sweden five
weekdays (Saturdays included) prior to the Annual
General Meeting and who have notified the Companyof their intention to participate in the AGM not later thanthe date indicated in the notice of the AGM are entitled
to attend the AGM and vote for the number of shares

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Audit or ’s Repor tthey hold. In addition to notifying the Company, shareholders whose shares are nominee registered through abank or other nominee must request that their shares be
temporarily registered in their own names in the register
maintained by Euroclear Sweden, in order to be entitledto participate in the AGM. Shareholders should informtheir nominees well in advance of the record date.
Shareholders may attend AGMs in person or by proxy
and may also be accompanied by a maximum of two
people. It will normally be possible for shareholders toregister for the AGM in several different ways, as indi­cated in the notice of the meeting.
Shareholders who wish to have an issue brought
before the AGM must submit a request in writing to
the Board ­of Directors. The request must normally bereceived by the Board of Directors not later than sevenweeks prior to the AGM.
Annual General Meeting and extraordinary meetings
during the Spring of 2017
At an Extraordinary General Meeting on February 3, 2017,
Helen Fasth Gillstedt was appointed new Board member.
Prior to the listing of the Company’s shares on Nasdaq
Stockholm in May 2017, decisions were taken at theAGM on March 28, 2017, and at the extraordinary
General Meeting on May 7, 2017, on issues including
the adoption of guidelines on compensation for senior
executives, instructions for the Nomination Committee,
the election of Board members, and the introductionof incentive programs for certain individuals in GroupManagement.
2018 Annual General Meeting (AGM)
The 2018 Annual General Meeting will be held on May
17, 2018, in Stockholm. For further information, see
Munters website.

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3 Nomination Committee
Pursuant to the Code and the criteria adopted
by the 2017 AGM, the Nomination Committee in respectof the AGM shall be composed of representatives of thefour largest shareholders in terms of voting rights listed
in the share register maintained by Euroclear Sweden
AB as of the last banking day of August each year. The
Nomination Committee also includes the Chairman of theBoard, who convenes the first meeting.
Prior to the AGM, the Nomination Committee shall present proposals concerning the Chair of the meeting, Board
members including who shall be the Chairman of theBoard, remuneration for the Chairman and other board
members, as well as remuneration for committee work,

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Hi st or yelection of and remuneration to the auditor and proposals
for changes to the Nomination Committee instructions for
the AGM , which shall be valid until further notice.
The composition of the Nomination Committee for
the AGM shall normally be announced no later thansix months before that meeting. Remuneration shall not
be paid to the members of the Nomination Committee.
Changes in the composition of the Nomination Committee shall be made public immediately.
Shareholders who wish to submit proposals to the­Nomination Committee may do so via the Committee’se-mail: valberedningen@munters.se or via mail. Munters
Group AB, Nomination Committee, Box 1188,
SE-164 26 Kista, Sweden.

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N OMIN ATION COMMITTEE PRIOR TO
T H E 2 018 A G M
Name

Appointed by

Share of
votes, 2017

Robert Furuhjelm, Chairman,
Nomination Committee

Nordic Capital

50.1%

Lars Wedenborn

FAM AB

11.4%

Tomas Risbecker

AMF Försäkringar och Fonder

6.9%

Magnus Billing

Alecta5.0%

Chris Curtis

Chairman of theBoard, Munters

0.3%

2 017 B O A R D M E E T I N G S
During 2017, the Board of Directors held 20 meetings.
Below is an overview of the most important issues addressed at these meetings.

February
Four meetings. Helen Fasth Gillstedt new chair of Audit Committee. Approvalof 2016 year-end accounts. Approval of new leasing agreement in China.

December
Two meetings. Decision on press release concerning developments in the
Data Centers business area. Compensation to CEO and CFO for 2018.

March

One meeting. Decision on approval and release of 		Q2 report.

OCT

A PR

G

AY

U

A

AugustF
M AR

One meeting. Strategy 2018–2020.

DEC

SEP

September

O

V

EB

Three meetings. Decision on approval and release of Q3
report. 2018 financial plan. Discussion of long-term strategy.

N

November

J AN

JU L

JU N

M

Four meetings. EY presented its audit work for 2016. Approval of 2016
Annual Report and 2017–2019 business plan. Approval of acquisitionof Edata. Adoption of financial targets and dividend policy. Appointment of members of the Audit and Compensation Committees. Application to Nasdaq Stockholm on admission for trading. Adoption ofpolicies. Decision on concluding new financing.
April
Two meetings. Approval of Q1 report. Establishment of new subsidiary in Thailand and capital contribution to said company. Approvalof press release confirming Munters intention to be listed on the stock
exchange.
May
Three meetings. Approval of prospectus ahead of listing. Decision on
allocation of shares in set-off issue, warrants in the incentive programs andshares in new share issue prior to listing.

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Nomination Committee prior to the 2018 AGM
The composition of the Nomination Committee prior to
the 2018 AGM was announced through a press releaseand published on Munters website on September 27,
2017. Up until the statement of the Annual Report, theNomination Committee had four minuted meetings.
The Nomination Committee has announced that it has­applied Rule 4.1 of the Code as diversity policy inproducing the proposal for the Board prior to the2018 AGM.
4 Board of Directors
The duties of the Board of Directors are primarily set forthin the Swedish Companies Act and the Code. In addition
to this, the work of the Board is guided by formal rulesof procedure that the Board adopts every year. The rulesof procedure govern the division of work and of responsibility among the members of the Board, its committees,
its Chairman and the CEO. The instructions for the CEO
also contain instructions for financial reporting.
The tasks of the Board of Directors include adopting
strategies, business plans and targets, and issuing interim
reports and year-end financial statements, as well as, setting policies and guidelines. The Board is also required
to follow economic developments and ensure the qualityof financial reporting and the internal controls, andevaluate the Group’s operations based on the objectives
and guidelines set by the Board of Directors. The Boardis also responsible for appointing the CEO. Finally, theBoard of Directors decides on major investments andchanges in organization and activities.
Composition of the Board of Directors
According to the Company’s Articles of Association,
Munters Board of Directors shall consist of at least threeand no more than ten members elected by the AGM fora term of office until the end of the next AGM. The Board

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IN F ORM ATION

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COMPOSITION OF THE BOARD OF DIRECTORSNameElected inFee, SEK5

Independent

Present
Board
Meeting

Audit
Committee

Chris Curtis, Chairman

2015

1,050,000

Yes

20/20

Helen Fasth Gillstedt

2017

500,000

Yes

19/19

Per Hallius

2013

400,000

7

Yes

19/20

Joakim Karlsson

2010

400,000

No1

13/20

John Peter Leesi,
President and CEO

2011

–

No

19/20

Andreas Näsvik

2011

400,000

No1

19/20

3/5

Lena Olving

2017

400,000

Yes

10/126

4/5

Kristian Sildeby

2017

366,667

No1

8/86

Joachim Zetterlund

2012

450,000

Yes

19/20

3

Pia Nordqvist

2010

–

–-

19/20

3

2

6

Robin Hedén

2017

–

–

17/20

Simon Henriksson4

2017

–

–

17/20

Robert Wahlgren

2010

–

–

20/20

4

Compensation
Committee
5/5

5/5

5/5

5/5

1) Independent in relation to the Company and Group Management, but not to the Company’s major shareholders.
2) Independent in relation to the Company’s major shareholders, but not to the Company and Group Management.
3) Employee representative.
4) Employee representative, deputy.
5) Remuneration determined regarding work from the 2017 AGM to the 2018 AGM.
6) Participation in the meetings held from the date when the respective individual was elected to the Board of Directors.
7) Per Hallius has a consulting agreement with Nordic Capital Limited and Nordic Capitals Fonder.

currently consists of nine members elected at the meeting.
The trade unions have the right under Swedish law torepresentation on the Board, and they have appointed
two members and two deputies.
At the AGM on March 28, 2017, Lena Olving waselected to the Board, and at the Extraordinary General
Meeting on May 7, 2017, Kristian Sildeby was electedto the Board. The CEO of Munters is part of the Boardof ­Directors, and the CFO participates as a presenterat Board meetings. Lawyer Johan Lekholm serves as theM U NT E R S

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Board’s secretary. Other Company officers participate inBoard meetings to provide presentations on specific issues.
Independence of the Board of Directors
In accordance with the Code, a majority of the Board
members elected by the General Meeting are to be independent in relation to the Company and its management,
and two of these must be independent in relation to theCompany’s major shareholders. The Board members’
position of dependence is indicated by the table “Composition of the Board of Directors.”
Responsibilities of the Chairman of the Board
The Chairman of the Board of Directors leads and governs the work on the Board, ensuring that its activities are
conducted efficiently. The Chairman also ensures that theSwedish Companies Act and other applicable laws andregulations are observed, and that the Board is given the
training required and that it improves its knowledge of
Munters. The Chairman follows operations in close dialogue with the CEO, conveys opinions from shareholders
to the other Board members, and serves as a spokesperson for the Board. The Chairman of the Board is
responsible for other Board members receiving sufficient
information to perform their work effectively, and for
ensuring that the decisions of the Board are implemented.
The Chairman of the Board is also responsible for the
Board evaluating its work on a yearly basis.
Remuneration for the Board of Directors
At the 2017 AGM, it was decided that fees of SEK
1,050,000 would be paid to the Chairman and of
SEK 400,000 each to the other members elected at themeeting. It was further decided that fees of SEK 100,000
would be paid to the Chairman of the Audit Committee
and of SEK 50,000 to the Chairman of the Compensation Committee.

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Evaluation of the work of the Board
Every year, an evaluation must be conducted to ensure
the quality of the work of the Board and to survey theneed, if any, for additional competence or experience.
The Chairman of the Board is responsible for conducting
this evaluation and for providing it to the Nomination
Committee. Upon request of the Nomination Committee,
the Board members must participate in interviews with theNomination Committee so as to facilitate the evaluation.
Under 2017, the Board conducted a Board evaluationin which the members of the Board had to respond to
a comprehensive questionnaire concerning issues suchas strategies and objectives, investments, reporting andcontrol, organization and directors, the forms of theBoard’s work, the composition and overall function of
the Board of Directors, and their competence and theirown work on the Board. The Nomination Committee
was notified of the outcome of the Board evaluation in
January 2018.
Board Committees
The Board of Directors has two committees: the Audit
Committee and the Compensation Committee. Reports
to the Board on issues addressed during the meetings of
the Committees are either in writing or given orally. The
work of each committee is performed in accordance withwritten policies and the rules of procedure stipulated by
the Board of Directors. Minutes of committee meetings
are provided to all Board members.
5 The Audit Committee
The overall task of the Audit Committee is to ensure
fulfillment of the Board of Directors’ supervisory duty
in relation to internal control, audit, risk management,
accounting and financial reporting; to prepare mattersregarding the procurement of audit and other services
provided by the auditor; and to prepare certain accounting and auditing matters to be resolved by the Board.

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Audit or ’s Repor t

The Audit Committee must review procedures and routines for the aforementioned areas. The Audit Committee
shall submit recommendations and proposals to ensure
the integrity of the financial reporting and its compliancewith generally accepted accounting principles, and continually discuss the efficiency of the Company’s accounting
principles and financial control with the auditors andGroup Management, and consider any recommendations
regarding improvements to internal control. In addition,
the Audit Committee shall monitor the impartiality andindependence of the auditor, evaluate the audit workand discuss collaboration between the auditor and theCompany’s internal control function. The Audit Committee
shall also assist the Nomination Committee in preparing
nominations for auditor and proposals in respect of audit
fees by submitting recommendations to the Nomination
Committee.
The Audit Committee shall, during the period between
two consecutive AGMs hold at least five meetings, normally in conjunction with ordinary meetings of the Boardof Directors.
The Audit Committee has three members: Helen Fasth
Gillstedt (chair), Andreas Näsvik and Lena Olving. The
Audit Committee fulfills the requirement in respect ofaccounting and auditing competence as set forth in the
Swedish Companies Act.
The Audit Committee had five meetings during 2017.
Members’ attendance is shown in the table on page 70.
6 Compensation Committee
The task of the Compensation Committee is to prepare­issues relating to compensation for the CEO and Muntersother senior management.
The Compensation Committee proposes guidelines
for, among other things, the relationship between fixedand variable compensation, the principal conditions forbonuses and incentive schemes, conditions for nonmonetary benefits, pensions, termination and severanceM U NT E R S

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pay. The Committee also makes proposals on individualcompensation packages for the CEO and other executives in the Company’s senior management. Furthermore,
the Compensation Committee shall monitor and evaluate
the outcome of variable compensation schemes and theCompany’s compliance with compensation guidelines
adopted by the Annual General Meeting.
The Compensation Committee has three members:
Joachim Zetterlund (Chairman), Christopher Curtis andAndreas Näsvik.
The Compensation Committee had five meetings

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during 2017. Members’ attendance is shown in the tableon page 70.
7 Group Management
Apart from the President and CEO, Group Management
consists of four business area Vice Presidents and the
CFO, and seven Group Vice Presidents responsible forthe following central functions: Global Operations, Global
Services, Innovation and Technology, HR & Communications, Strategy & Business Development, CSR and Investor
Relations.

GROUP MANAGEMENT
President and CEOJohn Peter Leesi
CFO
Jonas Ågrup

Global Services
Sebastien Leichtnam

HR & Communications
Per-Arne Håkansson

Innovation and Technology
Paul Dinnage

Strategy & Business Development
Johannes Fabó

Global Operations
John Peter Leesi (acting)Corporate Social Responsibility
Sara Punkki
Investor Relations
John Womack

China
Wolf FrankAir Treatment
Scott Haynes

Hi st or y

Data Centers
Neil Yule

AgHortPeter Gisel-Ekdahl

Mist Elimination
Wolf FrankIN F ORM ATIONFIN AN CIALR APPORTS

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Until August 1, Per Hedebäck was Group VP for Mist
Elimination. Until September 2017, Ola Carlsson wasGroup VP for Global Operations. For the rest of the year,
John Peter Leesi was acting VP for Global Operations.
Katarina Lindström has been recruited for this role, andshe will take office in the spring of 2018.
8 CEO
The CEO is responsible for day-to-day management inaccordance with the guidelines and instructions of theBoard of Directors. The CEO’s responsibilities include
taking all measures necessary to ensure that the organization and control of the Company’s accounting takes
place in accordance with current rules and regulations.
The CEO shall also prepare all necessary informationand supporting documentation for Board meetings and,if requested by the Chairman of the Board, to summon
the meeting. The CEO reports at the Board meetingsand shall submit motivated proposals for decision to theBoard of Directors.
The CEO shall ensure that the Board members continually receive all information necessary to assess the Company’s financial situation. The quality of the report shallbe such that it permits the Board of Directors to make awell-grounded assessment.
Guidelines for compensation to Group Management
Guidelines for compensation to senior executives areevaluated and put forward for approval on a yearly basis at the AGM by the Board of Directors. Compensation
for the CEO is prepared by the Compensation Committee
and decided by the Board of Directors. Compensationfor other senior executives is prepared by the CEO anddecided by the Compensation Committee.
The guidelines decided on at the AGM on March 28,
2017, and which are in effect until the 2018 AGM, aredescribed below.
The group of senior executives encompassed by theM U NT E R S

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guidelines comprises the CEO and other members ofGroup Management, as well as, members of the Boardof Directors of Munters, to the extent employment or
consulting agreements are entered into. The guidelines
are valid for remuneration under agreements entered into
after the approval of the guidelines by the AGM, and forchanges made to existing agreements thereafter.
Compensation to Group Management may consistof fixed salary, variable salary, long-term incentive
programs, pension and other benefits. The total remuneration package should be based on market terms, becompetitive and enable Munters to recruit and retain the
managers needed for the Company to meet its short-termand long-term targets.
Fixed salary
The fixed salaries for the CEO and the other membersof the senior management shall mirror the demands
and responsibility that the position entails, as well as,
individual performance. The fixed salaries for the CEO
and the other members of the senior management are to
be reviewed on a yearly basis. To the extent a member ofthe Board of Directors carries out work for the Company
or for another Group company, in addition to the workfor the Board, consulting fees and/or other remuneration for such work may be payable. Annual fixed salaryhere means fixed salary in cash earned during the year
excluding pension, supplements, benefits and the like.
Variable salary
Variable salary in cash is conditional upon the fulfillment of defined and measurable criteria and should be
maximized to 140 percent of the annual fixed salary
for the CEO and 70 percent for the other members ofsenior management. These criteria are determined forthe promotion of the Company’s short-term and longterm targets, long-term development, value creation andfinancial growth and shall be designed not to encourage

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Hi st or yexcessive risk-taking. Terms and conditions for variablesalary should be designed so that the Board of Directors,
if exceptional economic circumstances prevail, has theoption of limiting or refraining from payment of variablesalary if such a measure is considered reasonable.
Long-term incentive programs
The Company’s long-term incentive programs aim at creating long-term commitment to the Company, attracting
and retaining members of the senior management andkey employees, and to align the interests of the participants with the interests of the shareholders.
The Company’s long-term incentive programs should
constitute a complement to the fixed salary and the variable salary, with participants to be nominated based on
factors such as competence and performance.
Pension benefits
Pension benefits should be defined-contribution. For
senior executives outside Sweden, pension benefits mayvary due to legislation or practice in the local market.
Notice period and severance pay
Fixed salary during notice periods and severance pay,
including remuneration for any non-compete restrictions,shall in aggregate not exceed an amount equivalent
to the fixed salary for three years for the CEO and 18
months for the other members of senior management.
Other benefits and compensation
Other compensation may consist of other benefits thatare customary and in line with market practice, suchas healthcare insurance, which shall not constitute amaterial portion of the total remuneration. Additional ­compensation may after decision by the Board of Directors be paid out in extraordinary circumstances, provided
that such arrangement is made for management recruitment or retention purposes and is agreed only in indi-

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Audit or ’s Repor tvidual cases. Such extraordinary arrangements may, forexample, include a one-off cash payment, or a support
package including relocation support or similar.
Deviations from the guidelines
The Board of Directors may resolve to deviate from theguidelines if the Board of Directors, in an individual
case, is of the opinion that there are special circum­
stances justifying that.
Current terms of employment for the CEO 		
and Group Management
Compensation
Compensation to the Group Management comprises
fixed salary, variable compensation, pension and otherbenefits. Note 28 contains information about salaries
and other remuneration for the CEO and other senior
executives recognized as expenses in 2017.
Notice of termination
The notice period for the CEO and other membersof Group Management is six months in the event oftermination by the senior executive, without entitlement
to severance pay. In the event of termination by Munters,
the notice period is 12 months for the CEO and 6 months
for other members of Group Management.
In such an event, severance pay equivalent to 24
months’ salary is payable to the CEO and severance
pay equivalent to 12 months’ salary is payable to othermembers of Group Management.
Share-based incentive programs
At the Munters Extraordinary General Meeting on May
7, 2017, it was resolved to issue warrants as part ofan incentive program for certain members of GroupManagement (the “Participants”). In total, the incentive
program comprises eight individuals and not more than
5,222,000 warrants. The Participants were allowed toM U NT E R S

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subscribe for warrants at a market value corresponding
to in total not more than SEK 17.99 million. The maximum number of warrants corresponds to approximately
2.77 percent of Munters share capital, assuming full
exercise of the warrants.The warrants are being issued
in two separate series. Each Participant has received anequal number of warrants of both series.
The number of warrants depends on the Participant’s
position within Munters, and the number of shares heldby the Participant at the time the program commenced.
Series 2017/2019 comprises up to 2,611,000 warrants that may be exercised during the following subscription period: May 19 to November 19, 2019, with the
exception of the thirty-day period preceding, (a) the day of
publication of the company’s interim report for the second
quarter of 2019, and (b) the day of publication of theCompany’s interim report for the third quarter of 2019.
Series 2017/2020 comprises up to 2,611,000 warrants that may be exercised during the following subscription period: May 19 to November 19, 2020, with the
exception of the thirty-day period preceding (a) the day of
publication of the company’s interim report for the second
quarter of 2020, and (b) the day of publication of theCompany’s interim report for the third quarter of 2020.
The exercise price for Series 2017/2019 corresponds
to 121.22 percent of the offer price per share in connection with the Company’s listing on Nasdaq Stockholm(SEK 55), but may not be lower than the quotient value ofthe share. Furthermore, if at the time of subscription, thelast paid price for the shares on the closing of the stock
exchange on the trading day preceding the subscriptionof new shares exceeds 157.74 percent of the determined
exercise price, the exercise price shall be increased with
an amount corresponding to an amount of the said pricethat exceeds 157.74 percent of the exercise price.
The exercise price for Series 2017/2020 corresponds
to 130.91 percent of the offer price per share in connec-

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Hi st or ytion with the Company’s listing on Nasdaq Stockholm(SEK 55), but may not be lower than the quotient value ofthe share. Furthermore, if at the time of subscription, thelast paid price for the shares on the closing of the stock
exchange on the trading day preceding the subscriptionof new shares exceeds 189.29 percent of the determined
exercise price, the exercise price shall be increased with
an amount corresponding to an amount of the said pricethat exceeds 189.29 percent of the exercise price.
The terms of both warrant series include customaryrecalculation provisions, including for dividend payments
made prior to the exercise of the warrants. The Company has reserved the right to repurchase warrants if, forexample, the Participant’s employment with the Company
is terminated. Munters total costs for the program during
its term are not expected to exceed SEK 13.3 million(mainly relating to social security contributions for Partici­
pants in jurisdictions where participation in the incentive
program is taxed as earned income).
9 External auditor
Munters external auditor is appointed by the AGM. The
auditor reviews the Annual Report and the consolidated
financial statements, as well as, management by the
Board of Directors and the CEO. The audit is conducted in accordance with the International Standards on
Auditing and generally accepted auditing standards in
Sweden.
The audit is reported on a continual basis over theyear to the Company’s Audit Committee. Over the year,
the auditor participated in all Audit Committee meetingsand in the Board meeting where the annual accounts
are addressed. The auditor participates in the AGM,
describing the audit work and the observations made in
the audit report there.
The fee for the auditor for their audit work is paid out
on a continual basis according to approved invoices.

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Apart from audit work, Munters audit firm EY provided
other services during the year, primarily tasks in conjunction with the Company’s listing, acquisitions andtax-­related issues. For information on remuneration to EY,
refer to Note 29.
EY has been Munters auditor since 2010, and Erik
Sandström, authorized public accountant and memberof FAR (the professional institute for authorized public
accountants in Sweden), has been auditor-in-charge since2012. At Munters AGM in 2016, EY was re-elected asauditor for a term of office of four years, up through the2020 AGM.

Erik Sandström,
Authorized Public
Accountant, EY

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Internal control and risk management
Internal control deals with clarity and order, as well aswith ensuring that what is to be done is done the way
it was intended. Internal control is the collective term
for the organization and the systems, processes, androutines that enable it.
Munters internal control of its financial reporting isbased on the framework issued by the Committee ofSponsoring Organizations of the Treadway Commission(COSO). The most important objectives for Munters
internal control environment for financial reporting is that
it is suitable and efficient, produces reliable reports andcomplies with laws and regulations.
Control environment
Internal control is formed by the overall control environment. The Board of Directors is responsible for adopting
an efficient system of internal control and governing thework through the CEO. Group Management sets thetone for the operation, influencing employees’ awarenessregarding control. One precondition for a strong control
environment is that there are clearly defined values interms of ethics and integrity, and that these are communicated through governing documents such as policies,
guidelines, manuals and codes. For financial reporting,Group Management in Munters issues policies and guidelines to all its subsidiaries, which are followed up withnewsletters, telephone conferences, and direct control
activities. Courses are also conducted for many areas ofaccounting, internal reporting requirements and systems.
The basis for the internal control process consists of aframework that creates structure for the other four components in the process: risk assessment, control activities,
information and communication, and monitoring.
Risk assessment
Risk assessment is conducted on a yearly basis pursuant

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and regulatory risks into account. For more information on Munters' risk assessment efforts, refer to pages
61–63.
Control activities
Control activities are carried out in the entire organization, at all levels, and for all functions. They encompass a range of different activities such as approvals,
reconciliations, review of the operation’s earnings andallocation of responsibilities. Munters CFO is respon­sible for ensuring that identified risks relating to financial
reporting at the Group level are addressed. Withineach reporting unit, the finance staff are responsible forfair and accurate accounting and balancing the books.
Global controllers, as well as, financial directors in therespective business areas, update forecasts and conduct
outcome analyses. All business areas present their financial results in written reports on a monthly basis to the
CFO, who in turn presents these to Group Management.
Information and communication
Munters has informational and communications channels
that aim at ensuring that information is identified, collected,
and communicated in a way and within a time framethat enables employees and directors to perform theirtasks. Instructions for reporting and accounting guidelines are conveyed to the employees concerned throughmonthly newsletters and quarterly telephone conferences.
The Group uses a shared system for reporting and consolidation of financial information.
Governing documents – in the form of policies,
guidelines, and manuals for financial reporting – are

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communicated primarily via the intranet and the Group’s
financial handbook, which is updated as needed.
Information for external parties is communicated on
Munters' website together with other news and press
releases. Quarterly reports are published and supplemented with presentations and investor meetings.
The Annual Report is provided to shareholders andother stakeholders through publication on Munters' website, and in print upon request.
Monitoring
The Board of Directors has final responsibility for all
decisions regarding compliance within Munters. The
Board reviews and approves internal control policies
on a yearly basis. If needed, review and approval are
conducted more frequently.
Every head of division is ultimately responsible for thefinancial information for their respective divisions. The
information is further followed up at the business arealevel, by Group Management and, finally, by the Boardof Directors. Munters financial position, strategies, andinvestments are discusses at every Board meeting. The
Board is also responsible for monitoring internal control.
This effort encompasses tasks such as ensuring thatmeasures are taken to manage any deficiencies, and following up on proposals for measures that were pointed
out in conjunction with the external audit.
Munters has no internal audit function, as it is theBoard’s opinion that the Company’s internal organization and processes for monitoring fulfill this function in asatisfactory manner.

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CHRIS CURTIS

H E L E N FA S T H
GILLSTEDTPER HALLIUS

JOAKIM KARLSSONJOHN PETER LEESIANDREAS NÄSVIK

L E N A O LV I N G

Born 1957. Chairman of theBoard since 2015. Member of
the Compensation Committee.

Born 1962. Board member
since 2017. Chairman of the
Audit Committee.

Born 1962. Board member since2013.

Born 1971. Board member
since 2010.

Principal education andprofessional experience: M.Sc.
in Finance & Control and International Business, Stockholm
School of Economics. Studies
in Sustainable Development,
Stockholm Resilience Center at
Stockholm University and KTH
Royal Institute of Technology.
Over twenty years of experience in leading positions at
Statoil and SAS Group.

Principal education and professional experience: M.Sc. in
Economics, Stockholm Schoolof Economics. Part of theadvisory group of JP Morgan,
1997–1998. Attendance in
the Swedish Army Language
School. Employed at the Stockholm Institute of East European
Studies, 1993–1994, and theSwedish Embassy in Moscow,
1991–1993.

Born 1975. Board member
since 2011. Member of the
Audit Committee and the Compensation Committee.

Born 1956. Board member
since 2017. Member of the
Audit Committee.

Principal education andprofessional experience: BA,
LeMoyne College. Studies in
History and Economics. Twenty
years of experience in leading
positions at Schneider Electric.

Principal education andprofessional experience: MBA,Harvard Business School. M.Sc.
in Economics and Business
Administration, Stockholm Schoolof Economics. Independent
advisor, board representativeand investor. Almost 25 years
in management consulting, mostrecently as Senior Partner at the
Boston Consulting Group.

Born 1961. President andChief Executive Officer since
2014.

Other current assignments/
positions: CEO of Wencor
Group. Non-executive director
of S&C Electric Company.
Trustee of LeMoyne College.
Previous assignments/
positions (past five years):
CEO of Schneider ElectricNorth America. Non-executive
director of Aegion Corporation
and Kimball Electronics.
Holding in Munters Group AB:
501,437 Shares.*

Other current assignments/
positions: Board member ofHandelsbanken Fonder AB,
Samhall AB, Humana AB, andCEO of Blong AB.
Previous assignments/		
positions (past five years):
Board member of AcadeMediaAB, Lindorff Group AS, Swedesurvey AB, Svefa Holding AB,
Sjölunda Gård Ekogrossisten
AB.
Holding in Munters Group AB:
3,000 Shares.*

Other current assignments/
positions: Chairman of theBoard of Nefab Group AB.
Vice Chairman of the Board of
Ruukki Construction Oy. Board
member of PMH Affärsutveckling
AB, Beowulf AB and Quant AB.
Industrial Advisor to the Nordic
Capital Funds. Advisor to senior
executives of large industrial
multinationals.
Previous assignments/positions(past five years): Chairman of
the Board of United Minds Samhällsanalys AB and My Academy
Sweden.
Holding in Munters Group AB:
84,031 Shares.** No indirect holding

Other current assignments/
positions: Chairman of theBoard of Nordic Capital AB
and Partner of NC Advisory AB, advisor to the Nordic
Capital Funds. Board member
of Resman AB, Coach Nebez
Academy AB, Cidron Full
Service Top Holding AB, andLuvata Oy. Deputy Board member of Motiv Stockholm AB.
Previous assignments/positions(past five years): Chairman of
the Board of Nordic Fashion
Topholding AB. Board member
of Reynolds Holding AB.
Deputy Board member of Ellos
Holding AB.
Holding in Munters Group AB: –*Principal education and professional experience: BA in Business and Finance, Stockholm
University. Chairman of theBoard of Munters 2012-2015.
Former CFO of Sony Ericsson.
Other current assignments/
positions: Board member ofIncell International AB.
Previous assignments/positions(past five years): Chairmanof the Board of Luvata Heat
Transfer Solutions I AB and
Luvata Oy.
Holding in Munters Group AB:
1,823,829 Shares and2,500,000 warrants.*

Principal education andprofessional experience: M.Sc.
in Economics and Business Administration, Stockholm Schoolof Economics. Work with corporate finance, private equity,
mezzanine investing and debt
restructuring in Deutsche Bank,
Goldman Sachs Investment
Banking and Goldman Sachs
Capital Partners.

Principal education andprofessional experience: M.Sc.
in Mechanical Engineering,
Chalmers University of Technology. President and CEO of
Mycronic AB (publ). Former
Deputy CEO and COO of
Saab AB (publ), leading positions at Volvo Personvagnar AB
during 25 years, incl. 7 years
in Group Management. CEO
of Samhall Högland AB.

Other current assignments/
positions: Board member of
SNV Holding AB, Avvir Invest
Svenska AB, Hinter Lake Holding AB, and Lock TopCo AS.
Partner of NC Advisory AB,advisor to the Nordic CapitalFunds, and board member ofIntrum AB.

Other current assignments/
positions: Board member of
Investment AB Latour (publ),
Teknikföretagen and Kollegiet
för svensk bolagsstyrning.

Previous assignments/positions (past five years): Board
member of Lindorff AB.

Holding in Munters Group AB:
500 Shares.*Holding in Munters Group AB: –*Previous assignments/positions(past five years): Board member of SJ AB and NovozymesAS.

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KRIS TIAN SILDEBYJOAC HIMZETTERLUNDPIA NORDQVISTROBIN HEDÉNS I M O N 			HENRIKSSONR O B E R T WA H LG R E N

Born 1976. Board member
since 2017.

Born 1963. Board member
since 2012. Chairman of theCompensation Committee.

Born 1973. Board member
since 2004. Employee
representative appointed byUnionen.

Born 1991. Board member
since 2017. Employee
representative appointed by
IF Metall.

Born 1984. Deputy member
since 2017. Employee
representative appointed by
IF Metall.

Born 1969. Deputy member
since 2009. Employee
representative appointed byUnionen.

Position at Munters: Senior
Business Application Specialist,
Munters AB.

Position at Munters: Unit Assembler, Tobo plant.

Position at Munters: Material
supplier, Tobo plant.

Holding in Munters Group AB: –*Holding in Munters Group AB:
350 shares*

Position at Munters: Customized Project Engineering Coordinator, Munters Europe AB.

Principal education andprofessional experience: M.Sc.
in Economics and Business­Administration, Stockholm
School of Economics.
Investment Manager and CFO
in FAM AB. Former Vice President, Head of Finance and Risk
Management at Investor AB.
Other current assignments/
positions: Chairman of theBoard of 82an Invest AB,
Board member of Höganäs AB,
Nefab Holding AB, Sol Voltaics
AB, QuNano AB, and Kivra AB.
Previous assignments/positions(past five years): Chariman of
the board of Blasieholmen 54
Restaurang AB, Board memberof Lindström & Göthberg Executive Development AB, PowerWind Partners AB, Elk Holding
AB and Mathias Dahlgren
Innovations AB.
Holding in Munters Group AB:
6,000 Shares.** No indirect holding

Principal education andprofessional experience:
Executive Vice President E­ urope
Corechange, Managing
Director Preferred Accounts
Division Dell UK, Vice President
Northern Europe Cambridge
Technology Partners andBusiness Area Manager DigitalMedias Expressen.
Other current assignments/
positions: Chairman of theBoard of One Agency AB
and FörlagsSystem AB. Board
member of MHI Investments
AB, JZ Business Development
AB, Quant AB and Xpeedio
Support Solutions AB.
Previous assignments/positions(past five years): Chairman of
the Board of Office IT-Partner
i Sverige AB. Board memberof Basset AB and Tailormade
Consulting Group Sweden AB.
Holding in Munters Group AB:
84,031 Shares.*Holding in Munters Group AB: –*Holding in Munters Group AB: –*R APPORTS

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JOHN PETER LEESIJONAS ÅGRUPJ O H A N N E S FA BÓ

PER-ARNE
HÅKANSSON

SARA PUNKKIPAU L D I N N AG E

JOHN WOMAC K

Born 1961. President andChief Executive Officer since
2014.

Born 1960. Group Vice
President and Chief Financial
Officer since 2011.

Born 1955. Group Vice President HR and Communications
since 2011.

Born 1975. Group Vice President CSR since 2017.

Born 1962. President Innovation and Technology.

Born 1966. Head of Investor
Relations since 2017.

Principal education and professional experience: BA in Business and Finance, Stockholm
University. Chairman of theBoard of Munters 2012–2015.
Former CFO of Sony Ericsson.

Principal education and professional experience: BA in Business and Economics, Stockholm
University. Various positions in
ÅF, WM-data, Cardo and Atlas
Copco.

Born 1978. Group Vice
President Strategy, Business
Development and M&A since2012.

Principal education and professional experience: Master’s degree in business law, Jönköping
University. Various positionsin Munters and prior to thatin Arthur Andersen, Deloitte,
Ericsson and Swedbank.

Principal education andprofessional experience: B.Sc.
in Economics, Lund University.
Diploma degree in Communication and Advertising,
Stockholm University.

Other current assignments/
positions: Board member ofIncell International AB.

Other current assignments/
positions: Board member ofHandelsbanken Kista.

Principal education andprofessional experience: B.S.
Mechanical Engineering
Massachusetts Institute of Technology 1984. Numerous roles
within Munters over 32 years,
from Operations Management
to Vice President Technology.

Previous assignments/positions(past five years): Chairmanof the Board of Luvata Heat
Transfer Solutions I AB and
Luvata Oy.

Previous assignments/positions(past five years): -Holding in Munters Group
AB: 1,823,829 Shares and2,500,000 warrants.

Holding in Munters Group AB:
319,035 Shares and 415,000
warrants.

Principal education and professional experience: M.Sc. inIndustrial Engineering and Management, Chalmers Universityof Technology. Consultant andProject Leader at the Boston
Consulting Group.

Principal education andprofessional experience:
BA in Political Science andEconomics, University of Lund.
BA in Psychology, Universityof Lund. Various positions in
Maersk and Digital Equipment
Corporation.

Other current assignments/
positions: –Other current assignments/
positions: -Previous assignments/positions(past five years): -Previous assignments/positions(past five years): –Previous assignments/positions(past five years): Board member of Quant AB and PAHIT
Consulting AB.

Holding in Munters Group AB:

Holding in Munters Group AB:
79,333 Shares and 450,000
warrants.

Holding in Munters Group AB:
126,401 Shares and 725,000
warrants.

Other current assignments/
positions: -31,026 Shares and 42,000
warrants.

Other current assignments/
positions: –Previous assignments/positions(past five years): –Holding in Munters Group AB:
353,842 Shares.

Other current assignments/
positions: Board member of
ArtGlass i Malmö AB, Womack
Investor Relations AB and
CarpetVista Group AB. Senior
Advisor of Fogel & Partners.
Previous assignments/positions(past five years): Director of
Investor Relations of Alimak
Group AB (publ). Directorof Information and Investor
Relations of Clas Ohlson AB(publ).
Holding in Munters Group AB:
100 Shares.

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SEBASTIENLEICHTNAMS C OT T H AY N E SPETER GISEL -EKDAHL

NEIL YULEWOLF -MARKUS
FRANK

Born 1971. Group Vice
President Global Services since
2016.

Born 1963. Group Vice
President Air Treatment since
2014.

Born 1970. Group Vice President AgHort since 2011.

Born 1960. Group Vice President Data Centers since 2016.

Principal education and professional experience: MBA, EDHEC
Business School. Executive
education, INSEAD. Technician
certificate diploma degree, Lille
Catholic University. Various
management positions in Tetrapak AB, Cardo AB, Crawford
France and Hafa Manutention.

Principal education and professional experience: B.Sc. in Business Administration, Isenberg
School of Management at the
University of Massachusetts.
Management Development
Program, Boston University.
Sales Management Training
Program, General Electric.
Leadership & International
Management, Swedish Instituteof Management AB/Duke University. Various management
positions in within Munters
1994–2004.

Principal education and professional experience: M.Sc. in
Chemical Engineering, KTH
Royal Institute of Technology.
MBA, Copenhagen Business
School. Various positions in
Wedholms and Hackmans.

Principal education andprofessional experience: MBAin Business Administration,
Open Business School. Various
management positions in Fläkt
Woods Group. Managing
Director of Waterloo Air
Management plc, Hampton
Mouldings Ltd and Salex
Acoustic Materials Ltd.

Born 1968. Group Vice
President Mist Elimination since2017, President Munters China
since 2013.

Other current assignments/
positions: –Previous assignments/positions(past five years): –Holding in Munters Group AB:
57,307 Shares.

Other current assignments/
positions: –Previous assignments/positions(past five years): –Holding in Munters Group AB:
332,157 Shares and 240,000
warrants.

Other current assignments/
positions: Board member of
ABECE AB and Wedcooling
AB.
Previous assignments/positions(past five years): Deputy Board
member of Drivec AB.
Holding in Munters Group AB:
191,176 Shares and 295,000
warrants.

Other current assignments/
positions: –Previous assignments/positions(past five years): –Holding in Munters Group AB:
42,951 Shares and555,000 warrants.

Principal education and professional experience: MBA, Bradford University. MBA, University
Paderborn. Various positions inElectrolux and jlu Group.
Other current assignments/
positions: Managing Directorof UBB-Frank GmbH.
Previous assignments/positions(past five years): Board member of Electrolux Spain.
Holding in Munters Group AB:
60,173 Shares.

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H I S TORY

Our promise to customers: Creating the perfect climate
Munters has been an innovator in advanced climate control
solutions since its founding in 1955. Carl Munters (1897–1989),
a Swedish inventor and entrepreneur, built the company on
his insights into the laws of thermodynamics and his ability totransform them into innovative technologies and commercial
successes.
As time went on, Carl Munters would receive nearly 1,000
patents, most of them in the areas of dehumidification andevaporative cooling – which are today’s core technologies atMunters. 227 of the patents he registered during his time at thecompany are still active today. Carl Munters was a passionate
inventor, and his example is a strong source of inspiration in ourdaily work. Curiosity, innovation and the art of engineering are
his legacy to us.

C A R L M U N T E R S ( 18 9 7 – 19 8 9 )In 1923, Carl Munters (above, right), and Baltzar
von Platen invent the first refrigerator without moving
parts, and sell the rights to Electrolux.
In the 1940s, Carl and a number of his employees
developed the central inventions behind Munters
operations: an air conditioning system based on
evaporative cooling and dehumidification. The key
components of the system were the sorption rotor andthe evaporative cooling pads.

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H I S TORY

1990s:
An international Group
Munters expands to become
an international Group,with sales offices in over 25
countries.

1950s:
A breakthrough in modern
dehumidifiers

Product ranges, customer
segments, and areas of use
all expand. An international
distribution network is established. The oil crisis of 1973
results in severe demands onenergy savings, giving Munters major market potential.
The company is acquired by
Incentive AB in 1974, andCarl Munters retires.

1960

1970

Munters is acquired by Nordic
Capital Fund VII and is de-listedfrom the Stockholm Exchange
in 2010. Several strategicacquisitions are made in thefollowing areas:

A new manufacturing plantis built in San Antonio toconcentrate dehumidification
solutions for supermarkets
and ice rinks. Environmental
issues become increasingly
important, laying the basis
for new products in evaporative cooling. Munters finalizes
its largest acquisition to date,
and through Euroemme is
now able to offer complete
climate solutions for the rapidly expanding poultry industry.
In 1997, Munters is listed on
the Stockholm Exchange.

1970s:New markets

Carl Munters founds Carl
Munters & Co together with anumber of partners, including
Marcus Wallenberg, in
1955. The idea was to develop modern air conditioning
systems based on evaporative cooling, dehumidificationand heat recuperation. The
starting shot for Muntersdehumidification businessis fired in 1958, when the
Swedish Armed Forces orders
200 dehumidifiers.

1950

2010s:
Focus on the core

1980

1990

Livestock farming and greenhouses• Rotem – experts in control
and management systems• Reventa – specialists inclimate control• MTech and Edata – twooutstanding companies insoftware for poultry and swine
production
The power and processing
industry• Kevin Enterprises in India.

2000

2010
Air treatment for industrial andcommercial applications

1960s:Out into the world
The company expands its
production base, establishing
dehumidifier production in
the US. Its best-selling model
ever, the M100, is launched
in 1964.

1980s:
Broad international
expansion
A modern Munters takes
shape through acquisitionof resellers and agents.
The company establishes
operations in several
countries, including Japan in
1987. Munters focuses onenvironmental improvements;
in 1988 it acquires a unique
Swedish air purification technology (Zeol) that it further
improves with Munters rotor
technology.

2000s:
Strategic acquisitions
Munters invests in sales andproduction in Asia. The acquisitions of Aerotech, Agro
A/S, Turbovent Environment
and Form make Munters aworld leader in climate
systems for livestock farming
and greenhouse cultivation.
Munters also acquires Des
Champs Technologies –strengthening the company’s
position as a leading supplierof energy-efficient solutions
for commercial buildings –and Toussaint Nyssenne, aleading European manufacturer of large-scale air
treatment systems.

• ProFlute – a leading supplierof desiccant rotors to the global
OEM market• HB Group – a significant
supplier of high-quality customized hygienic air treatment
systems to clients such as thefood industry
In 2017, Munters Group[ticker: MTRS] was listed on
Nasdaq Stockholm.

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Auditor’s report
AUDITOR’S REPORT ON THE S TATUTORYSUS TAIN ABILIT Y S TATEMENT

AUDITOR’S REPORT ON THE CORPORATE
GOVERN AN CE S TATEMENT

To the general meeting of the shareholders of Munters Group AB (publ.), corporate
identity number 556819-2321

To the general meeting of the shareholders of Munters Group AB (publ.), corporate
identity number 556819-2321

Engagement and responsibility
It is the Board of Directors who is responsible for the statutory sustainability statement
for the year, for which the extent is presented on page 15 and that it has been prepared in accordance with the Annual Accounts Act.

Engagement and responsibility
It is the Board of Directors who is responsible for the corporate governance statement
for the year 2017-01-01–2017-12-31 on pages 66–75 and that it has been prepared in accordance with the Annual Accounts Act.

The scope of the audit
Our examination has been conducted in accordance with FAR’s auditing standard
RevR 12, the auditor’s opinion regarding the statutory sustainability statement. Thismeans that our examination of the corporate governance statement is different andsubstantially less in scope than an audit conducted in accordance with International
Standards on Auditing and generally accepted auditing standards in Sweden. We
believe that the examination has provided us with sufficient basis for our opinions.

The scope of the audit
Our examination has been conducted in accordance with FAR’s auditing standard
RevU 16, the auditor’s examination of the corporate governance statement. Thismeans that our examination of the corporate governance statement is different andsubstantially less in scope than an audit conducted in accordance with International
Standards on Auditing and generally accepted auditing standards in Sweden. We
believe that the examination has provided us with sufficient basis for our opinions.

Opinions
A statutory sustainability statement has been prepared.

Opinions
A corporate governance statement has been prepared. Disclosures in accordancewith chapter 6 section 6 the second paragraph points 2–6 the Annual Accounts Act
and chapter 7 section 31 the second paragraph the same law are consistent withthe annual accounts and the consolidated accounts and are in accordance with theAnnual Accounts Act.

Stockholm April 17, 2018
Ernst & Young AB

Erik Sandström
Authorized Public Accountant

Stockholm April 17, 2018
Ernst & Young AB

Erik Sandström
Authorized Public Accountant

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Def initions

Board of Directors’ report

MUNTERS ANNUAL REPORT 2017

1

Board
of Directors’
Directors’report
ReportBoard of
The Board of Directors and the Managing Director of Munters Group AB (publ), renamed from Munters
Topholding AB in 2017, corp. reg. no. 556819-2321, with its registered office in Stockholm, Sweden,
hereby submits the consolidated accounts and annual report for the fiscal year 1 January – 31 December 2017. “Munters Group AB” or “the Parent Company” refer to Munters Group AB (publ), and“Munters” or “the Group” refer to the Munters Group, which comprises Munters Group AB and its
Group companies.
The Board of Directors approved the annual accounts for publication 26 March 2018. The consolidated and Parent Company income statements and balance sheets will be submitted for approval at
the Annual General Meeting on 17 May 2018.

Order intake and net sales
The Group

OPERATIONS

Order intake for the full year 2017 increased by 12% and 13% organically. The Industrial sub-segment led byfood, pharmaceutical and electronic applications was the main growth engine for the business area in 2017.
Demand from the Supermarket end-market also increased substantially, but overall order intake in the Commercial sub-segment was in line with prior year as a result of exiting lower value-add product offerings. Services and Components showed solid growth in orders for the year.
Net sales for the full year 2017 grew by 9%, all organic. The revenue growth was generated by increased
deliveries to industrial customers in food, pharmaceutical, electronics, transport and aerospace industries.
Revenues from Services grew in all three regions. Deliveries to OEMs were strong in Americas and Asia,
boosting growth in the Components sub-segment.

The Munters Group is a world leading supplier of energy efficient dehumidification and air treatment solutions.
Using innovative technology, Munters’ experts create the perfect climate for customers in our focused business segments. Our largest customers are found in the food, pharmaceutical, retail, data centers, livestock
and power industries. Munters has been a pioneer in the field of air treatment since the company was founded
in 1955. As of 2017 the operation is organized into four business areas: Air Treatment, Data Centers, AgHort
and Mist Elimination. During 2016 a decision was taken to reorganize the operation into four business areas,
where Data Centers is separated from the business area Air Treatment. Services was also restructured andbecame a global product organization which serves all business areas. Munters’ business areas focus on
industrial process air treatment, comfort-oriented climate control, data center cooling, climate control for livestock and greenhouses and flue gas cleaning. Manufacturing and sales are carried out through subsidiaries
in some 30 countries. The Group has approximately 3,900 employees.

FINANCIAL PERFORMANCE AND POSITION
Five-year summary

2017

2016

2015

2014

2013

Order intake, SEKm
Net sales, SEKm
Organic growth, %Earnings before interest and tax (EBIT), SEKm
EBIT margin, %Profit/Loss after financial items, SEKm
Income for the year, SEKm

7,197
6,604
6
453
7
152
173

6,373
6,040
8
577
10
153
85

5,420
5,399
12
384
7
13
-18

4,323
4,216
7
-104
-2
-513
-435

3,837
3,791
-5
77
2
-264
-276

Net debt, SEKm 1)
Equity/assets ratio, % 1)
Total assets, SEKm

2,661
41
9,198

2,724
38
8,991

2,617
37
8,008

2,148
39
7,271

1,662
43
6,627

Investments, SEKm

170

184

113

104

222

Average number of employees

3,559

2,953

2,874

2,635

2,658

1) Net debt and equity ratio are calculated excluding shareholder loans for the years 2016 to 2013.

Order intake year to date increased by 13% to SEKm 7,197 (6,373) of which 10% organically. The increase
was mainly due to strong order intake in Air Treatment and Data Centers. AgHort reported minor organic
growth during the year despite the current market decline.
Net sales year to date increased by 9% to SEKm 6,604 (6,040) and 6% organically. The increase was due
to revenue growth in Air Treatment and Data Centers while AgHort and Mist Elimination showed negative
organic growth. Structural effects in net sales were 3% comprising of the acquisitions.

Air Treatment

Data Centers

Order intake for the year ended 2017 increased by 37%, all organic. This increase was primarily the result of
an increase in orders in Europe to a large digital customer as well as minor increases in orders from customers
in Americas and APAC.
Net sales year to date increased by 25% of which 24% was organic growth. The increase was related
primarily to sales to large digital and co-locations customers in the US and Europe and was partially offset bya decrease in sales to co-location customers in APAC.

AgHortOrder intake in 2017 increased by 10% whilst the organic growth was 2%. Strong growth was seen in Asia,
primarily driven by the Chinese swine market. Order intake in Americas, excluding structural effects, declined
compared to the same period 2016.
Net sales in 2017 increased by 8% compared to 2016 primarily driven by the acquisitions of MTech. The
organic growth was slightly negative (-1%). However, the slowdown in end-user investments starting late in2016 has reduced the demand in many markets. The global footprint enabling the fast growth in Asia, and theexposure to five different markets segments lowered the negative impact for Munters from the market slowdown.

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Board of Directors’ report
Mist Elimination

Order intake for the full year of 2017 decreased by 5% with no currency impact but structural effects of +6%(Kevin acquisition). The main reason for the weak organic order intake during 2017 has been the slowdown
within Coal FGD in China.
Net sales for the full year of 2017 decreased by 7% with no currency effect but structure impacting by +7%.
The main drivers were lower full-year Coal FGD volumes in the US and in China.
Mist Elimination is in a transition period where new business opportunities other than Coal FGD are being
actively pursued, for example within Marine (emission gas cleaning for ships) and Process industries. To
support this, the acquisition of Kevin Enterprises was made in April 2017.

Gross profit

Gross profit for Munters amounted to SEKm 2,146 (2 109) and the gross margin was 32.5 % (34.9).

Indirect costs

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MUNTERS ANNUAL REPORT 2017

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Mist Elimination

EBIT for the full year was SEKm 34 (69). The key reasons for the accumulated decline are unfavorable mix
impacts, with lower volumes of high-margin FGD projects in the US (despite volume increase in Q4), and thelimited volumes of Coal FGD projects in China in Q4. A set of low-margin projects in Europe, mainly in Q4,
also impacted full year results negatively.

Net finance items

Financial income and expenses for the full year amounted to SEKm -301 (-424). The improvement compared
to last year was due to better terms on the external financing and that interest cost related to the former
shareholder loan has ceased after the conversion to equity in May 2017. The total average weighted interest
rate per end the year, including financing fees, was 3.5% (6.8).

Taxes

Operating profit (EBIT)The Group

Operating profit (EBIT) year to date decreased by 22% to SEKm 453 (577), including depreciations of SEKm
-79 (-75) and amortizations and write-downs of SEKm -209 (-186), whereof SEKm -189 (-169) was related tosurplus values derived through acquisitions.

Income taxes for the full year amounted to SEKm 21 (-69).
Impact of the US tax reform (Tax Cuts & Jobs Act) for the full year was a one-off net income effect of SEKm
74.5, deriving from revaluation of deferred tax liability at the lower tax rate, mainly related to prior acquisitions.
The effective tax for the full year 2017, excluding the mentioned one-off related to the US tax reform, was
35% (45%). The tax cost was negatively impacted by the non-deductible interest costs relating to the shareholder loans prior to the conversion in May, amounting to SEKm -16. It was also positively impacted by thesettlement of the HB earn-out in the second quarter, amounting to SEKm 12.
However, as a result of the decreased tax rate in the US from 1 January 2018 the effective tax rate is
expected to decrease further in 2018.

Air Treatment

Items affecting comparability

Data Centers

Investments

Selling and - och administrative costs for Munters amounted to SEKm 1,566 (1,425) corresponding to 23.7
percent (23.6) of net sales.

EBIT increased to SEKm 511 (437) for the year. Two items were effecting comparability; settlement of an
acquisition earn-out, which resulted in a gain of SEKm 53 and gain from a property sale of SEKm 7. The
production challenges in the Mexican facility during the year had a negative impact on the earnings.
EBIT for the year was SEKm -13 (54). The decrease was due to low net sales volumes in the second and third
quarter of the year, mainly caused by the postponement of a large order in the US. The low factory
utilization during the second and third quarter had a profit impact of approximately SEKm 40-50. The decreased profit for the full year 2017 compared to 2016 was also impacted by the production delays in Europe
with lower than planned sales volumes and higher project startup costs in the third and fourth quarter of 2017.

AgHortEBIT in 2017 was SEKm 225 (276). Previous year included a positive item effecting comparability due to effectfrom the early settlement of the Reventa acquisition earn-out of SEKm 30. In addition to the margin pressure
on larger projects and cost increases mainly related to R&D, earnings included cost of SEKm 7 related to theacquisition of MTech Systems and Edata, as well as costs related to the production issues in Mexico. The
shift of net sales volumes from the US (Layer sub-segment) to China (Swine segment) has led to additionalcosts for building up the AgHort organization in China and a less favorable sales mix.

Items affecting comparability that impacted income for 2017 totaled SEKm -13 (-17), consisting primarily of
preparation costs for listing Munters amounting to SEKm 73 and a positive effect of SEKm 53 after final agreement on the purchase consideration for HB Group.
Investments in tangible assets during the period totaled SEKm 126 (163). One part relates to machinery andequipment for the production operations in Mexico, Italy, the US, China, and Germany. Investments in intangible assets excluding goodwill and other intangible assets related to acquisitions totaled SEKm 44 (20) in2017. Depreciation, amortization and impairments totaled SEKm 288 (262).

Goodwill

Goodwill as of December 31, 2017 amounted to SEKm 4,251 (4,227). The change is primarily attributable tothe year’s acquisitions (refer to Note 5), which impacted goodwill by a total of SEKm 243, and to negative
exchange-rate effects of SEKm 220, mainly owing to a stronger SEK against USD compared to the previous
year.

Financial position and liquidity

Munters primary financing is through bank loans with a group of Scandinavian banks as lenders. The facilities
consist of a Term Loan of USDm 250 and a Revolving Credit Facility of EURm 185. The facilities have no

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Board of Directors’ reportmandatory amortization requirement. The final maturity date is in May 2022. The loan agreement has one
financial covenant, which stipulates a limit on the consolidated net debt in relation to Adjusted EBITDA. Outof the total Revolving Credit Facility, is EURm 20 allocated to overdraft- and guarantee facilities. Available
unutilized credit facilities as of December 31 amounted to SEKm 811 (68). Interest bearing liabilities amounted
to SEKm 2,855 (5,661) at the end of the quarter. Cash and cash equivalents amounted to SEKm 402 (432)
as of December 31, 2017.

Outlook for the coming year

Demand is expected be slightly better in 2018 than in 2017.

SIGNIFICANT EVENTS DURING THE YEAR
Acquisitions and divestments

Acquisition of 60% of the shares in MTech Systems was completed on February 1. The purchase priceamounted to SEKm 222.
On April 1, Munters completed the acquisition of Kevin Enterprises Private Limited, a privately owned company headquartered in Mumbai, India. The acquisition was structured as an asset deal, acquiring company
being Munters India Humidity Control Private Limited (Munters India).
On May 30, Munters announced the acquisition of Brazilian-based Edata specializing in key software forfood processing plants, primarily for poultry production. Further information on acquisitions and divestments
is presented in Note 5.

Market listing

Munters Group AB was listed on Nasdaq Stockholm on May 19, 2017. The price per share in the offering was
SEK 55, corresponding to a total value of the number of outstanding shares in Munters of SEKm 10,098.
Excluding Over-Allotment Option, the offering consisted of 73,439,120 shares, of which 1,872,728 newshares were issued by the Company. The remaining 71,566,392 existing shares were offered mainly by theprincipal shareholders: Nordic Capital Fund VII and Five Arrows. The offering of new shares provided Munterswith gross proceeds of SEKm 103.
After full exercise of the Over-Allotment Option, the value of the offering amounted to approximately SEKm
4,524 corresponding to approximately 44.8% of the total number of outstanding shares in Munters upon completion of the offering.
As a result of the set-off issue and the new cash share issue carried out by Munters Group AB in connection
with the initial public offering, the number of shares and votes in the company has increased by 166,799,454
since the first day of trading on Nasdaq Stockholm.
As of 31 December 2017, the number of shares and votes in Munters Group AB was a total of 183,597,802.

Share Capital

In connection with the listing of Munters shares on Nasdaq Stockholm, all preference shares and all commonshares of the company were converted into one class of common shares outstanding. Furthermore, a directed
set off issue of new common shares was made to the selling shareholders against set-off of shareholder loans
to the company. The extraordinary general meeting held on 7 May 2017 resolved on the following corporate
actions to effect the share conversion and the set off issue.

IN F ORM ATIONMUNTERS ANNUAL REPORT 2017




FIN AN CIALR APPORTS

Def initions

3

A conversion of each outstanding preference share (preference shares of class A and class B) andeach common share (common shares of class A and class B) into one new common share (commonshares class B).
A directed set-off issue of new common shares is, with deviation from shareholders´ preferential rights,
given to the selling shareholders against set-off of shareholder loans to the company. The aggregate
value of the shareholder loans and accrued interest thereon amounted to SEKm 2,553 and SEKm 251,
respectively, as of 19 May 2017. The set-off issue comprised an issuance of up to 164,926,726 shares.

Incentive program

At the extraordinary general meeting on 7 May 2017, it was resolved to issue warrants as part of an incentive
program for certain members of the Group management (the “participants”). In total, the incentive program
comprises 8 individuals and not more than 5,222,000 warrants. The participants could subscribe for warrants
at a market value corresponding to in total not more than SEKm 17.99. The maximum number of warrantsthat could be subscribed for by the participants corresponded to approximately 2.77% of the Company’s sharecapital following completion of the offering and assuming full exercise of the warrants.
The warrants were issued in two separate series. Each participant subscribed for an equal number of warrants of both series. This number of warrants per participant and series depended on the participant’s position
within the Group and the number of shares held by the participant at the time of the commencement of the
program. Series 2017/2019 comprised up to 2,611,000 warrants that was exercised during the following subscription period; 19 May to 19 November 2019, with the exception of the thirty-day period preceding (a) the
day of the announcement of the company’s interim report for the second quarter of 2019, and (b) the day of
the announcement of the company’s interim report for the third quarter of 2019. The exercise price for series
2017/2019 corresponded to 121.22% of the offer price.
Series 2017/2020 comprises up to 2,611,000 warrants that may be exercised during the following subscription period; 19 May to 19 November 2020, with the exception of the thirty-day period preceding (a) the day of
the announcement of the company’s interim report for the second quarter of 2020, and (b) the day of theannouncement of the Company’s interim report for the third quarter of 2020. The exercise price for series
2017/2020 corresponds to 130.91% of the offer price. The Company has reserved the right to repurchasewarrants for example if the participant’s employment with the company is terminated.

SIGNIFICANT EVENTS AFTER PERIOD END

Katarina Lindström was appointed President Global Operations in January 2018. Katarina will be a memberof the Group Management team and will assume her position during spring of 2018.

FINANCIAL INSTRUMENTS

Financial instruments in the Group, beyond those arising in operating activities, consist of interest-bearing
bank borrowings, shareholder loans and currency hedging. Further information on the financial instruments ispresented in Notes 3 and 18.

RESEARCH AND DEVELOPMENT

Overall, research and development costs incurred by the Group amounted to SEKm 167 (138), corresponding
to 9,8 percent (9,0) of operating expenses. Capitalization of internally generated intangible assets totaled

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MUNTERS ANNUAL REPORT 2017

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SEKm 31 (13). Activities in the area comprise research initiatives, technology and product development andproduct ownership. Ensuring value creation with good staying power requires trying to attain a balance
between the various activities in the portfolio, in which a continual flow of innovative ideas are gradually refined
into products with unrivalled customer value. By basing this to a greater extent on product requirements takenfrom various market segments, we achieve greater certainty in developing the right products for the respective
markets. Thanks to the efforts made during the year, greater resources could be allocated to new development, and we are seeing a marked increase in the number of patent applications.

PROPOSAL ON DISTRIBUTION OF DIVIDENDEMPLOYEESSTATEMENT BY THE BOARD OF DIRECTORS PURSUANT TO CHAPTER 18, SECTION
4 OF THE SWEDISH COMPANIES ACTThe number of permanent employees at year-end was 3,496 (2,939), which corresponds to an increase of
557 people (19 percent) compared with the previous year. The increase in the number of permanent employees is primarily attributable to increased production personnel in Data Centers and to the acquisition of Kevin
Enterprises Private Limited. The average number of employees during the period was 3,559 people (2,953),
an increase of 21 percent compared with the previous year. Women accounted for 18 percent (18) of all
employees. Staff turnover totaled 20 percent (16), which is relatively high. The high staff turnover relates
mainly to Mexico, the US, and Asia, where Munters has large production operations. The average age was
42 (43). For remuneration to senior management as well as adopted remuneration guidelines, see Note 28.

FINANCIAL RISKS

Financial risks mainly consist of currency, interest and financing risks. The continued development of the
global economy including changes of interests and currency rates is a factor of uncertainty for future profitability. A more detailed description of the Group’s financial risks and how they are monitored and managed aredisclosed in Note 3.

PARENT COMPANY

The Parent Company does not engage in sales of goods and services to external customers. Cash and cash
equivalents at the end of the period amounted to SEKm 134 (44). The Parent Company has two permanent
employees.

SHARE CAPITAL AND OWNERSHIPThe share capital of SEK 5,507,934 comprises 183,597,802 shares with a par value of SEK 0.03 per share.
The shares in Munters Group AB are listed on Nasdaq Stockholm’s list of major companies under the symbol
MTRS. The ten largest owners in Munters Group AB holds 83.2 percent of the number of shares outstanding.
Of these, Nordic Capital holds 50.1 percent indirectly via its Nordic Capital VII fund, and FAM AB 11.4 percent.
No other shareholder holds more than ten percent of the shares, either directly or indirectly.

Earnings of SEK 4,275,457,022 are at the disposal of the Annual General Meeting.
The Board of Directors of Munters Group AB proposes that the Annual General Meeting 2018 resolves on
a dividend of SEK 0.30 per share, equivalent to a total dividend amount of SEK 55,079,341. The Board of
Directors further proposes that 21 May 2018 be set as the record date for the dividend. If the Annual General
Meeting resolves in accordance with the Board of Directors’ proposal, the payment is expected to be distributed by Euroclear Sweden on 24 May 2018.

By reason of the Board of Directors’ proposed dividend, the Board of Directors hereby makes the following
statement pursuant to Chapter 18, Section 4 of the Swedish Companies Act (2005:551).
As of 31 December 2017, Munters’ restricted equity totaled SEK 5,507,934 and its non-restricted equity
totaled SEK 3,742,760,259 whereof 2017 year’s profit amounts to SEK 172,641,287.
Provided that the Annual General Meeting 2018 approves the Board of Directors’ proposed allocation of
profits, an amount of SEK 3,687,680,918 will be carried forward. The company’s restricted equity will thus befully covered after the proposed dividend.
It is the Board of Directors’ assessment that the shareholders’ equity of the company and the group, after
the distribution of the dividend, will be sufficient in relation to the nature, scope and risks of the business. In
this context, the Board of Directors has considered factors such as the company’s and group’s historicaldevelopment, budgeted development and the cyclical situation.
The Board of Directors has also considered the company’s and the group’s financial position and the company’s and the group’s prospects of fulfilling their commitments in the short and long term. The proposed
dividend amounts to approximately 1.29 percent of the company’s shareholders’ equity and 1.47 percent of
the group’s shareholders’ equity.
After the distribution of the dividend, the company’s and the group’s equity/assets ratio will amount toapproximately 99 percent and 40 percent, respectively. Accordingly, the equity/assets ratio of the company
and the group is satisfactory by comparison with the industrial sector. The Board of Directors is of the opinion
that the company and the group will be able to assume future business risks and to withstand potential losses.
The proposed dividend will not have a negative impact on the company’s or the group’s capacity to makefurther investments pursuant to the plans of the Board of Directors.
The proposed dividend will not negatively affect the company’s and the group’s ability to fulfil their payment
obligations. The company and the group have ready access to short- as well as long-term credits that can be
drawn down at short notice. Accordingly, the Board of Directors considers the company and the group well
prepared to respond to any changes in liquidity as well as unexpected events.
In addition to the above, the Board of Directors has considered other known circumstances that may besignificant to the company’s and the group’s financial position. In this context, no circumstance has arisen
implying that the proposed dividend would not appear justifiable.
With reference to the above, the Board of Directors is of the opinion that the proposed dividend is justifiableconsidering the requirements that the nature, extent and risks of the operations impose on the company’s andthe group’s equity as well as the company’s and the group’s consolidation requirements, liquidity and positionin general.

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GUIDELINES FOR REMUNERATION TO SENIOR EXECUTIVESFor the guidelines for remuneration to senior executives in effect during 2017, refer to Note 28. The Company’s
auditors have checked that the guidelines adopted by the Annual General Meeting have been followed.
The Board of Directors proposes that the annual general meeting 2018 resolves on guidelines for the
remuneration of senior executives to apply up to the annual general meeting 2019, pursuant to the following.
The group of senior executives encompassed by the guidelines comprises the CEO and other members ofGroup executive management, as well as members of the Board of Directors of the company, to the extent
employment or consulting agreements are entered into. The guidelines are valid for remuneration underagreements entered into after the approval of the guidelines by the annual general meeting, and for changes
made to existing agreements thereafter.
The remuneration to the management may consist of fixed salary, variable compensation, long-term incentive programmes, pension and other benefits. The total remuneration package should be based on market
terms, be competitive and enable the company to recruit and retain the managers the company needs to meetits short-term and long-term targets.

Fixed salary

The fixed salary for the CEO and the other members of the senior management shall mirror the demands andresponsibility that the position entails as well as individual performance. The fixed salary for the CEO and theother members of the senior management is to be reviewed on a yearly basis.
To the extent a member of the Board of Directors carries out work for the company or for another groupcompany, in addition to the board work, consulting fees and/or other remuneration may be payable.

Variable compensation

Variable compensation in cash is conditional upon the fulfilment of defined and measurable criteria and should
be maximised to 140 per cent of the annual fixed salary for the CEO and 70 per cent for the other membersof senior management, except for three members of senior management, the President AgHort, the President
Data Centers and the President Global Services, whose variable cash compensation instead shall be maximised to 210 per cent of the annual fixed salary. Any variable compensation in cash exceeding 50 per cent of
the annual fixed salary for these three members of senior management shall be conditional on 75 per cent of
the exceeding amount (after deduction of taxes payable) being invested in shares in Munters and such shares
being retained during a period of at least one year. If the investment in shares in Munters is not carried out, or
if the shares are divested prior to the expiration of the one-year period, the part of the variable cash compensation that was conditional on the investment in, and retention of, shares in Munters shall be refunded to
Munters.
The criteria for variable compensation in cash are determined for the promotion of the company’s and thegroup’s short-term and long-term targets, long-term development, value creation and financial growth andshall be designed not to encourage excessive risk taking. Terms and conditions for variable compensation in
cash should be designed so that the Board of Directors, if exceptional economic circumstances prevail, has
the option of limiting or refraining from payment if such a measure is considered reasonable. In this context,
fixed annual salary means cash salary earned during the year, excluding pension, supplements, benefits andsimilar.

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MUNTERS ANNUAL REPORT 20175

Long-term incentive programmes

The aim of having long-term incentive programs is to create a long-term commitment to the company, to attract
and retain members of the senior management and key employees and to align the interests of the participants
with the interests of the shareholders.
Long-term incentive programs, if any, should constitute a complement to the fixed salary and the variable
compensation in cash, with participants to be nominated based on, among other things, competence andperformance.

PensionPension benefits should be defined contribution. For senior executives outside Sweden, pension benefits mayvary due to legislation or practice in the local market.

Other benefits and compensation

Fixed salary during notice periods and severance payment, including payments for any non-compete
restrictions, shall in aggregate not exceed an amount equivalent to the fixed salary for three years for the CEO
and 18 months for the other members of senior management.
Other compensation may consist of other benefits that are customary and in line with market practice, suchas healthcare insurance, which shall not constitute a material portion of the total remuneration.
Additional compensation may after decision by the Board of Directors be paid out in extraordinary circumstances, provided that such arrangement is made for management recruitment or retention purposes and isagreed only in individual cases. Such extraordinary arrangements may for example include a one-off cash
payment, or a support package including relocation support or similar.

Deviation from the guidelines

The Board of Directors may resolve to deviate from the guidelines if the Board of Directors, in an individual
case, is of the opinion that there are special circumstances justifying that.

CORPORATE GOVERNANCE REPORT AND SUSTAINABILITY REPORT

Munters Group AB has chosen to prepare the Corporate Governance Report and Sustainability Report as aseparate document from the Annual Report. The Corporate Governance Report can be found on Pages 66–
75 and the Sustainability Report on Pages 15–22. For descriptions of risks and controls in conjunction withpreparation of the consolidated accounts, refer to the Corporate Governance Report.

FINANCIAL STATEMENTS AND NOTESThe Group’s income and financial position in other respects are presented in the following statements of comprehensive income, financial position, cash flows and changes in equity, as well as in the notes.
The Parent Company’s income and financial position in other respects are presented in the following income
statement and balance sheet, statement of changes in equity, cash flow statement and notes.
All amounts are in millions of Swedish kronor (SEKm) unless otherwise specified.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

88

2 017

B US I NE S S

ARE AS

Pa re nt F i na nci a l s

AND

Notes

S E RV I CE

Assura nce

CO RPORATE

Aud i t or ’ s Re p or t

IN F ORM ATION

Financial reports

Statementofofcash
cashflows
flows
Statement

GROUP
Amounts in SEKm

GROUP
Amounts in SEKm

Note

2017

2016

Net sales
Cost of goods sold
Gross profit/loss

6

6,604
-4,4582,146

6,040-3,931
2,109

Other operating income
Selling expenses
Administrative costs
Research and development costs
Other operating expenses
Earnings before interest and tax (EBIT)

7

53
-978
-588
-167
-14
453

31
-913
-512
-138
0
577

8
-309
152
21
173

12
-436
153
-69
85

174
-1
119,658,011
119,720,995
1.45
1.45

85
0
16,798,348
16,798,348
5.08
5.08

Attributable to Parent Company shareholders
Attributable to non-controlling interests
Average number of outstanding shares before dilution
Average number of outstanding shares after dilution
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss insubsequent periods:
Exchange-rate differences on translation of foreign operations
Other comprehensive income not to be reclassified to profit or loss insubsequent periods:
Actuarial gains and losses on defined-benefit pension obligations, incl.
payroll tax
Income tax effect on other comprehensive income not to be reclassified to
profit or loss in subsequent periods
Other comprehensive income, net after tax
Comprehensive income for the year
Attributable to Parent Company shareholders
Attributable to non-controlling interests

R APPORTS

6

MUNTERS ANNUAL REPORT 2017

Statementofofcomprehensive
comprehensiveincome
incomeStatement

Financial income
Financial expenses
Profit/Loss after financial items
Tax
Income for the year

FIN AN CIAL

Def initions

7
4, 8, 9
10
10
11

12
12

-89

198

21

-13

-17

11

3
-99

4
185

74
75
-2

270
270
0

Earnings per share, basic and diluted, are calculated based on income for the year related to Parent Company ordinary
shareholders.

OPERATING ACTIVITIES
Earnings before interest and tax (EBIT)
Reversal of non-cash items;
Depreciation, amortization, and impairments
Provisions
Other profit/loss items not affecting liquidity
Cash flow before interest and tax
Paid financial items
Taxes paid
Cash flow from operating activites before changes in working capital

Note

8

Cash flow from changes in working capital
Cash flow from operating activities
INVESTING ACTIVITIESBusiness acquisitions
Sales of tangible assets
Sales of intangible assets
Business divestment
Investment in tangible assets
Investment in intangible assets
Cash flow from investing activities
FINANCING ACTIVITIESNew share issue
Warrants
Loans raised
Amortization of loans
Cash flow from financing activities
Cash flow for the year
Cash and cash equivalents at 1 January
Exchange-rate differences in cash and cash equivalents
Cash and cash equivalents at 31 December
Interest received totaled 8 (2). Interest paid on bank debt totaled -123 (137).

5

5
13
14

18
18

2017

2016

453

577

288
13
-24
730
-176
-109
445

262
-27
-18
794
-206
-130
458

-210
235

-180
277

-268
1
1
-27
-126
-44
-464

-2
–
–
–
-163
-20
-186

99
18
3,749
-3,662
205

–
–
503
-522
-19

-24
432
-6
402

72
346
14
432

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

89

2 017

B US I NE S S

ARE AS

Pa re nt F i na nci a l s

Notes

AND

Financial reports

Note

CURRENT ASSETS
Raw materials and consumables
Products in process
Finished products and goods for resale
Work on contract
Advances to suppliers
Accounts receivable
Prepaid expenses and accrued income
Derivative instruments
Current tax assets
Other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETSIN F ORM ATIONFIN AN CIALR APPORTS

Def initions

7

Statementoffinancial
position
Statement of financial position
2017

2016

GROUP
Amounts in SEKm at December 31

2017

2016

6
5,083
351
-1,691
3,748

0
2,167
439
-1,850
756

20

0
3,748

11
767

18

2,848
207
22
137
394
3,607

2,688
2,544
179
30
15
525
5,981

7
382
581
486
2
52
212
8
114
1,843

429
315
530
565
4
53
232
5
110
2,243

9,198

8,991

Note

EQUITY AND LIABILITIESASSETSNON-CURRENT ASSETS
Goodwill
Patents, licenses, brands, and similar rights
Buildings and land
Plant and machinery
Equipment, tools, fixtures, and fittings
Construction in progress
Other financial assets
Deferred tax assets
Total non-current assets

CO RPORATE

Aud i t or ’ s Re p or t

MUNTERS ANNUAL REPORT 2017

Statementoffinancial
position
Statement of financial position
GROUP
Amounts in SEKm at December 31

S E RV I CE

Assura nce

15
14,15
8, 13
8, 13
8, 13
13
18
11

3, 18
17
18
18
18

4,251
1,456
155
219
142
48
14
242
6,526

4,227
1,550
156
172
133
69
24
242
6,574

386
135
243
16
18
1,204
106
2
35
126
402
2,672

321
123
208
8
17
1,094
76
2
32
103
432
2,417

9,198

8,991

EQUITY
Attributable to Parent Company shareholders
Share capital
Other capital contributions
Reserves
Profit brought forward
Non-controlling interests
Total equity
NON-CURRENT LIABILITIESShareholder loan
Interest-bearing liabilities
Provisions for pensions and similar commitments
Other provisions
Other liabilities
Deferred tax liabilities
Total non-current liabilities
CURRENT LIABILITIESInterest-bearing liabilities
Advances from customers
Accounts payable
Accrued expenses and deferred income
Derivative instruments
Current tax liabilities
Other liabilities
Provisions for pensions and similar commitments
Other provisions
Total current liabilities
TOTAL EQUITY AND LIABILITIES

20

18
21
22
18
11

18
18
23
18
18
21
22

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

90

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t or ’ s Re p or t

Financial reports

IN F ORM ATIONFIN AN CIALR APPORTS

Def initions

8

MUNTERS ANNUAL REPORT 2017

Statementofofchanges
changesininequity
equityStatement

Statement of comprehensive income

Attributable to Parent Company shareholders

SharecapitalOther
capitalcontributions

Translation
reserve

Profitbrought
forwardNoncontrolling
Total interests

0

2,167

439

-1,850

756

11

767

6

2,798
18
99

2,803
18
99

-

2,803
18
99

-

-

-10

-10

19

19

-

19

-24

-24

1

-23

GROUP
Amounts in SEKm
Opening balance, January 1,
2017

Total
equityChanges in equity, 2017
Set off issue
Warrants
New share issue
Change in non controlling interest
Put/call option related to noncontrolling interests
Acquisition of non-controllinginterests
Income for the year
Other comprehensive income, net after tax

-89

174
-10

174
-98

-1
-1

173
-99

Comprehensive income for the year

-89

164

75

-2

74

Closing balance, December 31,
2017

6

5,083

351

-1,691

3,748

0

3,748

Opening balance, January 1,
2016

0

2,167

241

-1,921

487

8

495

Changes in equity, 2016
Shareholders’ contributions
Acqusition of non-controllinginterests
Income for the year
Other comprehensive income, net after tax--

Comprehensive income for the year
Closing balance, December 31,
2016

0

2,167

3

3

-

-

-

-

-

198

85
-13

85
185

-

85
185

198

71

270

-

270

439

-1,850

756

11

767

The new share issue put SEKm 103 into the Group; together with transaction costs of SEKm 4, net SEKm 99.

PARENT COMPANY
Amounts in SEKm

2017

2016

-

-

-77
-77

-5
-5

-84
-161

-202
-207

86
-75

27
-180

-75

-180

2017

2016

Profit/Loss for the year

-75

-180

Other comprehensive income, net after tax
Comprehensive income for �the year

-75

-180

Note

Net sales
Gross profit/loss
Administrative costs
Earnings before interest and tax (EBIT)
Financial expenses
Profit/Loss after financial items

8
10Group contributions
Profit/Loss before tax
Tax
Income for the year

11

Other comprehensive income
Amounts in SEKm

Note

M U NT E R S

A NNUAL -INTROD U CT I ON

B oard o f D i re ct o r s ’ Re p o r t

A N D

S U S TA IN A B IL IT Y

R E PO RT

91

2 017

MH
UN
E R SWAEN N W
U AO
L R
RE
0 TW
KP O R T 2 0 1 7 B U S I N E S S

Gro u p F ina ncia ls

ARE AS

Pa re nt F i na nci a l s

Notes

A N D8 S E R V I C E

Assura nce

Statement of comprehensive income

8

MUNTERS ANNUAL REPORT 2017

Total
equity767
Totalequity
2,803
767
18
99
-10
2,803
18
19
99
-10
-23
173
19
-99
74
-23
173
3,748
-99
74
495
3,748
4953
85
1853
27085
767
185
270
767

CO RPORATE

Aud i t or ’ s Re p or t

IN F ORM ATIONFIN AN CIAL

Financial reports

Statementofofcomprehensive
comprehensiveincome
incomeStatement

Statement
financialposition
position
Statement ofoffinancial

PARENT COMPANY
Amounts in SEKm

PARENT COMPANY
Amounts in SEKm, at Dec 31

Net sales
PARENT COMPANY
Gross profit/loss
Amounts in SEKm
Administrative costsNetsales before interest and tax (EBIT)
Earnings
Gross profit/loss
Financial expenses
Profit/Lossafter
financial items
Administrative
costs

Earnings before interest and tax (EBIT)Group contributions
Profit/Lossbefore tax
FinancialexpensesProfit/Lossafter financial items
Tax
IncomefortheyearGroup contributions

Note

2017

2016

-

-

Note

2017

2016

8

-77
-77-

-5
-5-

-84
-161
-77

-202
-207
-5

-161-7586-75-207-180
27
-180
-180

10
8
10
11

Profit/Loss before tax

-77
86
-75
-84

-5
27
-180
-202

Tax
Income for the year

11

Other comprehensive income-75

Amounts in SEKm

Note

2017

2016

-75

-180

2017
-75
-75

2016
-180
-180

-75

-180

Other
comprehensive income
Other comprehensive income
Profit/Loss for the year

Other comprehensive income, net after tax
Amounts
in SEKmincome for �the year
Comprehensive
Profit/Loss for the year
Other comprehensive income, net after tax
Comprehensive income for �the year

Note

R APPORTS

Def initions

Note

2017

2016

16

4,086
4,086

4,086
4,086

17

0
86
0
134
220

27
44
71

4,306

4,157

6

0

4,074
276
-75
4,281

1,177
437
-180
1,434

-

2,688
2,688

1
2
20
2
25

35
35

4,306

4,157

ASSETSNON-CURRENT ASSETS
Participations in subsidiaries
Total non-current assets
CURRENT ASSETS
Prepaid expenses and accrued income
Receivables from subsidiaries
Other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETSEQUITY AND LIABILITIESEQUITY
Restricted equity
Share capital
Unrestricted equity
Share premium reserve
Profit brought forward
Income for the year
Total equity
NON-CURRENT LIABILITIESShareholder loan
Total non-current liabilities
CURRENT LIABILITIES
Accounts payable
Accrued expenses and deferred income
Liabilities to subsidiaries
Other liabilities
Total current liabilities
TOTAL EQUITY
AND LIABILITIES

20

18

23

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

92

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t or ’ s Re p or t

Financial reports

IN F ORM ATIONFIN AN CIAL10MUNTERS ANNUAL REPORT 2017

Statementofofcash
cashflows
flows
Statement

Statementofofchanges
changesininequity
equityStatement

PARENT COMPANY

PARENT COMPANY

2017

2016

Amounts in SEKm

OPERATING ACTIVITIESProfit/Loss after financial items

-161

-207

Opening balance January
1, 2017

Profit/loss items not affecting liquidity
Cash flow from operating activities before changes in working capital

82
-78

202
-5

Changes in equity, 2017

Cash flow from changes in working capital
Cash flow from operating activities

4
-74

0
-5

FINANCING ACTIVITIESNew share issue
Warrants
Shareholders’ contributions
Group contributions
Loans raised
Loan amortization
Cash flow from financing activities

99
18
27
20
165

53
-4
49

Cash flow for the year
Cash and cash equivalents at t�he beginning of the period
Cash and cash equivalents at the end of the year

90
44
134

44
0
44

Amounts in SEKm

Total non-cash items comprise of capitalized interest from shareholder loans.

R APPORTS

Def initions

Note

RestrictedequityUnrestricted equity

Share
capitalSharepremium Other capitalreserve contributions

Income forthe year

Total

437

-180

1,434

-180

180
-75

2,804
18
99
0
-75

0

1,177

6

2,798

0

99

Closing balance,
December 31, 2017

6

4,074

18

257

-75

4,281

Opening balance January
1, 2016

0

1,177

-

575

-138

1,614

-138

138
-180

0
-180

437

-180

1,434

Debt conversion
Warrants
New share issue
To be carried forward
Income for the year-

Profitbrought
forward18

Changes in equity, 2016
To be carried forward
Income for the year
Closing balance,
December 31, 2016

0

1,177

-

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

93

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions
MUNTERS ANNUAL REPORT 2017

11

Notes
NOTE 1

ACCOUNTING POLICIES

Munters Group AB, corp. reg. no. 556819-2321, is a Swedish public limited company registered in Sweden with its registeredoffice in Stockholm, Sweden. The address of the headquarters is Munters Group AB, Box 1188, SE-164 26 Kista, Sweden.
This Annual Report and Consolidated Accounts were signed by the Board of Directors for Munters Group AB on March
26th 2018, and approved for release by the Board on the same date. The income statements and balance sheets for the
Parent Company and the Group published in the Annual Report and Consolidated Accounts were adopted by the Annual
General Meeting on May 17th 2018. The most important accounting policies applied in preparing the financial reports arereported below. In the main, the same principles applied to the Parent Company were applied to the Group. The extent towhich the Parent Company’s accounting policies differ from those of the Group, or to which it was deemed important to
explain the principle applied in the Parent Company, is indicated under a special heading at the end of this Note.

for expected credit losses, however the impact is not material since the current applied model used is similar to therequirements in IFRS 9.

BASIS OF PREPARAT ION

The new standard is designed according to a control-based five-step model framework. The standard regulates commercial
agreements (contracts) with customers in which delivery of goods/services is divided into separately identifiable performanceobligations that are recognized independently. In certain cases, the good/service can be integrated with other obligations in
the contract, whereby a package of goods/services comprises a joint obligation. The standard establishes rules for calculating
the transaction price for delivery of goods and services and the manner in which this can be allocated among the various
performance obligations. Revenue is recognized when control has passed to the customer by the customer being able touse or benefit from the good/service, at which point it is deemed to have been transferred. Control may be passed at a given
point in time or over time.
Three different criteria have been established for determining whether a performance obligation is satisfied over time.
Either the customer receives and consumes all of the benefits as the obligation is performed; the company’s performanceenhances an asset that the customer controls; or finally the company’s performance does not create an asset with analternative use to the company and the company has an enforceable right to payment for performance completed to date.

The Consolidated Accounts were prepared in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR
1 – Supplementary Accounting Rules for Corporate Groups. The Parent Company’s Annual Report has been prepared inaccordance with the Annual Accounts Act and with the application of the Swedish Financial Reporting Board’s
recommendation RFR 2 – Accounting for Legal Entities. IFRS rules for measurement and disclosure are thus applied, withthe exception of the deviations indicated in the section titled “Accounting Policies of the Parent Company.”

Basis for assessment

The Consolidated Accounts are based on historical acquisition costs with the exception of financial derivatives, acquisition
options and purchase considerations.

New and amended IFRS applied from 1 January 2017
IAS7 Statement of Cash Flows

A change has been introduced into IAS 7 Statement of Cash Flows, signifying that information on changes to debts
attributable to financing operations – including changes linked to cash flows, for example loan disbursement and repaymentof loans; changes not affecting cash flows such as from acquisitions and divestments; and changes from currency effects.
None of the new interpretations that will start being applied during the fiscal year opening on 1 January 2017 have had
any substantial impact on the financial reports.

New and amended IFRS that have not started being applied

A number of new standards will go into effect for fiscal years beginning after 1 January 2017, and have not been applied in
the preparation of this financial report. These new standards are expected to impact the Group as follows:

IFRS 9 Financial Instruments

IFRS 9 Financial instruments is a new standard on accounting for financial instruments and will replace IAS 39. The standard
comprises classification, valuation and impairment of financial instruments as well as hedge accounting. Munters groupaccounting has engaged in a project to analyze the implications of the transition to IFRS 9 to the Group’s financial statements
and has concluded that the only part of IFRS 9 with an impact on the Group’s financial statements is the impairment model

IFRS 15, Revenue from contracts with customers

IFRS 15 Revenue from contracts with customers establishes a new regulatory framework to account for revenue fromcontracts with customers and replaces IAS 11 Construction Contracts, IAS 18 Revenue and all revenue related IFRICs(International Financial Reporting Interpretations Committee) and SICs (Standing Interpretation Committee of the IASC,
predecessor to the IFRIC).

The new standard summary

Transition to IFRS 15

During 2017 Munters has engaged in an IFRS 15 project to analyze the implications of the transition to IFRS 15 to theGroup’s financial statements. The focus has been to identify deviations between current revenue recognition principles andthe new requirements under IFRS 15 as well as to prepare for implementation of the new standard within the Group. The
evaluation phase included a questionnaire circulated to all business units and business areas in order to identify the various
types of contracts that exists within the group. The questionnaire has been followed up with discussions between
local/regional controllers and group accounting in order to understand terms and conditions in Munters’ customer contracts,
both general customer contracts and contracts of a more complex character.
Munters has decided to use the full retrospective approach for transition to the new revenue standard which means thatprior reporting periods are to be adjusted. The overall assessment from the IFRS 15 transition project is that the new revenue
standard does not have material impact on Munters’ historical consolidated financial statements, based on the fact that
Munters as of December 2017 did not have open contracts of material values that would have been treated differently shoulc
IFRS 15 have been applied. Munters will therefore not report any prior period adjustments.

Revenue recognition principles going forward

Munters provides goods such as components, equipment (units) and spare parts to customers within four business areas.
Customer contracts can contain pure component/equipment (units) sales or sales of equipment (units) including activities
such as installation, startup and commissioning. Both equipment (units) and installation, startup and commissioning are allM U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

94

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or tNotes
distinct in accordance with the definitions in IFRS 15 meaning any bundled sales will comprise several performanceobligations under IFRS 15.

Sale of goods

The majority of customer contracts within Munters business areas Air Treatment, AgHort and Mist Elimination fulfill therequirement to recognize revenue at a point in time, meaning revenue for the performance obligation to deliver equipment(units) will be recognized when this performance obligation is satisfied (when control passes of the equipment/units).
Revenue is already today recognized at a point in time (when control has passed) and therefore there is no change fromcurrent principles. Contracts including installation, startup and commissioning activities include several separate
performance obligations and the performance obligations to provide installation, startup and commissioning will be satisfied
over time, meaning revenue related to these performance obligations will be recognized over time according to themeasurement of progress towards complete satisfaction. For the majority of customer contracts revenue relating to these
activities is already deferred and recognized over time as they are performed according to current principles; however, somecustomer contracts have recognized revenue for these activities already at equipment delivery.
The total transaction price will be allocated to each performance obligation according to each performance obligations relative
standalone selling price. This will result in a change with the effect that a somewhat higher amount of the total transaction
price being recognized at equipment/units delivery.
Customer contracts within Data Centers fulfill the requirement to recognize revenue over time, i.e. equipment/units arehighly customized and customer contract terms stipulate that cost incurred will be recovered with a reasonable profit margin
should the customer decide to terminate the contract. Revenue for the performance obligation to deliver equipment/units will
therefore be recognized over time using a measurement of progress towards complete satisfaction. The Group will use an
output method (units produced method) for this purpose, meaning number of produced units in relation to total units in thecustomer contract. Data Centers customer contracts including installation, startup and commissioning supervision meansseveral separate performance obligations and the performance obligations to provide installation, startup and commissioning
supervision are performance obligations satisfied over time. Revenue relating to these performance obligations will berecognized over time according to the measurement of progress towards complete satisfaction. Revenue from customer
contracts within Data Centers is already under current principles recognized over time and IFRS15 therefore there is nochange from current principles.
Within Air Treatment, AgHort and Mist Elimination there are a number of customer contracts that fulfills the requirement
to recognize revenue over time according to the criteria’s mentioned above. Revenue for the performance obligation todeliver equipment/units will therefore be recognized over time according to the measurement of progress towards complete
satisfaction. The Group will use the output method (units produced method). Since revenue from equipment/units arerecognized at equipment/unit delivery (at the time when control passes) already under current principles this will not be any
material change. There are no open contracts of signififcance as of yearend 2017 that has affected the opening balance asof 2018.

Rendering of service

Munters provides different kinds of services to customers such as maintenance services. Revenue from service contracts isalready recognized over time as the customer simultaneously receives and consumes the benefits of the services and there
will be no change from current principles.

Warranty obligations

Munters provides assurance-type warranties where the warranty is a guarantee of quality of the goods provided. These willcontinue to be accounted for under IAS 37 Provision, Contingent Liabilities and Contingent Assets. Certain contracts withcustomers also include extended warranty. These warranties are regarded as service-type warranties and will be accounted
for as a separate performance obligation with revenue recognized over time. This is a change and will affect the timing ofrevenue since these warranties are currently recognized at the end of each warranty year. There are no open contracts ofsignififcance as of yearend 2017 that has affected the opening balance as of 2018.

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Presentation and disclosure

Qualitative and quantitative disclosures will increase in volume in the Group’s financial statements going forward. Disclosures
will include contract terms, significant judgments (and changes in judgments) made in applying the Standard, disaggregationof revenue in to categories, information on when the Group typically satisfies its performance obligations, significant payment
terms, explanations of how the timing of satisfaction of performance obligations relates to the typical timing of payment, types
of warranties and related obligations, for performance obligations that an entity satisfies over time, methods used torecognize revenue, and methods used to determine and allocate the transaction price.

IFRS 16 Leases

Munters has begun to analyze the impact of IFRS 16 Leases on the Groups financial statements. In brief, the initial analysis
shows that Munters, as an operational lessee, will be impacted by the implementation of IFRS 16. Monetary calculations of
the effect of IFRS 16 and choice of transition approach have not yet been carried out. Based on the Group’s preliminary
review of its leases (primarily lease agreements in respect of premises), including notice periods and rental amounts, theGroup currently consider that IFRS 16 will have an impact on the consolidated accounts and financial key performanceindicators, primarily ratios based on gross assets and gross liabilities.
No other of IFRS or IFRIC amendments that have not yet been adopted expects to not have any significant effect on theGroup’s financial statements.

BASIS FOR CONSOLIDAT ION

The Consolidated Accounts encompass Munters Group AB (the Parent Company) and its subsidiaries.
Subsidiaries are all companies over which the Group has a controlling influence. The Group has controlling influence over acompany when it is exposed to, or has the right to, variable returns from its holdings in the company and can impact thereturns through its controlling influence in the company. Subsidiaries are included in the Consolidated Accounts as of thedate on which controlling influence was transferred to the Group. They are excluded from the Consolidated Accounts as ofthe date on which controlling influence ceases.
The financial statements for the Parent Company and its subsidiaries included in the Consolidated Accounts refer to thesame period and have been prepared in accordance with the accounting policies that apply to the Group. All intra-Grouptransactions, revenues, costs, gains, or losses that arise in transactions between companies included in the Consolidated
Accounts have been wholly eliminated.

Business acquisitions

The Consolidated Accounts have been prepared using application of the acquisition method, which involves eliminating theacquisition cost of shares in subsidiaries against their equity at the time of acquisition. Transaction costs related toacquisitions are not included in the acquisition cost, but are expensed on an ongoing basis. The equity acquired in thesubsidiaries is established using a market-based evaluation of assets, liabilities and contingent liabilities at the time ofacquisition. The Group’s equity thus includes only that part of the subsidiaries’ equity that arose after the time of acquisition.
In the event of business combinations where the sum of (i) the acquisition cost of shares in subsidiaries; (ii) the value ofholdings without controlling influence; and (iii) the fair value of previous holdings exceeds the fair value at the time ofacquisition as regards the Group’s share of the identifiable net assets required, the difference is recognized as goodwill. A
potential negative difference – “negative goodwill” – is recognized as income immediately after being established.
The useful life of each individual intangible asset is established and then amortized over the established useful life. If theuseful life is deemed indefinite, no amortization is recognized. An assessment that causes the useful life of an intangible
asset to become indefinite takes all the relevant circumstances into account and is based on the premise that there is no
predictable maximum time limit for the net cash flow generated by the asset. The useful life of goodwill is assumed to beindefinite and goodwill is not amortized.
If the initial recognition of a business combination is incomplete at the end of the reporting period when the businesscombination took place, the amounts for items where recognition is incomplete is recognized on a preliminary basis. These
preliminary amounts can be adjusted during the evaluation period, or additional assets or liabilities can be recognized, toM U NT E R S

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reflect new information obtained about the facts and conditions that existed as of the time of acquisition, and would have
impacted the recognized amounts at that time if the information had been available.
Contingent considerations are classified as financial liabilities and re-evaluated every period to fair value. Re-evaluation
profits and losses, if any, are recognized in income for the year. If the business combination is carried out in several steps,
the previous equity shares in the acquired company are re-evaluated to their fair values at the time of acquisition. Any
resulting profit or loss arising out of the re-evaluation is recognized in income for the year.
Munters has call options and has issued put options regarding non-controlling participations, which were agreed on in
conjunction with the business combination. Depending on the conditions in the options as well as in the shareholder agreements, each of the options are classified and recognized based on one of the two following principles:In the event the conditions are deemed to mean that all economic benefits and disadvantages accrue to Muntersright from the time of acquisition, no non-controlling interest is recognized but a liability equivalent to the fair value ofthe future redemption price, on the other hand, is; changes in value attributable to the liability are recognized overthe income statement. At 31 December 2017, Munters recognizes no options based on this principle.
In the event the conditions in the put/call options are not deemed to mean that all financial benefits and disadvantages
accrue to Munters as of the time of acquisition, Munters recognizes non-controlling participation initially and allocatesthis part of the income. The Group also recognizes a liability corresponding to the discounted expected redemption
price for the options whereupon non-controlling participations attributable to the options are eliminated. The difference between liabilities for the options and the non-controlling participations to which the options refer is recognizeddirectly in equity and disclosed separately from other changes in equity. The dissolution of the discounting effect isalso therefore directly recognized against equity. Munters recognized the option attributable to MTech Systems in
the US based on this principle.

Associated companies“Associated company” refers to a company in which the Parent Company directly or indirectly has a long-term holding corresponding to not less than 20 percent and not more than 50 percent of the voting rights, or otherwise has a significant
influence. Munters has no holdings in associated companies.

Non-controlling interests

In the event of acquisitions under one hundred percent but where controlling influence is achieved, non-controlling interest
is determined either as a proportional share of fair value on identifiable net assets excluding goodwill, or at fair value. This
choice of principle is made for each individual business combination.
Non-controlling interests are recognized as individual items in the Group’s equity. The Group’s earnings and each component in other comprehensive income are attributable to the Parent Company’s owners and to non-controlling interests.
Losses attributable to non-controlling interests, if any, are also recognized if it means that the share is negative. Transactions
with non-controlling interests that do not lead to loss of control are recognized as equity transactions (i.e. as transactions
with owners in their role as owners). A change in holdings is recognized through an adjustment of the recognized values forcontrolling and non-controlling interests so that they reflect the changes in their relative interests in the subsidiary. Upon
acquisition from non-controlling interests, the difference between fair value of purchase consideration paid and the actual
share acquired of the recognized value of the subsidiary’s net assets are recognized in equity. Profits and losses on divestments to non-controlling interests are also recognized in equity.
When the Group no longer has controlling interest, each remaining holding is evaluated at fair value at the time whencontrolling interest was lost. The change in recognized value is recognized in the income statement. Fair value is used as
the initial recognized value and constitutes the basis for the continued recognition of the remaining holding as an associatedcompany, joint venture or financial asset.

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MUNTERS ANNUAL REPORT 2017

Translation of the accounts, functional currency and reporting currency of foreign subsidiaries

Items included in the financial reports for the various units in the Group are valued in the currency used in the economic
environment where the respective companies primarily operate (functional currency).
The Consolidated Accounts are prepared in SEK, which is the functional and reporting currency of the Parent Company.
Results of operations and financial condition for all Group companies that have a functional currency other than the reporting
currency are translated into the Group’s reporting currency as follows:

Aassets and liabilities are translated into the exchange rate on the balance date;
Rrevenue and costs are translated into the average exchange rate; andall exchange-rate differences that arise are recognized in other comprehensive income.

Goodwill and adjustments of fair value that arise in connection with acquisition of foreign operations are handled as assets
and liabilities in that operations and are translated into the exchange rate as of the balance date.
Exchange-rate differences attributable to translation of a net investment in foreign operations are recognized in the Consolidated Accounts, together with exchange-rate differences attributable to borrowing or other financial instruments classified
as hedging instruments for such investments, in Other comprehensive income and classified as hedge reserves in equity.
Accumulated gains and losses in equity are recognized in the income statement when foreign operations are fully or partiallydivested.
The following foreign exchange rates have been used in translating accounts:

Currency
AUD
CAD
CNY
DKK
EUR
GBP
JPY
NOK
SGD
THB
USD
ZAR

Country
Australia
CanadaChina
DenmarkEuro zone
United Kingdom
Japan
NorwaySingapore
Thailand
United States
South Africa

TRANSACTIONS IN FOREIGN CURRENCIES

Average rate
2017
6.54
6.58
1.26
1.29
9.63
10.99
0.08
1.03
6.18
0.25
8.54
0.64

2016
6.37
6.46
1.29
1.27
9.47
11.57
0.08
1.02
6.20
0.24
8.56
0.59

Closing rate
2017
6.42
6.56
1.26
1.32
9.85
11.10
0.07
1.00
6.16
0.25
8.23
0.67

2016
6.57
6.74
1.31
1.29
9.57
11.18
0.08
1.05
6.29
0.25
9.10
0.67

Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates that applyon the transaction date. Exchange-rate gains and losses that arise in connection with payment of such transactions andupon translation of monetary assets and liabilities in foreign currency to the exchange rate on the balance date are recognized in the income statement. Exchange-rate differences concerning operating receivables and operating liabilities arerecognized in EBIT, while exchange-rate differences attributable to financial assets and liabilities are recognized as financial
income or financial expense. Realized and unrealized exchange-rate differences are thus recognized in income for the year.

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SEGMENT REPORTING

Operating segments are reported using a method that tallies with the internal reporting submitted to the chief operating
decision maker. The chief operating decision maker is the function responsible for allocating resources and evaluating theGroup’s financial position and earnings. In Munters, this function has been identified as Group Management. Group Management monitors operations from a product-based perspective, which also constitutes Munters’ operating segments: Air
Treatment, Data Centers, AgHort and Mist Elimination.
The accounting policies applied to the segments are the same ones applied to the Group. From 2017 the Data Centers’
cooling business, previously a part of Air Treatment, is reported as a separate business area. The comparative figures from2016 for Data Centers and Air Treatment have been translated. Earnings for the segments are reported in Note 6.

REVENUE RECOGNITION

Net sales are recognized at the sales value less discounts, value added tax and other taxes.
Revenue from the sale of goods is recognized upon delivery, at which point essentially all risks and rights are transferred tothe purchaser. Normally, this means that sales are reported on delivery to the customer in accordance with the terms of sale.
Revenue from major project assignments, essentially originating from the Data Centers segment, are recognized in relation to the degree of completion at the end of the reporting period, provided that the profit can be reliably calculated. The
degree of completion is determined mainly on the basis of units produced in relation to the total number of units in the project.
Anticipated losses are expensed directly.
In the event delivery is delayed, and this delay is due to the customer requesting postponement of delivery, revenue fromthe sale is recognized only in the event 1) the customer specifically consents to invoicing; 2) it is likely that delivery will occur;3) that the commodity is finished and ready for immediate delivery; and 4) that no changes are made to the terms of payment
arising out of the delay in delivery.

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forwards. Current tax costs are calculated on the basis of the tax regulations decided, or decided in practice, in the countries
where the Parent Company and its subsidiaries operate and generate taxable income. Taxes are recognized in the income
statement except when the underlying transaction is recognized directly in equity or other comprehensive income, in whichcase the associated tax is also recognized in equity or other comprehensive income.
Deferred tax is recognized on all temporary differences arising between the carrying amount on assets and liabilities andtheir recognized tax base in the Consolidated Accounts. Deferred tax liability, however, is not recognized if it arises out of
the initial recognition of goodwill. Nor is deferred tax liability recognized if it arises out of a transaction constituting the initialrecognition of an asset or liability that is not a business combination and at the time of the transaction impacts neither
recognized nor taxable earnings. Deferred income tax is calculated by applying the prevailing tax rate (and laws) that were
decided or announced as of the balance date and are expected to be in effect when the deferred tax asset is realized or adeferred tax liability is settled. Deferred tax assets on loss carry-forwards are recognized to the extent that it will be possible
to deduct such losses from future profits.
Deferred taxes attributed to temporary differences regarding holdings in subsidiaries, associated companies or joint ventures are recognized only to the extent to which the Parent Company can control the timing of reversal of the temporary
differences and that it is probable that such a reversal will not occur in the foreseeable future. Deferred tax assets andliabilities are offset when there is a legal right to offset for current tax assets and tax liabilities, and when the deferred tax
assets and liabilities are attributed to taxes levied by the same tax authority and relate to either the same tax subject, ordifferent tax subjects when there is an intent to settle accounts through net payments.

TANGIBLE AND INTANGIBLE FIXED ASSETSInterest income on receivables of long maturity is calculated using the effective-interest method. Interest income includes
the accrued amount of transaction costs and any discounts, premiums, and other differences between the original value ofthe receivable and the amount received when due.

Non-current assets are recognized in the statement of financial position at acquisition cost, less accumulated depreciationaccording to plan and any impairment losses. The assets of acquired companies are recognized at fair value on the date ofacquisition, less accumulated depreciation or amortization.
The acquisition cost of the asset is depreciated or amortized on a straight-line basis to the estimated residual value over
the anticipated useful life of the asset. For anticipated useful lives, refer to Note 8, Depreciation, amortization and impairment
losses. Each asset’s remaining useful life is tested at the end of each accounting period, and adjusted as necessary.

Dividends

Buildings, machinery and equipment

Dividends are recognized as revenue when the right to receive payments has been established. This applies even if thedividends are disbursed from profits resulting before the time of acquisition. Consequently, the investment may need to betested for amortization.

Land is not subject to depreciation because it is considered to have an indefinite useful life. Normal maintenance and repair
costs are expensed as they arise. More extensive renovation and upgrade costs are reported as an asset and depreciatedover the remaining useful life of the asset.

BORROWING EXPENSES

LeasesInterest income

Borrowing expenses are recognized as costs in the period in which they arise, apart from borrowing expenses that are
directly attributable to the purchase, design or production of an asset that will necessarily take substantial time to complete
and that is intended for use or sale. Borrowing expenses are capitalized in the respective asset when they are directly
attributable.

WARRANTY COMMITMENTS

Warranty costs are recognized in cost of goods sold. Provisions for warranty costs are calculated at a standard rate in an
amount that corresponds to the average warranty costs in relation to sales in the most recent 24-month period, with an
adjustment for known warranty claims exceeding the standard provision. Provisions for warranty commitments are related
to the stated warranty period.

INCOME TAXESTax expenses for the period cover current tax calculated on taxable earnings according to the prevailing tax rate. Current
tax costs are adjusted with changes to deferred tax assets and liabilities attributed to temporary differences and loss carry-

Lease of tangible fixed assets where the Group, as lessee, essentially holds the financial risks and benefits associated withownership of an asset classified as a finance lease. Leases in which a significant part of the risks and benefits of ownershipare retained by the lessor are classified as operating leases.
Recognition of finance leases entails recognizing a non-current asset as an asset item in the statement of financial position, at the lower of the fair value of the asset or the estimated present value of the underlying lease payments, and initiallyreporting a corresponding liability. The asset is depreciated according to plan over its useful life, while the lease payments
are recognized as interest and repayment of the liability. For an operating lease, the lease payments during the lease period
are expensed in the income statement.

Goodwill

Goodwill relates to the value by which consideration remitted, non-controlling interest (if any) in one’s own company and thefair value of previous equity share in the acquired company at the date of acquisition (if the business combination was carriedout in steps) exceed the fair value of identified net assets. If the amount falls below fair value for the net assets acquired (inthe event of an acquisition at low price) the average difference is recognized directly in the income statement.

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Goodwill is not amortized, but the impairment is tested yearly, or more often if events or changes in circumstances indicate
a possible decrease in value. Goodwill is reported at acquisition cost less accumulated amortizations. In connection with thesale of a unit, the recognized value of goodwill is included in the resulting profit/loss.

Patents, licenses and similar intellectual property rights

Direct external expenses for the development of software for internal administrative use are capitalized, provided future
efficiency gains are probable and exceed the expenses committed. Activities during the feasibility study phase, and maintenance and training costs, are expensed on an ongoing basis.

Research and development

The Group’s outlays for research are expensed as they are incurred. Research outlays are recognized as an intangible asset
in the statement of financial position, provided that it is technically feasible and also that the Group intends to complete theasset for use or sale. There should also be conditions to use and sell the asset, and it should be possible to demonstrate theprobability of future financial benefits. In addition, adequate resources are required to complete the development and to use
or sell the asset. Outlays arising before the aforementioned criteria are met are expensed. Depreciation of capitalized development starts when the asset is complete and ready to use. Amortization occurs on a straight-line basis over the useful life,
usually three to five years, and is recognized in the report on comprehensive income as research and development costs.

Impairment testing

When there is an indication that a non-current asset’s value has declined, the carrying amount of the asset is assessed.
Goodwill and other intangible assets with an indefinite useful life are impairment tested on a yearly basis, or more often if
there are indications of impairment.

Impairment testing of individual assets

In the event an asset’s recognized value exceeds its estimated recoverable amount, the asset is depreciated to its recoverable amount. The recoverable amount is the higher of the asset’s fair value minus sales costs, and its value in use. The
recoverable amount is assessed individually for each cash-generating unit.
“Net sale value” refers to the most likely sale price in a normally functioning market. “Value in use” refers to the present
value of the estimated future cash flows that are expected to result from the use of the asset plus the estimate residual value
at the end of the asset’s useful life.
Value in use is normally measured using discounted cash flow models, which requires assumptions of such parameters
as a discount rate, future cash flows, and the expenses necessary to generate the estimated cash flows. Any impairment
previously recognized is reversed, if the recoverable amount is deemed to exceed the carrying amount. The reversal amounts
are limited such that a carrying amount must not exceed what it would have been if no impairment had been recognized inprior periods.

Impairment testing of goodwill

For the purpose of testing the need for amortization, goodwill acquired in a business combination is allocated to cash-generating units or groups of cash-generating units expected to be favored by synergies in the acquisition. Each unit or groupof units goodwill has been allocated to corresponds to the lowest level in the group at which the goodwill in question ismonitored in internal governance. It is not a larger part of the group than a segment (i.e. a business area according to theGroup’s segment reporting). Amortization of goodwill is never reversed.

INVENTORY

Inventory (raw materials and consumables, products in process and finished products and goods for resale) is valued at thelower of acquisition cost and net sales value. Net sales value is the estimated sale price in operating activities less applicablevariable sales costs.

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For products manufactured in-house, the acquisition cost consists of direct manufacturing costs plus a reasonable share ofindirect manufacturing costs. Interest expenses are not included in the value of inventory. Measurement has taken into
account normal capacity utilization. The acquisition cost is determined using the first-in, first-out method. Otherwise, weighted
average cost may be used if this method is a good approximation of the first-in, first-out method. Required impairment isrecognized for obsolescence based on each item’s age and rate of turnover.

WORK ON CONTRACTWork on contract consists of committed expenses attributable to currently incomplete work.

FINANCIAL INSTRUMENT S

Financial instruments are all forms of contract that give rise to a financial asset in one company and a financial liability or anequity instrument in another company. Financial instruments are classified in the following categories: (a) financial assets
and liabilities measured at fair value through the income statement; (b) loans receivable or accounts receivable; (c) financial
instruments held to maturity; (d) financial assets available for sale; and (e) other financial liabilities. Classification depends
on the purpose for which the instrument was acquired. Management establishes the classification of an instrument for initialrecognition and reassesses this classification at each reporting date. All financial instruments are recognized from the transaction date the date the Group engages to purchase or sell the instrument.

Classification of financial assets and liabilities

Munters has financial assets and liabilities in the following categories:

Financial assets and liabilities measured at fair value through the income statement

This category has two sub-groups: financial assets and liabilities held for trading, and assets and liabilities that are initiallyclassified as measured at fair values through the income statement. A financial asset or liability is classified in this category
if it was acquired primarily with the intention to sell or buy it soon, or if this classification was determined by management.
Derivative instruments are also classified as held for trading if they are not identified as hedges. Assets and liabilities in thiscategory are classified as current assets or other liabilities if they are held for trading or are expected to be realized within
12 months of the end of the reporting period. Munters has foreign exchange forwards, contingent purchase considerations
and put/call options classified in this category.

Loans receivable and accounts receivable

Loans receivable and accounts receivable are non-derivative financial assets with determined or determinable paymentsthat are not quoted on an active market. Characteristic for these assets is that they arise when the Group provides money,
goods or services directly to a customer without the intention to trade the resulting receivable. They are included in current
assets, with the exception of items falling due more than 12 months after the end of the reporting period, which are classified
as non-current assets. Munters has cash and cash equivalents, accounts receivable, accrued income and certain otherreceivables in this category.

Other financial liabilities

Other financial liabilities are financial liabilities not held for trading. Munters’ borrowing and accounts payable, as well as
certain accrued expenses, are included in this category.

Recognition and measurement of financial instruments

Financial assets and liabilities measured at fair value through the income statement
Derivatives are recognizes in the statement of financial position on the trading date and measured at fair value both initiallyand in subsequent revaluations at the end of every reporting period. Changes in value are recognized in the income statement, no hedging is applied.

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Contingent purchase considerations and put/call options are initially and thereafter, recognized at fair value in the statementof financial position. Changes in value are recognized in the income statement, or alternately in other operating expenses.
The net investments attributable to Munters’ net investments in foreign currency are not currently hedged. Exchange-rate
effects on receivables that constitute an extended investment in the subsidiary are recognized through other comprehensive
income in the same way as translation differences pertaining to investments in foreign subsidiaries.

RECLASSIFICATIONS AN D CHANGE OF ACCOUNTI NG POLICY

Loans receivable and accounts receivable

Provisions are recognized when the Group has or may be considered to have an obligation as a result of events that haveoccurred, and where it is probable that payments will be required to fulfill the obligation. An additional prerequisite is that it
must be possible to reliably estimate the amount to be paid. Provisions for restructuring measures are allocated when adetailed, formal plan for the measures is established and well-founded expectations have been created among those whowill be affected by the measures.
Provisions are measured as the present value of the amount expected to be required to settle the obligation. In thisconnection a discount rate before tax is used that reflects a current market assessment of the time value of money and therisks associated with the provision. The increase in the provision owing to time passing is recognized as an interest expense.

This category is initially measured at fair value. On subsequent occasions, the assets are measured at amortized cost using
the effective-interest method and adjusted for any credit losses. A provision for credit losses is made when there are strong
indications that the Group will not be able to receive the amounts specified in the original terms of the receivable.

Other financial liabilities

This category is initially measured at fair value. For borrowing, this corresponds to the amount received, less any transaction
costs. On subsequent occasions, the liabilities are measured at amortized cost using the effective-interest method. Any gains
or losses arising in conjunction with the disposal of financial instruments or the repurchase of loan obligations are recognizedthrough the income statement.

Offsetting of financial instruments

Financial assets and liabilities may be offset against each other and recognized net in the Consolidated Accounts in cases
where Munters has agreed with the counterparty that assets and liabilities will be netted. No offsetting has taken place in thestatement of financial position.

Accounts receivable

As the expected tenor of accounts receivable is short, they are recognized at the amount expected to be paid in based on
an individual assessment of undiscounted bad debts according to the method for amortized cost. Any amortization of
accounts receivable affects operating profit or loss.

From 2017 the Data Centers’ cooling business, previously a part of Air Treatment, is reported as a separate business area.
The comparative figures from 2016 for Data Centers are translated. Earnings for the segments are reported in Note 5.

PROVISIONSEMPLOYEE BENEFITS
Short-term employee benefits

Liabilities for salaries and benefits expected to be settled within 12 months after the end of the fiscal year are recognized as
current liabilities at the undiscounted amount that is expected to be paid when the liabilities are settled. The cost is recognized
as the services are performed by the employees.

Post-employment benefits

Within the Group, there are several defined-contribution as well as defined-benefit pension plans and other non-current
employee benefits, including some with pension plan assets.

Defined-contribution pension plans

Cash and cash equivalents are defined as cash, bank balances, and investments in securities maturing in three months or
less, and utilized overdraft facilities. Utilized overdraft facilities are recognized in the statement of financial position as current
liabilities.

In defined-contribution pension plans, the Group pays a predetermined premium to a separate legal entity and does not have
any legal or informal obligation to make additional payments if, when compensation to the employee is to be paid, the legal
entity has insufficient assets. The Group’s payments relating to defined-contribution plans are recognized as an expense
during the period the employee performed the services to which the expense relates. Deferred fees are recognized as an
asset to the extent that cash repayment or reduction in future payments can be of benefit to the Group.

Accounts payable

Defined-benefit pension plans

Cash and cash equivalents

Accounts payable are commitments to pay for goods and services acquired from suppliers in operating activities. The
amounts are unhedged and most often paid within 30 days. Accounts payable and other liabilities are classified as current
liabilities if they fall due within one year. If not, they are recognized as non-current liabilities.

Borrowing

Borrowing is initially recognized at fair value, net after transaction costs. It is subsequently recognized at amortized cost as
described above under Other financial liabilities, and any difference between the amount received and the amount repaid isrecognized in the income statement, allocated over the borrowing period using the effective-interest method. Fees paid forloan facilities are recognized as transaction costs for borrowing to the extent it is probable that the credit line will be used,either in whole or in part. In such cases, the fee is recognized when the credit line is used. When no proof exists that it isprobable the credit line will be used, either in whole or in part, the fee is recognized as an advance payment for financial
services and allocated over the tenor of the loan commitment in question.

All other plans for post-employment benefits other than defined-contribution plans are defined-benefit plans. The liability orasset regarding defined-contribution pension plans that is recognized in the statement of financial position is the present
value of the defined-benefit obligation at the end of the reporting period less the fair value of the plan assets. The definedbenefit pension obligation is calculated annually by independent actuaries using the projected unit credit method. The present
value of the defined-benefit obligation is established by discounting estimated future cash flows using the interest rate forhigh-quality corporate or housing bonds issued in the same currency that the benefits will be paid in, with tenors comparable
to the pension obligation in question. For Swedish plans, the discount rate equals the housing bond rate. Net interest is
calculated by applying the discount rate to defined-benefit plans and to the fair value of the plan assets. This cost is included
in labor costs in the income statement.
Revaluation gains and losses arising out of experience adjustments and changes to actuarial assumptions are recognizedin other comprehensive income during the period in which they arose. They are included in profit brought forward in thestatement of changes in equity and in the statement of financial position. Expenses for employment during previous periods
are recognized directly in the income statement. Expenses for the year for employment in the current year are recognized inadministrative costs and the interest expense for the defined-benefit net liability is recognized in financial expenses in theincome statement.

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IN F ORM ATIONMUNTERS ANNUAL REPORT 2017

Special employer’s contribution in Sweden is calculated on the difference between the pension obligation adopted according
to IAS 19 and according to the rules applied for the legal entities. Calculated future employer’s contribution is recognized in
the statement of financial position as a part of the pension obligation. The change in the provision is recognized, to the extent
that it pertains to the effects of revaluations, in other comprehensive income.

ACCOUNTING POLICIES OF THE PARE NT COMPANYSHARE CAPITAL

Financial statements

Ordinary shares are classified as equity. Mandatory redeemable preferential shares are classified as liabilities. Transaction
costs that can be directly attributed to issue of new shares or options are reported, net after tax, in equity as a deduction
from proceeds.

DIVIDENDS

Dividends to the Parent Company’s shareholders are recognized as a liability in the Group’s financial reports in the period
when the dividend was approved by the Parent Company’s shareholders.

EARNINGS PER SHARE

Earnings per share before dilution are calculated by dividing earnings attributable to the Parent Company’s shareholders,
excluding dividends attributable to preferential shares, by a weighted average number of ordinary shares outstanding during
the period. Earnings per share after dilution are calculated by adjusting the amount used for calculating earnings per share
before dilution through observing the effect after tax of dividends and interest expenses on potential ordinary shares and of
the weighted average of additional ordinary shares that would have been outstanding in the event of a conversion of all
potential ordinary shares.

CONTINGENT LIABILITI ES

Contingent liabilities are reported when there are possible obligations relating to transpired events that will only become
actual obligations given the occurrence or non-occurrence of one of more uncertain future events that are not entirely within
the control of Munters. Contingent liabilities may also be an obligation arising from transpired events but not reported as aliability or a provision because it is not probable that the obligation will be settled or because the amount of the obligation
cannot be calculated with sufficient reliability.

RELATED PARTY DISCLOSURESThe companies related to Munters are defined as the Parent Company, subsidiaries, and associated companies as well asother companies managed by Nordic Capital. “Related physical persons” are defined as Board members, senior executives,and close family members of such persons. Companies in which any of the mentioned physical persons have significant
influence are also defined as companies related to Munters. Information on transactions that entail a transfer of resources,
services, or obligations between related parties is disclosed, regardless of whether or not remuneration is paid. The disclosure contains information as to the character of the relationship and the effect of the relationship on the financial statements.

EVENTS AFTER THE END OF T HE REPORTING PERIOD

If events arise that are significant but should not be taken into account when the amounts in the statement of comprehensive
income and statement of financial position are adopted, then the character of the event and, if possible, an estimate of its
financial impact will be disclosed in the Board of Directors’ Report and notes. “Significant” implies that an omission to disclose
the information could influence financial decisions made by users of the financial statements.
Significant events that confirm the situation existing at the end of the reporting period and occur after the reporting period
but prior to the signing of the Annual Report will results in adjustments to the amounts in the Annual Report.

FIN AN CIALR APPORTS

D ef initions

17

The Parent Company’s Annual Report has been prepared in accordance with the Annual Accounts Act and with the application of the Swedish Financial Reporting Board’s recommendation RFR 2 – Accounting for Legal Entities. This means thatIFRS are applied with the deviations and additions presented below.

Under the requirements in RFR 2. the Parent Company’s financial statements deviate from those presented for the Group.
This means that the Parent Company has the following five statements in the Annual Report: income statement, other comprehensive income, balance sheet, statement of cash flow and statement of changes in equity.

Financial instruments: Recognition and measurement

The Parent Company does not apply IAS 39 Financial Instruments: Recognition and Measurement. Instead, measurements
are based on the acquisition costs of assets and liabilities.

Ownership of subsidiaries

Holdings in subsidiaries are recognized in the Parent Company using the cost method. If there are indications of a decline
in value, the value is tested and, if required, the holdings are impaired.

Group contributions

The Parent Company recognized all Group contributions, paid and received, as appropriations.

Shareholders' contribution

Shareholders' contributions from the Parent Company are recognized directly in the receiver’s equity and capitalized in theshares and participations of the Parent Company, to the extent impairment is not required.

NOTE 2SIGNIF ICANT ESTIMATE S AND ASSESSMENTS

In preparing the financial statements, Company management and the Board of Directors must make assessments and assumptions that affect the final accounts and disclosures. These assessments are based on past experience and the various
assumptions that management and the Board consider reasonable under the prevailing circumstances. The conclusions
thus drawn form the basis for determinations concerning carrying amounts of assets and liabilities in cases where theycannot be readily determined using information from other sources. Actual outcomes may differ from these assessments, if
other assumptions are made or other conditions applied.
The estimates and assessments that are considered to have the greatest impact on Munters earnings and financial position are discussed below.

Measurement of goodwill

The Group tests for impairment of goodwill each year. This test requires an estimation of parameters affecting future cash
flows and a determination of a discount rate. Then the recoverable amount of each individual cash-generating unit is established by calculating the value in use. Note 15 presents the significant assumptions made to test goodwill and describes theeffects of reasonable and possible changes to the assumptions on which the calculations were based. At the end of 2017,
the Group recognized goodwill to a value of SEKm 4,251 (4,227).

Acquired intangible assets and establishing useful lives

When businesses are acquired, the intangible assets acquired are measured at fair value. In cases where there is an active
market for the acquired assets, the fair value is determined based on prices in that market. Because active markets are often

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lacking for these assets, valuation models have been developed to estimate fair values. One example of a valuation model
is discounted future cash flows. These assets are amortized based on established useful lives. When establishing useful
lives, Company management makes assumptions and judgements regarding how long each asset will generate financial
benefits for the Group. At the end of 2017, the Group recognized Technology, Customer relationships and Brands to a valueof SEKm 1,341 (1,450).

Development expenses

Determining whether or not an intangible asset resulting from development should be recognized as an asset requires anassessment of the extent to which certain specific conditions are satisfied. With regard to capitalized development projects,
management’s assessment is that their technical and financial feasibility are confirmed. At the end of 2017, the Group recognized intangible assets regarding product development to a value of SEKm 72 (54).

Deferred tax assets on loss carry-forwards

The Group recognizes deferred tax assets on loss carry-forwards to the extent that it is probable such losses can be deductedfrom future profits. The actual outcome may deviate from the assessments made because of factors such as changes in thebusiness climate or to tax regulations.
At the end of the 2017 reporting period, the Group’s total tax loss carry-forward was SEKm 968 (900). In the consolidatedbalance sheet, a value for tax purposes of capitalized loss carry-forwards was recognized in the amount of SEKm 120 (100),
relating primarily to Australia, Belgium, Brazil, the Netherlands, Mexico, Turkey, Germany and Sweden.

Contingent purchase considerations

A contingent purchase consideration in connection with acquisitions is often dependent on future financial performance
related to the acquired unit. Actual results may differ from these assumptions, which involve changing a previously recognized contingent consideration. In 2016, the contingent purchase consideration in Reventa was released prematurely andthe payment was SEKm 9, which was less than what had been recognized in the purchase price analysis and therefore
meant a positive effect of SEKm 30. Settlement of the HB Group acquisition earn-out was reached in 2017 and also led to a
positive impact on results of SEKm 53.

Legal disputes

Provisions for legal disputes are estimates of the future cash flows that will be required to settle the obligations. The disputes
primarily related to contracted obligations attributable to contracts with customers and suppliers, though other types of disputes also arise in normal business operations. Management considers it improbable that any of the known disputes in which
Munters is currently involved will have a significant negative effect on the Group’s accounts.

Estimation of forecast and completion of assignments

S E RV I CE

Assura nce

Successive revenue recognition is applied in the Group, which means that revenue is recognized based on the degree ofcompletion. The forecasts for each contract constitute an estimate of final revenue and expenses.

CO RPORATE

Aud i t o r ’ s Re p or t

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

MUNTERS ANNUAL REPORT 201718

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NOTE 3

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

19

MUNTERS ANNUAL REPORT 2017

FINANCIAL RISK MANAGEMENT

Through its operations in a global environment, Munters is exposed to several different financial risks, such as currency risk,interest rate risk, credit risk, and liquidity risk.
The financial risks are controlled and managed based on a financial policy adopted by the Board. The policy covers theentire Group and is updated annually. The purpose of the policy is to create a framework for managing the various financial
risks. Risk management and financing activities are handled centrally by the CFO and the Group Treasury function, under
the control and monitoring of the Board of Directors and CEO. The overall objective is to limit the volatility attributable tofinancial factors in the income statement and balance sheet, protect financial assets and future cash flows, as well as optimize the Group’s financing and meet covenants. The Treasury function, which acts as the Group’s internal bank, identifies,
evaluates, and hedges financial risks in close cooperation with the Group’s operational units.

Currency
USD
EUR
CNY
DKK
SEK
JPY
GBP
BRL
KRW
AUD
THB
SGD
Övrigt
Total

Percentage of revenue, %
2017
2016
43.3%
43.4%
26.1%
28.4%
9.8%
8.4%
3.5%
1.4%
3.3%
1.3%
2.2%
2.3%
1.7%
4.1%
1.7%
1.6%
1.5%
1.0%
1.5%
1.9%
1.2%
0.6%
0.9%
3.1%
3.2%
2.5%
100.0
100.0

Percentage of costs, %
2017
2016
38.4%
39.0%
29.7%
29.3%
7.3%
7.0%
1.5%
1.3%
8.9%
7.1%
2.1%
2.3%
2.3%
4.3%
2.1%
1.7%
0.7%
0.5%
1.1%
1.6%
0.7%
0.5%
0.5%
0.5%
4.8%
4.8%
100.0
100.0

Currency risk

Due to Munters global presence, the Group is exposed to currency risks, both through transaction exposure in transactions
in foreign currency and through translation exposure when translating income statements and balance sheets into SEK.

Transaction exposureGroup internal sales in foreign currency primarily occur through the Group’s sales companies, which are invoiced in therecipient’s functional currency. In so doing, transaction exposure and hedging operations are concentrated to a few companies in the Group.
The hedging of transaction exposure shall primarily occur through so-called natural hedges, whereby incoming and outgoing cash flows in foreign currencies are matched so as to minimize the net exposure. For example, Munters has decided
to have their external loans in USD to get a natural hedge towards the large inflows of USD as presented in the table above.
Otherwise, hedging shall chiefly occur through the forward selling of currency. The value of forward contracts at year-end
was about SEKm -0.1 (-2), see Note 18. Munters does not apply hedge accounting for these financial instruments.

A significant proportion of Munters’ income and expense is generated in foreign currencies, of which the most significant arepresented in the tables. The geographic distribution of Munters’ production plants results in significant matching of revenues
and expenses in local currencies, which limits the currency exposure.
Munters’ sensitivity to variations in exchange rates is presented in the table below. The analysis includes transaction
exposure and is based on EBIT for 2017. All other factors influencing earnings are assumed unchanged in the calculation.
Estimated effect on earnings before
interest and tax (EBIT)SEK +10% �compared with
USD
CNY
DKK
KRW
THB
AUD
SGD
CAD
TRY
CZK
ILS
MXN
EUR
Övriga valutor
Total

SEKm
-57,1
-24,2
-17,0
-6,8
-4,2
-3,6
-3,2
-3,2
-3,0
3,1
7,8
9,5
14,6
-0,6
-87,9

%
-12,6%
-5,3%
-3,8%
-1,5%
-0,9%
-0,8%
-0,7%
-0,7%
-0,7%
0,7%
1,7%
2,1%
3,2%
-0,1%
-19,3%

Translation exposure

A large proportion of Munters’ subsidiaries have net assets in a functional currency that is different from the Group’s reporting
currency. When these are translated into SEK, translation differences arise which are recognized in other comprehensive
income. Translation differences attributable to net investments in foreign currency are not hedged. However, pursuant to thefinancial policy, this is monitored and calculated regularly in order to determine its impact on earnings and financial position.
The effect on other comprehensive income of the translation of foreign subsidiaries’ net assets into SEK totaled SEKm -89(198). This refers mainly to subsidiaries that have USD, EUR and CNY as functional currency.

Interest rate risk

Interest rate risk refers to the risk of the value of financial instruments and interest-bearing assets and liabilities changing
due to changes in the interest rate level.
To ensure efficiency and sound risk control, the major part of borrowings are managed by the Group Treasury function.
Munters is exposed to interest risk through interest-bearing borrowings, which are one of the Group’s sources of financing
in addition to equity and cash flow from operating activities. Interest-bearing borrowings consist primarily of a long-term bankloan with a variable interest rate. In addition, few subsidiaries have been permitted to keep individual third party bank debt.
The Group has no significant interest-bearing assets besides bank balances, so revenues and cash flow from operating
activities are largely independent of changes in market interest rates.
The Group had at the end of 2017 no outstanding interest rate derivatives.

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Counterparty exposure

Credit risk

Liquidity risk

The average fixed interest term for the Group’s external loans was 2.1 months (3.1) at year-end 2017. If the interest rateincreases with one percentage in all countries where Munters has loans or investments, the impact on net financial income
and expense would be approximately SEKm 24 (23). This sensitivity analysis assumes that all other factors, such as exchange rates, remain unchanged.

Credit risk is the risk of Munters incurring losses due to a counterparty failing to pay.

Credit exposure

For Munters, the predominant portion of credit risk relates to accounts receivable. Munters works actively to limit this risk.
An approved credit rating is required for a counterparty to be approved. Advance payment is generally encouraged, andpartial advance payment is required when the value of the order is a significant amount and delivery extends over a long
period of time. Accounts receivable are also mainly spread among many customers, primarily companies in different industries and with wide geographical distribution, which limits concentration of the credit risk. The Group’s five largest customers
accounted for 14 percent (13) of total revenues, calculated on a full-year basis. At December 31, 2017, the five largest
customers accounted for 17 percent (12) of total outstanding accounts receivable.
To ensure that the Group’s accounts receivables are paid, the management of receivables is regulated in a special policy.
According to this policy, each business unit must have established and documented processes for handling unpaid receivables. The documented processes include specifications of time limits for taking various actions, including legal action, as
well as who is responsible at various stages of the process. Documentation of actions taken ensures that follow-up is possible. The measures are matched to amounts and to different groups of customers and business areas in a manner that will
result in efficient handling of overdue accounts receivable.

R APPORTS

20

A list of approved counterparties and maximum exposure to each approved counterparty is established in the financial policy.
Approved counterparties should be characterized by high ethical values and have a credit rating of at least A-/A2 according
to Standard & Poor’s/Moody’s credit assessments. Exceptions may sometimes be made for local banks, but such cases
must have the advance approval of the CFO.

Liquidity risk refers to the risk of Munters, at a given point in time, not having sufficient liquidity to cover expected or unforeseen expenses.
The liquidity reserve is defined as bank balances or invested funds that can be released within two banking days without
any additional or minor cost, plus any unutilized credit facilities, committed for minimum 12 months, less any outstanding
uncommitted debt. Management continually monitors forecasts of Group cash flows and liquidity reserves to ensure that theGroup has sufficient funds to satisfy the needs of operating activities and to cover interest payments and loan repayments.
According to the financial policy, the long-term liquidity reserve shall exceed an amount equivalent to 1.5 months of disbursements (both direct and indirect). Short term the Liquidity reserve can fall below that level to SEKm 350. A risk to go below
the permitted threshold level requires immediate actions. At the end of 2017, the Group had unutilized credit facilities of
SEKm 811 (68).
Group Treasury works actively to ensure an effective cash management structure by centralizing the liquidity to the parent
company through cash pools and other form of sweeping mechanisms. Cash surplus shall primarily be used to repay on
external debt. The Group’s cash and cash equivalents shall be placed in bank accounts or high-liquidity interest-bearing
instruments. Surplus liquidity in subsidiaries shall be placed with Group Treasury. By securing accessibility to guaranteedlong-term credit facilities and spreading maturities and sources of financing for borrowings, the Group will avoid expensive
financing and refinancing difficulties. For more information about the Group’s borrowings, see Note 18.

Capital structure
2017
314
103
69
9
494

2016
177
135
39
1
352

Provisions for bad debts correspond to 3 percent (4) of total receivables and changed as follows.
Provision for bad debts
Amount at January 1
Provision for anticipated losses
Realized losses
Reversals of unutilized amounts
Exchange-rate differences
Closing balance

FIN AN CIALMUNTERS ANNUAL REPORT 2017

Interest exposure

Time analysis of accounts receivable,
past due but not impaired< 30 days
30-90 days
91-180 days
> 180 days
Closing balance

IN F ORM ATION

D ef initions

2017
42
24
-8
-19
-1
38

2016
51
27
-8
-30
2
42

The credit quality of financial assets not past due or not impaired at the end of the reporting period is considered good.
The credit risk for financial assets besides accounts receivable, such as cash and cash equivalents, equals the carrying
amounts.

Munters aims to have a capital structure that ensures long-term stability in the operations, satisfies various investment requirements and safeguards the value of the Group. Munters endeavors to ensure that the Group’s subsidiaries shall havean optimal capital structure relating to financing requirements and foreign exchange and tax regulations in each jurisdiction.
Subsidiary financing shall mainly be done by internal loans or capital contributions. Requirements in the Groups externalloan agreement and commonly praxis following the type of business of the individual subsidiary and country shall be taken
into account when deciding form of financing. An analysis of the subsidiaries’ capital structure is done on a yearly basis tosecure that the different requirements are met.

NOTE 4

INFORMATION ON COSTS BY NATURE

2017 Group
Material costs
Other production costs
Personnel and other administration
Cost of depreciation
Amortization and write downs on surplus
valuesOther costs
Total

Cost ofgoods sold

Sales costs

Administrative
costs

R&D costs

Other costs-2,797
-896
-706
-60

-781
-8

-570
-18

-153
-13

-

0
-4,458

-189
-978

-588

-167

-14
-14

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MUNTERS ANNUAL REPORT 20172016 Group
Material costs
Other production costs
Personnel and other administration
Cost of depreciation
Amortization and write downs on surplus
valuesOther costs
Total

NOTE 5IN F ORM ATION

Cost ofgoods sold

Sales costs

Administrative
costs

R&D costs

Other costs-2,511
-744
-587
-59

-737
-7

-497
-15

-126
-12

-

-32
-3,931

-169
-913

-512

-138

-

BUSINESS ACQUISITIONS AND DIV ESTMENTS

Acquisitions 2016

No acquisitions were made during 2016.

Acquisitions 2017
MTech Systems

On February 1, 2017, Munters completed an acquisition of 60% of the shares in the US based software company MTech
Systems. The company is operating within the business area AgHort. The purchase price amounted to SEKm 222, corresponding to a debt-free enterprise value for 100% of the company of SEKm 370. Munters also has an option to acquire theremaining 40% of the shares that are held by senior executives of MTech Systems, who also have an option to sell, startingin December 2020. The purchase consideration on exercising the option will be based on the financial result for the 12months prior to the date of exercising the option. As a consequence of the option Munters recognize non-controlling interest
initially and allocate such part of income. The Group also recognizes a liability corresponding to the discounted expected
redemption price for the option whereupon non-controlling interest attributable to the option is eliminated. The difference
between liabilities for the options and the non-controlling participations to which the options refer is recognized directly inequity and disclosed separately from other changes in equity.
Compared with the purchase price allocation presented in the first quarter of 2017, the value of technology has been
decreased by SEKm 25 and goodwill increased with the same amount during the second quarter. Final purchase allocations
have been performed during the fourth quarter and has resulted in increased goodwill of SEKm 61. The main adjustments
related to deferred income which increased by SEKm 36 and other current assets which was decreased by MSEK 27.
The acquisition of MTech Systems was financed by raising bank loans. In 2016 MTech Systems had revenues amounting
to approximately SEKm 140. Acquisition costs incurred amounted to SEKm 10, which is reported as administrative costs.
The goodwill arising from the acquisition, SEKm 223, was primarily attributable to future synergies expected through combining MTech Systems expertise in advanced data analysis with data from Munters controllers, creating a complete overview
of the supply chain for poultry and swine producers. Overall this will significantly expand Munters offering to our customers
in business area AgHort.
The acquired business contributed revenues of MSEK 124 and net profit of MSEK 34 to the group for the period from 1
April to 31 December 2017. If the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and profit
for the year ended 31 December 2017 would have been MSEK 136 and MSEK 37 respectively.

FIN AN CIALR APPORTS

D ef initions

Information about acquired net assets and goodwill follows
Cash purchase consideration paid
Total purchase consideration
Fair value of non-controlling interests
Fair value of acquired net assets
Goodwill

Acquired net assets at time of acquisition
AssetsProperty, plant and equipment
Customer relationships
Technology
Brands
Accounts receivable
Other current assets
Cash and cash equivalents
Total assets

21

According to final purchase priceallocation
222
222
162
-161
223

Fair values according to final
purchase price allocation
10
29
97
19
51
12
35
252

Liabilities
Non-current interest-bearing liabilities
Current interest-bearing liabilities
Accounts payable
Accrued expenses and deferred income
Deferred tax liabilities
Other current liabilities
Total liabilities

0
0
1
56
22
12
91

Net identifiable assets and liabilities

161

Cash purchase consideration paid
Cash and cash equivalents in acquired company
Change in the Group's cash and cash equivalents on acquisition

222
-35
187

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MUNTERS ANNUAL REPORT 2017

Kevin Enterprises

On April 1, 2017, Munters completed an acquisition of Kevin Enterprises Private Limited, a privately owned company headquartered in Mumbai, India. The acquisition was structured as an asset deal, acquiring company being Munters India
Humidity Control Private Limited, Munters India. Since April 2017, the acquired business is reported as a separate reporting
unit within Munters India, and is consolidated into Business Area Mist Elimination, which is also the cash-generating unit towhich the acquisition has been allocated. The purchased consideration, after preliminary net working capital and net debt
adjustments, amounted to SEKm 76. Preliminary fair value of transferred net working capital and net fixed assets amounted
to SEKm 18 and 35 respectively. Value of intangible assets, including goodwill, was estimated at approximately SEKm 23.
Net debt items were estimated at approximately SEKm 0.2. In 2016, Kevin Enterprises generated revenues of approximately
SEKm 65. Acquisition costs incurred amounted to SEKm 6, which is accounted as administrative costs.
The acquired business contributed revenues of MSEK 28 and net profit of MSEK -5 to the group for the period from 1
June to 31 December 2017. If the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and profit
for the year ended 31 December 2017 would have been MSEK 38 and MSEK -7 respectively.

Information about acquired net assets and goodwill follows
Cash purchase consideration paid
Total purchase consideration
Fair v alue of acquired net assets
Goodwill
Acquired net assets at time of acquisition
AssetsProperty, plant and equipment
Technology
Order backlog
Favourable contract to use Brand nameInventories
Accounts receivable
Other current assets
Total assets

According to final purchase priceallocation
76
76
61
15
Fair values according to final
purchase price allocation
35
6
1
1
11
10
64

Liabilities
Accounts pay able
Accrued expenses and deferred income
Other current liabilities
Total liabilities

3
3

Net identifiable assets and liabilities

61

Cash purchase consideration paid

76
76

Change in the Group's cash and cash equivalents on acquisition

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

22

Edata

On May 30, 2017, Munters Group acquired Brazilian-based Edata specializing in key software for food processing plants,
primarily for poultry production. The purchased consideration amounted to SEKm 5. Edata provides software to keep trackof production within food processing plants and is a long-term partner to MTech Systems, the leading supplier of software
solutions to the live production industry which was acquired by Munters on Feb 1, 2017. Edata delivers form-fit solutions for
tracking finished products, measuring quality and yield, and for controlling waste in the food production process. Edata’s
software will be fully incorporated into MTech’s suite enabling Munters to integrate data from farms, hatcheries, feed mills in
the food producers' production system. Identified goodwill from the acquisition has been allocated to the AgHort cash-generating unit. Acquisition costs incurred total SEKm 1 and are recognized as administrative expenses. Edata had a turnoverof approximately 15 SEKm in 2016 and had 34 employees.
The acquired business contributed revenues of MSEK 8 and net profit of MSEK -6 to the group for the period from 1 June
to 31 December 2017. If the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and profit for theyear ended 31 December 2017 would have been MSEK 13 and MSEK -11 respectively.

Krako

Munters has divested its 50 percent share in the company Hebora SRO for SEKm 30. In connection with the divestment ofHebora SRO, Munters acquired the remaining shares in HB Krako SRO for SEKm 57, in which Munters previously had thecontrolling interest. HB Krako SRO is 100 percent owned by Hebora SRO. HB Krako SRO conducts operations in premises
owned by Hebora SRO. A ten-year lease agreement has been drawn up between HB Krako SRO and Hebora SRO. The
total effect of the transaction on cash flow totaled SEKm -27, which was reported as a divestment in the statement of cashflow.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

105

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
NOTE 6IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

23

MUNTERS ANNUAL REPORT 2017

OPERATING SEGMENTS

Munters is a global leader in energy-efficient solutions for air treatment based on its expertise in humidity- and climatecontrol technologies.

Reportable operating segments

AgHort manufactures and markets energy-efficient products and systems to create the right indoor climate for the animalhusbandry and horticultural industries.
Mist Elimination manufactures and markets environmentally friendly solutions and products for mist elimination, such as
for cleaning flue gas.
Business area consolidation is performed applying the same policies as for the Group as a whole. Transactions between
business areas are conducted on market terms. Key control and reporting concepts are order intake, net sales, EBIT, andoperating working capital. No individual external customer represents 10 percent or more of Munters’ sales.

The Group’s reportable operating segments have been identified from a management perspective. Thus the segment information disclosed is based on internal reporting to the chief operating decision maker, which at Munters has been equatedwith Group management.
The Group’s operations are managed and reported by four business areas as described below.
Air Treatment manufactures and markets products and holistic solutions for controlling humidity and improving the indoor
climate. Customers’ manufacturing processes and warehousing are becoming more efficient and product quality, shelf life,and hygiene are improving.
Data Centers manufactures and markets products and precision climate control systems to medium and large scale data
centers.

Air Treatment
2017
2016

Data Centers
2017
2016

AgHort2017

2016

Order intake

3,787

3,385

1,261

919

1,866

1,704

394

416

-112

Sales from external customers
Transactions between business segments
Net sales

3,569
19
3,588

3,288
6
3,294

833
23
856

655
30
685

1,808
30
1,837

1,669
36
1,705

395
11
406

428
9
437

Earnings before interest and tax (EBIT)

511

437

-13

54

225

276

34

Accounts receivable
Inventories
Accounts payable
Advances from customers
Change in operating working capitalInternal reallocations
Investment
Add back of depreciation, amortization, and impairments
Operating cashflow

-11
18
-17
-4
-13
5
-83
42
462

24
-70
62
-36
-21
11
-109
45
364

-13
-98
50
42
-20
0
-23
13
-43

-256
-21
81
135
-61
0
0
8
1

-51
-50
52
40
-9
-0
-50
37
203

-18
-38
-4
4
-56
4
-59
36
200

Other disclosures
Number of permanent employees at year end

1,886

1,598

452

488

770

639

1) Pertains group internal eliminations and group items not allocated to any operating segment.

Mist Elimination
2017
2016

Other & Eliminations 1)
2017
2016

Total
2017

2016

-50

7,197

6,373

-83
-83

-80
-80

6,604
0
6,604

6,040
0
6,040

69

-303

-258

453

577

3
-5
3
4
4
1
-4
6
41

-6
-2
-0
-1
-10
1
-3
5
62

-4
0
-28
-3
-35
-5
-10
189
-165

7
0
6
2
15
-16
-12
168
-103

-76
-135
59
79
-72
0
-170
288
498

-249
-132
145
104
-132
0
-184
262
523

318

156

70

58

3,496

2,939

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

106

2 017

B US I NE S S

ARE AS

Pa re nt F i na nci a l s

Notes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

FIN AN CIALR APPORTS

24

MUNTERS ANNUAL REPORT 2017

GEOGRAPHIC INFORMATIONNOTE 8The information above is based on where customers have their registered head office.
External net sales
SwedenUnited States
Germany
China
Other countries
Total revenues from e� xternal customers

2017
155
2,413
424
783
2,829
6,604

2016
135
2,153
456
658
2,639
6,040

Non-current assets
SwedenUnited States
Euro countries
Other countries
Total non-current assets

2017
484
3,654
1,889
243
6,270

2016
499
3,719
1,892
197
6,308

The information presented in the table above regarding non-current assets is grouped according to assets location, i.e. where
the entity carries on its production of goods and services. Non-current assets consist of buildings and land, plant andmachinery, equipment, tools, and installations, construction in progress, patents, licenses, brands and similar rights andgoodwill.

NOTE 7IN F ORM ATION

D ef initions

DEPRECIATION, AMORTI ZATION, AND IMPAIRME NT LOSSES

Amortization of intangible assets and depreciation of property, plant, and equipment are based on the historical acquisition
cost and the estimated useful life of different groups of assets. For assets acquired during the period, depreciation or amortization is calculated from the acquisition date. Depreciation and amortization are charged primarily on a straight-line basis
over the following useful lives.
Leasehold improvements
Research and development work
Patents, licenses, brands (with definitive useful life)
Customer relationships
Technology
Brands (with indefinitive useful life)
Machinery and equipment
Buildings
Land lease

The brands that emerged in connection with business combinations acquired when Munters Topholding AB acquired Munters
AB via Munters Holding AB are deemed to have an indefinite useful life, while the useful life of customer relationships andtechnology also identified are estimated at 6–12 years. Also the brands that emerged in connection with the acquisition ofProflute are deemed to have an indefinite useful life. A write down by SEKm 19.6 was made during 2017, which was related
to customer relations in Mtech. No other write-down of goodwill and other acquisition-related intangible assets has been
made during the year.
Depreciation, amortization, and impairment losses on non-current assets were charged to income for the year as shown
below.

OTHER OPE RATING REVE NUE AND OPERATING EX PENSES
Group

Other operating income
Change in contingent price considerations
Other
Total
Other operating expenses
Other
Exchange-rate differences
Total

2017

2016

53
0
53

30
1
31

-2
-12
-14

-2
2
0

Other operating revenue 2016 refers to the contingent purchase price consideration prematurely settled in the German subsidiary Munters Reventa GmbH and 2017 contained the settlement of the HB Group acquisition earn-out, that was acquired2015.

3-7 years
3-5 years
3-10 years
7-12 years
6-8 years
not amortized
3-10 years
20-33 years
50 years

Cost of goods soldSelling expenses
Administrative costs
Research and development costs
Total

Group
2017
-60
-197
-18
-13
-288

2016
-59
-176
-15
-12
-262

Amortization and impairment of acquisition-related intangible assets totaled SEKm 189 (169) and is included in the item
selling expenses.
Group
Write down of inventory
2017
2016
Opening balance-71-60
Write down current year
-13
-10
Reversal of previous years write down
51Organizational change
1
Exchange rate differences
1-3
Closing balance-77-71
Most of the write downs and reversal of write down are related to the obsolescence that is made at each period end.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

107

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
NOTE 9IN F ORM ATION

R APPORTS

25

MUNTERS ANNUAL REPORT 2017

NOTE 11LEASESINCOME TAXES

Operating leases

The period’s expense for operating leases on assets, such as leased premises, machinery, and major computer and officeequipment, is recognized among operating expenses and totaled SEKm 106 (91). The minimum future lease payments forirrevocable operating leases have the following maturity.
2018
2019-2022
2023 and later
Total

104
251
45
400

Finance leases
Like last year, there are no significant amounts of financial leases.

NOTE 10FIN AN CIAL

D ef initions

FINANCIAL INCOME AND EXP ENSES

Financial income
Interest income, subsidiaries
Interest income, other
Other financial income
Financial expenses
Interest expenses subsidiaries
Interest expenses, loans
Financing Fees
Exchange-rate differences
Other financial expenses
Total financial income
and expenses

Group
2017

Parent Company
2017
2016

2016

8
0
8

10
2
12

-

-

-224
-69
-12
-6
-309

-391
-18
-19
-7
-436

-83
-1
-0
-84

-202
-202

-301

-424

-84

-202

Current tax
Tax attributable to prior years/withholding tax
Deferred tax related to temporary differences and loss
carry-forwards
Income tax not calculated based on net profits
Tax recognized in income statement for the year
Reconciliation of effective tax
Profit/Loss before tax
Tax according to prevailing tax rate for the Parent
Company
Difference attributable to foreign tax rates
Tax effect of;
Non-deductible expenses 1)
Non-taxable income
Utilization of losses not recognized as an
asset in the balance sheet
Change in valuation of deferred tax on temporary
differences and losses
Revaluation of deferred tax assets/liabilities
due to change in tax rate 2)
Non-income-related taxes
Tax attributable to prior years/withholding tax
Other
Tax recognized in income statement for the year

Group
2017
-98
-6

2016
-109
-5

Parent Company
2017
2016
-

128
-3
21

50
-5
-69

-

-

152

153

-75

-180

-33

-34

17

40

2

-18

-

-

-23
17

-54
12

-17
-

-41
-

1

3

-

-

-1

36

0

1

69
-3
-6
21

-4
-5
-5
-69

-

-

2017

2016

3
3

4
4

1) Mainly related to interest cost on shareholder debt.
2) Mainly related to decreased tax rates in the US and Belgium.

Tax attributable to components of other comprehensive income
Deferred tax attributable to:
Actuarial gains and losses on defined-benefit pension obligations
Total

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

108

2 017

B US I NE S S

ARE AS

Pa re nt F i na nci a l s

Notes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

IN F ORM ATIONMUNTERS ANNUAL REPORT 2017

Reconciliation of net change in deferred tax assets from the beginning of the year to the end of year:
Deferred tax assets
Buildings
Machinery and equipment
Inventory
Accounts receivable
Provisions
Accrued expenses and prepaid income
Goodwill
Loss carry-forwards
Provisions for pensions
Other
Total

Group
2017
0
3
24
6
9
49
5
120
22
5
242

2016
5
21
10
6
61
6
100
19
14
242

Deferred tax liabilities
Buildings
Machinery and equipment
Technology
BrandsCustomer relationships
Goodwill
Other
Total

Group
2017
3
21
30
281
44
11
4
394

2016
3
21
45
361
83
10
2
525

Change in deferred taxes
Opening balance
Acquisition of subsidiaries (Note 5)
Charges in this year's profit
Tax on amounts recorded in Other comprehensive income 1)
Closing balance

Group
2017
283
22
-128
-25
152

2016
311
-50
22
283

1) Including change in Translation reserve for the year.

Deferred tax assets for pension provisions refer to the difference between the calculation of defined-benefit pension obligations based on local tax legislation and based on IAS 19 Employee Benefits.
Deferred tax assets relating to loss carry-forwards are recognized to the extent that it is deemed likely that the losses will
be used to offset taxable income.
At year-end, there were tax loss carry-forwards in the group companies amounting to SEK 968 million (900), of which SEK
929 million (877) may be carried forward for an unlimited period of time. Loss carry-forwards for which deferred tax assets
are not recognized totaled SEK 496 million (528), of which SEK 496 million (528) may be carried forward for an unlimited
period of time. Consequently, deferred tax assets on loss carry-forwards totaling SEK 472 million (372) were recognized.
These losses relate to the subsidiaries in Australia SEK 18 million (14), Germany SEK 56 million (70), Belgium SEK 97
million (83), Brazil SEK 5 million (-), Mexico SEK 17 million (-), Netherlands SEK 30 million (16), Turkey SEK 8 million (24)FIN AN CIALR APPORTS

D ef initions

26

and Sweden SEK 241 million (155). Tax losses in Turkey may be carried forward for five years. In the other countries, losses
may be carried forward for an unlimited period of time.
SEK 8 million (24) out of the SEK 472 million (372) that has been included in the basis for calculating a deferred tax asset
relate to Turkey. During 2017 additional deferred tax assets relating to old loss carry-forwards were recognized in Sweden
since the business conditions have improved and the loss carry-forward is thus deemed possible. Australia, Belgium, Brazil,
Mexico and Netherlands has generated tax losses during the year and these losses are deemed possible to use and thus adeferred tax asset was recognized on these losses.
The deferred tax liabilities are mainly attributable to surplus values identified in connection with the acquisition of Muntersin 2010.

NOTE 12EARNINGS PER S HARE

Net income, KSEK
Attributable to Parent Company shareholders, KSEK
Attributable to non-controlling interests, KSEK
Average number of outstanding shares before dilution
Average number of outstanding shares after dilution
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK

Group
2017
2016
172,641
84,830173,853
85,264-1,212-434
119,658,011
16,798,348
119,720,995
16,798,348
1.45
5.08
1.45
5.08

Computing earnings per share, basic and diluted, is based on the net income attributable to the Parent Company’s ordinary
shareholders. The number of shares used in the calculation consists of a weighted average of outstanding ordinary shares
during the period.
In total, the incentive program comprises eight individuals and not more than 5,222,000 warrants. At 31 December 2017,
the share price fell below the redemption price, while the average price for 2017 stood somewhat above the redemption
price.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

109

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
NOTE 13IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

27

MUNTERS ANNUAL REPORT 2017

PROPERTY, PLANT , AND EQUIPMENT

2017 GroupAcquisition cost
Opening balance
Acquisition of subsidiaries (Note 5)
Investment for the year
Divestment of subsidiaries (Note 5)
Sales and disposals
Reclassifications
Exchange-rate differences for the year
Closing balance

Buildings
and landEquipment,
Plant and tools, fixtures, Construction
machinery
and fittings in progress

Total

393
26
1
-28
-15
7
-15
371

731
6
42
-38
48
-33
756

454
6
35
-33
12
-14
460

69
0
49
-67
-3
48

1,647
38
126
-28
-86
0
-65
1,634

Accumulated depreciation
Opening balance
Divestment of subsidiaries
Sales and disposals
Reclassifications
Depreciation for the year
Exchange-rate differences for the year
Closing balance

237
-7
-12
0
7
-10
215

559
-34
1
33
-23
537

321
-31
-1
39
-10
319

-

1,117
-7
-77
0
79
-42
1,070

Closing carrying amount

155

219

142

48

563

Depreciation is based on an asset’s acquisition cost and its estimated useful life as specified in Note 8.
The carrying amount of land totaled SEKm 35 (17).

Buildings
and land2016 GroupAcquisition cost
Opening balance
Investments for the year
Sales and disposals
Reclassifications
Exchange-rate differences for the year
Closing balance
Accumulated depreciation
Opening balance
Sales and disposals
Reclassifications
Depreciation for the year
Exchange-rate differences for the year
Closing balance
Closing carrying amount0

Equipment,
Plant and tools, fixtures, Construction
machinery
and fittings in progress

Total

368
3
-1
1
22
393

674
55
-36
1
39
731

385
66
-26
4
25
454

31
39
-1
-6
5
69

1,458
163
-64
0
91
1,647

214
-1
0
11
13
237

534
-35
-2
32
30
559

293
-24
2
32
19
321

-

156

172

133

69

1,041
-60
0
75
61
1,1170530

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

110

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
NOTE 14

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

28

MUNTERS ANNUAL REPORT 2017

PATENTS, LICENSES, CUSTOMER R ELATIONS AND OTHERINTANGIBLE ASSETS WITH DE FINITE USEFUL L IFE

Technology

Customer
relationships

Internallygeneratedintangible
assetsOther
intangible
assets

Total

519
105
-32
592

864
30
-43
852

89
31
-4
116

135
1
13
-1
0
147

1,607
136
44
-1
-79
1,706

Accumulated amortization
Closing balance
Amortization for the year
Impairment for the year
Sales and disposals
Exchange-rate differences for the year
Closing balance

375
69
-21
423

607
93
20
-31
688

34
11
-1
44

89
16
-1
0
104

1,106
189
20
-1
-54
1,259

Closing carrying amount

169

163

72

42

446

2017 GroupAcquisition cost
Opening balance
Acquisition of subsidiaries (Note 5)
Investment for the year
Sales and disposals
Exchange-rate differences for the year
Closing balance

The impairment of customer relationships in 2017 was related to the segment AgHort.

Technology

Customer
relationships

Internallygeneratedintangible
assetsOther
intangible
assets

Total

485
33
519

809
55
864

73
13
-1
4
89

124
7
0
1
2
135

1,491
20
-2
1
95
1,607

Accumulated amortization
Opening balance
Amortization for the year
Sales and disposals
Exchange-rate differences for the year
Closing balance

290
62
23
375

474
96
37
607

25
9
34

68
19
0
1
89

857
186
0
62
1,106

Closing carrying amount

143

257

55

46

501

2016 GroupAcquisition cost
Opening balance
Investments for the year
Sales and disposals
Reclassifications
Exchange-rate differences for the year
Closing balanceTechnology

This item includes technology, SEKm 169 (143), where the majority of which was identified in conjunction with the acquisitionof Munters AB in 2010.

Customer relationships

This item includes customer relationships, SEKm 163 (257), where the majority of which was identified in conjunction withthe acquisition of Munters AB in 2010.

Other intangible assets

Other intangible assets mainly include patents, tradenames, licenses, and similar rights in Sweden, Germany, the UnitedStates, the Netherlands and China.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

111

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE AS

Notes

AND

Notes

NOTE 15S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

IN F ORM ATIONFIN AN CIAL

29

MUNTERS ANNUAL REPORT 2017

GOODWILL AND OTHER I NTANGIBLE ASSETS WITH
INDEFINITE USEFUL LIFE

Intangible assets with indefinite useful life consist of brands and goodwill.
2017 Group

BrandsGoodwill

Acquisition cost
Opening balance
Acquisition of subsidiaries (Note 5)
Exchange-rate differences for the year
Closing balance

1,055
21
-61
1,015

4,253
243
-220
4,275

Accumulated impairment
Opening balance
Exchange-rate differences for the year
Closing balance

6
-0
6

26
-1
25

Closing carrying amount

1,010

4,251

2016 GroupAcquisition cost
Opening balance
Acquisition of subsidiaries (Note 5)
Exchange-rate differences for the year
Closing balance

BrandsGoodwill

985
70
1,055

3,968
0
285
4,253

5
0
6

24
2
26

Closing carrying amount

1,049

4,227

Recognized brands per cash-generating unit
Air Treatment
Data Centers
AgHortMist Elimination
Total

2017
832
119
59
1,010

2016
884
105
61
1,049

Accumulated impairment
Opening balance
Exchange-rate differences for the year
Closing balance

R APPORTS

D ef initions

Recognized amount of goodwill per cash-generating unit
Air Treatment
Data Centers
AgHortMist Elimination
Total

2017
2,907
229
980
136
4,251

2016
3,067
257
778
125
4,227

At November 8, 2010, the subsidiary Munters Holding AB acquired 97.6 percent of the share capital and votes in the Munters
Group, a global leader in energy-efficient solutions for air treatment based on its expertise in humidity- and climate-control
technologies. In 2011 the remaining shares were acquired through compulsory redemption. In connection with the acquisitionof the Munters group, goodwill arose, primarily attributable to the general cyclical recovery, expansion into new customer
categories and markets, and efficiency enhancements in processes such as production, purchasing, and pricing. Furthermore, the brand Munters was identified upon acquisition, which essentially consists of the recognized value of the brand.
In connection with the acquisition in 2011 – of Rotem Computerized Controllers (1994) – goodwill arose. It was chiefly
attributable to future synergy effects expected by adding Rotem’s advanced control systems to Munters’ existing productrange thus offering a greater range of products, and reaching more customers through each company’s sales channels.
The goodwill arising from the acquisition in 2013 of Swedish company Proflute AB and its Chinese subsidiary Jiangyin
SAT Air Treatment Equipment Co. Ltd (“SAT”) is chiefly attributable to future synergies expected through adding Proflute’s
advanced technology and reaching more customers through each company’s sales channels. Upon acquisition, the brand
Proflute was also identified.
The goodwill arising from the acquisition in 2015 of the Dutch company Hebova Holding B.V., and its subsidiaries in the
Netherland, Belgium, Denmark and the Czech Republic is chiefly attributable to future synergies expected through adding
Hebova Group’s product portfolio and Food application knowledge into AirTs Food segment and reaching more customers
through each company’s sales channels. In addition, the HB Groups owns competitive production facilities in The Netherlands and the Czech Republic.
The goodwill arising from the acquisition in 2015 of the German company Reventa Group is chiefly attributable to futuresynergies expected through adding Reventa’s market position in the husbandry of Swine and markets with colder climates.
Overall, this extends Munters’ market position in Europe. Upon acquisition, the brand Reventa was also identified.
No acquisitions were made during 2016. Goodwill was impacted only by positive exchange-rate effects during 2016, after
SEK weakened against USD.
During 2017, goodwill increased through three acquisitions, refer to Note 5. At the same time, the goodwill value decreased
owing to the Swedish crown strengthening against the US dollar.

IMPAIRMENT TESTING OF GOODWILL AND BRANDS

The values of goodwill and brands are tested annually to ensure that the value does not deviate negatively from bookvalue, but are tested more often if there are indications of impairment. The carrying amounts for goodwill and brands were
tested at September 30 and at December 31, 2017.
Goodwill and brands with indefinite useful life are allocated to the Group’s cash-generating units, which are the smallest
identifiable groups of assets that, as part of continual usage, generate cash inflows that are substantially independent ofother assets or groups of assets. The Group’s cash-generating units are consistent with the Group’s four business areas,
which also comprise the Group’s operating segments: Air Treatment, Data Centers, AgHort and Mist Elimination.
Impairment testing of recognized goodwill and brands were based on recoverable amounts for cash-generating units
established through calculating future value in use. Future cash flows for the first five years are mainly based on the forecasts
approved by the Board and Group management, and progress thereof. The growth rate in the terminal period after the first
five years has been determined at 2 percent (2).

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

112

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE AS

Notes

AND

Notes
Significant assumptions used to calculate values in use are the progression of sales growth and EBIT margin, utilization ofoperating capital employed, and the discount rate. Management has established the forecast growth rate based on previous
results and expectations about the future market trend by operating segment, which for Air Treatment substantially exceeds
the current sales levels. These assessments observe various economic indicators and internal and external analyses thereof.
In addition, important aspects are observed pertaining to the future financial trend, described in the Group’s strategic plan.
No impairment has been identified.
These calculations use a nominal discount rate (average weighted cost of capital before tax) of 9.4 percent (12.4). Lowertax rate in the US and lower cost of funding are the main reasons behind the lower rate.
A sensitivity analysis for the parameters discount rate, sales growth and EBIT margin has been performed for each cashgenerating unit, as below. The effects refer to a change in the individual parameter, all else being equal.

Sensitivity analysis
Discount rate

A 3.9 percentage point (5.0) increase in the discount rate would be required for goodwill and brands impairment to be necessary in the Air Treatment cash-generating unit, a 6.6 percentage point (26.7) increase in Mist Elimination, a 9.0 percentage
point increase (12.4) in AgHort and a 22 percentage point increase in Data Centers.

Sales growth

A sales growth of 28 percent (15) in the period from 2019 to 2022 would be required for impairment of goodwill and brands
to be necessary in the Air Treatment cash-generating unit. For the AgHort, Mist Elimination and Data Centers cash-generating units, no reasonable changes are judged to lead to a need for impairment.

EBIT margin

S E RV I CE

Assura nce

A decrease of 5.8 percentage points in the EBIT margin for the period from 2019 to 2022 would be required for impairmentof goodwill and brands to be necessary in the Air Treatment cash-generating unit, and 5.9 percentage points in Mist
Elimination. For the Data Centers and AgHort cash-generating units, no reasonable changes are judged to lead to a needfor impairment.

CO RPORATE

Aud i t o r ’ s Re p or t

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

MUNTERS ANNUAL REPORT 201730

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

113

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
NOTE 16

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

31

MUNTERS ANNUAL REPORT 2017

PARTICIPATIONS IN SUBSIDIARIES
Carrying
amount4,086

Direct shareholdings, 100%
Munters Holding AB (corp. reg. no. 556818-9749)
Registered office: StockholmCountry
SwedenMaterial indirect shareholdings
Munters AB (Corp.reg. no. 556041-0606)
AB Carl Munters (Corp.reg. no. 556035-1198)
Munters Europe AB (Corp.reg. no. 556380-3039)
Pro Component Sweden AB (Corp.reg. no. 556904-0891)
Proflute AB (Corp.reg. no. 556558-3415)
Munters Corporation
Munters Canada Inc
Munters de Mexico S de RL de CV
Shelf Service Company No 1 S de RL de CV
Munters Brasil Industria e Commércio Ltda
Munters Beteiligungs GmbH
Munters Euroform GmbH
Munters GmbH
Munters Reventa GmbH
Munters Netherlands BV
HB Beheer BV
Munters BV
Munters Spain S.A.U.
HB KRAKO s.r.o.
Munters France S.A.S.
Munters Italy SpA
Munters Ltd
Munters Management Service Ltd
Munters Belgium SA
HB Drying Belgium (MBE)
Munters Finland OY
Rotem Computerized Controllers (1994) Ltd
Munters A/S
Munters (Pty) Ltd
Munters-Form Endüstri Sistemleri Sanayive Ticaret A.Ş. (MTR)
Munters India Humidity Control Private Ltd
Munters Air Treatment Equipment (Beijing) Co., Ltd
Jiangyin SAT Air Treatment Equipment Co Ltd
Munters Korea Co., Ltd
Munters Company Ltd
Munters (Thailand) Co. Ltd
Munters K.K.
Munters Pte Ltd
Munters Pty Ltd
M-Tech Systems USA, LLC (MTC)
M-Tech Systems America Latina Ltda (MTS)
M-Tech Processing, LLC (MTP)
M- Tech Processing Brazil Sistemas Da Informacao, Ltda (MTB)

Country
Percentage, %Sweden100
Sweden100
Sweden100
Sweden100
Sweden100
United States
100
Canada100
Mexico100
Mexico100
Brazil100
Germany
100
Germany
100
Germany
100
Germany
100
Netherlands
100
Netherlands
100
Netherlands
100
Spain
100
Czechia100
France
100
Italy
100
United Kingdom
100
United Kingdom
100
Belgium
100
Belgium
80
Finland100
Israel100
Denmark
100
South Africa
100
Turkey
80
India
100
China
100
China
100
South Korea
100
Thailand100
Thailand
100
Japan
100
Singapore
100
Australia
100
United States
60
Brazil60
United States
42
Brazil
42

2017
4,086
4,086

Acquisition cost at January 1
Shareholders’ contributions, cash
Shareholders’ contributions, otherAccumulated acquisition cost at December 31

2016
4,086
4,086

4,086

No restrictions exist regarding Group’s access to the subsidiaries assets, as a result of regulations or minorities.

NOTE 17

PREPAID EXPENSES AND ACCRUED INCOME

Prepaid rent and leases
Prepaid insurance premiums
Prepaid expenses for goods and services
Other items
Total

NOTE 18

Group
2017
7
18
4
77
106

2016
8
19
4
45
76

Parent Company
2017
2016
0
0
0
-

FINANCIAL INSTRUMENT S

Munters’ financial risks and how they are managed are described in Note 3.

Derivative instruments

At year-end, there were forward currency contracts in the Group as follows. They were recognized at fair value in the statement of financial position.
Nominal amount
Carrying
in local currency,
amount,000s
SEK 000s
CNH/SEK-17-0.9
DKK/SEK-15
0.2
EUR/SEK-5
0.5
JPY/SEK100-0.1
SGD/SEK1
0.1
USD/SEK2
0.6
ZAR/SEK
-20
-0.4
-0.1
Total
Negative net amounts refer to sales, and positive net amounts refer to purchases. All forward contracts fall due for payment
during 2018.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

114

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

FIN AN CIALR APPORTS

32

MUNTERS ANNUAL REPORT 2017

Financial assets and liabilities that are offset, or which are covered by a legally binding master netting
arrangement or similar agreement

Financial assets and liabilities that can be offset against each other consist of foreign exchange derivatives covered by alegally binding master netting arrangement. No offsetting has occurred in the balance sheet in the year 2017. The carrying
amounts of such assets and liabilities amount to SEKm 1.9 (2.4) and SEKm -2.0 (-4.5) respectively.

Fair value of assets and liabilities

The carrying amounts of interest-bearing assets and liabilities in the statement of financial position may deviate from theirfair value for reasons such as changes in market interest rates. Munters deems that the interest rate on interest-bearing
liabilities is in line with market terms at December 31, 2017, and the fair value at the end of the reporting period therefore in
all material aspects corresponds to the carrying amount.
The fair value of financial instruments such as accounts receivable, accounts payable, and other non-interest-bearing
financial assets and liabilities, which are recognized at amortized cost less any impairment, is deemed equal to the carrying
amount because of the short maturities of these instruments.
The Group’s derivatives, recognized at fair value in the statement of financial position, were measured according to IFRS
13 Level 2, fair value hierarchy – data for the asset or liability other than quoted prices on an active market for identicalassets or liabilities that are observable either directly (as quoted prices) or indirectly (derived from quoted prices).
The Group’s contingent earn-outs, recognized at fair value in the statement of financial position, are measured according
to IFRS 13 and level 3 in the fair value hierarchy.
The table below shows how the contingent purchase considerations and put/call options changed during 2017. The largest
change is attributable to the acquisition of MTech Systems (162) and is determined by MTech’s earnings levels for 2020–2021. Settlement of the HB Group acquisition earn-out resulted in a gain of SEKm 53.
Contingent price considerations
Opening balance
Estimated liabilities at acquisition (note 5), undiscounted
Payments
Changes recognized in other operating income
Discounting
Exchange-rate differences for the year
Closing balance

IN F ORM ATION

D ef initions

2017
51
162
-53
-13
-11
136

2016
78
-9
-30
7
5
51

Group Book value of financial assets and liabilities by category
Financial assets
Loans receivable and accounts receivable
Other non-current financial assets
Accounts receivable
Other current receivables
Cash and cash equivalents
Total
Financial assets at fair value through profit/loss
Currency derivatives whose cash flows
are not subject to hedge accounting
Total
Total financial assets

2017

2016

14
1,204
126
402
1,745

24
1,094
103
432
1,653

2
2

2
2

1,747

1,655

Financial liabilities
Financial liabilities measured at amortized costNon-current interest-bearing liabilities
Current interest-bearing liabilities
Accounts payable
Accrued expenses
Other non-current liabilities
Other current liabilities
Total

2017

2016

2,848
7
581
9
1
212
3,657

5,231
429
530
35
15
181
6,421

Financial liabilities at fair value through profit/loss
Currency and interest rate derivatives whose cash flows
are not subject to hedge accounting
Additional purchase consideration HB Group, current
Acquisition warrant MTech, non-current 1)
Total

2
136
138

4
51
55

Total financial liabilities

3,795

6,475

1) Fair value adjustments recorded through equity.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

115

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
Interest-bearing liabilities

31 December 2017
Interest-bearing liabilities
Derivative instruments
Other liabilities
Accounts payable
Total<1 year
82
2
220
581
885

1-5 years
3,116
137
3,253

>5 years
-

Total
3,197
2
357
581
4,137

Maturity
Non-current loans
2022
2022

31 December 2016
Interest-bearing liabilities
Derivative instruments
Other liabilities
Accounts payable
Total<1 year
590
4
234
530
1,358

1-5 years
570
17
587

>5 years
6,683
6,683

Total
7,843
4
251
530
8,629

2022

Changes in interest-bearing liabilities

Munters has during the year re-financed the loan portfolio which has generated changes of the mix of types of loans andcurrencies. The Term Loan in USD has been decreased in favor of increased utilization of credit facilities. The currency
effects shown in the table below are mainly caused by changes in the US dollar.

Total loans

R APPORTS

33

Openingbalance
2,591
2,688
16
-63
5,232

Cash flow
-296
819
-6
-22
496

Currency
effects
-237
-5
-7
0
-249

Non cash
movements-2,68857-2,631

Closingbalance
2,058
815
3
-28
2,848

Interest-bearing liabilities comprises of non-current and current bank loans, and amounting to SEKm 2 855 (5 660) at year
end. The distribution is presented in the table below.

2022

2022
2017-2025
Total

Openingbalance
387
42
429
5,661

Cash flow
-387
-28
-415

Currency
effects0-7-7

Non cash
movements-

Closingbalance
0
7
7
2,855

Interest rate Currency

Shareholder loan
Term Loan
Utilized committed credit
facilities Sweden
Utilized committed credit
facilities Sweden
Utilized committed credit
facilities Sweden

Fixed
Variable

SEK
USD

2,030

2,688
2,528

Variable

USD

189

-

Variable

EUR

295

-

Variable
Fixed/
Variable

SEK
Variouscurrencies

330

-

3
2,848

16
5,231

Variable
Fixed/
Variable

USD
Variouscurrencies

-

27

1
1

1
28

Variable

USD

-

182

Variable
Fixed/
Variable

SEK
Variouscurrencies

-

205

6
6

14
401

2,855

5,660

Other non-current loan

Other non-current loan
Total
Other �current loans

Utilized committed credit
facilities Sweden
Utilized committed credit
facilities Sweden
Other current loan

Total

Non-current loans

Book value Book value
2017
2016

Type of loan

Current portion of �non-current loans
Non-current loan

Total loans

Current loans
Revolving credit facility
Other third party debt
Total

FIN AN CIALMUNTERS ANNUAL REPORT 2017

The table below maps the maturity of the Group’s financial liabilities. The amounts specified in the table are the contractual,
non-discounted cash flows. Variable interest streams with future interest adjustment dates are estimated using the anticipated market interest rate at year-end for each settlement date and each interest adjustment date. All cash flows in foreign
currency are converted into SEK using the rate at the end of the period.

Non current loans
Term loan
Revolving credit facility
Shareholder loan
Other third party debt
Financing fees
Total

IN F ORM ATION

D ef initions

In connection with the listing at the stock exchange, Munters entered into a loan facility agreement with a group of six
Scandinavian banks. The loan is unsecured and the facilities contains of a Term Loan of USDm 250 and a Revolving Credit
Facility of EURm 185. There is no mandatory amortization requirement. The final maturity date is in May 2022. The loan
agreement contains one financial covenant which stipulates a limit on the consolidated net debt in relation to Adjusted
EBITDA.
Also along with the listing, the Shareholder loan which at previous years was a large portion of the interest bearing debt,
was converted into equity. The table below outlines the long term debt together with local bank debt in group companies in
Brazil, Czech Republic, the Netherlands and Canada.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

116

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

FIN AN CIALMUNTERS ANNUAL REPORT 2017

Munters’ financial policy regulates the management of external borrowings. The management and Board monitor the Group’s
forecast performance in relation to the limits stipulated by the covenant. This ensures that the Group fulfills its commitments
to external lenders and minimizes the liquidity and financing risk. At December 31, 2017, the covenant was met and is
expected to be met during 2018. The revolving credit facility has final maturity in year 2022. Drawings under the facility arelisted among non-current loans.

Current loans

The table outlines current bank debt in Munters subsidiaries in China, the Netherlands, Czech Republic Brazil and Canada.
The total average weighted interest rate including both long- and short term financing at the end of the year was 3.26 percent(6.26).

NOTE 19

IN F ORM ATION

Share capital

The share capital of SEK 5,507,934 comprises 183,597,802 shares with a par value of SEK 0.03 per share. The shares in
Munters Group AB are listed on Nasdaq Stockholm’s list of major companies under the symbol MTRS. The ten largest
owners in Munters Group AB hold a total of 86.3 percent of outstanding shares. Of these, Nordic Capital holds 50.1 percent
indirectly via its Nordic Capital VII fund, and FAM AB 11.4 percent. No other shareholder holds more than ten percent of theshares, either directly or indirectly, in Munters Group AB.
The table below shows the changes in the number of shares in 2017.

Equity shares A and B
Preference shares A and B

The following earnings (in SEK ´000) are at the disposal of the Annual General Meeting:
Proposed distribution of earnings, parent company
Unrestricted equity in parent company:
Profit brought forward
Capital contribution
Income for the year
Total

1,434,348
2,915,850-74,741
4,275,457

The Board of Directors proposes that earnings be distributed as follows:
Dividend
To be carried forward
Total

55,0794,220,378
4,275,457

34

EQUITY

Number of shares
Opening number, January 1, 2016

PROPOSED DISTRIBUTIO N OF EARNINGS

The proposed dividend corresponds to SEK 0.30 per share.

NOTE 20R APPORTS

D ef initions

Changes 2016:
Closing number, December 31, 2016
Equity shares A and B
Preference shares A and B

2,399,764
536,981
1,862,783
2,399,764
536,981
1,862,783

Changes 2017:
Conversion of preference shares A and B and of Equity shares A to Equity share B 1:1
Share B, split by 1/7
Off set issue
Share issue

0
14,398,584
164,926,726
1,872,728

Closing number, December 31, 2017
Equity shares B

183,597,802
183,597,802

Reserve for exchange rate differences
Opening balance, January 1, 2016
Exchange-rate differences
Closing balance, December 31, 2016
Exchange-rate differences
Closing balance, December 31, 2017

241
198
439
-88
351

The reserve for exchange-rate differences consists of differences that arise when the income statements and balance sheetsof foreign subsidiaries are translated into SEK. Compared with last year, the positive exchange-rate effects during 2017 weremainly to a stronger SEK against USD.

Holdings of treasury shares

Munters Group AB does not have any treasury shares.

Dividend during the period

No dividend has been made during the period.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

Notes

NOTE 21WE

WOR K

R E PO RT

117

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

PROVISIONS F OR PENSIONS AND SIMILAR COMM ITMENTS

Group
Non-current defined-benefit obligations to employees
Other benefits to employees
Non-current

2017
193
14
207

2016
175
4
179

Current defined-benefit commitments to employees
Other current employee benefits
Current

6
2
8

4
1
5

Total provisions for pensions
and similar commitments

215

184

Non-current defined-benefit obligations to employees
Current defined-benefit commitments to employees
Provisions recognized as per IAS 19

193
6
199

175
4
179

The Group finances pension plans for its employees in several countries. These plans mainly follow practice in the country
in question and may be defined-contribution or defined-benefit plans or a combination of both. The most important definedbenefit pension plans cover employees in Sweden, Italy and Belgium. In France and Italy, provisions are made for mandatory remuneration when employment ceases. For senior executives of the Group, there are guidelines regarding pension
rights and pension plans described in Note 28.
Defined-benefit pension plans in Sweden constitute 93 per cent (94) of total Group provisions for pensions recognized as
per IAS 19. The calculations are primarily based on final salary and the plans are unfunded. The pension plan in Belgium isfunded and constitutes 0 per cent (0) of total pension provisions. The pension plans in Italy, which constitute 4 per cent (4)of total pension provisions, are unfunded.
The Swedish pension plans (known as ITP plans) supplement the country’s social insurance system, and result fromagreements between employer and employee organizations. ITP plans mainly comprise retirement pensions, disability pensions and survivor’s pensions.
The ITP plan has two parts, firstly, ITP1, which is a defined-contribution pension plan applying to employees born in 1979or later, and secondly, ITP2, which is a defined-benefit pension plan applying to employees born before 1979. White-collar
employees within the Group in Sweden were covered by both these parts. The ITP2 plan is managed within Munters in the
FPG/ PRI system. Financing occurs through provisions to an account in the balance sheet, safeguarded by credit insurance
from the mutual insurance company Försäkringsbolaget PRI Pensionsgaranti.
Defined-benefit pension plans subjects the Group to different kinds of risk attributable to increases in life expectancy,
inflation and salary.
In the Group, there are also defined-contribution plans that mainly comprise retirement pensions, disability pensions andsurvivor’s pensions. The premiums are paid continuously during the year by each Group company to separate legal entities,
such as insurance companies. The size of the premium is based on salary. The cost of these defined-contribution plans forthe period totaled SEK 69 million (73).
Munters recognizes actuarial gains and losses in other comprehensive income in the period they occur to the extent thatthey refer to post-employment remuneration. Actuarial losses totaled SEKm -13 (-17) for the period.

CO RPORATE

Aud i t o r ’ s Re p or t

IN F ORM ATIONFIN AN CIAL

D ef initions
MUNTERS ANNUAL REPORT 2017

R APPORTS

35

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

118

2 017

B US I NE S S

Pa re nt F i na nci a l s

Notes

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

36

MUNTERS ANNUAL REPORT 2017

Recognition of provisions for pensions recognized as per IAS 19 in the consolidated balance sheet:

Present value of defined
benefit obligation
195

Fair value of plan assets-16

Recognized provision, net
179

6
5
11

-

6
5
11

13
1
14

-

13
1
14

Exchange rate differences for the year

-6
-5
-11
6

5
-2
3
-3

-6
0
-2
-8
3

Closing balance

215

-16

199

Of which funded plans:
Other countries (Belgium)

14
-

-14
-

0
-

Of which unfunded plans:
SwedenOther countries

189
11

-

189
11

2017 Group
Opening balance
Pension expenses current year, included in Income for the year
Current service cost
Interest cost/income on benefit obligation
Re-measurement, included in Other comprehensive income
Return on plan assets
Actuarial changes arising from changes in demographic assumptions
Actuarial changes arising from changes in financial assumptions
Experience adjustments
Transactions
Benefits paid by employer
Benefits paid from plan assets
Benefits paid by employer to plan assets

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

119

2 017

B US I NE S S

Pa re nt F i na nci a l s

Notes

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

37

MUNTERS ANNUAL REPORT 2017

Present value of defined
benefit obligation
174

Fair value of plan assets-4

Recognized provision, net
170

7
0
5
12

-

7
0
5
12

0
8
9
0
17

0
0
0

0
8
9
0
17

Additional pension plan 2)
Exchange rate differences for the year

-7
0
0
-12
-19
11
0

0
-1
-1
-11
0

-7
1
-1
-12
-20
0
0

Closing balance

195

-16

179

Of which funded plans:
Other countries (Belgium)

17

-16

1

Of which unfunded plans:
SwedenOther countries

167
11

-

167
11

2016 Group
Opening balance
Pension expenses current year, included in Income for the year
Current service cost
Result from settlement 1)
Interest cost/income on benefit obligation
Re-measurement, included in Other comprehensive income
Return on plan assets
Actuarial changes arising from changes in demographic assumptions
Actuarial changes arising from changes in financial assumptions
Experience adjustments
Transactions
Benefits paid by employer
Benefits paid from plan assets
Benefits paid by employer to plan assets
Settlements 1)

1) Redeemed benefits.
2) Pension plan reclassified as defined benefit pension plan due to changed legislation in Belgium.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

120

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

Group, weighted values
Discount rate, %Future inflation, %Future wage and salary increases, %Pension increases, %Social security increases, %FIN AN CIALR APPORTS38

MUNTERS ANNUAL REPORT 2017

Plan assets comprise insurance contracts signed with independent insurance companies. No portion of plan assets in2017 was invested in the Company’s equity instruments, debt instruments, real estate, or other assets used by the Company. The Company only has a minor share of funded plans.The most important actuarial assumptions are as follows:Significant actuarial assumptions

IN F ORM ATION

D ef initions

2017
Sweden
2.60
1.75
2.70
1.75
2.70

Others
1.30
1.70
2.80
-

2016
Sweden
2.70
1.50
2.70
1.50
2.70

Others
1.50
1.70
2.80
-

Sensitivity analysis

A reduction of 0.5 percentage points in the discount rate would increase the pension commitments by around SEKm 22,
while an increase in the rate of 0.5 percentage points would reduce the commitment by around SEKm 20. Altered assumptions with respect to inflation being 0.5 percentage points lower would reduce the commitment by around SEKm 15, andincrease it by around SEKm 17 in an assumption of it being 0.5 percentage points higher. The sensitivity analysis isperformed by an actuarial assumption changing, while the other assumptions are kept unchanged. The method shows thesensitivity of the liability to an individual assumption.
This is a simplified method, because actuarial assumptions are normally correlated. Assumptions about life span are
based on public statistics and experience from mortality surveys in each country, and are set in consultation with actuarial
experts. As of this year, for Swedish pension plans, the most current life span investigation DUS14. Munters’ budgeted
fees for defined-benefit obligations equal SEKm 5 for 2018.
Duration analysis regarding expected payments for post-employment pension benefits (not calculated on present value):

The weighted average duration for the defined-benefit commitments is 18.9 years (19.8).

2017
5
6
16
38
65

OTHER PROVISIONS

2017 Group
Opening balance

At the end of the reporting period, the discount rate is derived from a functioning market based on investment-grade corporate bonds adjusted for the duration of the commitment.

Payments in the future years
Within the next 12 months
Between 1 and 2 years
Between 2 and 5 years
Between 5 and 10 years
Total

NOTE 22

2016
5
5
16
35
62

Additional provisions
Acquisition of subsidiaries (Note 5)
Reversals of unutilized provisions
Exchange-rate differences
Utilized during the year
Closing balance, December 31, 20172016 Group
Opening balance
Additional provisions
Reversals of unutilized provisions
Exchange-rate differences
Utilized during the year
Closing balance, December 31, 2016

Provisions forwarranties
113

Provision for
restructuring
4

Otherprovisions
23

Total
140

36
-15
-5
-14
115

1
0
0
-1
3

2
0
0
-7
17

38
0
-15
-5
-22
136

Provisions forwarranties
108

Provision for
restructuring
2

Otherprovisions
17

Total
128

29
-25
7
-7
113

6
0
0
-4
4

7
-4
2
0
23

42
-29
9
-11
140

Provisions consist of:Current portion
Non-current portion
Total

NOTE 23

2017
114
22
136

2016
110
30
140

ACCRUED EXPE NSES AND DE FERRED INCOME

Vacation pay liabilities
Social security contributions
Other expenses related to personnel
Received goods not yet invoiced
Commissions to agents/sales representatives
Interest expenses
Other
Total

Group
2017
91
34
78
76
31
9
167
486

2016
77
41
157
82
61
35
111
565

Parent Company
2017
2016
1
0
33
0
1
2
35

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WOR K

121

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
NOTE 24

FIN AN CIALNOTE 25

PLEDGED ASSETS AND C ONTINGENT LIABILITIES
Group
2017
14
13
27

2016
207
586
193
42
2,380
3,408

Parent Company
2017
2016
4,086
4,086

1) Other net assets refer to consolidated values for all subsidiaries pledged with the exception of individual assets
pledged and separately specified in the table above.
Group
Parent Company
Contingent liabilities
2017
2017
2016
2016
FPG guarantees
22-Guarantees from banks and insurance companies
Total

152
154

113
115

-

-

The change of guarantees from banks between 2016 and 2017 is due to the new financing is done without any secured
assets. A description of the loans are found in note 18.
FPG guarantees refers to pension liabilities in Sweden. Other guarantees are operational guarantees, such as advancesand completion guarantees.

Munters is involved in a small number of commercial disputes. None of these disputes are deemed to have any major
negative effect on the Company’s financial position or earnings.
Hunter New England Health District has sued Munters’ Australian subsidiary, Munters Pty Ltd., for breach of contract inrelation to services provided to John Hunter Hospital in the spring of 2008. The services were provided as part of Munters
Pty Ltd.’s Moisture Control Services, which were later discontinued in 2010. Munters Pty Ltd. disputes the claim. Furthermore,
Munters Pty Ltd is of the opinion that the plaintiff’s demands are greatly exaggerated, and that the plaintiff through carelessness and negligence contributed to the damage they are claiming compensation for. In the event Munters Pty Ltd. is held
liable for the damage, there will be a not insignificant adjustment of the amount of damages. Munters Pty Ltd is protectedunder local liability insurance and for surplus amounts up to the limit in effect at the time under Munters AB’s insurance. In
the event Munters Pty Ltd. is held liable for the damage, there is a risk that the company will have to bear that part of thedamage that exceeds the part covered by insurance.
Other significant legal proceedings are attributable to Munters’ subsidiary in the United States, Munters Corporation. The
company is currently named as co-respondent in 8 (8) asbestos-related cases (a few of which have multiple plaintiffs). In thepast few years, Munters Corporation has in seven cases won through summary judgments, and these are no longer inprogress. Munters Corporation is of the firm opinion that the remaining claims are unfounded and intend to strongly dispute
every claim. Munters Corporation has coverage for the asbestos-related claims through several insurance policies. Subject
to certain reservations, the insurance companies have confirmed that, until further notice, they will pay a significant portionof the expenses for legal defense. Munters Corporation also has a dispute in progress regarding product liability for damages
arising out of a fire at the facilities of S&R Egg Farms. Munters Corporation has disputed the claim in its entirety and is of
the opinion that Munters will probably win in the trial. Munters Corporation has coverage for the claim.

R APPORTS

39

MUNTERS ANNUAL REPORT 2017

Pledged assets forliabilities to credit institutions
Non-current assets
Current assets
Bank accounts
Receivables from subsidiaries
Other net assets 1)
Shares in subsidiaries
Total

Litigation

IN F ORM ATION

D ef initions

TRANSACTIONS WITH RE LATED PARTIES

Shares in Munters Group AB are owned indirectly through the companies Cidron Maximus Limited and Cidron Maximus
S.a.r.l, 50.1 percent owned by Nordic Capital through its fund Nordic Capital VII Limited.
Other parties related to Munters include other portfolio companies managed by Nordic Capital, and associated companies
as well as Munters board of directors and group management. The table below shows significant transactions and otheroutstanding dealings with other portfolio companies. Sales and purchasing have occurred on market terms. The Parent
Company has a related party relationship with its subsidiaries. Information about participations in subsidiaries is provided in
Note 16. Transactions between Munters Group AB and its subsidiaries have been carried out on market terms.
Group
Luvata

Sales
0

2017
Purchasing
42

Receivables-

Liabilities
1

Luvata

Sales
1

2016
Purchasing
35

Receivables-

Liabilities
2

Until 19 May 2017 Munters Group AB had a shareholder loan, which was put in place during 2010. The debt amounted to
SEK 2,688 million as per 31 December 2016 and was converted to equity in connection with the IPO. During 2017 the interest
cost related to the shareholder loan amounted to SEK 83 million (202).
Remuneration for senior executives and individual members of the Board is presented in Note 28. Munters has not provided guarantees or securities to or on behalf of Board members or senior executives. Munters has not identified any transactions with other related parties, besides those specified in this Note and those to which reference is made.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

122

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASANDNotes

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes
NOTE 26

IN F ORM ATIONFIN AN CIALR APPORTS

D ef initions

40

MUNTERS ANNUAL REPORT 2017

AVERAGE NUMBER OF EM PLOYEES AND GENDER DISTRIBUTION
2017

Group
United States
China
SwedenMexicoGermany
Belgium
India
Italy
BrazilIsraelCzech Republic
United Kingdom
Netherlands
Japan
Denmark
Australia
FranceSouth Africa
Singapore
Korea
ThailandFinland
Spain
TurkeyCanadaPolandAustria
United Arab Emirates
Switzerland
VietnamNumber
1,025
380
324
241
225
214
173
168
166
130
82
74
73
56
40
32
29
21
19
18
17
11
10
10
4
4
4
4
3
3
3,559

of whichmen, %
82
81
74
74
84
92
91
83
84
78
88
80
92
82
70
84
83
81
79
72
59
82
80
80
75
100
75
86
67
67
82

Gender distribution – Board of Directors and Group management

2016
Number
886
354
277
155
212
173
21
157
104
125
76
59
67
45
38
29
27
22
18
16
17
11
10
34
4
3
4
3
3
3
2,953

of whichmen, %
83
81
76
74
83
93
95
83
88
81
91
78
90
84
70
83
85
82
78
75
59
82
80
82
75
100
75
100
67
67
82

At year-end, the Board of Directors consisted of eight men and three women. Group management, including the CEO, consisted of eleven men and one woman. The Parent company consisted of one man and one woman.

NOTE 27

WAGES, SALARIES, OTH ER REMUNERATION, AN D SOCIALSECURITY EXPENSES

Wages, salaries and other remuneration
Social security expenses
Pension expenses - defined contribution
Pension expenses - defined benefit
Summa

NOTE 28

Group
2017
1,520
381
69
6
1,976

2016
1,341
307
73
7
1,728

Parent Company
2017
2016
4
1
1
5
-

REMUNERATION TO BOAR D MEMBERS AND SENIOR EXECUTIVES

Senior executives in the Group have been defined as the same as senior executives in the corporate group that Munters
Group AB acquired by acquiring Munters AB through Munters Holding AB. During 2017 the same Chief Executive Officer(CEO) has been appointed in Munters Group AB as previously appointed in Munters Holding AB and Munters AB.

Guidelines

The remuneration to the management may consist of fixed salary, variable salary, long-term incentive programs, pension
and other benefits. The total remuneration package should be based on market terms, be competitive and enable the Company to recruit and retain the managers the Company needs to meet its short-term and long-term targets.
Fixed salary
The fixed salary for the CEO and the other members of the senior management shall mirror the demands and responsibility
that the position entails as well as individual performance. The fixed salary for the CEO and the other members of the senior
management is to be reviewed on a yearly basis. To the extent a member of the Board of Directors carries out work for theCompany or for another group company, in addition to the board work, consulting fees and/or other remuneration for suchwork may be payable.
Variable salary
Variable salary in cash is conditional upon the fulfillment of defined and measurable criteria and should be maximized to 140
per cent of the annual fixed salary for the CEO and 70 per cent for the other members of senior management. These criteria
are determined for the promotion of the Company’s/the group’s short-term and long-term targets, long-term development,
value creation and financial growth and shall be designed not to encourage excessive risk-taking. Terms and conditions forvariable salary should be designed so that the Board of Directors, if exceptional economic circumstances prevail, has theoption of limiting or refraining from payment of variable salary if such a measure is considered reasonable. In this context,
fixed annual salary means cash salary earned during the year, excluding pension, supplements, benefits and similar.
Long-term incentive programs
The aim of having long-term incentive programs is to create a long-term commitment to the Company, to attract and retain
members of the senior management and key employees and to align the interests of the participants with the interests of theshareholders. Long-term incentive programs, if any, should constitute a complement to the fixed salary and the variablesalary, with participants to be nominated based on, among other things, competence and performance.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

123

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

Other benefits and compensation
Fixed salary during notice periods and severance payment, including payments for any non-compete restrictions, shall inaggregate not exceed an amount equivalent to the fixed salary for three years for the CEO and 18 months for the othermembers of senior management. Other compensation may consist of other benefits that are customary and in line withmarket practice, such as healthcare insurance, which shall not constitute a material portion of the total remuneration.
In addition thereto, additional compensation may after decision by the Board of Directors be paid out in extraordinary
circumstances, provided that such arrangement is made for management recruitment or retention purposes and is agreed
only in individual cases. Such extraordinary arrangements may for example include a one-off cash payment, or a support
package including relocation support or similar.
Deviation from the guidelines
The Board of Directors may resolve to deviate from the guidelines if the Board of Directors, in an individual case, is of theopinion that there are special circumstances justifying that.

Remuneration and other benefits to senior executives during the year

Christopher Curtis, chairman
Helen Fasth Gillstedt, board member andchairman of audit committe
Joakim Karlsson, board member
Andreas Näsvik, board member
Lena Olving, board member
Joachim Zetterlund, board member
Per Hallius, board member
Kristian Sildeby, board member
Klas Nordin, board member
Pia Nordqvist, board member and employee
representative
Simon Henriksson, deputy board member andemployee representative
Robert Wahlgren, deputy board member andemployee representativeCEO

FIN AN CIALR APPORTS

41

MUNTERS ANNUAL REPORT 2017

PensionPension benefits should be defined contribution. For senior executives outside Sweden, pension benefits may vary due tolegislation or practice in the local market.

Amounts in SEK 000s
Members of the Board:(3 women and 8 men)

IN F ORM ATION

D ef initions

Board
fee/BasesalaryVariable
remuneration

2017
Other
benefits

Pensionexpenses

Total

1,218

-

-

-

1,218

375
363
363
300
442
404
280
63

-

-

-

375
363
363
300
442
404
280
63

-

-

-

-

-

-

-

-

-

-

6,104

-

297

2,440

8,841

Other senior executives(1 woman and 11 men)

25,357

864

5,132

6,472

37,825

Total

35,268

864

5,429

8,912

50,473

Amounts in SEK 000s
Members of the Board(1 woman and 8 men)
Christopher Curtis, chairman
Joakim Karlsson, board member
Andreas Näsvik, board member and chairman ofaudit committe
Joachim Zetterlund, board member
Per Hallius, board member
Klas Nordin, board member
Pia Nordqvist, board member and employee
representative

Board
fee/BasesalaryVariable
remuneration

954
150

2016
Other
benefits

Pensionexpenses

Total

-

-

-

954
150

150
250
250
150

-

-

-

150
250
250
150

-

-

-

-

-

-

-

-

-

-

Gunnar Ståhlberg, employee representative
Simon Henriksson, deputy board member andemployee representative
Robert Wahlgren, deputy board member andemployee representative
CEO

-

-

-

-

-

6,188

8,258

312

2,475

17,234

Other senior executives(10 men)

21,297

13,931

5,043

5,088

45,358

Total

29,38922,189

5,355

7,563

64,496

Senior executives refer to the Chief Executive Officer, Chief Financial Officer, Group Vice President Air Treatment, Group
Vice President AgHort, Group Vice President Mist Elimination, Group Vice President Munters China, Group Vice President
Operations, Group Vice President Business Development & PMO, Group Vice President Human Resources and Corporate
Communication, Group Vice President Data Centers, and Group Vice President Global Services.
From 1 April 2017 Group Vice President Human Corporate Social Responsibility, and from 1 October 2017 Group Vice
President Innovation & Technology, will be included as senior executives.
Variable remuneration refers to the period’s proportional share of variable remuneration for the fiscal year 2017, which will
be paid in 2018. For the CEO, the variable remuneration corresponds to at most 140 percent of fixed annual salary. For othersenior executives, the variable remuneration corresponds to 40–70 percent of fixed annual salary.
Other benefits refer to company cars and meal benefits, as well as housing benefits. The amount specified under otherbenefits also includes housing and school allowances for four senior executives temporarily based outside Sweden during
the year. Pension expenses include costs for disability pension insurance, survivor annuity, and the like. The amounts arestated excluding special employer’s contribution pension expenses.

Severance pay

Between the Company and the CEO, the period of notice shall not be longer than 24 months. Between the Company andother senior executives, the period of notice shall not be longer than six months. If employment is terminated by the Company,
severance pay will be paid equal to 12 months’ base salary. Severance pay is not considered pensionable income. If the
CEO or other senior executive takes the initiative in terminating employment, there is no severance pay.

M U NT E R S

A NNUAL -A N DS U S TA IN A B IL IT Y

INTROD U CT I ON

H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

R E PO RT

WOR K

124

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t o r ’ s Re p or t

Notes

NOTE 29

FIN AN CIALR APPORTS

MUNTERS ANNUAL REPORT 201742

INCENTIVE PROGRAM

At the extraordinary General Meeting on 7 May 2017, it was resolved to issue warrants as part of an incentive program forcertain members of the Group Management (“the participants”). In total, the incentive program comprises eight individuals
and not more than 5,222,000 warrants. The participants could subscribe for warrants at a market value corresponding to in
total not more than SEKm 17.99. The maximum number of warrants that could be subscribed for by the Participants corresponded to approximately 2.77 percent of the Company’s share capital following completion of the offering and assuming
full exercise of the warrants.
The warrants were issued in two separate series. Each participant subscribes for an equal number of warrants of both
series. This number of warrants per participant and series depends on the participant’s position within the Group and thenumber of shares held by the participant at the time of the commencement of the program. Series 2017/2019 comprises up
to 2,611,000 warrants that may be exercised during the following subscription period: 19 May to 19 November 2019, withthe exception of the thirty-day period preceding (a) the day of publication of the company’s interim report for the second
quarter of 2019, and (b) the day of publication of the Company’s interim report for the third quarter of 2019. The exercise
price for series 2017/2019 corresponds to 121.22 percent of the offer price.
Series 2017/2020 comprises up to 2,611,000 warrants that may be exercised during the following subscription period: 19
May to 19 November 2020, with the exception of the thirty-day period preceding (a) the day of publication of the company’s
interim report for the second quarter of 2020, and (b) the day of publication of the Company’s interim report for the third
quarter of 2020. The exercise price for series 2017/2020 corresponds to 130.91 percent of the offer price.
The Company has reserved the right to repurchase warrants for example if the employment is terminated. Since theparticipants have paid market value for the options there are no expenses incurred in the Group related to this incentive
program.

NOTE 30

IN F ORM ATION

D ef initions

FEES TO AUDITORS

Fees and remuneration recognized as an expense to the Group’s auditors during the period are shown below. Audit engagement refers to the statutory audit of the annual report and accounts, as well as the administration of the Board of Directors
and the President, other tasks which the Company’s auditors are responsible for performing, and advice or other assistanceoccasioned by observations in such audits or the performance of other similar tasks. Tax advice is consulting on fiscal issues.
Other services are advice that cannot be attributed to any of the above-mentioned categories.
Amounts in SEK 000s
Ernst & Young
Audit engagements

Group
2017

2016

Parent Company
2017

2016

10,171

8,558

539

142

Audit business beyond
audit engagements
Tax advice
Other services

8,925
1,406
5,308

1,248
24,690--

Other auditors
Audit engagements
Tax advice
Other services
Total

109
13
25,932102
1434,612539

142

Other services concerning 2016 (KSEK 24,690) consisted primarily of advisory services in conjunction with preparations
ahead of the listing of Munters.

NOTE 31SIGNIF ICANT EVENTS A FTER THE END OF THE REPORTING PERIOD

Katarina Lindström was appointed President Global Operations and will assume her position during the spring of 2018.

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A NNUAL -A N DS U S TA IN A B IL IT Y

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H 0 W

B oard o f D i re ct o r s ’ Re p o r t

Gro u p F ina ncia ls

WE

WOR K

R E PO RT

125

2 017

B US I NE S S

Pa re nt F i na nci a l s

ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t or ’ s Re p or t

IN F ORM ATIONFIN AN CIALR APPORTS

Def initions

ASSURANCEMUNTERS ANNUAL REPORT 2017

Assurance 20172017
Assurance
The undersigned assures that the Annual Report has been prepared in accordance with generally accepted accounting principles, and that the consolidated accounts have been prepared in accordance with international
accounting standards as referred to in Regulation EC 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the application of international accounting standards, provide a true and fair view of theCompany’s and the Group’s financial position and earnings, and that the Board of Directors’ report and the Board of Directors’ report for the Group provide a fair view of the development of the Company’s and the Group’s
operations, financial position, and earnings and describe material risks and uncertainty factors to which the Company and the companies in the Group are exposed.
Stockholm, March 26 2018

Christopher Curtis
Chairman of the Board

John Peter Leesi
President and CEO

Helen Fasth Gillstedt
Board Member

Per Hallius
Board Member

Joakim Karlsson
Board Member

Andreas Näsvik
Board Member

Lena Olving
Board Member

Kristian Sildeby
Board Member

Joachim Zetterlund
Board Member

Robin Heden
Board Member,
employee representative

Pia Nordquist
Board Member,
employee representative

Simon Henriksson
Deputy Board Member,
employee representative

Robert Wahlgren
Deputy Board Member,
employee representative
Our Auditor’s report was submitted on
April 17, 2018
Ernst & Young AB

Erik Sandström

Authorized Public Accountant

43

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126

2 017

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ARE ASNotes

AND

S E RV I CE

Assura nce

CO RPORATE

Aud i t or ’ s Re p or t

IN F ORM ATIONFIN AN CIALR APPORTS

Def initions

ASSURANCEMUNTERS ANNUAL REPORT 201744

Auditor’s
Auditor’s Report
ReportTo the general meeting of the shareholders of Munters Group AB (publ.), corporate identity number 556819-2321

Report on the annual accounts and consolidated accounts
Opinions

We have audited the annual accounts and consolidated accounts of Munters Group AB (publ.) for the year the financial year
2017. The annual accounts and consolidated accounts of the company are included on pages 83-124 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly,
in all material respects, the financial position of the parent company as of 31 December 2017 and its financial performanceand cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been
prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of thegroup as of 31 December 2017 and their financial performance and cash flow for the year then ended in accordance with
International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. The statutory
administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet forthe parent company and the group.
Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation(537/2014) Article 11.

Basis for Opinions

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section.
We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden
and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on
the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 havebeen provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

Key Audit Matters

Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of
the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of ouraudit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do notprovide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matteris provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements
section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures
designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of ouraudit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion
on the accompanying financial statements.

Timing of revenue recognition
Description

As described in note 1, revenue from sale of goods is recognized on delivery when risks and rewards are transferred to thebuyer in accordance with the delivery terms. Revenue from larger project assignments are recognized in proportion to percentage of completion at the reporting date, given the presumption that the outcome can be reliably calculated.
The company´s customer agreements often contain several different commitments. To determine the timing of revenue
recognition an assessment must be made of when the risk and reward transfer. In the same way, estimation is required todetermine the percentage of completion in larger project assignments, as described in note 2.
As a result of the above, we have assessed that the timing of revenue recognition is a key audit matter.

How our audit addressed this key audit matterIn our audit of the fiscal year 2017, we have evaluated the company´s principles of revenue recognition in accordance withapplicable GAAP. We have reviewed the company´s processes for revenue recognition and evaluated key controls withinthese processes.
Also, we have audited revenue transactions close to the year-end by reviewing customer agreements and delivery notes
to verify that revenue is recognized in the correct period. Furthermore, we have evaluated the company´s estimates fordetermining percentage of completion and revenue recognition related to larger project assignments.
We have assessed whether the disclosures in the annual report is appropriate.

Valuation of goodwill and trademarks
Description

Goodwill and trademarks amounts to SEK 4,251 million and SEK 1,010 million respectively in the consolidated statement offinancial position. As described in note 15 the company annually, or when indicators of impairment are identified, performs
an impairment test to verify that the carrying values do not exceed the recoverable amount. Recoverable amount is determined by calculating the value in use for the respective cash-generating unit, which for the company coincides with therespective operating segments, using a discounted cash flow model. As also described in note 15, forecasts of future cash
flows for the next five years are based on financial plans approved by the board of directors. The financial plans include
assumptions of future sales growth and operating margin, as well as utilization of operating capital employed. Furthermore,assumptions of discount rates and growth beyond the five-year period are required.
The impairment test of the fiscal year did not result in any impairment. As shown in note 15, changes in significant assumptions and estimates could have an effect on the carrying value.
Due to the assumptions and estimates made in conjunction with these impairment tests, and due to the total amount of
the carrying value, we have considered valuation of goodwill and trademarks as a key audit matter.

How our audit addressed this key audit matterIn our audit of the fiscal year 2017, we have evaluated the company´s process for preparing impairment tests. We haveaudited the cash flow models used for the impairment tests and evaluated how cash-generating units are identified. We havealso evaluated the assumptions related to future cash flows by comparing to historical outcome and forecasts, as well as
performing sensitivity analyzes. Furthermore, we have assessed the discount rate and the assumption of long term growthrate after the forecast period by comparisons to peers and by involving our valuation specialists in the audit.
We have assessed whether the disclosures provided in the annual report is appropriate.

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Other Information than the annual accounts and consolidated accounts

This document also contains other information than the annual accounts and consolidated accounts and is found on pages
83-124. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not
express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information
identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated
accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether
the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of thisother information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning theconsolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director
are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts
and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are
responsible for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, asapplicable, matters related to going concern and using the going concern basis of accounting. The going concern basis ofaccounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, tocease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among otherthings oversee the company’s financial reporting process.

Auditor’s responsibility

Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also: Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
 Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

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 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the Board of Directors and the Managing Director.
 Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basisof accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on theaudit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts
and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’sreport. However, future events or conditions may cause a company and a group to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including thedisclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions andevents in a manner that achieves fair presentation.
 Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities
within the group to express an opinion on the consolidated accounts. We are responsible for the direction, supervisionand performance of the group audit. We remain solely responsible for our opinions.
We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also
inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.
We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards
From the matters communicated with the Board of Directors, we determine those matters that were of most significancein the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material
misstatement, and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or
regulation precludes disclosure about the matter.

Report on other legal and regulatory requirements
Opinions

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of theBoard of Directors and the Managing Director of Munters Group AB (publ.) for the financial year 2017 and the proposed
appropriations of the company’s profit or loss.
We recommend to the general meeting of shareholders that the profit be appropriated (loss be dealt with) in accordancewith the proposal in the statutory administration report and that the members of the Board of Directors and the Managing
Director be discharged from liability for the financial year.

Basis for opinions

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities underthose standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company
and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethicalresponsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

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Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the proposal of adividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group’s type of operations, size and risks place on the size of the parent company's and the group’s equity,
consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This
includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring thatthe company's organization is designed so that the accounting, management of assets and the company’s financial affairs
otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according
to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill
the company’s accounting in accordance with law and handle the management of assets in a reassuring manner.

Auditor’s responsibility

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain
audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or theManaging Director in any material respect: has undertaken any action or been guilty of any omission which can give rise to liability to the company, or in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association
Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion
about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance withgenerally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to thecompany, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The examination of the administration and the proposed
appropriations of the company’s profit or loss is based primarily on the audit of the accounts. Additional audit procedures
performed are based on our professional judgment with starting point in risk and materiality. This means that we focus theexamination on such actions, areas and relationships that are material for the operations and where deviations and violations
would have particular importance for the company’s situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis
for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss we examined the Board of
Directors’ reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal isin accordance with the Companies Act.
Ernst & Young AB, Box 7850, 111 44, Stockholm, was appointed auditor of Munters Group AB (publ.) by the general
meeting of the shareholders on the 26th of May 2016 and has been the company’s auditor since 2010.

Stockholm April 17, 2018
Ernst & Young AB

Erik Sandström
Authorized Public Accountant

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Definitions of key financial indicators
Definitions of key financial indicators

In this annual report as well as in the quarterly interim reports, there are references to a number of performance measures.
Some of the measures are defined in IFRS, others are alternative performance measures and are not disclosed in accordance with applicable financial reporting frameworks or other legislations. The performance measures are used by the Groupto assist both investors and management in analyzing Munters’ business. Below are the performance measures found in
this annual report described, defined and the reason for use disclosed.

Organic growth

Change in order intake and net sales compared to the previous period, excluding currency translation effects and contributions to order intake and net sales from businesses that were acquired and/or divested during the current period and/or any
comparison period. The measure is used by Munters to monitor order intake and net sales growth driven by changes involume and price between different periods.

Order backlog

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Return on capital employed (ROCE)

Operating profit (EBIT), divided by the average capital employed. The average capital employed for each year consists ofan average of the closing capital employed in the last 13 months.
Return on capital employed (ROCE) is also presented applying EBIT adjusted for IAC and Capital employed adjusted for
goodwill for improving comparability against other industrials.

Cash and cash equivalents

Cash and bank balances plus investments in securities and the like with maturity periods not exceeding three months. Thisis a measure that highlights the short-term liquidity.

LTM

LTM (last twelve months) after any key indicator means that the KPI corresponds to an accumulation of previous twelve
month reported numbers. The measure highlight trends in different KPIs, which is valuable in order to gain a deeper understanding of the development of the business.

Net debt

Received and confirmed sales orders not yet delivered and accounted for as net sales. Order Backlog is a useful measure
to indicate the efficiency of the conversion of received and confirmed sales orders into net sales in future periods, and isused by Munters to monitor business performance and customer demand, and adjust operations.

Net debt calculated as interest bearing debt and pension liabilities, deducted by cash and cash equivalents. This is a measureof the ability to repay the debt if it was all due.

Order intake

Average number of employee is calculated as the sum of permanent employees at the end of each of the last 13 months
divided by 13.

Received and confirmed sales orders during the reporting period. The order intake is an indicator of future revenues and,
consequently, an important KPI for the management of Munters’ business.

Operating profit (EBIT)

Earnings before interest and tax. Munters believes that EBIT shows the profit generated by the operating activities.

Adjusted EBITA

Operating profit, adjusted for amortizations, write-downs of intangible assets and items affecting comparability. Muntersbelieves that using adjusted EBITA is helpful in analyzing our performance as it removes the impact of items considered not
to be of recurring character and therefore do not reflect our core operating performance.

Adjusted EBITA margin

Adjusted EBITA as a percentage of net sales. Munters believes that Adjusted EBITA margin is a useful measure for showing
the Company’s profit generated by the operating activities.

Items affecting comparability (IAC)

Items affecting comparability relates to income statement items that have an impact on operating profit and are, in our
opinion, considered not to be of recurring character.

Capital employed

Capital employed is calculated as the balance sheet’s total assets, excluding interest-bearing assets and deferred tax assets,less total liabilities, excluding interest-bearing liabilities, pension liabilities and deferred tax liabilities.

Average number of employees

Operating cash flow

Earnings adjusted for depreciation, amortization, and impairments, as well as for investments and operating capital.

Operating working capital

Accounts receivables, inventories, accounts payables and advances from customers.

Earnings per share

Net income adjusted for the right of preferential shares to dividend, divided by the weighted average number of ordinary
shares.

Equity/assets ratio

Equity (including holdings with non-controlling interests) divided by total assets.

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